Jul 242016
 
 July 24, 2016  Posted by at 9:25 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »


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: , , , , , , , , ,  2 Responses »


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.

Read more …

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: , , , , , ,  18 Responses »


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.

Read more …

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.

Read more …

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.

Read more …

“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.

Read more …

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.

Read more …

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.

Read more …

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.

Read more …

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.

Read more …

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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