Mar 152017
 
 March 15, 2017  Posted by at 9:46 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Russell Lee Proprietor of small store in market square, Waco, Texas 1939

 


MSNBC’s Non-Story: Trump Made $150 Million, Paid 25% Tax Rate (ZH)
The Most Important Chart To See Before The Dutch Election (Ed Harrison)
Fragmentation Is the Solution, Not the Problem (CHS)
Economists Are Political Actors (Sapir)
One Chart That Captures the Debate Over Quantitative Easing (BBG)
Fed Expected To Raise Rates As US Economy Flexes Muscle (R.)
Britain Is Politically Dead From The Neck Down (Monbiot)
Turkish Paradoxes (K.)
World’s Spiders Eat More “Meat” Than All Of Mankind (G.)
Monsanto Accused of Ghostwriting Papers on Roundup Cancer Risk (BBG)
Monsanto Colluded With EPA, Could Not Prove Roundup Doesn’t Cause Cancer (ZH)
Greece: A Year of Suffering for Asylum Seekers (HRW)
As Greek Crisis Grinds On, Children Pay Price (K.)

 

 

Boomerang.

MSNBC’s Non-Story: Trump Made $150 Million, Paid 25% Tax Rate (ZH)

While Rachel Maddow drones on with the coherence of Janet Yellen, losing thousands of viewers by the minute, the MSNBC anchor was promptly scooped not only by the White House which revealed her “secret” one hour in advance, but also by the Daily Beast which reported that its contributor David Cay Johnston had obtained the first two pages of Trump’s 2005 federal income tax return, allegedly receiving them in the mail, and posted his “analysts” on his website, DCReport.org. According to the documents, Trump and his wife Melania paid $38 million in total income tax, consisting of $5.3 million in regular federal income tax, and an additional $31 million of “alternative minimum tax,” or AMT.

The White House statement confirmed the finding: “Before being elected President, Mr. Trump was one of the most successful businessmen in the world with a responsibility to his company, his family and his employees to pay no more tax than legally required,” the White House said in a statement. “That being said, Mr. Trump paid $38 million dollars even after taking into account large scale depreciation for construction, on an income of more than $150 million dollars, as well as paying tens of millions of dollars in other taxes such as sales and excise taxes and employment taxes and this illegally published return proves just that.” As the Beast notes, 2005 was the year that Trump, then a newly minted reality star, made his last big score as a real-life real estate developer, when he sold two properties, one on Manhattan’s west side and one in San Francisco, to Hong Kong investors, accounting for the lion’s share of his income that year.

“It is totally illegal to steal and publish tax returns,” the White House statement concluded. “The dishonest media can continue to make this part of their agenda, while the President will focus on his, which includes tax reform that will benefit all Americans.” But the real story here is that there is no story: what MSNBC confirmed is that Trump made more money than some of his critics said he made in the period in question, and more importantly, that he paid a generous effective income tax rate, well above the 14.1% rate paid by Mitt Romney, and even higher than the 13.5% federal tax rate paid by Bernie Sanders in 2014.

Read more …

Three articles in a row that deal with decentralization, each from their own angle. Most important chart I don’t know, but a good indicator of the entire west moving away from traditional parties. The majority of votes may go to new parties, not established ones.

The Most Important Chart To See Before The Dutch Election (Ed Harrison)

The present Prime Minister of the Netherlands, Mark Rutte, is the first Prime Minister from a party other than the two traditional centrist parties, the PvdA and the CDA, and their predecessor parties since the Dutch constitution and voting system was fundamentally changed in 1917. Clearly, we are seeing a change in voting patterns. But what is even more remarkable is that right now poling for parties that have always been in opposition is almost half of the vote for this election. Why it matters: We are in the midst of an economic upswing in Europe and globally as well. By all macro accounts, the Dutch economy is performing well. Yet, between them, previous ruling coalition parties —the VVD, PvdA, CDA, D66 and CU — are projected to only get 52% of the vote.


Source: Legatum Institute

They could even get fewer votes than the parties that have never been in government during the 100 years of the modern Dutch electoral system. People talk about voters turning to populists. But what happens to electoral patterns in a recession — or another sovereign debt crisis? And how would more populist platforms or parties in Europe deal with the existing economic orthodoxy, dominated by the stability and growth pact’s 3 and 60% deficit-debt hurdles? The next coalition in the Netherlands could be unstable, as it is likely to be cobbled together to exclude the PVV. Overall, the political risks in Europe may be high right now, but depending on how the economy does, the risks can rise further still.

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As I’ve addressed many times. Centralization is in the past.

Fragmentation Is the Solution, Not the Problem (CHS)

The fragmentation of political consensus (i.e. the consent of the citizenry) is presented by the Powers That Be and their media servants as being a disaster. The implicit fear is real enough: how can we rule the entire nation-empire if it fragments?\ As I noted the other day, fragmentation terrifies the Establishment of racketeers and insiders, for when the centrally-enforced rentier skims and scams collapse, those who own and control the rentier skims, scams and rackets will lose the source of their wealth and power. To understand why fragmentation is the solution rather than the problem, we have to look at how power is leveraged in centralized government. Let’s take the recent increase in a common pinworm treatment from $3 to $600: Pinworm prescription jumps from $3 to up to $600 a pill (via J.F.).

In a top-down, centralized hierarchy of political power (i.e. the central state), the pharmaceutical company only needs to lobby a few authorities in the central state to impose its rentier skim/scam on the entire nation. Lobbying/bribing a relative handful of federal officials and elected representatives is remarkably inexpensive: a financier or corporation only needs to focus on these few key players, and smoothing the PR pathway via a highly concentrated corporate media. A mere $5 million spent in the right places guarantees $100 million in future profits– profits earned not from open competition in a transparent market, but profits plundered as rentier skims: the product didn’t get any better or effective when the price leaped from $3 to $600, and competition was squelched by regulatory capture and high barriers to entry.

Now imagine if the pharmaceutical company had to lobby/bribe officials in each of America’s 3,142 counties to impose its rapacious rentier skim on the populace of each county. The lobbying/bribing effort will be orders of magnitude more costly and complex, and the national corporate media is less effective at the local level, where community groups and local media have some influence. If we look at the source of the 2008 Global Financial Meltdown, we find that the centralization of capital and power were the primary enablers of the meltdown. If the financial system were composed of 1,200 local banks, each of which had to comply with local and state regulations instead of five behemoth banks that had the capital and klout to buy Washington D.C.’s approval of their leverage and shady dealings, some hundreds of the smaller banks might have failed–but the system would have survived.

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Sapir is interesting. But economics is still not a science. Also addresses decentralization.

Economists Are Political Actors – Sapir (AHT)

[..] economists have appropriated a power that is not theirs. They have indeed penetrated the inner workings of the ruling apparatus. This is true at the State level, as to that of major international organizations, whether it is in the European Union, the OECD or the WTO. They are thus increasingly inclined to intervene on all social and political problems. But when they occur, it is by mixing an experts position and a position of political actors. This poses an immediate problem. For, if the expert is legitimate to speak on behalf of an acquaintance, the political actor must comply with the rule of democratic debate. By having it both ways, economists are exonerated from the problem of verification. The problem, therefore, is to know in which space one speaks, in that of pure competence or in that of political choices. If it is in the latter, it is no longer possible to accept that the “expertise” alone can decide the debate, expertise which can no longer be verified because any judgment would combine elements of competence and political values.

If one is in the political space, then the question of legitimacy arises. Now, this question immediately refers to the higher-level issue of sovereignty. In the space of politics, one asks first who is legitimate, and who is sovereign. But there is a problem that is deeper. The scientific credibility they claim to be is far from being indisputable, or undisputed. There are very serious reasons for this, which I explained in a book dating back to the early 2000s [1]. The very way in which the majority of the profession, the economists of the mainstream, understands the object of its work, is today debated and strongly criticized [2]. The methods used by these economists, the models on which they are based, are openly contested. [..] In fact, economists do politics, what nobody ever thinks to reproach them for, but they do politics by pretending not to do so, and by delegitimizing in advance any critical discourse. This is, of course, a serious attack on democracy.

[..] It is wrong here to speak of “Europe” as if it were an institution or a federation. The only reality of Europe is a historical reality, diverse, and above all a cultural reality. If you go to Vladivostok in Russia, you are in a European city. What is now a problem for democracy is the existence of the European Union, which is an institution and of which we can follow the evolution from the origin, that is to say the Maastricht Treaty. Indeed, the evolution of the European Union since 2007-2009 is a real problem. There, yes, unquestionably, we are in the presence of a structure that tends to develop itself without control or responsibility. The statements of Jean-Claude Juncker in the Greek election of January 2015 testify it [37].

The behavior of the EU and the institutions of the Euro zone call for an overall reaction because these institutions contest this freedom that is sovereignty [38]. Let us remind here the quotation from Mr. Jean-Claude Juncker, the successor of the ineffable Barroso at the head of the European Commission: “There can be no democratic choice against European treaties”. This revealing statement dates from the Greek election of January 25, 2015, which precisely saw the victory of SYRIZA. In a few words, everything is said. It is the quiet and satisfied affirmation of the superiority of non-elected institutions over the voting of voters, of the superiority of the technocratic principle over the democratic principle.

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The mother of all asset bubbles.

One Chart That Captures the Debate Over Quantitative Easing

Not all price increases are created equal. Goldman Sachs raises questions about the success of the efforts by the Federal Reserve and its peers to spark inflation in the wider economy with a chart showing what’s happened with prices in the largest developed economies since the start of 2009. A replication of their analysis shows a big spread in gains. While wages would never show swings on par with the likes of high-yield bonds, the chart does illustrate how well financial markets recovered from the 2007 to 2009 meltdowns. By contrast, consumer price inflation, incomes and other such gauges of the “real” economy have put in muted performances. For politicians, the chart sums up the frustrations that have helped propel the populism that Brexiteers and Donald Trump rode to victory.

Few would question that the real economy would have been in much worse shape without the Fed, ECB and Bank of Japan’s determination to avert a financial-industry meltdown last decade, an effort that saw their balance sheets balloon by trillions of dollars. [..] Economic growth and wage increases have disappointed in recent years, depressed by poor productivity gains and historically low labor-force participation – dynamics that lie outside the purview of central banks. Now that monetary policy makers are leaving the onus on governments to address growth, and contemplating the easing off of stimulus, the big question for investors is how resilient markets will be. For now, optimism prevails – everything from corporate-bond premiums to emerging-market bonds are flashing confidence. It’s perhaps no wonder: though the Fed has ended its QE, continuing programs at the ECB and BOJ are driving almost $200 billion of purchases a month, according to Deutsche Bank estimates.

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Yawn…

Fed Expected To Raise Rates As US Economy Flexes Muscle (R.)

The Federal Reserve is expected to raise interest rates for the second time in three months on Wednesday, encouraged by strong monthly job gains and confidence that inflation is finally rising to its target. A rate hike at the conclusion of the Fed’s latest two-day policy meeting is already baked into bond yields and financial markets overall, with investors putting the likelihood of such a move at 95%, according to CME Group’s FedWatch program. Attention is turning instead to whether the U.S. central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at the December policy meeting.

“Expectations have some catching up to do regarding the Fed’s need to ‘lean into the wind’ of rising inflation, strong growth, robust sentiment, easy financial conditions, and the likelihood of fiscal stimulus in 2018,” analysts from Goldman Sachs wrote ahead of the meeting. They said they regarded a fourth rate increase this year as a “close call.” A rate increase on Wednesday would push the Fed’s target overnight lending rate to a range of between 0.75% and 1.00%, still low but approaching the range that the central bank has typically operated within. The Fed is scheduled to release its latest policy statement along with updated economic forecasts at 2 p.m. EDT. Fed Chair Janet Yellen is due to hold a press conference half an hour later.

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“Will my family and I truly be better off by going it alone? Will we really be more safe and secure?”

Britain Is Politically Dead From The Neck Down (Monbiot)

Here is the question the people of Scotland will face in the next independence referendum: when England falls out of the boat like a block of concrete, do you want your foot tied to it? It would be foolish to deny that there are risks in leaving the United Kingdom. Scotland’s economy is weak, not least because it has failed to wean itself off North Sea oil. There are major questions, not yet resolved, about the currency it would use; its trading relationship with the rump of the UK; and its association with the European Union, which it’s likely to try to rejoin. But the risks of staying are as great or greater. Ministers are already trying to reconcile us to the possibility of falling out of the EU without a deal.

If this happens, Britain would be the only one of the G20 nations without special access to EU trade – “a very destructive outcome leading to mutually assured damage for the EU and the UK”, according to the Commons foreign affairs committee. As the government has a weak hand, an obsession with past glories and an apparent yearning for a heroic gesture of self-destruction, this is not an unlikely result. On the eve of the first independence referendum, in September 2014, David Cameron exhorted the people of Scotland to ask themselves: “Will my family and I truly be better off by going it alone? Will we really be more safe and secure?” Thanks to his machinations, the probable answer is now: yes.

In admonishing Scotland for seeking to protect itself from this chaos, the government applies a simple rule: whatever you say about Britain’s relationship with Europe, say the opposite about Scotland’s relationship with Britain. In her speech to the Scottish Conservatives’ spring conference, Theresa May observed that “one of the driving forces behind the union’s creation was the remorseless logic that greater economic strength and security come from being united”. She was talking about the UK, but the same remorseless logic applies to the EU. In this case, however, she believes that our strength and security will be enhanced by leaving. “Politics is not a game, and government is not a platform from which to pursue constitutional obsessions,” she stormed – to which you can only assent.

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“And the last of the paradoxes is that Turkish electoral law prohibits pre-election rallies abroad..”

Turkish Paradoxes (K.)

What Turkish President Recep Tayyip Erdogan is trying to accomplish is perfectly clear: He wants to win the April 16 referendum on constitutional reform and thus gain the enhanced powers his ambitious nature so covets, some of which he already enjoys after turning last summer’s failed coup into an opportunity. His strategy is also clear: criminalizing any opposition, be it in actions or mere words, mainly at the expense of journalists and the Kurds, as well as condemning in summary fashion anyone perceived as being pro-Gulen. The second part of his strategy involves exporting his edginess and bullying rhetoric, first and foremost to the Aegean at the expense of Greece, and then to the European Union in a bid to win favor among Gray Wolves voters.

The Turkish president is also trying to strong-arm Western Europe into recognizing his prerogative (and that of his subordinates, though only those who vote his way next month) to a right that he himself openly scorns and denies his opponents. History is full of such paradoxes. Another is that while Erdogan accuses the West of Islamophobia, he is doing everything in his power to strengthen this sentiment because it will benefit him at the polls, as for years he has been cultivating the myth that he is the leader of all of Islam, both in the East and the West. In contrast to Erdogan, what the EU is trying to achieve vis-a-vis Ankara is not so clear, neither in terms of strategy nor even in tactics. Overall, it’s hard to know what it’s thinking about Turkey’s “European prospects” and, more specifically right now, about the pre-election speeches of Turkish pro-Erdogan officials in EU member-states.

Pre-election anxiety strengthened by the rising popularity of anti-systemic, anti-migrant, far-right forces, has been instrumental in Europe as well, especially in the Netherlands and Germany. It has resulted in bans against Turkish officials that demonstrate fear rather than faith in the strength of democracy, even when it is exposed to the test of regimes which are hardly democratic, such as Turkey. Meanwhile, fears that the European Union’s refugee deal with Turkey may collapse have prevented the German and Dutch leaderships from openly condemning the human rights violations in Turkey, resulting in them basically swallowing profound insults from Erdogan and some of his ministers referring to fascists and Nazis. Here’s another paradox: Turkey, which didn’t exactly shine in the war against Nazism, condemning the Netherlands, a victim of Nazism.

And the last of the paradoxes is that Turkish electoral law prohibits pre-election rallies abroad.

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I’d be interested to see a study like this done for bats. They eat a lot of insects. And there are lots of them: 1/3 of all mammals is a bat I recall reading.

World’s Spiders Eat More “Meat” Than All Of Mankind (G.)

The world’s spiders eat 400-800m tonnes of insects every year – as much meat and fish as humans consume over the same period, a study said Tuesday. In the first analysis of its kind, researchers used data from 65 previous studies to estimate that a total of 25m metric tonnes of spiders exist on Earth. Taking into account how much food spiders need to survive, the team then calculated the eight-legged creatures’ annual haul of insects and other invertebrates. “Our estimates … suggest that the annual prey kill of the global spider community is in the range of 400-800m metric tons,” they wrote in the journal The Science of Nature. This showed just how big a role spiders play in keeping pests and disease-carriers at bay – especially in forests and grasslands where most of them live.

“We hope that these estimates and their significant magnitude raise public awareness and increase the level of appreciation for the important global role of spiders,” the study authors wrote. For context, the study points out that humans consume about 400m tonnes of meat and fish every year, while whales feed on 280-500 tonnes and seabirds about 70m tonnes of seafood. There are about 45,000 known spider species, all of them meat-eating. And the critters can travel far to feed, swinging from place to place on silken threads that allow them to cover up to 30km (19 miles) in a day. Spiders are found everywhere from the Arctic to the most arid of deserts, in caves, on ocean shores, sand dunes and flood plains, the study authors said.

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Unbelievable.

Monsanto Accused of Ghostwriting Papers on Roundup Cancer Risk (BBG)

Monsanto was accused in court documents of ghostwriting scientific literature that led a U.S. regulator to conclude a key chemical in its Roundup weed killer shouldn’t be classified as carcinogenic. Lawyers suing the company on behalf of farmers and others, who claim exposure to glyphosate caused their non-Hodgkin’s lymphoma, alleged in a court filing which was partially blacked out until Tuesday that the Environmental Protection Agency “may be unaware of Monsanto’s deceptive authorship practice.” The filing was made public by a federal judge in San Francisco handling the litigation. The judge said last month he’s inclined to require a retired EPA official to submit to questioning by plaintiffs’ lawyers who contend he had a “highly suspicious” relationship with Monsanto.

The former official oversaw a committee that found insufficient evidence to conclude glyphosate causes cancer and left his job last year after his report was leaked to the press. The plaintiff lawyers said in the filing that Monsanto’s toxicology manager and his boss were ghost writers for two of the reports, including one from 2000, that the EPA committee relied on to reach its conclusion. Among the documents unsealed Tuesday was a February 2015 internal e-mail exchange at the company about how to contain costs for a research paper. The plaintiff lawyers cited it to support their claim that the EPA report is unreliable, unlike a report by an international agency that classified glyphosate as a probable carcinogen.

“A less expensive/more palatable approach” is to rely on experts only for some areas of contention, while “we ghost-write the Exposure Tox & Genetox sections,” one Monsanto employee wrote to another. The names of outside scientists could be listed on the publication, “but we would be keeping the cost down by us doing the writing and they would just edit & sign their names so to speak,” according to the e-mail, which goes to on say that’s how Monsanto handled the 2000 study.

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And this is even more unbelievable. After 25 years of Roundup being on the market, not one cancer study has been done.

Monsanto Colluded With EPA, Could Not Prove Roundup Doesn’t Cause Cancer (ZH)

newly unsealed court documents released earlier today seemingly reveal a startling effort on the part of both Monsanto and the EPA to work in concert to kill and/or discredit independent, albeit inconvenient, cancer research conducted by the World Health Organization’s International Agency for Research on Cancer (IARC)….more on this later. But, before we get into the competing studies, here is a brief look at the ‘extensive’ work that Monsanto and the EPA did prior to originally declaring Roundup safe for use (hint: not much). As the excerpt below reveals, the EPA effectively declared Roundup safe for use without even conducting tests on the actual formulation, but instead relying on industry research on just one of the product’s active ingredients.

“EPA’s minimal standards do not require human health data submissions related to the formulated product – here, Roundup. Instead, EPA regulations require only studies and data that relate to the active ingredient, which in the case of Roundup is glyphosate. As a result, the body of scientific literature EPA has reviewed is not only primarily provided by the industry, but it also only considers one part of the chemical ingredients that make up Roundup.” Meanwhile, if that’s not enough for you, Donna Farmer, Monsanto’s lead toxicologist, even admitted in her deposition that she “cannot say that Roundup does not cause cancer” because “[w]e [Monsanto] have not done the carcinogenicity studies with Roundup.”

[..] In early 2015, once it became clear that the World Health Organization’s IARC was working on their own independent study of Roundup, Monsanto immediately launched their own efforts to preemptively discredit any results that might be deemed ‘inconvenient’. That said, Monsanto, the $60 billion behemoth, couldn’t possibly afford the $250,000 bill that would come with conducting a legitimate scientific study led by accredited scientists. Instead, they decided to “ghost-write” key sections of their report themselves and plotted to then have the independent scientists just “sign their names so to speak.”

Finally, when all else fails, you call in those “special favors” in Washington D.C. that you’ve paid handsomely for over the years. And that’s where Jess Rowland, the EPA’s Deputy Division Director for the Office of Chemical Safety and Pollution Prevention and chair of the Agency’s Cancer Assessment Review Committee, comes in to assure you that he’s fully exploiting his role as the “chair of the CARC” to kill any potentially damaging research…”if I can kill this I should get a medal.”

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Even HRW has moved to using the politically correct ‘asylum seekers’. for refugees.

Greece: A Year of Suffering for Asylum Seekers (HRW)

The EU-Turkey deal has trapped thousands of people in abysmal conditions on the Greek islands for the past year, while denying most access to asylum procedures and refugee protection, Human Rights Watch said today. This assessment of conditions is released ahead of the first anniversary of the agreement, signed on March 18, 2016. To carry out the deal, the Greek government has adopted a containment policy, keeping asylum seekers confined to the islands, including in the so-called refugee hotspots and other reception facilities, to facilitate speedy processing and return to Turkey. But continued arrivals, the mismanagement of aid funding, and the slow pace of decision-making, as well as the positive decisions of Greek appeals committees rejecting summary returns to Turkey as unsafe, have led to overcrowded and abysmal conditions on the Greek islands.

These factors, combined with the Greek authorities’ failure to properly identify vulnerable asylum seekers for transfer to the mainland, have resulted in deteriorating security conditions, unnecessary suffering, and despair. “The EU-Turkey deal has been an unmitigated disaster for the very people it is supposed to protect – the asylum seekers trapped in appalling conditions on Greek islands,” said Eva Cossé, Greece researcher at Human Rights Watch. “Greek authorities should ensure that people landing on Greece’s shores have meaningful access to asylum and put an end to the containment policy for asylum seekers. The deal’s flawed assumption that Turkey is a safe country for asylum seekers would allow Greece to transfer them back to Turkey without considering the merits of their asylum claims.

But in the months after the deal was completed, Greek asylum appeals committees have rightly ruled in many instances that Turkey does not provide effective protection for refugees and that asylum applications should be admitted for regular examination on their merits in Greece. Following EU pressure, however, Athens changed the composition of the appeals committees in June, and the restructured committees have ruled in at least 20 cases that Turkey was a safe country, even though it excludes non-Europeans from its refugee protection. That finding was challenged by two Syrian asylum seekers at Greece’s highest court, the Council of State, which heard their case on March 10. No one has yet been forcibly returned to Turkey on the grounds that their asylum application was inadmissible because they could obtain effective protection in Turkey. But if the Council of State turns down the appeal, it could pave the way for mass returns of asylum seekers to Turkey.

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Boy, the sadness…

As Greek Crisis Grinds On, Children Pay Price (K.)

In Greece’s grinding economic crisis, a home for abused children is now taking in those whose parents are struggling to feed them. It is perhaps the darkest sign of economic devastation in Greece, where traditionally strong family ties are starting to crumble after years of depression. A quarter of Greece’s workforce is unemployed and a quarter of its children live in poverty, according to United Nations figures, forcing parents to depend on grandparents for handouts. But pensions too have been cut a dozen times. In Athens, the Model National Nursery, set up a century ago for orphans of war, can hardly keep up with the number of parents turning to it for help. Unable to cover their basic needs, parents leave their children in the home all week.

Iro Zervaki, its head, says at least 40 children are on the waiting list, four times as many as a couple of years ago. The home sleeps 25 in a bare room with rows of beds draped in blue blankets, and lacks the staff and funds to increase capacity, she said. Most places are for abused children. Dozens of other children, all aged two to five, come in daily, but the days away from their parents are long. “We had incidents where children even attempted to leave, to run away, to go to their mother,” Zervaki said. In the buzzing playground, a little girl tugged the social worker’s blouse and yelled: “Miss! When will I go to my mum?” “They can’t tell the days apart so every day they ask: ‘Is it Friday?’” Anthoula Zarmakoupi, the social worker, said. “They know mum will pick them up at the weekend.”

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Feb 222017
 
 February 22, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , ,  4 Responses »
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DPC Launch of battleship Georgia, Bath, Maine, Oct 1904

 


Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back (CP)
Will EU and IMF Finally Offer Light At The End Of The Greek Debt Tunnel? (G.)
France Exiting The Euro Would Be Largest Sovereign Default In History (CNBC)
EU Tax Chief Admits Le Pen Win Would Be The End Of The European Project (CNBC)
Marine Le Pen’s Party’s Headquarters Raided Over ‘Fake Jobs’ Scandal (AFP)
Revised Trump Travel Ban Will Face Legal Hurdles, Too (BBG)
The Cognitive Bias President Trump Understands Better Than You (Wired)
US Car Loans, Delinquencies Hit Record Levels (Q.)
‘Trapped Wealth’ Drives Toronto’s Speculative Real Estate Dilemma
China’s Central Bank To Shine Regulatory Light On Shadow Banking (SCMP)
Tech CEOs Back Call For Basic Income (CNBC)
Monsanto and Bayer’s Chemical Romance: Heroin, Nerve Gas and Agent Orange (AN)
Canada Will Not Halt Illegal Border Crossing Despite Opposition – Trudeau (R.)
Canada To Welcome 1,200 Yezidi Refugees From Iraq (AFP)
Europe Wrote The Book On Demonising Refugees, Long Before Trump Read It (G.)
Bodies Of At Least 74 Migrants Wash Ashore In Western Libya (G.)

 

 

Michael Hudson speaking. “..when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites.”

Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back (CP)

I take issue with one thing that you said. You said the lenders expect Greece to grow. That is not so. There is no way in which the lenders expected Greece to grow. In fact, the IMF was the main lender. It said that Greece cannot grow, under the circumstances that it has now. What do you do in a case where you make a loan to a country, and the entire staff says that there is no way this country can repay the loan? That is what the IMF staff said in 2015. It made the loan anyway – not to Greece, but to pay French banks, German banks and a few other bondholders – not a penny actually went to Greece. The junk economics they used claimed to have a program to make sure the IMF would help manage the Greek economy to enable it to repay. Unfortunately, their secret ingredient was austerity.

Sharmini, for the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy. As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink. So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay.

When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities. This is by now a program that has gone on and on, decade after decade. Now, surprisingly enough, America’s ambassador to the EU, Ted Malloch, has gone on Bloomberg and also on Greek TV telling the Greeks to leave the euro and go it alone. You have Trump’s nominee for the ambassador to the EU saying that the EU zone is dead zone. It’s going to shrink. If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see. Greece is suffering the result of these bad loans. It is already in a longer depression today, a deeper depression, than it was in the 1930s.

[..] when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites. But most of all, they want to set an example of Greece, to show that France, the Netherlands or other countries that may think of withdrawing from the euro – withdraw and decide they would rather grow than be impoverished – that the IMF and EU will do to them just what they’re doing to Greece. So they’re making an example of Greece. They’re going to show that finance rules, and in fact that is why both Trump and Ted Malloch have come up in support of the separatist movement in France. They’re supporting Marine Le Pen, just as Putin is supporting Marine Le Pen. There’s a perception throughout the world that finance really is a mode of warfare.

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Suggestion: lock them up until they have an agreement. Then let Greeks vote on that.

Will EU and IMF Finally Offer Light At The End Of The Greek Debt Tunnel? (G.)

Simon Tilford, deputy director of the Centre for European Reform, a thinktank, said he believed the IMF and eurozone would find a compromise, whereby the fund signed up to the 3.5% target for a limited period of time, as the price of stabilising the eurozone in an election year. “My feeling is they will largely settle for a fig leaf. It will be made to look as if the pace of austerity has been eased, ie that the eurozone will agree that the size of the primary budget surplus will be reassessed at some specified point in the future.” “All we are going to see us another round of extend and pretend.” He added that this would not do anything “significant to alleviate the pressure we see on Greece”. He pointed out that even a primary budget surplus of 1.5% (favoured by the IMF) “would still mean ongoing austerity in Greece”. The IMF’s reforms may also prove politically difficult to sell to a population reeling from nearly eight years in the EU’s bailout regime.

One of the IMF’s key demands is an overhaul of the Greek tax system to ensure more middle-class professionals pay their dues. More than 50% of Greek wage earners do not pay income tax, compared with 8% in the rest of the eurozone. But the low tax take partly reflects the economic collapse that has pushed down wages and squeezed people out of regular work. Reforming pensions, another IMF priority, may also run into trouble. The fund wants to rein in “extremely generous” Greek pensions that absorb 11% of national income. But Greek pensions have already been slashed since 2010, with 43% of pensioners living on €660 a month, compared with an average annual income of €20,000 for over-65s in other eurozone countries, according to government figures. Many Greek pensioners are also supporting unemployed children and grandchildren, as other benefits have been cut. With these politically tough reforms ahead, the light at the end of tunnel looks dim and distant. “Greeks are facing ongoing austerity into the foreseeable future,” Tilford says.

Read more …

Sorry, but fearmongering no longer works.

France Exiting The Euro Would Be Largest Sovereign Default In History (CNBC)

A few days ago, David Rachline of the far-right National Front party in France said that “the debt of France is about €2 trillion, about €1.7 trillion are issued under French law, which means that it can be re-denominated.” The economic program of the National Front specifically calls for the exit of the euro and the creation of a new currency, the French franc, which would be “closely” linked to the euro while allowing the government to undertake “competitive devaluations” making the transition in an “orderly way”. There is only one problem. It does not work. There is no “orderly exit” from the euro. It is an oxymoron. This would be the largest credit event in history and would create a massive contagion effect throughout the euro zone. The euro, obviously, would suffer from the break-up risk, so the fallacy of the “closely linked” second currency is simply a joke.

Both would collapse in tandem. The risk is already evident. The French-German yield spread has reached the highest level since 2012 despite the ECB’s massive quantitative easing. The ECB has bought more than €255 billion of French bonds. This mirage of an “orderly exit” ignores that the French financial system, which carries assets more than three times the size of France´s GDP, would be severely damaged from the impact of the credit event. A financial system that already suffers from weak net income margins and more than 160 billion euros in non-performing loans, would collapse as these bad loans escalate and the losses in the banks’ bond portfolios eat away their core capital. This would inevitably lead to Greek-style capital controls and bank runs as the entities would lose liquidity support from the ECB.

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“I think the rise of Le Pen is a result of the disappointment in other candidates..” Eh, no, it’s disappointment in the EU.

EU Tax Chief Admits Le Pen Win Would Be The End Of The European Project (CNBC)

A win for far-right presidential candidate Marine Le Pen would spell the end of the EU – but the French are not crazy enough to let that happen, insists European Commissioner Pierre Moscovici. “I’m confident. I know my citizens and my compatriots well and know they are not going to elect a candidate who is proposing France exiting (Europe). That would be the end of the European project,” Moscovici, who is European Commissioner for Economic and Financial Affairs, told CNBC Monday. In a clear nod to the rising populist movements in Europe, the election of U.S. President Donald Trump and the U.K.’s EU referendum, Moscovici, said he believes common sense will prevail as France goes to the polls in the two-round election this year. “I cannot imagine 50% of the French are crazy enough to vote for her,” he said.

“I’m quite convinced that she cannot win … she never even ever won a regional election in France – never ever.” Moscovici appealed, however, to the other presidential candidates, who include Independent Emmanuel Macron and Republican Francois Fillon, to prove themselves to the electorate and, ultimately, make a stronger case for remaining in the EU. “The other candidates need to have a stronger campaign and show that they are credible to propose a future that is likeable for the French. “I think the rise of Le Pen is a result of the disappointment in other candidates, so I urge them to make a strong proposal for France, and as well for Europe, and for France in Europe.”

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It’s amazing that they haven’t tried more of these tactics to make her look bad (they will, though). “For the second time, a raid took place at the same offices, over the same allegations, which confirms that the first raid amounted to nothing..”

Marine Le Pen’s Party’s Headquarters Raided Over ‘Fake Jobs’ Scandal (AFP)

French investigators probing an alleged fake jobs scam by the far-right National Front (FN) raided the group’s headquarters outside Paris on Monday, the party said. The raid is the second in a year by investigators trying to determine whether the FN used European Parliament funds to pay for 20 assistants presented as parliamentary aides while continuing to work for the party elsewhere. “For the second time, a raid took place at the same offices, over the same allegations, which confirms that the first raid amounted to nothing,” the party said in a statement. The group accused investigators acting for the Paris prosecutor’s office of a “media operation” designed to disrupt the presidential campaign of FN leader Marine Le Pen. Le Pen, who has led the anti-EU party since 2011, is a member of the European Parliament which accuses her of defrauding it of nearly €340,000.

She is riding high in polls ahead of the two-stage presidential election on April 23 and May 7 election, and has denied the claims, describing the investigation as a vendetta against her. According to a report by the EU’s anti-fraud office OLAF, leaked last week, the parliament paid out 41,554 euros towards a contract for Le Pen’s bodyguard Thierry Legier who was falsely presented as a parliamentary assistant. The allegations against Le Pen have been drowned out by a fake jobs scandal engulfing her conservative rival Francois Fillon. Fillon’s campaign has been adrift since it emerged that his wife netted at least 680,000 euros for a suspected fake job as a parliamentary assistant over a period spanning 15 years. He has denied the allegations. Polls currently show Le Pen winning the first round of the election, but failing to garner the more than 50% of voters needed for victory in the second round.

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I still think it’s a good thing the US is having this conversation. But the upcoming ugliness is terrible. You need to always take care of individual people first.

Revised Trump Travel Ban Will Face Legal Hurdles, Too (BBG)

President Donald Trump is poised to announce a redrafted executive order on immigration from seven majority-Muslim countries. Will it pass legal muster? Or will the courts once again thwart the president’s will? Early reports suggest that the new order will be drafted to avoid many of the legal problems that were posed by the earlier version, and to make judicial review harder to obtain. But the crucial question is whether the courts will consider the political context in which the order was drafted to conclude that it is still a Muslim ban under another name. Whether the court should do so turns out to be a close legal question. But Supreme Court precedent suggests that it should – in which case the new order could well be blocked like the original. The expected fixes in the new order would improve the administration’s legal position.

For one thing, the new order is expected to exclude legal permanent residents with green cards, who were included in the original order according to the administration’s early guidance, then excluded by a later interpretation. In its decision upholding a temporary restraining order by a federal judge in Seattle against enforcement of the first travel ban, the U.S. Court of Appeals for the Ninth Circuit treated the executive order as covering green card holders. That mattered because, as the court said, green card holders have a stronger constitutional claim to be covered by the due-process clause of the Constitution than do other visa holders. By excluding green card holders, the new order would force plaintiffs to identify different people who are harmed by the order.

Another smart revision would be to omit the provision that said religious minorities in the seven countries – which is to say, almost certainly Christians – would be given preferential treatment when refugees are once again let into the U.S. That provision was the only part of the text that could be used to suggest that the order unconstitutionally favored one religion, Christianity, over another, Islam. The Trump administration would also be smart to phase in the new order to avoid trapping visa holders who are in transit, which creates sympathetic plaintiffs detained at the airports. But that’s not the end of the game, constitutionally speaking. Even if due process is omitted from the case entirely, plaintiffs could still allege once more that the order discriminates on the basis of religion in violation of the free-exercise and establishment clauses of the First Amendment.

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Paint a strong picture of something that’s not the norm.

The Cognitive Bias President Trump Understands Better Than You (Wired)

Americans born in the United States are more murderous than undocumented immigrants. Fighting words, I know. But why? After all, that’s just what the numbers say. Still, be honest: you wouldn’t linger over a story with that headline. It’s “dog bites man.” It’s the norm. And norms aren’t news. Instead, you’ll see two dozen reporters flock to a single burning trash can during an Inauguration protest. The aberrant occurrence is the story you’ll read and the picture you’ll see. It’s news because it’s new. The problem here is not just that this singling out creates a distorted, fish-eye lens version of what’s really happening. It’s that the human psyche is predisposed to take an aberration—what linguist George Lakoff has called the “salient exemplar”—and conflate it with the norm.

This cognitive bias itself isn’t new. But in a media environment driven by clicks, where politicians can bypass journalistic filters entirely to deliver themselves straight to citizens, it’s newly exploitable. You know who else isn’t as likely to commit murders in the US as native-born citizens? Refugees. Or immigrants from the seven countries singled out in President Trump’s shot-down travel ban. Or for that matter, immigrants at all. According to numerous studies, increased immigration correlates with lower violent crime rates in a community. Yet next week, Trump is promising a revised travel ban in the name of safety. In the past, the president has also promised to publish a weekly list of crimes committed by undocumented immigrants. What he hasn’t promised to publish is a list of crimes committed by Americans. That’s not news.

But his list is likely to create the false impression that undocumented immigrants are especially prone to commit violent crimes—an impression in which the human brain is complicit. Lakoff, a University of California, Berkeley linguist and well-known Democratic activist, cites Ronald Reagan’s “welfare queen” as the signature “salient exemplar.” Reagan’s straw woman—a minority mother who uses her government money on fancy bling rather than on food for her family—became an effective rhetorical bludgeon to curb public assistance programs even though the vast majority of recipients didn’t abuse the system in that way. The image became iconic, even though it was the exception rather than the rule. Psychologists call this bias the “availability heuristic,” an effect Trump has sought to exploit since the launch of his presidential campaign, when he referred to undocumented Mexican immigrants as rapists.

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Slaves.

US Car Loans, Delinquencies Hit Record Levels (Q.)

Last year, Americans bought more new cars than ever before. Given that auto sales make up around a fifth of all retail spending, 2016’s banner year is being hailed as a sign of burgeoning consumer confidence across the country. But something else is revving up, too: auto loans. The US closed out 2016 with just shy of $1.2 trillion in outstanding auto loan debt, a rise of 9% from the previous year and 13% above the pre-crisis peak in 2005, in inflation-adjusted terms. The number of cars and trucks on the road, meanwhile, rose by only 1.5% last year, and 9% since 2005, according to US transportation department data.

Total household debt levels are now a hair under their 2008 peak, with some of the fastest growth in recent years down to auto loans. If America’s car-buying bonanza is being fueled by cheap credit, is consumer sentiment really as robust as it might seem? And is it sustainable? There are reasons to wonder. While car purchases and financing have leapt since 2009, wages have picked up only slightly over the same period. Meanwhile, the average loan taken out to buy a new car has risen steadily.

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TO learned nothing from Vancouver.

‘Trapped Wealth’ Drives Toronto’s Speculative Real Estate Dilemma

Toronto’s housing boom is unrelenting. Prices in Canada’s largest city surged more than 20% over the past year, the fastest pace in three decades, data released last week show. Some of the city’s neighboring towns are posting even bigger gains. It’s become a matter of considerable alarm. Stability is one concern: if the market tumbles, so will Canada’s economy. Pricier real estate also drives away less-affluent, younger people and boosts the cost of doing business, eroding competitiveness. “I don’t think anybody is cheering,” said Doug Porter, the Toronto-based chief economist of Bank of Montreal, who used the dreaded “bubble” word last week to describe the market. “I don’t see who benefits other than real estate agents. It’s trapped wealth.”

So, what’s driving the boom? The housing industry – builders and brokers – claim lack of supply is the main culprit. Others, Porter included, see demand as the problem. Lately, evidence is mounting that speculation is behind the jump. Builders say they are being held back by everything from regulations to prohibitive taxes and land restrictions. Ontario’s greenbelt region around Toronto is one example. This is no doubt true for one segment of the market: single-detached homes. Just over one-quarter of the 176,000 homes built in Toronto over the past five years were single-detached. That’s well down from the 1990s, when they accounted for almost half of all construction. Supply constraints don’t explain the price gains for condominiums, which have seen a flood of new completions. The average sale price of a condo is up 15% year-over-year. That’s after builders completed more than 54,000 apartment units over the past two years, easily a record supply for Toronto.

Canada’s recent census results, released this month, also provide some evidence against the shortage argument. Occupied private dwellings have risen by 7.2% in Toronto over the past five years, faster than population growth. The census, however, doesn’t say what type of homes are being built. Plus, there is also the recent puzzle of disappearing listings. New listings in Toronto fell 17% in January from a month earlier, the biggest one-month decline since 2002. Sales as a share of new listings rose above 90%, smashing the record. Is this a sign of a bubble? Are sellers holding off putting their homes on the market to see where prices settle? Has supply become so tight that potential sellers are pulling out of the market altogether since they have nowhere to move to? “The market is thinning out basically, you know what that means,” said David Madani, an economist at Capital Economics in Toronto, said in a telephone interview.

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They keep on announcing this. And the shadow system keeps growing, rapidly.

China’s Central Bank To Shine Regulatory Light On Shadow Banking (SCMP)

China’s financial watchdogs are considering casting a huge new regulatory net over the country’s vast shadow banking sector. The central bank has spearheaded the drafting of new regulations to tame China’s 60 trillion yuan “asset management” industry. According to people who have seen the draft regulations, the rules would bring the various kinds of asset management products and investment schemes offered by all kinds of financial institutions under the one regulatory umbrella. Oversight for the flourishing sector is now split between the securities, banking and insurance regulators. China Minsheng Banking chief analyst Wen Bin said regulatory standards differed between watchdogs and a unified system would help regulators cut systemic risks and financial leverage.

“China’s financial innovation has grown quickly in the past few years and the blending of financial operations through asset management products has challenged the fragmented regulatory system,” Wen said. Mainland financial institutions, including banks, mutual fund firms, brokerages and insurance companies, have rushed to set up asset management schemes, raising funds from clients and then investing in a range of markets and projects. These schemes are usually beyond the watch of regulators and harbour growing risks for the country’s financial stability, something the leadership is determined to eliminate ahead of a big power reshuffle due late this year. If rolled out, the rules would ban financial institutions from promising clients a minimum or fixed return from their products. Institutions would have to contribute 10% of their management fees to a risk reserve fund, and funds in one “asset management product” could not be used in another, except in authorised cases.

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These people really think they will rule the world. But what happens when the economy collapses? When the S&P falls 50%+? Are robots going to grow your food?

Tech CEOs Back Call For Basic Income (CNBC)

It’s 2067 and robots have wiped out millions of jobs, AI is rampant, and unemployment is on the rise. Technology companies and CEOs have become public enemy number one. This portrayal of the future is one tech executives are keen to avoid and has driven a growing chorus to support the idea of a universal basic income (UBI). “There is going to be backlash when it comes to jobs,” Sayantan Ghosal, an economics professor at the University of Glasgow who has written about UBI, told CNBC by phone. U.S. technology firms have been investing heavily in research and development of AI. Tesla with driverless cars, Amazon with workerless shops, and the likes of Google developing smarter-than-human software. Even Sergey Brin, the co-founder of Google, recently stated that he was “surprised” by the pace of AI developments.

Over the past few months, major technology executives have come out in support of a UBI. In an interview with CNBC in November, Tesla Chief Executive Elon Musk backed the idea. “There is a pretty good chance we end up with a universal basic income, or something like that, due to automation,” Musk said. He reiterated his thoughts last week at the World Government Summit in Dubai, in which he said a UBI would be “necessary”. Marc Benioff, chief executive of Salesforce, warned of AI creating “digital refugees”. At the World Economic Forum (WEF) in Davos in January, Benioff said there was “no clear path forward” on how to deal with the job displacement that will occur. Other tech executives talked up the industry’s responsibility. “We should do our very best to train people for the jobs of the future,” Microsoft CEO Satya Nadella said at Davos.

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The dark side of the man.

Monsanto and Bayer’s Chemical Romance: Heroin, Nerve Gas and Agent Orange (AN)

Fifty years ago, the Monsanto and Bayer corporations were forced to separate in order to avoid violating basic antitrust regulations. U.S. courts declared that the two chemical giants, when operating together under the name Mobay, stymied market competition and comprised a monopoly that could not stand. But that was then. Today, under a much different regulatory climate that all but rubberstamps such corporate monopolies, the Germany-based Bayer’s $66 billion offer to purchase Monsanto is being fast-tracked by U.S. regulators. The proposed mega-merger, or re-marriage, will result in nearly 30% of all worldwide pesticide and seed sales being controlled by the new partnership. The merger faces federal antitrust scrutiny before it can be finalized, a process currently underway.

It already passed its first test in January when it got the blessings of President-elect Donald Trump, who held an exclusive meeting with the CEOs of both corporations and emerged—not surprisingly—with his thumbs up. Trump’s exclusive meeting with these corporate titans came well before he had even bothered to name his selection to lead the U.S. Department of Agriculture, a not-so-subtle acknowledgement of where the true power lies when it comes to the politics of food. In addition to market control, Bayer’s proposed purchase is aimed at steadying a reeling Monsanto, which is mired in turmoil from a long list of objectionable activities involving toxic pesticides and its increasingly unpopular genetically-modified organisms.

Ironically, given its own sullied past that includes Nazi sympathizing and marketing heroin-laced cough syrup for children, Bayer is being portrayed as the one riding to the rescue of Monsanto’s poor public image. If anything, it’s a sign of just how low the Monsanto brand and reputation has plummeted, forcing it to try and improve its image by sidling up to Bayer, a participant in some of the cruelest crimes in human history. While these types of mergers are nothing new to the agribusiness sector, where consolidation has been king for decades, last year’s proposed mega-mergers shattered the record for such deals. There were $125 billion worth of proposed agri-chemical mergers in 2016, nearly doubling the previous record of $65 billion in 2010. In addition to the proposed Bayer/Monsanto deal, there are also pending mergers between Dow and DuPont as well as Syngenta and the Chinese National Chemical Corporation.

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Canada continues to set the standard. But protests begin.

Canada Will Not Halt Illegal Border Crossing Despite Opposition – Trudeau (R.)

Canada will continue to accept asylum seekers crossing illegally from the United States but will ensure security measures are taken to keep Canadians safe, Canadian Prime Minister Justin Trudeau said on Tuesday. The number of would-be refugees crossing into Canada at isolated and unguarded border crossings has increased in recent weeks amid fears that U.S. President Donald Trump will crack down on illegal immigrants, and photos of smiling Canadian police greeting the migrants have gone viral. Opposition Conservatives want Trudeau’s center-left Liberal government to stem the flow of asylum seekers from the United States because of security fears and a lack of resources to deal with them.

“One of the reasons why Canada remains an open country is Canadians trust our immigration system and the integrity of our borders and the help we provide people who are looking for safety,” Trudeau told parliament. “We will continue to strike that balance between a rigorous system and accepting people who need help.” Immigration Minister Ahmed Hussen also said Canada would continue to honor the Canada-U.S. Safe Third Country Agreement, which requires it to turn back refugees if they make asylum claims at Canadian border crossings with the United States. Refugee advocates have argued this drives asylum seekers to cross illegally at isolated locations, risking their lives in frigid weather. Amnesty International and other groups are pressuring the Canadian government to abandon the agreement, arguing the United States is not safe for refugees.

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Very smart move. They will contribute a lot to the country. Stong, hardened, intelligent and grateful.

Canada To Welcome 1,200 Yezidi Refugees From Iraq (AFP)

Canada will resettle 1,200 Yezidi refugees who faced persecution by the Islamic State group, the immigration minister said Tuesday. Some 400 have already been airlifted to this country. “Our operation is under way and individual survivors of Daesh have been arriving in Canada for resettlement in the last number of months and this began on October 25, 2016,” Immigration Minister Ahmed Hussen, using an Arabic name for the Islamic State. “Our government will resettle approximately 1,200 highly vulnerable survivors of Daesh and their family members in Canada,” he added. The initiative follows Parliament’s resolution last fall to take in Yezidis facing “genocide” in Iraq at the hands of the Islamic extremist IS group.

The original aim was to bring over women and girls at risk, but Hussen told a news conference that Ottawa had learned that “Daesh has also deliberately targeted boys and as such we are helping to resettle all child survivors of Daesh.” Hussen said the migrants are arriving on commercial flights at a “controlled pace” to avoid overwhelming Canada’s refugee system. The operation is expected to cost Can$28 million (US$21 million). Since coming to power in late 2015, Prime Minister Justin Trudeau’s government has resettled 40,000 Syrian refugees. The Yezidis taken in have been subjected to comprehensive security checks and medical examinations, Hussen said. Yezidis are a Kurdish-speaking minority with a pre-Islamic religion thought partly to have its origin in the Zoroastrianism of ancient Persia. They are neither Arab nor Muslim and IS considers them polytheistic heretics.

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And don’t you forget it.

Europe Wrote The Book On Demonising Refugees, Long Before Trump Read It (G.)

It has become an article of faith among liberals that Donald Trump is the world’s biggest enemy to refugees and Muslims, while the EU somehow offers them a safe harbour. After all, with the words “We can do it” Angela Merkel invited a million Syrian refugees into Germany, while Trump’s travel ban has slammed shut America’s door to some of the world’s most vulnerable displaced people. In today’s liberal mindset, it is Brexit that has stirred up hostility against migrants, while the EU is a bulwark of civilised values, protecting refugees from the threat of a resurgent far right. If you were a migrant in a leaking boat approaching Lesbos, however, the treatment you would receive from Frontex, the EU’s border patrol, would be no less hostile than anything Trump could inflict.

In Tunis last week a video showed Tunisian border police whipping cowering migrants from elsewhere in north Africa. This brutality was EU-sponsored. Like Libya, Morocco, Turkey and Egypt, Tunisia receives funding and training from Brussels through the European neighbourhood policy (ENP). Under a broader framework of “development” and “reforms”, these ENP countries serve as a buffer zone, making sure that refugees are intercepted and turned back – or, in Libya, locked up and tortured in refugees’ prisons – before these desperate people can reach the EU’s shores. The idea that the Europe of Merkel and Theresa May is more welcoming to refugees than Trump’s America simply isn’t borne out by the facts. The EU’s deal with Turkey, condemned by humanitarian agencies, ensures that refugees arriving in Greece – regardless of their point of departure – will be sent to Turkey.

Turkey now has the largest refugee population in the world, at about 3 million people. This month Britain reneged on its promise to admit 3,000 unaccompanied child refugees. Concerned that the Balkan route is a weak link into Europe, Austria has mobilised aspiring EU members including Macedonia, Serbia and Kosovo into a Balkan frontier defence project to fortify the refugee entry points of the “Balkan corridor”. Last year Macedonian police used tear gas, grenades and stun guns against Iraqis and Syrians attempting to get through a razor-wire fence and into the country.

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“..traffickers came and removed the engine from the boat and left the craft adrift..”

Bodies Of At Least 74 Migrants Wash Ashore In Western Libya (G.)

The bodies of at least 74 people, believed to be migrants, have washed ashore on the Libyan coast in the latest tragedy at sea for people fleeing to Europe to escape war and poverty. The Libyan Red Crescent said on Tuesday the bodies had been found the previous morning on the coast of the city of Zawiya, and aid workers had spent six hours recovering them, with more dead believed to be in the vicinity. A spokesman for the organisation, Mohammed al-Misrati, told the Associated Press that a torn rubber boat was found nearby and it was likely that more migrants had drowned in the incident, as such vessels usually carry about 120 people.

The Zawiya coastguard later posted a video that showed the migrants’ boat with no engine. Joel Millman, a spokesman for the International Organization for Migration (IOM), told Reuters a local staff member had reported that “traffickers came and removed the engine from the boat and left the craft adrift”. “This is not a only horrible number of deaths in one incident but it strikes us as something that we haven’t really seen much of, which is either deliberate punishment or murder of migrants,” Millman said.

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Sep 142016
 
 September 14, 2016  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »
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LoC Old Patent Office model room, Washington DC 1865


The US Consumer Will Cause The Next Crisis (Vallee)
Shares Crumble As Oil Falls, Bond Yields Soar On Stimulus Doubts (R.)
How ‘Zombie’ Oil Companies Stay Alive in Life-or-Death Debt Markets (BBG)
Negative Rates May Do More Harm Than Good (BBG)
Why Democrats in Western Pennsylvania Are Voting Trump (Atlantic)
How Much It ‘Costs’ To Get An Ambassadorship (ZH)
Buffett Loses $1.4 Billion as Wells Fargo Tumbles on Scandal (BBG)
Hanjin Brings One of World’s Busiest Shipping Terminals to Near Standstill (BBG)
IMF’s Lagarde Slams Globalization (ZH)
Bayer To Announce Acquisition Of Monsanto On Wednesday (R.)
Hillary’s 9/11 “Medical Episode” Looks More Like Parkinson’s Than Pneumonia (ZH)
An ‘Amicable Divorce’ For The Eurozone? (Varoufakis)
Expel Hungary From EU For Hostility To Refugees, Says Luxembourg (G.)
Greece Has Exposed The NGO Aid Community’s Failures (G.)

 

 

If you still need this spelled out, this is quite good. Lots of graphs too.

The US Consumer Will Cause The Next Crisis (Vallee)

The market is materially mispricing the strength of the US consumer whose weakness will lead the US economy into a recession in Q117. The divergence is a result of the top 40% of earners who have accrued 84% of all new income and only 34% of new debt since 2013. This strength has driven headline sales figures and accounted for nearly all deleveraging since the financial crisis. That said, the market has extrapolated the health of top 40% to all consumers, as it corresponds to the current narrative of low unemployment and rising average hourly earnings leading to higher rates of consumption and balance sheet strength. Due to this misconception, we believe the market has overlooked the deterioration of lower and middle income households who have historically preceded the fall of the top. We see this disparity being corrected over the next 6-9 months, as a series of disappointing retail sales and consumption figures lead market participants to the realization that their thesis is imperfect.

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Markets won’t get quiet again at least before November 8, and more likely 2017.

Shares Crumble As Oil Falls, Bond Yields Soar On Stimulus Doubts (R.)

Asian stocks fell to fresh six-week lows on Wednesday and the greenback stood strong against a broad swathe of currencies including the Japanese yen as concerns grew about the fading impact of the world’s major central banks to stimulate growth. Losses in stock markets across Asia deepened as rising bond yields and soaring volatility forced investors to unwind positions. The MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.2%, extending its decline since late last week to 4.2%. Within the region, Japan’s Nikkei led losers with a 0.3% decline as uncertainty grew ahead of a central bank policy meeting next week. The BOJ plans to make its controversial negative interest rate policy the centerpiece of future monetary easing, promising to weigh further rate cuts as expansions to asset buying near their limits, the Nikkei newspaper reported on Wednesday.

“The moves in developed market fixed-income, which are largely behind the volatility, have stemmed from Japan and the potential changes in monetary policy,” said Chris Weston at IG Markets. “Secondly, some of the biggest systematic funds have had to alter their portfolios. The rest of the market participants have had to simply react.” Stock markets have come under pressure as investors cut positions after large inflows in recent weeks betting on a long period of low volatility and suppressed bond yields. Inflows into emerging market equity funds amounted to $24 billion dollars over the past 10 weeks, the highest on record according to Bank of America Merrill Lynch flow data. An index of market volatility soared to its highest level in three months.

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The refusal to restructure will come back to bite the US.

How ‘Zombie’ Oil Companies Stay Alive in Life-or-Death Debt Markets (BBG)

Beneath the surge in corporate defaults lies a surge in distressed exchanges. Such exchanges – defined by Moody’s as when a troubled company offers its lenders new or restructured debt, securities, cash, or other assets, that amount to a smaller commitment than the original IOU – could have big implications for debt markets as they stretch out the current credit cycle and result in even greater losses for investors. The trend is most apparent in the energy sector where oil and gas companies have been deploying a raft of creative measures to stay afloat amid lower crude prices that have crimped profits and threatened their survival. Such measures have included swapping unsecured debt for secured, offering discounted buybacks of existing debt, or junior-lien debt that gets paid after other creditors.

“While these [distressed exchanges] do result in some level of loss to bondholders, unlike missed payments and bankruptcy filings the bonds typically remain eligible for inclusion in the high-yield index,” Kai Gilkes and Anneli Lefranc, analysts at CreditSights, wrote in new research. They note that the 12-month default rate rose to 7.2% for U.S. junk-rated bonds in August. That’s an increase of 30 basis points compared to July’s default rate of 6.9%, spurred on by six corporate defaults last months – including a trio of U.S. energy companies. “Distressed exchanges have contributed greatly to the rise in default rates,” they add, with 38 of the 75 U.S. high-yield defaults over the last 12 months coming from such deals. The degree to which distressed exchanges are propelling defaults higher is apparent in the below CreditSights chart, which shows the U.S. and European default rate excluding the swaps.

The question now will be whether such exchanges actually help companies improve their balance sheets and reduce their debt long enough to enjoy a recovery in oil prices or the market’s appetite for energy-related assets. If they don’t, then truly troubled companies will only have succeeded in putting off the inevitable and their lenders risk suffering greater losses further down the line.

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You think? Again, there’s one solution only: take away central banks’ powers.

Negative Rates May Do More Harm Than Good (BBG)

The negative interest rate strategy that Japan and Europe’s central banks have embraced may do more harm than good, according to John Taylor, the creator of an eponymous rule for guiding monetary policy. “What we are learning is that, in my view, negative rates may not have helped and may have hurt,” Taylor, a professor at Stanford University in California, said in a telephone interview this week. “It could be counterproductive, no question.” A potential problem is that the strategy of charging banks for a portion of their reserves squeezes the availability of credit. Bank of Japan Governor Haruhiko Kuroda last week rejected the idea that the negative-rate policy adopted in January had hurt banks’ “intermediary functions” – their ability to channel savings to lending.

Even so, he acknowledged that the move had spurred a powerful drop in long-term yields. That, in turn, hurt earnings on savings including pensions, generating some risk for the “sustainability of the financial function in a broad sense.” “The macro models we have don’t really incorporate that financial-sector behavior, so it’s hard to give a magnitude to it,” Taylor said. While some companies may boost investment, others could pare it back, and saving rates could be affected, said Taylor, who served as the U.S. Treasury’s top international official from 2001 to 2005.

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Joe Bageant meets Brexit. Excellent from the Atlantic. Nothing learned from Project Fear that helped shape Brexit.

Why Democrats in Western Pennsylvania Are Voting Trump (Atlantic)

Lee Supply is a third-generation family-owned business, operating since 1954. “My dad started it servicing the coal industry,” Lee said. Nestled in a glen between the rolling hills of the Alleghenies and the Monongahela River, the company bustles with workers moving about the plant. Today, it sells pipe and pumping systems used in everything from traditional applications, such as water distribution and sewage treatment, to highly specialized applications such as horizontal directional drilling, slip lining, leachate and methane collection, gas extraction, and water transport. One man wearing a florescent-yellow Lee Supply safety shirt, with grease smudged on his arms and face, registered to vote for the first time in his 61 years.

His eyes watered as he put down the pen. “This is about me,” he said, declining to give his name. “I am doing this for me, my hometown.” “Sheik” Shannon, 55, a 17-year employee at the company, believes the political class fundamentally misunderstands what this election cycle is all about. “They think it is the celebrity of Trump. It’s not. They think we’ve all gone mad. We’ve not,” he said, emphasizing each sentence with passion. “Communities like where I live do not need to shutter and die. We lead solid, honest lives, we work hard, we play hard, we pray hard … we love where we are from, and we feel a duty to make sure that it is here for generations.” Paul Sracic, a Youngstown State University political scientist, believes there are two categories of voters rallying to support Trump.

“First, there are people who don’t normally vote,” he said. “Nearly half the voting-age population was either not registered to vote, or was registered and decided not to vote in 2012. And if even 10% of that group was to show up and vote this year, it could easily change the outcome in the important swing states.” Sracic—who frankly admits he obsesses over opinion polls—wonders whether these voters are even represented in the endless presidential surveys: “If people aren’t registered voters, they won’t be picked up by most polls. If they are registered voters but don’t normally vote, they may be eliminated by ‘likely voter’ screens pollsters use.” Romney lost Pennsylvania in 2012 by about 300,000 votes out of about 5.5 million cast; in Ohio, he lost by less than 200,000. “So bringing new people in can make a difference,” Sracic said.

Potentially more significant, however, are those voters who “flip”—Sracic’s second category. “Remember,” he said, “taking a Democratic voter and having them vote Republican is both a +1 and a -1. In other words, if Romney lost Pennsylvania by 300,000 voters, all you have to do [this time] is flip slightly more than 150,000 votes.” Between Ohio and Pennsylvania, if approximately 225,000 voters (out of the 11 million who are expected on Election Day) switch parties, they could tip the entire election.

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For names, amounts and photos click the link.

How Much It ‘Costs’ To Get An Ambassadorship (ZH)

After addressing a cybersecuirty conference in London, notorious hacker ‘Guccifer’ shared over 500Mb of documents detailing 100,000 DNC donors contact info and donations. A large number of the largest donors received senior diplomatic or political positions following thge donations, ranging from UK Ambassador to Assistant Attorney General. The DNC released a statement pre-emptively claiming that this was the work of Russia (and reigniting Trump’s links to Putin). Probably just coincidence… The dcoments contained detailed lists of 100,000 alledged donors, addresses, and phone numbers, and well as amounts donated…

[..] The DNC responded to the latest hack claim Tuesday through its Interim Chair Donna Brazile, who stated that the “DNC is the victim of a crime,” which she blamed on “Russian state-sponsored agents,” while also cautioning that the hacked documents were still being authenticated by the DNC legal team, as “it is common for Russian hackers to forge documents.” DNC pre-emptively published a statement in an attempt to change the narrative… [..] Once again blaming Russia (and Trump)… As RT reports, it’s not the first time that the name of Vladimir Putin has been brought up in the US presidential campaign, but this time the US president used this “argument” while openly campaigning for Clinton against Trump. The situation has become “really ludicrous and it borders on the ridiculous,” believes Gregory R. Copley, editor of Defense & Foreign Affairs.

“In my 50 odd years covering the US government, I have never seen this level of partisanship within the administration where a sitting president actually regards the opposition party as the enemy of the state,” Copley told RT. [..] The US establishment is “sacrificing key bilateral relationships in order to win [a] domestic election,” believes Copley. He added that neither Obama nor Clinton are interested in unifying the country, but they are rather “interested in winning and engaging in what modern democracy seems to have become – the tyranny of the marginal majority over the marginal minority.”

“When you think about the number of times that the Clinton campaign has brought up President Putin and the alleged Russian hacking of Hillary Clinton’s service, it makes you wonder just how desperate they are,” Copley noted. “President Obama has lost literally all prestige in an international community…with the loss of prestige he has become desperate.”

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Is there anything more boring in the world than billionaires?

Buffett Loses $1.4 Billion as Wells Fargo Tumbles on Scandal (BBG)

Warren Buffett had $1.4 billion wiped from his fortune Tuesday after Wells Fargo fell 3.3% as the fallout continued from revelations that bank employees had opened more than 2 million accounts without clients’ approval. Berkshire Hathaway, the lender’s biggest shareholder, fell 2%, causing the 86-year-old’s fortune to drop more than anyone else’s on the Bloomberg Billionaires Index. The U.S. investor is the world’s fourth-richest person with a net worth of $65.8 billion. Tuesday’s decline came amid a global equity sell off that has wiped out $93 billion from the world’s 400 biggest fortunes since Friday. The billionaires shed $37.3 billion Tuesday as stocks and bonds both slumped, and oil sank after the IEA’s prediction that a glut will extend into next year.

The world’s second-richest person, Inditex founder Amancio Ortega, leads the 400 richest people with a decline of $3.3 billion since the sell off began, according to the index. Microsoft co-founder Bill Gates, the world’s richest person with $87.3 billion, has lost $2.4 billion. Amazon founder Jeff Bezos, the world’s third-richest person with $66.2 billion, has shed $1.9 billion. Buffett, whose fortune is mostly in Berkshire shares, has lost $1.6 billion in the sell off. Wells Fargo was overtaken by JPMorgan as the world’s most valuable bank on Tuesday. It has fallen 5.9% since Thursday, when the Consumer Financial Protection Bureau announced fines stemming from the fake accounts. The drop since Thursday compares with a 2.5% fall for the Standard & Poor’s 500 Index.

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Good example of why systems need redundancy, but don’t have it.

Hanjin Brings One of World’s Busiest Shipping Terminals to Near Standstill (BBG)

The Hanjin Shipping Co. terminal at South Korea’s largest port used to be one of the world’s busiest. Dozens of container carriers would line up to ferry boxes to and from the giant cranes that loaded and unloaded the world’s biggest ships.
Last week the terminal, as big as 100 football fields, came to a virtual standstill. In front of hundreds of containers stacked four-high, Seo Seong Deok, a 35-year-old driver of the port tractors, wondered if he would ever get to move them again. “We have no work now,” said Seo, one of about 1,000 tractor drivers without work. “This Hanjin terminal used to be always bustling with trucks and ships. Now, I heard some fresh food such as mango or banana is rotting in Hanjin container ships drifting somewhere in the ocean.”

Since the world’s seventh-largest container line filed for protection from creditors on Aug. 31, the port has been paralyzed as unshipped boxes piled up. The collapse has come at the worst time: September is peak season for the industry as manufacturers look to stock store shelves for holidays like Thanksgiving and Christmas. Port officials say cargo owners have been scrambling to find alternative ways to send goods. The port in Busan, on the tip of the Korean peninsula about 200 miles southeast of Seoul, handles more than 70% of the containers that enter or leave South Korea, according to local government data. Until last week, Hanjin alone accounted for about 10% of goods that flow through its wharves. “The biggest concern is Busan losing its longtime reputation as a maritime hub in Asia,” said Kim Kyu-Ok, the city’s vice mayor for economic affairs. Hanjin’s collapse “could make ship owners shun Busan.”

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A good take from Tyler: turn Christine on her head.

IMF’s Lagarde Slams Globalization (ZH)

Two months after consultancy giant McKinsey dramatically flip-flopped on its long held position of praising globalization, cautioning that – as Britain’s vote to exit the European Union exemplified what happens when people feel like the system is letting them down – the system is on the verge of “explosion”, comparing the buildup of resentment over globalization to a dangerous natural gas leak in a row of houses, today it was the IMF’s turn. In a speech titled “Making Globalisation Work For All”, IMF managing director Chrstine Lagarde became the latest in a growing chorus of senior policymakers urging governments to take heed of rising discontent and economic insecurity in the advanced world.

Lagarde said that governments in the developed world should focus their attention on boosting support for low income workers and reducing inequality, amid a “groundswell of discontent” against globalisation. Effectively reiterating the McKinsey report, Lagarde said that there is “a growing sense among some citizens that they “lack control,” that the system is somehow against them”, a system which she now slams, even though the IMF been instrumental in helping create and grow precisely this system ever since its inception, saying that “growing inequality in wealth, income, and opportunity in many countries has added to a groundswell of discontent, especially in the industrialized world.” She then slammed both banks, tax regimes and pervasive corruption, saying that “financial institutions are being seen as unaccountable to society. Tax systems allow multinational companies and wealthy individuals not to pay what many would consider a fair share. Corruption remains endemic.”

Last but not least she warned about the “challenge” from migration flows: And there is the challenge from uncontrolled migration flows, contributing to economic and cultural anxieties.” To be sure, Lagarde did have some kinds words for globalisation, highlighting the opening up of world trade and the entry of the likes of China and India into the global economy, which has had “far reaching effects” for low-income workers in the likes of Europe and the US, however even here she highlighted the negatives saying that “the size of the global workforce effectively doubled, putting downward pressure on wages, especially for lower-skilled workers in advanced economies…. Some local labour markets that have faced deep, long-lasting effects from overseas competition.” We are confident this is a bullet point that Trump will be delighted to use during the upcoming debates.

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This is very dangerous. We should not allow it.

Bayer To Announce Acquisition Of Monsanto On Wednesday (R.)

Chemicals and healthcare group Bayer is poised to announce the acquisition of U.S. seeds company Monsanto on Wednesday for more than $66 billion, clinching the biggest deal of the year, people familiar with the matter said. By accepting Bayer’s offer, the largest cash acquisition proposal on record, Monsanto is set to give the German company a shot at grabbing the top spot in the fast-consolidating farm supplies industry, combining its crop science business with Monsanto’s strength in seeds. It will also set the stage for the deal to be closely scrutinized by antitrust regulators. The breakthrough in negotiations, which follows more than four months of talks, came after Bayer further improved on the sweetened offer of $127.50 per share in cash it disclosed last week, the people said.

However, the deal will still value Monsanto at less than $130 per share, which the company was previously hoping to fetch, the people added. Once Monsanto’s board of directors approves the deal on Tuesday, Bayer’s supervisory board will meet on Wednesday to also authorize the transaction, with an announcement expected before the stock market opens in New York on Wednesday. It is still possible the board of either company could decide to walk away from the deal at the last minute, the people cautioned. Bayer’s bid to combine its crop chemicals business, the world’s second-largest after Syngenta, with Monsanto’s industry leading seeds business, is the latest in a series of major consolidation moves in the agrochemical sector. U.S. chemicals giants Dow Chemical and DuPont have agreed to merge and spin off their respective seeds and crop chemicals operations into a major agribusiness.

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I don’t want to get into this too much, but the good doctor makes a convincing case.

Hillary’s 9/11 “Medical Episode” Looks More Like Parkinson’s Than Pneumonia (ZH)

A few weeks back, Dr. Ted Noel, an anesthesiologist with 36 years of experience, gained notoriety by sharing his opinion on his website, Vidzette, that Hillary likely had Parkinson’s disease. Now, Dr. Noel has posted a new video in which he explains how Hillary’s behavior on 9/11 and the subsequent decisions made by her campaign staff and secret service detail are more consistent with Parkinson’s disease than pneumonia. Among other things, Noel points out that if Hillary actually was suffering from such a severe case of pneumonia that it forced her to literally collapse on a sidewalk, it’s extremely unlikely that she could make a seemingly full recovery after only 90 minutes at Chelsea’s apartment and feel well enough to great onlookers and snap a selfie with a child.

Per Noel, Hillary’s recovery timing is more consistent with how long it would take her to ingest a dosage of Levodopa and wait for her Parkinson’s symptoms to subside. Noel also points out that sunglasses with dark blue lenses, like the ones Hillary wore this weekend despite the cloud cover, have been noted by doctors to help treat patients with major motion disorders such as Parkinson’s disease. With that preview, here is the full analysis

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I’m looking at doing another article on the political restraints on an EU ‘redesign’. Wrote on that years ago, don’t know if I can find any of it back. Nothing much has changed, other than tensions have increased.

Yanis looks at the economic/financial side. I think I’m more convinced that a ‘divorce’ is inevitable than he is, ugly as it may be.

An ‘Amicable Divorce’ For The Eurozone? (Varoufakis)

Stefano Fassina points out that in my article ‘Europe’s Left After Brexit’ I did not discuss his preferred option for Eurozone member-states: Stay in the EU but leave the euro. Of course the reason my article did not discuss that position is that it was focusing on Brexit and addressing Lexiteers like Tariq Ali and Stathis Kouvelakis who are arguing, from a left-wing position, for leaving the EU altogether – i.e. Brexit-like moves. But I am more than happy to comment on Stefano’s preferred option (In the EU, Out of the Euro) here. Stefano invokes Joe Stiglitz who, in his recent book on the euro, recommends an ‘amicable divorce’ that would lead to the creation of at least two new currencies (one for the deficit and one for the surplus countries).

Since I have recently discussed this with Joe Stiglitz it is perhaps useful to share the gist of our discussion with Stefano and our readers. In my email to Joe, I expressed scepticism that an ‘amicable divorce’ is at all possible. The moment it becomes public that a ‘divorce’ is under discussion, a wall of money will leave the banks of the countries destined for devaluation, heading for Frankfurt. At that point, the banks of the deficit member-states will collapse (as they run out of ECB-acceptable collateral) and the member-states will impose stringent currency and capital controls – complete with officials at airports checking suitcases and/or harsh limits in cash withdrawals. This would spell the end not only of monetary union but also of (the already injured) Schengen Treaty.

Meanwhile, as bank deposits are being redenominated, huge assets belonging to the Bundesbank and the central banks of other surplus countries (e.g. the Netherlands), which are the liabilities of the deficit countries, will disappear, causing an uproar of indignation in Germany and the Netherlands. Under such circumstances, and given the already advanced stage of the EU’s disintegration, it is almost certain that the dissolution of the Eurozone will be anything but amicable. Joe Stiglitz responded to me thus: “You are absolutely right that the moment any country contemplated leaving, capital controls would have to be imposed… The rush out will occur presumably before–when a party advocating a referendum looks like it might win.

So the hard decisions about imposing capital controls are likely to be faced ironically by a pro-Euro government. If it delays, by the time the election occurs, the country may be in shambles. The picture ahead for Europe is not a pretty one.” In conclusion, it is a fantasy to think that the EU can oversee an amicable disintegration of the Eurozone. Indeed, it is hard to imagine the EU surviving a Eurozone breakdown.

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Yeah, about that EU divorce…

Expel Hungary From EU For Hostility To Refugees, Says Luxembourg (G.)

Luxembourg’s foreign minister has called for Hungary to be thrown out of the EU over its increasingly hostile approach to refugees, as campaigners accuse Viktor Orbán’s hardline government of whipping up xenophobia to block a European plan to relocate asylum seekers. Jean Asselborn said Hungary should be temporarily or even permanently expelled from the EU for treating asylum seekers “worse than wild animals”. In an interview with German daily Die Welt, he said: “Anyone who, like Hungary, builds fences against refugees from war or who violates press freedom and judicial independence should be excluded temporarily, or if necessary for ever, from the EU.”

Asselborn called for EU rules to be changed to make it easier to expel Hungary as this was “the only way of preserving the cohesion and values of the EU”. Hungary’s foreign affairs and trade minister Péter Szijjártó dismissed Asselborn as “an intellectual lightweight” and his comments as “sermonising, pompous and frustrated”. He said only Hungarians have the right to decide who they wish to live with, adding that no Brussels bureaucrat can deprive them of this right. In a statement issued by the Hungarian government, Szijjártó added: “It is somewhat curious that Jean Asselborn and Jean-Claude Juncker – who both come from the country of tax optimisation – speak about jointly sharing burdens. But we understand what this really means: Hungary should take on the burden created by the mistakes of others.”

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This is what I have observed in Greecem, and why I support Konstantinos so strongly. His is the much better model for aid, not the massive overhead NGO one. But they get the millions, and he gets nothing, except from the Automatic Earth and a few minor other sources. NGOs have become corporations entrenched in a system that’s as expensive as it is a failure. And guess who the victims of this failure are?

Greece Has Exposed The NGO Aid Community’s Failures (G.)

The aid community has over many years developed a habit of finding reasons for why the school was not built in the Afghan village, why the women’s agricultural businesses never made any profits, why the toilets took three months to set up in the refugee camp. When it comes to our shortcomings, we have become very comfortable with, and rely upon the shopping list of excuses that we find ourselves using in Haiti, Afghanistan, Iraq, the Democratic Republic of Congo and the other contexts we’re flown into. The humanitarian excuses list includes, but is not limited to: a fragile context, ongoing war and conflict, poor infrastructure, a corrupt government, dictatorship (current or past), insufficient funding, and values that are not akin to our own.

Or if all else fails, that other favourite go-to, the overwhelming scale and number of people, such as the 1,033,513 registered Syrian refugees in Lebanon, 655,990 Syrian refugees in Jordan or 3.9 million internally displaced people in Iraq. But in Greece we are without the humanitarian excuse list to fall back on. The aid community has already received €83m to improve conditions for refugees in Greece with €214m to come from the European Commission alone in the next few months. This makes it hard to suggest we are underfunded, especially when you look at the scale of the crisis. At the time of writing, the number of refugees in Greece is approximately 60,000. The problem is not overwhelming. This time we are in an EU country.

I feel safe wherever I am – this means I can conduct a visit to monitor the impact of a programme or ensure I am consulting refugees about what they want. But I don’t, because it is something we have talked about but not done for many years, and there is little pressure to change. The disconnect between the sector’s standards and the reality on the ground is more stark here than in any other mission I’ve been involved in. We have historically been unaccountable, failing to sufficiently consult and engage affected communities. In Greece we are continuing to operate in the same ways as before, but without the traditional excuses to rely on.

Across Greece there are volunteers working both independently and as organised groups, meeting needs and filling gaps. They take over abandoned buildings to ensure refugees have somewhere to sleep, provide additional nutrition to pregnant and breastfeeding women, organise and manage informal education programmes, including setting up schools inside camps. All of this while INGO staff sip their cappuccinos in countless coordination meetings – for cash distribution, protection, water, sanitation and hygiene, food distribution and child-protection.

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Jul 172016
 
 July 17, 2016  Posted by at 4:08 pm Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Ben Shahn Daughter of Virgil Thaxton, farmer, near Mechanicsburg, Ohio 1938

Recently, I posted a two-tear old article on facebook.com/TheAutomaticEarth that was shared so many times it seems to make sense to use it for an Automatic Earth article as well. The article asks how toxic the wheat we eat is – or Americans, more specifically-, and why that is.

But first I would like to touch on a closely connected issue, which is Nassim Nicholas Taleb’s ‘war’ on GMOs. Taleb, of Black Swans fame, has been at it for a while, but he’s stepped up his efforts off late.

In 2014, with co-authors Rupert Read, Raphael Douady, Joseph Norman and Yaneer Bar-Yam, he published The Precautionary Principle (with Application to the Genetic Modification of Organisms), an attempt to look at GMOs through a ‘solidly scientific’ prism of probability and complex systems. From the abstract:

The precautionary principle (PP) states that if an action or policy has a suspected risk of causing severe harm to the public domain (affecting general health or the environment globally), the action should not be taken in the absence of scientific near-certainty about its safety. Under these conditions, the burden of proof about absence of harm falls on those proposing an action, not those opposing it. PP is intended to deal with uncertainty and risk in cases where the absence of evidence and the incompleteness of scientific knowledge carries profound implications and in the presence of risks of “black swans”, unforeseen and unforeseable events of extreme consequence.

[..] We believe that the PP should be evoked only in extreme situations: when the potential harm is systemic (rather than localized) and the consequences can involve total irreversible ruin, such as the extinction of human beings or all life on the planet. The aim of this paper is to place the concept of precaution within a formal statistical and risk-analysis structure, grounding it in probability theory and the properties of complex systems. Our aim is to allow decision makers to discern which circumstances require the use of the PP and in which cases evoking the PP is inappropriate.

This puts into perspective the claims made by Monsanto et al that since no harm has ever been proven to arise from the use of GMOs, they should therefore be considered safe. Which is the approach largely taken over by American politics, and increasingly also in Europe and other parts of the world. In their paper, Taleb et al say the approach does not meet proper scientific standards.

This is very close to my personal opinion, expressed in many articles in the past, that GMOs pose such risks on such a wide scale to the food supply of every human being on earth -as well as a much wider selection of organisms- that they should not be legalized before perhaps 100 years of tests have been done by large and independent teams of specialists.

Note that if you, as an individual farmer, as a community or even as a nation, want to ban GMOs but your neighbors do not, you will in the case of many crops not stand a chance of keeping your plants GMO free. For which you can subsequently be sued by the ‘owner’ of the genetically altered plants and seeds.

Also, I think it is irresponsibly dangerous to give a handful of companies (Monsanto, Bayer, DuPont, Syngenta), who all happen to be chemical giants dating back to the 20th century interbellum, and all with questionable pasts, a quasi-monopoly over the -future of- world’s food. Because that is where things will go unless proper principles are applied, both scientific and legal.

One of the main arguments proponents of GMOs use is that through thousand of years mankind has altered crops through selection ‘anyway’, so talking about anything ‘pure’ or ‘natural’ in this regard is not relevant. Taleb put the difference between altering a staple through this ‘generational’ selection on the one hand and the modifying of genes in a lab into a sketch:

The sketch was later annotated by Rahul Goswami, approved and shared by Taleb:

I think it is obvious that ‘generational’ selection through breeding is localized, can be rejected by nature. Genetic modification is something completely different, it takes a much bigger step (a giant leap) and forces itself -as a more or less alien body- onto a much larger eco-system.

It’s not about trying to figure out what works, but about forcing itself upon the world and its inhabitants regardless of the consequences. The precautionary principle is missing where it is most needed.

A few examples of Taleb’s tweets on the topic in the past few days make his stance abundantly clear.

“GMO issue is ignorance of the properties of complex systems/fattails (Monsanto’s 107 Nobels, 80 y.o. are 50 y behind)”

“Anyone pro-GMOs on “scientific” grounds is 50 years behind, ignorant of complexity, or just stupid”

“Monsanto pulled no stop trying to discredit me: 1000 mails to Univ (!),>1000 shill posts. Nada. F***you money works.”

Then, on to the article I started talking about above. As I said, it was written some two years ago by Sarah at the Healthy Home Economist. From the reactions to my posting it on Facebook -a huge number of shares- I surmise that many people A) had no idea that what Sarah describes is common practice, and B) have a profound interest in the topic.

Note: while a fair number of people said they had never heard of this, and/or doubted it was true at all, quite a few confirmed it as common where they live, and not just stateside, but in Scotland, Argentina etc.

Let’s see how we get through this. I don’t want to just post the whole thing, but I’ll need large portions of it.

The Real Reason Wheat is Toxic

The stories became far too frequent to ignore. Emails from folks with allergic or digestive issues to wheat in the United States experienced no symptoms whatsoever when they tried eating pasta on vacation in Italy. Confused parents wondering why wheat consumption sometimes triggered autoimmune reactions in their children but not at other times.

In my own home, I’ve long pondered why my husband can eat the wheat I prepare at home, but he experiences negative digestive effects eating even a single roll in a restaurant. There is clearly something going on with wheat that is not well known by the general public. It goes far and beyond organic versus nonorganic, gluten or hybridization because even conventional wheat triggers no symptoms for some who eat wheat in other parts of the world.

What indeed is going on with wheat? For quite some time, I secretly harbored the notion that wheat in the United States must, in fact, be genetically modified. GMO wheat secretly invading the North American food supply seemed the only thing that made sense and could account for the varied experiences I was hearing about. I reasoned that it couldn’t be the gluten or wheat hybridization. Gluten and wheat hybrids have been consumed for thousands of years.

It just didn’t make sense that this could be the reason for so many people suddenly having problems with wheat and gluten in general in the past 5-10 years.

Finally, the answer came over dinner a couple of months ago with a friend who was well versed in the wheat production process. I started researching the issue for myself, and was, quite frankly, horrified at what I discovered. The good news is that the reason wheat has become so toxic in the United States is not because it is secretly GMO as I had feared (thank goodness!).

The bad news is that the problem lies with the manner in which wheat is grown and harvested by conventional wheat farmers. You’re going to want to sit down for this one. I’ve had some folks burst into tears in horror when I passed along this information before.

Common wheat harvest protocol in the United States is to drench the wheat fields with Roundup several days before the combine harvesters work through the fields as the practice allows for an earlier, easier and bigger harvest

Pre-harvest application of the herbicide Roundup or other herbicides containing the deadly active ingredient glyphosate to wheat and barley as a desiccant was suggested as early as 1980. It has since become routine over the past 15 years and is used as a drying agent 7-10 days before harvest within the conventional farming community.USDA pesticides applied to wheat.

According to Dr. Stephanie Seneff of MIT who has studied the issue in depth and who I recently saw present on the subject at a nutritional Conference in Indianapolis, desiccating non-organic wheat crops with glyphosate just before harvest came into vogue late in the 1990’s with the result that most of the non-organic wheat in the United States is now contaminated with it.

Seneff explains that when you expose wheat to a toxic chemical like glyphosate, it actually releases more seeds resulting in a slightly greater yield: “It ‘goes to seed’ as it dies. At its last gasp, it releases the seed” says Dr. Seneff. According to the US Department of Agriculture, as of 2012, 99% of durum wheat, 97% of spring wheat, and 61% of winter wheat has been treated with herbicides. This is an increase from 88% for durum wheat, 91% for spring wheat and 47% for winter wheat since 1998.

Wheat farmer Keith Lewis: “I have been a wheat farmer for 50 yrs and one wheat production practice that is very common is applying the herbicide Roundup (glyphosate) just prior to harvest. Roundup is licensed for preharvest weed control. Monsanto, the manufacturer of Roundup claims that application to plants at over 30% kernel moisture result in roundup uptake by the plant into the kernels. Farmers like this practice because Roundup kills the wheat plant allowing an earlier harvest.

A wheat field often ripens unevenly, thus applying Roundup preharvest evens up the greener parts of the field with the more mature. The result is on the less mature areas Roundup is translocated into the kernels and eventually harvested as such. This practice is not licensed. Farmers mistakenly call it “dessication.”

Consumers eating products made from wheat flour are undoubtedly consuming minute amounts of Roundup. An interesting aside, malt barley which is made into beer is not acceptable in the marketplace if it has been sprayed with preharvest Roundup. Lentils and peas are not accepted in the market place if it was sprayed with preharvest roundup….. but wheat is ok.. This farming practice greatly concerns me and it should further concern consumers of wheat products.”

This practice is not just widespread in the United States either. The Food Standards Agency in the United Kingdom reports that use of Roundup as a wheat desiccant results in glyphosate residues regularly showing up in bread samples. Other European countries are waking up to to the danger, however. In the Netherlands, use of Roundup is completely banned with France likely soon to follow.

Using Roundup on wheat crops throughout the entire growing season and even as a desiccant just prior to harvest may save the farmer money and increase profits, but it is devastating to the health of the consumer who ultimately consumes the glyphosate residue laden wheat kernels.

The chart below of skyrocketing applications of glyphosate to US wheat crops since 1990 and the incidence of celiac disease is from a December 2013 study published in the Journal Interdisciplinary Toxicology examining glyphosate pathways to autoimmune disease. Remember that wheat is not currently GMO or “Roundup Ready” meaning it is not resistant to its withering effects like GMO corn or GMO soy, so application of glyphosate to wheat would actually kill it.

While the herbicide industry maintains that glyphosate is minimally toxic to humans, research published in the Journal Entropy strongly argues otherwise by shedding light on exactly how glyphosate disrupts mammalian physiology. Authored by Anthony Samsel and Stephanie Seneff of MIT, the paper investigates glyphosate’s inhibition of cytochrome P450 (CYP) enzymes, an overlooked component of lethal toxicity to mammals.

The currently accepted view is that glyphosate is not harmful to humans or any mammals. This flawed view is so pervasive in the conventional farming community that Roundup salesmen have been known to foolishly drink it during presentations! However, just because Roundup doesn’t kill you immediately doesn’t make it nontoxic. In fact, the active ingredient in Roundup lethally disrupts the all important shikimate pathway found in beneficial gut microbes which is responsible for synthesis of critical amino acids.

Friendly gut bacteria, also called probiotics, play a critical role in human health. Gut bacteria aid digestion, prevent permeability of the gastrointestinal tract (which discourages the development of autoimmune disease), synthesize vitamins and provide the foundation for robust immunity. In essence:

Roundup significantly disrupts the functioning of beneficial bacteria in the gut and contributes to permeability of the intestinal wall and consequent expression of autoimmune disease symptoms

In synergy with disruption of the biosynthesis of important amino acids via the shikimate pathway, glyphosate inhibits the cytochrome P450 (CYP) enzymes produced by the gut microbiome. CYP enzymes are critical to human biology because they detoxify the multitude of foreign chemical compounds, xenobiotics, that we are exposed to in our modern environment today.

As a result, humans exposed to glyphosate through use of Roundup in their community or through ingestion of its residues on industrialized food products become even more vulnerable to the damaging effects of other chemicals and environmental toxins they encounter! What’s worse is that the negative impact of glyphosate exposure is slow and insidious over months and years as inflammation gradually gains a foothold in the cellular systems of the body.

The consequences of this systemic inflammation are most of the diseases and conditions associated with the Western lifestyle: Gastrointestinal disorders, Obesity ,Diabetes, Heart Disease, Depression, Autism, Infertility, Cancer, Multiple Sclerosis, Alzheimer’s, etc.

In a nutshell, Dr. Seneff’s study of Roundup’s ghastly glyphosate which the wheat crop in the United States is doused with uncovers the manner in which this lethal toxin harms the human body by decimating beneficial gut microbes with the tragic end result of disease, degeneration, and widespread suffering

[..] The bottom line is that avoidance of conventional wheat in the United States is absolutely imperative even if you don’t currently have a gluten allergy or wheat sensitivity. The increase in the amount of glyphosate applied to wheat closely correlates with the rise of celiac disease and gluten intolerance.

Dr. Seneff points out that the increases in these diseases are not just genetic in nature, but also have an environmental cause as not all patient symptoms are alleviated by eliminating gluten from the diet. The effects of deadly glyphosate on your biology are so insidious that lack of symptoms today means literally nothing. If you don’t have problems with wheat now, you will in the future if you keep eating conventionally produced, toxic wheat!

I guess we can leave it at that for now. Do go to the original article for more. Whether you look at it from a scientific viewpoint, as Taleb et al do, or from a common sense one, as Sarah does, the common thread seems obvious: Monsanto and other rich chemical giants seek to be the sole providers -even owners- of the world’s food, handed to us for free by nature and generations of our ancestors.

And to achieve that magnitude of power -and riches- they are more than willing to literally drive over sick and dead bodies. Once again, Taleb:

The precautionary principle (PP) states that if an action or policy has a suspected risk of causing severe harm to the public domain (affecting general health or the environment globally), the action should not be taken in the absence of scientific near-certainty about its safety. Under these conditions, the burden of proof about absence of harm falls on those proposing an action, not those opposing it.

That is not what’s happening, and there’s not much time left to start applying it before it’s too late. Because GMOs, once they’ve been introduced in a large enough environment, are near impossible to get rid of.

To end on a somewhat happier note, Taleb thinks that Monsanto is doing quite poorly these days, financially. Then again, that’s why Bayer wants to buy them, and that would only mean a continuation or even increase of the present practices.

What we need is decision makers who understand the science of complex systems, probability and the precautionary principle. And I don’t know about you, but when I look at who’s vying to be the leaders of the US, UK and many other nations, I think we’re a long way away from that.

Only Putin seems to get it. His stated goal is to make Russia the largest producer of organic food in the world. So maybe there is still hope.

May 262016
 
 May 26, 2016  Posted by at 8:42 am Finance Tagged with: , , , , , , , , , , ,  7 Responses »
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NPC Graf Zeppelin over Capitol 1928


Britain’s Property Market Is Going To Implode (BI)
Trillions in Debt—but for Now, No Reason to Worry (WSJ)
IMF: No Cash Now for Greece Because Europe Hasn’t Promised Debt Relief (WSJ)
China’s ‘Feud’ Over Economic Reform Reveals Depth Of Xi’s Secret State (G.)
Chinese Officials To Ask US Counterparts When Fed Will Raise Rates (BBG)
Fear Of UK Steel Sector’s ‘Death By 1,000 Cuts’ (Tel.)
Varoufakis: Australia Lives In A Ponzi Scheme (G.)
Venezuela Sells Gold Reserves As Economy Worsens (FT)
Wall Street Crime: 7 Years, 156 Cases and Few Convictions (WSJ)
Quantitative Easing and the Corruption of Corporate America (DMB)
Brexit, And The Return Of Political Lying (Oborne)
We Have Entered The Looting Stage Of Capitalism (PCR)
France Digs In to Endure Oil Strike With Release of Fuel Reserve (BBG)
Union Revolt Puts Both Hollande’s Future And France’s Image On The Line (G.)
Bayer Could Get ECB Financing For Monsanto Bid (R.)
Putin Closes The Door To Monsanto (DDP)

No doubt here. Ditto for all bubbles.

Britain’s Property Market Is Going To Implode (BI)

Property prices in Britain may be surging due to a horrendous imbalance of supply and demand — but the market is poised to implode. Why? Because Britons are not earning enough money to either get on the housing ladder or are spending such a large portion of their wages on mortgages that may not be sustainable. Well, not unless everyone suddenly gets a huge pay rise over the next year or so. That’s the assumption in the latest figures from think tank Resolution Foundation, which show that lower- and middle-income households are spending 26% of their salaries on housing, compared to 18% back in 1995. In London, households spend 28% of their income on housing. The think tank said this is the equivalent to adding 10 percentage points onto income tax.

Only the rich are not feeling the pressure of rising house prices. Higher-income households spend 18% of their income on housing, compared to 14% in 1995. The average price to buy a house in Britain now stands at £291,504, according to the Office for National Statistics. Meanwhile, the average London property price is at a huge £551,000. To put this into perspective, Resolution Foundation estimated that median income, at £24,300, is only around 3% higher than it was when the credit crunch hit in 2007/2008. [..] the house price-to-earnings ratio is near the pre-crisis peak. Considering the average deposit to secure a home is around 10% of the total property price, this means Britons are taking on huge amounts of debt and eating into the little savings they have to buy a home.

[..] the market is poised on a knife edge between interest rates and wages. If interest rates were to rise — and they will eventually — it could prove a major problem for the Britons who already spend 25-28% of their salaries on housing. Similarly, if another downturn depresses wages, mortgage payments will become an increasing portion of their income even without an interest rate increase. That situation is pricing out low- and middle-income people from the market, as the chart shows. Ownership rates in this group have sunk from nearly 60% in 1997 to just 25% today. That’s how fragile the housing market is: With those buyers unable to afford to buy, the market is dependent on a thinner slice of owners, whose incomes are increasingly stretched by housing costs, who can’t afford a decrease in wages, and who may not be able to afford any increase in interest.

Read more …

“Global debt—including households, businesses and governments—has risen from 221% of GDP at the end of 2008 to 242% at the end of the first quarter.”

Trillions in Debt—but for Now, No Reason to Worry (WSJ)

If current trends persist through the end of the year, U.S. households will owe as much as they did at the peak of borrowing in 2008. Global debt has already topped 2008 levels and keeps rising. That’s pretty astonishing so soon after debt-driven crises in the U.S. and Europe and endless worries about too much borrowing in Japan, China and emerging markets. But for all the hand-wringing, a near-term debt crisis is unlikely. Lower interest rates mean debt payments are far lower than they were before the crisis. In the U.S., household debt compared with the overall economy is way down. And overseas, loans can easily be rolled over. Yet even with low rates, the cycle of borrowing and rolling over loans has a cost. People, governments and businesses spend now instead of later, likely reducing future growth.

The cycle also allows borrowing to go on for years, which can be good—allowing reform to take hold—or not, allowing bad policies to go on almost indefinitely. U.S. households owed $12.25 trillion at the end of the first quarter, up 1.1% from the end of 2015, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, released Tuesday. If the first quarter repeats itself through the end of the year, U.S. household debt will approach its peak of $12.68 trillion, which it hit in the third quarter of 2008. Many people remember that quarter because it’s when the global financial system went off a cliff. This time is different because short-term interest rates have been stuck near zero since then. For U.S. consumers, that means household debt-service payments as a percent of disposable personal income are at their lowest level since at least 1980, despite a much higher debt load. In addition, more loans are going to higher-quality borrowers.

[..] Low rates have had an even more dramatic impact overseas, where economies are weaker or less stable. Global debt—including households, businesses and governments—has risen from 221% of GDP at the end of 2008 to 242% at the end of the first quarter. But the cost of interest payments, as a share of GDP, has fallen to 7% from a peak of 11%, according to J.P. Morgan. Japan is the prime example of how low interest rates can change the rules of the game. At 400% of GDP, Japan’s debt level is by far the highest in the world. One of the great mysteries of finance is why investors lend the government money for negligible or negative yields when it seems impossible for Japan to pay off its debt.

Read more …

“..no one does what’s in Greece’s best interests..”

IMF: No Cash Now for Greece Because Europe Hasn’t Promised Debt Relief (WSJ)

A senior IMF official Wednesday said it can’t help Europe with fresh emergency financing for Greece because Athens’s creditors haven’t yet committed to detailed debt relief. The comments show that the agreement touted by European finance ministers last night to release fresh bailout cash for Greece hasn’t nailed down the key elements the IMF says are critical to finally return the debt-laden country to health. Rather, the IMF’s reserved support for the deal has paved the way for Germany to approve new funds and sets the stage for more tough negotiations later this year. “Fundamentally, we need to be assured that the universe of measures that Europe will to commit to…is consistent with what we think is needed to reduce debt,” the senior official told reporters on a conference call. “We do not yet have that.”

But the official said Europe’s acknowledgment that debt relief is needed and would be detailed later this year was enough to win the fund’s conditional backing. “All the stakeholders now recognize that Greek debt is…highly unsustainable,” the official said. “They accept that debt relief is needed, they accept the methodology that is needed to calibrate the necessary debt relief. They accept the objectives of gross financing needs in the near term and in the long run. They even accept the time tables.” Many outside economists see the deal as papering over the differences and once again prolonging the crisis. “Summary of Eurogroup: Germany always wins, IMF caves under pressure from Germany and U.S., no one does what’s in Greece’s best interests,” said Megan Greene at Manulife and John Hancock Asset Management. Marc Chandler at investment bank Brown Brothers Harriman called the deal a “paper charade” that saves Europe more than it does Greece.

Read more …

Li wants more debt, Xi at least sees the danger in that.

China’s ‘Feud’ Over Economic Reform Reveals Depth Of Xi’s Secret State (G.)

It was hardly a headline to set the pulse racing. “Analysing economic trends according to the situation in the first quarter: authoritative insider talks about the state of China’s economy,” read the front page of the Communist party’s official mouthpiece on the morning of Monday 9 May. Yet this headline – and the accompanying 6,000-word article attacking debt-fuelled growth – has sparked weeks of speculation over an alleged political feud at the pinnacle of Chinese politics between the president, Xi Jinping, and the prime minister, Li Keqiang, the supposed steward of the Chinese economy.

“The recent People’s Daily interview not only exposes a deep rift between [Xi and Li], it also shows the power struggle has got so bitter that the president had to resort to the media to push his agenda,” one commentator said in the South China Morning Post. “Clear divisions have emerged within the Chinese leadership,” wrote Nikkei’s Harada Issaku, claiming the two camps were “locking horns” over whether to prioritise economic stability or structural reforms. The 9 May article – penned by an unnamed yet supposedly “authoritative” scribe – warned excessive credit growth could plunge China into financial turmoil, even wiping out the savings of the ordinary citizens.

As if to hammer that point home, a second, even longer article followed 24 hours later – this time a speech by Xi Jinping – in which the president laid out his vision for the Chinese economy and what he called supply-side structural reform. “Taken together, the articles signal that Xi has decided to take the driver’s seat to steer China’s economy at a time when there are intense internal debates among officials over its overall direction,” Wang Xiangwei argued in the South China Morning Post. Like many observers, he described the front page interview as a “repudiation” of Li Keqiang-backed efforts to prop up economic growth by turning on the credit taps.

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“A less aggressive Fed stance is in China’s interest.” Look, the dollar will rise no matter what the Fed does. China must devalue.

Chinese Officials To Ask US Counterparts When Fed Will Raise Rates (BBG)

Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Fed interest-rate increase in June, according to people familiar with the matter. The Chinese delegation will try to deduce whether a June or a July rate rise is more likely, as their nation’s policy makers prepare for the potential impact on financial markets and the yuan, the people said, asking not to be named as the discussions were private. In China’s view, if the Fed does lift borrowing costs, a July move would be preferable, the people said. China’s exchange rate has already been weakening as expectations rise for the U.S. central bank to boost its benchmark rate for the first time since it ended its near-zero policy in December with a quarter%age point increase.

It’s not unusual for senior officials to press each other on their policies, and any inquiries by the Chinese about the Fed would follow repeated expressions of concern from the U.S. about China’s intentions with its exchange rate. The Treasury Department put China on a new currency watch list last month to monitor for unfair trade advantages. “The Chinese side will argue that the U.S. should tread cautiously as it tightens monetary policy and avoid any surprises,” said Mark Williams, chief Asia economist at Capital Economics in London, who participated in U.K.-China meetings when working at Britain’s Treasury. “The Federal Reserve will make its decision solely on what it deems best for the U.S. economy, but it is clear that concerns about China have influenced its thinking about the balance of risks facing the U.S.”

[..] “Chinese officials are pretty anxious about the Fed as a June rate hike – which is not fully discounted in the market – may boost the dollar,” said Shen Jianguang, chief Asia economist at Mizuho in Hong Kong. “This could pose a threat or make it difficult for the PBOC to keep a stable RMB exchange rate,” he said, referring to the People’s Bank of China’s management of the renminbi, another term for the yuan. “A less aggressive Fed stance is in China’s interest.”

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Trying to rewrite UK pensions laws just to sell one company. Wow.

Fear Of UK Steel Sector’s ‘Death By 1,000 Cuts’ (Tel.)

Tata has refused to rule out holding on to its crisis-hit British steel division, raising fears that the business could suffer “a death by a thousand cuts”. Delivering annual results for the Tata’s global steel business, Koushik Chatterjee, executive director, declined to give details on the board’s thoughts on the seven bids the company has received for the loss-making UK plants. But pressed on whether Tata could do a U-turn and hold on to the business – which the Government has said it is willing to take a 25pc stake in and offer financial support to if this will keep it alive – he refused to deny this was an option “I don’t think we have a case as yet,” said Mr Chatterjee. “There is lots of focus only on a sale.” The results announcement – which showed Tata Steel’s revenues down 6pc to £11.9bn and an annual loss of £309m – echoed Mr Chatterjee, saying: “The board… is actively reviewing all options for the Tata Steel UK business, including a potential sale.”

Sajid Javid, the Business Secretary, met with Tata’s directors on Monday night for several hours ahead of their monthly meeting, which considered the bids. It is thought Mr Javid sees Tata keeping the UK business as a way of retaining a viable steel industry in the Britain, after bidders signalled their reluctance to take on the Tata pension scheme, which has a £500m deficit. Ministers are this week expected to start consultations on controversial proposals to restructure the pension scheme [..] The changes would alter the way pension payments are calculated by swapping from RPI inflation to the lower CPI, potentially shaving billions from the scheme’s liabilities. However, such a move would require a change off law and could set what some pensions experts have described as a dangerous precedent.

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Like Britain, like New Zealand, like Canada.

Varoufakis: Australia Lives In A Ponzi Scheme (G.)

Varoufakis’s answers are quick, sharp and eloquent – and ready. He barely needs a pause when asked what he’d do if suddenly installed as Australia’s treasurer, before he’s firing off a prescription for the economy. “The first thing that has to happen in this country is to recognise two truths that are escaping this electorate, and especially the elites. “Firstly, Australia does not have a debt problem. The idea that Australia is on the verge of becoming a new Greece would be touchingly funny if it were not so catastrophic in its ineptitude. Australia does not have a public debt problem, it has a private debt problem. “Truth number two: the Australian social economy is not sustainable as it is. At the moment, if you look at the current account deficit, Australia lives beyond its means – and when I say Australia, I mean upper-middle-class people. The luxurious lifestyle is not supported by the Australian economy.

It’s supported by a bubble, and it is never a good idea to rely on the proposition that a bubble will always be there to support you. “So private debt is the problem. And secondly, because of this private debt, you have a bubble, which is constantly inflated through money coming into this country for speculative purposes.” Varoufakis is unequivocal in his conviction that current growth – which he likens to a Ponzi scheme – needs to be replaced with growth that comes from producing goods. “Australia is switching away from producing stuff. Even good companies like Cochlear, who have been very innovative in the past, have been financialised. They’re moving away from doing stuff to shuffling paper around. That would be my first priority [if I were Australian treasurer]: how to go back to actually doing things.”

Varoufakis wouldn’t be the first to compare the Australian economy to a Ponzi scheme. Economist Lindsay David has made a similar criticism of the housing market, and has also heavily criticised Australia’s reliance on Chinese investment. David and fellow economist Philip Soos have predicted the economy is heading for a crash, and Varoufakis thinks they might be right. He is quick to point out that crashes can never be predicted, but he is in little doubt that it will happen if Australia doesn’t change direction soon. “There is no doubt, if you look at the pace of house prices over the past 20 years in Australia and the pace of value creation; they’re so out of kilter that something has to give.”

Read more …

US revenge on Chavez is nearing completion.

Venezuela Sells Gold Reserves As Economy Worsens (FT)

Venezuela’s gold reserves have plunged to their lowest level on record after it sold $1.7 billion of the precious metal in the first quarter of the year to repay debts. The country is grappling with an economic crisis that has left it struggling to feed its population. The OPEC member’s gold reserves have dropped almost a third over the past year and it sold over 40 tonnes in February and March, according to IMF data. Gold now makes up almost 70% of the country’s total reserves, which fell to a low of $12.1 billion last week. Venezuela has larger crude reserves than Saudi Arabia but has been hard hit by years of mismanagement and, more recently, depressed prices for oil. Oil accounts for 95% of its export earnings. Despite the recent price rebound, declining oil output is likely to take a further toll on the economy. The IMF forecasts the economy will shrink 8% this year, and 4.5% in 2017, after a 5.7% contraction in 2015.

Inflation is forecast to exceed 1,642% next year, fueled by printing money to fund a fiscal deficit estimated at about 20% of GDP. Venezuela began selling its gold reserves in March 2015, according to IMF data. At roughly 367 tonnes, Venezuela has the world’s 16th-biggest gold reserves, according to the World Gold Council. In contrast, China and Russia both added to their gold holdings this year, the data show. Gold prices have risen 15% this year. Last year Venezuela’s central bank swapped part of its gold reserves for $1 billion in cash through a complex agreement with Citi. The late president Hugo Chávez had said he would free Venezuela from the “dictatorship of the dollar” and directed the central bank to ditch the US dollar and start amassing gold instead. In 2011, as a safeguard against market instability, Chávez brought most of the gold stored overseas back to Caracas.

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What an incredible charade this has turned into.

Wall Street Crime: 7 Years, 156 Cases and Few Convictions (WSJ)

The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found. The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring. Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000.

Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case. They include Mr. Heinz, the former UBS employee. One of the few successful government cases was overturned Monday. A federal appeals court tossed civil mortgage-fraud charges and a $1 million penalty against Rebecca Mairone, a former executive at Countrywide Financial Corp., now part of Bank of America Corp. The court also threw out a related $1.27 billion penalty against Bank of America. Representatives of Ms. Mairone and the bank this week welcomed the verdict, while the Justice Department, which brought the cases, declined to comment.

There are plenty of possible explanations for the small number of successful cases. For starters, much of the institutional conduct during and after the financial crisis didn’t break the law, said law-enforcement officials. Even when the government has been able to prove illegal activity, it has rarely been traced to the upper echelons of big banks. “The typical scenario is not that the bank has this plan for world domination being cooked up by the chairman and CEO,” said Adam Pritchard, a law professor at the University of Michigan. “It’s some midlevel employee trying to keep his job or his bonus, and as result the bank gets into trouble.”

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“The Fed might want to imitate the ECB but may be restricted from doing so by its charter..” “We wouldn’t discount the possibility it will try to amend, or get around, any prohibitions, however.”

Quantitative Easing and the Corruption of Corporate America (DMB)

[..] corporate leverage is hovering near a 12-year high and domestic capital expenditures have plunged. In the interim, reams of commentary have been devoted to share buybacks and with good reason. Companies reducing their share count have, at least in recent years, been where the hottest action is, courtyard-seat level action. But now, it looks as if the trend is finally cresting. A fresh report by TrimTabs found that companies have announced 35% less in buybacks through May 19th compared with the same period last year. And while $261.5 billion is still respectable (for the purpose of placating shareholders), it is nevertheless a steep decline from 2015’s $399.4 billion. Even this tempered number is deceiving – only half the number of firms have announced buybacks vs last year.

Have U.S. executives and their Boards of Directors finally found religion? We can only hope. The devastation wrought by the multi-trillion-dollar buyback frenzy is what many of us learned in Econ 101 as the ‘opportunity cost,’ or the value of what’s been foregone. As yet, the value of lost investment opportunities remains a huge unknown. In the event doing right by future generations does not suffice, executives might be motivated to renounce their errant ways because shareholders appear to have stopped rewarding buybacks. According to Marketwatch, an exchange traded fund that affords investors access to the most aggressive companies in the buyback arena is off 0.8% for the year and down 9.8% over the last 12 months.

The hope is that Corporate America is at the precipice of an investment binge that sparks economic activity that richly rewards those with patience over those with the burning need for instant gratification. The risk? That central bankers whisper sweet nothings the likes of which no Board or CFO can resist. Mario Draghi may already have done so. In announcing its latest iteration of QE, the ECB added investment grade corporate bonds to the list of eligible securities that can satisfy its purchase commitment. Critically, U.S. multinationals with European operations are included among qualifying issuers. As Evergreen Gavekal’s David Hay recently pointed out, McDonald’s has jumped right into the pool, issuing five-year Euro-denominated paper at an interest rate of a barely discernible 0.45%.

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Yeah, like it was ever gone.

Brexit, And The Return Of Political Lying (Oborne)

During the run-up to the Iraq invasion, intelligence officers would hand ministers an estimate, an allegation, a straw in the wind, in certain cases (the 45-minute claim being the most notorious example) an outright fabrication. Tony Blair’s office would then bless it with the imprimatur of a government assessment, usually employing vague wording — in the hope that the media would repeat and then amplify the message. Cameron and Osborne have become masters of this kind of politics. ‘We’re paying down Britain’s debts,’ said David Cameron in 2013. This was a straight lie: the national debt was soaring as he spoke. ‘When I became Chancellor,’ observed Osborne last year, ‘debt was piling up.’ True – and he has been piling it up ever since, even now rising by £135 million a day.

This kind of deception works: polls show that only a minority of voters realise that the national debt is still rising. George Osborne has now converted the Treasury into a partisan tool to sell the referendum, exactly as Tony Blair used the Joint Intelligence Committee to make the case for war against Iraq. Before becoming Chancellor, Osborne was critical of Gordon Brown’s Treasury, and rightly so, because it had been so heavily politicised. He rightly stripped the Treasury of its forecasting function and created an independent Office for Budget Responsibility — an encouraging sign that he was determined to avoid the culture of deceit which was such a notable feature of the Brown/Blair era. It is therefore very troubling that the Office for Budget Responsibility has not come anywhere near the two Treasury dossiers that make the case for the EU.

It’s easy to see why – they would point out straight away that the Chancellor has been engaged in fabrication. For example, let’s take a hard look at how he induced Treasury officials to endorse his central claim that families would be £4,300 ‘worse off’ if Britain left the EU. The main technique that Osborne used was his conflating GDP with household income – and referring to ‘GDP per household’, a phrase that has never been used in any Budget. As the Chancellor used to argue, GDP is a misleading indicator which can be artificially inflated by immigration. Immigration of 5% may well raise GDP by the same amount, but nobody would be any better off. ‘GDP per capita is a much better indicator,’ said Osborne when newly in office. He made no mention at all of GDP per capita when launching the Brexit documents published by the Treasury.

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“We have entered the looting stage of capitalism. Desolation will be the result.” Paul Craig Roberts doesn’t hold back.

We Have Entered The Looting Stage Of Capitalism (PCR)

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion . The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks. The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. Neoliberalism intends to reestablish feudalism—a few robber barons and many serfs: the 1% and the 99%. The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF. As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principallly the banks themselves or their major clients.

So far the so-called “creditors” have only pledged to some form of debt relief, not yet decided, beginning in 2 years. By then the younger part of the Greek population will have emigrated and will have been replaced by immigrants fleeing Washington’s Middle Eastern and African wars who will have loaded up Greece’s unfunded welfare system. In other words, Greece is being destroyed by the EU that it so foolishly joined and trusted. The same thing is happening to Portugal and is also underway in Spain and Italy. The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine. The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false. No “creditor” has yet agreed to write off one cent of the debt.

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Euro Cup starts in a few weeks, but “The French government said it was prepared to endure weeks of strikes at refineries..” Oh, sure.

France Digs In to Endure Oil Strike With Release of Fuel Reserve (BBG)

The French government said it was prepared to endure weeks of strikes at refineries and began releasing strategic oil reserves to help ease nationwide fuel shortages. While panic-buying by motorists drove demand to three times the normal level Tuesday, France has enough stocks even if the strikes persist for weeks, Transport Minister Alain Vidalies said. The problem isn’t about supply but about delivery, he said. Oil companies have mobilized hundreds of trucks to ship diesel and gasoline around the country since the start of the week as filling stations ran dry after all the nation’s refineries experienced disruptions or outright shutdowns. By Wednesday Exxon Mobil reported that its Gravenchon plant was operating normally and able to transport fuel while elsewhere strikers have blocked refineries to try to bring shipments to a halt.

Workers are protesting against President Francois Hollande’s plans to change labor laws to reduce overtime pay and make it easier to fire staff in some cases. While the government has watered down its proposals since first floating them in February, unions are calling for them to be scrapped altogether. The new law will not be withdrawn and police will continue to ensure access to fuel depots, Prime Minister Manuel Valls told Parliament Wednesday. Total’s Feyzin refinery near Lyon and its Normandy plant have stopped production. La Mede was working at a lower rate Wednesday, while the facilities at Grandpuits near Paris and Donges close to Nantes will come to a complete halt later this week, according to a company statement.

Total may reconsider a plan to spend €500 million to upgrade the Donges facility as workers take the plant “hostage,” CEO Patrick Pouyanne said Tuesday. He urged motorists not to rush to gas stations and create an “artificial” shortage. Some 348 of Total’s 2,200 gas stations ran out of fuel and 452 faced partial shortages as of Wednesday morning, the company said. The figures are little changed from Tuesday. About one in five of the country’s 12,200 stations were facing shortages Tuesday afternoon, the government said.

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All Marine Le Pen has to do is to sit back and watch.

Union Revolt Puts Both Hollande’s Future And France’s Image On The Line (G.)

As smoke rises from burning tyres on French oil refinery picket-lines, motorists queue for miles to panic-buy rationed petrol, and train drivers and nuclear staff prepare to go on strike. With the 2017 French presidential election nearing, the Socialist president François Hollande is facing his toughest and most explosive crisis yet. It is not just Hollande’s political survival at stake, though, but the image of France itself. The country is preparing to host two million visitors at the showpiece Euro 2016 football tournament in two weeks, and the back-drop is not ideal: strikes and feared fuel shortages, potential transport paralysis, a terrorist threat, a state of emergency and a mood of heightened tension and violence between street protesters and police.

Hollande, the least popular leader in modern French history whose approval ratings are festering, according to various polls, at between 13% and 20%, might not seem as though he has further to fall. But in fact he is clinging, white-knuckled, to the edge of a cliff. The Socialist was supposed to be spending May and June testing the waters for a possible re-election bid by repeating his new mantra “things are getting better” – even if more than 70% of French people don’t believe that that is true. Instead, France has been hit by an explosive trade union revolt over Hollande’s contested labour reforms. The beleaguered president has framed these reforms as a crucial loosening of France’s famously rigid labour protections, cutting red-tape and slightly tweaking some of the more cumbersome rules that deter employers from hiring.

This would, he has argued, make France more competitive and tackle stubborn mass employment that tops 10% of the workforce. But after more than two months of street demonstrations against the labour changes, the hardline leftist CGT union radically upped its strategy and is now trying to choke-off the nation’s fuel supply to force Hollande to abandon the reforms.

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Win win win squared. That’s why you feel so happy right now; look in the mirror. You get to finance a winning proposition!

Bayer Could Get ECB Financing For Monsanto Bid (R.)

Bayer could receive financing from the European Central Bank that would help to fund a takeover of Monsanto, according to the terms of the ECB’s bond-buying program. U.S.-based Monsanto, the world’s largest seed company, turned down Bayer’s $62 billion bid on Tuesday, but said it was open to further negotiations. The ECB can buy bonds issued by companies that are based in the euro area, have an investment-grade rating and are not banks, provided that they are denominated in euros and meet certain technical requirements. The purpose for which the bonds are issued is not among the criteria set by the ECB, which will start buying corporate bonds on the market and directly from issuers next month.

This means that, in theory, the ECB could buy debt issued by Bayer, which said on Monday it would finance its cash bid for Monsanto with a combination of debt and equity. “It will be interesting to observe how much of such a deal would be absorbed by the central bank,” credit analysts at UniCredit wrote in a note. The ECB is buying €80 billion worth of assets every month in an effort to revive economic growth in the euro zone by lowering borrowing costs. Central bank sources told Reuters that it would not be the ECB’s first choice if the money it spent ended up financing acquisitions. But even this would have a silver lining if consolidation made an industry or sector more efficient and if it gave fresh impetus to the stock market, the source added. And if issuers ended up exchanging the euros raised through bond sales for dollars, that would also help the euro zone by weakening the euro against the greenback, the sources said.

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“Russia is able to become the largest world supplier of healthy, ecologically clean and high-quality food which the Western producers have long lost..”

Putin Closes The Door To Monsanto (DDP)

Russia’s Vladimir Putin is taking a bold step against biotech giant Monsanto and genetically modified seeds at large. In a new address to the Russian Parliament Thursday, Putin proudly outlined his plan to make Russia the world’s ‘leading exporter’ of non-GMO foods that are based on ‘ecologically clean’ production. Perhaps even more importantly, Putin also went on to harshly criticize food production in the United States, declaring that Western food producers are no longer offering high quality, healthy, and ecologically clean food. “We are not only able to feed ourselves taking into account our lands, water resources – Russia is able to become the largest world supplier of healthy, ecologically clean and high-quality food which the Western producers have long lost, especially given the fact that demand for such products in the world market is steadily growing,” Putin said in his address to the Russian Parliament.

And this announcement comes just months after the Kremlin decided to put a stop to the production of GMO-containing foods, which was seen as a huge step forward in the international fight to fight back against companies like Monsanto. Using the decision as a launch platform, it’s clear that Russia is now positioning itself as a dominant force in the realm of organic farming. It even seems that Putin may use the country’s affinity for organic and sustainable farming as a centerpiece in his economic strategy. “Ten years ago, we imported almost half of the food from abroad, and were dependent on imports. Now Russia is among the exporters. Last year, Russian exports of agricultural products amounted to almost $20 billion – a quarter more than the revenue from the sale of arms, or one-third the revenue coming from gas exports,” he added.

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May 222016
 
 May 22, 2016  Posted by at 9:29 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle May 22 2016
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Unknown Medical supply boat Planter, General Hospital wharf on the Appomattox, City Point, VA 1865


G-7 Warns on Weak Global Growth as Japan Bristles Over Yen (BBG)
Jeremy Corbyn Calls For New Economics To Tackle ‘Grotesque Inequality’ (G.)
“We Are Becoming Convinced That The System Won’t Stabilize” (Matt King)
Greece Braces for More Austerity Amid EU-IMF Quarrel About Debt (BBG)
This Time, The IMF Comes Bearing Gifts For The Greeks (G.)
Europe Should Heed The Lessons of 1913 (Horvat)
New Evidence About The Dangers Of Monsanto’s Roundup (Intercept)
Technology Is Changing Our Hands (G.)
The Worst Famine Since 1985 Looms Across Africa (G.)

The US risks forcing Japan into a position it cannot afford to be in.

G-7 Warns on Weak Global Growth as Japan Bristles Over Yen (BBG)

Finance chiefs from the world’s biggest developed economies meeting in Japan underscored concerns that global growth is flagging and reaffirmed a pledge not to deliberately weaken their currencies, even as Japan again warned on the yen’s surge. At the end of two days of talks, Group of Seven central bank governors and finance ministers highlighted risks from terrorism, refugee flows, political conflicts and the potential for a U.K. exit from the EU. While officials agreed not to target currencies to stoke growth and warned of the negative consequences from disorderly moves in exchanges rates, host Japan repeated a stance that recent trading in the yen has been one sided and speculative.

Comments on the yen’s moves by Finance Minister Taro Aso hint at a growing frustration inside Japan’s government about the impact on exporters after the currency surged 9% this year, spurring speculation that the government may intervene. Aso raised the issued in a meeting with U.S. Treasury Secretary Jacob J. Lew on Saturday. “I told him that one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important,” Aso said to reporters. Tensions over the yen were evident over the course of the meetings, which were held at a hot springs resort in the country’s north. As Japan warned about the impact of disorderly trading, Lew repeated his view that the yen’s movement hasn’t been overly volatile.

“It’s a pretty high bar to have disorderly conditions,” Lew told reporters. To be sure, Japan remains a long way from its first intervention since 2011, when the G-7 sanctioned selling the yen to aid the country’s recovery after a devastating earthquake, tsunami and nuclear meltdown. A strengthening dollar amid rising bets that the Federal Reserve may lift interest rates over coming moths is helping ease pressure on Japan’s exporters. Aso also made it clear that the difference of opinion with the U.S. is manageable. “They have an election and we have an election and we both have TPP talks,” Aso said. “There are various things on our plates and we of course have to say various things as that’s our jobs.”

Still, by choosing to be so vocal on the yen, Aso is both attempting to jawbone the currency lower and put a marker down in the event the currency again starts to appreciate rapidly. “There’s no sign that Japan and the U.S. will move closer together,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center.

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Left, right, everyone wants growth. But what if that is quite literally a broken record? What if the ‘New Economics’ should be one that questions perpetual growth? After all, growth is no more than an assumption, and there are others.

Jeremy Corbyn Calls For New Economics To Tackle ‘Grotesque Inequality’ (G.)

Jeremy Corbyn said the UK needed a serious debate about wealth creation, as he called for a new style of economics to tackle Britain’s “grotesque inequality”. Closing a Labour state of the economy conference in central London on Saturday, the party’s leader said: “Wealth creation is a good thing: we all want greater prosperity. But let us have a serious debate about how wealth is created, and how that wealth should be shared.” Corbyn also said a Labour government would “chase down the tax avoiders and the tax evaders” and ensure HMRC had the resources it needed to do so. Labour needed to be ambitious and bold to win the next election, he said. In the meantime, he insisted that the party could make a difference despite the frustrations of being in opposition.

“We must continue to stand up against the Conservative six-year record of mismanagement of the economy – and stand up for the vital services on which we all depend.” George Osborne had vowed six years ago that austerity would wipe out the deficit, Corbyn said. “That’s the wonderful thing about George Osborne’s five-year plans: they’re always five years away,” he added. Shopfloor workers, entrepreneurs and technicians should be put in the driving seat, the Labour leader said. “We want to see a genuinely mixed economy of public and social enterprise, alongside a private sector with a long-term private business commitment, that will provide the decent pay, jobs, housing, schools, health and social care of the future. Labour will always seek to distribute the rewards of growth more fairly. But to deliver that growth demands real change in the way the economy is run,” Corbyn said.

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Citi’s Matt King on markets that are supposed to self-stabilize, a still popular notion. Despite the fact that, as Minsky noted quite a while ago, stability breeds instability.

“We Are Becoming Convinced That The System Won’t Stabilize” (Matt King)

Take market liquidity, for example. Despite near-record notional volumes on TRACE, and policymakers’ protestations that nothing has really changed, market participants continue to lament that bid-offer is misleading, and depth is not what it used to be. Worse, many managers have struggled to make money on the basis of traditional single-name fundamentals, and poor performance is contributing to a steady leakage of flows away from traditional benchmarked funds towards totalreturn funds, indices and ETFs. The shift is not unique to credit: in European equities, futures-to-cash ratios – one convenient measure of index trading versus single-name trading – have reached all-time highs, for example (Figure 1).

Traditional thinking would not read too much into this. A decline in active single-name trading by some market participants should lead to greater dislocations, and hence greater opportunities for others. As index, or asset class, or factor investing becomes more popular, so it should become harder to make money there, and money should return to single-name trading. The system should stabilize. We are becoming more and more convinced this is wrong. In ways that were underappreciated at the time, the pre-crisis era of unlimited leverage led to a veritable bonanza for sellside and buyside alike, in which trading begat more trading, and liquidity begat liquidity. Cyclicals vs non-cyclicals. Value vs momentum. On-the-runs vs off-the-runs. Cash vs CDS. Single names vs indices. The constant arbitraging of relative value relationships led to regular patterns of mean reversion, which in turn encouraged more investors to trade.

In the post-crisis era, this process is running in reverse. Yet what started as a simple desire by regulators to curtail excesses of leverage risks is having much more farreaching repercussions. The curtailment of the hedge fund bid means that many relationships which previously mean reverted are now failing to do so, or at a minimum are doing so much more erratically. Cyclicals vs non-cyclicals. Value vs momentum. On-the-runs vs off-the-runs. Cash vs CDS. Single names vs indices. In principle, these aberrations do constitute trading opportunities – but only for investors with sufficiently strong stomachs and long time horizons, which these days nobody has. Central bank distortions have exacerbated these movements, making investor interest more one-sided and leading one market after another to exhibit more bubble-like tendencies, rising exponentially and then falling back abruptly.

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More broken records.

Greece Braces for More Austerity Amid EU-IMF Quarrel About Debt (BBG)

Greek Prime Minister Alexis Tsipras braces for yet another vote on additional austerity measures, as European creditors remain at loggerheads with the IMF about how much debt relief the country will get for its pain. Lawmakers in Athens are scheduled to vote Sunday evening on an omnibus bill that includes measures ranging from the taxation of diamond dust and coffee to the transfer of thousands of real estate assets from the state to a new privatization fund. The debate will test the resilience of Tsipras’s three-seat parliamentary majority, as euro-area states resist calls from the IMF to set less ambitious fiscal targets and hand Greece more generous debt relief.

Approval of the measures is one of the prior actions Greece has to fulfill to unlock the next tranche of emergency loans from the European Stability Mechanism, the currency bloc’s crisis-fighting fund. The Eurogroup of 19 finance ministers will convene Tuesday to assess the country’s compliance with its latest bailout agreement struck in the summer of 2015. A positive assessment is also a condition for the Eurogroup to ease the servicing terms for over €200 billion of bailout loans handed to the country since 2010.

[..] The Washington-based IMF proposed that interest and principal payments on Greece’s European bailout loans be deferred until 2040, and that maturities on those loans will be extended to 2080, according to a document obtained by Bloomberg News. Even though European counter-proposals acknowledge that current Greek debt dynamics are unsustainable, they fall short of what the IMF wants, according to people familiar with the discussions that took place between government officials over the past week. Instead, the euro area expects Greece to maintain a budget surplus level which the IMF has said is a “far-fetched fantasy.”

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Really? Are you sure IMF and EU are not playing good cop bad cop here?

This Time, The IMF Comes Bearing Gifts For The Greeks (G.)

Another Sunday, another vote in the Greek parliament, another self-imposed punishment beating as the parliament in Athens votes through fresh austerity measures. There will be higher VAT and an increase in taxes on all the pleasures of life: coffee, booze, fags, gambling, even pay TV. And just in case Greece might need to tighten its belt by another couple of notches to meet stringent budget targets, there will be additional measures that will kick in if there is any fiscal slippage over the next couple of years. George Harrison started his song Taxman with the words: “Let me tell you how it will be/There’s one for you, nineteen for me.” The Greeks know exactly what he meant. Greece’s predicament is simple. It has debt repayments to make this summer and it doesn’t have the money to pay the bills.


David Simonds/Observer

The EU can solve this acute cashflow problem by unlocking the funds pledged to Greece under the terms of last summer’s bailout agreement, but it will only do so if Athens demonstrates that it is serious about sorting out its budget. Austerity today will lead to generosity from EU finance ministers when they meet on Tuesday. That, at least, is the hope of Alexis Tsipras, Greece’s prime minister, who is looking for a package in which he gets debt relief in return for austerity. Here’s where things get interesting. The difference between this Sunday and all the other tension-packed Sundays that have studded the Greek crisis over the past six and a half years is that, this time, the battle is not between Greece and the “troika” of the European commission, the ECB and the IMF. Instead, there is a face-off between Europe and the IMF.

The Europeans badly want the fund to be part of Greece’s bailout and to contribute money to it. But Christine Lagarde, the IMF’s managing director, says her support is conditional on two things: a credible deficit reduction plan and a decent slug of debt relief. Hardline EU governments, led by Germany, have resisted this idea, fearing the Greeks will interpret any writedown of its debts as a sign of weakness that Athens will exploit to avoid meeting its budgetary commitments.

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“Back to 1913. Isn’t it one of the most curious facts that all these historical figures [Tito, Hitler, Stalin, Trotsky, Freud and Franz Ferdinand] lived at the same time at the same place, maybe only a few hundred metres apart? Did any of them ever meet? Were they drinking coffee at the same place? Would the world history look different if Hitler had been psychoanalysed by Freud?”

Europe Should Heed The Lessons of 1913 (Horvat)

Imagine the following group of curious characters living in the same city: a worker from Croatia, one unsuccessful painter, two Russians, a guy who analyses dreams and a young Austrian soldier and trophy hunter. Tito, Hitler, Stalin, Trotsky, Freud and Franz Ferdinand might make for unusual neighbours but, as Charles Emmerson describes in his recent book, 1913: In Search of the World Before the Great War, they spent plenty of time in the same two square miles of the capital of the Austro-Hungarian empire, Vienna, in 1913. Only one year later, Franz Ferdinand would become the Archduke of the empire, and his assassination in Sarajevo would lead to the first world war. In 1917, the two Russians became the leading figures of the October revolution and, about the same time, Tito – who would soon become leader of Yugoslavia – became active in the communist movement too.

Sixteen years later, on 30 January 1933, the unsuccessful painter became German Reichskanzler – the second world war was just around the corner. And Freud? After Nazi Germany annexed Austria in 1938, the Gestapo came after him and he became a refugee in London. In short, 1913 was one in which the course of history could have altered significantly. I am in no doubt that now might be another such period. At its collapse, the Austro-Hungarian empire consisted of 15 nations and more than 50 million inhabitants. The EU consists of 28 member states – with some now threatening to exit – and a population of 500 million.

Today’s Austria is facing one of its biggest political crises with the resignation of its chancellor, Werner Faymann, a second round of presidential elections looming on 22 May – which will in all likelihood result in a turn to the right – and, at the same time, nationalist calls for a referendum on Tyrol unification. We don’t know if some future Stalin or Hitler is living in Vienna, but the whole of Europe seems to be on the verge of an abyss. Recent news about a Syrian refugee who was shot by guards on the border between Slovakia and Hungary, and Turkish forces using live bullets to drive away Syrian refugees fleeing violence in their home towns point in that direction. If countries such as Denmark and Switzerland start to seize refugees’ assets, what is left of the European project nominally based on solidarity and brotherhood (“Alle Menschen werden Brüder …”, as the official anthem of the EU claims)?

The refugee crisis wasn’t – and can’t be – solved by investing €6bn in Turkey and “outsourcing” the “redundant humans” to the periphery of Europe again. Moreover, the case of German comedian Jan Boehmermann, who was charged for allegedly insulting the Turkish president, Recep Erdogan, shows that the EU’s only foreign policy is something we might call “export-import”. First we export wars (to Libya or Syria), then we import refugees. Then we export the refugees again (to Turkey), and then we import authoritarian values from Turkey, which is now killing one of the foundations of the European project – free speech. And humour.

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And there’s more…

New Evidence About The Dangers Of Monsanto’s Roundup (Intercept)

Some European governments have already begun taking action against one {Roundup’s] co-formulants, a chemical known as polyethoxylated tallowamine, or POEA, which is used in Monsanto’s Roundup Classic and Roundup Original formulations, among other weed killers, to aid in penetrating the waxy surface of plants. Germany removed all herbicides containing POEA from the market in 2014, after a forestry worker who had been exposed to it developed toxic inflammation of the lungs. In early April, the French national health and safety agency known as ANSES took the first step toward banning products that combine glyphosate and POEA. A draft of the European Commission’s reregistration report on glyphosate proposed banning POEA.

[..] manufacturers of weed killers are required to disclose only the chemical structures of their “active” ingredients — and can hide the identity of the rest as confidential business information — for many years no one knew exactly what other chemicals were in these products, let alone how they affected health. In 2012, Robin Mesnage decided to change that. A cellular and molecular toxicologist in London, Mesnage bought nine herbicides containing glyphosate, including five different formulations of Roundup, and reverse engineered some of the other components. After studying the chemicals’ patterns using mass spectrometry, Mesnage and his colleagues came up with a list of possible molecular structures and then compared them with available chemical samples.

“It took around one year and three people (a specialist in pesticide toxicology, a specialist of chemical mixtures, and a specialist in mass spectrometry) to unravel the secrets of Monsanto’s Roundup formulations,” Mesnage explained in an email. The hard work paid off. In 2013, his team was able not only to deduce the chemical structure of additives in six of the nine formulations but also to show that each of these supposedly inert ingredients was more toxic than glyphosate alone. That breakthrough helped scientists know exactly which chemicals to study, though obtaining samples remains challenging. “We still can’t get them to make experiments,” said Nicolas Defarge, a molecular biologist based in Paris. Manufacturers of co-formulants are unwilling to “sell you anything if you are not a pesticide manufacturer, and even less if you are a scientist willing to assess their toxicity.”

So when Defarge, Mesnage, and five other scientists embarked on their most recent research, they had to be creative. They were able to buy six weed killers, including Roundup WeatherMax and Roundup Classic, at the store. But, finding pure samples of the co-formulants in them was trickier. The scientists got one from a farmer who mixes his own herbicide. For another, they went to a company that uses the chemical to make soap. “They were of course not aware that I was going to assess it for toxic and endocrine-disrupting effects,” said Defarge. András Székács, one of Defarge’s co-authors who is based in Hungary, provided samples of the other three co-formulants studied, but didn’t respond to inquiries about how he obtained them.

In February, the team published its findings, which showed that each of the five co-formulants affected the function of both the mitochondria in human placental cells and aromatase, an enzyme that affects sexual development. Not only did these chemicals, which aren’t named on herbicide labels, affect biological functions, they did so at levels far below the concentrations used in commercially available products. In fact, POEA — officially an “inert” ingredient — was between 1,200 and 2,000 times more toxic to cells than glyphosate, officially the “active” ingredient.

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Interesting thoughts. Long article. Not sure how fast our hands could change, though, and quite sure our present tech push will be interrupted.

Technology Is Changing Our Hands (G.)

The new era of the internet, the smartphone and the PC has had radical effects on who we are and how we relate to each other. The old boundaries of space and time seem collapsed thanks to the digital technology that structures everyday life. We can communicate instantly across both vast and minute distances, Skyping a relative on another continent or texting a classmate sitting at the next table. Videos and photos course through the web at the touch of a screen, and social media broadcast the minutiae of both public and private lives. On the train, the bus, in the cafe and the car, this is what people are doing, tapping and talking, browsing and clicking, scrolling and swiping.

Philosophers, social theorists, psychologists and anthropologists have all spoken of the new reality that we inhabit as a result of these changes. Relationships are arguably more shallow or more profound, more durable or more transitory, more fragile or more grounded. But what if we were to see this chapter in human history through a slightly different lens? What if, rather than focusing on the new promises or discontents of contemporary civilisation, we see today’s changes as first and foremost changes in what human beings do with their hands? The digital age may have transformed many aspects of our experience, but its most obvious yet neglected feature is that it allows people to keep their hands busy in a variety of unprecedented ways.

The owner of the Shakespeare and Company bookshop describes the way young people now try to turn pages by scrolling them, and Apple have even applied for patents for certain hand gestures. Patent application 7844915, filed in 2007, covered document scrolling and the pinch-to-zoom gesture, while the 2008 application 7479949 covered a range of multitouch gestures. Both were ruled invalid, not because gestures can’t be patented, but because they were already covered by prior patents. At the same time, doctors observe massive increases in computer- and phone-related hand problems, as the fingers and wrist are being used for new movements that nothing has prepared them for.

Changes to both the hard and soft tissues of the hand itself are predicted as a consequence of this new regime. We will, ultimately, have different hands, in the same way that the structure of the mouth has been altered, it is argued, by the introduction of cutlery, which changed the topography of the bite. The edge-to-edge bite that we used to have up to around 250 years ago became the overbite, with the top incisors hanging over the lower set, thanks to new ways of cutting up food that the table knife made possible. That the body is secondary to the technology here is echoed in the branding of today’s products: it is the pad and the phone that are capitalised in the iPad and iPhone rather than the “I” of the user.

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The world risks reaching crisis fatigue. Largely because of how the media present them.

The Worst Famine Since 1985 Looms Across Africa (G.)

Countries are just waking up to the most serious global food crisis of the last 25 years. Caused by the strongest El Niño weather event since 1982, droughts and heatwaves have ravaged much of India, Latin America and parts of south-east Asia. But the worst effects of this natural phenomenon, which begins with waters warming in the equatorial Pacific, are to be found in southern Africa. A second consecutive year without rain now threatens catastrophe for some of the poorest people in the world. The scale of the crisis unfolding in 10 or more southern African countries has shocked the United Nations. Lulled into thinking that Ethiopia in 1985 was the last of the large-scale famines affecting many millions, donor countries have been slow to pledge funds or support. More than $650m and 7.9m tonnes of food are needed immediately, says the UN. By Christmas, the situation will have become severe.

The scale of the crisis unfolding in 10 or more southern African countries has shocked the United Nations. Lulled into thinking that Ethiopia in 1985 was the last of the large-scale famines affecting many millions, donor countries have been slow to pledge funds or support. More than $650m and 7.9m tonnes of food are needed immediately, says the UN. By Christmas, the situation will have become severe. Malawi, Mozambique, Lesotho, Zimbabwe, Namibia, Madagascar, Angola and Swaziland have already declared national emergencies or disasters, as have seven of South Africa’s nine provinces. Other countries, including Botswana and the Democratic Republic of the Congo, have also been badly hit. President Robert Mugabe has appealed for $1.5bn to buy food for Zimbabwe and Malawi is expected to declare that more than 8 million people, or half the country, will need food aid by November.

More than 31 million people in the region are said by the UN to need food now, but this number is expected to rise to at least 49 million across almost all of southern Africa by Christmas. With 12 million more hungry people in Ethiopia, 7 million in Yemen, 6 million in Southern Sudan and more in the Central African Republic and Chad, a continent-scale food crisis is unfolding. “Food security across southern Africa will start deteriorating by July, reaching its peak between December 2016 and April 2017,” says the UN’s office for humanitarian affairs. The regional cereal deficit already stands at 7.9m tonnes and continues to put upward pressure on market prices, which are already showing unprecedented increases, diminishing purchasing power and thereby reducing food access. As food insecurity tightens and water scarcity increases due to the drought, there are early signs of acute malnutrition in Madagascar, Malawi, Mozambique and Zimbabwe.

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May 212016
 
 May 21, 2016  Posted by at 9:17 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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NPC National Service Co. front, 1610 14th Street N.W., Washington DC 1920


One-Third Of Chinese Real Estate Companies Are “Zombies” (Nikkei)
Defaults Throw Wrench in China’s $3 Trillion Company Bond Engine (BBG)
Easy Money = Overcapacity = Deflation (Rubino)
Cash-Stuffed US Balance Sheets No Match for Even Bigger Debt Loads (BBG)
US, Japan FX Row Overshadows G7 Meeting (R.)
Crude Tanker Storage Fleet Off Singapore Points To Stubborn Oil Glut (R.)
How Freddie and Fannie Are Held Captive (Morgenson)
TTIP: The Most Toxic Acronym In Europe (G.)
Monsanto Weedkiller Faces Recall From Europe After EU Fail To Agree Deal (G.)
Turkey Faces United EU Front in Row Over Visa-Free Travel (BBG)
EU Ministers Press Greece to Send More Syrians Back to Turkey (WSJ)
Syrian Refugee Wins Appeal Against Forced Return To Turkey (G.)

“..on the brink of default but still taking on more debt.”

One-Third Of Chinese Real Estate Companies Are “Zombies” (Nikkei)

As China’s economy continues to sputter, many local companies are having difficulty servicing their debts. A look at 3,000 listed Chinese businesses by French investment bank Natixis found that interest costs exceeded cash flow for 18.5% of them last year, compared with 8% in 2010. Real estate, the most debt-ridden sector, saw its leverage level reach 197% last year, nearly double the figure for 2008, according to Natixis. The investment bank estimates that almost one-third of listed companies in the sector are “zombies” – businesses that are on the brink of default but still taking on more debt.

“The share of zombies in the real estate sector literally doubles the average in [corporate] China,” said Iris Pang, senior economist for greater China at Natixis. Evergrande Real Estate, for example, saw its ratio of total liabilities to earnings before interest, taxes, depreciation and amortization – or EBITDA – leap to 15.4% at the end of 2015 from 8.5% a year earlier. The figure climbed to 28.6% from 14.9% at Greenland Holdings, 26.8% from 9.7% at Sunac China Holdings, and 58.5% from 20% at Shui On Land. A study released in May by brokerage CLSA of China’s property, mining, manufacturing, utilities, construction, and wholesale and retail sectors counted potential problem debts of 14 trillion yuan ($2.14 trillion) as of the end of 2015.

The property sector represented over half the total, at 54.1%, with industries plagued by excess capacity, such as utilities, steel and coal, accounting for much of the rest. Notably, most of the recent corporate bond defaults have come from these loss-making sectors too, including state-owned power equipment manufacturer Baoding Tianwei and Dongbei Special Steel. Worries about large-scale layoffs, especially in the steel and coal industries, have held the government back from pushing strongly on necessary capacity cutbacks. Instead, state banks have continued to extend more loans, said Francis Cheung at CLSA. Cheung estimates that the actual proportion of questionable debts on the books of China’s banks stands at 15-20%, compared with the 5.76% total reported by the central bank at the end of the first quarter for nonperforming loans and so-called special mention loans.

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Needing new debt to pay off the old. 72% of new debt is one year or less. Hmm..

Defaults Throw Wrench in China’s $3 Trillion Company Bond Engine (BBG)

Defaults and pulled sales are starting to gum up China’s bond refinancing machine. Chinese companies issued 382.7 billion yuan ($58.5 billion) of notes onshore this month, down 11% from the same period in April and 57% March, data compiled by Bloomberg show. With just eight trading days to go, fundraising may fall short of the record 547.3 billion yuan of debt due. That would mark a shift after sales were 83% more than maturities in April and almost three times higher in March. The faltering $3 trillion corporate bond market will test Premier Li Keqiang’s determination to weed out zombie companies dragging on growth in the world’s second-biggest economy. At least 10 issuers have reneged on onshore debt obligations this year, while 153 Chinese firms have pulled 175 billion yuan of domestic sales this quarter.

Shandong Iron & Steel, which canceled a 3 billion yuan bond offering on May 4, has 3 billion yuan of securities due this month and 30 billion yuan to repay this year. “Many Chinese companies are relying on new borrowings to repay their old debt,” said Liu Dongliang, a senior analyst at China Merchants Bank in Shenzhen. “If they can’t get the money they need, more will default.” Debt-laden companies are struggling to lock in stable, longer-term financing. Sales of onshore bonds maturing in one year or less accounted for 72% of issuance by Chinese coal and steel producers from May 2015 to April 2016, as many were unable to sell longer debt, according to Fitch Ratings. Most of the proceeds were used to refinance maturing notes, Fitch wrote in a May 13 report. “Only the best companies, which have strong profitability or trustworthy credit profiles, are able to sell bonds,” said Qiu Xinhong at First State Cinda Fund Management. “Confidence won’t rebound in the short term.”

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It really is that easy.

Easy Money = Overcapacity = Deflation (Rubino)

Somewhere back in the depths of time the world got the idea that easy money — that is, low interest rates and high levels of government spending — would produce sustainable growth with modest but positive inflation. And for a while it seemed to work. But that was an illusion. What actually happened was textbook, long-term, surreally-vast misallocation of capital in which individuals, companies and governments were fooled into thinking that adding new factories, stores and infrastructure at a rate several times that of population growth would somehow work out for the best.

China, as with so many other things, was the epicenter of this delusion. In response to the 2008-2009 financial crisis it borrowed more money than any other country ever, and spent most of the proceeds on infrastructure and basic industry. It’s steel-making capacity, already huge by 2008, kept growing right through the Great Recession, and now dwarfs that of any other country.

China steel produciton

The result was indeed higher prices for iron ore and finished steel up front (that is, the inflation the architects of the easy money era expected and desired). But this was soon followed by falling prices as the rest of the world’s steel makers tried to stay in the game.

Steel price

It’s the same story pretty much everywhere. Miners that produced the raw materials for the infrastructure/industrial build-out started projects based on inflated price projections and now have no choice but to keep producing to cover variable costs and avoid bankruptcy. Prices of virtually every commodity have as a result plunged. In the US, retailers built new stores at a pace that vastly exceeded population growth, apparently on the assumption that consumers would keep borrowing in order to buy ever-greater amounts of semi-useless stuff. And now bricks and mortar retailing is suffering a mass-die-off.

Retail space per capita

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Something’s got to give at some point.

Cash-Stuffed US Balance Sheets No Match for Even Bigger Debt Loads (BBG)

There’s more cash sitting on company balance sheets than ever before. For the first time since 2012, that’s not enough. Combining all of the corporate cash in the U.S. wouldn’t cover the $1.8 trillion of corporate debt that’s coming due in the next five years, according to a report by Moody’s Investors Service on Friday. That’s because U.S. companies have been borrowing more quickly than they’ve built up the record $1.68 trillion of cash on their balance sheets. And more of that debt comes due sooner. “You’re seeing more and more borrowing,” Richard Lane, a senior vice president at Moody’s, said by phone. “The increase in leverage has been notable. Cash coverage of near-term maturities hasn’t fallen below 100% since 2012, and hasn’t been as low as its current 93% since the year before that, according to Moody’s.

One reason may be that companies are making less money from merely running their businesses. Cash flow from operations declined 0.2% to $1.54 trillion in the 12 months ended in December 2015, the first time the metric declined in Moody’s data going back to 2007. To cope with sluggish global growth, companies went to the bond market to raise cash at rock-bottom rates. They issued a record $1.4 trillion of bonds last year, according to data compiled by Bloomberg. That helped lead to a 17% increase in the amount of company debt outstanding that matures in the next five years. In contrast, cash holdings only increased by 1.8% among U.S. non-financial companies at the end of 2015, according to Moody’s. The credit rater’s definition of cash includes short-term investments and liquid long-term investments.

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Was always inevitable.

US, Japan FX Row Overshadows G7 Meeting (R.)

The United States issued a fresh warning to Japan against competitive currency devaluation on Saturday, exposing a rift on exchange-rate policy that overshadowed a Group of 7 finance leaders gathering hosted by the Asian nation. Japan and the United States are at logger-heads over currency policy with Washington saying Tokyo has no justification to intervene in the market to stem yen gains, given the currency’s moves remain “orderly”. In bilateral talks ahead of the second day of G7 talks in Sendai, Japan on Saturday, U.S. Treasury Secretary Jack Lew told Japanese Finance Minister Taro Aso that it was important to refrain from competitive currency devaluation.

“Secretary Lew underscored that the commitments made by the G-20 in Shanghai to use all policy tools to promote growth – fiscal policy, monetary policy and structural reforms – and to refrain from competitive devaluation and communicate closely have helped to contribute to confidence in the global economy in recent months,” according to a statement by the Treasury Department.

“He noted the importance of countries continuing to adhere to those commitments,” the statement said. As years of aggressive money printing stretch the limits of monetary policy, the G7 policy response to anemic inflation and subdued growth has become increasingly splintered. Germany has shown no signs of responding to calls from Japan and the United States to boost fiscal spending. Washington also warned Tokyo against relying too much on monetary policy with a senior U.S. Treasury official saying structural reforms are being put in place in Japan “but slowly.”

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“..traders fully aware that they will not make a profit from storing the oil. This isn’t a trade play, it’s the oil market looking for places to store unsold fuel..”

Crude Tanker Storage Fleet Off Singapore Points To Stubborn Oil Glut (R.)

Prices for oil futures have jumped by almost a quarter since April, lifted by severe supply disruptions caused by triggers such as Canadian wildfires, acts of sabotage in Nigeria, and civil war in Libya. Yet flying into Singapore, the oil trading hub for the world’s biggest consumer region, Asia, reveals another picture: that a global glut that pulled down prices by over 70% between 2014 and early 2016 is nowhere near over, and that financial traders betting on higher crude oil futures may be in for a surprise from the physical market. “I’ve been coming to Singapore once a year for the last 15 years, and flying in I have never seen the waters so full of idle tankers,” said a senior European oil trader a day after arriving in the city-state.


Red dots are ships at anchor or barely moving, oil tankers or cargo (ZH)

As Asia’s main physical oil trading hub, the number of parked tankers sitting off Singapore’s coast or in nearby Malaysian waters is seen by many as a gauge of the industry’s health. Judging by this, oil markets are still sickly: a fleet of 40 supertankers is currently anchored in the region’s coastal waters for use as floating storage facilities. The tankers are filled with 47.7 million barrels of oil, mostly crude, up 10% from the previous week, according to newly collected freight data in Thomson Reuters Eikon. That’s enough oil to satisfy five working days of Chinese demand, suggesting recent supply disruptions – which have mostly occurred in the Americas, Africa and Europe – have done little to tighten supply in Asia as Middle East producers keep output near record volumes in a bid to win market share.

[..] the need to store oil is so strong that traders are calling up banks to finance storage charters despite there being no profit in keeping fuel in tankers at current rates. “We are receiving unusually high amounts of queries to finance storage charters,” said a senior oil trade financier with a major bank in Asia. “These queries come from traders fully aware that they will not make a profit from storing the oil. This isn’t a trade play, it’s the oil market looking for places to store unsold fuel,” he added.

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This story is getting very strange. The level of secrecy is off the charts.

How Freddie and Fannie Are Held Captive (Morgenson)

When Washington took over the beleaguered mortgage giants Fannie Mae and Freddie Mac during the collapse of the housing market and the financial crisis of 2008, it was with the implicit promise that they would be returned to shareholders after being nursed back to health. But now, with the unsealing of documents this week that were produced as part of a lawsuit filed against the government, new evidence is coming to light on how intimately the White House was involved in the Treasury’s decision in August 2012 to divert all the companies’ profits to the Treasury Department. That move effectively maintained Fannie and Freddie’s status as wards of the state.

An email from Jim Parrott, then a top White House official on housing finance, was sent the day the so-called profit sweep was announced. It said that the change was structured to ensure that the companies couldn’t “repay their debt and escape as it were.” The documents also show Treasury moving to modify the terms of the mortgage finance giants’ $187.5 billion bailout shortly after a July 2012 meeting when the Federal Housing Finance Agency, Fannie’s and Freddie’s regulator, learned that they were about to enter “the golden years” of profitability. Since then, Fannie and Freddie have returned to the Treasury over $50 billion more than they received in the bailout. The amount they owe to the government remains outstanding.

The new materials cast further doubt on arguments made in court by government lawyers that the profit sweep came about because Fannie and Freddie were in a death spiral and taxpayers needed protection from future losses. Documents unsealed last month also served to undermine that legal stance. The trickle of documents comes years after Fannie and Freddie shareholders filed suits against the government, contending that its decision regarding the companies’ profits was illegal. Defending against an array of these suits, lawyers for the Justice Department have requested confidential treatment for thousands of pages of materials. In a case brought in Federal Claims Court, the government’s lawyers asserted presidential privilege in 45 documents.

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Falling apart pretty fast.

TTIP: The Most Toxic Acronym In Europe (G.)

David Cameron narrowly avoided the parliamentary defeat of his Queen’s speech this week – an event that, theoretically, triggers the fall of a government and hasn’t happened since 1924. That was only achieved through an embarrassing U-turn on TTIP, the Transatlantic Trade and Investment Partnership, which he ardently supports. One of the primary concerns about TTIP is that it could pave the way to further privatisation of the NHS. Yesterday, a group of MPs gave notice that they would table an amendment to the Queen’s speech, lamenting the fact that the government had not included a bill to protect the NHS from TTIP in its programme. The cross-party group was led by Peter Lilley, a long-time supporter of free trade and a former minister under Margaret Thatcher and John Major, and was supported by at least 25 Tory MPs – easily enough to overturn the government’s majority.

Though many were Brexiters, by no means all were, and some, such as Sarah Wollaston, appear to have changed their position on TTIP. Realising he faced one of the most embarrassing defeats of his premiership – one not suffered since a similar motion removed Stanley Baldwin from office in 1924 – Cameron quickly said he’d support the amendment. Make no bones about it, this is a humiliation. The prime minister has repeatedly told MPs that TTIP poses no threat to the NHS. Yet to avoid the abyss, his government has supported an amendment contrary to these assertions. We must be under no illusions that he has any intention of moving to protect the NHS in TTIP. How did it come to this? The obvious answer is the EU referendum, which has brought into the open fundamental divisions within the Tory party.

But this only provided the opportunity for parliamentary defeat. If this had gone to a vote, the vast majority of MPs opposing the government in fact support remaining in the EU, and wouldn’t take part in anything that would make Brexit more likely. The reasons go deeper – and they mirror what is happening all over the EU and US. TTIP started out as an obscure trade agreement that would create the world’s biggest “free trade zone” between the US and EU, and received little media coverage or parliamentary debate. Two years ago very few politicians or journalists had even heard of it. Yet a movement has built against this deal, one that has stunned the negotiators and forced the EU trade commissioner to call TTIP “the most toxic acronym in Europe”.

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“More than 99% of people in one recent German survey were found to have traces of the compound in their urine, 75% of them at levels five times the safe limit for water or above.”

Monsanto Weedkiller Faces Recall From Europe After EU Fail To Agree Deal (G.)

Bestselling weedkillers by Monsanto, Dow and Syngenta could be removed from shops across Europe by July, after an EU committee failed for a second time to agree on a new license for its core ingredient, glyphosate. The issue has divided EU nations, academics and the WHO itself. One WHO agency found it to be “probably carcinogenic to humans” while another ruled that glyphosate was unlikely to pose any health risk to humans, in an assessment shaded by conflict of interests allegations earlier this week. EU officials say that while there could be a voluntary grace period of six-12 months, unless a compromise can be found, the product’s license will be allowed to expire on 30 June. One told the Guardian that after its proposal to cutting the authorisation to nine years was rejected, the bloc was now in “uncharted territory” with no clear path to a deal that could reach consensus.

“Our position is clear,” he said. “If we can reach a qualified majority on a text we will go ahead. Otherwise, we have to leave the authorisation to expire and on 30 June member states will need to start withdrawing products containing glyphosate from the market.” Glyphosate is Europe’s most widely used weedkiller, and its parent RoundUp herbicide accounts for a third of Monsanto’s total earnings. The compound is routinely – but not exclusively – used on crops that have been genetically engineered to resist it. Several studies have linked blanket spraying with damage to surrounding flora, fauna and the entire food chain. But the commission moved to relicense it last November, after a crucial European food safety authority (Efsa) report declared it unlikely to cause cancer, although that paper sparked controversy.

Philip Miller, Monsanto’s vice president of global regulatory affairs, condemned the EU’s failure to reapprove glyphosate as “scientifically unwarranted” and “an unprecedented deviation from the EU’s legislative framework”. Writing in a blog post, he said: “This delay undermines the credibility of the European regulatory process and threatens to put European farmers and the European agriculture and chemical industries at a competitive disadvantage.” Richard Garnett, the head of Monsanto’s regulatory affairs unit said that the situation was “discriminatory, disproportionate and wholly unjustified”. The US agri-giant is currently the subject of a takeover bid by the German chemicals multinational, Bayer. Under bloc rules, the commission could now go to an appeals committee but this would have the same balance of countries as the standing committee that has now twice failed to take a decision.

It could also go over the heads of the EU states and independently reauthorise glyphosate as a draft measure. EU president Jean-Claude Juncker has said that he opposes doing this and officials doubt it will happen, although the procedure has been used to approve GM crops for import. A short-term license might also be possible. Glyphosate is so ubiquitous that its residues are commonly found in breads, beers and human bodies. More than 99% of people in one recent German survey were found to have traces of the compound in their urine, 75% of them at levels five times the safe limit for water or above. But the very definition of a safe limit for chemicals such as glyphosate is contested, and linked to a broader regulatory divide between the US’s risk-based approach which errs towards product approvals where doubt cannot be quantified, and the EU’s hazard-based approach, which leans towards a precautionary principle in such situations.

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“.. If not, well, then not. It’s as simple as that.”

Turkey Faces United EU Front in Row Over Visa-Free Travel (BBG)

EU governments showed Turkey a united front in the battle over visa-free travel, insisting Ankara narrow its terrorism legislation to qualify for the perk. The stance by European home-affairs ministers underscores a threat to an EU-Turkey agreement that has stemmed Europe’s biggest refugee wave since World War II and eased domestic political pressure on leaders including German Chancellor Angela Merkel. Turkey sought EU visa-free status in return for signing up to the mid-March deal, under which irregular migrants who enter the EU in Greece are sent back to Turkey and Syrian refugees in Turkish camps are resettled in Europe. The EU has said Turks can win visa-free status by mid-year as long as the Turkish government fulfills five remaining criteria – including on the terrorism law – out of a total of 72.

Turkish President Recep Tayyip Erdogan has signaled he won’t bow to the European demand over terrorism legislation, citing terror risks in Turkey that his critics say are being used as cover to jail political opponents. “We have a clear statement and a clear agreement on visa liberalization: it goes through if you meet the criteria,” Klaas Dijkhoff, migration minister of the Netherlands, current holder of the 28-nation EU’s rotating presidency, told reporters on Friday in Brussels after chairing a meeting with his counterparts from the bloc. “We will see if, over the next few weeks, the criteria are met. If so, we will go ahead. If not, well, then not. It’s as simple as that.” The standoff pits EU political principles against Turkish geopolitical power. Migrant flows into Europe via Turkey during the past year have handed Erdogan leverage over the EU, which has lambasted him for cracking down on domestic dissenters and kept Turkey’s longstanding bid for membership of the bloc largely on hold.

Along with the reintroduction of internal European border checks that shut a migratory route north from Greece, the March 18 EU agreement with Ankara has caused a slump in refugee sea crossings from the Turkish coast to nearby Greek islands. Arrivals in Greece fell to 3,650 last month from 26,971 in March and 57,066 in February, according to the UN refugee agency. On May 6, when commenting on the EU call for Turkish terrorism-rule changes, Erdogan said “we are going our way and you go yours.” He also dared the bloc to “go make a deal with whoever you can.” Erdogan’s position poses a “problem,” said Theo Francken, Belgium’s state secretary for asylum and migration. “It’s clear that all the conditions have to be fulfilled,” Francken told reporters at Friday’s EU meeting. “To get visa liberalization, it’s important that they change their terrorism law.”

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Europe speaks with forked tongue.

EU Ministers Press Greece to Send More Syrians Back to Turkey (WSJ)

European interior ministers on Friday pressured Greece to speed up asylum procedures and send more Syrians back to Turkey. Under a deal signed in March between the EU and Turkey, all migrants, including Syrian refugees are to be sent back to Turkey once they have their asylum applications assessed and rejected by Greek judges. But the first decisions—coming nearly two months after the deal went into effect—ruled mostly in favor of the Syrians applying for asylum. These early figures are raising concerns among EU officials that the intent of the plant to serve as a deterrent will be lost. Austrian minister Wolfgang Sobotka said if the trend continues, it would “at least undermine, if not annul the Turkey agreement.”

Germany, which championed the EU-Turkey deal, in particular pressed Greece for an acceleration in returning migrants to Turkey. German Interior Minister Thomas De Maiziere said that while Turkey is sticking to its part of the deal and arrivals in Greece have dropped, “on the Greek side, procedures take too long and the returns to Turkey are not happening with enough determination.” Mr. De Maiziere said he spoke to his Greek counterpart about the first appeal case won by a Syrian on Friday against a ruling to send him back to Turkey. He said “it was up to Greek authorities to establish what happened,” while insisting that Turkey is a safe country for Syrian refugees.

“Turkey has sheltered 2.5 million refugees, this is a tremendous performance. Despite all political debates that we can have and which are justified. we can’t doubt Turkey’s safe country status,” Mr. De Maiziere said, in reference to a decision Friday by Turkey’s parliament to strip lawmakers critical of the government of their immunity. Given that the Greek appeals body isn’t controlled by the government, the Greek minister asked for support from the EU to state that Turkey is a safe country where Syrian refugees can be sent back, according to one participant in the debate. “Member states today made it clear that they support Greece in considering Turkey a safe country for the return of migrants,” EU migration commissioner Dimitris Avramopoulos said.

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Can’t very well ignore your own judges. But the pressure will be relentless.

Syrian Refugee Wins Appeal Against Forced Return To Turkey (G.)

The EU-Turkey migration deal has been thrown further into chaos after an independent authority examining appeals claims in Greece ruled against sending a Syrian refugee back to Turkey, potentially creating a precedent for thousands of other similar cases. In a landmark case, the appeals committee upheld the appeal of an asylum seeker who had been one of the first Syrians listed for deportation under the terms of the EU-Turkey deal. In a document seen by the Guardian, a three-person appeals committee said Turkey would not give Syrian refugees the rights they were owed under international treaties and therefore overturned the applicant’s deportation order by a verdict of two to one. The case will now be re-assessed from scratch.

The committee’s conclusion stated: “The committee has judged that the temporary protection which could be offered by Turkey to the applicant, as a Syrian citizen, does not offer him rights equivalent to those required by the Geneva convention.” The decision undermines the legal and practical basis for the EU-Turkey deal, which European leaders had hoped would deter refugees from sailing to Europe by ensuring the swift deportation of most people landing on the Greek islands. After signing the deal on 18 March, EU officials claimed these deportations would be legally justified on the basis that Turkey respects refugee rights. But the EU’s executive has little control over Greek asylum protocols. The committee rejected the logic of the EU-Turkey deal, citing some of the EU’s own previous directives as explanations for their decision.

While nearly 400 other asylum seekers have been returned to Turkey under the terms of the deal, no one of Syrian nationality had been sent back against their will – making Friday’s decision a watershed moment. “At its very first test, the EU-Turkey deal crumbles,” said Gauri van Gulik, Amnesty International’s deputy Europe director. The Greek government, which played no part in the independent decision, admitted the judgment had created “a very difficult situation”. Greece’s deputy minister in charge of migration policy, Yannis Mouzalas, said by phone from Brussels: “I have only just learned of the decision by the appeals committee and I have to be in Greece to study it. They are, as you know, independent committees so it is very difficult for me to say anything – but if they think this way, we will have a very difficult situation.” Such a decision goes against all the directives of the UN and UNHCR, Mouzalas claimed. “Really I don’t know how they arrived at it.”

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May 202016
 
 May 20, 2016  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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John Vachon Window in home of unemployed steelworker. Ambridge, PA 1941


Lacking New Ideas, G7 To Agree On ‘Go-Your-Own-Way’ Approach (R.)
Japan And US Are Headed For A Showdown Over Currency Manipulation (MW)
Kuroda Stresses Readiness to Act if Yen Rise Threatens Inflation Goal (WSJ)
US Business Loan Delinquencies Spike to Lehman Moment Level (WS)
China Steelmakers Attack US 522% Tariff Move; Say Need More Time (R.)
The Iron Mountain on China’s Doorstep Tops 100 Million Tons (BBG)
Big Chinese Banks Issue New Yuan-Denominated Debt In US (WSJ)
Mass Layoffs Are Looming in South Korea (BBG)
‘Central Banks Can Do Nothing’: Steen Jakobsen (Saxo)
Making Things Matters. This Is What Britain Forgot (Chang)
Germany Strives to Avoid Housing Bubble (BBG)
Bayer Eyes $42 Billion Monsanto in Quest for Seeds Dominance (BBG)
Bayer’s Mega Monsanto Deal Faces Mega Backlash in Germany (BBG)
EU Declines To Renew Glyphosate Licence (EUO)
Ai Weiwei Says EU’s Refugee Deal With Turkey Is Immoral (G.)

In a strong sign of how fast the crisis is deepening, and in between the usual blah blah, the G7 is falling apart.

Lacking New Ideas, G7 To Agree On ‘Go-Your-Own-Way’ Approach (R.)

A rift on fiscal policy and currencies is likely to set the stage for G7 advanced economies to agree on a “go-your-own-way” response to address risks hindering global economic growth at their finance leaders’ gathering on Friday. As years of aggressive money printing stretch the limits of monetary policy, the G7 policy response to anemic inflation and subdued growth has become increasingly splintered. Finance leaders gathering in Sendai, northeast Japan, sought advice from prominent academics, including Nobel Prize-winning economist Robert Shiller, on ways to boost growth in an informal symposium ahead of an official G7 meeting on Friday.

Participants of the symposium agreed that instead of relying on short-term fiscal stimulus or monetary policy, structural reforms combined with appropriate investment are solutions to achieving sustainable growth, a G7 source said. If so, that would dash Japan’s hopes to garner an agreement on the need for coordinated fiscal action to spur global demand. Germany showed no signs of responding to calls from Japan and the United States to boost fiscal stimulus, instead warning of the dangers of excessive monetary loosening. “There is high nervousness in financial markets” fostered by huge government debt and excess liquidity around the globe, German Finance Minister Wolfgang Schaeuble said on Thursday.

But G7 officials have signaled that they would not object if Japan were to call for stronger action using monetary, fiscal tools and structural reforms – catered to each country’s individual needs. That means the G7 finance leaders, while fretting about risks to outlook, may be unable to agree on concrete steps to bolster stagnant global growth. “I expect there to be a frank exchange of views on how to achieve price stability and growth using monetary, fiscal and structural policies reflecting each country’s needs,” Bank of Japan Governor Haruhiko Kuroda told reporters on Thursday.

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The interests are too different to reconcile, and it’s by no means just Japan and the US that are involved in the showdown.

Japan And US Are Headed For A Showdown Over Currency Manipulation (MW)

Investors will be watching for signs of tension between Japanese and U.S. powers this weekend, when central bankers and finance chiefs face off in Sendai, a city northeast of Tokyo, for the latest Group of 7 summit. The two countries have sparred over the dollar-yen exchange rate in the months since the Japanese currency began a prolonged rise against the dollar. The yen has lost nearly 9% of its value relative to the dollar since the beginning of the year. Last week, Japanese Finance Minister Taro Aso spoke publicly about the continuing disagreement between U.S. and Japanese policy makers over whether the rise in the yen seen since the beginning of the year has been severe enough to warrant an intervention.

Japan might favor a weaker currency primarily because it makes the country’s exports more attractive. “We’ve have often been arguing over the phone,” Aso said, according to The Wall Street Journal. He also reiterated that Japanese officials wouldn’t hesitate to intervene in the market if the currency continued its sharp moves. Plus, he said, the Treasury Department’s decision to put Japan on a currency manipulation monitoring list “won’t constrain” the country’s currency policy. The Treasury published the list for the first time this year, including it as part of a semiannual report on currency practices released late last month. Japan was joined on the list by China, Germany, Taiwan and Korea.

To be included on the Treasury’s watch list, a country must meet at least two of three criteria: A trade surplus with the U.S. larger than $20 billion, a current-account surplus larger than 3% of its GDP—or it must engage in persistent one-sided intervention in the currency market, which the Treasury qualifies as repeated purchases of foreign currency amounting to more than 2% of a country’s GDP over the course of a year.

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And so are all other central bankers.

Kuroda Stresses Readiness to Act if Yen Rise Threatens Inflation Goal (WSJ)

Bank of Japan Gov. Haruhiko Kuroda said he would act quickly if the yen’s rise threatens his inflation goal, highlighting his caution over exchange rates ahead of a major international convention. “Be it exchange rates or anything, if it has negative effects on our efforts to achieve our price-stability target, and from that perspective if we figure that action is necessary, we will undertake additional easing measures,” Mr. Kuroda told reporters Thursday. The remarks by Mr. Kuroda come at a time of tension between the U.S. and Japan over whether the yen’s appreciation seen earlier this year is sharp enough to warrant intervention by authorities. Investors are closely watching whether Tokyo and Washington will continue to clash over yen policy during a meeting in northern Japan Friday and Saturday of finance chiefs from the Group of Seven leading industrialized nations.

Mr. Kuroda defended his policy stance, saying it is no different from that of central banks abroad. He also reiterated that the BOJ has kept in place massive stimulus to achieve its target of 2% inflation, not to guide the yen lower. Mr. Kuroda said that while he is watching how the bank’s negative-rates policy affects the economy, “this doesn’t mean that we will sit idly by until trickle-down effects become clear.” The BOJ will review the need for fresh steps “at every policy meeting,” he added. Speaking of risks facing Japan’s economy, Mr. Kuroda acknowledged that he is “paying close attention” to the coming British referendum to decide whether to leave the European Union.

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“Business loan delinquencies are a leading indicator of big economic trouble.”

US Business Loan Delinquencies Spike to Lehman Moment Level (WS)

This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping. Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released its delinquency and charge-off data for all commercial banks in the first quarter – very sobering data. So here a few nuggets. Consumer loans and credit card loans have been hanging in there so far.

Credit card delinquencies rose in the second half of 2015, but in Q1 2016, they ticked down a little. And mortgage delinquencies are low and falling. When home prices are soaring, no one defaults for long; you can sell the home and pay off your mortgage. Mortgage delinquencies rise after home prices have been falling for a while. They’re a lagging indicator. But on the business side, delinquencies are spiking! Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.

Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion. They’re halfway toward to the all-time peak during the Financial Crisis in Q3 2009 of $53.7 billion. And they’re higher than they’d been in Q3 2008, just as Lehman Brothers had its moment. Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:

Business loan delinquencies are a leading indicator of big economic trouble. They begin to rise at the end of the credit cycle, on loans that were made in good times by over-eager loan officers with the encouragement of the Fed. But suddenly, the weight of this debt poses a major problem for borrowers whose sales, instead of soaring as projected during good times, may be shrinking, and whose expenses may be rising, and there’s no money left to service the loan.

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Hadn’t seen this claim before: “..local steelmakers are more efficient (and enjoy far lower costs) than their international counterparts.”

China Steelmakers Attack US 522% Tariff Move; Say Need More Time (R.)

Chinese steelmakers attacked new U.S. import duties on the country’s steel products as “trade protectionism” on Thursday, saying the world’s biggest producer needs time to address its excess capacity. “There’s too much trade friction and it’s not good for the market,” Liu Zhenjiang, secretary general of the China Iron and Steel Association told Reuters when asked if China will appeal U.S. anti-dumping duties at the WTO. China said it will continue its tax rebates to steel exporters to support the sector’s painful restructuring after the United States said on Tuesday it would impose duties of 522% on Chinese cold-rolled flat steel. China, which accounts for half the world’s steel output, is under fire after its exports hit a record 112 million tonnes last year, with rivals claiming that Chinese steelmakers have been undercutting them in their home markets.

In the four months to April, China’s steel exports have risen nearly 7.6% to 36.9 million tonnes. “It’s not just China’s problem to tackle overcapacity. Everyone should play a part. China needs time,” Liu told an industry conference. “Trade protectionism hurts consumers, (it’s) against free trade and competition,” he added. China’s Commerce Ministry said on Wednesday the United States had employed “unfair methods” during an anti-dumping investigation into Chinese cold-rolled steel products. While a flood of cheap Chinese steel has been blamed for putting some overseas producers out of business, China denies its mills have been dumping their products on foreign markets, stressing that local steelmakers are more efficient and enjoy far lower costs than their international counterparts.

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All we got to do is wait till they run out of space to store it.

The Iron Mountain on China’s Doorstep Tops 100 Million Tons (BBG)

There’s a mountain of iron ore sat right on China’s doorstep. Stockpiles at ports have climbed above 100 million metric tons, offering fresh evidence of increased supplies in the world’s top user that may hurt prices. The inventories swelled 1.6% to 100.45 million tons this week, the highest level since March 2015, according to data from Shanghai Steelhome Information Technology. The holdings, which feed the world’s largest steel industry, have expanded 7.9% this year, and are now large enough to cover more than five weeks’ of imports. Iron ore has traced a boom-bust path over the past two months after investors in China piled into raw-material futures, then changed course after regulators clamped down.

While mills in China churned out record daily output in April to take advantage of a steel price surge, production in the first four months was 2.3% lower than a year earlier. Port inventories in China may continue to increase, BHP Billiton forecast this week. “There’s a lot of optimism actually that steel demand in China will increase,” Ralph Leszczynski at shipbroker Banchero Costa , said by phone. “It’s a bit of an ‘if’ as the economy is still quite fragile,” he said, calling the rise in port stocks “probably excessive.” The raw material with 62% content sank 5.8% to $53.47 a dry ton on Thursday, according to Metal Bulletin Ltd. Prices have tumbled 24% since peaking at more than $70 a ton in April, paring the gain so far in 2016 to 23%.

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A stronger dollar makes this a huge gamble.

Big Chinese Banks Issue New Yuan-Denominated Debt In US (WSJ)

Two of China’s largest banks are issuing new local currency debt in the U.S., offering attractive yields for investors willing to take some currency risk. Industrial and Commercial Bank of China, the world’s largest bank by assets, said it plans on Friday to raise 500 million yuan ($76 million) through 31-day certificates of deposit in the U.S. that will yield 2.6%. Agricultural Bank of China, the third-largest bank in the world, this week sold a 117 million yuan one-year bill that yields 3.35%. Both issues came at a significant premium to the 0.621% yield on the one-year U.S. Treasury bill. But the yuan-denominated debt could pay out less if the currency falls in value. Fed officials last month discussed the possibility of raising interest rates at their June policy meeting, according to minutes from the April meeting released on Wednesday.

A rate increase could cause the yuan to weaken against the dollar. China’s 3% devaluation in August sparked a selloff in yuan-denominated bonds, driving up interest rates in the offshore market, also known as the dim sum market. The new offerings will test demand for Chinese debt in local currency, the first issued by any Chinese bank in the U.S. since last year. China’s one-month interbank rate is currently 2.84%, which means some Chinese banks can borrow at better rates in the U.S. and other foreign markets than at home. The debt also promotes the use of the yuan abroad, one of the conditions set by the IMF when it said last year it would add the Chinese currency to its basket of reserve currencies. The IMF’s inclusion of the yuan is a step toward making the currency fully convertible.

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Take that, G7.

Mass Layoffs Are Looming in South Korea (BBG)

The South Korean government’s push to restructure debt-laden companies is set to cost tens of thousands of workers their jobs in an economy where social security is limited and a rigid labor market reduces the likelihood of getting rehired in a full-time position. Many of the layoffs will be in industrial hubs along the southeast coastline, where shipyards and ports dominate the landscape. These heavy industries, which helped propel South Korea’s growth in previous decades, have seen losses amid a slowdown in global growth, overcapacity and rising competition from China. As a condition of financial support, creditor banks and the government are pushing companies to cut back on staff and sell unprofitable assets. In Korea, losing a permanent, full-time job often means sliding toward poverty, one reason why labor unions stage strikes that at times lead to violent confrontations with employers and police.

A preference for hiring and training young employees, rather than recruiting experienced hands, means that many workers who get laid off drift into day labor or low-wage, temporary contracts that lack insurance and pension benefits, according to Lee Jun Hyup, a research fellow for Hyundai Research Institute. “The possibility of me getting a new job that offers similar income and benefits is about 1%,” said one of about 2,600 employees to be laid off following a previous restructure, of Ssangyong Motor in 2009. The 45-year-old worker, who asked only to be identified by the surname Kim as he tries to get rehired, initially delivered newspapers and worked construction after losing his permanent job. He’s now on a temporary contract at a retailer and taking night shifts as a driver to get by. Despite having these two jobs, his income has been halved. Being fired was “like being pushed into a desert with no water,” Kim said.

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Jakobsen’s always interesting. This is quite a long piece.

‘Central Banks Can Do Nothing’: Steen Jakobsen (Saxo)

TradingFloor.com: The “new nothingness” thesis was based on zero rates, zero growth, zero reforms. But you hinted that all of this nothingness has spilled over into culture and politics as well… do these macro facts hinder peoples’ imagination, or their ability to deal with the problem?

Steen Jakobsen: Yes, I think so. This year, we see a growing gap between the central banks’ narrative – which is that you have a trickle-down impact from lower rates – and [the situation on the ground]. People understand that zero interest rates are a reflection of zero growth, zero inflation, zero hope for changes, and zero reforms. In my opinion as an economist and a market observer, people are smarter than central banks. And because they are smarter, they can live with policy mistakes for a while because the narrative is very strong and because people like (ECB head Mario) Draghi and (Fed chief Janet) Yellen have these platforms from which they not only talk but occasionally shout, and they are deemed to be “credible”, scare quotes mine…

We see [this gap] in the Brexit debate as well, where the elite and the academics talk down to the average voter. By doing that, of course, they alienate the voters from their representatives. That’s what we see globally, that’s why Brazil is going to change presidents, why Ireland could not get its government re-elected with 6% growth. It’s not about the top line, but about the average person seeing that we need real, fundamental change.

TF: Earlier this year, you said that the social contract – the agreement between rulers and the ruled – is broken. It made me think of this year’s Davos meeting, which showed a leadership class terrified of slowing jobs growth and enamoured with the idea that population movements might be used to address this. Given the current unpopularity of globalisation and its effects, would you say that there are some things it is impossible for 21st century leaders and the led to agree upon? Is a social contract impossible?

SJ: No, it could be re-established, but it needs to be established on terra firma. Right now, we have a panacea in the form of low rates and the idea that things will somehow improve in six months. This has led to buyback programmes, a lack of motivation [and all the rest]. We as a society have to recognise that productivity comes from raising the average education level. People forget that all the revolutionary trends, the changes we’ve seen in history, have come from basic research. I don’t mean research driven by profit, but by an individual’s particular interest in one very minute area of a specific topic. This is what creates new inventions.

The second thing we often forget is that the military has been behind a lot of the industrial revolution. Mobile telephony, for example, had nothing to do with private citizens or companies – instead, it had a lot to do with the US military. The key thing here is that we need to be more productive. If everyone has a job, there is no need to renegotiate the social contract. The world has become elitist in every way. Before, you could start a company and build a small franchise; now, you have to be global, you have to have a billion users (if you’re an IT company), and [the pursuit of this] does not necessarily provide the best technologies, but only the biggest ones, the ones backed by [the firms with] the deepest pockets and largest web of connections.

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It’s what many countries ‘forgot’.

Making Things Matters. This Is What Britain Forgot (Chang)

It’s being blamed on the Brexit jitters. But the weakness in the UK economy that the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the 2008 financial crisis. At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year. At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing.

Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and manufacturing’s share of GDP has stagnated at around 10%. This is remarkable, given that the value of sterling has fallen by around 30% since the crisis. In any other country a currency devaluation of this magnitude would have generated an export boom in manufactured goods, leading to an expansion of the sector. Unfortunately manufacturing had been so weakened since the 1980s that it didn’t have a hope of staging any such revival. Even with a massive devaluation, the UK’s trade balance in manufacturing goods (that is, manufacturing exports minus imports) as a proportion of GDP has hardly budged.

The weakness of manufacturing is the main reason for the UK’s ever-growing deficit, which stood at 5.2% of GDP in 2015. Some play down the concerns: the UK, we hear, is still the seventh or eighth largest manufacturing nation in the world – after the US, China, Japan, Germany, South Korea, France and Italy. But it only gets this ranking because it has a large population. In terms of per capita output, it ranks somewhere between 20th and 25th. In other words, saying that we need not worry about the UK’s manufacturing sector because it is still one of the largest is like saying that a poor family with lots of its members working at low wages need not worry about money because their total income is bigger than that of another family with fewer, high-earning members.

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Just keep rates low enough for long enough and you’ll screw up any economy.

Germany Strives to Avoid Housing Bubble (BBG)

The German government, after years of warnings, is about to clamp down on rising home prices and mortgage lending. The government is preparing to implement measures to prevent real estate bubbles, the Finance Ministry said in an e-mail late on Wednesday. These policies may include capping borrowers’ loan-to-income ratio in order to reduce the probability of default, Handelsblatt reported on Thursday. The government continues to study the consequences of low interest rates on financial stability, a finance ministry spokesman said in the e-mail. However, there are currently no signs that German residential real estate lending is causing acute risks, he said.

With mortgage rates at record lows and savings accounts earnings almost nothing – thanks to a string of ECB rate cuts – Germans are buying homes at the fastest rate in decades. That’s pushed prices in cities including Berlin, Hamburg and Munich up by more than 30% in five years. New mortgages jumped by 22% in 2015 after five years of rising at 3% or less, according to the Bundesbank. In March, Bundesbank board member Andreas Dombret said he sees “clouds gathering on the horizon” and that the central bank is keeping a close eye on mortgages. Finance Minister Wolfgang Schaeuble, who has been critical of the ECB’s policy of pushing growth with cheap cash, in December said the hunt for yield could lead to the “formation of bubbles and excessive asset values.”

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Don’t think I can say in public what I think should happen to companies like Monsanto, Bayer, Syngenta et al. The people who brought you Agent Orange, Zyklon B and chemical warfare are coming for your food, all of it. A start might be to figure out who holds shares in these things. Your money fund, your pension fund? This is the industry of death, as much as arms manufactureers are.

Bayer Eyes $42 Billion Monsanto in Quest for Seeds Dominance (BBG)

Bayer made an unsolicited takeover offer for Monsanto Co. in a bold attempt by the German company to snatch the last independent global seeds producer and become the world’s biggest supplier of farm chemicals. The St. Louis-based company, with a market value of $42 billion, said it’s reviewing the offer in a statement Thursday. It didn’t disclose the terms of the proposal. Bayer, confirming the bid, said the combination would bolster its position as a life sciences company. Shares of Bayer plunged amid concern that a large purchase would weigh on its credit rating and force the company to sell more stock. The proposal by Werner Baumann, who’s been at Bayer’s helm for less than a month, follows Monsanto’s failed attempt to buy Syngenta and the proposed merger of Dow Chemical and DuPont.

To help finance its quest to buy the world’s largest seed maker, Bayer is considering asset disposals and a share sale, according to people familiar with the matter, who asked not to be identified because discussions are private. The German company is exploring the potential disposal of its animal-health business and the remaining 69% stake in plastics business Covestro, the people said. Animal health could fetch $5 billion to $6 billion, according to one of the people, and the Covestro holding is worth about €4.9 billion. If Bayer buys Monsanto, it could be the biggest acquisition globally this year and the largest German deal ever, according to data compiled by Bloomberg. A takeover of Monsanto would require an enterprise value of as much as €65 billionß, according to analysts at Citigroup.

[..]Merging Monsanto with the company that invented aspirin would bring together brands such as Roundup, Monsanto’s blockbuster herbicide, and Sivanto, a new Bayer insecticide. Monsanto is particularly vulnerable to a takeover after piling up a mountain of problems this year. The company has cut its earnings forecast, clashed with some of the world’s largest commodity-trading companies and become locked in disputes with the governments of Argentina and India. Shares are down 19% in the past 12 months. “It’s a relentless string of bad news,” Jonas Oxgaard, an analyst with Sanford C. Bernstein in New York, said. “It’s almost like they forgot to sacrifice a goat to the gods.”

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Bayer won’t be able to sell its new ‘products’ at home.

Bayer’s Mega Monsanto Deal Faces Mega Backlash in Germany (BBG)

Bayer’s proposed mega deal to buy Monsanto is likely to create a mega public relations challenge for the German company at home. Bayer faces a backlash against Germany’s biggest planned acquisition because of two products from the St. Louis-based company that are widely detested in the country: genetically modified seeds and the weedkiller Roundup, which uses a compound called glyphosate that some believe can cause cancer. “Germans view Monsanto as the main example of American corporate evil,” said Heike Moldenhauer, a biotechnology expert at German environmental group BUND. “It may not be such a good idea to take over Monsanto as that means incorporating its bad reputation, which would also make Bayer more vulnerable.”

A German Environment Ministry study released last month found 75% of citizens are against genetic engineering of plants and animals. Aware of voter suspicions, members of Chancellor Angela Merkel’s junior coalition partner, the Social Democrats, have already come out against the deal, which would turn Bayer into the biggest supplier of farm chemicals. Monsanto, which has a market value of $42 billion, said Thursday it’s studying the offer. Neither party has disclosed the terms. A merger would “strengthen the economic power of genetic engineering in Germany, which we see as very problematic as the majority of the population in Germany is opposed to the technology,” said Elvira Drobinski-Weiss, the lawmaker responsible for formulating policy positions on genetic engineering for the Social Democrats.

BASF four years ago abandoned research into genetically modified crops in Germany, citing a lack of acceptance of the technology in many parts of Europe from consumers, farmers and politicians. The German company moved the unit to the U.S. and halted development of products targeted for Europe to focus on crops for the Americas and Asia. “There’s virtually no market for genetically modified seeds in Europe because they’re so unpopular,” said Dirk Zimmermann, a GMO expert at Greenpeace in Hamburg. A deal combining Bayer and Monsanto would “hurt the future of sustainable agriculture.”

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The EU is good for something after all. The pro-Roundup arguments get an eery left field feel to them though: “We use it for some farming practices such as no-till and minimum-tillage, helping to ensure less greenhouse gas emissions and soil erosion.”

EU Declines To Renew Glyphosate Licence (EUO)

European experts failed again to take a decision on whether to renew a licence for glyphosate, the world’s widest-used weedkiller, during a meeting on Wednesday and Thursday (18-19 May). The EU standing committee on plants, animals, food and feed (Paff), which brings together experts of all EU member states, failed to organise a vote. There was no qualified majority for such a decision. The current licence expires on 30 June. The Paff committee was expected to settle on the matter already in March, but postponed the vote after France, Italy, the Netherlands and Sweden raised objections, mainly over the impact of glyphosate on human health. The European Commission has since tabled two new proposals, both of which failed to convince the member states.

The health commissioner Vytenis Andriukaitis insists that member states decide with a qualified majority because of the controversies involved. A spokesperson said the commission will reflect on the discussions. ”If no decision is taken before 30 June, glyphosate will be no longer authorised in the EU and member states will have to withdraw authorisations for all glyphosate based products”, the spokesperson said. Pekka Pesonen, the secretary general of agriculture umbrella organisation Copa-Cogeca, told EUobserver he regretted the outcome. ”This adds to uncertainty in an already pressured business”, he said. Glyphosate is widely used by European farmers because it is cost-efficient and widely available on the market.

”Without it, production will be jeopardised. This raises questions about food safety, competitiveness of European farmers, as well as our commitments to climate change,” Pesonen said. “We use it for some farming practices such as no-till and minimum-tillage, helping to ensure less greenhouse gas emissions and soil erosion.” ”Glyphosate is also recognised as safe by the EU food safety authority [Efsa]”, he added.

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“It is not legal or moral, it is shameful and it is not a solution. It will cause problems later.”

Ai Weiwei Says EU’s Refugee Deal With Turkey Is Immoral (G.)

The Chinese artist Ai Weiwei described the EU’s refugee deal with Turkey as shameful and immoral as he unveiled the artistic results of his stay on the Greek island of Lesbos. Speaking in Athens, where the works are going on public display for the first time from Friday, Ai said that although he had seen and experienced extreme and violent conditions in China, he “could never have imagined conditions like this”. Lesbos last year became the main European entry point for tens of thousands of Syrian and Iraqi refugees, but arrivals have fallen dramatically since the implementation of an agreement between Brussels and Ankara to return migrants from the Greek islands to Turkey. Of the agreement, Ai said: “It is not legal or moral, it is shameful and it is not a solution. It will cause problems later.”

The artist told the Guardian: “These people have nothing to do with Europe; they are like people from outer space, but they have to come. They have been pushed out and they are being totally neglected by Europe. They are sleeping in the mud and rain and it is only volunteers giving them food or clothes.” Ai arrived on Lesbos in December, having been invited to stage an exhibition at the Museum of Cycladic Art in Athens. The island seemed like a good starting point for thinking about ancient Greece and its mythologies, philosophies and values. Instead Ai became caught up in what he said was the biggest, most shameful humanitarian crisis since the second world war. He had told his girlfriend and young son it was a holiday, but five months later he and his studio are still there. He said he has been changed by what he has seen.

“It is such a beautiful island – blue water, sunshine, tourists – and to see the boats come in with desperate children, pregnant women and elderly people, some 90 years old, and they all have fear and they all have it in their eyes … You think: how could this happen? I got completely emotionally involved.” Ai said Europe needed to understand that the refugees were fleeing their countries because they had to. It was leave or die, he said. The exhibition at the MCA, Ai’s first in Greece, includes an enormous collage of 12,030 small pictures taken on his camera phone, documenting his time on the island. He is also exhibiting photographs taken by six Greek amateur photographers, in partnership with the Photographic Society of Mytilene.

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Jan 142016
 
 January 14, 2016  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »
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DPC Oyster luggers along Mississippi, New Orleans 1906


Asia Stocks Extend Losses, Japan’s Nikkei Falls 3.67% (CNBC)
Oil and US Stocks Tumble Over Fears For Global Economy (Guardian)
China Bear Market Looms as PBOC Fails to Stop Flight to Safety (BBG)
Q4 Will Be Worst US Earnings Season Since Third Quarter Of 2009 (ZH)
The Real Price of Oil Is Far Lower Than You Realize (BBG)
Crude At $10 Is Already A Reality For Canadian Oil-Sands Miners (BBG)
Tanker Rates Tumble As Last Pillar Of Strength In Oil Market Crashes (ZH)
Currency Swings Sap US Corporate Profits by Most in Four Years (BBG)
African Exports To China Fell By 40% In 2015 (BBC)
Money Leaving Emerging Markets Faster Than Ever Amid China Slump (BBG)
China Bond Yield Sinks To Record Low As Central Bank Injects $24 Billion (BBG)
China’s Better-Than-Expected Trade Numbers Raise Questions (WSJ)
Surging China-Hong Kong Trade Raises Doubts Over Recovery (BBG)
The Quiet Side of China’s Market Intervention (WSJ)
As China Dumps Treasuries, Other Buyers Expected To Step In (BBG)
Reporting Rule Adds $3 Trillion Of Leases To Balance Sheets Globally (FT)
EU Scientists In Bitter Row Over Safety Of Monsanto’s Round-Up (Guardian)
Thousands Of Farmer Suicides Prompt India Crop Insurance Scheme (Guardian)
Greece Said To Propose Return Trips For Illegal Migrants (AP)
Tighter Border Checks Leave Migrants Trapped In Greece (AP)
Refugee Influx To Greece Continues Unabated Through Winter (Reuters)
Europe Sees No Let Up in Refugee Crisis as January Arrivals Soar (BBG)

“In Japan, core machinery orders in November fell 14.4%..”

Asia Stocks Extend Losses, Japan’s Nikkei Falls 3.67% (CNBC)

[..] major Asian stock markets continued their downward slide, following a massive sell-off on Wall Street overnight, pressured by concerns over a global economic slowdown and low oil prices. After a late sell-off Wednesday afternoon, the Chinese markets opened in negative territory before trimming losses, with the Shanghai composite down some 1.05%, while the Shenzhen composite was flat. At market open, Shanghai was down 2.73% and Shenzhen saw losses of 3.37%. Hong Kong’s Hang Seng index was down 1.51%. Offering some sign of stability in a generally volatile market, the People’s Bank of China (PBOC) set Thursday’s yuan mid-point rate at 6.5616, compared with Wednesday’s fix of 6.5630. The dollar-yuan pair was nearly flat at 6.5777.

Japan’s Nikkei 225 erased all of Wednesday’s 2.88% gain and plunged 3.95%, weighed by commodities and machinery sectors, which were all down between 3 and 4%. Earlier, it fell as low as 4% before paring back some of the losses. South Korea’s Kospi traded down 1.45%. Down Under, the ASX 200 dropped 1.61%, with energy and financials sectors sharply down. All sectors were in the red except for gold, which saw an uptick of 3.71%. In Japan, core machinery orders in November fell 14.4% from the previous month, according to official data, down for the first time in three months. The data is regarded as an indicator of capital spending and fell more than market expectations for a 7.9% decline.

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Or is it just price discovery?

Oil and US Stocks Tumble Over Fears For Global Economy (Guardian)

US stocks fell heavily on Wednesday, with the Standard & Poor’s 500 falling 2.5% to take the index below 1,900 points for the first time since September, due to growing concerns about the falling oil price, which dipped below $30 a barrel for the first time in nearly 12 years. The S&P 500, which closed at 1,890 points, suffered its worst day since September and has fallen by 10% since its November peak taking it into “correction” territory, something that has not happened since August 2014. The Dow Jones industrial average dropped by 364 points, or 2.2%, to 16,151, and the Nasdaq composite dropped 159 points, or 3.4%, to 4,526. This deepened the New York stock exchange’s already worst start to a year on record.

Wednesday’s stock market declines were triggered by new figures showing US gasoline stockpiles had increased to record high, which caused Brent crude prices to fall as low as $29.96, their lowest level since April 2004, before settling at $30.31, a 1.8% fall. The oil price has fallen by 73% since a peak of $115 reached in the summer of 2014. Industry data showed that US gasoline inventories soared by 8.4m barrels and stocks of diesel and heating oil increased by more than 6m barrels – confirming the forecasts of many analysts that a huge oversupply of oil could keep prices low during most of 2016. Analysts said that growing fears of a weakening outlook for the global economy, made worse by falling oil prices, was behind the steep falls. Some oil analysts this week predicted that the price could fall as low as $10.

In recent days several analysts have warned that the global economy could suffer a repeat of the 2008 crash if the knock-on effects of a contraction in Chinese output pushes down commodity prices further and sparks panic selling on stock and bond markets. [..] Earlier in the day China’s stock market fell more than 2% after officials played down the significance of better-than-expected trade figures for December, saying exports could sink further before they find a floor.

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Looms?!

China Bear Market Looms as PBOC Fails to Stop Flight to Safety (BBG)

Chinese stocks headed for a bear market while government bond yields fell to a record as central bank cash injections and a stable yuan fixing failed to shore up confidence in the world’s second-largest economy. The Shanghai Composite Index sank as much as 2.8%, falling more than 20% from its December high and sinking below its closing low during the depths of a $5 trillion rout in August. Investors poured money into government bonds after the People’s Bank of China added the most cash through open-market operations since February 2015, sending the yield on 10-year notes down to 2.7%. While the central bank kept its yuan reference rate little changed for a fifth day, the currency dropped 0.5% in offshore trading and Hong Kong’s dollar declined to the weakest since March 2015.

The selloff is a setback for Chinese authorities, who have been intervening to support both stocks and the yuan after the worst start to a year for mainland markets in at least two decades. As policy makers in Beijing fight to prevent a vicious cycle of capital outflows and a weakening currency, the resulting financial-market volatility has undermined confidence in their ability to manage the deepest economic slowdown since 1990 “You can’t really find buyers in this environment,” said Ken Peng, a strategist at Citigroup Inc. in Hong Kong. “It’s a very, very fragile status quo China is trying to maintain.” The government faces a dilemma with the yuan, according to Samuel Chan at GF International.

On one hand, a weakening exchange rate would help boost exports and is arguably justified given declines in other emerging-market currencies against the dollar in recent months. The downside is that a depreciating yuan encourages capital outflows and makes it harder to keep domestic interest rates low. The monetary authority “doesn’t want the yuan to depreciate fast because it will push funds to leave China very quickly,” Chan said. The country saw capital outflows for 10 straight months through November, totaling $843 billion, according to an estimate from Bloomberg Intelligence. Foreign-exchange reserves, meanwhile, sank by a record $513 billion last year to $3.33 trillion, according to the central bank.

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Still sinking after all these years.

Q4 Will Be Worst US Earnings Season Since Third Quarter Of 2009 (ZH)

Couple of things: first of all, any discussion whether the US market is in a profit (or revenue) recession must stop: the US entered a profit recession in Q3 when it posted two consecutive quarters of earnings declines. This was one quarter after the top-line of the S&P dropped for two consecutive quarters, and as of this moment the US is poised to have 4 consecutive quarters with declining revenues as of the end of 2015. Furthermore, as we showed on September 21, when Q4 was still expected to be a far stronger quarter than it ended up being, in the very best case, the US would go for 7 whole quarters without absolute earnings growth (and even longer without top-line growth).

Then, as always happens, optimism about the current quarter was crushed as we entered the current quarter, and whereas on September 30, 2015, Q4 earnings growth was supposed to be just a fraction negative, or -0.6%, as we have crossed the quarter, the full abyss has revealed itself and according to the latest Factset consensus data as of January 8, the current Q4 EPS drop is now expected to be a whopping -5%. And just to shut up the “it’s all energy” crowd, of the 10 industries in the S&P, only 4 are now expected to post earnings growth and even their growth is rapidly sliding and could well go negative over the next few weeks. It gets even worse. According to Bloomberg, on a share-weighted basis, S&P 500 profits are expected to have dropped by 7.2% in 4Q, while revenues are expected to fall by 3.1%.

This would represent the worst U.S. earnings season since 3Q 2009, and a third straight quarter of negative profit growth. It’s no longer simply a recession: as noted above, the Q4 EPS drop follows declines of 3.1% in Q3 and 1.7% in Q2. it is… whatever comes next. As Bloomberg adds, the main driving forces behind drop in U.S. earnings are the rise in the dollar index (thanks Fed) and the drop in average WTI oil prices. However, since more than half of all industries are about to see an EPS decline, one can’t blame either one or the other. So while we know what to expect from Q4, a better question may be what is coming next, and according to the penguin brigade, this time will be different, and the hockey stick which was expected originally to take place in Q4 2015 and then Q1 2016 has been pushed back to Q4 2016, when by some miracle, EPS is now expected to grow by just about 15%.

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WTI/Brent prices are just a story.

The Real Price of Oil Is Far Lower Than You Realize (BBG)

While oil prices flashing across traders’ terminals are at the lowest in a decade, in real terms the collapse is even deeper. West Texas Intermediate futures, the U.S. benchmark, sank below $30 a barrel on Tuesday for the first time since 2003. Actual barrels of Saudi Arabian crude shipped to Asia are even cheaper, at $26 – the lowest since early 2002 once inflation is factored in and near levels seen before the turn of the millennium. Slumping oil prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.

Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said. The nation’s economic expansion faltered last year to the slowest pace in a quarter of a century. “You see a big destruction in the income of the oil and commodity producers,” Turner said. “That is having a major effect on their expenditure across the world.” The benefit for consumers from historically low oil prices is being blunted by changes in fuel taxation and a reduction in subsidies, according to Paul Horsnell at Standard Chartered in London. “But it certainly shows that current prices are very low by any description,” he said.

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“..$8.35 on Tuesday, down from as much as $80 less than two years ago.”

Crude At $10 Is Already A Reality For Canadian Oil-Sands Miners (BBG)

Think oil in the $20s is bad? In Canada they’d be happy to sell it for $10. Canadian oil sands producers are feeling pain as bitumen – the thick, sticky substance at the center of the heated debate over TransCanada’s Keystone XL pipeline – hit a low of $8.35 on Tuesday, down from as much as $80 less than two years ago. Producers are all losing money at current prices, First Energy Capital’s Martin King said Tuesday at a conference in Calgary. Which doesn’t mean they’ll stop. Since most of the spending for bitumen extraction comes upfront, and thus is a sunk cost, production will continue and grow. Canada will need more pipeline capacity to transport bitumen out of Alberta by 2019, King said.

Bitumen is another victim of a global glut of petroleum, which has sunk U.S. benchmark prices into the $20s from more than $100 only 18 months ago. It’s cheaper than most other types of crude, because it has to be diluted with more-expensive lighter petroleum, and then transported thousands of miles from Alberta to refineries in the U.S. For much of the past decade, oil companies fought environmentalists to get the pipeline approved so they could blend more of the tar-like petroleum and feed it to an oil-starved world. TransCanada is mounting a $15 billion appeal against President Barack Obama’s rejection of Keystone XL crossing into the U.S. – while simultaneously planning natural gas pipelines from Alberta to Canada’s east coast to carry diluted bitumen. Environmentalists are hoping oil economics finish off what their pipeline protests started.

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Inventories are overflowing. How predictable.

Tanker Rates Tumble As Last Pillar Of Strength In Oil Market Crashes (ZH)

If there was one silver-lining in the oil complex, it was the demand for VLCCs (as huge floating storage facilities or as China scooped up ‘cheap’ oil to refill their reserves) which drove tanker rates to record highs. Now, as Bloomberg notes so eloquently, it appears the party is over! Daily rates for benchmark Saudi Arabia-Japan VLCC cargoes have crashed 53% year-to-date to $50,955 (as it appears China’s record crude imports have ceased). In fact the rate crashed 12% today for the 12th straight daily decline from over $100,000 just a month ago…

China imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners. China’s crude imports last month was equivalent to 7.85 million barrels a day, 6% higher than the previous record of 7.4 million in April, Bloomberg calculations show.

China has exploited a plunge in crude prices by easing rules to allow private refiners, known as teapots, to import crude and by boosting shipments to fill emergency stockpiles. The nation’s overseas purchases may rise to 370 million metric tons this year, surpassing estimated U.S. imports of about 363 million tons, according to Li Li, a research director with ICIS China, an industry researcher. But given the crash in tanker rates – and implicitly demand – that “boom” appears to be over.

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What neighbors can the US beggar?

Currency Swings Sap US Corporate Profits by Most in Four Years (BBG)

Volatility in the $5.3-trillion-a-day foreign exchange market is dragging down U.S. corporate earnings by the most since 2011, according to a report from FiREapps. Currency fluctuations eroded earnings for the average North American company by 12 cents per share in the third quarter, according to the Scottsdale, Arizona-based firm, which advises businesses and makes software to help reduce the effect of foreign-exchange swings. That’s the most in data going back at least four years, and is up from an average 3 cents per share in the second quarter. “This is the worst I’ve seen it,” FiREapps chief executive officer Wolfgang Koestersaid in a telephone interview. “Investors and analysts are taking a very close look at corporate results impacted by foreign exchange and recognize how material they are.”

A JPMorgan measure of currency volatility averaged 10.1 % during the third quarter, up from 6.3 % 12 months earlier. Last year, some of the biggest price swings came from unscheduled events, such as China’s August devaluation of the yuan, Switzerland’s decision to scrap its currency cap and plummeting commodity prices. Companies in North America lost at least $19.3 billion to foreign-exchange headwinds in the third quarter of 2015, FiREapps data showed. The losses grew by about 14 % from the second quarter. Of the 850 North American corporations that Fireapps analyzed, 353 cited the negative impact of currencies in their earnings, more than double the previous quarter. “That is the largest number of companies talking about currency impact that we’ve ever seen,” Koester said.

China’s yuan is garnering more attention from corporations amid concern that growth in the world’s second-largest economy is slowing, according to FiREapps. Yet North American firms remain most concerned about the effects of the euro, Brazilian real and Canadian dollar on their results. The currencies have fallen 8.3 %, 34 % and 16 % against the greenback over the past 12 months. The stronger U.S. dollar means higher, less-competitive prices for U.S. businesses seeking to sell their products overseas. Companies also take a hit when they account for revenue denominated in weaker overseas currencies, unless they hedged their exposure.

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That is a very big number.

African Exports To China Fell By 40% In 2015 (BBC)

African exports to China fell by almost 40% in 2015, China’s customs office says. China is Africa’s biggest single trading partner and its demand for African commodities has fuelled the continent’s recent economic growth. The decline in exports reflects the recent slowdown in China’s economy. This has, in turn, put African economies under pressure and in part accounts for the falling value of many African currencies. Presenting China’s trade figures for last year, customs spokesman Huang Songping told journalists that African exports to China totalled $67bn (£46.3bn), which was 38% down on the figure for 2014.

BBC Africa Business Report editor Matthew Davies says that as China’s economy heads for what many analysts say will be a hard landing, its need for African oil, metals and minerals has fallen rapidly, taking commodity prices lower. There is also less money coming from China to Africa, with direct investment from China into the continent falling by 40% in the first six months of 2015, he says. Meanwhile, Africa’s demand for Chinese goods is rising. In 2015 China sent $102bn worth of goods to the continent, an increase of 3.6%. Last year, South Africa hosted a China-Africa summit during which President Xi Jinping announced $60bn of aid and loans, symbolising the country’s growing role on the continent.

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And for now that’s still largely due to China.

Money Leaving Emerging Markets Faster Than Ever Amid China Slump (BBG)

Investors pulled more money from emerging markets in the three months through December than ever before as investors dumped riskier assets in China amid concern the country’s currency will weaken further, according to Capital Economics. Capital outflows from developing nations reached $270 billion last quarter, exceeding withdrawals during the financial crisis of 2008, led by an exodus from China as investors pulled a record $159 billion from the country just in December, Capital Economics’ economist William Jackson said in a report. Excluding outflows from the world’s second-largest economy, emerging markets would have seen inflows in the quarter, he said.

“This appears to reflect a growing skepticism in the markets that the People’s Bank can keep the renminbi steady,” Jackson said in the note, which was published Wednesday. “Given the fresh sell-off in EM financial markets and growing concerns about the level of the renminbi, it seems highly likely that total capital outflows will have increased” in January, he said. Investor skepticism increased last year as a surprise devaluation of China’s yuan roiled global markets and triggered a $5 trillion rout in the nation’s equity markets, casting doubt on the government’s ability to contain the selloff and support growth.

Chinese leaders have since then stepped up efforts to restrict capital outflows and prop up share prices despite pledges to give markets greater sway and allow money to flow freely across the nation’s borders within five years. The yuan traded in the mainland market declined 4.4% in 2015, the most since 1994. Outflows from emerging markets rose to a record $113 billion in December, Capital Economics said. Over 2015, investors pulled $770 billion from developing nations, compared with $230 billion a year earlier.

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“For local investors, there’s nothing to buy..”

China Bond Yield Sinks To Record Low As Central Bank Injects $24 Billion (BBG)

China’s government bonds advanced, pushing the 10-year yield to a record low, as the central bank stepped up cash injections and volatile stock and currency markets drove demand for safety. The offshore yuan traded in Hong Kong declined for the first time in six days on speculation a narrowing gap with the Shanghai rate will dissuade the People’s Bank of China from stepping into the market, while Chinese equities slid below the lowest levels of last year’s market selloff. “For local investors, there’s nothing to buy,” said Li Liuyang at Bank of Tokyo-Mitsubishi. “Equities are not performing well, so bonds become the natural investment target. The PBOC increased reverse repo offerings partly because it may be taking some preemptive measures before next month’s Lunar New Year holidays.”

The yield on debt due October 2025 fell as much as three basis points to 2.70%, the least for a benchmark 10-year note in ChinaBond data going back to September 2007. The previous low was 2.72% in January 2009, during the global financial crisis. The PBOC conducted 160 billion yuan ($24 billion) of seven-day reverse-repo agreements in its open-market operations on Thursday, up from 70 billion yuan a week ago. That’s the biggest one-day reverse repo offerings since February 2015, data compiled by Bloomberg show. The PBOC injected a net 40 billion yuan this week, taking its total additions to 230 billion yuan so far this month. “The PBOC wants to keep liquidity abundant onshore to bolster the economy,” said Nathan Chow at DBS Group. “It’s also trying to calm the currency market as the yuan declined significantly last week and caused high volatility. But in the long run, the yuan will depreciate as the fundamentals are still weak.”

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Fake invoices. It’s as simple as that.

China’s Better-Than-Expected Trade Numbers Raise Questions (WSJ)

China’s better-than-expected trade figures in December have sparked questions over whether trade flows have been inflated by investors evading capital controls and the extent of incentives being offered by government agencies to prop up exports. China reported Wednesday that exports in December declined 1.4% year on year. This was much better than the 8% drop expected by economists in a WSJ survey and compared with a 6.8% decline in November, allowing Beijing to end the trading year on a stronger note. Imports fell by 7.6% last month, better than the expected 11% decline, compared with an 8.7% drop in November. The December trade figures also were helped by favorable comparisons with year-earlier figures, economists said.

Of particular note was a 64.5% jump in China’s imports from Hong Kong, the strongest pace in three years, analysts said. This compared with a 6.2% decline for the January-November period. ”It really looks like capital flight,” said Oliver Barron with investment bank North Square Blue Oak. “This has artificially inflated the total import data.” China in recent months has struggled to adjust to massive capital outflows as Chinese investors seek better returns overseas. China saw its foreign exchange hoard drop 13.3% in 2015, or by $500 billion, to $3.3 trillion by the end of December. Under Beijing’s strict capital controls, consumers are only allowed to purchase $50,000 worth of U.S. dollars each calendar year. But manipulated foreign trade deals offer a way around tightening restrictions, say economists.

In an effort to stem the outflow, Beijing’s foreign exchange regulator announced stricter supervision starting January 1 to screen suspicious individual accounts and crack down on organized capital flight, according to an online statement. Bank customers also have reported more difficulty recently exchanging yuan into dollars, with some forced to wait four days to complete a transaction that normally takes one. And China has cracked down on illegal foreign-exchange networks, including a bust announced in November in Jinhua, a city of five million people in eastern Zhejiang province, allegedly involving eight gangs operating from over two dozen “criminal dens” that reportedly handled up to $64 billion in unauthorized transactions, according to state media and a detailed police report.

The official People’s Daily newspaper said 69 people had been criminally charged and another 203 people had been given administrative sanctions. ”Regulators have been trying really hard to close the loopholes,” said Steve Wang with Reorient Financial, adding that the market seems skeptical of Wednesday’s trade figures. The Shanghai Composite Index fell 2.4%. “I don’t think Hong Kong has been buying or selling any more from China. The December data is a huge question mark,” he added. An example of how a Chinese company might move capital abroad using trade deals would be to import 1 million widgets at $2 apiece from a Hong Kong partner or subsidiary company, paying the $2 million, analysts said. It then exports the same widgets at $1 apiece, receiving $1 million from the Hong Kong entity. The goods are back where they started, but $1 million has now moved offshore.

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“..the surprise gains may harken back to past instances of phony invoicing and other rules skirted to escape currency restrictions.”

Surging China-Hong Kong Trade Raises Doubts Over Recovery (BBG)

China exports to Hong Kong rose 10.8% from a year earlier for the biggest gain in more than a year, making the city the biggest destination for shipments last month and spurring renewed skepticism over data reliability and the broader recovery in the nation’s outbound trade. Exports to Hong Kong rose to $46 billion last month, according to General Administration of Customs data released Wednesday. That was the highest value in almost three years and the biggest amount for any December period in the last 10 years, customs data show. Imports from Hong Kong surged 65%, the most in three years, to $2.16 billion. Economists said the surprise gains may harken back to past instances of phony invoicing and other rules skirted to escape currency restrictions.

China’s government said in 2013 some data on trade with Hong Kong were inflated by arbitrage transactions intended to avoid rules, an acknowledgment that export and import figures were overstated. The increase in exports to Hong Kong and China’s imports from the city probably indicate “fake invoicing,” said Iris Pang at Natixis in Hong Kong. Invoicing of China trade should be larger in December because of the wider gap between the onshore yuan and the offshore yuan traded in Hong Kong, she said. China’s exports to the Special Administrative Region of more than 7 million people eclipsed the $35 billion tallies last month for both the U.S. and the EU, the data show. Exports to Brazil, Canada, Malaysia, Russia all dropped more than 10%.

The imports gain “points to potential renewed fake trade activities,” said Larry Hu at Macquarie. When the yuan rose in 2013, exports to Hong Kong were inflated artificially, he said, and “now it’s just the opposite.” China’s total exports rose 2.3% in yuan terms from a year earlier, the customs said, after a 3.7% drop in November. Imports extended declines to 14 months. The recovery in exports in December may prove to be a temporary one due to a seasonal increase at the end of the year, and it doesn’t represent a trend, a spokesman for customs said after the Wednesday briefing. A weak yuan will help exports, but that effect will gradually fade, the spokesman told reporters in Beijing. Morgan Stanley economists led by Zhang Yin in Hong Kong also said in a note Wednesday that the higher-than-expected trade growth may have been affected by currency arbitrage. Overall external demand remained weak, as shown by anemic export data reported by South Korea and Taiwan, he said.

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State firms buying/holding lousy paper.

The Quiet Side of China’s Market Intervention (WSJ)

As Chinese markets tanked last week, China Inc. appeared to be rallying to their support. At least 75 Chinese companies issued statements during the past week and a half, saying their biggest shareholders would be holding on to their stakes in order to protect investor interests. Officially, the companies were acting spontaneously. But privately, people close to Chinese regulators as well as some of the companies themselves said they were prompted to release the statements by exchange officials, who had called and asked them to issue expressions of support. In many cases, the statements contained similar or nearly identical language. The behind-the-scenes activity reflects the secretive, unofficial side to Chinese regulators’ attempts to bolster the country’s sagging stock markets.

The regulators’ varied arsenal includes tactics such as phone calls from exchange officials to big holders of shares, urging them not to sell, as well as pumping hundreds of billions of yuan into the markets through government-affiliated funds. The hand of the regulators was most apparent over the summer, when a 43% plunge in the Shanghai Composite Index over slightly more than two months was accompanied by dozens of declarations by brokerages and fund managers abjuring stock sales, as well as huge purchases of shares in bellwether Chinese stocks by a shadowy group of firms known as the “national team.” Brokers, company executives and people close to Chinese regulators say tactics have become more subtle during the current market downturn: The national team hasn’t been making the high-profile buys of half a year ago, and regulators have been less overt in their requests for cooperation.

An executive at one environmental technology firm listed on the Shenzhen exchange said that in July, the bourse sent a letter demanding the company release a statement saying its controlling shareholders wouldn’t unload stock. Last week, the exchange was more low key, he said, phoning up and urging the company to release another statement to set an example for other firms. But the flurry of companies declaring their support for the market in recent days shows that Chinese regulators still haven’t given up on behind-the-scenes efforts to guide the direction of stocks. “We issued the statement because the [Shenzhen] exchange encouraged listed firms to maintain shareholdings,” said an executive at LED device-maker Shenzhen Jufei who requested anonymity. “You can think of this as a concerted effort by listed firms to voluntarily stabilize the market.”

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The popularity of T-Bills is guaranteed.

As China Dumps Treasuries, Other Buyers Expected To Step In (BBG)

It might be easy to conclude China’s unprecedented retreat from Treasuries is bad news for America. After all, as the biggest overseas creditor to the U.S., China has bankrolled hundreds of billions of dollars in deficit spending, particularly since the financial crisis. And that voracious appetite for Treasuries in recent years has been key in keeping America’s funding costs in check, even as the market for U.S. government debt ballooned to a record $13.2 trillion. Yet for many debt investors, there’s little reason for alarm. While there’s no denying that China’s selling may dent demand for Treasuries in the near term, the fact the nation is raising hundreds of billions of dollars to support its flagging economy and stem capital flight is raising deeper questions about whether global growth itself is at risk.

That’s likely to bolster the haven appeal of U.S. debt over the long haul, State Street Corp. and BlackRock Inc. say. Any let up in Chinese demand is being met with record buying by domestic mutual funds, which has helped to contain U.S. borrowing costs. “You have China running down reserves and Treasuries are a big portion of reserves, but even with that we still think the weight of support” will boost demand for U.S. debt, said Lee Ferridge, the head of macro strategy for North America at State Street, which oversees $2.4 trillion. The question is “if China slows, where does growth come from. That’s what’s been worrying a lot of people coming into 2016.”

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And then the TBTFs will need rescue again?!

Reporting Rule Adds $3 Trillion Of Leases To Balance Sheets Globally (FT)

Companies around the world will be forced to add close to $3tn of leasing commitments to their balance sheets under new rules from US and international regulators — significantly increasing the debt that must be reported by airlines and retailers. A new financial reporting standard — the culmination of decades of debate over “off-balance sheet” financing — will affect more than one in two public companies globally. Worst hit will be retail, hotel and airline companies that lease property and planes over long periods but, under current accounting standards, do not have to include them in yearly reports of assets and liabilities. In these sectors, future payments of off-balance sheet leases equate to almost 30% of total assets on average, according to the International Accounting Standards Board, which collaborated with the US Financial Accounting Standards Board on the new rule.

Hans Hoogervorst, IASB chairman, said: “The new Standard will provide much-needed transparency on companies’ lease assets and liabilities, meaning that off-balance-sheet lease financing is no longer lurking in the shadows”. As a result of the accounting change, net debt reported by UK supermarket chain Tesco would increase from £8.6bn at the end of August to £17.6bn, estimated Richard Clarke, an analyst from Bernstein. However, while the new standard would make Tesco look more indebted, Mr Clarke added that the assets associated with the leases would also come on to the company’s balance sheet, so “the net effect would be neutral.” Investors warned that the new standards could affect some groups’ banking covenants and debt-based agreements with lenders, but said they would make it easier to compare companies that uses leases with those that prefer to borrow and buy.

Vincent Papa, director financial reporting policy at the Chartered Financial Analysts Institute, which has been pushing for these changes since the 1970s, said: “Putting obligations on balance sheets enables better risk assessment. It is a big improvement to financial reporting.” For some airlines, the value of off-balance- sheet leases can be more than the value of assets on the balance sheets, the IASB noted. It also pointed out that a number of retailers that had gone into liquidation had lease commitments that were many times their reported balance sheet debt. [..] In 2005, the SEC calculated that US companies had about $1.25 trillion of leasing commitments that were not included in assets or liabilities on balance sheets. Six years later, the Equipment Leasing and Finance Foundation in the US said that “Capitalising operating leases will add an estimated $2 trillion and 11% more reported debt to the balance sheets of US-based corporations…and could result in a permanent reduction of $96bn in equity of US companies. ”

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“..used so widely that its residues are commonly found in British bread.”

EU Scientists In Bitter Row Over Safety Of Monsanto’s Round-Up (Guardian)

A bitter row has broken out over the allegedly carcinogenic qualities of a widely-used weedkiller, ahead of an EU decision on whether to continue to allow its use. At issue is a call by the European Food and Safety Authority (Efsa) to disregard an opinion by the WHO’s International Agency for Research on Cancer (IARC) on the health effects of Glyphosate. Glyphosate was developed by Monsanto for use with its GM crops. The herbicide makes the company $5bn (£3.5bn) a year, and is used so widely that its residues are commonly found in British bread. But while an analysis by the IARC last year found it is probably carcinogenic to humans, Efsa decided last month that it probably was not. That paves the way for the herbicide to be relicensed by an EU working group later this year, potentially in the next few weeks.

Within days of Efsa’s announcement, 96 prominent scientists – including most of the IARC team – had fired off a letter to the EU health commissioner, Vytenis Andriukaitis, warning that the basis of Efsa’s research was “not credible because it is not supported by the evidence”. “Accordingly, we urge you and the European commission to disregard the flawed Efsa finding,” the scientists said. In a reply last month, which the Guardian has seen, Andriukaitis told the scientists that he found their diverging opinions on glyphosate “disconcerting”. But the European Parliament and EU ministers had agreed to give Efsa a pivotal role in assessing pesticide substances, he noted. “These are legal obligations,” the commissioner said. “I am not able to accommodate your request to simply disregard the Efsa conclusion.”

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What’s Monsanto’s role in this?

Thousands Of Farmer Suicides Prompt India Crop Insurance Scheme (Guardian)

India’s government has approved a $1.3bn insurance scheme for farmers to protect against crop failures, saying it was intended to put a halt to a spate of suicides. Two successive years of drought have battered the country’s already struggling rural heartland, with farmer suicides in rural areas regularly hitting the headlines. More than 300,000 farmers have killed themselves in India since 1995. Under the new scheme, farmers will pay premiums of as little as 1.5% of the value of their crops, allowing them to reclaim their full value in case of natural damage, the government said. “The scheme will be a protection shield against instances of farmer suicides because of crop failures or damage because of nature,” home minister Rajnath Singh said on Wednesday after the cabinet approved the scheme.

The Prime Minister Crop Insurance Scheme is also an attempt by Narendra Modi’s government to woo the country’s powerful farming community after being beaten in two recent state elections. “This scheme not just retains the best features of past policies but also rectifies all previous shortcomings… This is a historic day,” Modi said in a tweet. Previous crop insurance schemes have been criticised by the agricultural community as being too complex or for having caps that prevented them from recouping the full commercial value in the case of damage. Take-up of existing schemes by farmers is as low as 23%, the agriculture minister Radha Mohan Singh said, adding that he hoped to increase coverage to 50%. The heavily subsidised scheme will come into effect in April, a major crop-sowing season.

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Priorities.

Greece Said To Propose Return Trips For Illegal Migrants (AP)

A senior Greek official has said the government will ask Europe’s border protection agency Frontex to help set up a sea deportation route to send migrants who reach the country illegally back to Turkey. The official told AP the plan would involve chartering boats on Lesvos and other Greek islands to send back migrants who were not considered eligible for asylum in the EU. The official spoke on condition of anonymity because Athens hasn’t yet formally raised the issue with other European governments. More than 850,000 migrants and refugees reached Greece in 2015 on their route through the Balkans to central Europe. But the EU is seeking to toughen and better organize procedures for asylum placements, while Balkan countries outside the EU have also imposed stricter transit policies.

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NIMBY.

Tighter Border Checks Leave Migrants Trapped In Greece (AP)

As twilight falls outside the Hellenikon shelter – a former Olympic field hockey venue currently housing about 280 people – Iranian men play volleyball, a red line on the ground serving as a notional net. Inside, migrants are coming to terms with their bleak future. “I can’t go back to Somalia,” said English teacher Ali Heydar Aki, who hoped to settle in Europe and then bring his family. “I have sold half my house” to fund the trip. While it’s unclear exactly how many are stuck in Greece, a comparison of arrivals there and in FYROM since late November leaves about 38,000 people unaccounted for. Greek immigration minister Ioannis Mouzalas’ best guess is “a few thousand.” “But (that’s) a calculation based on experience, not something else,” he said.

Syed Mohammad Jamil, head of the Pakistani-Hellenic Cultural Society, says about 4,000 Pakistanis could be stuck in Greece, mostly still on the islands, and about as many Bangladeshis. “Every day we get … phone calls from people in tears asking for help,” he said. “We can’t help – send them where? Germany, Spain, Italy, England? We can’t.” All now face two legal options: To seek asylum in Greece – which has 25% unemployment and a crumbling welfare system – or volunteer for repatriation. Greek authorities have recorded an increase in both since FYROM tightened controls. Karim Benazza, a Moroccan hotel worker in his 20s, has signed up to go home on Jan. 18.

“This is all I do now, smoke and smoke, but no money, no food,” he said, lighting a cigarette outside the International Organization for Migration building. “There is nothing for us in Greece, and the Macedonian border is closed.” Daniel Esdras, IOM office head in Greece, sees a steep increase in voluntary repatriations, which the IOM organizes. About 800 people registered in December and 260 have been sent home. “It’s one thing to return in handcuffs … and quite another to go as a normal passenger with some money in your pocket, because we give them each €400,” Esdras said.

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5,700 children in 12 days.

Refugee Influx To Greece Continues Unabated Through Winter (Reuters)

More than 1,000 migrants and refugees arrived at Greece’s biggest port of Piraeus near Athens on Wednesday as the influx of people fleeing conflict zones for Europe continued unabated into the winter months. More than 1 million refugees and migrants braved the seas in 2015 seeking sanctuary in Europe, nearly five times more than in the previous year, according to the United Nations’ refugee agency. Most entered through Greece’s outlying islands. So far this year, 31% of arrivals to Europe have been children, said medical aid group Medecins Sans Frontieres, which has been treating arrivals to the Greek islands. About 5,700 children crossed the narrow but dangerous sea passage between Greece and Turkey in just 12 days aboard rickety, overcrowded boats, it said.

“I leave my home, my country [because] there was violence, it was not safe,” said 18-year-old Idris, who left his home and family behind in Afghanistan three months ago, traveling alone through Turkey and hoping to reach Germany to study. As others disembarked from the ferry on Wednesday, volunteers passed out hot tea and fruit to help them get through the next leg of their journey, an eight-hour bus ride from Athens to Greece’s northern border with Former Yugoslav Republic of Macedonia [FYROM]. The ferry picked up a total of 1,238 migrants and refugees from the Eastern Aegean islands of Lesvos and Chios. Among those was 25-year-old Salam, from the Syrian city of Homs, who said he had lived in a number of different cities before the fighting led him and his friends to flee. “[They killed] women and children and men,” said Salam, who also hopes to reach Germany. [It was] very very very bad in Syria.”

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How blind is this? “Work must also step up on “returning those who have no right to international protection.” There are people who have no right to protection? Who gets to decide?

Europe Sees No Let Up in Refugee Crisis as January Arrivals Soar (BBG)

The number of refugees entering Europe in the first 10 days of 2016 is already three times the level in all of January 2015, signaling no let up in the pressure facing the region’s leaders amid the biggest wave of migration since World War II. The number of migrants crossing the Mediterranean Sea to the European Union from Turkey, the Middle East and North Africa reached 18,384 through Jan. 10, according to the United Nations Refugee Agency. That compares with 5,550 in January last year. “This year, these weeks, the coming months must be dedicated to delivering clear results in terms of regaining controls of flows and of our borders,” EC Vice President Frans Timmermans told reporters in Brussels on Wednesday after discussing the latest situation with EU commissioners.

Turmoil in Syria and across the Arab world triggered an influx of more than 1 million people arriving in the EU last year. Faced with migration in such unprecedented numbers, governments have reintroduced internal border checks, tried – and failed – to share refugees between one another and have been forced to defend their policies amid anger at violence allegedly perpetrated by the recent arrivals.

The number of refugees entering the EU increased month-on-month from January 2015 until hitting a peak of 221,374 in October, according to the agency. The level fell back to 118,445 last month as bad weather deterred people from making the journey. Almost a third of those arriving are children. So far this year 49 people have either died or are missing having attempted to cross into Europe. EU countries need to work together to tackle the “root causes” of the refugee influx, Timmermans said. Work must also step up on “returning those who have no right to international protection.”

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Oct 252015
 
 October 25, 2015  Posted by at 10:18 am Finance Tagged with: , , , , , , ,  1 Response »
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NPC Capitol Refining Co. plant, Relee, Alexandria County 1925


Pensioners Prosper, The Young Suffer. UK Social Contract Is Breaking (Willetts)
Putting China’s “6.9% GDP Growth” In Context (Lebowitz)
China Premier Says 7% Growth Goal Never Set In Stone (Reuters)
China Communist Party Paper Says Country Should Join TTIP (Reuters)
Cyber Attacks Bigger Threat To Our Banking System Than Bad Debts (Luyendijk)
The Age Of The Torporation (Economist)
Listen – Is That The Sound Of A Bubble Bursting Down Under? (Steve Keen)
Mortgage Rate Rises Too Little, Too Late For Australia’s Bloated Banks (David)
Portugal Left Vows To Topple Government With No-Confidence Vote (Reuters)
More Syrians Risk Deadly Crossings To Greece In Race Against Winter (Guardian)
Hotspot ‘Solution’ Deepens Europe’s Refugee Crisis (IRIN)
Bodies Of 40 Migrants Wash Ashore In Libya (AP)
Europe Split On Migrant Crisis On Eve Of Brussels Talks (Reuters)
Balkan Countries Threaten To Close Borders If Germany Does (Reuters)
Refugee Crisis Agreement Between Serbia And Croatia (BN.ie)
Tampons, Sterile Cotton, Sanitary Pads Contaminated With Monsanto Glyphosate (RT)

This scenario is playing out across the -western- world. A very big storm brewing.

Pensioners Prosper, The Young Suffer. UK Social Contract Is Breaking (Willetts)

It marks a dramatic turnaround in the fortunes of different generations. Last week, the Institute for Fiscal Studies estimated that the median income of pensioners (£394 per week) is now higher than the median income of the rest of the population (£385 per week). In many ways, this is a triumph. Nobody wants to see pensioners struggling in poverty. And we might hope that the forces driving up the incomes of today’s pensioners will similarly boost incomes of the generations coming after. But if we investigate what lies behind the headline figures we see that this is not a simply benign economic and social trend from which we might all expect to benefit. Instead, there are some specific reasons why especially younger pensioners, the boomers who are now retiring, have ended up enjoying spectacular advantages that may not boost incomes of the generations coming after them.

We can get a good idea of how this has come about if we look behind the headline figures. First, they measure incomes left over after deducting housing costs. More and more old people own their homes with the mortgage paid off. They have very low housing costs. Meanwhile, younger generations struggle to get on the housing ladder, with high rents for poor quality property. We simply are not building anything like the number of houses we need. Through the 1950s and 1960s, we were building 300,000 houses a year but now, despite all the government’s efforts, we are only at about half that. Getting more houses built and bringing down the cost of housing is crucial to reducing this gap between the generations. Pensioners are also doing well because of the triple lock protecting their incomes.

This means the state pension is boosted by either inflation or earnings or 2.5% – whichever is highest. This is a ratchet that means whatever the state of the economic cycle the state pension keeps on going up. So even when earnings were not increasing, pensioners kept enjoying increases in their pension because it was linked to prices. Inflation has now dipped below zero but, because earnings are going up by 2.9 %, pensioners are going to do as well as workers next April. Increases in the female state pension age do provide some offset to these costs for the exchequer. Nevertheless, the annual ratchet of the triple lock raises public spending at a time when the government is, for example, planning cash cuts in the incomes of working people on tax credits. One estimate suggests that the triple lock is already costing around £6bn a year, significantly more than the £4.5bn cut to tax credits from next April that is causing so much controversy.

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Nice list.

Putting China’s “6.9% GDP Growth” In Context (Lebowitz)

On Friday morning, following Chinese Premiere Li’s comment that growth was still in a “reasonable range”, China’s central bank (PBoC) proceeded to cut interest rates as well as the required deposit reserve ratio for major banks. The language of the Premier and the actions of the PBoC are contradictory. Their actions in conjunction with their words offer even more evidence to believe reported growth is a mirage [..] Before viewing the statistics below take a moment to consider the following: If China’s economy is in fact humming along at a “reasonable” 6.9% pace, then what is the logic and motivation behind aggressively easier monetary policy? Put another way, what don’t we know about the Chinese economy?

Central Bank Actions

  • 1yr Benchmark Lending Rate: Since November 2014 China has cut their 1 year interest rate 6 times. Over this period the rate has been lowered from 5.60% to 4.35%
  • Required Deposit Reserve Ratio for Major Banks (determines amount of leverage banks can take and therefore the amount of loans they can make): Since February 2015 China has lowered it 4 times from 19.50% to 17.50%.
  • Renminbi: Since August China devalued their currency 2.8%

Economic Statistics

  • China export trade: -8.8% year to date
  • China import trade: -17.6% year to date
  • China imports from Australia: -27.3% year over year
  • Industrial output crude steel: -3% year to date
  • Cement output: -3.2% year over year
  • Industrial output electricity: -3.1% year over year
  • China Manufacturing Purchasing Managers Index: 49.8 (below 50 is contractionary)
  • China Services Purchasing Managers Index: 50.5 (below 50 is contractionary)
  • Railway freight volume: -17.34% year over year
  • Electricity total energy consumption: -.20% year over year
  • Consumer price index (CPI): +1.6% year over year
  • Producer price index (PPI): -5.9% year over year, 43 consecutive months of declines
  • China hot rolled steel price index: -35.5% year to date
  • Fixed asset investment: +10.3% (averaged +23% 2009-2014)
  • Retail sales: +10.9% the slowest growth in 11 years
  • Shanghai Stock Exchange Composite Index: -30% since June

Are these actions and statistics consistent with a country thought to be growing at 6.90% annually?

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But 6.9% was.

China Premier Says 7% Growth Goal Never Set In Stone (Reuters)

China has never said the economy absolutely must grow seven% this year, Premier Li Keqiang said in comments reported by the government late on Saturday, adding that he had faith in the country’s ability to overcome its economic difficulties. China’s economy in the July-to-September quarter grew 6.9% from a year earlier, data showed last week, dipping below 7% for the first time since the global financial crisis. Speaking at the Central Party School, which trains rising officials, Li said that China’s economic achievements had been not easy to come by and that the difficulties ahead should not be underestimated. Li’s report to the annual meeting of parliament set this year’s GDP growth target at about 7%.

“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range,” the central government paraphrased Li as saying in a statement released on its website. China’s economic growth has not been bad over the last year considering the problems in the global economy, he added. There are reasons for optimism going forward, such as rising employment, more spending on tourism and a fast growing service sector, Li said. “The hard work of people up and down the country and the enormous potential of China’s economy gives us more confidence that we can overcome the various difficulties,” he added. China’s central bank cut interest rates on Friday for the sixth time in less than a year, and it again lowered the amount of cash that banks must hold as reserves in a bid to jump start growth in its stuttering economy.

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What a great idea.

China Communist Party Paper Says Country Should Join TTIP (Reuters)

China should join at an appropriate time the U.S.-backed regional trade accord the Trans-Pacific Partnership (TPP) as its broad aims are in line with China’s own economic reform agenda, an influential Communist Party newspaper said on Sunday. China is not among the 12 Pacific Rim countries who earlier this month agreed the trade pact, the most ambitious in a generation. The accord includes Australia and Japan among economies worth a combined $28 trillion. China’s trade minister has said the country does not feel targeted by it, but will evaluate the likely impact comprehensively. In a commentary, the biweekly Study Times, published by the Central Party School that trains rising officials, admitted there were those in China who viewed the TPP as a “plot” to isolate and restrain the country’s global ambitions.

But the broad aims of the TPP, including reducing things such as administrative approvals and protecting the environment, were what China wants to achieve too, it wrote. China has been trying to shift to a more sustainable, ecologically-sound, consumption-led economic growth model. “The rules of the TPP and the direction of China’s reforms and opening up are in line,” the newspaper said. “China should keep paying close attention and at an appropriate time, in accordance with progress on domestic reform, join the TPP, while limiting the costs associated to the greatest degree,” it added. However, how China’s state-owned industries might be affected by joining the TPP would need careful consideration, as the party has made clear their key role in the economy, the newspaper said.

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Could as easily be talking about the electricity grid: “So there we are, called into a bank to solve a problem. They take us to a greying man sitting in the corner: ‘Please meet Peter, he is the only one left around here who still understands the systems’”

Cyber Attacks Bigger Threat To Our Banking System Than Bad Debts (Luyendijk)

Many IT specialists and financial consultants say megabanks have simply become too big and too complex to manage. This would be fine if they were restaurants or hairdressers, companies that can safely go bust. But as we saw in September 2008, megabanks are also too big to fail. Like generals trying to win the last war, financial regulators today are obsessed with preventing a repetition of that 2008 collapse. It was caused by a combination of ever-thinner capital buffers plus overly complex financial products, which had seemed risk-free until they exploded. Hence regulators’ and lawmakers’ response was to force banks to hold more capital to cushion new shocks, and to make the type of product that exploded far less lucrative.

Bankers and regulators like to point out that almost nobody saw the crash of 2008 coming. It was a so-called black swan event – one considered so unlikely as to be outside the realm of the possible, while having huge and irreversible consequences when it does occur. It makes sense to hunt for another black swan, another complex financial product that could blow up and take the global financial sector with it. Many IT specialists with experience in banks I have interviewed seem genuinely concerned that one day a megabank will be shut out of its own data. What happens to the companies who rely on that bank’s payment system? “It would make the panic during a bank run look innocent,” said one.

He spoke of colleagues who retain paper copies of all their internet banking statements and confirmed a favourite quote from another IT specialist I interviewed: “The generation who built the computer systems when automation took off is now reaching retirement age. So there we are, called into a bank to solve a problem. They take us to a greying man sitting in the corner: ‘Please meet Peter, he is the only one left around here who still understands the systems’.” Much of the debate about banks and the dangers they pose to society has focussed on moral hazard; since bankers know they will be saved anyway there is little incentive to be cautious, especially when shareholders demand ever higher returns. That is the problem of Too Big to Fail.

But listen to IT specialists and you realise that the next big blow-up may result from an entirely different problem with banks today: Too Big and Too Complex to manage. This raises very real risks, both of the kind of meltdowns that specialists fear but also of cyber attacks: if you are a terrorist and you want to hit the West where it genuinely hurts, then the IT systems of a big bank must look like an attractive target. All the more reason to break up the banks and make them smaller so should one go then the entire system is not pulled down with it.

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Stagnation and deflation.

The Age Of The Torporation (Economist)

At the economy-wide level companies’ sales are closely related to nominal GDP growth (which includes inflation). So it should be no shock that firms are struggling given that deflation stalks rich countries and growth is slowing in the emerging world. After two lost decades, Japanese firms’ sales per share are still similar to the level in the 1990s. For Western firms there is also a suspicion that the methods used to crank out profits during the golden era were unsustainable. The unease is compounded by the fact that earnings are high relative to two yardsticks. S&P 500 earnings per share are 28% above their ten-year average. And in America profits are stretched relative to GDP). Since the 1970s American firms have yanked on three big levers to boost profits.

First, multinationals expanded abroad, with foreign earnings supplying a third or so of long-term earnings growth. Today, however, it seems that emerging economies are at the end of their 15-year boom. Second, finance was a crucial prop for profits in the two decades to 2007, with the banking industry expanding rapidly and industrial firms such as GE and General Motors building huge shadow banks. The regulatory clampdown since the financial crisis means this adventure is now over. Third, after 2007-08 firms relied heavily on pushing down the share of their profits that they paid out in wages. But now there are hints that wages are rising. On October 14th Walmart said that higher pay and training costs would lower its profits by $1.5 billion, or just under 10%, in 2017.

A week later Chipotle, a fast-food chain specialising in burritos big enough to ballast a ship, blamed falling margins on labour costs. If the share of domestic gross earnings paid in wages were to rise back to the average level of the 1990s, the profits of American firms would drop by a fifth. Faced with stagnation, the quick fix is share buy-backs, which are running at $600 billion a year in America. They are a legitimate way to return cash to investors but also artificially boost earnings per share. IBM spent $121 billion on buy-backs over the past decade, twice what it forked out on research and development. In the third quarter its sales fell by 14%, or by 1% excluding currency movements and asset disposals. Big Blue should have invested more in its own business. Walmart spent $60 billion on buy-backs even as it fell far behind Amazon in e-commerce.

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The ‘Hair of the Dog’ cure.

Listen – Is That The Sound Of A Bubble Bursting Down Under? (Steve Keen)

In everywhere but Australia, I’m famous for predicting the 2008 crash. In Australia, I’m famous for being wrong about house prices – they rose after the crash, when I expected them to fall. So why should you listen to me about the one thing I got wrong? Partly because I got the cause right, but the direction of the cause wrong. As the Irish know only too well, what really causes house prices to rise rapidly is too much mortgage debt, rising too quickly. House prices exploded here in the “Celtic Tiger” days, only to collapse when the mortgage bubble burst – bringing the economy down with it. Australians avoided this nasty hangover by the classic Antipodean method: they went for the ‘Hair of the Dog’ cure.

Whereas the rest of the world unwound its mortgage debt, Australians piled into it – first in 2008 when the government turbocharged the market by doubling the grant it gave to first-home buyers, and then since 2012 when falling interest rates encouraged Baby Boomers to throw their so-called retirement savings into the housing market casino. The Australian hangover cure worked, but at the expense of mortgaging Australia to the hilt. When the crisis hit in 2008, Australian mortgage debt was already higher than in the USA: mortgage debt peaked at 72pc of GDP in America then, but Australia’s level was 10pc higher again. Today, mortgage debt in the USA has fallen to 53pc of GDP-what wimps! The hard-drinking Australians now have a mortgage debt level of 91pc of GDP and rising.

And therein lies the rub. As any fan of the ‘Hair of the Dog’ cure knows, it only works if you keep drinking. So can Australians maintain their record for insobriety and keep imbibing from the Bar of the Banks? Left to their own devices, I have little doubt that my ex-countrymen could keep knocking back the 4X of mortgage debt forever. But as ‘Hair of the Dog’ devotees also know, one danger of this cure is that the bartender will eventually refuse to serve you. And that seems to be happening in Australia now. Two of the banks have recently put up the interest rate on speculator (sorry, I mean investor) loans, while the policeman (the “Australian Prudential Regulation Authority”) has finally awoken from his slumber, and is now insisting on less alcohol in the brew-otherwise known as a lower loan to valuation ratio.

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At least 5 years too late. More like 10.

Mortgage Rate Rises Too Little, Too Late For Australia’s Bloated Banks (David)

In Australia, the big four banks are joining the mortgage interest rate hike bandwagon to boost additional capital in what is truly a high-risk banking and financial system. Simply put, when it comes to lending, banks are facilitators. On the front end, banks’ assets are generated by providing credit (debt) to homebuyers and charging a specific rate of interest. On the back end, banks have liabilities derived from depositors and wholesale lenders, fetching an interest rate which is lower than that charged to homebuyers. The banks earn the difference in revenue. Australian households owe creditors an unconsolidated $1.97tn as of the second quarter of 2015, comprised primarily of mortgages with a remainder of personal loans.

Relative to GDP, this amounts to 121.5%, and the proportion increased by 150 basis points every quarter over the past year. Given this historically and internationally large stock of household debt, the banks are earning mega dollars via net interest rate margins. Australian banks are raking in record-breaking profits due to the sheer volume of mortgage debt issued to homebuyers and residential property investors. This is the primary reason housing prices in Australia are at record levels, relative to inflation, rents and household income: a housing bubble generated by debt-financed speculation. Today, our banks are more exposed to the risk of a shock to the housing market than in any other moment in Australia’s economic history.

There are various reasons for banks to increase mortgage interest rates without a shift in the cash rate set by the Reserve Bank. In Australia’s case, policymakers and the prudential regulator, Apra, woke up – 17 years too late. They finally realised our banks would not be able to withstand a financial shock based on the colossal stock of mortgage and other debts on their balance sheets relative to the amount of security they have to defend their businesses in the event of a severe economic downturn. [..] This is a pyramid or Ponzi scheme, that puts the speculator at risk of owing more to a bank than their property portfolio is worth (negative equity). This presents a clear and present danger to the banking and financial system, depositors, taxpayers and welfare of millions of Australians who have borrowed on a large scale as residential land prices escalate.

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Where democracy went to die.

Portugal Left Vows To Topple Government With No-Confidence Vote (Reuters)

Portugal’s opposition Socialists have pledged to topple the centre-right minority government with a no-confidence motion, saying the president had created “an unnecessary political crisis” by nominating Pedro Passos Coelho as prime minister. The move could wreck Mr Passos Coelho’s efforts to get his centre-right government’s programme passed in parliament in 10 days’ time, extending the political uncertainty hanging over the country since an inconclusive October 4th election. Mr Coelho was named prime minister on Thursday after his coalition won the most votes in the national election but lost its majority in parliament, which swung to leftist parties.

This set up a confrontation with the main opposition Socialists, who have been trying to form their own coalition government with the hard left Communists and Left Bloc, who all want to end the centre-right’s austerity policies. “The president has created an unnecessary political crisis” by naming Passos Coelho as prime minister,” Socialist leader Antonio Costa said. The Socialists and two leftist parties quickly showed that they control the most votes when parliament reopened on Friday, electing a Socialist speaker of the house and rejecting the centre-right candidate. “This is the first institutional expression of the election results,” Mr Costa said. “In this election of speaker, parliament showed unequivocally the majority will of the Portuguese for a change in our democracy.”

Early Friday, Mr Costa’s party gave its lawmakers a mandate to “present a motion rejecting any government programme” that includes similar policies to the last government. After the national election, Passos Coelho tried to gain support from the Socialists, who instead started negotiating with the Communists and Left Bloc. Antonio Barroso, senior vice president of the Teneo Intelligence consultancy in London, said Mr Costa was likely to threaten any Socialist representative with expulsion if they vote for the centre-right government’s programme. “Therefore, the government is likely to fall, which will put the ball back on the president’s court,” Mr Barroso said in a note.

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“..in the winter there will be winds that will turn boats over, our beaches will be beaches of death..”

More Syrians Risk Deadly Crossings To Greece In Race Against Winter (Guardian)

At a reception centre in the village of Moria there have been riots. Human rights groups say conditions in the barbed-wire enclosure are “inhumane”. “They treated us like animals,” sighed Al Shabai. “The Greeks have been very nice, very good, but in there it’s a wild world, people sleep on the ground, in their own shit, please write that, please let the world know.” Newcomers crammed into its floodlit confines are often forced to wait days before they are registered, fingerprinted and split into groups of those considered genuine refugees and those who are economic migrants. “I think it is clear that Greece has enormous structural difficulties because of the economic situation,” the UN High Commissioner for refugees, António Guterres, told the Guardian recently.

“It didn’t have an adequate asylum system [before the emergency] but despite the financial restrictions there is enormous goodwill and in [leftwing] Syriza, Greece has a government that is taking a humanistic approach,” he said after a recent tour of the island. The UN agency, which more usually operates in war zones, has been compelled to increase its presence dispatching personnel not only to the country’s Aegean isles but northern Balkan borders in a first for an advanced western economy.On Lesbos, officials worry that the situation is bound to get worse before it gets better. Although local people have been generally welcoming – citing their own experience as refugees from Turkey after the 1922 Asia Minor disaster – the neo-fascist Golden Dawn party received unusually high support in September’s general election.

Masked men have been attacking refugee boats. For the newly arrived, relief is frequently replaced by frustration. With the vast majority determined to get to Germany before the winter sets in, few want to linger – often electing to walk a distance longer than the Athens Marathon to get to Moria and off the island. “They are tired and cold, totally exhausted and then we tell them they have to wait because there is no bus service and that’s when you see them collapse and get really frustrated,” said Mona Martinsen, a Norwegian aid worker. “It’s out of control, you see people sleeping in their own faeces, its not right, the world has to send more help.”

In his office overlooking the port capital of Mytilini, the island’s mayor, Spyros Galinos, fears that Europe is dragging its feet and that human tragedy will soon be stalking the shores of Lesbos. Already, he says, the waters have grown rougher, causing shipwrecks off the isle that have left 19 people dead in the past nine days. “Right now, they are coming in on the northerly winds, but in the winter there will be winds that will turn boats over, our beaches will be beaches of death,” he said. Every month the municipality spends more than €200,000, with most allocated to cleaning up the island. “Every day the population of a small town arrives on this island,” he says.

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What the EU is good at.

Hotspot ‘Solution’ Deepens Europe’s Refugee Crisis (IRIN)

An EU initiative to screen and fingerprint all migrants and refugees arriving in Italy and Greece is creating chaos, particularly on the island of Lesvos where the new system is causing further delays in registering new arrivals and thousands of people have been queueing in the open for days. The introduction of “hotspots” – an EU term for key arrival points where more rigorous systems for screening and fingerprinting migrants and refugees will be implemented – is central to a controversial plan to relocate 160,000 asylum seekers from Italy and Greece to other member states over the next two years. The relocation scheme, which was agreed to by EU leaders last month, is still in its infancy with just two hotspots functioning and only 89 Eritreans and Syrians transferred from Italy to Scandinavia so far, but the approach is already coming up against major problems.

Previously, most of the more than 600,000 people who have arrived by sea to Italy and Greece this year avoided being fingerprinted and made their own way to northern Europe. It was no secret that, under the EU’s Dublin Regulation, the country that took their fingerprints was responsible for processing their asylum claim, preventing them from claiming asylum in the country of their choice. For their part, authorities in Italy and Greece, already facing a backlog of asylum claims, did not insist that new arrivals be fingerprinted. But the quid pro quo for the relocation deal is that the two countries comply with the new approach. In Italy, the first hotspot opened in late September on the country’s southernmost island of Lampedusa. A further four hotspots are set to begin operations by the end of November – three in Sicily and another in the mainland Puglia region.

Italian officials say people on Lampedusa are being “verbally convinced” to give their fingerprints (EU human rights laws rule out the use of physical force). “We explain that it’s important [to be identified] to go to the countries where they want to go,” said Mario Morcone, head of the interior ministry’s department for civil liberties and immigration. In reality, those accepted for relocation will not get to choose the country they are sent to, and anyone who refuses to give their fingerprints risks being moved to a closed Centre for Identification and Expulsion (CIE) rather than an open reception facility.

Carlotta Sami, a spokeswoman for the UN’s refugee agency, UNHCR, said that so far no one had been transferred to a CIE because everyone had agreed to be fingerprinted. She added that UNHCR backed the new procedure, while emphasising the need for a humanitarian approach. “Everyone should be identified and fingerprinted,” she told IRIN. “It’s very important. A big part of this European refugee crisis is due to a lack of organisation, and the fact that procedures have not been well organised since the beginning. The result is chaos, a further burden on the shoulders of refugees.”

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Europe is synonymous with misery.

Bodies Of 40 Migrants Wash Ashore In Libya (AP)

Libya’s Red Crescent says the bodies of 40 migrants have washed ashore in the Mediterranean country. Red Crescent spokesman Mohamed al-Masrati says 27 of the bodies were found Saturday at the town of Zliten, east of the capital, Tripoli. The rest were found along the shores of Tripoli and the nearby town of Khoms. Al-Masrati says most of the migrants were from sub-Saharan African countries. He says search efforts are underway for another 30 migrants whom they believe were on the boat that capsized. Thousands of migrants seeking a better life in Europe cast off from Libya on rickety boats. The country slid into chaos following the 2011 toppling and killing of dictator Moammar Gadhafi. Smugglers have exploited Libya’s turmoil, sending off thousands of desperate migrants from the country’s shores.

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They will never agree.

Europe Split On Migrant Crisis On Eve Of Brussels Talks (Reuters)

European leaders traded threats and reprimands on Saturday as thousands more migrants and refugees streamed into the Balkans on the eve of European Union talks aimed at agreeing on urgent action to tackle the crisis. Concern is growing about hundreds of thousands of migrants arriving in Europe, many from war zones in the Middle East, and camping in western Balkan countries in ever colder conditions as winter approaches. More than 680,000 migrants and refugees have crossed to Europe by sea so far this year, fleeing war and poverty in the Middle East, Africa and Asia, according to the International Organization for Migration. Bulgaria, Serbia and Romania said they would close their borders if Germany or other countries shut the door on refugees, warning they would not let the Balkan region become a “buffer zone” for stranded migrants.

“The three countries, we are standing ready, if Germany and Austria close their borders, not to allow our countries to become buffer zones. We will be ready to close borders,” Bulgarian Prime Minister Boiko Borisov told reporters. European Commission president Jean-Claude Juncker has invited the leaders of Austria, Bulgaria, Croatia, Macedonia, Germany, Greece, Hungary, Romania, Serbia and Slovenia to Sunday’s mini-summit. The aim of the meeting is to agree “common operational conclusions which could be immediately implemented.” German media have reported that Juncker will present a 16-point plan, including an undertaking not to send migrants from one country to another without prior agreement.

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“We carry out our obligations, we are in solidarity with all of Europe,” Ponta said. “But the responsibility cannot be put with just some countries.”

Balkan Countries Threaten To Close Borders If Germany Does (Reuters)

Bulgaria, Serbia and Romania said on Saturday they would close their borders if Germany or other countries do the same to stop refugees coming in, warning they would not allow the Balkan region to become a buffer zone for stranded migrants. Bulgarian Prime Minister Boiko Borisov announced the decision after meeting his Serbian and Romanian counterparts in the capital Sofia ahead of a planned summit of European Union leaders on Sunday. It is an indication of the divisions that have opened up between European Union states over how to deal with an influx of hundreds of thousands of migrants, many fleeing conflict in Syria, Iraq and Afghanistan.

“The three countries, we are standing ready, if Germany and Austria close their borders, not to allow our countries to become buffer zones. We will be ready to close borders,” Borisov told reporters. “We will not expose our countries to the devastating pressure of millions that would come.” Romanian Prime Minister Victor Ponta said this would be the three countries’ common position at an extraordinary meeting of some European leaders on Sunday to tackle the migrant crisis in the western Balkans. Thousands trying to reach Germany are already trapped there in deteriorating conditions. “We carry out our obligations, we are in solidarity with all of Europe,” Ponta said. “But the responsibility cannot be put with just some countries.”

“If there are countries which close their borders, or build fences, then we have the right to defend ourselves in a timely manner.” Romania’s neighbor Hungary has built a fence to keep out migrants and closed its border with Croatia, prompting Slovenia to consider following suit with its own fence. European Commission chief Jean-Claude Juncker has invited to Sunday’s mini-summit the heads of state or government of Austria, Bulgaria, Croatia, Macedonia, Germany, Greece, Hungary, Romania, Serbia and Slovenia, plus key organizations involved. The aim of the meeting is to agree “common operational conclusions which could be immediately implemented”.

It comes as crowds of refugees and other migrants camp by roads in western Balkan countries in worsening autumn weather after Hungary sealed its borders, causing a chain reaction in other overwhelmed states. “It is important for the people to know that it is not a problem to register (refugees), or build bigger centers, nothing of this is a problem for Serbia,” Serbian Prime Minister Aleksandar Vucic told reporters. “But if someone thinks that we can be the place for two or three million refugees: this is unrealistic.”

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To quicken transport north.

Refugee Crisis Agreement Between Serbia And Croatia (BN.ie)

Serbia and Croatia have agreed to ease the flow of refugees over the border between the countries after thousands of people, including children, were forced to spend the night in near-freezing temperatures along a muddy border passage. The interior ministers of Serbia and Croatia said they will start shipping migrants by train directly from Serbia to Croatia so they will not have to cross on foot, with them often trekking for miles. Refugees will register when they enter Serbia and will be able to cross into Croatia without any delays, which should speed up the process significantly, the ministers said. “We have agreed to stop this torture,” said Croatian interior minister Ranko Ostojic. “There will be no more rain and snow, they will go directly from camp to camp.”

Further west, thousands of migrants aiming to reach northern Europe walked out of refugee camps on the border between Slovenia and Austria on their own, frustrated after waiting long hours in overcrowded facilities. Eager to move on, thousands spread around along railway tracks, highways and mountain roads. Confused and unaware which roads to take to go west, some refugees later turned back and returned to the refugee camps to wait for bus transport to other locations. Tensions have been building after the so-called Balkan route shifted. refugees still cross first from Greece into Macedonia and then Serbia, but now go via Croatia and Slovenia instead of Hungary, which has erected fences along its borders with Serbia and Croatia.

Overwhelmed after nearly 50,000 migrants crossed in just a few days, Slovenia said it has not ruled out erecting a fence of its own along parts of its 400-mile border with Croatia. Prime Minister Miro Cerar was quoted by the state news agency STA as saying Slovenia will consider all options if left to cope on its own with the influx of thousands of people. “Our sights are foremost on finding a European solution,” said Mr Cerar. “But should we lose hope for this … all options are open within what is acceptable.” The country of 2 million people has already deployed 650 army troops to help the police manage the flow and has asked the European Commission for an aid package, including €60 million in financial aid and police gear and personnel.

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Is this a better reason to oppose Monsanto than GMO food?

Tampons, Sterile Cotton, Sanitary Pads Contaminated With Monsanto Glyphosate (RT)

The vast majority, 85%, of tampons, cotton and sanitary products tested in a new Argentinian study contained glyphosate, the key ingredient in Monsanto’s Roundup herbicide, ruled a likely carcinogen by the World Health Organization. Meanwhile, 62% of the samples tested positive for AMPA, glyphosate’s metabolite, according to the study, which was conducted by researchers at the Socio-Environmental Interaction Space (EMISA) of the University of La Plata in Argentina. All of the raw and sterile cotton gauze analyzed in the study showed evidence of glyphosate, said Dr. Damian Marino, the study’s head researcher. “85% of all samples tested positive for glyphosate and 62% for AMPA, which is the environmental metabolite, but in the case of cotton and sterile cotton gauze the figure was 100%”, Marino told TElam news agency.

The products tested were acquired at local stores in Argentina. “In terms of concentrations, what we saw is that in raw cotton AMPA dominates (39 parts per billion, or PPB, and 13 PPB of glyphosate), while the gauze is absent of AMPA, but contained glyphosate at 17 PPB.” The results of the study were first announced to the public last week at the 3rd National Congress of Doctors for Fumigated Communities in Buenos Aires. “The result of this research is very serious, when you use cotton or gauze to heal wounds or for personal hygiene uses, thinking they are sterilized products, and the results show that they are contaminated with a probably carcinogenic substance”, said Dr. Medardo Avila Vazquez, president of the congress.

“Most of the cotton production in the country is GM [genetically modified] cotton that is resistant to glyphosate. It is sprayed when the bud is open and the glyphosate is condensed and goes straight into the product”, Avila continued. Marino said the original purpose of his research was not to test products for glyphosate, but to see how far the chemical can spread when aircraft sprayed an area, such as cropland. “There is a basic premise in research that when we complete testing on out target we have to contrast it with something ‘clean,’ so we selected sterile gauze for medical use, found in pharmacies,” he said. “So we went and bought sterile gauze, opened the packages, analyzed and there was the huge surprise: We found glyphosate! Our first thought was that we had done something wrong, so we threw it all away and bought new gauze, analyzed them and again found glyphosate.”

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