Mnuchin Archives - Page 2 of 2 - The Automatic Earth

Sometimes it is not appreciated quite how industrial Italy is. It has long been Europe’s second-biggest manufacturing power, beaten only by Germany. Italy is far more industrial than France or the UK. In some areas of design and high-quality manufacturing, Italy is still without peer. However, since it gave up the lira and adopted the euro – in effect Germany’s currency – things have gone pear-shaped. This economic calamity is driving Italian politics, leading many to question the euro and Italy’s membership of it. From 1945 to 1995 there was an understanding that Italy would devalue the lira. This is what Italy did. Traditionally, it devalued the lira every few years. This kept Italian industry competitive.

For example, when Italy joined the European Monetary System, in 1979, the exchange rate was 443 lire per Deutschmark. By 1990, the year of German reunification, the rate was 750 lire to the Deutschmark. By 1995 it was 1,000 lire to the Deutschmark. In the 1992 currency crisis the lira fell to a low of 1,250 against the Deutschmark before recovering a bit. The gradual fall in the value of the lira was a price that the Italians were prepared to pay for industrial success. Contrary to the dogma spouted by Europe’s central bankers, Italian devaluations worked particularly well. From 1979 to 1998, Italian industrial production outpaced that of Germany by more than 10%. Italian equities outperformed German equivalents by 16% – after having taken into account the devaluations.

So not only was Italian industry growing faster than German industry, aided by lira devaluations, but also the return on capital in Italy was higher than in Germany. This is because if the stock market of a country is outperforming another country’s, it implies that the capital that is deployed in the faster-growing country is being deployed more efficiently. Therefore, not only was Italy growing more quickly than Germany, but it was more efficient too. Then came the euro. Since Italy joined the single currency, almost to the day, its industry has gone backwards. Having outperformed German stocks during the period of the lira, Italian stocks have underperformed German stocks by a whopping, bankruptcy-inducing 65%.

During the half-century when Fellini was writing the story of postwar Italian success, the Italian stock market almost always returned more than the German stock market. Once Italy joined the euro that stopped almost overnight. Deep in the economy, the strictures imposed by the euro have destroyed much of Italian industry. For example, having outgrown Germany’s industrial output in the 1980s and 1990s by 10%, Italian factory output since Italy joined the euro has lagged Germany’s by 40%.

Hard to summarize this long Zero Hedge piece. Depending on where you look, Italy may not be all that weak.

“If you owe the ECB €10 billion, you have no leverage. If you owe the ECB €426 billion, you have all the leverage.”

• An Italian Exit May Be Rome’s Best Option – JPMorgan (ZH)

[..] with €426BN, Italy has the highest Target2 deficit with the Eurosystem (Spain is a close second with €377BN) any discussion about an Italian euro exit raises concerns about costs. [..] due to QE induced cross border flows since 2015, Target2 balances have exploded since the launch of the ECB’s QE (and third Greek bailout in 2015), and surpassed the previous extremes from the depths of the euro debt crisis in the summer of 2012.

[..] a euro exit by a debtor country would represent more of a cost to creditor countries such as Germany rather than to the exiting country itself. And, as shown in the chart above, Germany sure has a lot of implicit accumulated costs, roughly €1 trillion to be precise, as a result of preserving a currency union that allowed German exporters to benefit from a euro dragged lower by the periphery, relative to where the Deutsche Mark would be trading today. But here the analysis gets slightly more complex, as Target2 does not provide the full picture of potential costs (or benefits, assuming a scorched earth approach). As JPMorgan writes, the Target2 liabilities of a debtor country give only a partial picture of the cost to creditor nations from that debtor country exiting.

This is because Target2 balances represent only one component of the Net International Investment Position of a country, i.e. the difference between a country’s total external financial assets vs. liabilities. The broader metric that one must use, is of the Net International Investment Position for euro area countries and is shown in the chart below. It shows that contrary to the Target2 imbalance, Italy leaving the euro would inflict a lot less damage to creditor nations than Spain leaving the euro. This is because Spain’s net international investment liabilities stood at close to €1tr as of the end of last year, almost three times as large as its Target2 liabilities. In contrast Italy’s net international investment liabilities were much smaller and stood at only €115bn at the end of last year, around a quarter of its €426bn Target2 liabilities. This, as JPM explains, is because Italy has accumulated over the years more external assets than Spain and should thus be overall more able to repay its external liabilities.

[..] Ironically, the surprisingly low net international investment liabilities of Italy are the result of the persistent current account surpluses the country has been running since the euro debt crisis of 2012, and smaller current account deficits compared to Spain before the crisis. The flipside is that the current account surplus – in theory – also makes it easier for a country like Italy to exit the euro relative to a current account deficit country. This is because the higher the current account deficit of a debtor country, the higher the cost of an exit for this country as the current account deficit would have to be closed abruptly following an exit. Most importantly, this means that as a result of Italy’s decent current account surplus, from a narrow current account adjustment point of view, its own cost of a euro exit should be relatively small.

Merkel has weakened a lot. Italy knows it.

• Angela Merkel Rules Out Debt Relief For Italy (CNBC)

German Chancellor Angela Merkel appeared on Saturday to rule out debt relief for Italy, saying in a newspaper interview that the principle of solidarity among members of the euro zone should not turn the single currency bloc into a debt-sharing union. “I will approach the new Italian government openly and work with it instead of speculating about it intentions,” Merkel told the Frankfurter Allgemeine Sonntagszeitung in an interview to be published on Sunday.

On Friday, Italy swore a populist coalition into power, ending months of political uncertainty that hit global markets in the last week. Newly designated Prime Minister Giuseppe Conte will lead Western Europe’s first anti-establishment government with the aim of cutting taxes, boosting spending on welfare and overhauling EU rules on budgets and immigration. Italy accounts for 23.4 percent of the euro zone’s public debt and 15.4 percent of the bloc’s GDP, according to Eurostat.

Conte has a full agenda.

• New Italy PM Starts Off In Shadow Of His Powerful Deputies (AFP)

Italy’s new prime minister Giuseppe Conte mostly kept quiet on his full first day in office Saturday, while his two powerful deputies took centre stage in setting the tone of the populist government’s policy. Conte, a political novice, was finally sworn in on Friday as the head of a government of ministers from the anti-establishment Five Star Movement and the far-right League, ending months of uncertainty since elections in March. But Conte was a compromise candidate between Five Star leader Luigi Di Maio and the League’s Matteo Salvini – both of whom are now his deputy prime ministers – and he will have to walk a delicate line to push through the anti-austerity and pro-security promises their populist parties campaigned on.

The 53-year-old academic also inherited a daunting list of issues from his predecessor Paolo Gentiloni, including the financial travails of companies such as Ilva and Alitalia, a Group of Seven summit in Canada and a key EU summit at the end of the month, as well as the thorny question of immigration. Immigration is the bugbear of Conte’s interior minister, Salvini, the 45-year-old leader of the anti-immigrant, anti-Islam League. Salvini announced Friday that he would visit Sicily to see the situation for himself at one of the main landing points for refugees fleeing war, persecution and famine across North Africa and the Middle East. “The good times for illegals is over – get ready to pack your bags,” Salvini said at a rally in Italy’s north on Saturday, adding however that he wants to economically assist migrants’ countries of origin.

His comments come after more than 150 migrants, including nine children, disembarked from a rescue ship late Friday in Sicily. Conte attended a military parade alongside President Sergio Mattarella on Saturday, marking Republic Day for the foundation of the Italian Republic in 1946. However the new prime minister has issued few public statements since being appointed. On Saturday he did post on Facebook that he had spoken with German Chancellor Angela Merkel and French President Emmanuel Macron and would meet the two leaders at the G7 summit, where he will be a “spokesman for the interests of Italian citizens”. Conte has also opted to keep the country’s intelligence services under his personal control.

Deputy premier Di Maio, who is serving as economic development minister, also took to Facebook, calling for “entrepreneurs to be left alone”. “Employers and employees in Italy must not be enemies,” he said, promising “I will not disappoint you”. On Saturday evening Five Star held a rally in the centre of Rome with thousands of supporters and all its ministers to celebrate “the government of change”. Di Maio told the crowd that “from today, the state is us”. Five Star’s founder, former comic Beppe Grillo, rang a bell in front of the crowd, saying the sound “marks the fracture between a world that is going away and a new one that is arriving”.

Right. Sure.

• Juncker: EU Won’t ‘Meddle’ In Italy’s Affairs (O.)

Italy, the third-largest economy in the eurozone, has a public debt second only to Greece’s and there was a negative reaction from the financial markets to the League-M5S coalition, which plans to significantly raise public spending. Juncker offered a more placatory tone, suggesting that Brussels and Berlin had learned the lessons of the Greek crisis. He also denied that the eurozone was set on a course for another economic downturn: “The Italians cannot really complain about austerity measures from Brussels. However, I do not now want to lecture Rome. We must treat Italy with respect. Too many lectures were given to Greece in the past, in particular from German-speaking countries. This dealt a blow to the dignity of the Greek people. The same thing must not be allowed to happen to Italy.”

Juncker said that the financial markets’ reaction was “irrational”: “People should not draw political conclusions from every fluctuation in the stock market. Investors have been wrong on so many occasions.” Neither of the coalition parties in the new Italian government campaigned on leaving the euro or the EU, but both have backed such calls in the past and are scathing about the rules that underpin the eurozone. Mujtaba Rahman, a former European commission and UK Treasury official who now works for consultancy the Eurasia Group, warned that as the cornerstone of the coalition government’s platform was fiscal expansion, it was liable to clash with the commission this autumn.

“Though no official estimates have been produced, independent estimates suggest the proposed measures would cost, combined, upwards of €100bn per annum, around 6% of GDP.“If the government were to propose a very expansionary budget, the commission – which provides its opinions and recommendations on member states’ draft budgetary plans – would have to reject it in September. This would be a first, and would set the stage for a real confrontation with Rome,” he said. “A significant deviation from EU-mandated fiscal targets may prompt the commission to open a new Excessive Deficit Procedure, a process designed to give the EU more power to enforce austerity on Rome. Yet the symbolism of this move would only strengthen the Italian government’s domestic standing.”

Poker player?!

• Political Bruiser Sánchez Stuns Spain To Become PM (Spain Report)

Forget about what the new socialist government’s policies are going to be, because no one really knows yet. Forget about who the new ministers are going to be, because no one really knows yet. And forget about how long this government is going to last. No one has a clue right now. What is worthy of note is how Pedro Sánchez has just crushed all of his political opponents in a week. Last Friday, the PSOE had slowly slumped to less than 20% in the polls and he was being written off by columnists and commentators. This Saturday, he will be driven to Zarzuela Palace to be sworn in as the new socialist Prime Minister of Spain [..]

Mr. Rajoy is likely not the only political leader who needs a stiff drink this weekend. Pedro Sánchez has just left Pablo Iglesias—who nine days ago thought his biggest problem was an absurd internal ballot about his new luxury home—sitting in the dust in the fight for the Spanish left. Two years ago, with the sudden appearance and meteoric rise of Podemos, Mr. Iglesias’s stated strategic goal was not to win the election but to dominate the Spanish left. He just lost that race. Pedro Sánchez has just left Ciudadanos leader Albert Rivera rabbiting on incessantly about wanting a new general election instead of the socialists “unfairly” grabbing power, because Mr. Rivera is—or was—doing rather better in the polls than the rest.

But rabbit on is all he can do for now because, just like nine days ago, in the real world Ciudadanos still only has 32 seats in Congress. And Pedro Sánchez has just left the powerful leader of the Socialist Party in Andalusia, Susana Diaz, well, in Andalusia. This might be the sweetest victory of all for the new Prime Minister, because it was she who wielded her considerable internal and establishment influence in October 2016 to oust Mr. Sánchez as leader of the PSOE, allowing Mariano Rajoy to be reappointed Prime Minister after a year of national stalemate unbroken by two general elections.

Again: Pedro Sánchez, written off by some as being too handsome to have any interesting ideas, has, somewhere along the way, learnt to execute political hit jobs that have left all of his major political opponents staggering, and sent what was a confident conservative party that had only just passed a new budget—two days previously—scurrying into opposition, wounded. In a week. Whatever happens next in Spanish politics, do not underestimate Pedro Sánchez.

More division.

• Europe: Confront Trump or Avoid a Costly Trade War (NYT)

Despite its name, the European Union is not generally a model of unity. If Mr. Trump was banking on internal division stymieing the European response, he picked an opportune moment. Britain is consumed with domestic sniping over its pending departure from the European Union, making it a bit player in these proceedings. Italy has been immersed in the operatic political drama at which it excels, only Friday swearing in a new government after inconclusive elections in March. The incoming government presents a coalition of two populist parties that have expressed disdain for the European Union and the shared euro currency, stoking fears that the bloc will be presented with a new challenge to its cohesion.

Spain just swapped governments. Germany is headed by a chastened chancellor Angela Merkel following her own lengthy struggles to form a government after elections last fall. The French president has been frustrated in his attempts to forge greater political unity within the bloc. “Europe is in disarray,” said Nicola Borri, a finance professor at Luiss, a university in Rome. “It’s even difficult to understand who is in power in Europe.” In deliberating how to respond to Mr. Trump’s tariffs, the key schism appears to run between Germany and the rest of the bloc. “I don’t think there is a unified consensus for how to deal with the Americans,” said Meredith Crowley, an expert on international trade at the University of Cambridge in England. “The Germans benefit from open markets globally, so they don’t want to throw up more barriers to free trade.”

That’s quite the statement. What if Beijing said the same about the US?

• US Wants Structural Changes To China’s Economy: Mnuchin

The United States wants trade talks in Beijing this weekend to result in structural changes to China’s economy, in addition to increased Chinese purchases of American goods, U.S. Treasury Secretary Steven Mnuchin said on Saturday. U.S. Commerce Secretary Wilbur Ross arrived in Beijing on Saturday with an interagency team of U.S. officials for talks on long-term purchases of U.S. farm and energy commodities, just days after Washington renewed its threats to impose tariffs on Chinese goods.

The purchases are partly aimed at shrinking the $375 billion U.S. goods trade deficit with China. Mnuchin, speaking at a G7 finance leaders meeting in Canada where he was the target of U.S. allies’ anger over steel and aluminum tariffs, said the China talks would cover other issues, including the Trump administration’s desire to eliminate Chinese joint venture requirements and other policies that effectively force technology transfers.

It’s election time.

• Uber’s ‘Business Is Finished’ In Turkey, Erdogan Says (R.)

Turkey’s President Tayyip Erdogan has said ride hailing app Uber is finished in Turkey, following pressure from Istanbul taxi drivers who said it was providing an illegal service and called for it to be banned. About 17,400 taxis operate in Istanbul, home to about a fifth of Turkey’s population of 81 million people, and since Uber entered the country in 2014 tensions have risen sharply. Erdogan’s statement came after new regulations were announced in recent weeks tightening transport licensing requirements, making it more difficult for drivers to register with Uber and threatening a two-year ban for violations.

“This thing called Uber emerged. That business is finished. That does not exist anymore,” he said in a speech in Istanbul late on Friday. “We have our taxi system. Where does this (Uber) come from? It is used in Europe, I do not care about that. We will decide by ourselves,” added Erdogan, who is running for re-election in three weeks. [..] Uber said that about 2,000 yellow cab drivers use its app to find customers, while another 5,000 work for UberXL, using large vans to transport groups to parties, or take people with bulky luggage to Istanbul’s airports.

The Tories can’t wait to return to Dickens.

• Britain’s Low-Paid Face Decade Of Wage Squeeze (O.)

The wages of 10 million low-paid workers have stalled for two decades and face pressure for a decade to come, according to a bleak assessment of Britain’s future jobs market. Global economic competition, automation, the shift to the gig economy and a widening regional divide will see further pressure placed on the incomes of those earning between £10,000 and £15,000, it warns. The analysis by the Centre for Social Justice (CSJ) thinktank, which is on the political right and chaired by the former Tory leader Iain Duncan Smith, also blamed a chronic national failure to boost skills and education. It will be seen as another warning to Theresa May from Conservative figures to kickstart her domestic agenda.

There have been concerns within the party that the focus on Brexit has led to inaction in other crucial areas that could hold Britain back after its exit from the European Union. The analysis, co-written by Boris Johnson’s former economic adviser and Brexit supporter Gerard Lyons, concludes that wages of those on the lowest salaries stalled long before the 2008 financial crash. It warns that the current evidence shows that most never escape a life on low pay. The centre’s support for action on low pay shows that it is now an issue of concern across the political spectrum, with automation expected to place further pressure on jobs in some low-paid sectors unless new skills and opportunities are developed.

The CSJ report states that 20% of Britain’s 33 million workers earn £15,000 a year or less, and that 50% earn no more than £23,200. Only 10% of employees, or about 3 million people, earn above £53,000 a year. Britain does not compare well with other developed nations when it comes to low pay, it states. Taking data from manufacturing, and giving the US a score of 100, Switzerland topped the table with a pay rate of 155, followed by Norway on 126, Germany on 111 and France on 97. However, the UK was much further behind, on 73.

These people would be better off moving to Poland.

• UK Universal Credit Change To Bar 2.6m Children From Free School Meals (Ind.)

Up to 2.6 million children whose parents are on benefits could be missing out on free school meals by 2022, the shadow education minister will warn. Angela Rayner will tell a GMB union conference on Sunday that the Government’s claims on school meals are “falling apart” after changes to eligibility under Universal Credit (UC). When the system was first introduced in 2013, all children of recipients – who were all unemployed – were eligible for free school meals (FSM), as they would have been under the old system. But in April the criteria was tightened based on income. In England, the net earnings threshold will be £7,400 whereas in Northern Ireland it will be £14,000.

A government technical note published in May said that if the change had not been made, “around half of all (state school) children would become eligible for FSM and the meals would no longer be targeted at those who need them the most”. It said that in 2017 around 1.1 million disadvantaged children were eligible and received a free school meal, some 14 per cent of all state-school pupils. But if the change had not been made the number of additional children who would have been eligible was between 2,300,000 and 2,600,000 by 2022.

And that’s just one animal that we could see.

• Whale Dies From Eating More Than 80 Plastic Bags (AFP)

A whale has died in southern Thailand after swallowing more than 80 plastic bags, with rescuers failing to nurse the mammal back to health. The small male pilot whale was found barely alive in a canal near the border with Malaysia, the country’s department of marine and coastal resources said. A veterinary team tried “to help stabilise its illness but finally the whale died” on Friday afternoon. An autopsy revealed 80 plastic bags weighing up to 8kg (18lb) in the creature’s stomach, the department added. People used buoys to keep the whale afloat after it was first spotted on Monday and an umbrella to shield it from the sun. The whale vomited up five bags during the rescue attempt.

Thon Thamrongnawasawat, a marine biologist and lecturer at Kasetsart University, said the bags had made it impossible for the whale to eat any nutritional food. “If you have 80 plastic bags in your stomach, you die,” he said. Thailand is one of the world’s largest users of plastic bags. Thon said at least 300 marine animals including pilot whales, sea turtles and dolphins, perished each year in Thai waters after ingesting plastic. “It’s a huge problem,” he said. “We use a lot of plastic.” The pilot whale’s plight generated sympathy and anger among Thai netizens. “I feel sorry for the animal that didn’t do anything wrong, but has to bear the brunt of human actions,” wrote one Twitter user.

Debt Rattle April 22 2018

Apr 222018

April 22, 2018 Posted by Raúl Ilargi Meijer at 9:41 am Finance Tagged with: boycott, Greece, IMF, May, minimum wage, Mnuchin, Taleb, truce, Vancouver Model, Windrush, World Bank 17 Responses »

Vincent van Gogh Green Wheat Field With Cypress 1889

• US Hints at China Truce as World Warns of Trade-War Threat (BBG)

• US Banks Push Mortgage Apps As Home Lending Slows (R.)

• Chinese Gangs Are Laundering Drug Money Through Vancouver Real Estate (GN)

• New Zealand’s Ban On Home Sales To Foreigners Is “Discriminatory” – IMF (BBG)

• Whirling Whirling (Jim Kunstler)

• Home Office Under Theresa May Was Urged in 2014 To Act On Windrush (Ind.)

• Tory Ministers Milking The System Are The Real Shirkers (G.)

• Theresa May’s Hateful ‘Hostile Environment’ Immigration Policy (O.)

• Europe’s Depopulation Time Bomb Is Ticking in the Baltics (BBG)

• Members of European Parliament Call For Boycott of FIFA World Cup in Russia (UAW)

• World Bank Recommends That Countries Eliminate Minimum Wage (BB)

• Hopes For Greek Debt Deal Low Amid EU-IMF Discord (K.)

• Turkish Justice Minister: Greece ‘A Gathering Place For Criminals’ (K.)

• Nassim Nicholas Taleb Has Never Borrowed a Cent in His Life (Esq.)

At least in words, China has caved.

• US Hints at China Truce as World Warns of Trade-War Threat (BBG)

U.S. Treasury Secretary Steven Mnuchin said he’s considering a trip to China amid a trade dispute with Beijing that finance chiefs warn could derail the global economic upswing. Mnuchin said he’s “cautiously optimistic” of reaching an agreement with China that bridges their differences over trade. “A trip is under consideration,” Mnuchin told reporters on Saturday in Washington at the IMF’s spring meetings. “I’m not going to make a comment on timing, nor do I have anything confirmed.” China’s Ministry of Commerce said Sunday it is aware that the U.S. is considering a visit to Beijing to negotiate economic and trade issues and welcomes such a move.

A visit by the U.S. Treasury secretary to China could signal a breakthrough in the spat between the world’s two-biggest economies, whose threats to slap tariffs on each other have rattled markets and raised fears of a trade war. It would come at a sensitive time for the region’s geopolitics, with negotiations under way on a planned meeting between President Donald Trump and North Korean leader Kim Jong-Un. Mnuchin’s remarks came as finance ministers and central bankers at the IMF meetings gave their latest economic assessments, often citing trade as a threat looming over the strongest upswing in seven years.

[..] Mnuchin said he met with Yi Gang, governor of the People’s Bank of China, at the IMF gathering this week. The discussions focused on issues related to the Chinese central bank, not trade, said the secretary. Mnuchin said they also discussed China’s planned further opening of some markets, a move that U.S. has encouraged and “appreciated.” “China will vigorously push forward the reform and opening-up of the financial sector, significantly relax market access restrictions, create a more attractive investment environment, strengthen the protection of intellectual properties and actively expand imports,” Yi said in a statement on Saturday. China has announced plans to gradually remove foreign ownership caps for limits for car-, ship- and aircraft-makers.

“Buying a house is supposed to be a joyful thing..”

• US Banks Push Mortgage Apps As Home Lending Slows (R.)

Big U.S. banks are racing to launch websites and mobile apps to make getting a mortgage faster and easier, investments that may have modest near-term payoffs as home lending activity slows. Lenders have been spending on digital tools to cut costs, eliminate error-prone paperwork and appeal to younger home buyers. However, they are chasing a shrinking pool of refinancing business and new home loan volumes are still below pre-crisis levels. Bank of America has spent $1 billion on its digital banking services in the last six years and launched its lineup of techy mortgage products last week. Wells Fargo rolled out its website and app service during the first quarter, and JPMorgan Chase, which is investing $1.4 billion in technology in 2018, plans to launch its offering later this year.

Bank of America’s app automatically fills in a customer’s address, employment history and other information that the bank already has, cutting out hundreds of boxes customers would otherwise have to fill. JPMorgan’s lets customers e-sign important documents. Quicken Loans was the first to gain traction with digital home loans following its 2016 Rocket Mortgage launch. The app is now key to its mortgage sales with more than 98 percent of the $20 billion in first-quarter lending volume accessing Rocket Mortgage at some point in the mortgage process, Quicken spokeswoman Brianna Blust said.

Quicken was the biggest home lender by volume in the fourth quarter of 2017 and first quarter of 2018, Blust said. It was the second-largest U.S. mortgage lender for the full year 2017, according to data from Inside Mortgage Finance Publications. “Buying a house is supposed to be a joyful thing,” said Steve Boland, Bank of America’s head of consumer lending. “Filling out 330 fields is not, I think, something that brings you joy.” Refinancing volumes have plunged as interest rates have risen, meaning lenders must compete for a much smaller revenue pie in fresh home purchases.

Bit over the top?

• Chinese Gangs Are Laundering Drug Money Through Vancouver Real Estate (GN)

Criminal syndicates that control chemical factories in China’s booming Guangdong province are shipping narcotics, including fentanyl, to Vancouver, washing the drug sales in British Columbia’s casinos and high-priced real estate, and transferring laundered funds back to Chinese factories to repeat this deadly trade cycle, a Global News investigation shows. The flow of narcotics and chemical precursors — and a rising death count in western Canada caused by synthetic opioids — is driven by sophisticated organized crime groups known as Triads. The Triads have infiltrated Canada’s economy so deeply that Australia’s intelligence community has coined a new term for innovative methods of drug trafficking and money laundering now occurring in B.C.

It is called the “Vancouver Model” of transnational crime. Details of the Vancouver Model are outlined in a November 2017 report obtained by Global News from B.C.’s provincial government, in a freedom of information request. The report, by John Langdale of the department of security studies and criminology at Macquarie University, was presented to Australian intelligence officers and Austrac, the country’s anti-money laundering agency. B.C. Attorney General David Eby has reviewed the report, and recently travelled to Ottawa to inform a federal committee of his concerns. His message was blunt. Eby testified that Canada’s anti-money laundering system has completely failed. He told the committee that gangsters have been openly carrying hockey bags stuffed with hundreds of thousands in drug cash into B.C. casinos, and there has not been a single prosecution.

In an interview with Global, Eby said the Australian report shows “that Vancouver is now recognized internationally as a hub of transnational money laundering.”

Is this also about Chinese gangs?

• New Zealand’s Ban On Home Sales To Foreigners Is “Discriminatory” – IMF (BBG)

The IMF has criticized New Zealand’s “discriminatory” ban on home sales to foreigners, saying it’s unlikely to improve housing affordability. “Foreign buyers seem to have played a minor role in New Zealand’s residential real estate market recently,” the IMF said in a statement Tuesday, after concluding its annual Article IV mission to New Zealand. If the government’s broader housing policy agenda is fully implemented, that “would address most of the potential problems associated with foreign buyers on a less discriminatory basis,” it said. The new Labour-led government has pledged to fix the nation’s housing crisis with a raft of measures, including a ban on foreign speculators buying residential property, removal of tax distortions and an ambitious building program.

House prices have surged more than 60% in the past decade amid record immigration and a construction shortfall, shutting many out of the housing market. [..] Proposed changes to the Overseas Investment Act, which the government says will bring New Zealand into line with neighboring Australia, will classify residential land as “sensitive,” meaning non-residents or non-citizens can’t purchase existing dwellings without the consent of the Overseas Investment Office. While non-resident foreigners will be allowed to invest in new construction, they will be forced to sell once the homes are built.

“Their parting shot to an unjust world was voting for Donald Trump. Next time, they won’t even be around.”

• Whirling Whirling (Jim Kunstler)

It begins to look like The USA will litigate itself into Civil War Two with the first battle being half the lawyers in the Department of Justice prosecuting the other half until Anthropogenic Global Warming puts the DC Swamp completely underwater and all parties concerned scuttle off into the deep blue sea. It was rather a shock to see the photo lineup of all those familiar faces — Comey, Hillary, McCabe, Loretta Lynch et. al. — in the criminal referral “matters” sent over to the DOJ by congress on Wednesday, as if they were some mob of goombahs caught running a waste management kickback racket in the Hackensack mud-flats.

But the evidence trail has been in plain sight for more than a year that Justice Department officials of various ranks and stripes colluded to bring off a legalistic coup d’etat against the loathed and despised winner of the 2016 election — with a little help from (of all things and personae) Russia, as in that political smallpox blanket known as the Steele Dossier. Mixed metaphors aside, it looks like all the clones of Ricky Ricardo and Lucy engineered in some CIA black lab will never satisfy the amount of ’splainin’ that needs to be done, and that the ensuing trials may last longer than the lifetimes of millennials still struggling on campus with their gender presentation. There may be even more line-ups to come.

I’m thinking players like Susan Rice, the Podesta brothers, Huma Abedin, John Brennan, James Clapper, Debbie Wasserman-Schultz, and perhaps the gentleman who preceded the Golden Golem of Greatness in the oval office. This melodrama will make The Lord of the Rings look like a knock-knock joke. Meanwhile, the Republic actually whirls around the drain, both as a legitimate polity between Montauk Point and the Farallon Islands, and as an actor on the world stage. The Washington bureaucracy is not the only swamp that needs to be drained. There’s also the reeking Okeefenokee wasteland known as the US economy, led by its financial avatars on Wall Street who engineered the orgy of asset-stripping that chewed through the industrial states like some flesh-eating bacteria.

There is nothing left in Flyover-land. I drove through part of it yesterday on a book-reporting chore: the “quiet corner” of northeastern Connecticut south of Worcester, Mass, a valley of decrepitating mill towns and opiate addiction, like some place out of H.P. Lovecraft’s demon-haunted imagination, where the sun comes up twenty minutes later than anywhere else, and a dwindling population of malevolent diseased imbeciles shriek their lonesome agonies of failure and destitution to a God that never returned from lunchbreak one day in 1985. Their parting shot to an unjust world was voting for Donald Trump. Next time, they won’t even be around.

No accident.

• Home Office Under Theresa May Was Urged in 2014 To Act On Windrush (Ind.)

Home Office officials were urged four years ago to act on the growing problems facing the Windrush generation, it has emerged, including recommendations to create a specialist taskforce which was only set up this week. It follows intense pressure on the government department and Theresa May over their handling of the Windrush scandal that has highlighted the plight of members of a generation of immigrants who arrived as British citizens in the mid-twentieth century. This week both Amber Rudd, the home secretary, and the prime minister have personally apologised for the debacle, promising compensation for those affected and setting up a new dedicated team in the Home Office tasked with helping members of the Windrush generation prove their right to British citizenship.

But the government now faces renewed criticism after it emerged that a similar recommendation – the creation of specialist Home Office unit – was made in October 2014 while Ms May was in charge of the department as home secretary. In a detailed report, published in October 2014 by the Legal Action Group, it was also warned that thousands of migrants who have been in Britain legally for decades were falling victim to the “hostile immigration” policies aimed at illegal immigrants in the UK. The recommendations of the Chasing Status report also included maintaining applicants’ ability to work and claim benefits while their status is resolved.

[..]The Labour MP David Lammy, who has been a leading campaigner for those members of the Windrush generation experiencing difficulties, told The Independent: “It is utterly extraordinary that the Home Office was clearly aware of the impact that their pernicious policies would have, yet ignored all the warnings and impact assessments. “The apologies made by the home secretary and prime minister are merely crocodile tears given that they were fully aware of the human cost that their policies would have. It’s time for a proper and independent review of our immigration policy and the hostile environment.”

“Lose one form, and you lose cancer treatment and your liberty – lose a generation’s forms, and you’re the effing PM..”

• Tory Ministers Milking The System Are The Real Shirkers (G.)

If I were editing a tabloid newspaper this week – and I’m always open to guest stints – I would have had advertising vans out since Monday. They would have been crawling v-e-r-y slowly back and forth past the houses of Theresa May, Amber Rudd, Nick Timothy and David Cameron – and those just for starters. Instead of the repulsive GO HOME message that adorned the infamous vans May’s Home Office sent out, which resulted in the eventual deportation of precisely 11 migrants, I would have something along the lines of STAY HOME. Stay home, permanently. Whether they would get the message is uncertain. Collectively, Britain did its very best to provide a hostile environment for May with the election result. The message was very clear: take a hike. Not a hiking holiday, but the full hike.

Yet the import does not seem to have got through to the prime minister, or the various arse-coverers around her. It’s fair to say we are dealing with a very specific class of unworthy here. There are few groups who take less responsibility for their actions, as this week in the Windrush scandal has laid starkly bare. Some of the most senior political figures in the land are – in the purest sense of one of their favourite terms – shirkers. They are feckless. They act like these things are happening to them, as opposed to because of them. Given the judgments they like to visit on the weaker members of society for comparatively minuscule transgressions, this makes them the most raging hypocrites too.

[..] And on they all go. If the government is in any doubt as to why so many millions think it’s one rule for them and another for the little people, then this week couldn’t be a better primer. You lose one form and you lose your job, your cancer treatment, your benefits, your liberty; you lose a generation’s forms and you’re the effing prime minister. Those condemned to battle the systems that ministers design know what happens if they make tiny errors. Furthermore, they know that if they messed up a tenth as badly in their jobs, they’d be sacked. But in the arse-over-tit world of government, you’re safe because your sacking would make the big boss – May – look weak. Just like your HR department, right? Except on crystal meth.

I don’t want to fall back on a series of politicians’ best-loved cliches, but this level of irresponsibility is just scrounging with a red box. They play for high stakes – but never their own. It’s the sort of system-milking demonised in a benefits office in Grimsby but regarded as career progression in Westminster. It makes it appear there’s no glass ceiling in modern political life, just a reinforced lead floor. Once you’re in, you basically have to die to stop earning rewards.

“Children as young as 10 who were born in the UK are subjected to a “good character” test when they apply for citizenship..”

• Theresa May’s Hateful ‘Hostile Environment’ Immigration Policy (O.)

History will judge Theresa May harshly. In recent weeks, the appalling stories about the impact of the government’s “hostile environment” policy reported by our sister paper, the Guardian, have continued to grow in number. They paint a shocking picture of a Kafkaesque state that has denied people who came to the UK from the Commonwealth as children their rightful entitlement to work, to housing and to healthcare. May has maintained these are people who have been wrongly caught up in her 2013 decision as home secretary to create a “really hostile environment” for people living in Britain illegally. But their tragic stories are the direct consequence of a policy so punitive that it would inevitably make life intolerable for legal British residents.

People without a passport are now being required to provide an absurd level of proof – four pieces of documentary evidence for each year of residence – of their legal status. Without this, they can no longer work, rent a home, open a bank account or access NHS care and may be detained and threatened with deportation. Doctors, bank clerks and landlords have become obliged to snoop on their fellow citizens by checking up on their immigration status.

[..] Those who become caught up in this are confronted with a cruel Home Office bureaucracy that operates outside the principles of natural justice. Officials are incentivised to reject applications for the tiniest of technical errors; immigration application fees are so high they are generating profits of up to 800% for the state, and there is no longer any right of appeal or legal aid available in most types of immigration cases. Children as young as 10 who were born in the UK are subjected to a “good character” test when they apply for citizenship; if they have been cautioned, their application can be refused.

The EU fails everywhere, and spectacularly. It sucks the periphery dry. Just like Rome did.

• Europe’s Depopulation Time Bomb Is Ticking in the Baltics (BBG)

With much of Eastern Europe already in the European Union or looking to join, living standards have been rising in the cities that dot these former Soviet satellites. More storefronts beckon to western tourists, who have grown more eager to wander among the cobblestones of historic capitals that were once less than hospitable. But a closer look outside the central squares reveals a different reality. According to the UN’s Department of Economic and Social Affairs, nine of the world’s countries most at risk of losing citizens over the next few decades are former East bloc nations. Porous borders and greater opportunity in the west have lured people away. Meanwhile, the populist wave sweeping the continent has made it next-to-impossible for African or Middle Eastern refugees to take their place.

Former Latvian economic minister Vjaceslavs Dombrovskis, now head of the Certus think tank, compared the westward migration of young eastern Europeans to the industrial revolution, when peasants rushed to large urban centers. He said these countries risk turning into what ancestral villages are for city dwellers: “a lovely place where you might spend an odd weekend with your folks.” The trend is hitting especially hard in the Baltics. Latvia, with a current population of 1.96 million, has lost about 25% of its residents since throwing off Soviet control in 1991. The UN predicts that by 2050, it will have lost an additional 22% of its current population—second only to Bulgaria—and by 2100, 41%.

In Estonia, with a population of 1.32 million, the UN foresees a 13% decline by 2050, growing to 32% by 2100. And in Lithuania, the current population of 2.87 million is expected to drop by 17% in 2050. By 2100, it will have lost 34%. As bad as those numbers look, the trend looks even worse for Ukraine and Moldova. The UN predicts 36% and 51% declines in those nations by the end of the century, respectively. Russia, meanwhile, is expected to lose 13% by 2100. Several factors are contributing to the depopulation of Eastern Europe, and Latvia has all of them: low income, compared with more developed EU nations; insufficient growth; and strong anti-immigrant sentiment. The average annual take-home pay among all EU nations was 24,183 euros ($29,834) in 2015, according to Eurostat, while in Latvia it was only 6,814 euros ($8,406).

There are 751 members. 60 support this.

• Members of European Parliament Call For Boycott of FIFA World Cup in Russia (UAW)

60 members of the European Parliament called on EU member states to boycott the FIFA World Cup in Russia, DW reports. The initiator of this appeal is a representative of the Green Party, Rebecca Harms. She believes that Russian President Vladimir Putin cannot be a host of the World Cup while the war continues in Syria and Ukraine. She also pointed out that Russia supports right-wing extremist and anti-democratic parties in the EU and has been trying to influence elections. Overall, the statement was signed by representatives of 5 factions of the European Parliament from 16 countries. The authors of the document indicate that Russia itself is pushing Europe towards such steps.

A group of deputies reminded others about the poisoning of former GRU agent Sergei Skripal and his daughter Yulia, which they called a mockery of European values. MEPs believe that EU member states should take the UK and Iceland as good examples of the countries which counter the “strengthening of the authoritarian and anti-Western course of the Russian president.” The authors also draw attention to the unsatisfactory situation with human rights and freedoms in Russia, especially the violation of freedom of speech. Earlier, a White House representative urged British and American fans to think twice before going to the World Cup in Russia.

Let’s shut down the World Bank. It’s been rotting for too long.

• World Bank Recommends That Countries Eliminate Minimum Wage (BB)

A draft of the World Bank’s annual flagship World Development Report says that its creditor-states (the poorest countries in the world) should eliminate their minimum wage rules, allow employers to fire workers without cause, and repeal laws limiting abusive employment contract terms. The bank argues that this is necessary to stop employers from simply investing in automation and eliminating workers altogether. The report does not contemplate the possibility that the world’s governments would just raise taxes on corporations and their investors to provide for all their citizens.

Poor countries – especially decolonized countries – are often in debt to organizations like the World Bank and IMF, sometimes because they were forced to literally buy their freedom (like Haiti, whose slave-descended population had to remit a sizable portion of its annual GDP to the descendants of French slavers until 1947), sometimes because their wealth was looted by colonists during and after the colonial period, and sometimes because rich creditor nations were complicit in the exfiltration of the nation’s treasure by gangster-politicians, a practice that continues to this day.

Countries generally carry more debt than they can hope to repay, and teeter on the brink of continuous default, putting them at the mercy of creditor-organizations, who can order changes to national laws, sell-offs of public industries and assets, and other measures that further reduce debtor-states’ ability to prosper, creating more debt and deeper concessions. The World Bank’s recommendations feel like the beginning of the end-game of late-stage capitalism, a recognition that the post-war era in which cruel exploitation of workers was considered a bug rather than a feature is drawing to a close, and a return to a kind of market feudalism, where property rights – no matter how corrupt their origins – always trump human rights.

Divide and rule.

• Hopes For Greek Debt Deal Low Amid EU-IMF Discord (K.)

Hopes for a breakthrough on the issue of Greek debt relief at a summit of eurozone finance ministers in Sofia on Friday are muted following a lack of progress in talks between European officials and representatives of the IMF in Washington over the weekend. Talks involved all of the key players in the debate on Greece’s debt, including IMF chief Christine Lagarde, European Monetary and Economic Affairs Commissioner Pierre Moscovci, and the finance ministers of Germany, Italy, Spain and France. But a long-standing rift between EU and IMF officials over how a debt relief mechanism should operate continued, with the Fund representatives insisting that it should be automatic and the Europeans saying it should be tied to conditions.

In view of the resistance put up chiefly by Germany, the EU’s largest economy, Finance Minister Euclid Tsakalotos expressed his concern that the debt relief being considered for Greece would be inadequate. Another worry is over creditors’ objections to a growth plan proposed by Greece. European officials responded with a 30-page memo to Greece’s 85-page proposal, requesting more detail and a stricter time frame. The growth plan was one of the issues discussed by leftist SYRIZA’s political secretariat during a session chaired by Prime Minister Alexis Tsipras on Saturday.

What you say about a neighbor you want good relations with.

• Turkish Justice Minister: Greece ‘A Gathering Place For Criminals’ (K.)

Turkish Justice Minister Abdulhamit Gul has written to his Greek counterpart Stavros Kontonis saying “Greece is becoming a gathering place for criminals” following a court ruling releasing one of eight Turkish servicemen seeking asylum in Greece, Anadolu reported on Saturday. Gul’s letter came a day after Turkish Prime Minister Binali Yildirim slammed the Council of State ruling, saying Greece was becoming a “safe haven” for Turkey’s enemies. The ruling issued on Thursday by Greece’s highest administrative court relates to Süleyman Özkaynakçı, who piloted the helicopter in which he and seven other Turkish servicemen fled to Greece in July 2016 following Turkey’s failed coup.

However it is expected to apply to all eight servicemen. In his comments on Friday, Yildirim said it was “unacceptable” for people who took part in the coup attempt in the summer of 2016 to be protected by Greece. “Unfortunately, recently, criminals of the FETO organization have started seeing Greece as a safe haven,” he said, referring to what Ankara describes as a terrorist group led by exiled cleric Fethullah Gulen. “I hope they will extradite the members of this organization,” he said, adding that Turkish authorities “do not desire a negative impact on Greek-Turkish relations because of members of the FETO organization.”

“We have to worry about the 2 percent—the intellectuals and politicians making the big decisions who don’t have skin in the game and are messing the whole thing up for everybody else.”

• Nassim Nicholas Taleb Has Never Borrowed a Cent in His Life (Esq.)

People ask me my forecast for the economy when they should be asking me what I have in my portfolio. Don’t make pronouncements on what could happen in the future if you’re immune from the consequences. In French, they use the same word for wallet and portfolio. I have never, ever borrowed a penny. So I have zero credit record. No loans, no mortgage, nothing. Ever. When I had no money, I rented. I have an allergy to borrowing and a scorn for people who are in debt, and I don’t hide it. I follow the Romans’ attitude that debtors are not free people. I carry euros, dollars, and British pounds. What I do with my money is personal. People who say they give it to charity, that’s a no-no in my book. Nobody should ever talk about a charitable act in public.

Better to miss a zillion opportunities than blow up once. I learned this at my first job, from the veteran traders at a New York bank that no longer exists. Most people don’t understand how to handle uncertainty. They shy away from small risks, and without realizing it, they embrace the big, big risk. Businessmen who are consistently successful have the exact opposite attitude: Make all the mistakes you want, just make sure you’re going to be there tomorrow. Don’t invest any energy in bargaining except when the zeros become large. Lose the small games and save your efforts for the big ones. There’s nothing wrong with being wrong, so long as you pay the price. A used-car salesman speaks well, they’re convincing, but ultimately, they are benefiting even if someone else is harmed by their advice.

A bullshitter is not someone who’s wrong, it’s someone who’s insulated from their mistakes. There is less “skin in the game” today than there was fifty years ago, or even twenty years ago. More people determine the fates of others without having to pay the consequences. Skin in the game means you own your own risk. It means people who make decisions in any walk of life should never be insulated from the consequences of those decisions, period. If you’re a helicopter repairman, you should be a helicopter rider. If you decide to invade Iraq, the people who vote for it should have children in the military. And if you’re making economic decisions, you should bear the cost if you’re wrong.

Ninety-eight percent of Americans—plumbers, dentists, bus drivers—have skin in the game. We have to worry about the 2 percent—the intellectuals and politicians making the big decisions who don’t have skin in the game and are messing the whole thing up for everybody else. Thirty years ago, the French National Assembly was composed of shop owners, farmers, doctors, veterinarians, and small-town lawyers—people involved in daily activities. Today, it’s entirely composed of professional politicians—people who are just divorced from real life. America is a little better, but we’re heading that way.

Debt Rattle January 26 2018

Jan 262018

January 26, 2018 Posted by Raúl Ilargi Meijer at 11:09 am Finance Tagged with: Assange, Brexit, Davos, dollar, Draghi, Greece, Mnuchin, plastic class society, refugees, supercontinent, Trump, Turkey 10 Responses »

Horacio Coppola Avenida Díaz Vélez al 4800, Buenos Aires 1952

• Mario Draghi Slaps Down Steve Mnuchin Over Dollar Comments (Ind.)

• Mueller Almost Done With Obstruction Part of Trump Probe (BBG)

• Trump Denies Trying To Fire Mueller (BBC)

• Flying Blind, Part 2: The Destruction Of Honest Price Discovery (Stockman)

• China Chills (Mauldin)

• Dear Elon: Tesla’s Base Is Not the Model S Coalition (Klippenstein)

• Tory Civil War Erupts Over Brexit (Ind.)

• Seven in 10 UK Workers Are ‘Chronically Broke’ (G.)

• Rough Sleeping Is Now A Routine Sight In UK (G.)

• Assange to Ask UK Court to Lift Arrest Warrant (BBG)

• Turkish PM Disputes Greek Sovereignty, Tsipras Cites ‘Aggressive Neighbor’ (K.)

• Majority Of Refugees Stranded On Aegean Islands To Stay In Greece (K.)

• 1.7 Billion-Year-Old Chunk Of Canada Found Stuck To Australia (Ind.)

• Human Ancestors Left Africa Far Earlier Than Previously Thought (G.)

• A Third Of Coral Reefs ‘Entangled With Plastic’ (BBC)

One Goldman alumni to another. And Trump repaired it somewhat, and then this morning the dollar falls again. Trump may address this in his speech today in Davos. Mnuchin never talked about anything but short term. Storm, teacup.

• Mario Draghi Slaps Down Steve Mnuchin Over Dollar Comments (Ind.)

The President of the European Central Bank, Mario Draghi, has taken a sideswipe at the US Treasury Secretary, Steve Mnuchin, for endorsing a weaker dollar, emphasising deep concerns among central bankers over the economically destabilising impact of exchange rate swings. At the ECB’s regular conference Mr Draghi referred indirectly to the surprising comments at the World Economic Forum on Wednesday by Mr Mnuchin, who said “a weaker dollar is good for us as it relates to trade and opportunities.” These comments sent the dollar, which has been trending lower since early 2017, down still further. The dollar index, which measures the traded value of the greenback against a basket of other currencies, including sterling and the euro, hit a three-year low of 88.5.

Mr Draghi complained to reporters in Frankfurt that although exchange rate movements were “a fact of nature” reflecting economic fundamentals some recent volatility was caused by “someone else” – a clear reference to Mr Mnuchin – whose “use of language…doesn’t reflect the terms of reference that have been agreed.” Mr Draghi cited an IMF communique from last year, signed by the US, which said: “We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes”. Asked directly by journalists whether the ECB Council had been concerned by the Treasury Secretary’s comments Mr Draghi answered in the affirmative. “Several members of the Council expressed concern, and this concern was also in a sense was broader than simply the exchange rate, it was about the overall status of international relations right now,” he said.

Objection, your honor. Leading.

• Mueller Almost Done With Obstruction Part of Trump Probe (BBG)

Special Counsel Robert Mueller is moving at a far faster pace than previously known and appears to be wrapping up at least one key part of his investigation – whether President Donald Trump obstructed justice, according to current and former U.S. officials. Mueller has quietly moved closer to those around Trump by interviewing Director of National Intelligence Dan Coats, National Security Agency Director Michael Rogers, Attorney General Jeff Sessions and former FBI Director James Comey in recent weeks, officials said. His team has also interviewed CIA Director Mike Pompeo, NBC News reported. Those high-level officials all have some degree of knowledge about events surrounding Trump’s decisions to fire Comey and Michael Flynn, his first national security adviser.

“Clearly the names that are coming out now indicate that we’re into the obstruction of justice side of it,” said Stanley Twardy, a former U.S. attorney for Connecticut who’s now a white-collar criminal defense lawyer. “He’s now getting people who are closest to the president, closest to the issues.” Next, Mueller is expected to schedule an interview with Trump in coming weeks to discuss those events, according to a person familiar with the matter. “I’m looking forward to it,” Trump said of a meeting with Mueller, which he suggested may happen in about two to three weeks. He told reporters at the White House Wednesday that “I would love to do it” and “I would do it under oath” even though his Democratic rival Hillary Clinton wasn’t sworn in when she was interviewed in 2016 over her use of private emails as secretary of state.

Even if Mueller wraps up the obstruction probe, other elements of his investigation – such as whether Trump or anyone close to him helped Russia interfere in the 2016 presidential election or broke any other laws — are likely to continue for months more, said two officials who asked to remain anonymous speaking about the probe.

New York Times based on anonymous sources as usual.

• Trump Denies Trying To Fire Mueller (BBC)

US President Donald Trump has described as “fake news” a report that he ordered the firing of special counsel Robert Mueller last June, but backed down when his own lawyer threatened to resign. White House counsel Donald McGahn said the sacking would have a “catastrophic effect” on the presidency, the New York Times reported. Mr Mueller is leading an inquiry into possible Trump campaign collusion with Russia to influence the US election. Both Moscow and Mr Trump deny this. “Fake News. Typical New York Times. Fake Stories,” Mr Trump said at the World Economic Forum in the Swiss town of Davos, where he is due to give a speech later.

He has also been speaking about other issues: • Russian news agency Tass quoted Mr Trump as saying he “hoped” for more dialogue between the US and Russia • White House officials said Mr Trump was open to rejoining the Paris climate change agreement, if better terms for the US could be agreed • Mr Trump will say in his speech that he is in favour of “fair and reciprocal” free trade but will not tolerate trade abuses and intellectual property theft, according to US officials
Mr Mueller, a former FBI director, was appointed special counsel last May to look into the collusion allegations.

Nobody acknowledges the importance of price discovery anymore. Without which there are no functioning markets. How fast people forget.

• Flying Blind, Part 2: The Destruction Of Honest Price Discovery (Stockman)

[..] the real economic iniquity of central bank driven Bubble Finance is that it destroys all the pricing signals that are essential to financial discipline on both ends of the Acela Corridor. And as quaint at it may sound, discipline is the sine qua non of long-term stability and sustainable gains in productivity, living standards and real wealth. The pols of the Imperial City should be petrified, therefore, by the prospect of borrowing $1.2 trillion during the upcoming fiscal year (FY 2019) at a rate of 6.0% of GDP during month #111 through month #123 of the business expansion; and doing so at the very time the central bank is pivoting to an unprecedented spell of QT (quantitative tightening), involving the disgorgement of up to $2 trillion of its elephantine balance sheet back into the bond market.

Even as a matter of economics 101, the forthcoming $1.8 trillion of combined bond supply from the sales of the US Treasury ($1.2 trillion) and the QT-disgorgement of the Fed ($600 billion) is self-evidently enough to monkey-hammer the existing supply/demand balances, and thereby send yields soaring. But that’s barely the half of it. All the laws of economics, which are now being insouciantly ignored by the stock market revilers, are also time and place bound. That is to say, deficit finance in a muscle-bound Welfare State/Warfare State democracy like the US is always a questionable idea. After all, it is virtually guaranteed based on the budgetary doomsday forces now at work that by 2030 the public debt will approach $40 trillion compared to the $930 billion level where it stood when the Gipper took office in January 1981. In a half century, therefore, the GDP – swollen by inflation notwithstanding – will have grown by 8.5X versus a 43X eruption of the debt.

[..] At the present time, the S&P 500 is trading at the absurd multiple of 26.3X what are estimated to be reported profits for 2017. Yet the sell-side stock peddlers say not to worry because the one-year forward multiple on ex-items earnings is still only in the high teens. So what! The business cycle has not been outlawed and this one has at best a few quarters or even a year or two to go. So forward earnings are irrelevant nonsense. They are an interim place holder before the 30% to 50% hit to profits happens when the US economy finally experiences its next rendezvous with recession. The very idea that you would value the market based on a timeless forward PE multiple is complete baloney, of course. Yet that’s exactly where the Fed’s drastic financial repression and destruction of honest price discovery has led.

That is one graph.

• China Chills (Mauldin)

People have been predicting Chinese real estate crashes for years. Eventually they will be right. Is that time approaching? Here’s the lead from a January 16 Wall Street Journal story, “China’s Hot Housing Market Begins to Cool.” “BEIJING—China’s housing market has defied gravity and government restraints for two years, floating on a tide of bank loans and speculation. Until now. In Beijing and Shanghai – two of the country’s largest markets – and other megacities, sales have stalled and prices have dropped, falling slightly in some pockets and dramatically in others. Demand has dried up in these areas as a result of government measures including higher mortgage rates, higher down-payment requirements and limits on buying a second or third home. Would-be sellers are increasingly putting plans on hold in hope that prices will rebound.” That doesn’t sound good at all. WSJ backs up the gloomy language with data, though:

Some of this shake-out is happening by design as the government tries to manage growth on a sustainable path. The picture also varies greatly by city and region. Beijing and Shanghai are China’s equivalents of Washington and New York – except that they are much, much larger. What happens to them affects the whole country to some degree – and other countries, too. By some estimates, China’s property market accounts for a third of GDP growth. Falling construction activity will mean less need to import construction materials from Australia – and maybe fewer Chinese buyers in Canada. Falling demand won’t be good for housing prices in either of those places.

Then there are wild cards. President Trump has so far held back on promises to crack down on trade with China, in part because he wants Beijing’s help managing the North Korea issue. I doubt he will wait forever. He has a lot of latitude to impose tariffs, quotas, and other restrictions on China. Ironically, a peaceful resolution on the Korean Peninsula might be economically negative if it removes a barrier to trade war.

Bunch of hipsters.

• Dear Elon: Tesla’s Base Is Not the Model S Coalition (Klippenstein)

Losing the Obama coalition cost Hillary Clinton the Presidency in 2016; her base wasn’t big enough to bring success. Losing the Model S coalition could cost Elon Musk his own dreams, because his base isn’t big enough on its own, either. The Model S coalition of technophiles (techies) and progressives gave Tesla a strong tailwind when the vehicle launched. Techies formed the base, while progressives were the balance of the coalition. But while they came together for the Model S to strike a blow against Big Oil, these two groups aren’t natural allies.

We can see the rift growing in real time: while techies continue to celebrate Amazon, Uber, and Silicon Valley in general, there’s an escalating progressive backlash against labor conditions at warehouse distribution centres, more and more and more and more evidence of Uber’s culture of toxic lawlessness, and the obscene excesses of startup culture (which include a Dickensian digital class divide, possibly-endemic sexism, predatory sex parties and entitlement complexes worthy of the sons of Trump — and that’s only the stuff we know about so far).

The difference between the groups is aptly captured in the 2015 Canadian Plug-in Electric Vehicle study conducted by Simon Fraser University in Canada (webpage here, full report here, executive summary here).

Figure 23 from the SFU Canadian Plug-in Electric Vehicle Study 2015

The chart above shows the results of a study of Volt, Leaf, and Model S early adopters who were asked what images would be attributed to their vehicles. This tells us something about the buyers, because consumers purchase products whose so-called “symbolic benefits” (the brand, basically) match their own self-image, values, interests, and aspirations.

Volt and Leaf owners (yellow and green bars, respectively) are pretty similar, except when it comes to thinking their vehicle is attractive or sporty — the styling of the Leaf 1.0 is, shall we say, an acquired taste! Joking aside, this tells us that first-generation Leaf 1.0 buyers, like first-generation Prius buyers before them, really didn’t care about style. These people, and others of like mind, form the progressive coalition. The Tesla early adopters are different in two categories, and extremely different in four, suggesting that Tesla buyers have different motivations than Volt and Leaf owners. Tesla’s “tribe” wants status goods – which for automobiles means something sporty, exotic, powerful, and successful. They’re Tesla’s techie base.

As if that is the most important thing as the ship sinks.

• Tory Civil War Erupts Over Brexit (Ind.)

A fresh outbreak of Tory infighting is threatening Theresa May’s leadership after Philip Hammond vowed to keep Britain interlocked with the EU – while hard Brexit supporters staged an open revolt. The Prime Minister was accused of “losing control of the Brexit process” as the two wings of her party fought over her withdrawal policy, which Eurosceptics increasingly see as a sellout. In Davos, the Chancellor inflamed tensions with a dramatic call for only “very modest” changes to the UK’s trading rules with the EU, setting out the risks of trying to break free. He went out of his way to praise the plea by the CBI employers’ organisation for the “closest possible relationship between the EU and the UK post-Brexit” – days after it called for permanent membership of the customs union.

Britain must not agree to anything that “throws away all the benefits we have of the complete alignment of our regulatory systems, the complete integration of our economies”, Mr Hammond said. He later sought to clarify his remarks by saying “for anyone concerned” that the UK would be outside the customs union and single market “which clearly represents change”. But, in a major speech, Jacob Rees-Mogg put himself at the head of a growing Brexiteer revolt. The Government was accused of planning to leave the UK “shackled to the EU” and of putting the free-trade benefits of Brexit “at risk”. “The British people did not vote for that. They did not vote for the management of decline,” Mr Rees-Mogg told an audience in Hampshire. “They voted for hope and opportunity and politicians must now deliver it.

Uk and US have much in common.

• Seven in 10 UK Workers Are ‘Chronically Broke’ (G.)

Economic insecurity has become the “new normal” in the UK with at least 70% of the UK’s working population “chronically broke”, according to a study by the thinktank the Royal Society of Arts. Thriving, striving or just about surviving, the RSA/Populus survey of more than 2,000 workers, found that while about 30% of respondents said they lived comfortably, 40% said their finances were permanently precarious. The remaining 30% said they were not managing to get by. “Economic insecurity now stretches right throughout our labour market, including within jobs that appear safe on the surface,” said Brhmie Balaram, the author of the report and a senior researcher at the RSA.

According to the report, 32% of the UK’s workers have less than £500 in savings and 41% have less than £1,000. Almost 30% are concerned about their level of debt while 43% of workers do not have anyone in their household they could depend on to support them financially in the event of hardship. Fewer than half of employees (44%) feel they have progressed in their careers over the last five years; only 40% feel they have good opportunities to progress in future. “From retail workers to warehouse operatives, and from care workers to cleaners, we are beginning to uncover the hidden millions who are chronically broke year in, year out,” said Balaram. “The real danger for this group of workers is a childcare bill unpaid and yet another rent rise around the corner.”

Anyone want to argue the UK is NOT a class society?

• Rough Sleeping Is Now A Routine Sight In UK (G.)

Rough sleeping in the north London borough of Camden has increased by 647%, according to government figures released on Thursday. The huge rise is accounted for in part by an official underestimate of the problem last year, but no one who lives here will be surprised to see it confirmed that there has been a sharp jump in the numbers of people sleeping on the streets. Camden reported the largest increase in rough sleeping of any area in England, from 17 rough sleepers in 2016 (an optimistic estimate) to 127 counted this year. Ten years ago there were almost no rough sleepers in Camden. So what’s gone wrong? The Labour-run council says it’s clear that cuts are to blame. Councillor Nadia Shah said: “Rough sleeping in Camden is now at unprecedented levels. This is an appalling situation made worse by the politics of austerity that have led to cuts in services across the country.”

Nationally, welfare reform and cuts to benefits have increased financial insecurity, while soaring rents and reductions in the permitted housing benefit payments have left many people with an impossible gap between rent owing and income. On top of this, changes to the way housing benefit is paid have increasingly meant money no longer goes straight to the landlord but to the tenant, which has led to a sharp rise in arrears and evictions. Huge pressure on mental health services means vulnerable people are not getting the support they need. Drug and alcohol addiction services are struggling financially. Reductions to local authority budgets mean Camden’s funding from central government will have fallen by half between 2010 and 2020. In 2019-20 the council is forecast to receive £106m, down from the £241m received in 2010-11.

How political is the British court system?

• Assange to Ask UK Court to Lift Arrest Warrant (BBG)

After more than five years holed up in Ecuador’s embassy in London, WikiLeaks leader Julian Assange will ask a U.K. court to lift his arrest warrant. A one-day hearing will take place at Westminster Magistrates court and a ruling is scheduled to be issued Friday, according to a spokesman for the Crown Prosecution Service. Assange, 46, has been in the Ecuadorian embassy in London since evading deportation in a Swedish sexual assault probe. It’s “theoretically possible” that Assange could be released Friday, the CPS spokesman said. Assange and WikiLeaks have become famous over the past decade for disclosing confidential documents about the U.S. government and politics. In 2016, WikiLeaks injected itself into the middle of the U.S. presidential race by publishing hacked emails from Hillary Clinton’s campaign.

Assange is asking the court to lift the warrant about eight months after Swedish prosecutors dropped the underlying rape probe, saying that his steps to evade questioning made it impossible to pursue the case. Assange sought refuge in the Ecuadorian embassy in June 2012, after exhausting options in U.K. courts to avoid extradition over the allegations stemming from a 2010 trip to Sweden. He refused to return to the Scandinavian country, citing risks he would be extradited to the U.S. London police say that warrant is still in force unless lifted by court. “Westminster Magistrates’ Court issued a warrant for the arrest of Julian Assange following him failing to surrender to the court” in 2012, the police said in an emailed statement. “The Metropolitan Police Service is obliged to execute that warrant should he leave the embassy.”

Last time they were on the brink of war was 1996. Never far away.

• Turkish PM Disputes Greek Sovereignty, Tsipras Cites ‘Aggressive Neighbor’ (K.)

Turkish Prime Minister Binali Yildirim has again disputed Greece’s sovereignty over parts of the Aegean Sea, while accusing Athens of building up bilateral tension while Ankara is busy fighting what he described as “terrorism” in its wider region. In comments made to local media on Wednesday, Yildirim accused Athens of pursuing a repeat of the 1996 Imia crisis, when the two countries came to the brink of war over ownership of the uninhabited Aegean islets, adding that such an attempt “will not go down well” in Ankara. “In case something similar occurs, there are always means at Turkey’s disposal to defend itself. Let there be no qualms about that,” he said. Turkey disputes Greece’s territorial sovereignty over the rocky formations, known in Turkish as Kardak, on the basis of its “gray zones” theory.

Last week, a Turkish patrol boat conducting a dangerous maneuver bumped into a Hellenic Navy gunboat near Imia. No damage was reported from the contact. Meanwhile, notwithstanding Turkey’s ongoing air and ground operation in the Afrin region of northern Syria aimed at fighting Syrian Kurdish fighters and Islamic State militants, violations of Greek air space by Turkish fighter jets continue, if at a lower rate. A mock dogfight between Greek and Turkish F-16s took place northwest of Lesvos island on Wednesday at 2.35 p.m. The issue of Turkey’s provocations was raised on Wednesday by Greek Prime Minister Alexis Tsipras, who, speaking at the World Economic Forum in Davos, described Turkey as an “aggressive neighbor, sometimes unpredictable with an aggressive military activity in the Aegean.” “For somebody, it is very easy to be also aggressive if they are living in Luxembourg or Netherlands, because their neighbors are Belgium and Luxembourg, and not Turkey. But it’s not so easy for us,” he said in English.

In a bankrupt country. Greece should demand hundreds of billions from the EU to handle this.

• Majority Of Refugees Stranded On Aegean Islands To Stay In Greece (K.)

The majority of migrants and refugees who have landed on the Aegean islands since the March 2016 deal signed between the European Union and Ankara will remain in Greece as conditions for their return to Turkey are considered “not safe,” according to data from the country’s Asylum Service. According to the data, authorities have processed 25,814 applications for asylum submitted by individuals stuck at island screening centers, or hotspots. Authorities have rejected 5,437 of those claims and, under the terms of the deal, the applicants should be returned to Turkey. However, only around 1,400 of that number have been returned so far. Meanwhile, 20,337 people have received permission to move to the Greek mainland. They will move to the next stage of their asylum process, provided that they are not enlisted in a European relocation schemes. A total of 21,726 mostly Syrian refugees were relocated from Greece to other EU member-states under a program which was completed in 2017.

Sometimes a headline is enough.

• 1.7 Billion-Year-Old Chunk Of Canada Found Stuck To Australia (Ind.)

A chunk of what is now Canada broke away from the rest of North America and collided with Australia around 1.7 billion years ago, according to a new study. A team of geologists examining rocks found in northern Queensland concluded some of them did not appear to have originated in Australia, and had characteristics more common among those found in Canada. They say the discovery indicates the region surrounding present-day Georgetown in northern Queensland broke apart from the continent of North America during its early formation and smashed into what is now known as Australia. “Our research shows that about 1.7 billion years ago, Georgetown rocks were deposited into a shallow sea when the region was part of North America,” said Adam Nordsvan, a PhD student at Curtin University, who led the study published in the journal Geology.

“Georgetown then broke away from North America and collided with the Mount Isa region of northern Australia around 100 million years later.” The discovery provides scientists with new evidence about the formation of the ancient supercontinent, Nuna – a land mass made up of many of the continents we know today. Over millennia, the Earth’s continents have slowly moved around, reorganising themselves into different combinations, and Mr Nordsvan and his collaborators are trying to understand some of these ancient movements. “This was a critical part of global continental reorganisation when almost all continents on Earth assembled to form the supercontinent called Nuna,” said Mr Nordsvan. Nuna existed long before the more well-known supercontinent of Pangaea, which was formed around 335 million years ago.

We have no idea of our own history.

• Human Ancestors Left Africa Far Earlier Than Previously Thought (G.)

A prehistoric jawbone discovered in a cave in Israel has prompted scientists to rethink theories of how the earliest human pioneers came to populate the planet, suggesting that our ancestors left Africa far earlier than previously thought. The fossil, dated to nearly 200,000 years ago, is almost twice as old as any previous Homo sapiens remains discovered outside Africa, where our species is thought to have originated. Until recently, several converging lines of evidence – from fossils, genetics and archaeology – suggested that modern humans first dispersed from Africa into Eurasia about 60,000 years ago, quickly supplanting other early human species, such as Neanderthals and Denisovans, that they may have encountered along the way. However, a series of recent discoveries, including a trove of 100,000 year-old human teeth found in a cave in China, have clouded this straightforward narrative.

And the latest find, at the Misliya cave site in northern Israel, has added a new and unexpected twist. “What Misliya tells us is that modern humans left Africa not 100,000 years ago, but 200,000 years ago,” said Prof Israel Hershkovitz, who led the work at Tel Aviv University. “This is a revolution in the way we understand the evolution of our own species.” The find suggests that there were multiple waves of migration across Europe and Asia and could also mean that modern humans in the Middle East were mingling, and possibly mating, with other human species for tens of thousands of years. “Misliya breaks the mould of existing scenarios for the timing of the first known Homo sapiens in these regions,” said Chris Stringer, head of human origins at the Natural History Museum in London. “It’s important in removing a long-lasting constraint on our thinking.”

Plastic carrying disease.

• A Third Of Coral Reefs ‘Entangled With Plastic’ (BBC)

Plastic is one of the biggest threats to the future of coral reefs after ocean warming, say scientists. More than 11 billion items of plastic were found on a third of coral reefs surveyed in the Asia-Pacific region. This figure is predicted to increase to more than 15 billion by 2025. Plastic raises by 20-fold the risk of disease outbreaks on coral reefs, according to research. Plastic bags, bottles and rice sacks were among the items found. “Plastic is one of the biggest threats in the ocean at the moment, I would say, apart from climate change,” said Dr Joleah Lamb of Cornell University in Ithaca, US. “It’s sad how many pieces of plastic there are in the coral reefs …if we can start targeting those big polluters of plastic, hopefully we can start reducing the amount that is going on to these reefs.”

More than 275 million people rely on coral reefs for food, coastal protection, tourism income, and cultural importance. It’s thought that plastic allows diseases that prey on the marine invertebrates that make-up coral reefs to flourish. Branching or finger-like forms of corals are most likely to get entangled in plastic debris. These are important habitats for fish and fisheries, the scientists say. “A lot of times we come across big rice sacks or draping plastic bags,” said Dr Lamb, who led the study. “What we do find is these corals with a lot of complexity like branches and finger-like corals will become eight times more likely to be entangled in these types of plastics.” In the study, published in the journal Science, international researchers surveyed more than 150 reefs from four countries in the Asia-Pacific region between 2011 and 2014.

Debt Rattle January 25 2018

Jan 252018

January 25, 2018 Posted by Raúl Ilargi Meijer at 10:54 am Finance Tagged with: Assange, bigly, crypto, Davos, dollar, Dreamers, globalism, Greece, Mnuchin, Mueller, plastic, ratings, Trump 6 Responses »

Grete Stern Sueño No. 27: No destiñe con el agua 1951

• Trump to Tell Davos That ‘America First’ Is Good for Globalism (BBG)

• A Weaker Dollar Is Good For The US, Treasury Secretary Mnuchin Says (CNBC)

• Careless Whisper: Mnuchin Opens Door To New Era Of Currency Wars (BV)

• Trump Team Unleashes Verbal Assault On The Dollar (Pol.)

• IMF’s Lagarde Urges Mnuchin to Clarify Remarks on Weak Dollar (BBG)

• Trump Supports Immigration Plan With Pathway To Citizenship For Dreamers (G.)

• Trump ‘Looking Forward’ To Speaking Under Oath In Russia Inquiry (G.)

• Ratings Firm Issues First Grades On Cryptocurrencies (CNBC)

• Beppe Grillo Steps Aside From Italy’s Five Star Movement (G.)

• How About Showing Us The TPP Deal We’re About To Sign? (SMH)

• Trump Warns Erdogan To Avoid Clash Between U.S., Turkish Forces (R.)

• We Examined Julian Assange, And He Badly Needs Care – But He Can’t Get It (G.)

• Washington Post, Legacy Press Betray Assange (DisM)

• Greece Pays A Heavy Price For Its Primary Surplus (K.)

• Greeks Work Longest Hours in Europe (GR)

• Each EU Citizen Creates 31kg Of Plastic-Waste Per Year (Stat.)

Winning bigly. Triumphant talk of the town in Davos. Jamie Dimon, Lloyd Blankfein are on board. “They’re going to invest a lot of money in this country.” How long will it last?

• Trump to Tell Davos That ‘America First’ Is Good for Globalism (BBG)

President Donald Trump has a familiar message for the global elites populating the World Economic Forum in Davos, Switzerland: You were wrong. A year ago, some Davos participants predicted Trump’s protectionist rhetoric would lead to sluggish economic growth and lackluster stock market gains. It didn’t. And the president isn’t about to let that go unnoticed. Trump will arrive at the conference Thursday, joining a large delegation of U.S. officials already there, where he’s expected to boast about U.S. economic performance during his first year in office – unemployment down, the stock market up, robust growth. He’ll also seek to persuade the Davos audience in a major speech on Friday that his populist, “America First” policies can co-exist with globalism.

The president said on Twitter that he plans “to tell the world how great America is” and that “our economy is now booming and with all I am doing, will only get better.” “He wants to shatter the myth that he is only an ‘America First’ president,” said Anthony Scaramucci, the financier who was briefly Trump’s communications director and still informally advises the president. “That’s not the case. He is a globalist. He has a duality to his personality. He’s here to disrupt things, which he does a reasonably good to great job of.” The Swiss mountainside gathering of bankers, corporate chiefs and academics isn’t exactly Trump’s scene, and his administration deliberately spurned the conference prior to his inauguration last year. But now, chief executives are warming up to the president after a year in which his administration began a major deregulation effort and won passage of a law that slashes the U.S. corporate tax rate.

“What I’m bulled up about is that policy makers are making good policy decisions in the U.S. about taxes, about proper regulatory reform,” JP Morgan Chase CEO Jamie Dimon said in Davos. “I like a lot more stuff than I don’t like,” Goldman Sachs CEO Lloyd Blankfein said in an interview with CNBC. [..] Trump will host European executives on Thursday night to argue that the U.S. is a better place for businesses as a result of the tax overhaul and deregulation, his National Economic Council director, Gary Cohn, said Tuesday at a briefing. [..] Trump told reporters late Wednesday that he decided to go to Davos “to get them to bring back a lot of money. They’re going to invest a lot of money in this country.”

When does Beijing start to talk about currency manipulation.

• A Weaker Dollar Is Good For The US, Treasury Secretary Mnuchin Says (CNBC)

Treasury Secretary Steven Mnuchin said the U.S. is open for business and welcomed a weaker dollar, saying that it would benefit the country. Speaking at a press conference at the World Economic Forum in Davos Wednesday, he made a bid for investment into the U.S., saying the government was committed to growth of 3% or higher. “Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin told reporters in Davos, according to Bloomberg, adding that the currency’s short term value is “not a concern of ours at all.” “Longer term, the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency,” he said.

On the eve President Donald Trump’s arrival at the event, he said that the U.S. delegation to Davos was its largest ever. “(The) size of the delegation to Davos this year is testament to the scale of Trump’s work over the past year,” Mnuchin said. “What’s happening in the U.S. (is a) reflection of programs being put in place. As we look at U.S. growth, it continues to look quite good and is a very attractive place to invest,” he added. The dollar dipped slightly after his comments and hit a session low, with the dollar index slipping 0.47% for the day. The British pound climbed to a post-Brexit vote high shortly after 8:30 a.m. London time. Mnuchin iterated that his country is “absolutely” committed to free and fair trade, according to the Associated Press. He added that strong U.S. growth was good for the economy and that there was no inconsistency with Trump’s “America First” agenda, according to the news agency.

Calculation: others lose more than the US does short term.

• Careless Whisper: Mnuchin Opens Door To New Era Of Currency Wars (BV)

Speaking one’s mind can be dangerous, especially for the U.S. Treasury secretary. Steven Mnuchin said on Wednesday that a weaker dollar was good for his country. Textbook theory certainly supports his view that a depreciating currency is good for exporters. But the remarks are a break with what his predecessors have publicly asserted since 1995. If the greenback became a trade weapon it would be to the detriment of foreign holders of U.S. debt. Treasury secretaries since Robert Rubin have repeated the mantra that a strong dollar is in U.S. interests. That meant something when Rubin articulated it in 1995 with the aim of shoring up a weak dollar. But it has been used ad nauseam since then, both when the U.S. authorities were intervening in the currency markets to buy their currency and when they were selling it.

What qualified as strong is up for grabs. Since 1995, an index of the dollar’s value against a basket of other major currencies has risen as high as 121 and then fallen more than 40% without the wording being questioned or amended. The maxim has served its purpose, though, by reassuring investors and other countries that the United States would not try to talk its currency down to win a trade advantage. Little wonder then that the dollar index, which has been on a losing streak since the year started, hit a three-year low after Mnuchin’s comments. He probably had no intention of weakening the dollar and there is no evidence that President Donald Trump’s administration is about to embark on such a policy. The remarks do, however, reveal how focused U.S. policymakers are on domestic interests. From there, actually egging on such moves is only a small step.

There’s no way to keep the reserve currency down, and there’s no alternative either, but they’ll take what they can get today.

• Trump Team Unleashes Verbal Assault On The Dollar (Pol.)

U.S. presidents and Treasury secretaries have a long tradition of declaring their allegiance to a strong dollar policy in public remarks, even if privately many welcomed a softer dollar to boost U.S. exports and reduce trade deficits. If the U.S. is publicly supporting a weak dollar while also imposing tariffs on foreign imports — as the Trump administration did this week — it could invite retaliation from other countries, potentially sparking both currency and trade wars, economists say. “It’s remarkable, really, this kind of bomb-throwing from Mnuchin on the dollar the same week they slap on tariffs,” said Ian Shepherdson of Pantheon Macroeconomics, referring to action this week by the Trump White House to impose tariffs on some imported solar panels and washing machines. “The problem with this is it just invites retaliation. This is not a friendly action.”

A weaker U.S. dollar, while potentially a boost for exports, makes many foreign consumer goods more expensive for Americans to buy. That could hit lower-income consumers the hardest, including less well-off voters in Trump’s political base. Retaliatory tariffs on U.S. exports could also hurt domestic manufacturers. The concept of a public strong-dollar policy dates back at least three administrations to when Lloyd Bentsen and Robert Rubin served as Treasury secretaries under President Bill Clinton. The general approach reflects the belief that a stronger dollar improves the value of U.S. Treasury bonds, equities and other dollar-denominated assets and gives Americans more purchasing power. It also generally reflects an improving U.S. economy.

“I have been consistent in saying, as my predecessors have said, that a strong dollar is good for the United States. If you look at the U.S. economy right now, the truth is our economy is performing quite well,” then-Treasury Secretary Jack Lew said in January 2015, echoing the regular public refrain of U.S. officials. Mnuchin did nod to this tradition in his Davos comments after remarking on the benefits of a weaker dollar. “Longer term, the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency,” he said.

She must appear impartial. But this of course is utter crap: “The dollar is of all currencies a floating currency and one where value is determined by markets..”. There are no markets. There’s only central banks.

• IMF’s Lagarde Urges Mnuchin to Clarify Remarks on Weak Dollar (BBG)

IMF Managing Director Christine Lagarde suggested that U.S. Treasury Secretary Steve Mnuchin may wish to explain his comments in which he appeared to back a weak dollar, adding that U.S. tax cuts will probably cause the world’s reserve currency to rally. “I really hope that Secretary Mnuchin has a chance to clarify exactly what he said,” Lagarde said in Bloomberg TV interview with Francine Lacqua and Tom Keene in Davos, Switzerland. “The dollar is of all currencies a floating currency and one where value is determined by markets and geared by the fundamentals of U.S. policy.” The dollar slid to the lowest since December 2014 on Thursday, a day after Mnuchin’s endorsement of a weaker greenback at the WEF. The euro also climbed to its strongest against the dollar since 2014. “Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin told reporters in Davos.

The currency’s short term value is “not a concern of ours at all.” Losses for the greenback have mounted since U.S. President Donald Trump’s inauguration a year ago, with the currency weakening against every Group-of-10 peer. Lagarde reiterated the IMF’s view, presented in its World Economic Outlook this week, that the U.S. tax reform is likely to lead to dollar’s strengthening in the medium term. For many market analysts, Mnuchin’s comments represent a stark break from previous U.S. administrations and could provoke pushback from other regions before too long. “This is a further break away from the ‘strong USD’ mantra launched in the mid-1990s by Clinton’s Treasury Secretary Rubin and adhered to by subsequent Treasury leaders,” wrote Credit Agricole CIB strategists led by Valentin Marinov in a note to clients. “Inevitably, the Administration’s vocal preference for a weak dollar is likely to raise the risk of global currency wars.”

A carrot for the Democrats. They’ll take it.

• Trump Supports Immigration Plan With Pathway To Citizenship For Dreamers (G.)

Donald Trump on Wednesday said he would support a plan that offered a pathway to citizenship for so-called Dreamers, young undocumented immigrants who were brought to the US as children, as part of a broader immigration package that the White House is expected to unveil next week. Trump made the comments to a group of reporters assembled for a briefing on the president’s immigration plan before he departs to Davos, Switzerland, for the World Economic Forum. According to the Associated Press, Trump said he would be open to allowing certain immigrants to become citizens after “10 or 12 years”. Trump told reporters he would allow the Dreamers to “morph into” citizens over a period of time.

“Whatever they’re doing, if they do a great job, I think it’s a nice thing to have the incentive, of after a period of years, being able to become a citizen.” Lindsey Graham, one of the Republican Senators deeply involved in the negotiations over immigration, called Trump’s statement “a major breakthrough”. “I truly appreciate President Trump making it clear that he supports a path to citizenship for Daca recipients,” he said. “This will greatly help the Senate efforts to craft a proposal which President Trump can sign into law.” Trump had previously rejected the idea of citizenship for the young immigrants as “amnesty”. According to the AP, a senior White House official immediately clarified the remarks, telling reporters that a pathway to citizenship for Dreamers was only a “discussion point” in the plan that the White House would preview to Congress on Monday.

He’s not bluffing.

• Trump ‘Looking Forward’ To Speaking Under Oath In Russia Inquiry (G.)

Donald Trump said late Wednesday that he would be willing to speak to the special counsel office’s under oath, adding that he was “looking forward” to talking with Robert Mueller, who is investigating Russian interference in the 2016 election, including alleged contacts with the Trump campaign. Speaking with reporters at the White House before he set out for the World Economic Forum in Davos, Switzerland, Trump was asked about a potential interview with Mueller. “I’m looking forward to it,” he answered. “I would love to do it.” He added that the interview could occur in “two or three weeks”. Trump’s statement would seem to end months of speculation about whether the special counsel would interview the president, though he also said he would testify under oath last year. The president’s attorneys have met with their counterparts in the special counsel’s office.

Mueller’s team is tasked with investigating Russian meddling in the election, including hacks of Democratic party emails and contacts between members of Trump’s campaign and Russians. The special counsel’s office has charged Trump’s former campaign manager Paul Manafort with money laundering and conspiracy, and his former national security adviser Michael Flynn and one of his former foreign policy advisers, George Papadopoulos, have each pleaded guilty to lying to the FBI about their contacts with Russians. The special counsel’s office is also investigating potential obstruction of justice, and has questioned the attorney general, Jeff Sessions, in part to discuss the president’s decision to fire James Comey as FBI director. Also on Wednesday, Trump rejected criticism of his attacks on the Russia inquiry. “You fight back, oh, it’s obstruction,” Trump said. He added: “We’re going to find out” if he gets a fair shake from Robert Mueller. “There’s been no collusion whatsoever,” Trump said. “There’s no obstruction whatsoever.”

For what it’s worth.

• Ratings Firm Issues First Grades On Cryptocurrencies (CNBC)

Weiss Ratings, which claims to offer the first “ratings” on cryptocurrencies, has judged ethereum to be better than bitcoin. The securities ratings agency announced Wednesday that it gave ethereum a B rating because it “benefits from more readily upgradable technology and better speed, despite some bottlenecks.” Bitcoin received a “fair” C+ rating because the digital currency is “encountering major network bottlenecks, causing delays and high transactions costs,” according to a release. “Despite intense ongoing efforts that are achieving some initial success, Bitcoin has no immediate mechanism for promptly upgrading its software code.” None of the 74 cryptocurrencies the agency covers received an “excellent” A rating. B-rated ethereum and digital currency EOS have the highest ratings.

That tough take is apparently a trademark of the 47-year-old independent financial ratings agency. Reports from Barron’s and The New York Times from 2002 and 1992, respectively, note Weiss’ lack of A ratings in coverage of insurance stocks, mutual funds and other securities. The Florida-based company usually flies under the radar in comparison to better-known agencies such as Standard & Poor’s and Moody’s. Weiss says it does not accept compensation from the companies it rates for issuing the rating. Foreign cryptocurrency investors were apparently very worried that Weiss would issue negative ratings on digital currencies. The agency said in a release Wednesday that “staff was up all night last night fending off denial of service attacks from Korea” and cited Korean social media posts calling others to bring down the ratings agency’s website. The hackers then broke into the website, took information from it and are distorting it on social media, the company said.

No, Beppe is not ‘gaffe-prone’. He built a formidable force, and he’s the first to recognize he’s too old to take the next step. M5S was always going to be movement by and for the young. Because they’re not yet corrupt.

• Beppe Grillo Steps Aside From Italy’s Five Star Movement (G.)

Beppe Grillo, the bombastic comedian who co-founded Italy’s anti-establishment Five Star Movement, has stepped aside in what some speculate could be a move to bolster the party’s chances before the general election on 4 March. Grillo, who has been instrumental in turning the movement into Italy’s most popular party, roared on to the political scene in 2009 after joining forces with the late web strategist Gianroberto Casaleggio to launch a blog that railed against political corruption. The blog struck a chord among an electorate weighed down by the economic crisis and fed up with the traditional political class, and became the driving force behind the movement’s phenomenal success in the 2013 elections, when it snatched the second-largest share of the votes.

But the blog has now removed most references to the party. The 69-year-old has started a new blog, which he said will focus on technology and visions for the future as part of an “extraordinary liberating adventure”. He added that while he “likes to have points of view” he is “fed up with opinions”. Quite what that means has left commentators guessing, but Grillo has been distancing himself from the party for some time. In 2015, just a year after the party made gains in the European elections, he announced that he was leaving politics and returning to comedy. As he toured comedy clubs, the gaffe-prone Grillo was thrust back into the spotlight a year later after taking a swipe at Sadiq Khan, saying the Muslim mayor of London would “blow himself up in front of Westminster”.

After that Grillo took more of a back seat, gradually grooming 31-year-old Luigi di Maio for the party’s leadership. Di Maio, who was elected leader in September and is the party’s candidate for prime minister, said on Tuesday night that the split did not mean “patricide” or “reneging on the past”. “The party is now moving forward on its own legs and getting stronger,” he said. The Five Star Movement is leading in opinion polls, ahead of the centre-left Democratic party, Silvio Berlusconi’s Forza Italia and the far-right Northern League. Roberto d’Alimonte, a political science professor at Rome’s Luiss University, said: “Maybe [Grillo] wants to guarantee its survival and see how it will fly in his absence.”

“..we won’t see it until after it’s signed, in Chile on March 8. Really. That’s the way things normally work.”

• How About Showing Us The TPP Deal We’re About To Sign? (SMH)

What’s in the revised Trans-Pacific Partnership deal for Australia? There’s no way to tell until we’ve seen the text, and we won’t see it until after it’s signed, in Chile on March 8. Really. That’s the way things normally work. After that, there’s still time to back out if we don’t want to ratify it, and there’s a precedent. All 12 would-be members signed up to the original Trans-Pacific Partnership in February 2016. Barack Obama found himself unable to get it through Congress and Donald Trump didn’t try. As best as we can tell, the new deal, TPP-11, is the old one with fewer bad bits. Twenty of the most contentious provisions included at the insistence of the US have been “suspended” until the US decides to join. They include enforced protections for the owners of pharmaceutical patents and extensions to copyright law.

There’s no guarantee they would come back if the US did decide to join. Each of the 11 other members would have to agree. Still in the agreement, although somewhat weakened, are the investor-state dispute settlement provisions insisted on by the US and Korea. They will allow private companies to sue national governments in extraterritorial tribunals, as Philip Morris did over Australia’s tobacco plain-packaging laws using the terms of an obscure Hong Kong investment agreement. John Howard successfully resisted having them in the US-Australia agreement and the Abbott government managed to avoid them in the Australia-Japan agreement, but we have apparently agreed to them now, for Japan, Korea and eight other nations. The upside is that our companies will also be able to sue governments.

It’s time for Putin to tell Erdogan to back off.

• Trump Warns Erdogan To Avoid Clash Between U.S., Turkish Forces (R.)

U.S. President Donald Trump urged Turkey on Wednesday to curtail its military operation in Syria and warned it not to bring U.S. and Turkish forces into conflict, but a Turkish source said a White House readout did not accurately reflect the conversation. Turkey’s air and ground operation in Syria’s Afrin region, now in its fifth day, targets U.S.-backed Kurdish YPG fighters, which Ankara sees as allies of Kurdish insurgents who have fought in southeastern Turkey for decades. Turkish President Tayyip Erdogan said he would extend the operation to Manbij, a separate Kurdish-held enclave some 100 km (60 miles) east of Afrin, possibly putting U.S. forces there at risk and threatening U.S. plans to stabilize a swath of Syria.

Speaking with Erdogan by telephone, Trump became the latest U.S. official to try to rein in the offensive and to pointedly flag the risk of the two allies’ forces coming into conflict. “He urged Turkey to deescalate, limit its military actions, and avoid civilian casualties,” a White House statement said. “He urged Turkey to exercise caution and to avoid any actions that might risk conflict between Turkish and American forces.” The United States has around 2,000 troops in Syria. However, a Turkish source said the White House statement did not accurately reflect the content of their phone call. “President Trump did not share any ‘concerns about escalating violence’ with regard to the ongoing military operation in Afrin,” the source said, referring to one comment in the White House summary of their conversation.

Get him out of there, to a safe place. Get him treatment. A society that persecutes its smartest and bravest cannot succeed.

• We Examined Julian Assange, And He Badly Needs Care – But He Can’t Get It (G.)

Julian Assange, the founder of WikiLeaks, has not stepped outside the heavily surveilled confines of the Ecuadorian embassy in London since he entered the building almost six years ago. Naturally, much of the media attention has focused on his international legal drama and threats to his safety, including arrest and possible extradition to the US. In contrast, ongoing violations of his human rights, including his fundamental right to healthcare in the context of his unusual confinement, have received less coverage. As clinicians with a combined experience of four decades caring for and about refugees and other traumatised populations, we recently spent 20 hours, over three days, performing a comprehensive physical and psychological evaluation of Mr Assange.

While the results of the evaluation are protected by doctor-patient confidentiality, it is our professional opinion that his continued confinement is dangerous physically and mentally to him, and a clear infringement of his human right to healthcare. Packing a stethoscope and blood pressure cuff, and after being conspicuously photographed entering the embassy, we performed our examinations in a poorly ventilated conference room. The reason for examining Mr Assange in these conditions is that he has no access to proper medical facilities. Although it is possible for clinicians to visit him in the embassy, most doctors are reluctant to do so. Even for those who will see him, their capacity to provide care is limited. At the embassy, there are none of the diagnostic tests, treatments and procedures that we have concluded he needs urgently.

As clinicians, it is our ethical duty to advocate for the health and human rights of all people as promised under international law, and to call on our colleagues to hold our professional societies, institutions and governments accountable. In 2012, Ecuador, in accordance with its right as a sovereign state, formally determined that Mr Assange meets the requirements enshrined by the 1951 convention and 1967 protocol relating to the status of refugees. Regardless of the allegations against Mr Assange, he remains a citizen of Australia and a refugee, and, as the Guardian reported last week, he is now also a citizen of Ecuador.

Trump should support Assange vs their common enemy.

• Washington Post, Legacy Press Betray Assange (DisM)

At this juncture, it bears reminding that Jeff Bezos, the current owner of the Washington Post, has a $600 million contract with the CIA in relation to his monolithic company Amazon. The Nation wrote in 2013: “Amazon, under the Post’s new owner, Jeff Bezos, recently secured a $600 million contract from the CIA. That’s at least twice what Bezos paid for the Post this year. Bezos recently disclosed that the company’s Web-services business is building a “private cloud” for the CIA to use for its data needs. Critics charge that, at a minimum, the Post needs to disclose its CIA link whenever it reports on the agency. Over 15,000 have signed the petition this week hosted by RootsAction.” The Nation’s coverage of the CIA’s contract with Amazon has since been removed from their web page for unknown reasons, but is available through archive services.

When discussing The Washington Post’s exercise in gaslighting, it is important to keep the outlet’s well-documented financial connection with the CIA through Bezos in mind. In so doing, it is also pertinent to note that the CIA has made its hatred for Assange very clear, especially over the course of the last year. CIA Director Mike Pompeo put the agency’s hatred for Wikileaks were on full display as recently as yesterday, when the CIA Director lambasted the journalistic organization as a threat on par with Al Qaeda. Pompeo said of Al Qaeda and Wikileaks: “They don’t have a flag at the UN, but they represent real threats to the United States of America.” That a group who publishes information that is inconvenient for the CIA would be likened to a terrorist network speaks to the threat which Wikileaks represents not to the safety of the American public, but to the plutocratic class and the American deep state.

Pompeo is well known for his previous reference to Wikileaks as a “non-state hostile intelligence service.” The Hill wrote of the incident: “In his first major public appearance since taking the top intelligence post in the Trump administration, Pompeo took aim at WikiLeaks founder Julian Assange and former National Security Agency (NSA) contractor Edward Snowden…” The Hill also cited Pompeo’s characterization of Assange as a: “fraud, a coward hiding behind a screen.” Pompeo’s vitriolic characterization of Wikileaks is helpful, because it demonstrates that the CIA’s response to Wikileaks is on par with the force with which terrorist organizations like Al Qaeda are pursued. In that light, the magnitude of the threat faced by Assange and Wikileaks associates cannot be over-estimated. Pompeo’s words are not only absurd in light of Wikileaks being an extremely accurate journalistic organization, but also depict the real impetus behind Assange having been trapped in the Ecuadorian embassy for years.

The CIA Director’s statements, even taken at face value, completely undercut the manipulative coverage of Wikileaks and Assange by outlets like the Washington Post. That providing evidence of corruption is considered an existential threat by the establishment is indicative of the value of Wikileaks to the public. The publisher is only a threat to those whose lies are exposed by their publications. The same plutocracy that has aggressively targeted Assange and Wikileaks has progressively strangled free press and freedom of thought in the United States and the world for decades.

The zenith of EU cruelty: starve a gutted economy of investment. It’s how you guarantee it can’t ever recover.

• Greece Pays A Heavy Price For Its Primary Surplus (K.)

Greece ended 2017 with a revenue shortfall of 719 million euros that was covered by the failure to implement budgeted investments of 1.57 billion euros, leading to a primary surplus of 1.94 billion euros. At the same time Greek taxpayers piled up more arrears to the state, with December witnessing an increase in the creation of new debts. The definitive data of the budget’s execution last year, issued on Wednesday by the Finance Ministry, showed that the primary surplus was far above the target, exceeding it by some 877 million euros. Public Investments Program spending was 800 million euros below target, depriving the economy of much-needed cash just as it is trying to recover.

The shortfall was particularly evident on the program’s EU co-funded side, which missed the target by 1.127 billion euros, while the national part of the program showed a 327-million-euro increase in investment. It is therefore no surprise that the economy is now seen to have grown by an even smaller rate than the revised estimate included in the 2018 budget. The 1.941-billion-euro primary surplus, if confirmed by Eurostat in April, will be added to the so-called cash buffer to be created ahead of the conclusion of the bailout program. The non-execution of public investments co-funded by the EU also had an impact on budget revenues, as inflows from Brussels were 1.213 billion euros short of the target.

Those that have jobs, that is.

• Greeks Work Longest Hours in Europe (GR)

Greeks work the longest hours in Europe, while Germans clock the least hours, new data by the OECD reveal. The OECD includes 35 developed countries and some developing nations. The data were presented during the World Economic Forum in Davos, Switzerland. Mexicans are shown to be the hardest workers in the world, as the average Mexican spends 2,255 hours working per year, the equivalent of around 43 hours per week. In Europe, Greeks work the longest hours, averaging 2,035 hours per year. Germans, on the other hand, work the least in Europe and the world, averaging only 1,363 hours per year. The differences between countries has to do with differences in work cultures, the OECD says.

For instance, Mexicans work the most hours because they have a fear of unemployment, while lax labor rules allow employers to break a 48-hour-week law. However, although South Koreans come third in hours worked per year, employees there aim to boost economic growth. The Japanese, who are stereotyped as working very long hours, in fact put in only 1,713 hours per year, below the OECD average. An important factor regarding hours of work is the level of productivity. According to the study, Germans work the least hours but manage to maintain high productivity levels. The average German worker is reported to be 27% more productive than their British counterparts who work 1,676 hours per year. The Dutch, French and Danes also work fewer than 1,500 hours per year on average, while Americans average 1,783 work hours per year.

The easiest problem to solve, isn’t. So what hope is there then? If you must have plastic, and you rarely do really, make it compostable, edible. By next year, not 20-30 years from now.

• Each EU Citizen Creates 31kg Of Plastic-Waste Per Year (Stat.)

Plastic packaging waste is a huge problem around the world. Despite efforts in some European countries such as plastic bottle deposit schemes or having to pay for plastic bags in the supermarket, Statista’s Martin Armstrong notes that the average EU citizen creates 31kg of plastic waste per year. Eurostat figures show that the UK lies above this average, with its citizens responsible for 35kg of waste. The worst country by a long way though is Ireland. 61kg of packaging is thrown away by the average Irish person, 9kg more than the second most prolific country, Luxembourg. The least is created in Bulgaria where a more acceptable 14kg is disposed of over the year.

Debt Rattle October 23 2017

Oct 232017

October 23, 2017 Posted by Raúl Ilargi Meijer at 9:19 am Finance Tagged with: bonds, China, CO2, crisis, debt, Jimmy Carter, Mnuchin, Noble, salmon, trap, Trump 4 Responses »

Gordon Parks Place de la Concorde, Paris 1950

• Should I Stay or Should I Go? (IceCap)

• Americans Have More Debt Than Ever – And It’s Creating An Economic Trap (BI)

• Crisis, What Crisis? Banks Pile Back Into China (BBG)

• China’s Home Price Growth Steadies In September (R.)

• Jimmy Carter Unleashed: Russians Didn’t Alter Election (DaWi)

• Italy Regions Back ‘Big Bang’ Autonomy (AFP)

• Noble, Once Asia’s Largest Commodity Trader, Struggles To Survive (BBG)

• Washington To Back Greek Call For Debt Relief (K.)

• Car Pollution Causes A Huge Salmon Die-Off (WaPo)

• CO2 Rise ‘Will Affect All Sea Life’ (BBC)

“..a +0.7% increase in the US 10-Year Treasury market yield created chaos, havoc and over $1.7 Trillion in losses..”

• Should I Stay or Should I Go? (IceCap)

Life was so bad – especially for bond investors, that by the time 1982 rolled around you couldn’t give a bond away. If you were an investor or working in the investment industry at the time – you were painfully aware of the bond market and you were schooled to never, ever buy a bond again. Of course, 1982 was actually the best time ever to buy a bond. With long-term rates dropping like a stone over the next 35 years, bond investors and bond managers became known as the smartest people in the room. But, that was then and this is now. There are 2 points to remember forever here: 1) What goes down, must come up 2) There’s no one around today to remind us of what life was like for bond investors when long-term rates marched relentlessly higher

Interest rates are secular. And with interest rates today already hitting the theoretical 0% level – they have started to rise. And when long-term rates begin to rise, (unlike short-term rates) it happens in a snapping, violent manner. Neither of which is good for bond investors. Of course, there’s another important point to consider, the rise in long-rates from 1962 to 1982 occurred when there wasn’t a debt crisis in the developed world. And since 99% of the industry has only worked since 1982 to today, then 99% of the industry has never experienced, lived or even dreamt of a crisis in the bond market. This of course is the primary reason why all the negative stories about the stock market are alive and well played out in the media – they simply don’t know any better. And this is wrong. Very wrong. After all, the bond bubble dwarfs the tech bubble and the housing bubble. Think about it.

To grasp why the bond market is on the verge of crisis, and why trillions of Dollars, Euros, Yen and Pounds are about to panic and run away, we ask you to understand how free-markets really work. For starters, all free markets have two sides competing and participating. There are natural buyers and there are natural sellers. The point at which they meet in the middle is the selling/purchase price and the entire process is called price discovery. Price discovery is a wonderful thing. It always results in the determination of a true price for a product or service. However, a big problem arises when there is an imbalance between the buyers and sellers, and when one of the sides isn’t a natural buyer or seller. This is what has happened in the bond market. And this is why bond prices (or yields) have become so distorted; the true price of a bond hasn’t existed now for almost 9 years.

[..] over the last year, we’ve seen the most significant market reaction in the history of the bond world, not once but twice. Yet, the talking heads, the big banks and their mutual fund commentaries, and the stock market focused world have completely missed it. Almost a year ago in November immediately after the American Election, over a span of 54 hours – the bond market blew up. To put things into perspective, Chart 2 shows what happened during those fateful days. Ignoring the why’s, the how’s and the who’s – the fact remains that this tiny, miniscule increase in long-term interest rates caused the bond market to vomit over itself. Yes, a +0.7% increase in the US 10-Year Treasury market yield created chaos, havoc and over $1.7 Trillion in losses around the world.

“Most consumers, especially those in the bottom 80%, are tapped out..”

• Americans Have More Debt Than Ever – And It’s Creating An Economic Trap (BI)

There’s a scary little statistic buried beneath the US economy’s apparent stability: Consumer debt levels are now well above those seen before the Great Recession. As of June, US households were more than half a trillion dollars deeper in debt than they were a year earlier, according to the latest figures from the Federal Reserve. Total household debt now totals $12.84 trillion — also, incidentally, around two-thirds of GDP. The proportion of overall debt that was delinquent in the second quarter was steady at 4.8%, but the New York Fed warned over transitions of credit card balances into delinquency, which “ticked up notably.” Here’s the thing: Unlike government debt, which can be rolled over continuously, consumer loans actually need to be paid back. And despite low official interest rates from the Federal Reserve, those often do not trickle down to many financial products like credit cards and small business loans.

Michael Lebowitz, co-founder of market analysis firm 720 Global, says the US economy is already dangerously close to the edge. “Most consumers, especially those in the bottom 80%, are tapped out,” he told Business Insider. “They have borrowed about as much as they can. Servicing this debt will act like a wet towel on economic growth for years to come. Until wages can grow faster than our true costs of inflation, this problem will only worsen.” The IMF devotes two chapters of its latest Global Financial Stability Report to the issue of household debt. It finds that, rather intuitively, high debt levels tend to make economic downturns deeper and more prolonged. “Increases in household debt consistently [signal] higher risks when initial debt levels are already high,” the IMF says.

Nonetheless, the results indicate that the threshold levels for household debt increases being associated with negative macro outcomes start relatively low, at about 30% of GDP. Clearly, America’s already well past that point. As households become more indebted, the Fund says, future GDP growth and consumption decline and unemployment rises relative to their average values. “Changes in household debt have a positive contemporaneous relationship to real GDP growth and a negative association with future real GDP growth,” the report says. Specifically, the Fund says a 5% increase in household debt to GDP over a three-year period leads to a 1.25% fall in real GDP growth three years into the future.

“Housing busts and recessions preceded by larger run-ups in household debt tend to be more severe and protracted,” the IMF said. Is there a solution? If things reach a tipping point, yes, says the IMF — there’s always debt forgiveness. Even creditors stand to benefit. “We find that government policies can help prevent prolonged contractions in economic activity by addressing the problem of excessive household debt,” the report said. The Fund cites “bold household debt restructuring programs such as those implemented in the United States in the 1930s and in Iceland today” as historical precedents. “Such policies can, therefore, help avert self-reinforcing cycles of household defaults, further house price declines, and additional contractions in output.”

“.. it’s odd that banks would think China is getting debt under control even as they provide more of it.”

• Crisis, What Crisis? Banks Pile Back Into China (BBG)

China has been working hard to convince the world that it’s not a financial crisis waiting to happen. Judging from the latest data on cross-border lending, banks are buying it. Foreign banks’ total exposure to China reached $750 billion in June 2017, up from $659 billion a year earlier, according to the Bank for International Settlements. That’s a big contrast to a couple of years ago, when lenders were pulling tens of billions out amid concerns that a combination of high indebtedness, excessive investment and slowing growth would precipitate a wave of defaults. Here’s how that looks:

What changed? For one, China’s economy (according to the suspiciously smooth official data, at least) has proven more resilient than expected: The pace of growth has accelerated from a mid-2016 low of 6.7%, and forecasters have raised their projections for 2018. Perhaps more important, Chinese officials have advertised their commitment to controlling debt and containing an overheated property market. That said, it’s odd that banks would think China is getting debt under control even as they provide more of it. Although the accumulation has slowed in some areas, it has boomed in households and elsewhere. By one early-warning measure – the difference between the current and long-term levels of business and household credit as a share of GDP, also known as the credit gap – China and Hong Kong are still by far the riskiest countries tracked by the BIS.

As Beijing buys 25% of sales.

• China’s Home Price Growth Steadies In September (R.)

China’s new home prices registered a second straight month of weak growth in September, with prices in the biggest markets slipping and gains in smaller cities slowing as government measures to cool a long property boom took hold. China’s housing market has been on a near two-year tear, giving the economy a major boost but stirring fears of a property bubble even as authorities work to contain risks from a rapid build-up in debt. While monthly price rises peaked in September 2016 at 2.1% nationwide, they have softened only begrudgingly since then, regaining momentum as buyers shrugged off each new wave of measures to curb speculation. Analysts say more tightening could still be expected in lower-tier cities with relatively fast price gains, as critics argue China’s ever-growing administrative control over its property market has only reaffirmed speculator views that prices will remain steady.

“China’s property prices are still rising even as sales are falling off a cliff, which suggests the market still sees property as an investment product in the belief that the government won’t let prices fall,” said Yi Xianrong, a Professor of Economics at Qingdao University. Still, signs of a more stable and less frothy housing market for now will be welcome to the country’s leaders as they attend a critical Communist Party Congress to set political and economic priorities for the next five years. President Xi Jingping opened the twice-a-decade gathering last week, stressing the need to move from high-speed to high-quality growth. Average new home prices rose 0.2% month-on-month in September, the same rate as in August when prices rose at the slowest rate in seven months, according to Reuters calculations from National Bureau of Statistics (NBS) data out on Monday.

“The curbs are in general still intensifying, which have gradually impacted property buyers’ expectations,” said Zhang Dawei, an analyst with Centaline, a property agency. New home prices rose 6.3% year-on-year in September, decelerating from August’s 8.3% increase, partly thanks to last September’s high base. Higher prices are also eating up more of home buyers’ disposable income, which could dampen future demand.

Truth to power.

• Jimmy Carter Unleashed: Russians Didn’t Alter Election (DaWi)

At 93, Jimmy Carter is cutting loose. The former president sat down with The New York Times recently and chatted about all kinds of subjects. The Times decided to play up the fact that Carter — one of the worst presidents in U.S. history — would love to go over to North Korea as an envoy. But the Times is steadily proving how out of touch it is, and how it no longer seems to actually “get” what real news is. Here are some major highlights from the interview:

1. The Russians didn’t steal the 2016 election. Carter was asked “Did the Russians purloin the election from Hillary?” “I don’t think there’s any evidence that what the Russians did changed enough votes — or any votes,” Carter said. So the hard-left former president doesn’t think the Russians stole the election? Take note, Capitol Hill Democrats.

2. We didn’t vote for Hillary. Carter and his wife, Roselyn, disagreed on the Russia question. In the interview, she “looked over archly [and said] ‘They obviously did'” purloin the election. “Rosie and I have a difference of opinion on that,” Carter said. Rosalynn then said, “The drip-drip-drip about Hillary.” Which prompted Carter to note that during the primary, they didn’t vote for Hillary Clinton. “We voted for Sanders.”

3. Obama fell far short of his promises. Barack Obama whooshed into office on pledges of delivering “hope and change” to the country, spilt by partisan politics. He didn’t. In fact, he made it worse. “He made some very wonderful statements, in my opinion, when he first got in office, and then he reneged on that,” he said about Obama’s action on the Middle East.

4. Media “harder on Trump than any president.” A recent Harvard study showed that 93% of new coverage about President Trump is negative. But here’s another shocker: Carter defended Trump. “I think the media have been harder on Trump than any other president certainly that I’ve known about,” Carter said. “I think they feel free to claim that Trump is mentally deranged and everything else without hesitation.”

5. NFL players should “stand during the American anthem.” Carter, who joined the other four living ex-presidents on Saturday for a hurricane fundraiser, put his hand on his heart when the national anthem played — and he has a strong opinion about what NFL players should do, too. “I think they ought to find a different way to object, to demonstrate,” he said. ” I would rather see all the players stand during the American anthem.”

Expect more of this. Much more.

• Italy Regions Back ‘Big Bang’ Autonomy (AFP)

Two of Italy’s wealthiest northern regions on Sunday voted overwhelmingly in favour of greater autonomy in the latest example of the powerful centrifugal forces reshaping European politics. Voters in the Veneto region that includes Venice and Lombardy, home to Milan, turned out at the high end of expectations to support the principle of more powers being devolved from Rome in votes that took place against the backdrop of the crisis created by Catalonia’s push for independence. Veneto President Luca Zaia hailed the results, which were delayed slightly by a hacker attack, as an institutional “big bang”. But he reiterated that the region’s aspirations were not comparable to the secessionist agenda that has provoked a constitutional crisis in Spain.

Turnout was projected at around 58% in Veneto, where support for autonomy is stronger, and just over 40% in Lombardy. The presidents of both regions said more than 95% of voters who had cast ballots had, as expected, done so to support greater autonomy. The votes are not binding but they will give the right-wing leaders of the two regions a strong political mandate when they embark on negotiations with the central government on the devolution of powers and tax revenues from Rome. Secessionist sentiment in Veneto and Lombardy is restricted to fringe groups but analysts see the autonomy drive as reflecting the same cocktail of issues and pressures that resulted in Scotland’s narrowly-defeated independence vote, Britain’s decision to leave the EU and the Catalan crisis.

“What this vote has shown is that there is no ‘autonomy party’ in Veneto – what there is is an entire people who back this idea,” said Zaia. “What’s won is the idea that we should be in charge of our own back yard.” Lombardy governor Roberto Maroni said he would be looking to present detailed proposals on devolution within two weeks, in a bid to ensure they are considered before national elections due by May next year. “I will go to Rome and ask for more powers and resources within a framework of national unity,” he said.

Too much debt?!

• Noble, Once Asia’s Largest Commodity Trader, Struggles To Survive (BBG)

Embattled commodity trader Noble Group warned of a more than $1 billion third-quarter net loss and agreed to sell most of its oil-liquids unit to Vitol Group at a loss, further complicating its fight for survival. The long-awaited deal to sell its prized oil business provided little relief to Hong Kong-based company, with shares falling the most in three months. Details of the sale announced on Monday failed to give much clarity on how much Noble Group would ultimately receive from Vitol, while the third-quarter results highlighted the company’s struggle to return to profitability as it offloads assets to repay debt. “They’re still fighting to survive,” Nicholas Teo, a trading strategist at KGI Securities said by phone. Noble Group’s stock slumped as much as 12% in Singapore, extending a more than 90% retreat since questions over its financial reporting emerged in early 2015.

While the company has defended its accounting, it has also written down the value of its long-term commodity contracts, ousted senior managers and put almost all of its businesses outside Asia up for sale. Noble Group’s 2020 notes are trading at about 39 cents on the dollar, with analysts at BNP Paribas and Nomura predicting that the company will eventually be forced to restructure its debt. Noble Group said that based on its end-June accounts it would have received net proceeds of $582 million from the oil unit deal after paying back borrowings under a secured credit facility. But that figure included proceeds from the earlier sale of its gas-and-power unit, the company said, and was prior to a third quarter in which the business was “adversely impacted” by “capital constraints.” Based on that number, the company would report a $525 million loss on the sale.

As US alienates itself from Erdogan. For good reasons.

• Washington To Back Greek Call For Debt Relief (K.)

US Treasury Secretary Steven Mnuchin appears set to spearhead initiatives for Greek debt relief as part of Washington’s efforts to bolster Greece as a bastion of stability in the wider region, according to Kathimerini sources. Mnuchin took part in a meeting between US President Donald Trump and Greek Prime Minister Alexis Tsipras at the White House last week that addressed ways to promote investments in Greece, strengthen defense cooperation and push Greek debt relief demands. It was, reportedly, made clear at the meeting that Trump has made a strategic decision to support Greece as a reliable ally in the Eastern Mediterranean.

As a first step, the US may ask for an informal meeting of the IMF’s Executive Board to be convened – after a government is formed in Berlin and provided the third Greek bailout review is completed – where pressure will be applied for a specific time frame with regard to Greece’s debt. Another indication that the ball is beginning to roll was the result of talks between Tsipras and IMF chief Christine Lagarde a day before the meeting with Trump. Mnuchin told Trump and Tsipras that Lagarde had contacted him saying her talks with the Greek premier went well and there will be no surprises during the negotiations to complete the review. Mnuchin added that Lagarde said the IMF will push for debt relief.

A curious story.

• Car Pollution Causes A Huge Salmon Die-Off (WaPo)

Silvery coho salmon are as much a part of Washington state as its flag. The fish has a sacred place in the diets and rituals of the state’s indigenous peoples, beckons to tourists who flock to watch its migration runs, and helps to sustain a multimillion-dollar Pacific Northwest fishing industry. So watching the species die in agony is distressing: Adult coho have been seen thrashing in shallow fresh waters, males appear disoriented as they swim, and females are often rolled on their backs, their insides still plump with tiny red eggs that will never hatch. “Coho have not done well where a lot of human activity impacts their habitat,” said Nat Scholz, a research zoologist for the National Oceanic and Atmospheric Administration. That’s to say the least.

A recent study traced a major coho salmon die-off to contaminants from roads and automobiles — brake dust, oil, fuel, chemical fluids — that hitch a ride on storm water and flow into watersheds. The contaminants are so deadly, they kill the salmon within 24 hours. “Our findings are . . . that contaminants in stormwater runoff from the regional transportation grid likely caused these mortality events. Further, it will be difficult, if not impossible, to reverse historical coho declines without addressing the toxic pollution dimension of freshwater habitats,” said the study, published Wednesday in the journal Ecological Applications. This sort of point-source pollution from antiquated sewer systems is a problem across the nation, including the Chesapeake Bay region. Rain overwhelms storm drains, commingles with human waste and surface road garbage, then flushes into ponds, creeks, streams and rivers.

In Seattle and large cities across the Pacific Northwest, those waters are stocked with salmon. The finding could be a breakthrough in a mystery that has vexed scientists for years. But it fell short of explaining another mystery: Why are coho the only one of five salmon species to be affected? Chinook, sockeye, pink and chum don’t remotely experience the same mortality. “This is the great mystery that we are working on,” Scholz said. The future for a species that experiences up to 40 percent mortality before spawning in Puget Sound is no mystery. “The population will crash,” said Jay Davis, an environmental toxicologist for the U.S. Fish and Wildlife Service who coordinated field research for the study.

“.. an increase in acidity of about 26%…”

• CO2 Rise ‘Will Affect All Sea Life’ (BBC)

All sea life will be affected because carbon dioxide emissions from modern society are making the oceans more acidic, a major new report will say. The eight-year study from more than 250 scientists finds that infant sea creatures will be especially harmed. This means the number of baby cod growing to adulthood could fall to a quarter or even a 12th of today’s numbers, the researchers suggest. The assessment comes from the BIOACID project, which is led from Germany. A brochure summarising the main outcomes will be presented to climate negotiators at their annual meeting, which this year is taking place in Bonn in November. The Biological Impacts of Ocean Acidification report authors say some creatures may benefit directly from the chemical changes – but even these could still be adversely affected indirectly by shifts in the whole food web.

What is more, the research shows that changes through acidification will be made worse by climate change, pollution, coastal development, over-fishing and agricultural fertilisers. Ocean acidification is happening because as CO2 from fossil fuels dissolves in seawater, it produces carbonic acid and this lowers the pH of the water. Since the beginning of the Industrial Revolution, the average pH of global ocean surface waters have fallen from pH 8.2 to 8.1. This represents an increase in acidity of about 26%. The study’s lead author is Prof Ulf Riebesell from the GEOMAR Helmholtz Centre for Ocean Research in Kiel. He is a world authority on the topic and has typically communicated cautiously about the effects of acidification. He told BBC News: “Acidification affects marine life across all groups, although to different degrees.

“Warm-water corals are generally more sensitive than cold-water corals. Clams and snails are more sensitive than crustaceans. “And we found that early life stages are generally more affected than adult organisms. “But even if an organism isn’t directly harmed by acidification it may be affected indirectly through changes in its habitat or changes in the food web. “At the end of the day, these changes will affect the many services the ocean provides to us.”

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