Jul 112018
 
 July 11, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , ,  


Edward Hopper The camel’s hump 1931

 

As Global Debt Hits A Record $247 Trillion, The IIF Issues A Warning (ZH)
US To Slap Tariffs On Extra $200 Billion Of Chinese Imports (R.)
Has the Fed Permanently Inflated Home Prices? (Whalen)
Trump Forced To Reinstate ‘Catch And Release’ After Court Defeats (G.)
40% Of Mexican Territory Is Paralyzed By Violence (G.)
EU Negotiator Michel Barnier Says 80% Of Brexit Deal Is Agreed (G.)
UK Government Draws Up Secret Plans To Stockpile Processed Food (Sun)
Red Cross Tells UK: End Damaging Immigration Detention (Ind.)
I’m A Doctor In Lampedusa. We Can’t Let These Migrant Deaths Go On (Bartolo)
US Judge Allows Lawsuits Over Monsanto’s Roundup To Proceed To Trial (R.)
Thailand Water Pumps Failed Just After Last Boy Escaped (G.)

 

 

Madness.

As Global Debt Hits A Record $247 Trillion, The IIF Issues A Warning (ZH)

Every quarter the Institute of International Finance publishes a new number of the total amount of global debt outstanding, and every quarter the result is the same: a new record high Today was no exception: according to the IIF’s latest Global Debt Monitor, the amount of debt held in the world rose by the biggest amount in two years during the first quarter of 2018, when it grew by $8 trillion to hit a new all time high of $247 trillion, up from $238 trillion as of Dec. 31, 2017 and up by $30 trillion from the end of 2016. In other words, there is now a quarter quadrillion dollars in global debt, and it represents 318% of global GDP.

More concerning is that this was the first time since Q3 2016 that global debt to GDP increased, suggesting that the marginal utility of debt is once again below 1. This is how the debt is broken down as of Q1 2018 and compared to Q1 2013: • Non-financial corporate debt: $74 trillion, up from $58 trillion in 5 years • Government debt: $67 trillion, up from $56 trillion • Financial debt: $61 trillion, up from $56 trillion • Household debt: $47 trillion, up from $40 trillion. [..] What was surprising about the report – certainly not the latest all time high debt numbers, those are now standard – is that the IIF voiced a strongly negative opinion of recent developments in the debt arena.

“The pace is indeed a cause for concern,” warned IIF’s Managing Director Hung Tran during a call with reporters. “The problem with the pace and speed is if you borrow or if you lend very quickly, the quality of the credit tends to suffer.” It also means more governments, businesses and individuals have been borrowing that could have trouble paying the money back, or merely paying interest on it as rates rise. “The quality of creditworthiness has declined sharply,” Tran added ominously, echoing what Moody’s said at the end of May.

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“Tariffs are taxes, plain and simple..”

US To Slap Tariffs On Extra $200 Billion Of Chinese Imports (R.)

The Trump administration raised the stakes in its trade war with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports. U.S. officials released a list of thousands of Chinese imports the administration wants to hit with the tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminum. It also includes consumer goods ranging from car tires, , furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products. “For over a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” U.S. Trade Representative Robert Lighthizer said in announcing the proposed tariffs.

“Rather than address our legitimate concerns, China has begun to retaliate against U.S. products … There is no justification for such action,” he said in a statement. Last week, Washington imposed 25 percent tariffs on $34 billion of Chinese imports, and Beijing responded immediately with matching tariffs on the same amount of U.S. exports to China. Investors fear an escalating trade war between the world’s two biggest economies could hit global growth. President Donald Trump has said he may ultimately impose tariffs on more than $500 billion worth of Chinese goods – roughly the total amount of U.S. imports from China last year. The new list published on Tuesday targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms.

The tariffs will not be imposed until after a two-month period of public comment on the proposed list, but some U.S. business groups and senior lawmakers were quick to criticize the move. Senate Finance Committee Chairman Orrin Hatch, a senior member of Trump’s Republican Party, said the announcement “appears reckless and is not a targeted approach.” The U.S. Chamber of Commerce has supported Trump’s domestic tax cuts and efforts to reduce regulation of businesses, but it has been critical of Trump’s aggressive tariff policies. “Tariffs are taxes, plain and simple. Imposing taxes on another $200 billion worth of products will raise the costs of every day goods for American families, farmers, ranchers, workers, and job creators. It will also result in retaliatory tariffs, further hurting American workers,” a Chamber spokeswoman said.

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No.

Has the Fed Permanently Inflated Home Prices? (Whalen)

The importance of the fact that US bank credit metrics are showing essentially zero cost in residential lending from portfolio loans is that it begs the question as to home price valuations and thus loan-to-value (LTV) ratios. A number of analysts have predicted an imminent reset in terms of home prices, but this has not happened for several reasons. The chart below shows the Case-Shiller average for US home price appreciation. First, real estate is a local market, so generalizations such as Case-Shiller are dangerous. New York City has been slumping for the past two years, but other markets around the country such as Denver remain hot.

The work of Weiss Residential Research clearly shows a turn in some major urban markets that have been moving higher since 2012 and before. But these moves seem more a function of buyer exhaustion than a permanent move to a buyers market. They key factor is cheap money chasing a limited supply of homes. Second, the US home market is in a classic supply squeeze. Referring to the work of Laurie Goodman at Urban Institute, the US is adding less than 1 million new units per year net of attrition of obsolete homes. Basically, new household formation is 50% higher than the growth in new housing units. More, the Fed’s manipulation of interest rates and credit spreads encouraged Wall Street to allocate capital to buying residential homes as rental properties, further limiting supply of homes available for sale.

Net, net, Millennials have been priced out of the housing market because the omniscient souls on the Federal Open Market Committee think that boosting asset prices will lead to more spending and job creation. Instead, low interest rates and help from the GSES (Fannie, Freddie and Ginnie) have driven up home prices beyond the reach of many home owners in major metro areas.

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Stop. It.

Trump Forced To Reinstate ‘Catch And Release’ After Court Defeats (G.)

Donald Trump’s administration has said it will release some migrant families from detention with ankle monitors, marking a return to the so-called “catch-and-release” policy the president vehemently denounced. The announcement comes as the US government scrambles to reunite thousands of migrant children who were separated from their parents at the border under the Trump administration’s “zero tolerance” immigration policy. “Parents of children under the age of five are being reunified with their children, then released and enrolled into an alternative to detention (ATD) program, meaning they will be placed on an ankle monitor and released into the community,” said Matthew Albence, a senior official with US Immigration and Customs Enforcement.

The Trump administration was left with few options after a series of court orders. A federal judge last month ordered the reunification of children under five by 10 July. That deadline was not met, officials acknowledged, while noting plans were under way on Tuesday to reunite up to 54 migrant children under five with their parents. There are an estimated 102 migrant children under five in federal custody, with a limited number of cases not qualifying for reunification due to the parents’ criminal background or signs of child abuse. The administration additionally lost in an attempt to overturn a 1997 court precedent that says minors cannot be held for more than 20 days.

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What a job the new government has.

40% Of Mexican Territory Is Paralyzed By Violence (G.)

As much as 40% of Mexican territory is prisoner to chronic insecurity and violence, the future chief of staff of Andrés Manuel López Obrador, the incoming president, has claimed. Alfonso Romo, a prominent entrepreneur who was part of the leftist’s watershed election triumph last week, made the assertion during a summit of business leaders on Monday in Mexico City. “Veracruz is paralyzed. Tamaulipas, paralyzed; Michoacán, paralyzed. Guerrero, paralyzed,” Romo said, referring to four of the most notoriously violent states in a country that last year suffered a record 29,000 murders.

“I won’t go on, so I don’t scare you,” Romo added, according to the newspaper Unomásuno which splashed the widely-reported claim onto its front page under the bright red headline: “Paralyzed by Insecurity”. López Obrador, or Amlo as he is widely known, made cutting violence a key prong of his third presidential bid and his promise to “pacify” Mexico helped him secure more than 30 million votes. Amlo has vowed to rethink Mexico’s devastating and highly militarized war on drugs – which experts blame for at least 200,000 deaths since 2006 – and be tough on the social causes of crime.

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Hard to believe.

EU Negotiator Michel Barnier Says 80% Of Brexit Deal Is Agreed (G.)

The chief Brexit negotiator for the European Union has declared that 80% of a deal with the UK has been agreed, in a change of narrative that suggests a full agreement can be sealed before October’s deadline. Speaking in New York on Tuesday, Michel Barnier said: “After 12 months of negotiations we have agreed on 80% of the negotiations.” He added that he was determined to negotiate a deal on the remaining 20%. The declaration that four-fifths of the deal is done is a significant change of tone from the EU after months of protests that it could not negotiate because the UK had not put its own proposals on the table.

Speaking at the Council on Foreign Relations in New York, Barnier said he looked forward to a “constructive discussion” with the UK after the white paper on Brexit is published on Thursday. But he warned: “We need clarity for these negotiations to move forward for the time is very short.” Barnier said he had never been shown how Brexit provided added value when the world faced challenges from terrorism and climate change to migration, poverty and financial instability. “It will be clear, crystal clear at the end of this negotiation that the best situation, the best relationship with the EU, will be to remain a member,” he said. Barnier added: “No deal is the worst solution for everybody. It would be a huge economic problem for the UK and also for the EU. I’m not working for that deal, I’m working for a deal.”

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Fun with the Sun.

UK Government Draws Up Secret Plans To Stockpile Processed Food (Sun)

Ministers have drawn up secret plans to stockpile processed food in the event of EU divorce talks collapsing – to show Brussels that “no deal” is not a bluff. Theresa May has ordered “no deal” planning “to step up” — with the government poised to start unveiling some of the 300 contingency measures in the coming weeks. At last week’s Chequers summit, Brexiteer ministers demanded more be done to prepare for Britain leaving the EU out without a new arrangement in place. The Sun can reveal that includes emergency measures to keep Britain’s massive food and drinks industry afloat – including stockpiling ahead of exit day on 29 March next year.

More than £22 billion worth of processed food and drinks are imported in to the UK – 97 per cent from the EU – in an industry that keeps 400,000 workers employed in the UK. Similar stockpiles are also being prepared for medical supplies amid fears of chaos at British ports next year. Brexit department insiders also claim plans have also been “wargamed” to ease pressure on Calais, including importing and exporting more goods through Holland, Belgium and directly from Spain. Last night Downing Street said “no deal preparation work is to be stepped up” and led by new Brexit Secretary Dominic Raab. Yesterday the Cabinet newbie briefed fellow ministers on measures Britain is taking, with No10 saying: “It’s sensible to make preparations for all scenarios and that includes No Deal.”

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Humanity.

Red Cross Tells UK: End Damaging Immigration Detention (Ind.)

The British Red Cross has called for an overhaul of the UK’s immigration detention system. Conditions are such that detainees suffer mental health problems which sometimes lead to suicide attempts, according to the charity. Thousands of innocent asylum seekers – often fleeing war and torture – are detained each year and locked up indefinitely with no support, the charity warned. In the first intervention of its kind by a major charity, the Red Cross calls for significant reforms including a 28-day limit on detention. It found cases of asylum-seekers being detained for as long as two years and seven months. Five of the 26 detainees interviewed for the report had attempted suicide while they were detained, and just 25 of them said they had been given no access to mental health support services.

Pregnant women continue to be “needlessly detained” in breach of the Home Office’s own guidance – with 47 pregnant women detained in the year to June 2017. The charity said the “overly onerous and traumatic” experience of attending immigration reporting centres – which many are required to do every every two weeks – should be overhauled by banning the practice of detaining people when they turn up. Mike Adamson, chief executive of the British Red Cross, said: “Most of the people in the UK asylum process have fled conflict or persecution to find a place of safety. They have already experienced more trauma and anguish than the rest of us could possibly imagine.

“The threat of detention without notice hangs over many people going through the asylum process in the UK. Our research shows that not knowing whether this week will be the week they are detained again, can make the process of having to report regularly extremely distressing. “This can exacerbate existing mental health issues and mean people never truly feel free.”

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More humanity.

I’m A Doctor In Lampedusa. We Can’t Let These Migrant Deaths Go On (Bartolo)

For a long time, I was proud of my country. I work as a doctor on the small island of Lampedusa in the middle of the Mediterranean, a place that is something of a symbolic gateway between Africa and Europe. In recent decades, Italy showed how it could honour humanity, giving the word “welcome” a new meaning, without ever building walls or putting up barbed wire along its borders. These acts of openness were recognised by other countries, by the EU, and by the gratitude of the thousands of people whose lives we saved over the years. But I stopped feeling proud to be Italian from the moment our government, denying all that had previously been done, decided to establish an agreement with Libyan groups in Tripoli – which meant, directly or indirectly, with people smugglers.

I still remember how in 2016 my country had vigorously joined the outrage triggered by Europe’s decision to bankroll Turkey’s President Erdogan with €6bn so he’d ignore or stop the migration flows from Syria. Italy’s position was then sacrosanct. It has since been somehow inexplicably disavowed in deeds. There is only one dramatic difference between what Europe did with Turkey then and what Italy is doing with Libya today. Refugee camps set up in Turkey are more or less efficient; in Libya, people are detained in horror camps where they are raped, tortured and killed. Instead of the wall that Italy did not build on its own territory, we’ve erected two walls elsewhere. The one in Libya has allowed us to cut the number of arrivals on our shores by 70%; the other, within ourselves, allows us to pretend we don’t see what is being done to the 70%.

Well, I can tell you what’s being done to these people. From my workplace, the Lampedusa clinic, their fate is clear to see. They are tortured daily, atrociously, for years on end. Those brought to us, by helicopter or motorboat, are close to death, with burns, serious injuries from blows, electric currents applied to the head or genitals, gunshot wounds, and razor-blade cuts. They are almost always dehydrated, in a state of hypothermia, and so underfed they are on the brink of collapse. They bring to mind the suffering of a concentration camp – yes, a concentration camp.

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There will always be scientists willing to claim it’s not cancerous.

US Judge Allows Lawsuits Over Monsanto’s Roundup To Proceed To Trial (R.)

Hundreds of lawsuits against Monsanto by cancer survivors or families of those who died can proceed to trial, a federal judge ruled on Tuesday, finding there was sufficient evidence for a jury to hear the cases that blame the company’s glyphosate-containing weed-killer for the disease. The decision by U.S. District Judge Vince Chhabria in San Francisco followed years of litigation and weeks of hearings about the controversial science surrounding the safety of the chemical glyphosate, the key ingredient in Monsanto’s top-selling weed-killer. Monsanto is now a unit of Bayer, following a $62.5 billion takeover of the U.S. seed major which closed in June. The U.S. Environmental Protection Agency last September concluded glyphosate is likely not carcinogenic to humans.

But the World Health Organization in 2015 classified glyphosate as “probably carcinogenic to humans.” Chhabria called the plaintiffs’ expert opinions “shaky” and entirely excluded the opinions of two scientists. But he said a reasonable jury could conclude, based on the findings of four experts he allowed, that glyphosate can cause cancer in humans. The plaintiffs will next have to prove Roundup caused cancer in specific people whose cases will be selected for test trials, a phase Chhabria in his Tuesday opinion called a “daunting challenge.” Lawsuits by more than 400 farmers, landscapers and consumers who claim Roundup caused them to develop non-Hodgkin’s Lymphoma, a type of blood cell cancer, have been consolidated before Chhabria.

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Good read on what went down. Amazing people. All the equipment that was brought in. All the mud that was removed. Wow.

Thailand Water Pumps Failed Just After Last Boy Escaped (G.)

The rescue operation to free the last of the 12 boys and their football coach from a Thailand cave could have been a disaster, divers have revealed, with water pumps draining the area failing just hours after the last boy had been evacuated. Divers and rescue workers were still more than 1.5km inside the cave clearing up equipment when the main pump failed, leading water levels to rapidly increase, three Australian divers involved in the operation told the Guardian on Wednesday, in the first detailed account of the mission to be published. The trio, stationed at “chamber three”, a base inside the cave, said they heard screaming and saw a rush of head torches from deeper inside the tunnel as workers scrambled to reach dry ground. Everyone, including the last three Thai navy Seals and medic who had spent much of the past week keeping vigil with the trapped boys, was out of the cave a short time later.

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Jul 062018
 
 July 6, 2018  Posted by at 8:55 am Finance Tagged with: , , , , , , , , , , , ,  


Henri Matisse Reading woman in violet dress 1898

 

China Imposes Tariffs, Says US Launching ‘Largest Trade War In History’ (CNBC)
Trump Says China Could Face More Than $500 Billion In US Tariffs (CNBC)
Merkel Open To Reducing EU Tariffs On American Cars (NC5)
US Labor Shortage Is Reaching A Critical Point (CNBC)
Theresa May’s New Customs Plan ‘Dead On Arrival’ In EU (Ind.)
Theresa May Battles To See Off Revolt Ahead Of Key Brexit Summit (G.)
The Dark Cloud Of Global Debt (GT)
“People Assume That Stocks Always Rise Over Time. They’re Wrong” (Eric Peters)
Most Dangerous Market Ever – Michael Pento (USAW)
Moscow Using UK As Dumping Ground For Poison, Says Sajid Javid (G.)
If The Novichok Was Planted By Russia, Where’s The Evidence? (G.)
Seehofer Tells Merkel, Italy And Greece To Solve Migration Row (EUO)
European Parliament Rejects Controversial Copyright Rules (Ind.)

 

 

Act like grown-ups.

China Imposes Tariffs, Says US Launching ‘Largest Trade War In History’ (CNBC)

China implemented retaliatory tariffs on some imports from the U.S. Friday, state media reported, immediately after new U.S. duties had taken effect. The move signals the start of a full-blown trade war between the world’s two largest economies, after President Donald Trump’s administration had initially made good on threats to impose steep tariffs on Chinese goods. At midnight Washington time, the U.S. imposed new tariffs on $34 billion of annual imports from China. This prompted Beijing to respond in kind with levy tariffs on 545 items of U.S. imports — also worth $34 billion, state-run newspaper The China Daily reported Friday.

A spokesperson at China’s ministry of commerce said that while the Asian giant had refused to “fire the first shot,” it was being forced to respond after the U.S. had “launched the largest trade war in economic history.” “This act is typical trade bullying,” the spokesperson said, before adding: “It seriously jeopardizes the global industrial chain … Hinders the pace of global economic recovery, triggers global market turmoil and will affect more innocent multinational companies, general companies and consumers.”

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China has already retaliated.

Trump Says China Could Face More Than $500 Billion In US Tariffs (CNBC)

President Donald Trump said on Thursday he would consider imposing additional tariffs on $500 billion in Chinese goods, should Beijing retaliate. U.S. tariffs on $34 billion worth of Chinese goods kicked in on Friday. Another $16 billion are expected to go into effect in two weeks and potentially another $500 billion, Trump told reports aboard Air Force One on his way to a rally in Montana before the tariffs kicked in. China implemented retaliatory tariffs on some imports from the U.S., state media reported about two hours later, after new U.S. duties had taken effect.

First “34, and then you have another 16 in two weeks and then as you know we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300,” Trump said. “It’s only on China,” he added. Trump’s statements reinforce earlier threats that he would escalate the trade conflict. The dispute with China has roiled financial markets worldwide, including stocks, currencies and the global trade of commodities from soybeans to coal.

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Was that so hard?

Merkel Open To Reducing EU Tariffs On American Cars (NC5)

In the midst of trade tension between the European Union and the U.S., German Chancellor Angela Merkel said she’s open to lowering tariffs on American car imports. According to Reuters, Merkel said Europe would have to first agree upon a reduction in tariffs. In addition, she cited World Trade Organization rules that state lowering U.S. auto tariffs would mean doing the same for other countries as well. Merkel’s comments come after President Donald Trump imposed steel and aluminum tariffs on U.S. allies, including the EU, and threatened to put a 20 percent tax on European car imports.

The German chancellor warned Trump on Wednesday not to implement auto tariffs to avoid inciting an all-out trade war. Auto industry experts have suggested that if the Trump administration follows through on that threat, the move would negatively affect American autoworkers’ jobs and raise car prices. Trump is scheduled to travel to Brussels next week for the NATO summit, his first big meeting with European leaders together since last month’s G-7 summit.

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With 95 million still out of the labor force.

US Labor Shortage Is Reaching A Critical Point (CNBC)

America’s labor shortage is approaching epidemic proportions, and it could be employers who end up paying. A report Thursday from ADP and Moody’s Analytics cast an even brighter light on what is becoming one of the most important economic stories of 2018: the difficulty employers are having in finding qualified employees to fill a record 6.7 million job openings. Truck drivers are in perilously low supply, Silicon Valley continues to struggle to fill vacancies, and employers across the grid are coping with a skills mismatch as the economy edges ever closer to full employment. “Business’ number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement.

“These labor shortages will only intensify across all industries and company sizes.” Private payrolls grew by 177,000 in June, a respectable number but below market expectations. It was the fourth month in a row that the ADP/Moody’s count fell short of 200,000 after four months at or above that level. The reason for the tick down in hiring certainly isn’t because there aren’t enough jobs. The Bureau of Labor Statistics reported that April closed with 6.7 million job openings. May ended with just over 6 million people the BLS classifies as unemployed, continuing a trend this year that has seen openings eclipse the labor pool for the first time. At some point that gap will have to close. Economists expect that employers are going to have to start doing more to entice workers, likely through pay raises, training and other incentives.

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“We have been telling the UK for two years that we would not accept a single market a la carte. “What do they come with? – A single market a la carte.”

Theresa May’s New Customs Plan ‘Dead On Arrival’ In EU (Ind.)

Theresa May’s new plan for future relations with the EU will be “dead on arrival”, senior figures in Brussels have told The Independent. EU officials said any hint that the UK wants to be part of the single market on goods, but not services will be rejected. It is a blow for the prime minister who has spent the last week in meetings with EU leaders, including Angela Merkel, in a bid to prevent Europe dismissing her plans out of hand when they are published next week. Ms May is expected to push her cabinet to agree to a plan at Chequers on Friday, which would see Britain remaining in full regulatory alignment with the EU on goods, but not on services.

The meeting has also been preceded by threats and warnings from the Brexiteer wing of the Conservatives that the proposals mooted by the prime minister will not be accepted by them in the UK because they keep Britain too closely tied to the EU’s rules and regulations. But before her ministers have even agreed to the deal, EU officials told The Independent the white paper would be “dead on arrival” in Brussels if, as expected, it proposes that the UK remain in the EU’s single market for goods, but not services. They claimed they had repeatedly warned UK negotiators that this option would not work. They said it had been widely discussed among EU ministers and rejected – including, crucially, by the EU’s two most powerful players, France and Germany.

One Brussels source said: “We have been telling the UK for two years that we would not accept a single market a la carte. “What do they come with? – A single market a la carte.”

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Who will be left standing by Saturday?

Theresa May Battles To See Off Revolt Ahead Of Key Brexit Summit (G.)

Theresa May was battling to see off a revolt on the eve of a critical cabinet summit, as Boris Johnson convened a meeting of pro-Brexit ministers to discuss their options amid an atmosphere of tension and recrimination. The government was forced to deny “selective leaks” that appeared to suggest that the UK could struggle to strike a trade deal with the US in the future. No 10 insisted that paperwork released to ministers ahead of Friday’s crunch Brexit meeting at Chequers said just the opposite – as a caucus of seven cabinet members including Johnson, Michael Gove, Liam Fox and David Davis met at the Foreign Office to discuss their concerns.

An early leak suggested that the UK should “maintain a common rulebook” with the European Union on food and farming standards and that could make striking a trade deal with the more free market-oriented US more difficult as a result. That prompted a series of complaints from backbench Tory MPs and led to the Thursday evening meeting at the Foreign Office hosted by Johnson, the foreign secretary. Sources at No 10 said there had been selective leaks from the paperwork and the controversial passage appeared on page 15 out of 50 from one of several documents sent to all members of the cabinet.

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It’s corporations this time around.

The Dark Cloud Of Global Debt (GT)

While everyone is debating the effects of possible trade sanctions on the global economy, few are paying attention to a far more serious issue. Enormous global debt, combined with low-interest rates, have set the stage for a global recession that has the potential for economic chaos. The combination of enormous debt and artificially low-interest rates were at the center of the 2008 credit bubble. One would expect central banks to be aware of this and show more concern. However, the overall silence has been astonishing. An exception to this is the Bank for International Settlements (BIS), which has been making loud noises about the toxic level of global debt and the anticipated bubble.

It recently reported that the global debt of 2008 was $60 trillion, small when compared to the current debt of $170 trillion. To make matters worse, today’s global debt is 40 percent higher in relation to GDP than it was in 2008, just prior to the Lehman Bros. downfall. To add to the current headache are the rising debt levels of emerging markets and corporate debts. According to McKinsey & Company, a global consulting firm, two-thirds of U.S. corporate debt are from corporations that pose a high default risk. Countries such as Brazil, India, and China have been busy issuing questionable credit. This dubious credit being issued in many emerging markets has come with extremely low-interest rates.

If the borrowers’ default, the lenders won’t be looking at enough compensation to recoup their loses. Low-interest rates have become an overall global problem, including the rates in the U.S. high-yield bond market. Central banks around the world have been keeping interest rates artificially low while printing money with abandon. The current global debt is the direct result of this policy. $2 trillion in corporate debt will be maturing annually through 2022. A considerable amount of this debt may default and cause debt repricing. The damage caused by central banks and their policy of easy credit has been done, and there is little that can be done at this point to stem the tide. It can only be hoped that they are more aware now than they were in 2008.

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Central banks don’t really matter anymore.

“People Assume That Stocks Always Rise Over Time. They’re Wrong” (Eric Peters)

We’ve all looked at the stats, and we’re now at an unemployment rate in the US of sub-4% – 3.8%–3.7%. I think what a lot of people focus on is if the participation rate were back where it was pre-2008 you’d end up with an unemployment rate that had an 8 handle or something like that. So that’s what people are referring to. But making comparisons like that is difficult because a lot of things are changing. The US labor force is shrinking because people are getting older. There is the opioid issue. And this disability issue. Which are difficult to really handicap in terms of how big an impact that’s having on the US labor force.

If the central banks have been the ones who have gotten us here, they just – by definition – they’re not the ones that are going to get us out of here. So I think – look, we’re always going to look at what central banks are doing, they will be important. But I think that they’re no longer going to be dominant. What’s going to be dominant are the politicians. You’re seeing that in the US right now. I know that everyone loves to hang on every word that Powell speaks. And they look at the Fed statement. And people are still trained to look at the Fed dot plots (which are probably going to go away). People are trained to look at all of these things because that’s what they’ve done their whole careers.

But they just are not going to matter that much anymore. Whether the Fed’s terminal rate is 2.25 or 2.5 or 2.75 – we’re not talking about much. What are we going to do in terms of immigration policy? What are we going to do in terms of trade policy? How is that going to impact all of the major corporations’ global supply chains? These are the things that are really going to matter.

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“It is a confluence of events coming in October ..”

Most Dangerous Market Ever – Michael Pento (USAW)

Money manager Michael Pento is sounding the alarm because we are getting very close to something called a “yield curve inversion.” Pento explains, “Why do I care if the yield curve inverts? Because 9 out of the last 10 times the yield curve inverted, we had a recession. . . . The spread with the yield curve is the narrowest it has been since outside of the start of the Great Recession that commenced in December of 2007. . . . The last two times the yield curve inverted, we had a stock market drop of 50%. The market dropped, and the S&P 500 lost 50% of its value.” Can we keep partying in the markets like it’s 1999 or is there an expiration date for the good times?

Pento says, “Well, I have put a check on the calendar for October because of the fact the rate of quantitative easing goes to $15 billion per year, because the trade war will reach a crescendo, then because I believe, unfortunately because I am conservative, the Republicans lose the House of Representatives, because the Chinese credit boom will be in full reverse by October. It is a confluence of events coming in October . . . we’ve already entered into the beginnings of a bear market around the world. The top 22 banks in the world are in a bear market. There are many, many examples of banks around the world that are in a bear market. You have a bear market in Chinese shares. 20% of the S&P 500 is in a bear market. This is an incipient bear market that is already beginning. I believe it manifests clearly to even the people on CNBC by October.”

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None of this makes any sense.

Moscow Using UK As Dumping Ground For Poison, Says Sajid Javid (G.)

Britain will consult its allies about a possible response to Russia over the latest poisonings in Wiltshire as it emerged that the couple taken critically ill had handled an item contaminated with the nerve agent novichok. The home secretary, Sajid Javid, accused Moscow of using the UK as a “dumping ground” for poison and urged Russia to explain “exactly what has gone on”. In Salisbury, public health and council chiefs warned people not to pick up unidentified objects but dismissed the idea of making a general sweep of the city for novichok, although they said they could not rule out the possibility that more of the nerve agent was present.

The Guardian understands that the novichok that harmed them may have been in a sealed container left following the attack on the former Russian spy Sergei Skripal and his daughter, Yulia, in March. Sources close to the investigation dropped a hint that they may now know the identity of the would-be killers who targeted the Skripals. The Metropolitan police confirmed on Thursday evening that the couple taken ill, Dawn Sturgess, 44, from Salisbury, and Charlie Rowley, 45, of Amesbury, collapsed after picking up a contaminated item.

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Even the Guardian allows itself to publish out right criticism. Putin has a really successful World Cup going. Brexit splits Britain. 1+1=2

If The Novichok Was Planted By Russia, Where’s The Evidence? (G.)

I seem to be the only person alive with no clue as to who has poisoned four people in Wiltshire. I am told that only Russians have access to the poison, known as novichok – though the British research station of Porton Down, located ominously nearby, clearly knows a lot about it. Otherwise, I repeat, I have no clue. I suppose I can see why the Kremlin might want to kill an ex-spy such as Sergei Skripal and his daughter, so as to deter others from defecting. But why wait so long after he has fled, and why during the build-up to so highly politicised an event as a World Cup in Russia? Four months on from the crime, the Skripals have been incommunicado in a “secure location”. Barely a word has been heard from them.

Theresa May has persistently blamed Russia. She has called the incident “brazen and despicable”, and MI5 condemned “flagrant breaches of international rules”. But I cannot see the diplomatic or other purchase in prejudging the case, when no one can offer a clue. As to why the same person or persons should want to kill a couple, unconnected to the Skripals, on an Amesbury housing development, the questions are even more baffling. It seems a funny sort of carelessness. Did the couple pick up the infecting agent nearer the original site, eight miles away? Might the new poisoning be an attempt to divert attention from the earlier one? Could it be a devious plot, to make it seem that novichok is available on every street corner, from your friendly neighbourhood drug dealer?

Or perhaps one of the victims, Charlie Rowley, has mates in Porton Down? Perhaps someone is showing off, or panicking, or behaving like a complete idiot. Who knows? Since I have not a smidgen of an answer to any of these questions, I feel no need to capitulate to the politics of terror and fear. I can open my front door without cleaning my hand. I can visit Wiltshire in peace and safety and marvel at the spire of Salisbury Cathedral. I can revel in the remains of the bronze age Amesbury archer – whose death from bone disease has finally been resolved by the scientists. Where knowledge is nonexistent, ignorance is bliss.

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NIMBY on steroids.

Seehofer Tells Merkel, Italy And Greece To Solve Migration Row (EUO)

German interior minister Horst Seehofer defused tensions with Austria on Thursday (5 July) but increased political pressure on his boss, chancellor Angela Merkel, as well as on Italy and Greece, to find a way how Germany can reject asylum seekers without closing its border with Austria. “There will be no measures taken by Germany at the expense of Austria,” Austrian chancellor Sebastian Kurz said after meeting Seehofer in Vienna. Under a plan agreed on Monday between Merkel’s centre-right CDU party and Seehofer’s CSU, its Bavarian conservative sister party, asylum seekers would be sent back to the EU country where they were first registered, or to Austria.

Kurz had warned that in reaction, Austria would consider closing its own border with Italy and Slovenia in order to prevent migrants from coming in. This, Vienna had warned, would lead to a “domino effect” of closing borders and imperil the free-movement Schengen area. But Seehofer assured Kurz that Austria would have to take no specific measures, and that it would be up to Italy and Greece, where three-quarters of asylum seekers come from, to take them back. The Bavarian politician has been trying for almost a month to impose his plan on Merkel, who first refused to unilaterally reject asylum seekers. She advocated instead a “European solution” to be agreed with other member states, who would accept taking refugees from Germany.

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It’s not defeated yet.

European Parliament Rejects Controversial Copyright Rules (Ind.)

The European Parliament has voted against an incredibly controversial new set of copyright rules that campaigners claim could “ban memes”. The law will now be sent for a full reconsideration and debate inside the parliament, during which activists will try and remove the controversial Article 11 and 13. Article 11 has been referred to by campaigners as instituting a “link tax”, by forcing tech companies like Google and Facebook to pay to use snippets of content on their own sites. Article 13 adds rules that make tech companies responsible for ensuring any copyrighted material is not spread over their platforms. Those rules could force technology companies to scan through everything their users post and check it doesn’t include copyrighted material.

If it is found, the post will be forced to be removed, which campaigners claim could destroy the kind of memes and remixes that spread across the internet. The revamp has triggered strong criticism from Wikipedia founder Jimmy Wales, World Wide Web inventor Tim Berners-Lee, net neutrality expert Tim Wu, internet pioneer Vint Cerf and others. Copyright campaigners claim that the rules are necessary to ensure that material isn’t illegally spread across the internet. Europe’s broadcasters, publishers and artists including Paul McCartney backed the rules, arguing the controversial Article 13 would protect the music industry.

A total of 318 law makers voted against opening talks with EU countries based on the committee’s proposal while 278 voted in favour, and 31 abstained. In practice, the vote only delays the final decision on the rules and gives the European Parliament more time to deliberate on them. Another decision will be taken in September.

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Jul 032018
 


Edward Hopper Summer interior 1909

 

Buybacks Are The Only Thing Keeping The Stock Market Afloat (CNBC)
Stock Markets Look Ever More Like Ponzi Schemes (Murphy)
A Japanese Tsunami Out Of US CLOs Is Coming (HC)
The Eurozone’s Coming Debt Crisis (Lacalle)
The ‘Dirty Dozen’ Sectors Of Global Debt (Rochford)
UK’s Latest Brexit Proposal Is Unrealistic, Say EU Officials (G.)
Nassim Taleb Slams “These Virtue-Signaling Open-Borders Imbeciles” (ZH)
Merkel Dodges Political Bullet With Controversial Migrant Deal (AFP)
Austria Says To ‘Protect’ Its Borders After German Migrant Deal (AFP)
Is Facebook A Publisher? In Public It Says No, But In Court It Says Yes (G.)
Tesla’s All-Nighter To Hit Production Goal Fails To Convince Wall Street (R.)
The New York Times Squares off with the Truth, Again (AHT)
Anthony Kennedy and Our Delayed Constitutional Crisis (GP)
‘Snowden is the Master of His Own Destiny’ – Russia (TeleSur)

 

 

And then QE ends.

Buybacks Are The Only Thing Keeping The Stock Market Afloat (CNBC)

Stocks right now are hanging by a thread, boosted by a bonanza of corporate buying unrivaled in market history and held back by a burst in investor selling that also has set a new record. Both sides are motivated by fear, as corporations find little else to do with their $2.1 trillion in cash than buy back their own shares or make deals, while individual investors head to the sidelines amid fears that a global trade war could thwart the substantial momentum the U.S. economy has seen this year. “Corporate cash is going to find a home, and it’s either going to be in buybacks, dividends or M&A activity. What it’s not going to be is in capex,” said Art Hogan, chief market strategist at B. Riley FBR.

“Individuals are looking at the turbulence we’ve seen this year that we had not seen last year. That creates its own sort of exit sign for investors who don’t want to deal with that.” The numbers showing where each side put their cash in the second quarter are striking. Companies announced $433.6 billion in share repurchases during the period, nearly doubling the previous record of $242.1 billion in the first quarter, according to market research firm TrimTabs. Dow components Nike and Walgreens Boots Alliance led the most recent surge in buybacks, with $15 billion and $10 billion, respectively, last week. In all, 31 companies announced buybacks in excess of $1 billion during June.

At the same time, investors dumped $23.7 billion in stock market-focused funds in June, also a new record. For the full quarter, the brutal June brought global net equity outflows to $20.2 billion, the worst performance since the third quarter of 2016, just before the presidential election. The selling is particularly acute in mutual funds, which saw $52.9 billion in outflows during the quarter and are typically more the purview of the retail side.

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“People think their savings and pensions are safe because of rising share prices. They do not realise it is all a con-trick.”

Stock Markets Look Ever More Like Ponzi Schemes (Murphy)

The FT has reported this morning that: “Debt at UK listed companies has soared to hit a record high of £390bn as companies have scrambled to maintain dividend payouts in response to shareholder demand despite weak profitability.” They added: “UK plc’s net debt has surpassed pre-crisis levels to reach £390.7bn in the 2017-18 financial year, according to analysis from Link Asset Services, which assessed balance sheet data from 440 UK listed companies.” So what, you might ask? Does it matter that companies are making sense of low-interest rates to raise money when I am saying that government could and should be doing the same thing?

Actually, yes it does. And that’s because of what the cash is being used for. Borrowing for investment makes sense. Borrowing to fund revenue investment (that is training, for example, which cannot go on the balance sheet but still adds value to the business) makes sense. But borrowing to pay a dividend when current profits and cash flow would not support it? No, that makes no sense at all. Unless, of course, you are CEO on a large share price linked bonus package and your aim is to manipulate the market price of the company. It is that manipulation that is going on here, I suggest. These loans are being used to artificially inflate share prices.

The problem is systemic. In the US the problem is share buybacks, which I read recently have exceeded $5 trillion in the last decade, meaning that US companies are now by far the biggest buyers of their own shares. That is, once again, market manipulation. And this manipulation does matter. People think their savings and pensions are safe because of rising share prices. They do not realise it is all a con-trick. And companies claim that their pension funds are better funded as a result of these share prices, and so they are meeting their obligations to their employees when that too is a con-trick. They may be insolvent when the truth is known, so serious is the fraud.

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Japan plays a strange role in the global economy. It won’t be able to keep that up much longer. The Bank of Japan has many options; none are good.

A Japanese Tsunami Out Of US CLOs Is Coming (HC)

Japan is at the very centre of the global financial system. It has run current account surpluses for decades, building the world’s largest net foreign investment surplus, or its accumulated national savings. Meanwhile, other nations, such as the US, have borrowed from nations like Japan to live beyond their own means, building net foreign investment deficits. We now have unprecedented levels of cross-national financing.

Much of Japan’s private sector saving is placed in Yen with financial institutions who then invest overseas. These institutions currency hedged most of their foreign assets to reduce risk weighted asset charges and currency write down risks. The cost of hedging USD assets has however risen due to a flattening USD yield curve and dislocations in FX forwards. As shown below, their effective yield on a 10 year US Treasury (UST) hedged with a 3 month USDJPY FX forward has fallen to 0.17%. As this is below the roughly 1% yield many financial institutions require to generate profits they have been selling USTs, even as unhedged 10 year UST yields rise. The effective yield will fall dramatically for here if 3 month USD Libor rises in line with the Fed’s “Dot Plot” forecast for short term rates, assuming other variables like 10 year UST yields remain constant.

As Japanese financial institutions sell US Treasuries, which are considered the safest foreign asset, they are shifting more into higher yielding and higher risk assets; foreign bonds excluding US treasuries as well as foreign equity and investment funds. This is a similar pattern to what we saw prior to the last global financial crisis. In essence, Japan’s financial institutions are forced to take on more risk in search of yield to cover rising hedge costs as the USD yield curve flattens late in the cycle. Critically as the world’s largest net creditor they facilitate significant added liquidity for higher risk overseas borrowers late into the cycle.

I follow these flows closely. One area I think is rather interesting is US Collateralised Loan Obligations (CLOs) which Bloomberg reports “ballooned to a record last quarter thanks in large part to unusually high demand from Japanese investors”. CLOs are essentially a basket of leveraged loans provided to generally lower rated companies with very little covenant protection. Alarmingly, some US borrowers have used this debt to purchase back so much of their own stock that their balance sheets now have negative net equity. A recent Fed discussion paper shows in the following chart that CLOs were the largest mechanism for the transfer of corporate credit risk out of undercapitalised banks in the US and into the shadow banking sector. Japanese financial institutions have been the underwriter of much of that risk in their search for yield.

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“This reduction in costs is financed by pensioners and savers who are forced to invest in these debt instruments, often by institutional mandate.”

The Eurozone’s Coming Debt Crisis (Lacalle)

The European Central Bank (ECB) has signaled the end of its asset purchase program and even a possible rate hike before 2019. After more than 2 trillion euros of asset purchases and a zero interest rate policy, it is long overdue. The massive quantitative easing (QE) program has generated very significant imbalances and the risks far outweigh the questionable benefits. The balance sheet of the ECB is now more than 40 percent of the eurozone GDP. The governments of the eurozone, however, have not prepared themselves at all for the end of stimuli. They often claim that deficits have been reduced and risks contained. However, closer scrutiny shows that the bulk of deficit reductions came from lower cost of government debt.

Eurozone government spending has barely fallen, despite lower unemployment and rising tax revenues. Structural deficits remain stubborn, and in some cases, unchanged from 2013 levels. In other words, the problems are still there, they were just hidden for a while, swept under the rug of an ever-expanding global economy. The 19 eurozone countries have collectively saved 1.15 trillion euros in interest payments since 2008 due to ECB rate cuts and monetary policy interventions, according to German media outlet Handelsblatt. This reduction in costs is financed by pensioners and savers who are forced to invest in these debt instruments, often by institutional mandate.

However, that illusion of savings and budget stability will rapidly disappear as most Eurozone countries face massive amounts of debt coming due in the 2018–2020 period and wasted precious years of quantitative easing without implementing strong structural reforms. The recent troubles of Italian banks are just one precursor of things to come. Taxes rose for families and small and medium-sized enterprises, while current spending by governments barely fell, competitiveness remained poor, and a massive 1 trillion euro in nonperforming loans raises doubts about the health of the European financial system.

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Good overview. Crises wherever you look.

The ‘Dirty Dozen’ Sectors Of Global Debt (Rochford)

When considering where the global credit cycle is at, it’s often easy to form a view based on a handful of recent articles, statistics and anecdotes. The most memorable of these tend to be either very positive or negative otherwise they wouldn’t be published or would be quickly forgotten. A better way to assess where the global credit cycle is at is to look for pockets of dodgy debt. If these pockets are few, credit is early in the cycle with good returns likely to lie ahead. If these pockets are numerous, that’s a clear indication that credit is late cycle.

In reviewing global debt, twelve sectors standout for their lax credit standards and increasing risk levels. There’s excessive risk taking in developed and emerging debt, as well as in government, corporate, consumer and financial sector debt. This points to global credit being late cycle. Central banks have failed to learn the lessons from the last crisis. By seeking to avoid or lessen the necessary cleansing of malinvestment and excessive debt, this cycle’s economic recovery has been unusually slow. Ultra-low interest rates and quantitative easing have increased the risk of another financial crisis, the opposite of the financial stability target many central bankers have.

For global debt investors, the current conditions offer limited potential for gains beyond carry. With credit spreads in many sectors at close to their lowest in the last decade, there is greater potential for spreads to widen dramatically than there is for spreads to tighten substantially. Keeping credit duration low, staying senior in the capital structure and shifting up the rating spectrum will cost some carry. However, the cost of de-risking now is as low as it has been for a long time. If the risks in the dirty dozen sectors materialise in the medium term, the losses avoided by de-risking will be a multiple of the carry foregone.

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I’d say it’s about time for the British to wake up to the damage May et al are inflicting on the nation.

UK’s Latest Brexit Proposal Is Unrealistic, Say EU Officials (G.)

A draft of Theresa May’s Brexit plan has already been dismissed as unrealistic by senior EU officials, who say the UK has no chance of changing the European Union’s founding principles. The prime minister is gathering her squabbling ministers at Chequers on Friday for a one-day discussion to thrash out the UK’s future relationship with the EU. But EU sources who have seen drafts of the long-awaited British white paper said the proposals would never be accepted. “We read the white paper and we read ‘cake’,” an EU official told the Guardian, a reference to Boris Johnson’s one-liner of being “pro having [cake] and pro-eating it”. Since the British EU referendum, “cake” has entered the Brussels lexicon to describe anything seen as an unrealistic or far-fetched demand.

May’s white paper is expected to propose the UK remaining indefinitely in a single market for goods after Brexit, to avoid the need for checks at the Irish border. While the UK is offering concessions on financial services, it wants restrictions on free movement of people – a long-standing no-go for the EU. Jean-Claude Piris, a former head of the EU council’s legal service, said it would be impossible for the EU to split the “four freedoms” underpinning the bloc’s internal market, which are written into the 1957 treaty that founded the European project: free movement of goods, services, capital and people. “The EU is in difficulties at the moment; the one and only success which glues all these countries together is a little bit the money and the internal market,” Piris said. “If you fudge the internal market by allowing a third state to choose what they want … it is the beginning of the end.”

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Not easy to find the right position on the topic. But Europe seems to show that uncontrolled immigration leads to the rise of right wing movements. Merkal gave birth to Salvini.

Nassim Taleb Slams “These Virtue-Signaling Open-Borders Imbeciles” (ZH)

As liberals across America continue to attempt to one-up one another with the volume of virtue they can signal, specifically on the question of ‘open borders’ – especially since ‘jenny from the bronx’ victory over the weekend, none other than Nassim Nicholas Taleb unleashed a trite 3-tweet summary of how farcical this argument is…

What intellectuals don’t get about MIGRATION is the ethical notion of SYMMETRY:

1) OPEN BORDERS work if and only if the number of pple who want to go from EU/US to Africa/LatinAmer equals Africans/Latin Amer who want to move to EU/US

2) Controlled immigration is based on the symmetry that someone brings in at least as much as he/she gets out. And the ethics of the immigrant is to defend the system as payback, not mess it up. Uncontrolled immigration has all the attributes of invasions.

3) As a Christian Lebanese, saw the nightmare of uncontrolled immigration of Palestinians which caused the the civil war & as a part-time resident of N. Lebanon, I am seeing the effect of Syrian migration on the place.

So I despise these virtue-signaling open-borders imbeciles.

Silver Rule in #SkinInTheGame

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Mutti’s holding centers.

Merkel Dodges Political Bullet With Controversial Migrant Deal (AFP)

German Chancellor Angela Merkel survived a bruising challenge to her authority with a compromise deal on immigration but faced charges Tuesday that it spelt a final farewell to her welcoming stance toward refugees. In high-stakes crisis talks overnight, Merkel had put to rest for now a dangerous row with her hardline Interior Minister Horst Seehofer that had threatened the survival of her fragile coalition government. In separate statements, Merkel praised the “very good compromise” that she said spelt a European solution, while Seehofer withdrew a resignation threat and gloated that “it’s worth fighting for your convictions”.

In a pact both sides hailed as a victory, Merkel and Seehofer agreed to tighten border controls and set up closed holding centres to allow the speedy processing of asylum seekers and the repatriations of those who are rejected. They would either be sent back to EU countries that previously registered them or, in case arrival countries reject this – likely including frontline state Italy – be sent back to Austria, pending an agreement with Vienna. CSU general secretary called the hardening policy proposal the last building block “in a turn-around on asylum policy” after a mass influx brought over one million migrants and refugees.

But criticism and doubts were voiced quickly by other parties and groups, suggesting Merkel may only have won a temporary respite. Refugee support group Pro Asyl slammed what it labelled “detention centres in no-man’s land” and charged that German power politics were being played out “on the backs of those in need of protection”. Bernd Riexinger of the opposition far-left Die Linke party spoke of “mass internment camps” as proof that “humanity got lost along the way” and urged Merkel’s other coalition ally, the Social Democrats (SPD), to reject the plan.

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And Merkel made Kurz possible, too.

Austria Says To ‘Protect’ Its Borders After German Migrant Deal (AFP)

Austria’s government warned Tuesday it could “take measures to protect” its borders after Germany planned restrictions on the entry of migrants as part of a deal to avert a political crisis in Berlin. If the agreement reached Monday evening is approved by the German government as a whole, “we will be obliged to take measures to avoid disadvantages for Austria and its people,” the Austrian government said in a statement. It added it would be “ready to take measures to protect our southern borders in particular,” those with Italy and Slovenia. German Chancellor Angela Merkel reached a deal Monday on migration with her rebellious interior minister, Horst Seehofer, to defuse a bitter row that had threatened her government.

Among the proposals is a plan to send back to Austria asylum seekers arriving in Germany who cannot be returned to their countries of entry into the European Union. Austria said it would be prepared to take similar measures to block asylum seekers at its southern borders, with the risk of a domino effect in Europe. “We are now waiting for a rapid clarification of the German position at a federal level,” said the statement, signed by Austria’s conservative Chancellor Sebastian Kurz and his allies of the far-right Freedom party, Vice Chancellor Heinz-Christian Strache and Interior Minister Herbert Kickl. “German considerations prove once again the importance of a common European protection of the external borders,” the statement said.

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Wonder what the strategy meetings were like.

Is Facebook A Publisher? In Public It Says No, But In Court It Says Yes (G.)

Facebook has long had the same public response when questioned about its disruption of the news industry: it is a tech platform, not a publisher or a media company. But in a small courtroom in California’s Redwood City on Monday, attorneys for the social media company presented a different message from the one executives have made to Congress, in interviews and in speeches: Facebook, they repeatedly argued, is a publisher, and a company that makes editorial decisions, which are protected by the first amendment. The contradictory claim is Facebook’s latest tactic against a high-profile lawsuit, exposing a growing tension for the Silicon Valley corporation, which has long presented itself as neutral platform that does not have traditional journalistic responsibilities.

The suit, filed by an app startup, alleges that Mark Zuckerberg developed a “malicious and fraudulent scheme” to exploit users’ personal data and force rival companies out of business. Facebook, meanwhile, is arguing that its decisions about “what not to publish” should be protected because it is a “publisher”. In court, Sonal Mehta, a lawyer for Facebook, even drew comparison with traditional media: “The publisher discretion is a free speech right irrespective of what technological means is used. A newspaper has a publisher function whether they are doing it on their website, in a printed copy or through the news alerts.” [..] Mehta argued in court Monday that Facebook’s decisions about data access were a “quintessential publisher function” and constituted “protected” activity, adding that this “includes both the decision of what to publish and the decision of what not to publish”.

David Godkin, an attorney for Six4Three, later responded: “For years, Facebook has been saying publicly … that it’s not a media company. This is a complete 180.” Questions about Facebook’s moral and legal responsibilities as a publisher have escalated surrounding its role in spreading false news and propaganda, along with questionable censorship decisions. Eric Goldman, a Santa Clara University law professor, said it was frustrating to see Facebook publicly deny that it was a publisher in some contexts but then claim it as a defense in court. “It’s politically expedient to deflect responsibility for making editorial judgements by claiming to be a platform,” he said, adding, “But it makes editorial decisions all the time, and it’s making them more frequently.”

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He did pull it off. But it may be too little too late. Biggest no-no: Model 3 was supposed to be $35,000. ended up at $78,000.

Tesla’s All-Nighter To Hit Production Goal Fails To Convince Wall Street (R.)

Tesla’s burning the midnight oil to hit a long-elusive target of making 5,000 Model 3 vehicles per week failed to convince Wall Street that the electric carmaker could sustain that production pace, sending shares down 2.3% on Monday. Tesla met the target by running around the clock and pulling workers from other projects, workers said. The company also took the unprecedented step of setting up a new production line inside a tent on the campus of its Fremont factory, details of which Chief Executive Elon Musk tweeted last month. Tesla’s heavily-shorted shares rose as much as 6.4% to $364.78 in early trading, but sank after several analysts questioned whether Tesla would be able to sustain the Model 3 production momentum, which is crucial for the long-term financial health of the company.

“In the interim, we do not see this production rate as operationally or financially sustainable,” said CFRA analyst Efraim Levy. “However, over time, we expect the manufacturing rate to become sustainable and even rise.” Levy cut CFRA’s rating on Tesla stock to “sell” from “hold.” Tesla, which Chief Executive Elon Musk hailed on Sunday as having become a “real car company,” said it now expects to boost production to 6,000 Model 3s per week by late August, signaling confidence about resolving technical and assembly issues that have plagued the company for months. Tesla also reaffirmed a positive cash flow and profit forecast for the year. Tesla has been burning through cash to produce the Model 3. Problems with an over-reliance on automation, battery issues and other bottlenecks have potentially compromised Tesla’s position in the electric car market as a host of competitors prepare to launch rival vehicles.

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NATO is “justified by the need to manage the security threats provoked by its enlargement.”.

The New York Times Squares off with the Truth, Again (AHT)

Whenever I’m having a rough day and need a pick-me-up, I turn to The New York Times’ editorial page. It’s always a gas to see how far the empire’s leading propaganda outfit is prepared to go in its mission to pull the wool over we the people’s gullible little eyes. The good editors have come through for me again with their latest entry, “Trump and Putin’s Too-Friendly Summit.” (Original title: “Trump and Putin: Best Frenemies for Life”). No doubt the original headline was deemed rather too impish for such a serious newspaper—it might, for instance, have alerted readers to the fact that the editorial’s content is not to be taken very seriously—and so was understandably jettisoned.

“One would think,” the editors write, “that the president of the United States would let Mr. Putin know that he faces a united front of Mr. Trump and his fellow NATO leaders, with whom he would have met days before the [Putin] summit in Helsinki.” Alas, during said meeting Trump reportedly remarked that “NATO is as bad as NAFTA”—the “free trade” agreement that has succeeded in decimating most of the manufacturing jobs spared by the automation wrecking ball. In other words, Trump does not necessarily think it’s a good idea to encircle Russia with a hostile military alliance whose existence, according to geopolitical expert Richard Sakwa, is “justified by the need to manage the security threats provoked by its enlargement.” (If you haven’t read Professor Sakwa’s comprehensive study of the Ukrainian crisis, Frontline Ukraine, put it at the top of your summer reading list.)

One notes the Turgidsonian delight with which the Times reminds us that, should push come to shove, we’ve got those Russki bastards outgunned. Of course, gullibles like you and I are to pay no mind to the fact that such a confrontation (a military one, for the Times brought up NATO) would almost certainly involve a nuclear exchange, rendering the disparity in manpower that so excites the Times totally meaningless. No, what’s important is that NATO has twenty-nine member states and counting, while the Warsaw Pact was dissolved twenty-seven years ago: ergo, unless he wants the old mailed fist, Putin had better ask “how high?” when we tell him to jump. One would be hard-pressed to come up with a more delusional assessment of where things stand.

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“We are in that constitutional crisis now, but just at the start of it.”

Anthony Kennedy and Our Delayed Constitutional Crisis (GP)

Like “swing vote” Justice Sandra Day O’Connor before him, “swing vote” justice Anthony Kennedy has been one of the worst Supreme Court jurists of the modern era. With swing-vote status comes great responsibility, and in the most consequential — and wrongly decided — cases of this generation, O’Connor and Kennedy were the Court’s key enablers. They • Cast the deciding vote that made each decision possible • Kept alive the illusion of the Court’s non-partisan legitimacy. Each of these points is critical in evaluating the modern Supreme Court. For two generations, it has made decisions that changed the constitution for the worse. (Small “c” on constitution to indicate the original written document, plus its amendments, plus the sum of all unwritten agreements and court decisions that determine how those documents are to be interpreted).

These horrible decisions are easy to list. They expanded the earlier decision on corporate personhood by enshrining money as political speech in a group of decisions that led to the infamous Citizens United case (whose majority opinion, by the way, was written by the so-called “moderate” Anthony Kennedy); repeatedly undermined the rights of citizens and workers relative to the corporations that rule and employ them; set back voting rights equality for at least a generation; and many more. After this next appointment, many fear Roe v. Wade may be reversed. Yet the Court has managed to keep (one is tempted to say curate) its reputation as a “divided body” and not a “captured body” thanks to its so-called swing vote justices and the press’s consistent and complicit portrayal of the Court as merely “divided.”

The second point above, about the illusion of the Court’s legitimacy, is just as important as the first. If the Court were ever widely seen as acting outside the bounds of its mandate, or worse, seen as a partisan, captured organ of a powerful and dangerous political minority (which it certainly is), all of its decisions would be rejected by the people at large, and more importantly, the nation would plunged into a constitutional crisis of monumental proportions. We are in that constitutional crisis now, but just at the start of it. We should have been done with it long ago. Both O’Connor and Kennedy are responsible for that delay.


Image credit: Mike Thompson / Detroit Free Press

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A tale of two refugees
Putin: Snowden is free to do whatever he wants
Lenin: I ordered Assange to be gagged and isolated and am coordinating “next steps” with US

‘Snowden is the Master of His Own Destiny’ – Russia (TeleSur)

United States President Donald Trump is expected to pressure Russia to hand over NSA whistleblower Edward Snowden in exchange for sanctions relief at the upcoming Trump-Putin summit; however, Russia has emphasized that they “are not in a position” to expel Snowden and will “respect his rights” if any such attempt is made. “I have never discussed Edward Snowden with (Donald Trump’s) administration,” Russian Foreign Minister Sergey Lavrov said to Channel 4 reporters. “When he (Putin) was asked the question, he said this is for Edward Snowden to decide. We respect his rights, as an individual. That is why we were not in a position to expel him against his will because he found himself in Russia even without a U.S. passport, which was discontinued as he was flying from Hong Kong.”

Snowden, who is being prosecuted in the United States for leaking classified documents that showed surveillance abuse by U.S. intelligence agencies, was given political asylum in Russia after his passport was revoked. “Edward Snowden is the master of his own destiny,” Lavrov said. Trump is meeting with Russian President Vladimir Putin on July 16 in Helsinki, where Putin is expected to push for an end to U.S. sanctions. Trump has said he would like better relations with Russia, perhaps as a way of pulling them away from China, but Trump’s opponents in the United States are already applying political pressure on him for holding the summit, in the midst of the tensest U.S.-Russian relations since the height of the Cold War.

The fate of Wikileaks founder Julian Assange also lay in the balance when U.S. Vice President Mike Pence met with Ecuador’s President Lenin Moreno this week. “The vice president raised the issue of Mr. Assange. It was a constructive conversation. They agreed to remain in close coordination on potential next steps going forward,” a White House official said in a statement.

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Jun 252018
 
 June 25, 2018  Posted by at 8:45 am Finance Tagged with: , , , , , , , , , , ,  


Edward Hopper Cape Cod morning 1950

 

China’s Central Bank Frees Up $100 Billion In Funding As Trade War Looms (SCMP)
US Plans Limits On Chinese Investment In US Technology Firms (R.)
Tit-for-Tat Tariff Battle Could Spark Downturn In Global Economy – BIS (G.)
Why The Debt Deal With The EU Is Bad For Greece (AlJ)
UK Minister Urges Gov’t to Ignore BMW, Airbus Brexit Warnings (Sp.)
Some Of The Pictures Of Border Kids That Haunt Me Most Are From 2014 (PI)
Migration Is Threat To EU Free Travel Area – Italian Prime Minister (G.)
Italy Tells Rescue Ships Not To Help Refugees In Peril At Sea (Ind.)
The US, Under Obama, Created Europe’s Refugee Crisis (Zuesse)
Merkel’s Troubles Began in Syria and End in Italy (Luongo)
Erdogan To Gain Sweeping New Powers After Declaring Election Victory (Ind.)
Erdogan Says Turkey Will Continue Advancing In Syria (R.)
‘Tourists Go Home, Refugees Welcome’ – Barcelona (G.)

 

 

Bankruptcies. Nothing to do with a trade war.

China’s Central Bank Frees Up $100 Billion In Funding As Trade War Looms (SCMP)

China’s central bank said on Sunday it would unlock at least US$100 billion for the country’s lenders to bail out troubled state firms and to help small businesses, as Beijing tries to shore up growth under the shadow of a trade war with the United States. The People’s Bank of China (PBOC) said in a statement it would cut the reserve requirement ratio, the share of deposits lenders must put aside with the central lender, for commercial banks by half a percentage point from July 5. The cut would free up 500 billion yuan (US$76.86 billion) in funds for the big banks, including Industrial and Commercial Bank of China and China Construction Bank, to finance debt-to-equity swaps, a measure often used for troubled state enterprises.

It would also free up 200 billion yuan for smaller banks to boost lending to small businesses across the country, the central bank said. The move is a “targeted operation” aimed at supporting the weak links in the economy and not a change to the country’s “neutral and prudent” monetary policy stance, the PBOC said. Although the statement did not mention China’s trade row with the United States, or its recently released weaker economic indicators, the reduction in the reserve ratio will come into effect a day before the first of US President Donald Trump’s additional tariffs on Chinese products are due to be implemented.

Deng Haiqing, a visiting scholar at Renmin University of China, wrote in a note that the PBOC’s move represented a significant shift in China’s policy, and was not just fine-tuning. “The authorities have started to see the pain inflicted on the real economy from deleveraging, and they are trying to reduce it,” he said.

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Makes sense.

US Plans Limits On Chinese Investment In US Technology Firms (R.)

The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official briefed on the matter said on Sunday. The official, whose comments matched a report by the Wall Street Journal, emphasized that the Chinese ownership threshold may change before the restrictions are announced on Friday. The move marks another escalation of President Donald Trump’s trade conflict with China, which threatens to roil financial markets and dent global growth.

Tariffs on $34 billion worth of Chinese goods, the first of a potential total of $450 billion, are due to take effect on July 6 over U.S. complaints that China is misappropriating U.S. technology through joint venture rules and other policies. The Treasury investment restrictions are expected to target key sectors, including several China is trying to develop as part of its “Made in China 2025” industrial plan, the U.S. official said. Among its objectives, the plan aims to upgrade China’s capabilities in advanced information technology, aerospace, marine engineering, pharmaceuticals, advanced energy vehicles, robotics and other high-technology industries. The Wall Street Journal also said the U.S. Commerce Department and National Security Council were proposing “enhanced” export controls to keep such technologies from being shipped to China.

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Give me a break: “Ten years after the start of the global crisis, central bankers should feel satisfied with the state of the global economy..”

Tit-for-Tat Tariff Battle Could Spark Downturn In Global Economy – BIS (G.)

An escalation of protectionist measures could spark a fresh downturn just as the global economy is picking itself up after the last one, the international body that represents the world’s central banks has warned. The Bank for International Settlements (BIS) said there were already signs that “the ratcheting up of rhetoric” was weighing on investment. It comes as Donald Trump steps up hostility with some of the US’s key trading partners and allies, raising fears of a full-blown trade war. What began with tariffs imposed on steel and aluminium imported into the US has turned into a broader trade battle with trading partners including China and the EU, as they respond with retaliatory measures.

The US president is threatening Beijing with tariffs on $200bn of goods imported from China and on Friday Trump threatened to impose tariffs on European cars after Brussels introduced levies on American goods such as Levi’s jeans, bourbon whiskey and Harley-Davidson motorbikes. Agustín Carstens, the general manager of BIS, said an increase in protectionist measures was a key vulnerability in the global economy that threatened to undermine growth and could spread to financial markets. “One possible trigger of an economic slowdown or downturn could be an escalation of protectionist measures. Its impact could be very significant, if such escalation was seen as threatening the open multilateral trading system.

“Indeed, there are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting investment.” In its annual report on the challenges facing the global economy, BIS said that the ultra-low interest rates implemented by central banks as an emergency response to the financial crisis had served the global economy well but said loose monetary policy was posing a threat to stability. “Ten years after the start of the global crisis, central bankers should feel satisfied with the state of the global economy, after expansionary and unconventional monetary policies were left to bear the burden of recovery,” Carstens said. “But this has left a legacy of higher debts on public and private balance sheets. Still reliant on central bank support and with less room for manoeuvre. Central banks cannot continue be the only game in town.”

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This is where the EU started collapsing. Immigration issues will do the rest.

Why The Debt Deal With The EU Is Bad For Greece (AlJ)

[..] there is more to this deal than the arithmetic of long-term debt sustainability. At the heart of Greece’s protracted fiscal crisis was always a highly contentious social and political question about the real meaning of European solidarity: Who should be made to pay for the presumed “profligacy” of successive Greek governments, or the “excessive risk-taking” of profit-hungry private creditors in the lead-up to the crisis? The course of action that European leaders ended up settling on turned out to be very one-sided in this respect: Greece alone was to blame for its predicament, and therefore, Greece alone would be made to pay for it.

The real motivation behind the bailouts was always to safeguard the survival of a dangerously over-exposed European banking system – but this fact was quickly obscured. Instead, right-wing politicians and the tabloid media whipped up a frenzy of anti-Greek sentiment. The Greeks were widely portrayed as splurging the money on lavish pensions and long beach holidays – or on “booze and women,” as former Dutch finance minister Jeroen Dijsselbloem infamously put it last year. But as research by the European School of Management and Technology in Berlin has since shown, 95 percent of the bailout funds that were supposedly “given” to Greece actually went straight back to private creditors.

Meanwhile, the bailout loans themselves were added to Greece’s overall debt, and the country continued to pay interest on them over subsequent years. In other words, the Greek people never received any handouts from their European creditors. Meanwhile, the Greek government reduced the size of its public sector by 26 percent, cutting pensions and welfare spending by 70 percent and slashing the public health budget in half. As a result, incomes fell by one-third and unemployment skyrocketed to a peak of over 28 percent, unleashing a veritable humanitarian catastrophe.

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But Jeremy, they have shareholders.

UK Minister Urges Gov’t to Ignore BMW, Airbus Brexit Warnings (Sp.)

Speaking to the BBC, Health Secretary Jeremy Hunt said that businesses sounding the alarm about post-Brexit job losses actually affect the UK’s negotiations with the European Union. According to him, the best way for companies to achieve the “clarity and certainty” they need is to support the PM in her talks with Europe. Hunt suggested that a “Brexit fudge” would be likely if Theresa May’s attempts to “deliver the best possible Brexit, a clean Brexit” were undermined. The statement comes several days after BMW, a German-based car giant which employs around 8,000 people in Britain, threatened to start preparing “contingency plans” if it doesn’t get details on the UK’s post-Brexit trading arrangements by the end of summer.

BMW echoed the warning of the French aviation giant Airbus, which announced on June 21 that a no-deal scenario would have a “catastrophic” outcome and would force it to reconsider its long-term position in the UK, putting some 14,000 UK-based jobs at risk. With the UK government failing to provide clarity on Brexit for the time being, a recent survey has found that nearly half of business leaders from the rest of Europe have cut investment in the country. The poll also shows that three quarters of big companies want the bloc to make concessions to Britain to enable a better trading relationship after London’s divorce with Brussels.

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I think it’s important that we see the big picture here. You won’t find a solution if you can’t define the problem. This has been going on for years.

Some Of The Pictures Of Border Kids That Haunt Me Most Are From 2014 (PI)

The other day, a veteran immigration lawyer named R. Andrew Free shared an anecdote that sheds some really critical light on what’s happening on America’s southern border — a tale that not surprisingly got buried amid a sandstorm of news about mothers not knowing where their kids are, audiotapes of anguished, crying children, and now the protests to end the human rights abuses that the current government is undertaking in our name. What Free described on Twitter was an opportunity that few people get: A chance to personally confront the president of the United States and question him about his immigration policies.

Free wrote that the answers he received from the so-called leader of the free world “shook me to my core.” The immigration lawyer had been to two large detention centers in Texas where U.S. officials were holding hundreds of migrant families from Central America, often for months at a time. Free said some of the conditions at these makeshift detention camps were appalling. “I remember hearing the constant, violent coughing and sickness of small children, and the worry of their mothers who stood in the sun outside the clinic all day only to be told their kids should ‘drink water,’” Free tweeted. “I remember nearly doubling over when I saw the line of strollers.”

When Free had a chance encounter with the president at a political event, he warned him that the detention centers would be “a stain on his legacy.” He said the president wanted to know if Free was an immigration lawyer — implying that everyday citizens weren’t worried about what goes on at the border — and then said, according to Free: “I’ll tell you what we can’t have, it’s these parents sending their kids here on a dangerous journey and putting their lives at risk.” The message that Free took away was that the president saw family detention as a deterrent to keep more refugees from coming. This happened in 2015. The president with the looming stain on his legacy was Barack Obama.

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There goes Merkel.

Migration Is Threat To EU Free Travel Area – Italian Prime Minister (G.)

Italy has warned the future of the EU’s border-free travel zone is at stake as it sought to ease the pressure on Mediterranean countries arising from hosting refugees and migrants. Italy’s prime minister, Giuseppe Conte, was speaking at a mini-EU summit in Brussels, where he said a plan from his government presented at the summit represented a paradigm shift in dealing with migration. But his ambitious move to change what he called obsolete EU rules that govern who is responsible for asylum claimants is likely to encounter opposition from other countries.

The 10-point plan by his new populist government revives many ideas proposed by previous Italian governments, such as calling on all EU member states to share responsibility for migrants rescued at sea, and countries being docked EU funds if they refuse to take in refugees. Leaders from 16 EU countries put on a show of unity, as they left an emergency summit in Brussels on Sunday. The unorthodox meeting, boycotted by several EU countries, was called to shore up the conservative coalition government of the German chancellor, Angela Merkel, which is riven by a row over migration. Spain’s prime minister, Pedro Sánchez, said the talks had been “frank and open,” although they had not resulted in “any concrete consequences or conclusions”.

Sunday’s ad-hoc meeting sets the stage for a long-planned gathering of all EU leaders on Thursday, where it will be harder to mask Europe’s deep divisions on migration. Hungary’s prime minister, Viktor Orbán, can be expected to repeat his fierce opposition to migrant quotas, a policy opposed by other central European countries.

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Salvini is going to Libya this week.

Italy Tells Rescue Ships Not To Help Refugees In Peril At Sea (Ind.)

Italy’s far-right government told aid ships in the Mediterranean Sea not to rescue thousands of refugees in peril on Sunday – despite receiving six separate distress calls from unseaworthy boats. Officials said the vessels – carrying people from North Africa to Europe – were all in Libyan waters and, therefore, Libyan responsibility. The Spanish aid group, Proactiva Open Arms, which had ships in the area, said it had been specifically told not to help. Matteo Salvini, Italy’s interior minister, said in a tweet: “It’s right that the Libyan authorities intervene, as they’ve been doing for days, without having the NGOs interrupt them and disturb them.”

The latest revelation follows a fortnight in which Italy has refused permission for aid ships carrying rescued refugees to dock in its ports. One, the Aquarius with 630 people on board, had to reroute to Spain. Another, Lifeline holding 240 people, remained at sea over the weekend. Mr Salvini has said such refugees would only see his country “on a postcard”. Italy has said it is seeing a constant stream of people coming illegally from Africa, and has threatened to withhold payments to the EU unless a more even way of dispersing refugees is agreed.

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Zuesse misses the role that Britain -remember Blair, Cameron?- and France have played.

The US, Under Obama, Created Europe’s Refugee Crisis (Zuesse)

The current US President, Donald Trump, claimed on June 18th, that Germany’s leadership, and the leadership in other EU nations, caused the refugee-crisis that Europe is facing: “The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition. Crime in Germany is way up. Big mistake made all over Europe in allowing millions of people in who have so strongly and violently changed their culture!” The US Government is clearly lying about this. The US Government itself caused this crisis that Europeans are struggling to deal with.

Would the crisis even exist, at all, if the US had not invaded and tried to overthrow (and in some instances actually overthrown) the governments in Libya, Syria, and elsewhere — the places from which these refugees are escaping? The US Government, and a few of its allies in Europe (the ones who actually therefore really do share in some of the authentic blame for this crisis) caused this war and government-overthrow, etc., but Germany’s Government wasn’t among them, nor were many of the others in Europe. If the US Government had not led these invasions, probably not even France would have participated in any of them. The US Government, alone, is responsible for having caused these refugees.

The US Government itself created this enormous burden to Europe, and yet refuses to accept these refugees that it itself had produced, by its having invaded and bombed to overthrow (among others) Libya’s Government, and then Syria’s Government, and by its aiding Al Qaeda in organizing and leading and arming, jihadists from all over the world to come to Syria to overthrow Syria’s Government and to replace it with one that would be selected by the US regime’s key Middle Eastern ally, the Saud family, who own Saudi Arabia, including its Government, and who are determined to take over Syria.

Trump blames Angela Merkel for — in essence — having been an ally of the US regime, a regime of aggression which goes back decades, and which Trump himself now is leading, instead of his ending, and of his restoring democracy to the United States, and, finally, thus, his restoring freedom (from America), and peace, to other nations, in Europe, and elsewhere (such as in Syria, Yemen, etc.).

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Chaos.

Merkel’s Troubles Began in Syria and End in Italy (Luongo)

It looks like we are entering the end of Merkel-ism in Europe. German Chancellor Angela Merkel is approaching her final days in that position. Be it next week or the end of this year, we are looking at unprecedented change in European politics thanks to Merkel’s insistence on taking in millions of Syrian and North African refugees from chaos unleashed by aggressive and insane foreign policy actions by the U.S. and supported by the EU. From the destruction of Libya to the manufactured ‘civil war’ in Syria the displacement of millions of people was created from the desired to destabilize the entire region for the betterment of the U.S. and its allies in the region, Saudi Arabia and Israel. Jordan, Turkey and Qatar were originally involved but have since jumped ship in the wake of Russia’s intervention there.

Merkel’s current plight politically stems from her intractability in accepting the chain of events that led us to this point. All of the problems of Europe now stem from the collision of these foreign policy disasters and the economic degradation of the euro-zone from the flawed structure of the euro itself. And the insistence of the U.S./Saudi/Israeli alliance to continue trying to manufacture a win in Syria that is clearly beyond their control at this point only tightens the noose around Merkel’s neck.

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Predictable but still scary.

Erdogan To Gain Sweeping New Powers After Declaring Election Victory (Ind.)

Recep Tayyip Erdogan has been declared triumphant in Turkey’s presidential vote by the country’s electoral board, amid accusations of manipulation by his opponents. Mr Erdogan had earlier claimed he had won after state run news outlets said he was victorious. An announcement from the broadcaster TRT came soon after the Anadolu Agency, who reported that he had won 52.51 per cent of the vote with 98.4 per cent of the total counted. Independent election monitors and the opposition both maintained that less than half the votes had been counted at that point. The president’s main rival, Muharrem Ince – who state media said had won 30.72 per cent of the vote – urged observers and his supporters to stay on at counting centres, warning that vote rigging was likely to place if they left under the impression that the result had been decided.

But speaking in the early hours of Monday, the head of the Supreme Election Council Sadi Guven confirmed the result. He said that Mr Erdogan “received the absolute majority of all valid votes” and the remaining ballots would not affect the outcome. In his speech Mr Erdogan had warned: “The Turkish public has mandated me as president according to unofficial results. I hope nobody will damage democracy by casting a shadow on this election and its results to hide their failure.”

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Doesn’t waste any time.

Erdogan Says Turkey Will Continue Advancing In Syria (R.)

Turkey will continue to “liberate Syrian lands” so that refugees can return to Syria safely, President Tayyip Erdogan said in an election victory speech on Monday. Speaking to supporters from the balcony of his ruling AK Party’s headquarters in Ankara after Sunday’s presidential and parliamentary elections, Erdogan said Turkey would also act more decisively against terrorist organizations.

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“In 1990 the city received 1.7 million tourists; last year the figure was 32 million – roughly 20 times the resident population.”

‘Tourists Go Home, Refugees Welcome’ – Barcelona (G.)

Early last year, around 150,000 people in Barcelona marched to demand that the Spanish government allow more refugees into the country. Shortly afterwards, “Tourists go home, refugees welcome” started appearing on the city’s walls; soon the city was inundated with protestors marching behind the slogans “Barcelona is not for sale” and “We will not be driven out”. What the Spanish media dubbed turismofobia overtook several European cities last summer, with protests held and measures taken in Venice, Rome, Amsterdam, Florence, Berlin, Lisbon, Palma de Mallorca and elsewhere in Europe against the invasion of visitors. But in contrast to many, as fiercely as Barcelona has pushed back against tourists, it has campaigned to welcome more refugees.

When news broke two weeks ago that a rescue ship carrying 629 migrantswas adrift in the Mediterranean, mayor Ada Colau was among the first to offer those aboard safe haven. Is it really the case that Barcelona would prefer to receive thousands of penniless immigrants rather than the millions of tourists who last year spent around €30bn in the city? The short answer, it appears, is yes. Increasingly it is tourism, not immigration, that people see as a threat to the city’s very identity – though numbers of both have risen exponentially in recent decades. In 2000 foreigners accounted for less than 2% of the population; a mere five years later, the figure was 15% (266,000). In 2018, it is now officially 18% although, according to Lola López, the city’s integration and immigration commissioner, the true figure is closer to 30%.

The influx of new residents has radically changed the face of the city, but Barcelona has not seen a single anti-immigrant protest of any substance – nor is immigration an issue at local elections. According to research by Paolo Giaccaria, a social scientist at the University of Turin, the case of Barcelona “establishes a connection between two types of mobility that are at odds with each other: northern tourism and southern migration. It subverts the common feeling about which kind of mobility is desirable which is not.” Immigration has changed the city, but tourism is destabilising it – and even people in the industry agree that it can’t go on like this. In 1990 the city received 1.7 million tourists; last year the figure was 32 million – roughly 20 times the resident population. The sheer volume of visitors is driving up rents, pushing residents out of neighbourhoods, and overwhelming the public space.

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Jun 242018
 
 June 24, 2018  Posted by at 9:10 am Finance Tagged with: , , , , , , , , ,  


Ivan Aivazovsky The Ninth Wave 1849

 

Mueller’s Fruit of the Poisonous Tree (WSJ)
Refugees Now Make Up 1% Of The World’s Population (Wef)
There’s No Migration Crisis – The Crisis Is Political Opportunism (G&M)
Divided EU Leaders Convene For Emergency Talks On Migration (R.)
Italy Says ‘Arrogant’ France Could Become Main Enemy On Migration (R.)
Xi Says China Must Lead Way In Reform Of Global Governance (R.)
Turkey’s Erdogan Faces Resurgent Opposition In Twin Election Test (AFP)
Huge Anti-Brexit Demonstration Throngs Central London (G.)
Airbus Warns Of Harsh Brexit Reality With 100,000 Jobs Under Threat (Ind.)
Bitcoin Drops to $5,860, Lowest since October 2017 (WS)
The Eurozone Isn’t Ready For The Next Big Shock (Pol.eu)
Shooting The Messenger: Criminalising Journalism (G.)

 

 

Two lawyers in the WSJ warning that the FBI had so tainted the process, Mueller should at a minimum pause his investigation.

Mueller’s Fruit of the Poisonous Tree (WSJ)

Special counsel Robert Mueller’s investigation may face a serious legal obstacle: It is tainted by antecedent political bias. The June 14 report from Michael Horowitz, the Justice Department’s inspector general, unearthed a pattern of anti-Trump bias by high-ranking officials at the Federal Bureau of Investigation. Some of their communications, the report says, were “not only indicative of a biased state of mind but imply a willingness to take action to impact a presidential candidate’s electoral prospects.” Although Mr. Horowitz could not definitively ascertain whether this bias “directly affected” specific FBI actions in the Hillary Clinton email investigation, it nonetheless affects the legality of the Trump-Russia collusion inquiry, code-named Crossfire Hurricane.

Crossfire was launched only months before the 2016 election. Its FBI progenitors—the same ones who had investigated Mrs. Clinton—deployed at least one informant to probe Trump campaign advisers, obtained Foreign Intelligence Surveillance Court wiretap warrants, issued national security letters to gather records, and unmasked the identities of campaign officials who were surveilled. They also repeatedly leaked investigative information.

Mr. Horowitz is separately scrutinizing Crossfire and isn’t expected to finish for months. But the current report reveals that FBI officials displayed not merely an appearance of bias against Donald Trump, but animus bordering on hatred. Peter Strzok, who led both the Clinton and Trump investigations, confidently assuaged a colleague’s fear that Mr. Trump would become president: “No he won’t. We’ll stop it.” An unnamed FBI lawyer assigned to Crossfire told a colleague he was “devastated” and “numb” after Mr. Trump won, while declaring to another FBI attorney: “Viva le resistance.”

[..] The totality of the circumstances creates the appearance that Crossfire was politically motivated. Since an attempt by federal law enforcement to influence a presidential election “shocks the conscience,” any prosecutorial effort derived from such an outrageous abuse of power must be suppressed. The public will learn more once the inspector general finishes his investigation into Crossfire’s genesis. But given what is now known, due process demands, at a minimum, that the special counsel’s activity be paused. Those affected by Mr. Mueller’s investigation could litigate such an argument in court. One would hope, however, that given the facts either Mr. Mueller himself or Deputy Attorney General Rod Rosenstein would do it first.

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War and peace.

Refugees Now Make Up 1% Of The World’s Population (Wef)

If all the world’s refugees came together as a single nation they would collectively create one of the largest countries on Earth. According to the UNHCR, there are now almost 70 million forcibly displaced people worldwide, around 1% of the world’s population – the highest number in modern history. The number of refugees has steadily increased since 1951 but has jumped dramatically in the last 10 years. That’s mostly because of the Syrian civil war which began in 2011 and has since forced millions to flee their homes and seek refuge in neighbouring countries and in Europe. The most recent Global Peace Index, an annual report produced by Australian think tank the Institute for Economics and Peace, has found that for the fourth year in a row, overall levels of peace around the world have deteriorated.

92 countries have seen declining peace, while 71 countries have improved. Increased terrorist activity, conflicts in the Middle East and rising tensions in Eastern Europe and north-east Asia have all contributed to declining levels of peace. Even the most peaceful regions in the world according to the index – Europe, North America, Asia-Pacific, and South America – have all recorded declines. The rising number of refugees and heightened political tensions in Europe and the US have meant that even stable countries have seen their scores lowered. For instance, 23 out of 36 countries in Europe deteriorated last year. Now in its seventh year of civil war, Syria is the least peaceful country in the world, along with Afghanistan, South Sudan, Iraq and Somalia.

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But the article above talks about the highest number of refugees in history.

There’s No Migration Crisis – The Crisis Is Political Opportunism (G&M)

“Desperate times at our southern border call for desperate measures on the other side:” That was the very loud message from right-wing leaders in the United States and Europe this week. Their desperate measures shocked the world. The Trump administration’s policy requiring thousands of infants and children to be seized from their parents and held in detention left leaders and citizens aghast (and its most inhumane elements remain in place). On the other side of the Atlantic, we watched the new Italian Deputy Prime Minister Matteo Salvini order boatloads of migrant families turned back into the sea, following his call last year to deal with immigration with a “mass cleansing, street by street, quarter by quarter.”

Most reasonable people agree that these are not humane ways to deal with what these politicians call a “migration emergency.” But too many people take their word that there actually is some sort of a migration emergency. To be clear: There is no immigration crisis in 2018. Not in the United States, not in Europe, not in Canada. “It is not a migration emergency – it’s a political emergency,” William Lacy Swing, the American director-general of the International Organization for Migration, said this week. The IOM’s 8,400 staff monitor the movement of people around the world, and while they’ve identified plenty of challenges, there aren’t any overwhelming or unmanageable movements of people this year. “The overwhelming majority of migration is taking place in a regular, safe and orderly fashion,” he said.

“There is a very serious problem of communication, but what we’re seeing is that the numbers are pretty modest,” said Angel Gurria, secretary-general of the Organization for Economic Co-operation and Development. The OECD, which advises 34 countries (including the United States and Canada) on immigration policy, this week released its annual report on migration levels in OECD countries. It showed a fall in numbers to ordinary, non-crisis levels. The United States has always had movement, some of it undocumented, across its southern border. The 2018 numbers are somewhat higher than the 2017 numbers – but they’re a small fraction, less than a third, of the rate experienced in the 2000s under George W. Bush, or in the 1990s under Bill Clinton, or in the 1980s under Ronald Reagan. Since 2008, illegal crossings have fallen to lows not seen since the early 1970s.

What has risen, since 2014, has been the far smaller fraction of people on the Mexican border who are refugee claimants from Guatemala, Honduras and especially El Salvador. Those countries are experiencing crises of political and civic violence, and those fleeing have legitimate claims for asylum under the Refugee Convention, to which Washington subscribes. They are not illegal and they’re certainly not dangerous.

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No agreement seems possible anymore.

Divided EU Leaders Convene For Emergency Talks On Migration (R.)

European Union leaders gather in Brussels on Sunday in an attempt to bridge their deep divisions over migration, an issue that has been splitting them for years and now poses a fresh threat to German Chancellor Angela Merkel. Though arrivals across the Mediterranean are only a fraction of what they were in 2015, when more than a million people reached Europe, a recent opinion poll showed migration was the top concern for the EU’s 500 million citizens. Under heavy pressure from voters at home, EU leaders have been fighting bitter battles over how to share out asylum seekers in the bloc. Unable to agree, they have become more restrictive on asylum and tightened their external borders to let fewer people in.

They have given money and aid to countries in Northern Africa and the Middle East to keep people from heading for Europe. Only 41,000 refugees and migrants have made it to the EU across the sea so far this year, U.N. figures show. But the issue has in the meantime won and lost elections for politicians across the bloc from Italy to Hungary, with voters favoring those advocating a tougher stance on migration. On Saturday, French President Emmanuel Macron said France favored financial sanctions for EU countries that refuse migrants with proven asylum status. Merkel is under pressure because her longtime conservative allies, Bavaria’s Christian Social Union (CSU), have threatened to start turning away at the German border all asylum seekers already registered elsewhere in the EU unless the bloc reaches an agreement on distributing them more evenly.

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Not smart Macron.

Italy Says ‘Arrogant’ France Could Become Main Enemy On Migration (R.)

Italy on Saturday said “arrogant” France risked becoming its “No.1 enemy” on migration issues, a day before European leaders convene in Brussels for a hastily arranged meeting on the divisive topic. In answer to comments by French President Emmanuel Macron, who said migration flows toward Europe had reduced compared with a few years ago, Italy’s Deputy Prime Minister Luigi Di Maio said Macron’s words showed he was out of touch. “Italy indeed faces a migration emergency and it’s partly because France keeps pushing back people at the border. Macron risks making his country Italy’s No.1 enemy on this emergency,” Di Maio wrote on his Facebook page.

Macron said European cooperation had managed to cut migration flows by close to 80 percent and problems stemmed from “secondary” movements of migrants within Europe. “The reality is that Europe is not experiencing a migration crisis of the same magnitude as the one it experienced in 2015,” the French president said. “A country like Italy has not at all the same migratory pressure as last year. … The crisis we are experiencing today in Europe is a political crisis.” But Italy’s Interior Minister and Deputy Prime Minister Matteo Salvini said his country had faced 650,000 arrivals by sea over the past four years, 430,000 asylum requests and the hosting of 170,000 “alleged refugees” for an overall cost of more than 5 billion euros ($5.8 billion).

“If for the arrogant President Macron this is not a problem, we invite him to stop insulting and to show instead some concrete generosity by opening up France’s many ports and letting children, men and women through at Ventimiglia,” he said in a statement, referring to the northwestern Italian town at the border with France.

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Filling a void.

Xi Says China Must Lead Way In Reform Of Global Governance (R.)

China must lead the way in reforming global governance, the foreign ministry on Saturday cited President Xi Jinping as saying, as Beijing looks to increase its world influence. China has sought a greater say in global organizations such as the World Bank, the IMF and UN, in line with its growing economic and diplomatic clout. Since taking office in late 2012, Xi has taken a more muscular approach, setting up China’s own global bodies like the Asian Infrastructure Investment Bank and launching his landmark Belt and Road project to build a new Silk Road. Beijing has cast itself a responsible member of the international community, especially as President Donald Trump withdraws the United States from agreements on climate change and Iran, and as Europe wrestles with Brexit and other issues.

China must “uphold the protection of the country’s sovereignty, security and development interests, proactively participate in and show the way in reform of the global governance system, creating an even better web of global partnership relationships”, Xi said in comments reported at the end of a two-day high-level Communist Party meeting. This would help create conditions for building a modern, strong socialist country, the ministry cited him as saying at the meeting attended by officials from the foreign and commerce ministries, the military, the propaganda department and the Chinese embassy in the United States.

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Blocking the opposition from TV.

Turkey’s Erdogan Faces Resurgent Opposition In Twin Election Test (AFP)

Turks began voting Sunday in dual parliamentary and presidential polls seen as President Recep Tayyip Erdogan’s toughest election test, with the opposition revitalised and his popularity at risk from growing economic troubles. Erdogan has overseen historic change in Turkey since his Islamic-rooted ruling party first came to power in 2002 after years of secular domination. But critics accuse the Turkish strongman, 64, of trampling on civil liberties and displaying autocratic behaviour. Polling stations opened at 0500 GMT and were due to close at 1400 GMT, with the first results expected late in the evening.

Over 56 million eligible voters can for the first time cast ballots simultaneously in the parliamentary and presidential elections, with Erdogan looking for a first round knockout and an overall majority for his ruling Justice and Development Party (AKP). But both these goals are in doubt in the face of an energetic campaign by his rival from the secular Republican People’s Party (CHP), Muharrem Ince, who has mobilised hundreds of thousands in mega rallies, and a strong opposition alliance in the legislative polls. Erdogan remains the favourite to hold on to the presidency – even if he needs a second round on July 8 – but the outcome is likely to be much tighter than he expected when calling the snap polls one-and-a-half years ahead of schedule.

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It’s going to take demos ten times that size. You need millions on the streets.

Huge Anti-Brexit Demonstration Throngs Central London (G.)

At least 100,000 people took to the streets yesterday as part of the largest ever demonstration of support for a new referendum over Britain’s final Brexit deal. With more businesses poised to issue dire Brexit warnings this week and senior Tories already drawing up plans to soften Theresa May’s exit proposals, organisers of the march on Sunday said it showed Britain’s departure from the European Union was not a “done deal”. A former aide to Margaret Thatcher, several Labour MPs and pro-EU campaigners from across Britain took part in the demonstration, marking two years since the Brexit vote. Organisers said that people from every region and walk of life were among those who took part in the march down Whitehall.

Conservative supporters marched alongside Labour voters and Liberal Democrats during the protest, which saw angry denunciations of the chaos that has ensued inside government since the Brexit vote. Labour’s leadership also came under pressure at the march for refusing to back a second public vote. There were chants of “Where’s Jeremy Corbyn” from the crowd. The Labour leader was on a visit to a Palestinian refugee camp. Anger on the streets at the prime minister’s handling of the Brexit negotiations is being accompanied by a renewed push from industry to ensure that trade with Europe is not disrupted as a result of leaving. More prominent manufacturing firms are set to issue warnings about Britain’s Brexit negotiations within days, after Airbus and BMW broke cover to say they could reconsider their UK investment plans unless a Brexit deal was reached keeping Britain closely aligned with Europe.

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Reality should dawn on the British people.

Airbus Warns Of Harsh Brexit Reality With 100,000 Jobs Under Threat (Ind.)

“The dawning of reality,” is how Tom Williams, the chief operating officer of Airbus, described it, after warning that Airbus is seriously considering pulling out of the UK in the event of a no deal Brexit. It’s worth taking a moment to consider what that would mean. The firm employs 14,000 people directly in this country. It has provided 4,000 high quality apprentices over the last decade, thus supporting a flagship policy of the Government. It contributed £1.7bn to the UK exchequer in tax last year, before you consider the economic contributions of its employees, who are in well paid, unionised jobs. It is estimated that Airbus supports another 86,000 people through its supply chain, bringing the total number of jobs at risk to 100,000.

The companies in that supply chain, and their employees, further add to the tax take, and contribute to the economy. If, when, Airbus does go, if it seeks alternatives when it comes to the production of its wings, those jobs will not be replaced. Once they are gone, they are gone. Perhaps the Brextremists expect the people who held them to pick the fruit that the soft fruit industry has been warning about rotting in the fields for months? It once again puts the shockingly mendacious talk by ministers of a “Brexit dividend” to fund the NHS – even Chancellor Philip Hammond has now descended into that pit – into context. The economic damage if Airbus goes, and if other companies; car makers, and their suppliers, for example, do the same, no one will be talking about dividends. Quite the reverse.

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Wolf Richter is no fan.

Bitcoin Drops to $5,860, Lowest since October 2017 (WS)

Bitcoin dropped to $5,860 at the moment, below $6,000 for the first time since October 29, 2017. It has plummeted 70% in six months from the peak of $19,982 on December 17. There have been many ups on the way down, repeatedly dishing out fakes hopes, based on the ancient theory that nothing goes to hell in a straight line (chart via CoinMarketCap): If you’re a True Believer and you just know that bitcoin will go to $1 million by the end of 2020, as promised by a whole slew of gurus, including John McAfee – “I will still eat my dick if wrong,” he offered helpfully on November 29 – well you probably don’t need this sort of punishment. You’re suffering enough already. And I apologize. I feel your pain.

I was a true believer too a few times, and every single time it was a huge amount of fun, and I felt invincible and indestructible until I got run over by events. With 17.11 million bitcoins circulating today, if bitcoin were at $1 million today, it would amount to a market cap of $17 trillion. But new bitcoins are constantly being created out of nothing (“mined”) by computers that suck up enormous amounts of electricity. And by the end of 2020, there will be many more bitcoins, and if the price were $1 million each, the total would amount to about the size of US GDP. This doesn’t even count all the other cryptos that would presumably boom in a similar manner, amounting perhaps to half of global GDP, or something.

People who promote this brainless crap are either totally nuts or the worst scam artists. But I feel sorry for the True Believers whose fiat money got transferred and will continue to get transferred from them to others. So OK, there’s still some time left. It’s not the end of 2020 yet. And True Believers still have room for the fake hope of a $1-million bitcoin. But at the moment, bitcoin is even worse – incredibly – than one of the worst fiat currencies in the world, the Argentine peso, which has plunged “only” 35% over the period during which bitcoin plunged 70%. That takes some doing!

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France and Germany should stop trying to dictate the future. It will backfire.

The Eurozone Isn’t Ready For The Next Big Shock (Pol.eu)

The return to economic growth in the eurozone has produced a dangerous sense of complacency on the Old Continent, especially in the richer countries of the north. But Italy’s flirtation with an exit from the euro under a populist government is a stark reminder that, if left unaddressed, the deep structural weaknesses that plague the single currency could trigger an existential crisis across the EU. It would be a mistake, therefore, to believe we can drive along in business-as-usual mode, or just take a few small steps toward more European integration. This week’s Meseberg Declaration signed by Angela Merkel and Emmanuel Macron, although a step in the right direction, is part of a collective denial about what needs to be done.

You don’t need to be a populist to recognize that Europe’s monetary union is dysfunctional and in dire need of more substantial reforms than those proposed by Germany and France. To keep the single currency alive, it needs two major structural improvements. First, it needs to reduce the fragmentation in Europe’s banking system that has caused the Continent to experience more severe crises than other parts of the world — most notably in comparison to the U.S. Second, it has to develop a streamlined and legitimate decision-making process to respond quickly and boldly to the next major recession.

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Amen.

Shooting The Messenger: Criminalising Journalism (G.)

The fact that during the 10 years he was in office, the US president, Barack Obama, prosecuted more whistleblowers than all the presidents in US history combined is an indication of the increasing threat to journalism. In 2017 the head of the CIA questioned the first amendment rights which protect free speech, and the US attorney-general threatened that the WikiLeaks founder, Julian Assange, would be prosecuted (for what he was not clear). Both are acts of intimidation designed to silence. It has been argued that governments are not that concerned about most of the work that journalists do so, for most, concerns about surveillance are unnecessary. But the problem there is that, generally speaking, if governments are not worried about what journalists are doing, the journalists are not doing their jobs.

Reporting local news may be a useful social function, but the issues that arise where nations go to war, or where countries are involved in breaking the law, or plundering the treasure of other nations, are of great importance and need investigating. It is in these significant areas that journalists must be protected from the vested interests of the executive state; where the very people who make the decisions, as in the Iraq war, need to be exposed and held to account before the event, not after it. What is so disturbing is that the media has often aided and abetted governments and the intelligence agencies – who always want more access to information – as they invoked the fear of terrorism as grounds for introducing tougher surveillance laws.

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Jul 242016
 
 July 24, 2016  Posted by at 9:25 am Finance Tagged with: , , , , , , , , , , ,  


Milton Greene “Actress Marilyn Monroe in bed” 1955

China’s Growth Sucks In More Debt Bucks For Less Bang (R.)
G20 Will Use ‘All Policy Tools’ To Protect Growth As Brexit Looms (R.)
OECD’s Gurria Says No Other EU Country Will Consider Exit After Brexit (CNBC)
EU Considers Migration ‘Emergency Brake’ For UK For Up To 7 Years (O.)
Mortgages Issued By Greek Banks Declined 99% In Past Decade (Kath.)
5 Reasons Why Trump Will Win (Michael Moore)
Trump Policy Will Unravel Traditional Neocons – Michael Hudson (RNN)
WikiLeaks Trove Plunges Democrats Into Crisis On Eve Of Convention (SMH)
DNC Chair Won’t Speak At Dem Convention Following WikiLeaks Fallout (CNN)
Imagine How The Land Feels (G.)

 

 

Reuters says: “..this year it has taken six yuan for every yuan of growth,[..] twice even the level in the United States during the debt-fueled housing bubble..”

That’s questionable. ZH in 2013: “..over the past five years in the developed world, it took $18 dollars of debt (of which 28% was provided by central banks) to generate $1 of growth..”

China’s Growth Sucks In More Debt Bucks For Less Bang (R.)

As China’s economy notches up another quarter of steady growth, the pace of credit creation grows ever more frantic for every extra unit of production, as inefficient state firms swallow an increasing share of lending. The world’s second-largest economy grew 6.7% in the first half of the year, unchanged from the first quarter, testament to policymakers’ determination to regulate the pace of slowdown after 25 years of breakneck expansion. Analysts say that determination has come at the cost of a damngerous rise in debt, which is six times less effective at generating growth than a few years ago. “The amount of debt that China has taken in the last 5-7 years is unprecedented,” said Morgan Stanley’s head of emerging markets, Ruchir Sharma, at a book launch in Singapore.

“No developing country in history has taken on as much debt as China has taken on on a marginal basis.” While Beijing can take comfort that loose money and more deficit spending are averting a more painful slowdown, the rapidly diminishing returns from such stimulus policies, coupled with rising defaults and non-performing loans, are creating what Sharma calls “fertile (ground) for some accident to happen”. From 2003 to 2008, when annual growth averaged more than 11%, it took just one yuan of extra credit to generate one yuan of GDP growth, according to Morgan Stanley calculations. It took two for one from 2009-2010, when Beijing embarked on a massive stimulus program to ward off the effects of the global financial crisis.

The ratio had doubled again to four for one in 2015, and this year it has taken six yuan for every yuan of growth, Morgan Stanley said, twice even the level in the United States during the debt-fueled housing bubble that triggered the global crisis. Total bond debt in China is up over 50% in the past 18 months to 57 trillion yuan ($8.5 trillion), equal to around 80% of GDP, and new total social financing, the widest measure of credit provided by China’s central bank, rose 10.9% in the first half of 2016 to 9.75 trillion yuan. China’s money supply has increased in tandem with new lending, and at 149 trillion yuan is now 73% higher than in the US, an economy about 60% larger. “China is the largest money printer in the world – they have been for some time. The balance is really extreme,” says Kevin Smith, CEO of U.S.-based Crescat Capital.

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Ionesco and Samuel Beckett were ahead of their time, but we’re catching up with them. Words lose ever more meaning. Example are this article, but also this WSJ headline: “Hillary Clinton Introduces Tim Kaine as ‘a Progressive Who Likes to Get Things Done'”. That may have sounded lofty even just 20 years ago, but today it’s just meaningless, if not outright repulsive.

G20 Will Use ‘All Policy Tools’ To Protect Growth As Brexit Looms (R.)

Leaders from the world’s biggest economies are poised on Sunday to renew their commitments to support global growth and better coordinate actions in the face of uncertainty over Britain’s decision to leave the EU and growing protectionism. The meeting of finance ministers and central bankers from the Group of 20 major economies in China’s southwestern city of Chengdu is the first of its kind since last month’s Brexit vote and a debut for Britain’s new finance minister. Philip Hammond faced questions about how quickly the UK planned to move ahead with formal negotiations to leave the EU. “We are taking actions to foster confidence and support growth,” a draft statement by the policymakers seen by Reuters said.

“In light of recent developments, we reiterate our determination to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve our goal of strong, sustainable and balanced growth,” it said. The IMF this week cut its global growth forecasts because of the Brexit vote. Data on Friday seemed to bear out fears, with a British business activity index posting its biggest drop in its 20-year history. The draft communique, expected to be issued at the end of the meeting on Sunday afternoon, said Brexit added to uncertainty in the global economy but G20 members were “well positioned to proactively address the potential economic and financial consequences”.

U.S. Treasury Secretary Jack Lew said on Saturday it was important for G20 countries to boost shared growth using all policy tools, including monetary and fiscal policies as well as structural reforms, to boost efficiency. “This is a time when it is important for all of us to redouble our efforts to use all of the policy tools that we have to boost shared growth,” Lew told reporters.

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He’ll find out yet.

OECD’s Gurria Says No Other EU Country Will Consider Exit After Brexit (CNBC)

Countries in the European Union are unlikely to consider an exit from the bloc once they realize how complicated, costly and disruptive the process will be for the United Kingdom, the secretary general of the Organization for Economic Cooperation and Development (OECD) told CNBC on Saturday. “Nobody in their right mind will even attempt or even think of leaving the European Union because they will understand that it is not in their best interest,” Angel Gurria told CNBC before the start of the G-20 finance ministers and central bank governors meeting in Chengdu, China.

Gurria had recommended against the Brexit vote, but says the next step should be helping the U.K. and its partners through the proceedings in the least costly and least disruptive way. On the Italian banking crisis and whether the EU should rescue the country’s third largest bank, Monte dei Paschi di Siena, Gurria said that “national, regional and EU intervention is necessary”. However, the challenge is to define who is going to be doing what, he added. Rome is bracing for the results of critical bank stress tests that are due on July 29 and is hoping to find a solution for the battered bank ahead of that.

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Mere days after everyone said there could be no pre-Brexit discussions with the UK, of course there’s things like this anyway.

EU Considers Migration ‘Emergency Brake’ For UK For Up To 7 Years (O.)

Plans to allow the United Kingdom an exemption from EU rules on freedom of movement for up to seven years while retaining access to the single market are being considered in European capitals as part of a potential deal on Brexit. Senior British and EU sources have confirmed that despite strong initial resistance from French president François Hollande in talks with prime minister Theresa May last week, the idea of an emergency brake on the free movement of people that would go far further than the one David Cameron negotiated before the Brexit referendum is being examined.

If such an agreement were struck, and a strict time limit imposed, diplomats believe it could go a long way towards addressing concerns of the British people over immigration from EU states, while allowing the UK full trade access to the European market. While the plan will prove highly controversial in many member states, including France, Poland and other central and eastern European nations, the attraction is that it would limit the economic shock to the EU economy from Brexit by keeping the UK in the single market, and lessen the political damage to the European project that would result from complete divorce.

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Sales only to those with deep pockets. The rest of the world buys up Greece.

Mortgages Issued By Greek Banks Declined 99% In Past Decade (Kath.)

Cash was the preferred from of payment for the few people who decided to purchase real estate in the first half of the year in Greece, bank officials have suggested. Converging estimates by bank officials contacted by Kathimerini show that eight out of 10 property buyers opted for the transfer of cash between deposit accounts instead of a loan, a trend that started with the imposition of capital controls by the government just over a year ago and continues to date. The same trend is also dominant in consumer credit.

According to data compiled by Kathimerini, the new loans issued in H1 came to €75 million in mortgage credit across the banking system and to €150 million in consumer credit. This sum constitutes a historic low for the last few decades at least. Comparisons with a decade ago are staggering: The number of mortgages issued in January-June 2016 – also affected by the lawyers’ strike – came to just 800, against about 80,000 in the same period in 2006. A Bank of Greece analysis recently said that the course of loans to households is mainly determined by demand, and in the last couple of years the drop in house prices has played a decisive role in the reduction of loan issues.

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Well argued. But as Moore himself also argues, that’s a problem, not a winner.

5 Reasons Why Trump Will Win (Michael Moore)

Friends: I am sorry to be the bearer of bad news, but I gave it to you straight last summer when I told you that Donald Trump would be the Republican nominee for president. And now I have even more awful, depressing news for you: Donald J. Trump is going to win in November. This wretched, ignorant, dangerous part-time clown and full time sociopath is going to be our next president. President Trump. Go ahead and say the words, ‘cause you’ll be saying them for the next four years: “PRESIDENT TRUMP.” Never in my life have I wanted to be proven wrong more than I do right now. I can see what you’re doing right now. You’re shaking your head wildly – “No, Mike, this won’t happen!”

Unfortunately, you are living in a bubble that comes with an adjoining echo chamber where you and your friends are convinced the American people are not going to elect an idiot for president. You alternate between being appalled at him and laughing at him because of his latest crazy comment or his embarrassingly narcissistic stance on everything because everything is about him. And then you listen to Hillary and you behold our very first female president, someone the world respects, someone who is whip-smart and cares about kids, who will continue the Obama legacy because that is what the American people clearly want! Yes! Four more years of this! You need to exit that bubble right now. You need to stop living in denial and face the truth which you know deep down is very, very real.

Trying to soothe yourself with the facts – “77% of the electorate are women, people of color, young adults under 35 and Trump cant win a majority of any of them!” – or logic – “people aren’t going to vote for a buffoon or against their own best interests!” – is your brain’s way of trying to protect you from trauma. Like when you hear a loud noise on the street and you think, “oh, a tire just blew out,” or, “wow, who’s playing with firecrackers?” because you don’t want to think you just heard someone being shot with a gun. It’s the same reason why all the initial news and eyewitness reports on 9/11 said “a small plane accidentally flew into the World Trade Center.” We want to – we need to – hope for the best because, frankly, life is already a shit show and it’s hard enough struggling to get by from paycheck to paycheck. We can’t handle much more bad news. So our mental state goes to default when something scary is actually, truly happening.

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The attempts to link Trump to Russia have become a sort of hilarious boomerang.

Trump Policy Will Unravel Traditional Neocons – Michael Hudson (RNN)

On Friday, just after the RNC wrapped up with its presidential candidate, Donald Trump, Paul Krugman of the New York Times penned an article titled “Donald Trump: The Siberian Candidate.” He said in it, if elected, would Donald Trump be Vladimir Putin’s man in the White House? Krugman himself is worried as ludicrous and outrageous as the question sounds, the Trump campaign’s recent behavior has quite a few foreign policy experts wondering, he says, just what kind of hold Mr. Putin has over the Republican nominee, and whether that influence will continue if he wins. Well, let’s unravel that statement with Michael Hudson. [..] So let’s take a look at this article by Paul Krugman. Where is he going with this analysis about the Siberian candidate?

HUDSON: Well, Krugman has joined the ranks of the neocons, as well as the neoliberals, and they’re terrified that they’re losing control of the Republican Party. For the last half-century the Republican Party has been pro-Cold War, corporatist. And Trump has actually, is reversing that. Reversing the whole traditional platform. And that really worries the neocons. Until his speech, the whole Republican Convention, every speaker had avoided dealing with economic policy issues. No one referred to the party platform, which isn’t very good. And it was mostly an attack on Hillary. Chants of “lock her up.” And Trump children, aimed to try to humanize him and make him look like a loving man.

But finally came Trump’s speech, and this was for the first time, policy was there. And he’s making a left run around Hillary. He appealed twice to Bernie Sanders supporters, and the two major policies that he outlined in the speech broke radically from the Republican traditional right-wing stance. And that is called destroying the party by the right wing, and Trump said he’s not destroying the party, he’s building it up and appealing to labor, and appealing to the rational interest that otherwise had been backing Bernie Sanders.

So in terms of national security, he wanted to roll back NATO spending. And he made it clear, roll back military spending. We can spend it on infrastructure, we can spend it on employing American labor. And in the speech, he said, look, we don’t need foreign military bases and foreign spending to defend our allies. We can defend them from the United States, because in today’s world, the only kind of war we’re going to have is atomic war. Nobody’s going to invade another country. We’re not going to send American troops to invade Russia, if it were to attack. So nobody’s even talking about that. So let’s be realistic.

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Well, I said a long time ago that Clinton would not be electable. There’ll be much more of this released while the convention takes place.

WikiLeaks Trove Plunges Democrats Into Crisis On Eve Of Convention (SMH)

On the eve of the convention at which Hillary Clinton is to be confirmed as presidential candidate, the Democratic Party has been plunged into crisis – the US media is brimful of ugly and embarrassing stories from within the party’s head office, all based on 20,000 emails dropped on Friday evening by the anti-secrecy group WikiLeaks. The correspondence seems to confirm allegations by the campaign of defeated Senator Bernie Sanders that the Democratic National Committee was actively rooting for Mrs Clinton to win, a revelation that will most likely serve as a wedge between the two camps and make it even more difficult for her to persuade Sanders voters to support her.

The emails also reveal plotting within the DNC to embarrass Republican candidate Donald Trump, including drafting a fake ad to recruit “hot women” to work for him. Bad as this trove of emails is, it could presage something much worse. A brief introduction to the emails, that were released on Twitter with a link to a webpage, described them as “part one of our new Hillary Leaks series”. Naming key DNC officials, the introduction says how many of the emails came from each, including communications director Luis Miranda (10,770 emails), national finance director Jordon Kaplan (3797 emails), and finance chief of staff Scott Comer. The emails are dated through the five months to May 25, 2016.

Several of the emails address efforts to embarrass or to wrong-foot the Sanders campaign, which began almost as a non-event but surged with young voter support in particular to become a serious and determined challenger to Mrs Clinton. One email suggests that Senator Sanders be questioned on his faith, in the hope of revealing him as an atheist. It reads: “Does he believe in a God. He had skated on saying he has a Jewish heritage. I think I read he is an atheist. This could make several points difference with my peeps. My Southern Baptist peeps would draw a big difference between a Jew and an atheist.”

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“She’s been quarantined..” She should be under investigation.

DNC Chair Won’t Speak At Dem Convention Following WikiLeaks Fallout (CNN)

The head of the Democratic National Committee will not speak at the party’s convention next week, a decision reached by party officials Saturday after emails surfaced that raised questions about the committee’s impartiality during the Democratic primary. Debbie Wasserman Schultz, whose stewardship of the DNC has been under fire through most of the presidential primary process, will not have a major speaking role in an effort “to keep the peace” in the party, a Democrat familiar with the decision said. The revelation comes following the release of nearly 20,000 emails.

One email appears to show DNC staffers asking how they can reference Bernie Sanders’ faith to weaken him in the eyes of Southern voters. Another seems to depict an attorney advising the committee on how to defend Hillary Clinton against an accusation by the Sanders campaign of not living up to a joint fundraising agreement. Wasserman Schultz is expected to gavel the convention in and out, but not speak in the wake of the controversy surrounding the leaked emails, a top Democrat said. “She’s been quarantined,” another top Democrat said, following a meeting Saturday night.

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Love it. Not so much the part of how to get nature into a novel, but the idea itself. The world is alive. These fierce looking hunters singing to the land, the forest. And the land singing back:

“The place itself, in which their people had lived for millennia, was not an inanimate “environment”, a mere backdrop for human activity. It was part of that activity. It was a great being, and to live as part of it was to be in a constant exchange with it. And so they sang to it; sometimes, it sang back.”

Imagine How The Land Feels (G.)

We had climbed, slowly, to a high mountain ridge. We were two young Englishmen who were not supposed to be here – journalism was forbidden – and four local guides, members of the Lani tribe. Our guides were moving us around the highlands of West Papua, taking us to meet people who could tell us about their suffering at the hands of the occupying Indonesian army. The mountain ridge was covered in deep, old rainforest, as was the rest of the area we had walked through. This forest, to the Lani, was home. In the forest they hunted, gathered food, built their homes, lived. It was not a recreation or a resource: there was nothing romantic about it, nothing to debate. It was just life.

Now, as we reached the top of the ridge, a break in the trees opened up and we saw miles of unbroken green mountains rolling away before us to the horizon. It was a breathtaking sight. As I watched, our four guides lined up along the ridge and, facing the mountains, they sang. They sang a song to the forest whose words I didn’t understand, but whose meaning was clear enough. It was a song of thanks; of belonging. To the Lani, I learned later, the forest lived. This was no metaphor. The place itself, in which their people had lived for millennia, was not an inanimate “environment”, a mere backdrop for human activity. It was part of that activity. It was a great being, and to live as part of it was to be in a constant exchange with it. And so they sang to it; sometimes, it sang back.

When European minds experience this kind of thing, they are never quite sure what to do with it. It’s been so long since we had a sense that we dwelled in a living landscape that we don’t have the words to frame what we see. Too often, we go in one of two directions, either sentimentalising the experience or dismissing it as superstition. To us, the wild places around us (if there are any left) are “resources” to be utilised. We argue constantly about how best to use them – should we log this forest, or turn it into a national park? – but only the bravest or the most foolish would suggest that this might not be our decision to make.

To modern people, the world we walk through is not an animal, a being, a living presence; it is a machine, and our task is to learn how it works, the better to use it for our own ends. The notion that the non-human world is largely inanimate is often represented as scientific or rational, but it is really more like a modern superstition. “It is just like Man’s vanity and impertinence,” wrote Mark Twain, “to call an animal dumb because it is dumb to his dull perceptions.” We might say the same about a forest; and science, interestingly, might turn out to be on our side.

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Jan 122016
 
 January 12, 2016  Posted by at 9:43 am Finance Tagged with: , , , , , , , , ,  


V&APA Bowie age 16 in the Kon-Rads 1963

RBS Cries ‘Sell Everything’ As Deflationary Crisis Nears (AEP)
An ‘Extremely Normal And Realistic’ 26% S&P 500 Drop Is Taking Shape (MW)
Oil Down 20% Since Start Of Year, $10 Target Looms (Reuters)
Plunging Prices Could Force A Third Of US Oil Firms Into Bankruptcy (WSJ)
China Resorts To ‘Nuclear Strength’ Weapons To Defend The Yuan (Guardian)
Chinese Official: Bets Against Yuan Are ‘Ridiculous and Impossible’ (WSJ)
China Banks Feel The Heat Of Meltdown (FT)
China FX Reserve Sell-Off To Soon Move Beyond US Treasuries (Reuters)
Why China’s Market Illness Has Gotten More Contagious (WSJ)
China Rout Threatens to Spawn India Crisis (BBG)
EU Set To Weigh China’s Eligibility For Lower Import Tariffs (BBG)
South Africa’s Flash Crash Exposes Cracks in Currency Liquidity (BBG)
Saudi Arabia Plays Down Riyal Peg Fears (FT)
Banks’ Worst Fears Eased as Basel Soft-Pedals Capital Overhaul (BBG)
Canadian Stocks Fall in Longest Slump Since 2002 (BBG)
Discovery (Jim Kunstler)
It’s Time For Europe To Turn The Tables On Bullying Britain (Luyendijk)
Migrant Flows ‘Still Way Too High,’ EU Tells Turkey (AFP)
Mass Migration Into Europe Is Unstoppable (FT)

As things shape up the very way we always said they would, others claim ownership of the story.

“China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the ‘Goldlocks love-in’ of the last two years..”

RBS Cries ‘Sell Everything’ As Deflationary Crisis Nears (AEP)

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel. The bank’s credit team said markets are flashing stress alerts akin to the turbulent months before the Lehman crisis in 2008. “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note. Andrew Roberts, the bank’s credit chief, said that global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings. This is particularly ominous given that global debt ratios have reached record highs. “China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the ‘Goldlocks love-in’ of the last two years,” he said.

Mr Roberts expects Wall Street and European stocks to fall by 10pc to 20pc, with even an deeper slide for the FTSE 100 given its high weighting of energy and commodities companies. “London is vulnerable to a negative shock. All these people who are ‘long’ oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe,” he said. Brent oil prices will continue to slide after breaking through a key technical level at $34.40, RBS claimed, with a “bear flag” and “Fibonacci” signals pointing to a floor of $16, a level last seen after the East Asia crisis in 1999. The bank said a paralysed OPEC seems incapable of responding to a deepening slowdown in Asia, now the swing region for global oil demand Morgan Stanley has also slashed its oil forecast, warning that Brent could fall to $20 if the US dollar keeps rising.

It argued that oil is intensely leveraged to any move in the dollar and is now playing second fiddle to currency effects. RBS forecast that yields on 10-year German Bunds would fall time to an all-time low of 0.16pc in a flight to safety, and may break zero as deflationary forces tighten their grip. The European Central Bank’s policy rate will fall to -0.7pc. US Treasuries will fall to rock-bottom levels in sympathy, hammering hedge funds that have shorted US bonds in a very crowded “reflation trade”. RBS first issued its grim warnings for the global economy in November but events have moved even faster than feared. It estimates that the US economy slowed to a growth rate of 0.5pc in the fourth quarter, and accuses the US Federal Reserve of “playing with fire” by raising rates into the teeth of the storm. “There has already been severe monetary tightening in the US from the rising dollar,” it said.

It is unusual for the Fed to tighten when the ISM manufacturing index is below the boom-bust line of 50. It is even more surprising to do so after nominal GDP growth has fallen to 3pc and has been trending down since early 2014. RBS said the epicentre of global stress is China, where debt-driven expansion has reached saturation. The country now faces a surge in capital flight and needs a “dramatically lower” currency. In their view, this next leg of the rolling global drama is likely to play out fast and furiously. “We are deeply sceptical of the consensus that the authorities can ‘buy time’ by their heavy intervention in cutting reserve ratio requirements (RRR), rate cuts and easing in fiscal policy,” it said.

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How about 50%? Standard & Poor’s 1500 index – a broad basket of large, mid and small company stocks – is already down -26.9% from its 52-week high.

An ‘Extremely Normal And Realistic’ 26% S&P 500 Drop Is Taking Shape (MW)

It’s been a brutal start to 2016 in the markets. But the way this chart is setting up, there’s a lot more pain on the way, according to J.C. Parets of the All Star Charts blog. “We’re down 9% from the all-time highs in the S&P 500 SPX, +0.09% and I see people acting like two-year-olds that just had their favorite toy taken away from them,” he said. “Why, because the market is down 9% from its highs last year after rallying over 220% over the prior 6 years? Please.” He goes on to explain how this recent spate of selling action isn’t unusual and how “things get absolutely destroyed all the time.” Like the British pound, energy, emerging markets and agricultural commodities, to name just a few.

“And these are real collapses in prices, not this 9% nonsense that people are getting all worked up about because it’s the S&P 500, or Apple or something that they’re too sensitive about,” Parets wrote in his blog post. He used the chart above to support his prediction that the S&P is headed toward the 1,570 level, which would be an “extremely normal and realistic” 26% correction from the top. Or another 20% from where it stands now. “This is a ‘sell rallies’ market, not a ‘buy the dip’ environment,” he added. That’s not to say there won’t be bounces. “Go look at a list of the best days in stock market history, they all come during massive selloffs,” Parets said. “I would expect this decline to be no different and the rallies we do get should be vicious.”

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And now Lybia comes on line…

Oil Down 20% Since Start Of Year, $10 Target Looms (Reuters)

Crude oil prices continued a relentless dive early on Tuesday, falling almost 20% since the beginning of the year as analysts scrambled to cut their 2016 oil price forecasts and traders bet on further price falls. U.S. crude West Texas Intermediate was trading at $30.66 per barrel at 0531 GMT on Tuesday, down 75 cents from the last settlement and about 20% lower than at the beginning of the year. Earlier it traded at $30.60, the lowest since December 2003. Brent crude futures fell 83 cents to $30.72 a barrel. Earlier they declined to $30.66, their lowest since April 2004. Brent has fallen nearly 20% in January and, like WTI, has declined on every day of trading so far this year.

Trading data showed that managed short positions in WTI crude contracts, which would profit from a further fall in prices, are at a record high, implying that many traders expect further falls. “It’s going to be a very interesting year in oil,” said Ric Spooner at CMC Markets in Sydney. “The lower the price goes, the faster in time we are likely to form a base and recover.” Analysts also adjusted to the early price rout in the year, with Barclays, Macquarie, Bank of America Merrill Lynch, Standard Chartered and Societe Generale all cutting their 2016 oil price forecasts on Monday. “A marked deterioration in oil market fundamentals in early 2016 has persuaded us to make some large downward adjustments to our oil price forecasts for 2016,” Barclays bank said.

“We now expect Brent and WTI to both average $37/barrel in 2016, down from our previous forecasts of $60 and $56, respectively,” it added. But it was Standard Chartered that took the most bearish view, stating that prices could drop as low as $10 a barrel. “Given that no fundamental relationship is currently driving the oil market toward any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the USD and equity markets,” the bank said. “We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far,” it added.

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It’ll be epic.

Plunging Prices Could Force A Third Of US Oil Firms Into Bankruptcy (WSJ)

Crude-oil prices plunged more than 5% on Monday to trade near $30 a barrel, making the specter of bankruptcy ever more likely for a significant chunk of the U.S. oil industry. Three major investment banks – Morgan Stanley, Goldman Sachs and Citigroup – now expect the price of oil to crash through the $30 threshold and into $20 territory in short order as a result of China’s slowdown, the U.S. dollar’s appreciation and the fact that drillers from Houston to Riyadh won’t quit pumping despite the oil glut. As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017, according to Wolfe Research.

Survival, for some, would be possible if oil rebounded to at least $50, according to analysts. More than 30 small companies that collectively owe in excess of $13 billion have already filed for bankruptcy protection so far during this downturn, according to law firm Haynes & Boone. Morgan Stanley issued a report this week describing an environment “worse than 1986” for energy prices and producers, referring to the last big oil bust that lasted for years. The current downturn is now deeper and longer than each of the five oil price crashes since 1970, said Martijn Rats, an analyst at the bank. Together, North American oil-and-gas producers are losing nearly $2 billion every week at current prices, according to a forthcoming report from AlixPartners, a consulting firm. “Many are going to have huge problems,” said Kim Brady at consultancy Solic Capital.

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“Its actions are comparable to steps taken by other central banks when they previously fought against international speculators, such as George Soros..”

China Resorts To ‘Nuclear Strength’ Weapons To Defend The Yuan (Guardian)

The Chinese authorities have resorted to “nuclear strength” weapons to deter an attack on the yuan by short sellers and convince sceptical investors that they are in control of the country’s spluttering financial system. China’s central bank fixed the currency firmer again on Tuesday but traders were not persuaded and the currency slipped in early trade despite what dealers called aggressive intervention to support the currency. The gap between the mainland yuan and its offshore counterpart had grown in recent days but suspected intervention by China’s state-owned banks brought them almost into line on Tuesday. The action sent the rate at which banks charge each other to borrow yuan in Hong Kong to a record high of 67% on Tuesday.

“The market suspects that the People’s Bank of China is possibly using major state banks to directly drain yuan liquidity in offshore markets,” said a dealer at an European bank in Shanghai. The dealer described the strength of the central bank’s actions as being of “nuclear-weapon” level strength. “Its actions are comparable to steps taken by other central banks when they previously fought against international speculators, such as George Soros,” he said. [..] Perceived mis-steps by China’s authorities have stoked concerns in global markets that Beijing might be losing its grip on economic policy, just as the country looks set to post its slowest growth in 25 years. Amid suspicions by some in the market that China wants the yuan to devalue in order to boost its ailing exporters, sources suggested there were moves afoot for China’s cabinet to take a bigger role in overseeing financial markets.

The state council has set up a working group to prepare for upgrading the cabinet’s financial department to bureau level, said a source close to the country’s leadership. Officials were doing their best to talk up the currency [..] The central bank’s chief economist Ma Jun said on Monday that the bank planned to keep the yuan basically stable against a basket of currencies, and fluctuations against the US dollar would increase. Han Jun, deputy director of the office of the Chinese Communist party’s leading group on financial and economic affairs, said a more substantial decline in the yuan was “ridiculous” and “impossible”.

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The louder their claims, the lower confidence goes.

Chinese Official: Bets Against Yuan Are ‘Ridiculous and Impossible’ (WSJ)

Wagers that the yuan will slump 10% or more against the dollar are “ridiculous and impossible,” a senior Chinese economic official said Monday, warning that China had a sufficient tool kit to defeat attacks on its currency. “Attempts to sell short the renminbi will not succeed,” said Han Jun, deputy director of the office of the Central Leading Group on Financial and Economic Affairs, at a briefing at the Chinese Consulate in New York. “The expectations of markets can be changed.” The comments are the latest demonstration of Chinese officials’ determination to defeat those betting that yuan declines will intensify. They echo comments such as ECB President Mario Draghi’s 2012 “whatever it takes” speech, made when European government bonds issued by weaker countries were under attack.

Yet analysts said China’s plan carries considerable risks, potentially creating tension with the government’s efforts to integrate itself into the global financial architecture. Currency-market interventions are costly and risk confusing investors by adding to volatility, some said. “These interventions work well only if they’re undertaken in the context of much broader reforms,” said Eswar Prasad, a former top China hand at the International Monetary Fund and now an economics professor at Cornell University. Bets against the yuan, or renminbi, have picked up in 2016, sending the currency to its lowest level in nearly five years against the dollar and widening the gap between the official Chinese yuan fixing and the so-called offshore market in Hong Kong, where the government is less involved.

On Monday, the yuan rose 0.3% against the dollar in China and rose 1.5% in the offshore market, to 6.5863 per dollar. In late New York trading, the yuan was up 0.4% to 6.5666 per dollar. The debate over the direction of the yuan has captivated Wall Street since last August, when China roiled financial markets by reducing the currency’s value against the dollar by 2% on Aug. 11, its largest single-day decline in two decades. Further yuan devaluation would threaten to exacerbate existing problems in the global economy, where sluggish demand for goods and services is tripping up growth. Many nations have sought to bolster flagging domestic growth by increasing exports, but a sharp decline in the yuan would likely undermine such efforts by making Chinese goods cheaper and more competitive abroad.

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“China’s banks could require up to $7.7 trillion of new capital and funding over the next three years…” But that’s just part of the story; it’s still based on very low amounts of bad loans -“barely 1% at the big lenders, and 1.8% at mid-tier banks this year-, and that doesn’t seem realistic. Fitch puts it at 21%(!).

China Banks Feel The Heat Of Meltdown (FT)

If the US or Europe had experienced the kind of equity market slump that China has suffered of late, its financial institutions would be quaking and leading the list of biggest fallers in Shanghai and Hong Kong trading. As it is, the big banks have seen their share prices tumble by about 10% over the past two or three weeks, far less than the 15% slump in the Shanghai Composite index. On the face of it, there may be good reason for that. Traditionally China’s large financial institutions are not big stock market players — retail investors make up the bulk of the market. In reality, the banks are the most exposed to China’s ills. They are directly bound up in the stock market turmoil and the government’s efforts to shore up sentiment against the flood of selling. Figures relating to the past week or so are not yet available.

But during a similar rout in early July last year, 17 banks — including the big five listed but partly state-owned groups — lent more than $200bn to facilitate broker purchases of shares and funds. Even without the seizure of their balance sheets to prop up the equity market, China’s banks are pretty troubled. Like banks in the west before the financial crisis, China’s lenders — with government encouragement — have inflated a vast credit bubble, funding the country’s ambitious companies and fast-expanding property market. Chinese banking assets now amount to more than $30tn. Over the past decade, credit growth has consistently topped 10% a year. (It peaked at close to 35% in 2009.) Even this year, it is expected to be double the 6-7% forecast rate of GDP growth.

Last August, JPMorgan estimated China’s non-financial industry private sector debt at 147%, half as much again as in 2007. The downturn in China’s fortunes — particularly across its heartland heavy industry — is already hitting the banks. Annual non-performing loan rates have been doubling annually since 2012. China Merchants Bank, China Everbright and ICBC are seen as among the most troubled. China bulls point to the still low level of NPLs — barely 1% at the big lenders, and 1.8% at mid-tier banks this year, according to analyst forecasts. As a gauge, NPLs in Greece have risen to between 30 and 40% amid that country’s crisis. But China experts at independent research house Autonomous suggest investors are underestimating a spiralling problem. Across the board, loan losses will rise by $845bn this year, Autonomous predicts. That, they think, will be enough to shrink profits by 6% at big banks.

[..] Investors in China’s banks may well recognise that the lenders cannot be compared with institutions that operate along western lines and will expect hazier disclosures and readier state interference. They are also likely to think that China will not allow its banks to fail. But if analysts, like those at Autonomous are to be believed, China’s banks could require up to $7.7tn of new capital and funding over the next three years.

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Exporting deflation.

China FX Reserve Sell-Off To Soon Move Beyond US Treasuries (Reuters)

The unwinding of China’s foreign exchange reserves could soon extend beyond U.S. Treasuries, with U.S. corporate and euro zone sovereign bonds among the assets most vulnerable to selling from Beijing, Bank of America Merrill Lynch said on Monday. China sold a record $510 billion of FX reserves last year to counter the damaging impact on an already decelerating economy from the surge of capital fleeing the country. The lion’s share of that came from $292 billion sales of U.S. Treasury debt, followed by $92 billion sales of U.S. stocks, $3 billion of U.S. agency bonds and $170 billion of non-U.S. assets, according to BAML estimates. China increased its U.S. corporate bond investments by $44 billion last year to $415 billion, BAML strategists estimated, adding that it won’t be long before investors turn their attention to other assets Beijing could potentially sell.

“In the next two months I would still say Treasuries. But if the pressure continues beyond that, it’s non-U.S. assets, and in the U.S. space it’s definitely corporates and agencies,” said Shyam Rajan, rates strategist at BAML in New York. Rajan and his colleagues estimate that China’s $3.33 trillion FX reserves comprise $1.15 trillion non-U.S. assets (mostly short-dated euro-denominated bonds), $415 billion U.S. corporate bonds, $212 billion in agencies, $266 billion stocks and $1.29 trillion of Treasuries. Selling across these bonds may not automatically trigger a sharp rise in their yields though, Rajan said, pointing to the experience of Treasuries in the latter part of last year when swap spreads moved below zero.

“The way to trade the reserve flow story is through relative value trades, such as the swap spread tightening in Treasuries. I would imagine it plays out the same way in other markets too,” Rajan said. Last year’s record unwind brought China’s total FX reserves to a three-year low of $3.33 trillion. Most analysts expect that to be depleted further this year. JP Morgan estimates that capital flight from China since the second quarter of 2014 has totaled $930 billion, while credit ratings agency Fitch on Monday put the figure at over $1 trillion. U.S. investment bank Morgan Stanley on Monday joined Goldman Sachs in lowering its forecast for the Chinese yuan, citing the ongoing flow of capital out of the country and need for a weaker currency to support the economy.

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Nothing much has changed, other than suspicions that Beijing can’t handle the downfall. But global exposure to China is still the same, it’s just been ridiculously downplayed.

Why China’s Market Illness Has Gotten More Contagious (WSJ)

The Shanghai stock market is undersized and isolated. Its market capitalization is less than one-quarter the size of New York’s. Just 37% of its shares are available to trade, and foreigners own only a tiny fraction. Yet the tide of selling by Chinese investors last week—along with an unexpectedly sharp move to weaken the yuan—rolled through stocks, commodities and currencies across the globe. The chain reaction heralds a new era for China, whose financial-market muscle has long been underdeveloped compared with its economic heft. On Monday, Chinese shares resumed their slide. The Shanghai Composite Index dropped 5.3%, leaving it down 15% in the new year. U.S. shares stumbled but covered their losses in the final hour of trading and closed up slightly.

Oil fell to a new 12-year low in the U.S., and currencies in countries like South Africa and Russia fell sharply. Until last year, few in global markets took their cue from Shanghai, which has a history of roller-coaster trading. In the summer of 2015, a sharp plunge in the Shanghai Composite, after a 60% rise earlier in the year, combined with a surprise yuan devaluation to trigger a global selloff. Attention soon faded, and Shanghai’s market ended the year up 9.4%. But last week’s meltdown again showed China’s market influence. And to many, it suggested an even more ominous possibility: that Beijing may be fumbling its management of China’s economy. That could have disastrous consequences for the prices of goods and commodities, and thus markets, around the world.

Today, China accounts for about 11% of world gross domestic product, 12% of the globe’s oil consumption and about half the demand for steel. It is the No. 1 trading partner for countries from South Korea and Australia to Brazil and soaks up exports worth more than 10% of GDP from Singapore and Taiwan. Despite tight controls over the currency and the banking system that wall off China from much of the global financial system, China’s huge presence in global trade means the country is more tightly tied to the rest of the world than ever. Its roaring growth has been a boon to Western stock markets like Germany’s, whose exchange is filled with manufacturers that sell machines and factory equipment there.

Now, China ties may be a liability. In Europe, whose companies get 10% of their revenue from the Asia-Pacific region, the pan-European Stoxx Europe 600 is down 7% in 2016 through Monday, and Germany’s DAX is down 8.5%. Europe is especially vulnerable to a China slowdown: Its own economic growth has been weak for years, and the Continent has been counting on exports to plug the gap. Nearly 10% of the exports from the 28-member EU go to China. The story isn’t the same everywhere, though. U.S. companies get only 5% of their revenue from Asia-Pacific. They also can rely on a more buoyant domestic economy. The S&P 500 was down 6% this year through Friday.

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And India is one of the first victims of the popping China Ponzi.

China Rout Threatens to Spawn India Crisis (BBG)

A deepening slowdown in China threatens to derail India’s economic growth, triggering financial market upheaval and a falling currency, Vishal Kampani, the nation’s top investment banker, said. “If China keeps getting hit like this, the yuan has to devalue, and we will see another crisis in India,” Kampani at JM Financial, the South Asian country’s top M&A adviser last year, said in a Jan. 8 interview. “I refuse to believe that India will stand out and will look very different.” Indian stocks and the rupee fell Monday, tracking declines in other emerging markets as volatility in China sapped risk appetite globally. China’s efforts to stabilize the yuan failed to halt equity losses, reviving concern about the Communist Party’s ability to manage an economy set to grow at its weakest pace since 1990. India’s benchmark S&P BSE Sensex Index fell 0.4% on Monday in Mumbai after dropping as much as 1.4% earlier.

The rupee weakened 0.2% to 66.7725 against the dollar as of 4:11 p.m. local time. A devaluation of the yuan could weaken the rupee, creating “huge problems” for Indian companies that have to pay back dollar loans, Kampani said. China is India’s largest trade partner and third-largest export market, so a slowdown there could prolong a record slump in the South Asian nation’s overseas shipments, which declined 12 straight months through November. A China-led rout in Indian markets also risks damping private investment, already hurt by credit lines choked by bad debt and a legislative gridlock that’s blocked economic bills. That would boost pressure on Prime Minister Narendra Modi to sustain public spending even at the risk of worsening Asia’s widest budget deficit. Modi has seen his economic agenda stall in parliament, disappointing investors who bet that his landslide win in 2014 would speed up reforms.

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In which the richer nations can once again overpower the poorer.

EU Set To Weigh China’s Eligibility For Lower Import Tariffs (BBG)

European Union policy makers are poised to kick off deliberations to determine whether EU industries ranging from steel to solar can keep relying on import tariffs to fend off aggressive Chinese competitors, the opening salvo in a political and economic battle due to last all year. The European Commission, the EU’s executive arm, will hold an initial debate Jan. 13 about whether the bloc should recognize China as a market economy starting in December. Such a step would make it more difficult for European manufacturers such as ArcelorMittal and Solarworld AG to win sufficiently high EU duties meant to counter alleged below-cost – or “dumped” – imports from China.

The talks will pit free-trade governments in northern Europe against more protectionist ones in the south, put Europe on a possible track that the U.S. is staying off and produce a political verdict on whether communist China has come of age economically 15 years after it joined the World Trade Organization. In addition to being a political prize for Beijing, market-economy status would be a business boost for China, whose growth has slumped to the weakest since 1990 and which suffered a 10% fall in stocks last week. “This is one of the hottest issues on the agenda,” Jo Leinen, a German MEP who chairs its delegation for relations with China, said by phone from Saarbruecken, Germany, on Jan. 7. “It’s a hot potato. The Chinese are pushing for market-economy status and interests are divided in Europe.”

The matter combines top-level political calculations with tricky economic and legal considerations. With the EU struggling to bolster economic growth and keep Greece in the euro area, leaders across Europe have courted China for investment in infrastructure and orders of goods such as Airbus planes. While it’s the EU’s No. 2 trade partner behind the U.S., China is grouped with the likes of Belarus, Kazakhstan and Mongolia in seeking market-economy designation by Europe and faces more European anti-dumping duties than any other country. The import levies cover billions of euros of Chinese exports such as stainless steel, solar panels, aluminum foil, bicycles, screws, paper, kitchenware and office-file fasteners, curbing competition for producers across the 28-nation EU. Market-economy status for China would signal more European trust in Beijing by ensuring the EU uses Chinese data for trade investigations affecting the country.

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Emerging markets will start collapsing outright, Brazil, South Africa, China and more.

South Africa’s Flash Crash Exposes Cracks in Currency Liquidity (BBG)

It took just 15 minutes on Monday morning for South Africa’s rand to plummet 9% in what traders said may be a prelude of the new normal in the global $5.3 trillion-a-day currency market. Such flash crashes will probably become more common in foreign-exchange trading as liquidity shrinks amid tighter regulation and reduced demand for emerging-market assets, according to Insight Investment and Citigroup.The rand slid to record lows versus the dollar and yen in Asian trading before recovering the bulk of the day’s losses almost as swiftly. “The rand isn’t alone in this,” said Paul Lambert at Insight Investment, a Bank of New York Mellon unit, which manages more than $582 billion.

“The rand is another reflection of the change in the liquidity environment in which we’re all operating. We’re learning that unless there are clients on the other side, banks are very unwilling to take risk onto their books.” Volatility in the rand versus the dollar surged toward the highest level in four years, while a measure of global currency price swings climbed to the most since October. The difference between prices at which traders are willing to buy and sell the rand, used as a gauge of liquidity, was about 1.5 times wider on average in the past six months than it was during the first half of 2015, according to data compiled by Bloomberg.

In a phenomenon that’s also hit U.S. stock markets in recent years, regulation is pushing banks to reduce their size and cut down on market making, making it more difficult to trade without prices moving adversely. A reduction in liquidity has contributed to similar price swings in fixed-income securities, including the $13 trillion U.S. government bond market. Bursts of volatility in currency markets and diminishing liquidity are another affliction for emerging economies such as South Africa, which seek to secure overseas investments amid slowing growth, a rout in commodities and domestic political challenges. Boosting international trade and capital inflows is made harder by currency turmoil as investors and banks become less willing to take on additional risk.

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A rock and an impossible place.

Saudi Arabia Plays Down Riyal Peg Fears (FT)

Saudi Arabia sought to cool talk about the future of its currency peg, saying movements in the forward market were the result of market “misperception” about the state of the kingdom’s economy. Oil price declines and rising tensions between Saudi Arabia and Iran have pushed up the cost of riyal-dollar forward prices and questioned the validity of the 30-year-old peg. In a statement, the governor of the Saudi Arabian Monetary Agency said it would “uphold its mandate” of maintaining the peg at SR3.75 to the dollar, “backed up by the full range of monetary policy instruments including its foreign exchange reserves”. The statement was prompted by forward market volatility, said governor Fahad al-Mubarak, which he attributed to “mispricing linked to market operators’ misperception about Saudi Arabia’s overall economic backdrop”.

Economic and financial indicators were stable, underpinned by its net creditor position and a sound and resilient banking system, Mr al-Mubarak said. Oil price woes are weighing on several commodity currencies, not least Russia’s rouble, which dropped more than 1% to a 13-month low. Further rouble declines would cut across the Central Bank of Russia’s strategy for resuming its easing cycle, said Rabobank’s Piotr Matys, and increased the risk of a prolonged recession. Oil’s impact on the Saudi kingdom would prompt markets to “worry more” about falling reserves and the exchange rate pegs of Saudi Arabia and other Gulf states, said Kamakshya Trivedi of Goldman Sachs in a note, “especially if attempts at fiscal adjustment are not credible or unsuccessful”.

Simon Quijano-Evans at Commerzbank acknowledged that Saudi Arabia had four years’ worth of reserves to cover budget and current account deficits. But he added that without a sustained upward oil price move, market speculation about the peg would increase. “History has shown us that if a policy peg is not economically viable, there really is little point in holding on as the intrinsic benefits from the set-up eventually become its principal vulnerabilities,” he said. Gulf bankers were unconcerned, saying the peg had survived worse financial backdrops. In the late 1990s, when oil prices were even lower, the finance ministry toiled under domestic debts totalling more than 100% of gross domestic product. Sama still has $627bn in foreign reserves, down 14% on last November, as the kingdom burns through its savings to fund the deficit and an expensive war in Yemen.

“Traders are forgetting about Saudi firepower,” said one senior Gulf banker. “This is a low-cost trade with a huge potential payout,” said another senior financier. “Those bearish oil may want to bet that pressure will become too great for Saudi. Possible, but not my scenario.”

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Nothing has changed, nothing at all. The bankers still write the rules that are supposed to keep them in check.

Banks’ Worst Fears Eased as Basel Soft-Pedals Capital Overhaul (BBG)

Global banking regulators pledged to refrain from further tightening capital requirements with new rules to be finalized in 2016, dispelling industry fears that triggered intense lobbying efforts over the past year. The Basel Committee on Banking Supervision doesn’t plan to raise capital requirements across the board in the remaining projects of its post-crisis bank rule overhaul, it said Jan. 11 after a meeting of its oversight body, chaired by ECB President Mario Draghi. The group, which includes the Bank of England and U.S. Federal Reserve, said it will assess the potential costs of any additional action. “The committee will conduct a quantitative impact assessment during the year,” the group said in a statement. “As a result of this assessment, the committee will focus on not significantly increasing overall capital requirements.”

Basel’s slate of rules for this year, including a review of trading risks that the committee endorsed on Jan. 10, have faced heavy criticism from bankers, who say onerous new capital charges would crimp their ability to lend. The overhaul of how banks value risky assets has led industry executives to warn a regulatory onslaught – sometimes referred to as Basel IV – is still ahead, even after the last decade of new rules designed to prevent another market meltdown. Karen Shaw Petrou at Federal Financial Analytics said the Basel’s latest statement is a response to bankers’ warnings. “Global regulators clearly hope to tamp down continuing talk of a ‘Basel IV’ rule, emphasizing in both action and statements that continuing changes are recalibrations, not hikes,” Petrou said in an e-mail.

Draghi said the agreements reached by the Basel committee and the upcoming agenda seek to provide greater clarity about the capital framework and, “a clear path for completing post-crisis reforms.” As part of this process, the regulator will hold a public consultation on removing internal-model approaches for some risks, such as the Advanced Measurement Approach for operational risk, as well as on “setting additional constraints on the use of internal model approaches for credit risk, in particular through the use of floors.” The committee also sounded a soft note on another lingering worry of bankers, the unweighted leverage ratio. It will keep the minimum amount of capital per total assets unchanged at 3%, when it becomes a binding requirement in 2018, it said. For the world’s biggest banks, there may be an add-on, it said, without elaborating.

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Canada has so much more to go.

Canadian Stocks Fall in Longest Slump Since 2002 (BBG)

Energy’s drag on Canadian stocks showed no signs of abating as the nation’s benchmark equity gauge slumped a ninth straight day, the longest losing streak since 2002. Canadian equities have lost 7.4% during this period with the Standard & Poor’s/TSX Composite Index failing to post a positive trading day in 2016. Crude futures in New York tumbled to a 12-year low. Analysts at Morgan Stanley projected Brent oil may slump to as low as $20 a barrel on strength in the dollar. Brent dropped 6.7% to $31.32 a barrel in London. Bank of America Corp. cut its average 2016 Brent forecast to $46 a barrel from $50. “Risk appetite will not return until we start to see crude carve out a bottom,” said David Rosenberg at Gluskin Sheff in a note to clients.

The S&P/TSX fell 1% to 12,319.25 at 4 p.m. in Toronto. The gauge capped a 20% plunge from its September 2014 record on Jan. 7, hitting a magnitude in declines commonly defined as a bear market. Canada was the second Group of 7 country to see its benchmark enter a bear market, after Germany’s DAX Index did in August. Energy producers sank 2.7%. The group, which accounts for about 20% of the broader index, was the worst-performing sector in the S&P/TSX last year.

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The demise of retail.

Discovery (Jim Kunstler)

It looks like 2016 will be the year that humanfolk learn that the stuff they value was not worth as much as they thought it was. It will be a harrowing process because a great many humans are abandoning ownership of things that are rapidly losing value — e.g. stocks on the Shanghai exchange — and stuffing whatever “money” they can recover into the US dollar, the assets and usufructs of which are also going through a very painful reality value adjustment. Of course this calls into question foremost exactly what money is, and the answer is: basically a narrative construct. In other words, a story explaining why we behave the way we do around certain things. Some parts of the story have a closer relationship with reality than other parts. The part about the US dollar has a rather weak connection.

When various authorities — the BLS, the Federal Reserve, The New York Times — state that the US economy is “strong,” we can translate that to mean giant companies listed on the stock exchanges are able to put up a Potemkin façade of soundness. For instance, Amazon.com. The company continues to seem like a good idea. And it reinforces that idea in the collective imagination by sending a lot of low-priced goods to your door, (all bought on credit cards), which rings your (nearly) instant gratification bell. This has prompted investors to gobble up Amazon stock. It’s well-established by now that the “brick-and-mortar” retail operations are majorly sucking wind. Meaning, fewer people are driving to the Target store and venues like it to buy stuff. Supposedly, they are buying stuff at Amazon instead.

What interests me in that story is the idea that every single object purchased these days has a UPS journey attached to it. Of course, people also drive to the Target store, though I doubt they leave the place with just one thing. That dynamic ought to call into question just how people are living in the USA, and the answer to that is: spread out all over the place in a suburban sprawl living arrangement that has poor prospects for being reformed or mitigated. Either you drive yourself to the Target store for a slow-cooker and a few other things, or Amazon has to send the brown truck to each and every house. Either way includes an insane amount of transport, and sooner or later both the brick-and-mortar chain store model and the Amazon home delivery model will fail.

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Joris is primarily funny here. But he wants to ‘reform’ the EU, and that’s a dead end. One point is good: EU’s finance center can’t be in a country outside of it. So the UK threat to leave would force banks and multinationals out of London.

It’s Time For Europe To Turn The Tables On Bullying Britain (Luyendijk)

So let us start talking now, out loud in Brussels as well as in Europe’s opinion pages and in national parliaments, about the offer we are going to make to the Scots, should they prefer Brussels to London in the event of Brexit. Let’s also discuss in which ways we are going to repatriate financial powers from London to the European mainland. It is strange enough that Europe’s financial centre lies outside the eurozone, but to have it outside the EU? That would be like placing Wall Street in Cuba. Clearly multinational corporations from China, Brazil or the US cannot have their European HQs outside the EU. So let’s have an EU summit about which European capitals these headquarters should ideally move to. Make sure the English can hear these discussions, and in the meantime keep an eye on how the value of commercial real estate in London plummets.

Or consider the UK-based Japanese car industry – would Greece, with its excellent port and shipping facilities, not be its ideal new home? Oh yes, and sooner or later, the 1.3 billion Indians will object again to not having a permanent seat on the UN security council when 55 million English do. Let’s work out what favours we want from India in exchange for our support. The best way for the EU to prevent Brexit is to start preparing for it, loudly. But this is not enough. European politicians and pundits must not be shy of cutting England down to size. This is the chief problem for those in England trying to make the EU case: they must acknowledge first how irrelevant and powerless their country has become. Except that is still a huge taboo. Seen from China or India, the difference between the UK and Belgium is a rounding error: 0.87% of world population versus 0.15%.

But this is not at all how Britain sees itself – consider the popular derogatory expression “a country the size of Belgium”. But alas, what a missed opportunity this referendum is. A child can see that the EU needs fundamental reform and just imagine for a moment that England had argued not for a better deal for Britain, but for all of us Europeans. How electrifying it would have been if Cameron had demanded an end to the insanely wasteful practice of moving the European parliament back and forth between Strasbourg and Brussels. If he had insisted on a comprehensive overhaul of the disastrous common agricultural policy, on the long overdue reduction in salaries and tax-free perks for Eurocrats, and on actual prosecution of corrupt officials. Instead he has set his sights on largely symbolic measures aimed at humiliating and excluding European migrants, safeguarding domestic interests versus those of the eurozone and, no surprises here, guarantees for London’s financial sector.

Ultimately, as far as the EU is concerned, the English are only in it for themselves. All the more reason, then, for Europeans to stop imploring them to stay in, and begin using their strength in the negotiations.

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These clowns actually believe they’re in control.

Migrant Flows ‘Still Way Too High,’ EU Tells Turkey (AFP)

The number of migrants crossing the Aegean Sea from Turkey to Greece is “still way too high”, a top EU official said Monday, a month and a half after a deal aimed to limit the flow. EU vice president Frans Timmermans said Turkey and Brussels had to speed work up on implementing the action plan, while Ankara reaffirmed it was looking at a measure to tempt more Syrians to stay in Turkey by granting them work permits. “The numbers are still way too high in Greece, between 2,000-3,000 people (arriving) every day. We cannot be satisfied at this stage,” Timmermans told reporters after talks with Turkey’s EU Affairs Minister Volkan Bozkir in Ankara. “The goal of this (action plan) is to stem the flow. 2,000-3.000 (arrivals) a day is not stemming the flow. But we are in this together and we will work on that,” he added.

Under the November 29 deal, EU leaders pledged €3 billion in aid for the more than 2.2 million Syrian refugees sheltering in Turkey, in exchange for Ankara acting to reduce the flow. Under pressure from voters at home, EU leaders want to reduce the numbers coming to the European Union after over one million migrants reached Europe in 2015. Yet there has so far been no sign of a significant reduction in the numbers of migrants from Syria, Afghanistan and other troubled states undertaking the perilous crossing in rubber boats from Turkey’s western coast to EU-member Greece. Turkish authorities on a single day last week found the bodies of at least 36 migrants, including several children, washed up on beaches and floating off its western coast after their boats sank.

In the latest tragedy Monday, two women and a five-year-old girl died when a boat carrying 16 Afghan migrants sank in bad weather off the Aegean coast, reports said. “I believe we need to speed our work to get some of the projects in place,” said Timmermans. “I also said to the minister that we need… to be very explicit on what elements of the action plan have already been implemented and where we still need work.” Bozkir said that Turkey was expending “intense efforts” on halting the migrant flow, saying the Turkish authorities were stopping 500 people every day. “We will try to reduce the pressure on illegal immigration by giving work permits to Syrians in Turkey,” he added.

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Dead on. Not a bright future. As long as the right wing keeps rising in the face of incompetence.

Mass Migration Into Europe Is Unstoppable (FT)

In the 18th and 19th centuries, Europeans populated the world. Now the world is populating Europe. Beyond the furore about the impact of the 1m-plus refugees who arrived in Germany in 2015 lie big demographic trends. The current migration crisis is driven by wars in the Middle East. But there are also larger forces at play that will ensure immigration into Europe remains a vexed issue long after the war in Syria is over. Europe is a wealthy, ageing continent whose population is stagnant. By contrast the populations of Africa, the Middle East and South Asia are younger, poorer and rising fast. At the height of the imperial age, in 1900, European countries represented about 25% of the world’s population. Today, the EU’s roughly 500m people account for about 7% of the world’s population. By contrast, there are now more than 1bn people in Africa and, according to the UN, there will be almost 2.5bn by 2050.

The population of Egypt has doubled since 1975 to more than 80m today. Nigeria’s population in 1960 was 50m. It is now more than 180m and likely to be more than 400m by 2050. The migration of Africans, Arabs and Asians to Europe represents the reversal of a historic trend. In the colonial era Europe practised a sort of demographic imperialism, with white Europeans emigrating to the four corners of the world. In North America and Australasia, indigenous populations were subdued and often killed — and whole continents were turned into offshoots of Europe. European countries also established colonies all over the world and settled them with immigrants, while at the same time several millions were forcibly migrated from Africa to the New World as slaves. When Europeans were populating the world, they often did so through “chain migration”.

A family member would settle in a new country like Argentina or the US; news and money would be sent home and, before long, others would follow. Now the chains go in the other direction: from Syria to Germany, from Morocco to the Netherlands, from Pakistan to Britain. But these days it is not a question of a letter home followed by a long sea voyage. In the era of Facebook and the smartphone, Europe feels close even if you are in Karachi or Lagos. Countries such as Britain, France and the Netherlands have become much more multiracial in the past 40 years. Governments that promise to restrict immigration, such as the current British administration, have found it very hard to deliver on their promises.

The EU position is that, while refugees can apply for asylum in Europe, illegal “economic migrants” must return home. But this policy is unlikely to stem the population flows for several reasons. First, the number of countries that are afflicted by war or state failure may actually increase; worries about the stability of Algeria are rising, for example. Second, most of those who are deemed “economic migrants” never actually leave Europe. In Germany only about 30% of rejected asylum seekers leave the country voluntarily or are deported. Third, once large immigrant populations are established, the right of “family reunion” will ensure a continued flow. So Europe is likely to remain an attractive and attainable destination for poor and ambitious people all over the world.

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Oct 152015
 
 October 15, 2015  Posted by at 11:19 am Finance Tagged with: , , , , , ,  


Marion Post Wolcott. Unemployed coal miner’s mother in law and child. Marine, West Virginia 1938

The Automatic Earth’s Nicole Foss recorded a podcast yesterday with Jack Spirko at the Survival Podcast. I haven’t even had time to listen to it yet, but I’m sure it’ll be as lightheartedly entertaining as her appearances always tend to be ;-). One thing I did notice is that for the first 13 minutes or so, there is no Nicole, just talk about sponsors of the Survival podcast. So you might want to skip that. Enjoy!

Remarks by Jack at the Survival Podcast site:

Special Notice – In the interest of journalistic integrity I feel obligated to reveal something that occurred today. Skype screwed up and only Nicole’s side of the interview came out in the end. Luckily she is a talker and I didn’t say much in this interview. To make it functional for the audience I went though a re recorded my side and pieced the entire thing together. It came out really well but if anything seems missing this is why. Likely if I didn’t tell you you would never even know that my side wasn’t live…

Join Me Today to Hear Nicole Discuss…
• What is the Age of Limits
• The coming liquidity crunch and economic depression
• Some reasons taking out a mortgage may not be a good idea
• What this means for small farms in regard to debt
• How and why population will most likely be reduced
• Why we should not even focus on climate change as a problem
• What do you recommend for the average 9-5er should do
• How much longer can we kick the can down the road
• Nicole’s predictions for how the world wide economic crisis will play out
• Thought on a possible mass migration in the US

Sep 202015
 
 September 20, 2015  Posted by at 9:38 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 20 2015


DPC Government Street, Mobile, Alabama 1906

Human Migration Will Be A Defining Issue Of This Century (Alexander Betts)
5-Year Old Child Drowns Off Greece, Others Paddle Across From Turkey (Reuters)
30 Refugees Missing In New Boat Sinking Off Greece On Sunday (AFP)
Europe Needs To Take Big Numbers Of Refugees. Until Then Chaos Reigns (Guardian)
Greece Is Making America Look Bad (Pittsburgh Post-Gazatte)
Thousands Of Refugees Pour Into Austria As European Crisis Intensifies (AFP)
Exhausted Migrants Left With Few Options on Slovenian Border (WSJ)
UN Warns European Unity At Risk As Borders Close To Refugees (Guardian)
Bank of Finland Governor Supports Opening Door to Migrants (WSJ)
Do China’s Ghost Cities Offer A Solution To Europe’s Migrant Crisis? (Reuters)
Xi Jinping: Does China Truly Love ‘Big Daddy Xi’ – Or Fear Him? (Guardian)
How China Decided To Redraw The Global Financial Map (Reuters)
The US Federal Reserve Has Got It Wrong (Andrew Sentance)
A Divided Fed Pits World’s Woes Against Domestic Growth (Reuters)
Stuck At Zero: Global Risks Have Tied The Fed’s Hands (Forbes)
US Oil Tumbles 4.7% To Settle At $44.68 A Barrel (Reuters)
Jim Chanos on What Lies Ahead for Greece (Lynn Parramore)
Catalonia Separatists: Spanish State Has Failed. We Can Change This (Guardian)
UK’s NHS To Collapse Within Two Years, Warns Former Health Minister (Guardian)

Certainly of this decade. A whole century is a bit much. A harbinger of things to come sounds about right.

Human Migration Will Be A Defining Issue Of This Century (Alexander Betts)

This is the first time in its history that the European Union has faced a mass influx of refugees from outside the region. Each year, as UNHCR announced record numbers of displaced people, the general assumption – until recently – was that this is a problem for other parts of the world. However, rising displacement that had mainly affected the Middle East and Africa has finally reached Europe’s shores in significant numbers. Many are beginning to ask whether the current crisis represents a temporary peak in displacement or presages a new, long-term trend. On what basis can we know? Will the dystopian images we see at the Hungarian-Serbian border of desperate families being beaten back by armed guards or the shocking image of Alan Kurdi become “the new normal”? The simple answer is: it depends.

It depends significantly on us, and the policies we, and our leaders, choose to adopt – nationally, regionally, and globally. Asylum numbers do fluctuate over time depending on the state of the world, and Europe has witnessed significant spikes in numbers before. In 1992, the EU received 672,000 asylum seekers, and numbers remained high during the Bosnia conflict. In 2001, numbers again peaked at 424,000 following the Kosovo crisis and with many arriving from Somalia and Afghanistan. This year, numbers are likely to exceed those figures but not dramatically, especially when one considers that in 1992 there were 15 EU member states and today there are 28. In general terms, the number of refugees in the world is broadly a function of the number of wars and human-rights-abusing dictatorships at any given time.

Today, there are a series of internal and regional armed conflicts around the world. Most of these are in two regions, the Middle East and Africa. There are humanitarian emergencies in Syria, Iraq, Afghanistan, South Sudan, Central African Republic, Somalia, Nigeria and, closer to home, in Ukraine. The UN high commissioner for refugees, António Guterres, has described a “world at war”. If we were able to address the root causes of those conflicts, the number of refugees in the world would decline significantly. However, there are also grounds to believe that refugees and displacement are likely to become a defining issue of the 21st century. Two global trends in particular suggest this: fragility and mobility. In both cases, the international community is struggling to come up with viable collective responses.

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Without photographs, the reaction is completely different.

5-Year Old Child Drowns Off Greece, Others Paddle Across From Turkey (Reuters)

A girl believed to be five years died on Saturday and 13 other migrants were feared lost overboard after their boat sank in choppy seas off the Greek island of Lesbos, the Greek coastguard said. A second, exhausted group of around 40 people reached the island in a small boat following a traumatic journey from Turkey, having paddled through the night with their hands across 10 kilometers (six miles) of ocean after their engine failed. “When we were on the sea … I didn’t have any hope … I said: I am dead right now, nobody can help me,” Mohammed Reza, 18, said after being pulled ashore from the boat by foreign volunteers. Hundreds of thousands of mainly Syrian refugees have braved the short but precarious crossing from Turkey to Greece’s eastern islands this year, mainly in flimsy and overcrowded inflatable boats.

Reza, who fled from Afghanistan and left the rest of his family in Iran, told Reuters TV: “The water and fuel mixed up together … and we were on the sea for about seven or eight hours without any water or any food.” He said neither the Greek and Turkish coastguard had assisted the group of men, women and children. “At that moment, we, all of us, thought that we are useless, we are not human.” Greek coastguard spokesman Nikos Lagkadianos said 11 people were rescued from the boat that sank and a twelfth swam ashore in the early hours. The girl who died was found unconscious and was later declared dead in hospital, Lagkadianos said, adding that the coastguard and Greek navy were searching for survivors. Fifteen babies and children were among 34 refugees who died when their boat capsized off the small island of Farmakonisi last Sunday. Twenty-two others drowned and 200 were rescued two days later trying to reach Kos.

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To be continued.

30 Refugees Missing In New Boat Sinking Off Greece On Sunday (AFP)

Nearly 30 migrants were feared missing off the Greek island of Lesbos, the coastguard said Sunday, in the latest boat sinking in an ongoing Aegean Sea tragedy that has cost hundreds of lives. The coastguard said it had rescued 20 people spotted in the water by a helicopter from EU border agency Frontex, but the survivors said another 26 people had been in the boat. The state news agency ANA said there were children among those missing. On Saturday, a five-year-old Syrian girl died in another attempted crossing from Turkey to Greece, and there were no news on another dozen people who were in the boat with her. The accident again occurred east of the island of Lesbos, one of the Greek islands that has seen a heavy influx of refugees from war-torn Syria this year.

Many have perished trying to cross the Aegean Sea in search of a better future in Europe. Earlier this month, harrowing pictures of three-year-old Syrian refugee Aylan Kurdi, whose body was found washed up on a Turkish beach after the boat carrying his family to the Greek island of Kos sank, caused an outpouring of emotion around the world, pressuring European leaders to step up their response to the refugee crisis. The body of another four-year-old Syrian girl washed up on a beach in western Turkey on Friday. Migrants have in recent days turned to Turkey’s land borders with Greece and Bulgaria to avoid the sea voyage that has cost over 2,600 people their lives in the Mediterranean this year. Greece has seen over 300,000 refugees and migrants enter the country this year, most of them passing through to other European countries.

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Much as Europe is criminally negligent, this is a global issue, not a European one.

Europe Needs To Take Big Numbers Of Refugees. Until Then Chaos Reigns (Guardian)

Europe’s heads of government gather this week for a meeting billed as a last-ditch effort to resolve the refugee crisis sweeping the continent. But the pace of arrivals has accelerated so fast that the deal some are touting as a solution to the challenge is actually more of a stopgap measure to tackle an emergency. Politicians in Brussels have been arguing fiercely about where 120,000 refugees should be allowed to settle, even though tens of thousands more have already travelled into the continent. Borders are being sealed with bewildering speed, as columns of desperate people move from country to country in their attempt to find a haven. And winter is only likely to bring a pause, rather than an end, to the crisis.

The sea crossing from Turkey to Greece may soon be partly “sealed” by harsh weather, but migration groups have warned that many people will die in a desperate attempt to cross before the seas get too stormy. And when spring comes again, the exodus will almost certainly pick up. Claude Moraes, MEP and chair of the European parliament’s justice, civil liberties and home affairs committee, said: “My concern is that we have had this paralysis for so long that the numbers are now out of date. So even if we get [a deal] on Wednesday we are going to have to lift them again. The EU has worked hard on this. But these were figures for the start of the crisis, not now.” Countries from the Balkans to Denmark are sealing land borders, setting up a chain of obstacles that may eventually all but block passage for refugees to prosperous western European nations.

But the journeys from Turkey to Europe’s eastern edge will be almost impossible to stop. Franck Düvell, senior researcher at Oxford University’s migration observatory, said: “Along the sea border with Greece there are too many routes and beaches. [Turkish authorities] can launch operations like they are doing around Bodrum now, but people will find other routes and other beaches.” The long, irregular coastline will always be a challenge, and Turkish police and border guards have told Düvell they are stretched too thin by other emergencies to monitor it all now. “They are at the limits of what they can do, and at the moment their priority lies in the east, borders with Syria and Kurdish areas.” While sea crossings are possible, they will continue to be made.

The trip is relatively short, and although the odds of survival may seem terrifying to people watching from safety, many fleeing war or the endless suffocating limbo of refugee camps long ago decided that they are not unreasonable. “You can’t block the border with Turkey in any meaningful way,” said Leonard Doyle, spokesman for the International Organisation for Migration. “There is the rise of expectation that you can do it, the push factor of people with Isis at their back, and the result is they put themselves at far greater risk than they would have before.” Only an unlikely peace, a moderation of the violence in Syria or far better conditions in regional refugee camps are likely to reduce the number of boats landing on Greek shores. Tighter border controls further north will only trap new arrivals in Greece, where they will still be a European responsibility.

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“If you scream about foreigners usurping the nation here, people might mistake you for a fascist. Back in America, you can be a frontrunner in a major political party.”

Greece Is Making America Look Bad (Pittsburgh Post-Gazatte)

More than 200,000 refugees fleeing mayhem in the Middle East already have worked their way this year from Turkey to Greece, site of the worst economic crisis to hit a developed country since World War II. About 100,000 illegal immigrants come each year from Mexico to the United States, which has 30 times as many people as Greece and a vastly more prosperous economy. So which country is witnessing the meteoric rise of an anti-immigrant political figure? Hint: It’s not Greece. It’s America, of course, where Donald Trump has shot to the top of the Republican presidential fold on an astoundingly nativist platform: Put up a wall between the United States and Mexico, deport anyone who is in America illegally and deny birthright citizenship to their offspring.

And that’s not because waves of Mexicans have been sneaking across our borders to steal jobs and commit crimes, as Mr. Trump would have you believe. Illegal immigration declined with the recession of 2007-2009 and remains a relative trickle. As for Mr. Trump’s fear-mongering, undocumented workers are less likely to engage in criminal activity than native-born citizens. It’s been especially depressing to watch Mr. Trump’s ascent from here in Greece, which has an actual — rather than imagined — flood of newcomers on its hands. On the islands closest to Turkey, especially Kos and Lesbos, 33,000 migrants have arrived in the last month alone. Despite their own economic crisis, however, Greeks have aided the refugees in every way they can.

Greece dispatched 60 extra coast guard officials to register refugees on the island of Lesbos, where an estimated 20,000 people were sleeping in streets and parks awaiting travel permits. The government also provided special ferries to transport refugees to Athens, where most of them will continue toward other destinations in Europe. In the wake of the debt deal signed earlier this summer, however, the government’s capacities are obviously limited. So ordinary citizens have stepped into the breach. Spurred by photos of a drowned Syrian child who was trying to reach Greece, vacationers in speedboats have rescued people cast adrift on the sea. Waves of volunteers have been providing food and clothing for refugees when they get to shore.

To be sure, there have also been reports of young thugs beating refugees. And the far-right Golden Dawn party has tried to capitalize on the crisis, spreading a rumor earlier this summer that Muslim immigrants had defecated in churches on Lesbos. “We will do everything we can to protect the Greek homeland against immigrants,” the party declared in response to the defecation story, which was later exposed as a lie. As Greece braces for elections Sunday, however, Golden Dawn’s popularity has remained in single digits. Its leader has denied the Holocaust, which took the lives of an estimated 60,000 Greek Jews. Its symbol is a slightly modified swastika. And whereas Donald Trump wants to build a wall on America’s southern border, Golden Dawn advocates putting land mines around Greece to kill illegal immigrants.

But Golden Dawn also helps to stigmatize anti-immigrant sentiment in Greece, in ways that might surprise Americans. If you scream about foreigners usurping the nation here, people might mistake you for a fascist. Back in America, you can be a frontrunner in a major political party.

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“Around 13,000 people entered Austria on Saturday, according to the Red Cross, after being forced away from to Croatia, Hungary and Slovenia”

Thousands Of Refugees Pour Into Austria As European Crisis Intensifies (AFP)

Thousands of refugees have streamed into Austria after being shunted through Croatia, Hungary and Slovenia as Europe’s divided nations stepped up efforts to push the migrants into neighbouring countries. The continent’s biggest migratory flow since 1945 has opened a deep rift between western and eastern members of the European Union over how to distribute the refugees fairly, and raised questions over the fate of the Schengen agreement allowing borderless travel within the 28-nation bloc. Several countries have imposed border controls, as recent figures have shown nearly half a million people have braved perilous trips across the Mediterranean to reach Europe so far this year, while the EU has received almost a quarter of a million asylum requests in the three months to June.

In Austria, up to 13,000 people entered the country over the course of Saturday alone, the head of the Austrian Red Cross told the APA news agency. The figure was not immediately confirmed by local police, who had said earlier they were readying for an influx of around 10,000 refugees and migrants. Austrian police said Hungary had shipped at least 6,700 people to the border, with more expected in the Burgenland border region by the end of Saturday. Hungary’s rightwing government has faced international criticism over violent clashes with migrants and a hastily-erected fence along its frontier with Serbia, but in a shift late Friday, Hungarian authorities began transporting thousands of migrants straight to the border with Austria, an apparent bid to move them through and out of their territory as quickly as possible.

There was no let-up in the stream of people making the gruelling journey across the Balkans into western Europe, with Croatia saying 20,700 had entered the country since Wednesday. Zagreb, which initially said it would allow migrants to pass through freely, announced it was swamped on Friday and began transporting hundreds to the Hungarian border by bus and train – sparking a furious reaction from Budapest. Despite the row, Croatian and Hungarian authorities appeared to be coordinating on the ground. An AFP journalist along the frontier between the two countries saw migrants board Croatian buses that took them to the border, before disembarking and crossing on foot then boarding Hungarian buses that quickly departed.

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Shifting disasters.

Exhausted Migrants Left With Few Options on Slovenian Border (WSJ)

In this small Croatian village, an army tent has been set up to cater for the hundreds of migrants stranded at the border crossing with Slovenia. Volunteers with the local Red Cross and Caritas are sorting through donated clothes and pouring hot ratatouille into plastic bowls. A sturdy, tattooed man is piling the fresh meals onto a large tray. “We delivered 600 meals yesterday and today we’re prepared for 2,000,” says Joakim Nilsson, a student from Sweden who traveled to the Balkans to help out wherever he could. “This is a world crisis,” he says about the thousands of migrants and refugees who have streamed daily from Serbia into Croatia after Hungary sealed its border.

At the border crossing, where a two-lane bridge is sealed off and guarded by a dozen of Slovenian riot police, the crowd is exhausted and angry. Many refuse Mr. Nilsson’s meals or prefer instead to walk back into the village where there is shade and stretchers for them to rest. Eventually, however, his tray is empty. “Good luck,” he tells one of the refugees. “And see you in Sweden.” The migrants, a mix of Syrians, Iraqis, Afghans and Africans, have been waiting for three days, and only on Saturday morning did two buses arrive to take some of them to a registration center in Slovenia. “When is a bus coming—when?” they repeatedly ask police officers wearing helmets, shields, batons and cans with pepper spray. But the officers remain silent.

At least one of those cans was used the night before, around midnight, when tensions flared as a group of migrants started pelting the police cordon with plastic bottles and sticks. A spokeswoman from the Slovenian Interior Ministry, Vesna Drole, maintained that only one officer used pepper spray against “a single protester” who was part of a larger group trying to break through the police cordon. “Pepper spray is one of the milder means of coercion that police may use to maintain public order and ensure people’s safety,” she added.

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Time for UN to act, not talk.

UN Warns European Unity At Risk As Borders Close To Refugees (Guardian)

Europe’s biggest refugee crisis in 70 years atomised into a chaotic series of border confrontations and diplomatic disputes this weekend, as crowds of refugees were blocked from passing through a number of crossings in central Europe, prompting the UN to warn that the concept of European unity was at risk. Hungary sent armoured vehicles to its border with Croatia, while Slovenian police sealed several crossings after Croatia attempted to offload tens of thousands of refugees who are using it as an alternative entry point to the European Union.

Croatian policemen accompanying hundreds of migrants into Hungary were disarmed by their Hungarian counterparts and turned away, while Slovenian police used pepper spray to ward off hundreds, mostly Syrians and Afghans, trying to cross to reach the countries of northern Europe. The chaos had been sparked by Hungary’s decision to shut off its southern border with Serbia, blocking a well-trodden refugee railroad that has brought more than 170,000 refugees into the EU since the start of the year. In response, refugees flooded instead into Croatia, which immediately tried to move them back into Hungary and Slovenia, prompting quasi-military manoeuvres from its neighbours.

Croatia’s prime minister, Zoran Milanovic, called Hungary’s actions “incomprehensible”, given that no refugee wanted to stay in Hungary, and said the situation was “the ugliest thing I have seen in Croatia since the [Balkans] war”. He also refused to seal Croatia’s border, because “even if that were possible under the constitution – and it is not – it means killing people”. In response, Hungary’s foreign minister, Péter Szijjártó, said Croatia had “lied in the face” of Hungary. He argued that Croatia had failed to show adequate solidarity with Hungary by sending refugees across their border, just days after the same refugees had rushed into Croatia after being blocked from crossing the Hungarian-Serbian border.

The UN warned that failure to agree on a united response to the crisis endangered the concept of European unity. Peter Sutherland, the UN’s special representative on international migration, said: “If there is no agreement to share refugees between the countries of the European Union, it risks undermining the very essence of the European project.” Sutherland was also surprised at how central and eastern European countries were undermining some of the EU’s key values so soon after joining its membership. “It’s amazing that this is the reaction of central and eastern Europe to the whole concept of solidarity, having only just joined,” Sutherland said.

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“..as new workers would help finance a generous set of welfare benefits..” Sure.

Bank of Finland Governor Supports Opening Door to Migrants (WSJ)

An influx of migrants into Finland could give the small Nordic nation’s shrinking economy a shot in the arm, as new workers would help finance a generous set of welfare benefits, Bank of Finland Governor Erkki Liikanen said Saturday. “More foreign workers would support our economic growth,” the central banker told Finnish television. Mr. Liikanen’s recommendation to open Finland’s doors to foreigners echo comments heard in Germany—where government and business leaders have said the large migrant stream into Europe represents an opportunity to rejuvenate a fast-aging population and boost the economy Finland has experienced three years of stagnation and is expecting gross domestic product growth of only 0.3% this year.

Although Mr. Liikanen cautioned the process of integrating refugees could be “difficult,” the central banker’s view contrasts sharply with the anti-immigration sentiment prevailing among Finns and the government they elected in June. Earlier on Saturday, the Finnish government introduced rules on processing asylum seekers in a bid to tighten Finland’s borders following an increasing number of refugees entering the country from Sweden through a northern checkpoint. The Finnish Interior Ministry said the new rules would see all refugees registered at the country’s border upon arrival. The Finnish Police and Immigration Service have tightened family reunification criteria, saying they aimed to make swift decisions on applications deemed unfounded.

Inside the government, the anti-immigrant camp is led by Timo Soini, leader of the populist Finns Party, who was named deputy prime minister and foreign minister in June. He serves in the government of Prime Minister Juha Sipilä, who has pledged to repair the country’s recession-choked economy through deep spending cuts.

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Bigger priority than stocks?! “A full 39% of individual wealth in China is kept in housing, and, according to Nomura, 21% of China’s urban households possess more than one home.”

Do China’s Ghost Cities Offer A Solution To Europe’s Migrant Crisis? (Reuters)

Nearly 150,000 Syrian refugees have already claimed asylum in Europe and tens of thousands more are flooding the borders in search of places to live. Meanwhile, in China, there are millions of new apartments sitting completely empty and entire sections of freshly constructed cities that are virtually uninhabited. This disparity between unmet housing need and oversupply has not been lost on many around the world, and after writing a book about China’s ghost cities, I’ve recently found my email inbox getting flooded with suggestions such as this: Do you think the Ghost Cities could be used, even as a temporary situation, to accommodate those displaced from Syria? It seems that many of the cities are just waiting for a community and here is a community that needs a city.

This sentiment is widespread across popular social media platforms, and on Twitter alone roughly 7 out of 10 results for searches pertaining to China’s ghost cities reveal tweets recommending the mass movement of Syrian refugees to these under-populated urban terrains. Realistically speaking, this suggestion isn’t worth analyzing with much depth. The political quagmire of relocating masses of people across the planet — not to mention the fact that refugees need more than just housing — means that this is a far greater ordeal than simply assuaging demand with supply. It does shed light, though, on the gulf that exists between the predominant international opinion on China’s so-called ghost cities and their present reality.

Even though there are between 20 and 45 million unoccupied homes across China, which account for roughly 600 million square meters of uninhabited floor space — enough to completely cover Madrid — these places are not the urban wastelands they are often posited to be. While many of China’s new cities and urban districts are deficient in people they are not deficient in owners. Nearly every apartment that goes on the market in China is quickly purchased, often at exorbitant prices that commonly range into the hundreds of thousands of dollars. Far from being unwanted infrastructure that could seamlessly be doled out to refugees, those arrays of vacant high-rises are actually the proud possessions of people who paid a lot of money for them.

So why would anyone spend incredible amounts of cash on houses they do not intent to use? All over the world, the value of property extends beyond the utilitarian function of being a place to live. Real estate is also a vital economic entity that presents an avenue for investment as well as a way of storing wealth — a use of property that is taken to the extreme in China. “Many Chinese investors are buying property based on expectations of appreciation, and that it is a solid, safe investment that they can easily understand,” said Mark Tanner, the founding director of China Skinny, a Shanghai based marketing research firm.

A full 39% of individual wealth in China is kept in housing, and, according to Nomura, 21% of China’s urban households possess more than one home. The reasons for this desire to invest in housing often results from a lack of better options. China’s banks pay negative interest and are becoming even more unattractive with the recent wave of currency devaluation. Wealth management products are not fully developed and are highly regulated by the government, and the stock market is viewed to be about as secure as a casino.

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Curious travel itinerary. Pope and XI are in US at the same time. Xi is due in Washington on Thursday, just two days after the Pope?!

Xi Jinping: Does China Truly Love ‘Big Daddy Xi’ – Or Fear Him? (Guardian)

[..] spin doctors have set about building a cult of personality around their leader with books, cartoons, pop songs and even dance routines celebrating Xi Dada’s rule. Earlier this month, thousands of troops goose-stepped through Tiananmen Square as part of a massive military parade proclaiming Xi’s unassailable position at the party’s helm. “There is this aristocratic flair which has now become more apparent, particularly after the military parade,” said Lam. “The word demi-god would be an exaggeration but after the military parade he looked like an emperor.” Many ordinary Chinese appear enamoured with their 21st century emperor. “He has the backing of the whole country,” claimed Zhang Jingchuan, the songwriter from Sichuan province, describing his leader as an approachable man of ideas.

Human rights activists, liberals and dissidents – some of whom will gather in the United States this week to protest the Chinese president’s visit – have been less impressed. Since Xi came to power, there has been a concerted effort to obliterate civil society in China, with moderate and once-tolerated critics including human rights lawyers, feminists, religious leaders and social activists harassed or thrown in prison. More than 200 lawyers have been detained or interrogated as part of a sweeping crackdown on their trade that began in July. At least 20 remain in detention or are missing, prompting calls for Barack Obama to cancel Xi’s visit to the US. “We had hoped for something different,” said Sophie Richardson, the China director of Human Rights Watch. “We are surprised by just how bad it is.”

MacFarquhar blamed the dramatic tightening on Xi’s obsession with the collapse of the Soviet Union, which followed Mikhail Gorbachev’s attempts at reform. “When he first came in he exhibited how much the Gorbachev phenomenon had spooked him. He is very conscious of long-term threats – and maybe he doesn’t see it as long-term. If he is only thinking in terms of 10 years, now is the time to solidify the country and he thinks he knows how to do it.” Yet for all Xi’s apparent muscle – one academic has dubbed him the Chairman of Everything – not everyone is convinced by the growing legend of Xi Dada. “I never bought the powerful leader narrative at all. But now it’s publicly displayed to be a fiction,” said Anne Stevenson-Yang, a respected observer of the Chinese economy and politics, who believes the recent stock market debacle and deadly Tianjin explosions exposed a president far weaker than many had thought.

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AIIB.

How China Decided To Redraw The Global Financial Map (Reuters)

Plans for China’s new development bank, one of Beijing’s biggest global policy successes, were almost shelved two years ago due to doubts among senior Chinese policymakers. From worries it wouldn’t raise enough funds to concerns other nations wouldn’t back it, Beijing was plagued by self-doubt when it first considered setting up the Asian Infrastructure Investment Bank (AIIB) in early 2013, two sources with knowledge of internal discussions said. But promises by some Middle East governments to stump up cash and the support of key European nations – to Beijing’s surprise and despite U.S. opposition – became a turning point in China’s plans to alter the global financial architecture.

The overseas affirmation, combined with the endorsement of stalwart supporters, including a former Chinese vice premier and incoming AIIB President Jin Liqun, a former head of sovereign wealth fund China Investment Corp, enabled China to bring the bank from an idea to its imminent inception. The bank’s successful establishment is likely to bolster Beijing’s confidence that it can play a leading role in supranational financial institutions, despite the economic headwinds it is facing at home. “At the start, China wasn’t very confident,” one of the sources said in reference to Beijing’s AIIB plans. “The worry was that there was no money for this.”

A Finance Ministry delegation that called on Southeast Asian nations to gauge interest in the AIIB was not encouraging, the source said. Governments backed the idea, but were too poor to contribute heavily to the bank’s funding. But subsequent visits to the Middle East helped to win the day as regional governments informed China they needed new infrastructure and, crucially, were able to pay for it, a source said. “They are all oil-producing countries, they have foreign currencies, they were very enthusiastic, and they could shell out the cash,” he said. “That was when we thought ‘Ah, this can be done.'”

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“The key debate then should be around the pace and extent of this rise, not whether it should take place at all.”

The US Federal Reserve Has Got It Wrong (Andrew Sentance)

The US Federal Reserve decided not to raise the key policy rate in the US this week. That would be an understandable decision if rates were at or close to a normal level. But they are not. Interest rates of 0.5% in the UK and 0-0.25% in the US are the lowest recorded levels in history. Seven years into a recovery, central bankers need to explain why the interest rate playing field is still so heavily tilted to borrowers. Continuing with such low interest rates in the UK and the US, when unemployment rates are back to 5-5.5% and our economies are growing well, raises some more profound questions about monetary policy in the west. First, how independent are central banks? Since the 1990s, the Fed and the Bank of England have pursued policies similar to the ones any well-meaning government official would have chosen.

They have cut interest rates very readily, but when they have raised them (in 1994-5 and 2005-7) they have been behind the curve. Independent central banks were established precisely to avoid this “behind the curve” interest rate policy. But it has not worked. Once again, they are at serious risk of lagging behind in their interest rate decisions as the major western economies climb out of the post-crisis recession. Second, if interest rates cannot rise now, when will they increase? In the case of the US, growth has averaged over 2% for more than six years since the recovery started in mid-2009. Unemployment has halved from around 10% to 5% over roughly the same period. Yet interest rates remain stuck — close to zero. A similar position prevails in the UK.

A multitude of reasons have been advanced for delaying the first rate rise: sluggish growth in all the major western economies in 2011-12; the euro crisis in 2013-14; and now the Fed is citing weak economic growth in China and the impact this has on financial markets. If you look around hard enough, there can always be a reason for not raising interest rates. But that highlights the key problem. Monetary policymakers are very timid at the moment. They are lions who have lost their roar. The third problem is that central bankers appear to lack a clear strategy for monetary policy. Their implicit strategy is that interest rates will remain at current excessively low levels — until sufficient evidence accumulates to raise them. But a more realistic approach to keeping monetary policy on a steady and neutral course would involve a gradual rise in interest rates over the next few years. The key debate then should be around the pace and extent of this rise, not whether it should take place at all.

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Liar, liar, economy on fire.

A Divided Fed Pits World’s Woes Against Domestic Growth (Reuters)

Federal Reserve policymakers appeared deeply divided on Saturday over how seriously problems in the world economy will effect the U.S., a fracture that may be difficult for Fed Chair Janet Yellen to mend as she guides the central bank’s debate over whether to hike interest rates. Though last week’s decision to again delay an interest rate increase was near-unanimous, drawing only one dissent, St. Louis Fed President James Bullard called the session “pressure-packed” as members debated whether global uncertainty or the continued strength of the U.S. economy deserved more attention. In the end the committee felt that tepid global demand, a possible weakening of inflation measures, and recent market volatility warranted waiting to see how that might impact the U.S.

Bullard, who does not have a vote this year on the Fed’s main policy-setting committee, said he would have joined Richmond Fed President Jeffrey Lacker’s dissent, and worried the central bank had paid too much attention to recent financial market gyrations. Markets sold off sharply this summer over concerns about a slowdown in China and weak world growth, leaving Fed officials to vet whether that reflected a short-term correction or more fundamental problems on the horizon. “Financial markets tend to wax and wane, sometimes suddenly. Monetary policy needs to be more stable,” said Bullard, who in prepared remarks here to the Community Bankers Association of Illinois said he did not think the Fed “provided a satisfactory answer” to why rates should stay near zero.

The economy is near full employment, and inflation will almost certainly rise, Bullard said, leaving the Fed’s near seven-year stay at near zero rates out of line with the broad economic picture. In a statement Lacker said he felt the current low rates “are unlikely to be appropriate for an economy with persistently strong consumption growth and tightening labor markets.”

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“Some people call this stealing economic activity from the future..”

Stuck At Zero: Global Risks Have Tied The Fed’s Hands (Forbes)

On the seventh anniversary of the implosion of Lehman Brothers, an event that rocked the global economy, it’s more than ironic that the main topic of global financial discussion has been a rate hike by the Federal Reserve, which just announced that it would leave rates unchanged yet again. Behind the scenes, more interesting is the growing list of risks which may be tying the FOMC’s hands behind their back. The Fed should have hiked rates in 2012, but every day they put off the rate raise, Lehman-like systemic risk is lurking and rising. It’s a Colossal Failure of Common Sense all over again. With all the debate about what exactly the Federal Reserve should do with short-term interest rates, historical perspective is something that’s being left behind.

The U.S. has had near zero short-term interest rates before. The period of 1932 to 1953 was defined by rates that were between zero and 2.1%. The last time we hit the zero bound, we stayed very close to it for upwards of 21 years. This is not something you hear often from economists these days. The main reason central banks raise and lower rates is to shift consumption around and smooth out periods of stagnation. The Fed’s dual mandate of non-accelerating inflation and full employment defines the characteristics of the smoothing that society wants to see. Low rates pull consumption and investment forward and allow projects to be undertaken that otherwise would have to wait. Some people call this stealing economic activity from the future, but we must keep our eye on the incentives created by Fed policy.

On the other hand, higher rates make debt more expensive and push consumption and investment out. This year, most economist have felt the Fed is looking to “tap the brakes” on the improving U.S. economy. The other pressing issue is high debt levels. The Fed is in no hurry to hike rates with debt levels so high in the post-Lehman era. The U.S. hit its debt ceiling in March, at $18.1 trillion, but the devil is in the details, or what’s called interest costs as a%age of federal spending. As you can see below, net interest outlays are on course to more than double by 2017 from 2005 levels. Interest costs on the staggering U.S. debt load, added together with government entitlement spending, is nearing 71% of Federal spending, compared to 26% in the early 1960s. Is this sustainable?

There’s a price to pay for six years of a zero interest rate policy, it’s not free. As the world’s most influential central bank has kept interest rates so low for so long, debt has piled up in all kinds of global pockets, especially in emerging markets. According to the Bank of International Settlements, emerging markets’ total debt to GDP ratio has surged to nearly 170%, up from 100% just before Lehman’s failure. Even more disturbing, according to Bloomberg data: there’s a strong correlation between the surge in emerging market debt levels and the cost of credit default protection. Investors wanting to insure themselves against the risk of EM defaults are paying up for the privilege these days.

U.S. Government Net Interest Outlays
2005: $150 billion
2009: $190 billion
2017: $335 billion
*Data from CBO

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The lower the price, the more producers will pump.

US Oil Tumbles 4.7% To Settle At $44.68 A Barrel (Reuters)

U.S. oil prices fell about 5% on Friday after U.S. energy firms cut oil rigs for a third week in a row this week, data showed on Friday, a sign the latest crude price weakness was causing drillers to put on hold plans announced several months ago to return to the well pad. The drop comes amid increased concerns about the outlook for energy demand. The U.S. central bank warned of the health of the global economy and bearish signs persisted that the world’s biggest crude producers would keep pumping at high levels. Drillers removed eight rigs in the week ended Sept. 18, bringing the total rig count down to 644, after cutting 23 rigs over the prior two weeks, oil services company Baker Hughes said in its closely followed report. Those reductions cut into the 47 oil rigs energy firms added in July and August after some drillers followed through on plans to add rigs announced in May and June when U.S. crude futures averaged $60 a barrel.

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“Can you imagine what would happen in the U.S. if you cut spending by 20 or 30% and cut Social Security? You’d have riots in the streets, more so than we ever saw in Greece.”

Jim Chanos on What Lies Ahead for Greece (Lynn Parramore)

Jim Chanos, the well-known hedge fund manager and president and founder of Kynikos Associates, is half Greek on his father’s side. He has been traveling to the country since 1970 and has also been active in the Greek community in the United States. A long-time observer of Greece, he became more involved in 2010 when he was part of a group that met with then-prime minister Papandreou to offer some pro bono advice. Since then, he has been watching closely from the sidelines with increasing levels of concern. In the following interview, he discusses how Greece reached this point of crisis, the upcoming elections, and what lies ahead.

LP: You’ve recently returned from a trip to Greece to visit family and friends. How did you find the mood in the country?

JC: It was grim — away from the vacation spots, of course, which are more international than domestic locations. I’d gotten there just after they’d finally agreed to sign the third memorandum. There was a general sense of resignation and not knowing what else they can do. The feeling of the people I spoke to — whether high level or people in restaurants and tavernas — was that they [the Troika] have them by the short hairs because of the banking system. And I think that was pretty clear. Really, there was no sense of any chance of this working out with an alternative currency. To this day we’re really not quite sure whether they had that planned — various reports differed as to whether they could have even done it — but I think that there’s just this general level of resignation coupled with despair amongst people worried about the long-term growth of the country and its well-being. People are worried about their kids, as they should be.

LP: I think pretty much everybody agrees that the negotiations with the Troika have been a fiasco. How do you assess what’s happened? Who is to blame?

JC: It’s important to understand that while Syriza may have botched the negotiations —and I do I think there’s a general consensus that they did or at least didn’t play it as well for their country as they could have — they didn’t cause this mess. When the first memorandum was signed and then agreed to by PASOK and Papandreou, and then the follow-on was agreed to by Samaras and New Democracy to the right, in effect they were the same types of understandings. But they couldn’t work from the get-go because, as we now know, there was no net new money in any meaningful way coming into Greece. Whatever new capital was coming in was just a way to keep the banks current. It was going in the front door and out the back door.

Greece really did a decent job from an austerity point of view. They brought down spending, they raised taxes. I know there’s this belief that the Greeks are just world-class tax evaders, but in fact, in terms of taxes collected as a%age of GDP, they’re now quite a bit higher than a number of European countries because a lot of the taxes are indirect: the Greeks couldn’t evade them if they wanted to. They also cut spending dramatically. Can you imagine what would happen in the U.S. if you cut spending by 20 or 30% and cut Social Security? You’d have riots in the streets, more so than we ever saw in Greece.

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This weekend Greece, next weekend Catalunya.

Catalonia Separatists: Spanish State Has Failed. We Can Change This (Guardian)

At the port of Tarragona recently, with the sun shining on the harbour, it became clear that Junts pel Sí (Together for Yes), the Catalan independence coalition which hopes to score a significant victory next weekend, is a pretty big tent. Asked about a controversial megacomplex of hotels, casinos and theme parks in the works, candidate Germà Bel was confident that the project would create wealth and jobs for the area. But Raül Romeva, charismatic leader of the Together for Yes list, doubted whether the project would actually go ahead. “It’s not a done deal,” he hedged. Spanish media seized on the moment as evidence of the uneasy bedfellows that had joined together for Catalonia’s forthcoming regional elections.

But Romeva, who leads the Junts pel Sí ticket, sees the unwieldy coalition backed by the conservative Democratic Convergence party, the leftwing Catalan Republican Left and grassroots independence activists, as a sign of the extraordinary moment Catalonia is experiencing. “This is a movement that goes from left to right, spanning conservatives, liberals, ecologists, sociologists and many others,” he told the Observer. “It’s a consequence of necessity.” For the past decade, he argued, the Spanish state has failed to represent the plurality of the country: “What we have is the opportunity to change all this.” His coalition seeks to turn the 27 September ballot into a de facto referendum on independence, segregating parties by their stance on the question and launching the region’s most ambitious move in recent years in the push to break away from Spain.

“If there is a majority, we will have to manage that result. If there is not a majority, we will have to accept that and move on.” Polls suggest that pro-independence parties could win a slim majority in the 135-seat regional parliament. If so, Catalan leader Artur Mas has pledged to lead a transitional government, lasting no longer than 18 months, which will begin drafting a Catalan constitution and work towards negotiating secession with the central government in Madrid. A leftist who dresses in jeans and wears bright yellow glasses, Romeva comes across as a bridge between the diverse groups that make up Junts pel Sí. Born in Madrid and raised in Catalonia, he said his position on independence was cemented in 2010, when Spain’s constitutional court ruled that Catalonia’s status and powers could not be considered tantamount to nationhood.

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Channel Greece: “The system will crash. Elderly people won’t get the care they need, and it will be people with mental ill health who suffer most, because that is where the squeeze always comes.”

UK’s NHS To Collapse Within Two Years, Warns Former Health Minister (Guardian)

The National Health Service will crash within two years with catastrophic consequences unless the government orders an immediate multibillion pound cash injection, the former minister in charge of care services says. The stark assessment from Norman Lamb, minister of state at the Department of Health until May’s general election, comes as fears mount among senior NHS officials, care providers and local authorities that NHS and care services are approaching breaking point. In an interview with the Observer, Lamb, a Liberal Democrat who was at the heart of policymaking during the Tory-Lib Dem coalition, accuses the government of dishonesty in failing to admit the scale of the problems.

He says that an increasing number of private companies and other organisations contracted to provide care by local authorities are refusing to tender again because cash-starved councils, already hit by budget cuts of more than 40% since 2010, cannot pay enough to let them run adequate services. Lamb says the result is that more elderly people in particular will end up in already overstretched hospitals, compounding the crisis. Pre-election promises by the Tories to provide an additional £8bn for the health service by 2020, on top of £2bn extra pledged at the end of last year, are insufficient and too vague to reassure anyone, he argues.

“If the investment is not made upfront and in the early period of this parliament, you could see serious failures in the system,” he said. “The system will crash. Elderly people won’t get the care they need, and it will be people with mental ill health who suffer most, because that is where the squeeze always comes.” While the promised extra money would help, it was nowhere near enough. “I don’t think anyone in the NHS believes that is enough. The government talks very vaguely about an extra £8bn by 2020, but it is needed now. If it comes in 2019-20, the system will have crashed by then. I think the next two years will make or break the NHS and the care system.”

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