neocons Archives - The Automatic Earth

In the days after President Trump fired James B. Comey as F.B.I. director, law enforcement officials became so concerned by the president’s behavior that they began investigating whether he had been working on behalf of Russia against American interests, according to former law enforcement officials and others familiar with the investigation. The inquiry carried explosive implications. Counterintelligence investigators had to consider whether the president’s own actions constituted a possible threat to national security. Agents also sought to determine whether Mr. Trump was knowingly working for Russia or had unwittingly fallen under Moscow’s influence.

The investigation the F.B.I. opened into Mr. Trump also had a criminal aspect, which has long been publicly known: whether his firing of Mr. Comey constituted obstruction of justice. Agents and senior F.B.I. officials had grown suspicious of Mr. Trump’s ties to Russia during the 2016 campaign but held off on opening an investigation into him, the people said, in part because they were uncertain how to proceed with an inquiry of such sensitivity and magnitude. But the president’s activities before and after Mr. Comey’s firing in May 2017, particularly two instances in which Mr. Trump tied the Comey dismissal to the Russia investigation, helped prompt the counterintelligence aspect of the inquiry, the people said.

The special counsel, Robert S. Mueller III, took over the inquiry into Mr. Trump when he was appointed, days after F.B.I. officials opened it. That inquiry is part of Mr. Mueller’s broader examination of how Russian operatives interfered in the 2016 election and whether any Trump associates conspired with them. It is unclear whether Mr. Mueller is still pursuing the counterintelligence matter, and some former law enforcement officials outside the investigation have questioned whether agents overstepped in opening it.

[..] The second event that troubled investigators was an NBC News interview two days after Mr. Comey’s firing in which Mr. Trump appeared to say he had dismissed Mr. Comey because of the Russia inquiry. “I was going to fire Comey knowing there was no good time to do it,” he said. “And in fact, when I decided to just do it, I said to myself — I said, you know, this Russia thing with Trump and Russia is a made-up story. It’s an excuse by the Democrats for having lost an election that they should’ve won.”

A remarkable turnaround. The peaceniks have turned into warmongers.

• Democratic Elites Reunite With Neocons (Greenwald)

[..] what is remarkable about the new polling data on Syria is that the vast bulk of support for keeping troops there comes from Democratic Party voters, while Republicans and independents overwhelming favor their removal. The numbers are stark: Of people who voted for Clinton in 2016, only 26 percent support withdrawing troops from Syria, while 59 percent oppose it. Trump voters overwhelmingly support withdraw by 76 percent to 14 percent. A similar gap is seen among those who voted Democrat in the 2018 midterm elections (28 percent support withdrawal while 54 percent oppose it), as opposed to the widespread support for withdrawal among 2018 GOP voters: 74 percent to 18 percent.

Identical trends can be seen on the question of Trump’s announced intention to withdraw half of the U.S. troops currently in Afghanistan, where Democrats are far more supportive of keeping troops there than Republicans and independents. This case is even more stark since Obama ran in 2008 on a pledge to end the war in Afghanistan and bring all troops home. Throughout the Obama years, polling data consistently showed that huge majorities of Democrats favored a withdrawal of all troops from Afghanistan.

With Trump rather than Obama now advocating troop withdrawal from Afghanistan, all of this has changed. The new polling data shows far more support for troop withdrawal among Republicans and independents, while Democrats are now split or even opposed. Among 2016 Trump voters, there is massive support for withdrawal: 81 percent to 11 percent; Clinton voters, however, oppose the removal of troops from Afghanistan by a margin of 37 percent in favor and 47 percent opposed.

They don’t understand AOC anymore then they understood Trump.

• Exasperated Democrats Try To Rein In Ocasio-Cortez (Pol.)

Alexandria Ocasio-Cortez is already making enemies in the House Democratic Caucus — and some of its members are mounting an operation to bring the anti-establishment, democratic socialist with 2.2 million Twitter followers into the fold. The effort, described by nearly 20 lawmakers and aides, is part carrot, part stick: Some lawmakers with ties to Ocasio-Cortez are hoping to coax her into using her star power to unite Democrats and turn her fire on Republicans. Others simultaneously warn Ocasio-Cortez is destined for a lonely, ineffectual career in Congress if she continues to treat her own party as the enemy.

“I’m sure Ms. Cortez means well, but there’s almost an outstanding rule: Don’t attack your own people,” said Rep. Emanuel Cleaver (D-Mo.). “We just don’t need sniping in our Democratic Caucus.” Incumbent Democrats are most annoyed by Ocasio-Cortez’s threat to back primary opponents against members of their ranks she deems too moderate. But their frustration goes beyond that: Democratic leaders are upset that she railed against their new set of House rules on Twitter the first week of the new Congress. Rank and file are peeved that there’s a grassroots movement to try to win her a top committee post they feel she doesn’t deserve.

Even some progressives who admire AOC, as she’s nicknamed, told POLITICO that they worry she’s not using her notoriety effectively. “She needs to decide: Does she want to be an effective legislator or just continue being a Twitter star?” said one House Democrat who’s in lockstep with Ocasio Cortez’s ideology. “There’s a difference between being an activist and a lawmaker in Congress.” It’s an open question whether Ocasio-Cortez can be checked. She’s barely been in Congress a week and is better known than almost any other House member other than Nancy Pelosi and John Lewis. A media throng follows her every move, and she can command a national audience practically at will.

Yes, we want fewer reserves, but don’t worry, we’ll just pay you more interest on what remains, so you’re fine.

• Fed Paid Banks $38.5 Billion in Interest on “Reserves” in 2018 (WS)

The Fed reported its preliminary results this morning for the year 2018. The headline is that it sent $65.4 billion of its profits to the US Treasury Department in 2018, and that this amount had plunged by 18.5% from the remittances, as they’re called, in 2017, and by 44.1% from the peak of $117 billion in 2015. The Fed earns interest income on the huge pile of securities it holds. After covering operating expenses, interest expenses, and some other items, it is required to remit the rest to the Treasury Department – to the taxpayer. Therefore, the amounts in interest expense the Fed pays the banks on their “Excess Reserves” and “Required Reserves” comes out of the taxpayer’s pocket and its transferred to the banks to become bank profits, and thereby bank executive bonuses and stock holder dividends, funded by the dear taxpayers. And this amount was huge in 2018: $38.5 billion!

The $38.5 billion: This is what the Fed paid US banks and foreign banks in the US on their Excess Reserves and Required Reserves on deposit at the Fed. • Required Reserves are the amounts that banks have to keep on deposit at the Fed for liquidity purposes. This is relatively small, $192 billion at year-end, and was roughly flat in 2018. • Excess Reserves are the amounts that banks voluntarily deposit at the Fed to earn risk-free income. The amount peaked in September 2014 at $2.7 trillion and has since fallen to $1.5 trillion. Of that $1.2 trillion drop, $510 billion occurred in 2018.

The interest rate that the Fed paid on both types of reserves was 1.5% at the beginning of 2018, and was raised four times with each rate hike during the year, but less than the 1/4-point hikes of the Fed’s target range for the federal funds rate. At its December meeting, the Fed raised this rate to 2.4%. So the balances of Excess Reserves have plunged, and the interest rate the Fed pays on those reserve balances has jumped. Both factors combined caused the Fed to pay a record $38.5 billion to US banks and foreign banks in the US.

Here is the sordid history of this annual wealth transfer from taxpayers to the banks via the Fed:

Wolf Richter has much more on this topic in the article, I just wanted to point out that, counterintuitively perhaps, the amount of US currency in circulation has surged. To the mattresses!

• Fed Balance Sheet and Currency In Circulation (WS)

The Fed’s balance sheet would be “substantially smaller” after the Fed gets done with its QE unwind, Fed Chairman Jerome Powell said on Thursday. [..] “Don’t know the exact level. That would depend really on the public’s appetite for our liabilities, specifically currency. To us, that’s a liability. And the public has a large appetite for currency….” “So it will be substantially smaller than it is now,” he said. “But nowhere near what it was before, and the reason is, currency was well less than $1 trillion before quantitative easing started and now is moving up toward $2 trillion.” The line item on the Fed’s balance sheet called “currency in circulation” is composed of Federal Reserve Notes – as it says on the wrinkled and thinning wad of twenties in my pocket — and coins. In other words, hard cash.

And as Powell pointed out, this is a liability on the Fed’s balance sheet, not an asset. The Treasury Department produces the bills and coins. But the Fed manages the amounts in circulation via the banking system. Currency in circulation grows when there is a lot of demand for paper-dollar cash. There must always be enough paper-dollars in the banking system to satisfy the demand by customers for the physical dollars. And as Powell pointed out, “the public has a large appetite for currency.” This demand for dollars is on a global basis. People globally are hoarding this stuff, and some countries use it as their primary currency, or as an alternate currency alongside their own trashed currency. When the Financial Crisis set in, folks started hoarding more of it, and demand increased at a steeper rate. This chart shows currency in circulation. The amount more than doubled from $830 billion in February 2008 to $1.72 trillion now:

$2000 for a phone. Get real. It’s a dead business model.

• Retailers Are Slashing iPhone Prices Across China (CNBC)

Apple’s latest iPhone models are facing huge discounts in China as retailers try to sell the struggling devices. That comes as the top-of-the-line Apple smartphones have posted poor China sales on what experts say are too-high prices for the world’s largest smartphone market and a lack of innovative features compared to local competitors like Huawei. The technology giant itself acknowledged earlier this month that unexpectedly low sales in the Chinese market would likely lead to worse-than-anticipated first quarter revenues. One of the most recent iPhone cost cuts in the country came from Suning, a large Chinese retailer, which changed the price of the 128GB version of the iPhone XR from 6,999 yuan ($1,036) to 5,799 yuan ($858) — a 1,200 yuan ($178) discount.

Other third-party sellers on the site had the devices for even cheaper, offering flash sales to try to unload iPhones.[..] Apple’s issues in China are down to two major factors, experts and local consumers say: It got its pricing wrong, and it has failed to introduce features to excite consumers in a forward-thinking technology market. Now, analysts said, competitors have taken market share in the premium smartphone space. In a public letter released on Jan. 2, Apple CEO Tim Cook blamed the slowing Chinese economy and rising trade tensions with the U.S. as one of the key reasons for lowering first quarter sales guidance. Experts, however, told CNBC that much of the iPhone’s China problem comes down to the company setting the wrong prices.

[..] “The trade war is background noise and more of a scapegoat excuse with the real issues being iPhone XR demand and a mispriced product in a competitive Chinese market,” Daniel Ives, managing director of equity research at Wedbush Securities, told CNBC by email. “It’s time for Cook and Apple to look in the mirror, take their medicine around pricing and execution and move forward with the biggest installed base in the world to turn this ship around from this dark chapter in Cupertino,” he added.

Of course, when your new phones don’t sell, you launch more new phones. Now with 3 cameras. Where’s Steve Jobs?

• Apple Plans To Launch Three New iPhones This Year (CNBC)

Apple plans to unveil three new iPhone models this year, including a successor to the XR, The Wall Street Journal reported Friday. The tech giant’s new phones will include new camera features, the Journal reported, citing people familiar with the situation. The higher-end model will be fitted with a triple rear camera, while the lower-end models will have a double rear camera, the report said. One will feature a liquid-crystal display, the display that Apple’s lower-end iPhone XR model comes with. The XR has reportedly struggled to win over Chinese consumers. Apple recently lowered its revenue guidance for the first quarter, alarming investors, and cited lower-than-expected iPhone revenue “primarily in Greater China” as one of the main reasons behind its warning.

Yeah, they’re not selling enough cars, i.e. they don’t create enough pollution: “What I find particularly unsettling are psychological factors. The whole diesel discussion, combined with the problems in the auto industry, increases uncertainty..”

• Unclear How Deep, Lasting Germany’s Economic Problems Are: ECB’s Nowotny (R.)

It is unclear if Germany’s recent economic setbacks are a one-off or a more lasting phenomenon caused by structural problems, particularly in its car industry, European Central Bank policymaker Ewald Nowotny said in remarks published on Saturday. Struggling to adjust to new emission testing standards, Germany’s car manufacturing contracted in the third quarter, dragging overall economic growth into negative territory and raising fears that Europe’s five-year-old growth run may be coming to a premature end. The Bundesbank said in a monthly economic report last month that Germany’s dominant car industry may take longer than previously thought to recover from a slump, weighing on growth in the euro zone’s biggest economy.

“The most important economic question for Europe is whether these are one-off slowdowns or whether structural factors are behind them,” ECB’s Governing Council member Nowotny said in an interview with Austrian newspaper Der Standard, discussing the prospect of a second quarter of negative growth in Germany. “The fear is that particularly in the auto industry we have lasting changes that affect Germany especially,” said Nowotny, who is also governor of the Austrian National Bank. The Bundesbank said in its report last month that while a quick rebound in the auto sector had been forecast, fresh data was disappointing those hopes.

It added that the slump was exacerbated by an overall deterioration in sentiment as well as uncertainty over the future of diesel cars as cities contemplate bans to reduce pollution. “What I find particularly unsettling are psychological factors. The whole diesel discussion, combined with the problems in the auto industry, increases uncertainty,” Nowotny said. “If people defer the purchase of a car by just half a year, that causes a vast fall in demand. There would be lasting and dramatic consequences if there were real structural collapses in the export- and machinery-oriented economy. Germany could become vulnerable,” he said.

Macron et al are clueless. They keep trying to separate the protesters from the ‘real French’, but they’re the same people.

• France Vows Tough Response As New ‘Yellow Vest’ Demos Loom (AFP)

France braced for a fresh round of “yellow vest” protests across the country on Saturday, with the authorities vowing zero tolerance for violence after weekly scenes of rioting and vandalism in Paris and other cities over the past two months. [..] “Those who are calling to demonstrate tomorrow know there will be violence, and therefore they are in part responsible,” Interior Minister Christophe Castaner said in a Facebook interview Friday with Brut, a digital news site favoured by many yellow vests. “Those who think that, a few thousand people, can make us question our institutions, are wrong,” Castaner added later Friday.

Far-right National Rally leader Marine Le Pen, who has presented her party as the longstanding expression of many yellow vest demands, condemned the government’s reaction as “disturbing”. “To accuse all protesters of ‘complicity’ with the thugs: here is a new verbal provocation and legal ineptitude waiting to undermine our rule of law,” she wrote on Twitter. [..] Macron has called for a national debate on voters’ grievances, beginning next week, hoping to sate demands for more of a say in national law-making and tamp down the protesters’ anger. But the process risks being hobbled by record levels of distrust towards politicians and representatives of the state.

A poll by the respected Cevipof political sciences institute released Friday showed 77 percent of respondents thought politicians inspired “distrust”, “disgust” or “boredom”. And it’s uncertain if the public consultations will be enough, with many protesters calling for Macron’s resignation or an immediate referendum on his presidency. “I had some hope with this ‘great debate’, but it’s not looking good because they don’t want to talk about taxes, and they’re the ones who are deciding the subjects,” said Patrick Lerest, a 62-year-old protester in Nemours, southeast of Paris. “I want us to have a real debate,” he said.

Damning no matter the outcome of the suit. Do no evil. Where is #MeToo?

• Google Sued For Covering Up $90m Payout To Ex-Exec Accused Of Sexcrimes (AFP)

Google’s board of directors is being sued for approving a $90m (£70m) payout to a former executive and covering up allegations including that he forced a female employee to perform oral sex. The lawsuit, brought by shareholder James Martin, claims directors made the payment to stop details of the allegations becoming public. It also cites examples of alleged sexual misconduct by other former employees which Google directors kept private. Google’s founders Larry Page and Sergey Brin allowed Mr Rubin to “quietly resign” even after an internal investigation had found the allegations against him credible, the complaint filed in California alleges.

“The directors’ wrongful conduct allowed the illegal conduct to proliferate and continue,” the complaint states. “As such, members of Alphabet’s board were knowing and direct enablers of the sexual harassment and discrimination.” The lawsuit also cites allegations that while Mr Rubin was at Google he engaged in “human sex trafficking – paying hundreds of thousands of dollars to women to be, in Rubin’s own words, ‘owned’ by him”. Mr Page, Mr Brin and other top executives failed in their duty by allowing harassment to occur at their company, approving excessive severance payments and keeping details of the allegations private, the lawsuit alleges. David Drummond, the chief legal officer of Google’s parent company Alphabet, and investor Ram Shriram are named among others in the court filings.

Why there’s Brexit.

• My Walk To Work Shows Me How Homelessness Is Transforming Britain (G.)

Before Christmas, the housing secretary James Brokenshire insisted that the fact the number of people sleeping rough has more than doubled since 2010 has nothing to do with Tory policies. Rather, he said, it was due to drug addiction, family breakdown and the number of foreigners. Brokenshire has since rowed back from this palpably ludicrous claim, admitting that Tories “need to ask ourselves some very hard questions”. Anyone who has seen this for themselves – which is to say, everyone who lives in a British city – could have told him that, because what has really changed is not just the number of homeless people, but who these homeless people are.

At Shelter from the Storm, my local shelter, the co-founder Sheila Scott told me last week that, when she started a decade ago, the people who stayed were “town-square drinkers” and foreign itinerants. Now, half the inhabitants have regular jobs and three-quarters are British. Some leave every night at 2am to work at Amazon factories; some are Uber drivers who took out too many loans to buy their car to do their job. Most have been driven out of their properties by private landlords – and you have only to look at Caledonian Road to see the damage such landlords can do. Many of the shopkeepers have been driven out by what one described to me as “deliberately high rents”, their stores turned into expensive flats.

One private landlord, Andrew Panayi, owns 200 properties in the area, and even though he has been fined for renting substandard properties (one tenant called them “worse than prison cells”), he still keeps a tight grip on the street. These landlords exploit the real problem, which is a lack of social housing and the decimation of social services. Scott says councils now send people directly to her, as they have nowhere else to put them. But they will soon have to send them to a new address: Shelter from the Storm is moving, because a property developer has bought the lot they currently stand on; like so many of the people the charity helps, it is being pushed out of the area.

John Bolton Won’t Play in the World Cup

Jun 292018

June 29, 2018 Posted by Raúl Ilargi Meijer at 1:19 pm Finance Tagged with: Assad, Bolton, defense, Europe, Helsinki, Moscow, NATO, neocons, Putin, Syria, Trump, World Cup 5 Responses »

René Magritte Mysteries of the horizon (a.k.a. The Masterpiece) 1955

Don’t know if you noticed, but the Trump-Putin summit in Helsinki on July 16 takes place one day after the soccer World Cup final, Sunday July 15. Now it seems clear that Trump doesn’t care about soccer, though he apparently knows Christiano Ronaldo, but that factoid is significant because the World Cup takes place in Russia.

It’s amusing to contemplate that Putin told Trump’s people he would love to meet with his counterpart, but not until after the Cup Final. So they settled on the very next day.

The same people who now express worries about the summit, also had worries about the nasty things that could happen to players and supporters in Moscow and other cities. There has not been one single incident. No police violence, no hooliganism, the stadiums are beautiful, the organization is pitch perfect. There’s been only sunshine, too.

The only problem reported in the media was that some cities ran out of beer, because the Russians hadn’t expected the Aussies and British to drink as much of the stuff as Russians themselves do. They probably didn’t expect them to show up in such large numbers either. But those Russians don’t see a real problem: “we always have enough vodka”.

Patrick Lang called the fact that Trump sent uber-neocon John Bolton to Moscow to organize the summit a stroke of genius. The man who wants WWIII more than anyone must now make sure a summit that may serve to prevent it, successful. But what does Trump really want? And what do the neo-cons want?

First off, US and Russian presidents should meet all the time. It’s beyond reason that Trump has been in the saddle almost a year and a half without such a summit. Trumped up allegations of election meddling in about half the nations on the planet, about poisonings in Britain and about chemical weapons in Syria, have prevented a summit so far.

It looks like Trump got tired of all that. But of course all we’ll see the next two+ weeks is more ‘Trump is Putin’s lapdog’ memes. While there are very serious issues to be discussed. A major one, undoubtedly, is Syria. There has been a lot of movement politically on that.

The US has indicated it will no longer support the Syrian rebels. It has acknowledged that regime change, and removal of Assad, is not going to happen. Because Russia will not leave Assad to fend for himself.

There are signs that another false flag chemical attack in the country is being prepared, but if that happens before July 16, Trump himself will jump in to condemn the nonsense. He wants the meeting, and he wants it bad. As he should, and not for some nefarious reason.

Regime change in Syria is off the calendar because of Putin. Regime change in Iran, apparently still on that calendar, will also fail because while Putin may -but just may- be willing to give in, China will not. And not even a Saudi-US-UAE-Israel cabal can withstand both China AND Russia. Those days are over.

The neocons are way behind the action. They think in terms of something that has long since passed its best before date. Yeah, wonder how John Bolton sees these things these days. Maybe he had a crash course upon entering the White House.

But let’s not kid ourselves: the US warmonger faction may be outdated, they are still very powerful and very present. They can still attempt to force Trump’s hand with a false flag here or there. Their plans to conquer Russia, though, will have to be shelved for now. Or do they?

Tyler Durden has a lengthy report on the proposed spending in Europe by the US military. I won’t get into the details (tons of infrastructure spending close to Russian borders), but here’s the money shot:

The request for additional funding would more than double the military’s infrastructure projects under the European Deterrence Initiative (EDI), from the 2018 request, when just a few years ago, the Pentagon was scaling back its Cold War-era footprint in Europe. According to Defense News, the EDI request increased to $6.5 billion from $4.8 billion in 2018, military construction projects in the EDI request jumped from $338 million in 2018, while pre-positioning funds soared from $2.2 billion to $3.2 billion.

The Air Force would spend roughly $368.6 million to pre-position equipment and $363.8 million for military construction projects. While the spending is almost equal to what was expensed in fiscal 2018, it is a huge jump from 2017, when the Air Force was only allotted $31.2 million in pre-positioning funds and $85.4 million for military construction.

And I know what you’re thinking: didn’t Trump say not so long ago that he wanted Europe to pay more for its own defense? Well, yes, he did, but Europe is other wise engaged, it’s now planning its own ‘army’, which can’t NOT take away from its contributions to NATO.

So Trump meets Putin on July 16, who knows all of this and a boatload more, and what’s he going to tell him? When Putin asks him about these new US ‘investments’ in Europe, what’s he going to say?

Putin will state that Russia’s military expenditures have only fallen over the past decade+, and that he doesn’t understand why the US spends that much more, because Russia’s new weapons are decades ahead of America’s. (I don’t think he’s kidding).

Of course Putin knows better then anyone that his military spending takes place for a whole different purpose than that in the US: he builds a strong defense, while America feeds its private contractors arms industry as much taxpayers’ money as it can get away with. What did the Pentagon lose track of again, was that $21 trillion?

And of course Putin knows that to an extent Trump is trapped inside the military-industrial complex Ike warned about. And that John Bolton is such a docile and eager servant of.

One thing we can be sure of is that just like the World Cup, the summit won’t be a boring event, the media will be all over it, each with their own favorite, and over half the world will follow the ‘games’. And the outcome of Helsinki is as unpredictable as that of the final in Moscow. One more thing that’s for sure: the US won’t be in that final. Not even John Bolton.

Debt Rattle June 5 2017

Jun 052017

June 5, 2017 Posted by Raúl Ilargi Meijer at 10:22 am Finance Tagged with: Banksy, Biden, Cameron, Corbyn, Greece, Iran, May, neocons, Qatar, Saudi, terrorism 1 Response »

Banksy Girl with a balloon 2002/2017

• Gulf Countries Cut Ties With Qatar, Oil Price Jumps (CNBC/R.)

• Saudi Arabia, Egypt, UAE, & Bahrain Cut Ties, Shut Borders With Qatar (ZH)

• Theresa May Urged Not To Suppress Report Into Funding Of Jihadi Groups (G.)

• Top Cameron Aide: Theresa May ‘Responsible’ For London Terror Attack (BI)

• Against Terror, Is London Pride Enough? (NYT)

• Nearly 10 Million Britons Are In Insecure Work (G.)

• Banksy Offers Free Art To People Who Vote Against The Tories (Ind.)

• World Bank Economist: Risks To World Economy Receded (AFP)

• Italy Faces Borrowing Shock When ECB Removes Support – Pimco (Tel.)

• Joe Biden Boasts of US Role in ‘Saving’ Greece (K.)

It’s not about Qatar. US neocons are testing a new way to get to Iran.

• Gulf Countries Cut Ties With Qatar, Oil Price Jumps (CNBC/R.)

The governments in Saudi Arabia, Egypt and the UAE are all wary of the Muslim Brotherhood because it enjoys support as an Islamist party among a broad base, Sluglett said. In the case of Iran, he added, a key factor is the Trump administration’s threat to review a landmark deal that lifted most economic sanctions against Iran in return for curbing its nuclear and missile programs. “The Americans cannot unilaterally back out of the deal as it is the P5+1 [permanent five members of the U.N. security council and Germany], so they are using the GCC and Egypt to put pressure on any countries supporting Iran,” Sluglett said, referring to the Gulf Cooperation Council, which counts Qatar, Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain and Oman as members.

Charles Lister, a senior fellow at the Middle East Institute, responded on Twitter to the news by pointing out that Qatar “is very heavily reliant on food supplies accessed” through Saudi Arabia, so a closing of the borders poses a “very” serious challenge to Doha. For its part, Saudi Arabia accused Qatar of backing militant groups and spreading their violent ideology, in an apparent reference to its influential state-owned satellite channel al Jazeera. “(Qatar) embraces multiple terrorist and sectarian groups aimed at disturbing stability in the region, including the Muslim Brotherhood, ISIS (Islamic State) and al-Qaeda, and promotes the message and schemes of these groups through their media constantly,” state news agency SPA said. The statement went on to accuse Qatar of supporting what it described as Iranian-backed militants in its restive and largely Shi’ite Muslim-populated Eastern region of Qatif and in Bahrain.

Qatar said in May that hackers had faked remarks by its emir, Sheikh Tamim bin Hamad al-Thani, criticizing some leaders of fellow Gulf Arab states and calling for an easing of tensions with Iran, a regional adversary. But several Gulf Cooperation Council states rejected Qatar’s explanation, leaving local media to unleash a barrage of attacks accusing the emir of cozying up to Tehran. Qatar shares the world’s largest gas field, South Pars, with Iran. The commercial and business ties have irritated Saudi Arabia and other Gulf Cooperation Council countries at odds with Iran over Tehran’s support for Shia-linked militants. Sluglett noted that Qatar’s dealings with Iran center on the gas field and that Doha is uncomfortable at times with a hard push against Tehran: “They find it quite ridiculous to blindly follow U.S. views on Iran.”

Saudi Arabia pointing to Iran as terror source is rich…

• Saudi Arabia, Egypt, UAE, & Bahrain Cut Ties, Shut Borders With Qatar (ZH)

Just days after president Trump left the region, a geopolitical earthquake is taking place in the Middle East tonight as the rift between Qatar and other members of the (likely extinct) Gulf Cooperation Council explodes with Bahrain, UAE, Saudi Arabia, and Egypt cutting all diplomatic ties with Qatar accusing it of “speading chaos,” by funding terrorism and supporting Iran. The dispute between Qatar and the Gulf’s Arab countries started over a purported hack of Qatar’s state-run news agency. It has spiraled since, and appears to be climaxing now… just days after President Trump left the region. As Al Arabiya reports, Bahrain has announced it is cutting diplomatic ties with Qatar, according to a statement carried on Bahrain News Agency.

The statement on Monday morning said Bahrain decided to sever ties with its neighbor “on the insistence of the State of Qatar to continue destabilizing the security and stability of the Kingdom of Bahrain and to intervene in its affairs”. The statement also said Qatar’s incitement of the media and supporting of terrorist activities and financing groups linked to Iran were reasons behind the decision. “(Qatar has) spread chaos in Bahrain in flagrant violation of all agreements and covenants and principles of international law Without regard to values, law or morals or consideration of the principles of good neighborliness or commitment to the constants of Gulf relations and the denial of all previous commitments,” the statement read. Qatari citizens have 14 days to leave Bahraini territories while Qatari diplomats were given 48 hours to leave the country after being expelled.

Meanwhile, Bahrain has also banned all of its citizens from visiting or residing in Qatar after the severance of ties. Additionally, Bahrain has has closed both air and sea borders with Qatar. Saudi Arabia then confirmed the same – cutting ties and shutting down all sea, airspace, and land crossings with Qatar as well as dissolving Qatar’s role in the Saudi-led coalition fighting against Yemen. Emirates, Etihad, Saudia, Gulf Air, and Egypt Air are no longer allowed to fly to Qatar and Saudi Arabia is providing facilities, services to Qatari pilgrims. Egypt then followed, confirming it was cutting diplomatic ties. Then UAE confirmed it would cut ties, shut down all sky, water, and land crossings, and expel all Qataris within 48 hours. The Maldives also just cut diplomatic ties with Qatar.

All of this happens within 24 hours of Iran calling out ‘The West’ for ignoring the real sponsors of terrorism around the world and UK’s Labor party leader outright name-shaming Saudi Arabia’s funding of terrorism. As a reminder, documents obtained by Middle East Eye show strategic alliance includes pledge by Ankara to protect Gulf state from external threats… “In December 2015, Turkey announced, to the surprise of many, that it planned to establish a military base in Qatar. Behind the scenes, the agreement was about forming a major strategic alliance. After a 100-year hiatus, Turkey is militarily back in the Gulf and ramping up its presence overseas. In January, Ankara announced that it would also establish a military base in Somalia. Specific details about the Qatar agreement, which Turkey described as an alliance in the face of “common enemies”, remain scant, but Middle East Eye has acquired copies of the agreements, as well as further details, which include a secret pledge by Ankara to protect Qatar from external threats.

Did Qatar just get scapegoated in the ‘war on terror’? One thing seems clear, support for a Syrian gas pipeline will be dwindling and with it the need for a Syrian war. Notably, this raises further doubts about OPEC’s stability. As Bloomberg notes, while Middle East ructions have historically added risk premia to oil prices, discord here could theoretically put downward pressure on prices as OPEC members struggle to maintain unity and compliance on production cuts.

Too late now. It’s not like she’ll volunteer to publish the report before June 8.

• Theresa May Urged Not To Suppress Report Into Funding Of Jihadi Groups (G.)

Jeremy Corbyn and Tim Farron have challenged Theresa May over a long-delayed inquiry into foreign funding and support of jihadi groups in the UK, after the Home Office suggested the investigation may not be published. The inquiry into revenue streams for extremist groups was commissioned by David Cameron when he was prime minister and is thought to focus on Saudi Arabia. But the Guardian revealed last week that the report was still incomplete and its contents may not be published. The Labour leader used a speech in Carlisle on Sunday evening to challenge the prime minister over the delayed report. Corbyn referenced May’s speech after the London Bridge attack on Saturday, in which she said challenging terrorism would “require some difficult and often embarrassing conversations”.

In a speech that also criticised May for ignoring warnings about the impact of police cuts, he said: “Yes, we do need to have some difficult conversations, starting with Saudi Arabia and other Gulf states that have funded and fuelled extremist ideology. “It is no good Theresa May suppressing a report into the foreign funding of extremist groups. We have to get serious about cutting off the funding to these terror networks, including Isis here and in the Middle East.” The Liberal Democrat foreign affairs spokesman, Tom Brake, wrote to May last week asking her to commit to not shelving the report. Writing in the Guardian on Monday, the Lib Dem leader, Tim Farron, said it was essential the report was not suppressed. “Theresa May now has a choice. Does she publish that report or keep it hidden?” Farron said.

“Theresa May talks of the need to have some difficult and sometimes embarrassing conversations. That should include exposing and rooting out the source funding of terror, even it means difficult and embarrassing conversations with those like Saudi Arabia that the government claims are our allies.” The Conservatives were criticised last year for selling billions of pounds of arms to the Saudis. Cameron ordered the investigation as part of a deal with the Lib Dems in exchange for the party supporting the extension of British airstrikes against Islamic State into Syria in December 2015. The Home Office’s extremism analysis unit was directed by Downing Street in January 2016 to investigate overseas funding of extremist groups in the UK, with findings to be shown to the then home secretary May and Cameron. Eighteen months on, the Home Office said the report, originally due to be published in spring 2016, had not yet been completed and publication was not guaranteed, given the sensitive nature of the content. .

May the cannabalism begin.

• Top Cameron Aide: Theresa May ‘Responsible’ For London Terror Attack (BI)

The Prime Minister should resign over her alleged failure to prevent the London Bridge terror attack, a former senior aide to the last Conservative Prime Minister David Cameron has said. Former Downing Street director of Strategy, Steve Hilton, on Monday claimed the Theresa May was “responsible” for the attack that left seven people dead and many more injured, and called for her to resign rather than seek re-election. “Theresa May responsible for security failures of London Bridge, Manchester, Westminster Bridge,” he tweeted. “Should be resigning not seeking re-election.” Hilton posted an excerpt from a Daily Mail report, suggesting that security services had been warned about at least one of the terrorists behind the attack on Saturday.

The Mail reported that one of the attackers had featured in a documentary about extremists and been reported to the security services by friends concerned that he had been radicalised. The paper also reported evidence that the suspect had been quizzed by police last year. Previous reports have indicated that the terrorists behind the Manchester and Westminster attacks earlier this year were also known to security services. May is also under pressure to release a suppressed report Home Office report into the international funding of terror groups in the UK. The report was commissioned by the last coalition government in 2015 and due to be published last year but has never been emerged. The Home Office admitted last week that it may never be published due to the “very sensitive” nature of the report.

The report is expected to reveal links between Saudi Arabia and extremist groups in the UK. Critics of the government believe it has been suppressed due to the UK government’s ongoing trade relationships with the country. The UK recently approved £3.5bn worth of arms export licences to Saudi Arabia, despite criticisms over its involvement in the bombing campaign in Yemen.

Keep calm as a myth.

• Against Terror, Is London Pride Enough? (NYT)

Cultures live by myths. These create their own reality. Britons may not know much history, but they all know about the spirit of the Blitz, and many lived through the bombing campaigns of the Irish Republican Army of the 1970s and ’80s. Many will remember that, in 1984, on the day Prime Minister Margaret Thatcher and half her cabinet team were blown out of their beds in the early morning by the Brighton bomb, in which five people died, she insisted that the Conservative Party conference should still start as scheduled at 9.30 a.m. Terrorism, she said, would never cripple democracy. The country is proud of that stoicism, and on the whole, wishes to live up to it. And yet. Today, there is a ripple of unease spreading through Britain, after the third brutal and unexpected attack in three months. It is the chilling realization that whatever the antiterror strategy has been so far, it clearly hasn’t worked.

However many plots are being foiled, now that anyone with the access to a car or van, a kitchen knife or the internet can choose to kill, some will succeed. This is a bleak and, frankly, unbearable prospect, and it’s concentrating minds. My 25-year-old son says that what terrifies him and his friends is their impotence. If this were indeed the Blitz, they could join up. If it was the ’70s they could either fight the I.R.A. or lobby for peace talks. But here, they have no idea how to combat this, whom to talk to, how to do anything other than wait for the next atrocity to happen, and then send sympathy and hashtags in the aftermath. Others, seeing that good will and candlelit vigils have their limits, are demanding radical action. On social media and phone-ins, and in private conversations, some people are calling for the immediate internment of the 3,000 suspected radicals on the terrorist watch lists, or their deportation, or for mass aerial bombing of the Islamic States abroad.

None of these will be solutions, but everyone is beginning to understand that savagery may become a regular occurrence, rather than an exceptional one — unless whoever is in government can offer a different and more successful approach. That is why Prime Minister Theresa May, only days away from a general election where she is fighting to keep her parliamentary majority, announced this morning that “enough is enough” in the war against terrorism, and that “things need to change.” There had been too much tolerance of extremism in Britain. The police and security services should have all the powers they needed. The internet giants, Facebook and Google, must be held responsible for radicalizing material that appeared on their sites.

Mrs. May knows just how vulnerable she is on these issues. She is already performing unexpectedly badly in the election campaign, appearing wooden and uneasy in comparison to her Labour challenger. Normally, she and the Tories could count on scoring high for law and order, but Mrs. May is in the uncomfortable position of denouncing counterterror policies for which she herself has been responsible over the past six years (in five years as home secretary and one as prime minister).

The result of what is it, 10 year, Tories?! That’s one in every three jobs? Or is it four? Talk about a gutted society… And then Brexit surprised?

• Nearly 10 Million Britons Are In Insecure Work (G.)

Up to 10 million Britons or nearly a third of the UK workforce do not have secure employment, according to the GMB union, which has warned of a heavy impact on health and family life. The union’s research, unveiled at its 100th annual congress in Plymouth on Monday, attempts to quantify people in what it calls precarious employment – those in the gig economy, on zero- or short-hours contracts, temporary workers, the underemployed and those at risk of false self-employment. The data, based on a survey of nearly 3,500 people of working age, emerged before the publication this month of recommendations from Matthew Taylor, a former adviser to Tony Blair who was appointed by the current prime minister to lead a review into the gig economy. He is expected to recommend changes to the rights of self-employed workers.

Tim Roache, the GMB’s general secretary, said: “This paints a shocking picture of the modern world of work. Up to 10 million people go to work either not knowing what their hours are, if they’ll be able to pay the bills, or what their long-term prospects are. That’s a sorry state of affairs in the 21st century and a product of government’s failure to tackle bogus self-employment, the use of agency contracts as a business model and point-blank refusal to ban zero-hours contracts.” Further interviews of those who identified themselves as insecure workers found that 61% had suffered stress or anxiety as a result of their current job and the same proportion said they had been to work while unwell for fear of not being paid, losing their job or missing out on future hours. The rapid change in employment practices was highlighted by more than three-quarters of those interviewed who said they had previously been in permanent employment.

Not sure it’s entirely legal.

• Banksy Offers Free Art To People Who Vote Against The Tories (Ind.)

Banksy has offered fans an exclusive free print if they vote against the Conservatives in the general election. The artist posted on his website asking voters in six Bristol-area constituencies to send him a photo of their ballot paper showing that they voted against the Tories to receive a limited-edition work. He wrote: “Simply send in a photo of your ballot paper from polling day showing you voted against the Conservative candidate and this complimentary gift will be mailed to you.” The artwork is taken from his iconic “girl with a balloon” motif but now features a Union Jack flag in the balloon. Banksy said that it will be released on 9 June. However, critics have pointed out that this would contravene laws designed to ensure votes remain secret, and could also break rules against bribery.

In a “lawyer’s note” disclaimer, Banksy’s post added: “This print is a souvenir piece of campaign material, it is in no way meant to influence the choices of the electorate, has no monetary value, is for amusement purposes only and is strictly not for resale. “Terms and conditions to follow, postage not included.” Under Section 66 of the Representation of the People’s Act, it is a criminal offence to “induce a voter to display his ballot paper after he has marked it so as to make known to any person the name of the candidate for whom he has or has not voted”. It is also illegal to show the paper’s unique identification number. An Electoral Commission spokesman told the BBC: “Given the risk that someone taking a photo inside a polling station may be in breach of the law, whether intentionally or not, the commission’s advice is against taking any photos inside polling stations.”

At the World Bank they get to smoke the good stuff.

• World Bank Economist: Risks To World Economy Receded (AFP)

The World Bank is keeping its forecast for global growth in 2017 unchanged, because for the first time in years, no new risks have arisen to threaten the outlook. “Over the past four years this is the first time we didn’t have a downgrade and I think that’s very good sign. Growth is firming,” World Bank economist Ayhan Kose told AFP. The World Bank expects the global economy to grow by 2.7% this year, and 2.9% in 2018 and 2019, the same as the January forecast. And after 10 years of crisis and tepid recovery, keeping a stable growth forecast is news. Kose, who heads the World Bank’s Development Prospects Group, which twice a year prepares the global economic forecasts, attributes the good news to the fact the risks, while still present, have receded.

The issues that had the potential to derail the incipient recovery included stress in financial markets as they adapt to rising US interest rates, uncertainty over the stability of oil prices, and concerns about election outcomes in Europe. But after the Federal Reserve’s two rate increases in recent months, markets have reacted “very well,” European political uncertainty “has receded quite a bit” – French voters rejected the anti-EU candidate – and oil prices while still low, have stabilized after OPEC and non-OPEC oil producers extended the agreement to limit output. “All in all, we still think that risks are tilted to the downside but the risk profile is a little bit more improved today versus six months ago,” Kose said.

However, uncertainty over policies, especially US trade protectionism and immigration restrictions under the Trump administration, is having immediate, real impacts on conditions that could dampen growth, Kose cautioned. Companies may delay business decisions and postpone investments in the absence of “well-defined policies,” for example in a case where companies have cross-border operations impacted by the North American Free Trade Agreement which President Donald Trump has opened to renegotiation. Kose noted the “serious slowdown” in investment in emerging markets and developing economy already seen over the past six years. “We are of course worried about how policy uncertainty impacts investment growth and then ultimately impacts growth in the real economy,” he said.

They won’t let Italy fall unless Beppe Grillo wins the next elections. Which by the way is quite possible.

• Italy Faces Borrowing Shock When ECB Removes Support – Pimco (Tel.)

Italy faces a “horror” scenario when the ECB winds down its bond buying programme in a move that risks sparking a surge in the country’s borrowing costs, according to one of the world’s largest bond managers. The Pacific Investment Management Company (Pimco) said the ECB’s €60bn-a-month QE programme was “very supportive” for countries such as Italy and Portugal and had helped to limit volatility in these countries. Andrew Balls, chief investment officer for global fixed income, said removing that support was likely to push up bond yields in a country that has struggled to implement reforms and reduce its massive debt pile amid weak growth. Italian 10-year benchmark borrowing costs currently stand at around 2.2pc, compared with 0.2pc in Germany and close to 3pc in Portugal.

Mr Balls said funding Italy at these rates “doesn’t look particularly attractive” considering the risks facing the eurozone’s third largest economy. He said removal of ECB support raised the risk that Italy could be forced into a bail-out programme if its borrowing costs rose to unsustainable levels, even though the country has long lived within its means excluding debt interest costs. “The thing which fills me with horror is an environment where the ECB has finished QE, Italy does need support, and the message is you need to go to the European Stability Mechanism [the eurozone’s bail-out fund],” said Mr Balls. “Replaying the events of a few years ago with Portugal, Greece and others in the case of Italy would be an event that would raise an awful lot of risk – and you’d want to get paid a lot more than a 2pc return over 10 years to take that risk.”

While Pimco believes an Italian exit from the eurozone is “not our baseline”, Mr Balls added: “It doesn’t seem terribly unlikely either”. “Italy can’t grow,” he said. “You have limited political will to implement reform …In contrast to Portugal it’s big and systemic, but its not clear how Italy improves the situation. “In the event of a recession or shock it’s not clear how the policy apparatus deals with something as large as Italy.”

In a piece on Cyprus, and Biden’s visit to Athens this week. Biden only cares about the impact of the Greek crisis abroad, not inside the country.

• Joe Biden Boasts of US Role in ‘Saving’ Greece (K.)

President Obama and I were engaged with all parties in the Greek financial crisis, because we wanted to prevent Greece from experiencing financial collapse. Grexit would have had very serious long-term consequences for Greece and Europe – and could potentially have triggered a wider crisis of confidence in the global economy. We were concerned that in the high-stakes negotiation between Greece and its creditors, failure to reach a sensible agreement would have made all parties much worse off in the end. But because of each side’s desire to secure the best possible terms, this worst-case scenario was a real possibility.

While the ultimate decision was up to the leaders of Greece, the IMF, and the eurozone countries, I think we helped steer the conversation in a more pragmatic direction because of the credibility we had in Athens, Brussels and Berlin. We argued with the creditor countries that Greece had been saddled with an unsustainably high debt burden and that reform would only go so far with such a large debt overhang. At the same time, we encouraged the Greek leadership to think about how to demonstrate to its creditors that it had a credible roadmap for systemic economic reform, which was necessary. While a deal was reached and the worst of the crisis is behind us, we are not yet completely out of the woods. I believe the United States continues to have a role to play in supporting the parties as they move forward with discussions on Greece’s economic future.

Debt Rattle April 22 2017

Apr 222017

April 22, 2017 Posted by Raúl Ilargi Meijer at 8:38 am Finance Tagged with: crisis, depression, Greece, IMF, India, neocons, refugees, shutdown, Troika, Trump Comments Off

Andrei Rublev Trinity 1411

• White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

• Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

• Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

• Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

• Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

• Everything Gets Worse – Pakistan vs. India (Bhandari)

• Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

• Schaeuble Says Greece to Blame for Delays in Bailout Program

• Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

• Greek Primary Surplus Chokes Market (K.)

• On Neocons and their Mental Defects (Taleb)

• 28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

It could happen.

• White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

The White House ordered federal agencies Friday to began preparations for a potential partial government shutdown after signaling President Donald Trump would demand money for key priorities in legislation to continue funding the government beyond April 29. But the president and his aides expressed confidence that Congress would work out a spending agreement and that there won’t be any halt in government operations. Administration officials portrayed the order as normal contingency planning, stressing that the previous administration had followed the same practice as funding deadlines approached. “I think we’re in good shape” on avoiding a deadlock on maintaining funding, Trump told reporters in the Oval Office on Friday. White House press secretary Sean Spicer said the administration is “confident” because negotiations are ongoing and “no one wants a shutdown.”

The push to reach an agreement on spending is complicated by White House efforts to try again for a House vote on replacing Obamacare next week, crowding the congressional schedule with two politically thorny measures the same week. House approval of an Obamacare repeal would give the president a legislative victory to boast about before his 100th day in office April 29. But failure to reach an agreement on spending legislation would risk marring the anniversary with a government shutdown. House Republicans plan a conference call Saturday with Ryan and other leaders to discuss the health-care bill as well as spending legislation. Republican Congressional leaders have pushed back against scheduling an Obamacare vote during the week, indicating there isn’t a clear strategy yet for achieving passage.

Mick Mulvaney, Trump’s director of Office of Management and Budget, said Thursday Democrats will need to agree to pay for some Trump’s top priorities, including a wall at the U.S.-Mexico border, in legislation to fund the government for the remainder of the fiscal year, which ends Oct. 1. Democrats responded harshly to Mulvaney’s remarks Thursday. “Everything had been moving smoothly until the administration moved in with a heavy hand,” said Matt House, spokesman for Senate Minority Leader Chuck Schumer of New York.

“Constantly printing more money will not end in prosperity, but in ruin.”

• Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

There is more debt, credit, and leverage today than there was preceding the banking crisis of 2008. No lessons were learned from that catastrophe as trillions of taxpayer dollars were provided in the form of bank bailouts from the US Federal Reserve. Despite their name, US Federal Reserve Banks are not part of the federal government and they are not banks. For the past 11 years, the Federal Reserve has been run by non-elected officials, Ben Bernanke and Janet Yellen (career academics), alongside a host of X Goldman and JP Morgan bankers. Since 2007, these non-elected bankers have provided banks “temporary, emergency liquidity measures.” Since when is eight years temporary?

Banks have continued to lend trillions and trillions of dollars to fund the construction of grotesquely overpriced residential and commercial properties around the world. The trillions of dollars given in bank bailouts are a perfect example of government “pay-to-play.” When giving out this money, most bankers are making at least three flawed assumptions:
1. Real estate prices will always go up. Clearly, this is the denial phase of “a bubble mentality.”
2. Rents will always keep rising. Rents peaked a few years ago. There is a massive oversupply of high-end residential and commercial properties on the market while real wages have declined. This is a sign that a crash is imminent.
3. The Federal Reserve will always bail them out. With zero transparency or an audit the Federal Reserve’s balance sheet has ballooned from 500 billion to nearly 5 trillion in a short period. The Federal Reserve doesn’t have the money to keep bailing companies out.

The Federal Reserve has become nothing more than a rogue hedge fund taking leveraged, wildly speculative, gargantuan and high-risk positions in bonds and mortgages. Next up, the Fed will angle to dump these toxic real estate assets in your pension fund. There are several steps that need to be taken to address this situation and save your pensions:
1. The President and Congress need to order an immediate audit of the Fed.
2. The Fed’s positions need to be unwound.
3. No more taxpayer funded bailouts – save your pension!

Capitalism without bankruptcy is like Catholicism without hell. Constantly printing more money will not end in prosperity, but in ruin. The coming collapse will be much worse than in 2008-2009 because the debt is so much larger and the Federal Reserve has run out of bullets. Since the 1980s, we have seen real average wages decline, college tuition skyrocket nearly 2,000%, and housing prices hitting all-time new highs while high-paying jobs have disappeared. Rents have risen so much that many small businesses are no longer economically viable. The situation doesn’t look any better for graduates. Graduates entering the jobs market have nearly $250,000 in student debt. A graduate may get a job in Manhattan for $40,000 a year ($3,333 a month before tax) but rent on a studio apartment costs $3,000 a month. The numbers just don’t add up anymore.

Social mood: “declining stock and property prices, contracting debt, angry and somber music, more intense horror movies..”

• Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?

Robert Prechter: The true top for stocks in terms of real money (gold) occurred way back in 1999. Overall prosperity has waned subtly since then. Primary wave five in nominal terms started in March 2009, and wave B up in the Dow/gold ratio started in 2011. Their tops should be nearly coincident.

Gilburt: What do you foresee will set off this event?

Prechter: Triggers are a popular notion, borrowed from the physical sciences. But I don’t think there are any such things in financial markets. Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested.

Gilburt: You’ve said we will be mired in a “depression-type” event. How long could that last?

Prechter: I don’t know. All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s.

Gilburt: How are conditions going to change from what we have now?

Prechter: The increasingly positive trend in social mood over the past eight years has been manifesting in rising stock and property prices, expanding credit, buoyant pop music, lots of animated fairy tales and adventure movies, suppression of scandals, an improving economy and — despite much opinion — fairly moderate politics. This trend isn’t quite over yet. In the next wave of negative mood, we should see the opposite: declining stock and property prices, contracting debt, angry and somber music, more intense horror movies, eruption of scandals, a contracting economy and political upheaval. That’s been the pattern of history.

It’s all relative, though, and it’s never a permanent condition. Just as people give up on the future, its brightness will return. The financial contraction during the negative mood trend of 2006-2011 was the second worst in 150 years. Yet, thanks to the return of positive mood, many people have already forgotten about it. Investors again embrace stocks, ETFs, real estate, mortgage debt, auto-loan debt and all kinds of risky investments that they swore off just a few years ago.

Because the Fed is doing such a great job of keeping banks in check.

• Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

Stanley Fischer, the vice chairman of the Federal Reserve, on Friday delivered an unusually sharp warning to President Donald Trump and his plan to “do a number” on post-crisis reforms aimed at reining in Wall Street. Fed officials usually go out of their way to not appear political, which makes the comments all the more startling. Fischer, a former Citigroup banker and respected policymaker who led the Bank of Israel for many years, appears truly concerned. “We seem to have forgotten that we had a financial crisis, which was caused by behavior in the banking and other parts of the financial system, and it did enormous damage to this economy,” Fischer told CNBC’s Sara Eisen in the lobby of the IMF, responding to a question about the potential rolling back of Dodd-Frank rules.

This happened just as the president was signing an executive order aimed at what he said was “reviewing” Dodd-Frank. “Millions of people lost their jobs. Millions of people lost their houses,” Fischer said. “This was not a small-time, regular recession. This was huge, and it affected the rest of the world, and it affected, to some extent, our standing in the world as well. We should not forget that. “The strength of the financial system is absolutely essential to the ability of the economy to continue to grow at a reasonable rate, and taking actions which remove the changes that were made to strengthen the structure of the financial system is very dangerous.”

Asked specifically about Trump’s vow to “do a number” on Dodd-Frank, Fischer shot back: “I’m not sure precisely what the president said and what a ‘number’ is, but there are aspects of Dodd-Frank, which if they were taken away would have very serious potential consequences for the economy — not immediately but when times get tough.” What provisions is he most worried about? The ability of the Fed and other regulators to wind down large banks, many of which are still seen as too big to fail. “I think it is very important that big banks be subject to the discipline of the possibility of going bankrupt. It is also very important that that discipline extends to not making those changes, the bankruptcy of a big bank, a huge shock and the source of crisis or damage to the overall economy,” Fischer said. “So we need the resolution mechanisms that have been put in place which will allow the authorities and the markets to wind up a big bank.”

Beware the cascade.

• Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

Former Finance Minister Lou Jiwei said China should allow smaller local governments to default on debt because it would signal that central government bailouts aren’t assured. Such defaults would educate investors that their investments will be allowed to go bad, Lou said Friday at a public finance forum in Beijing. “They need to shoulder responsibility,” said Lou, who’s now chairman of the country’s social security fund. “Nobody will save them.” Lou’s comments reiterate those by Premier Li Keqiang and other central government officials such as current Finance Minister Xiao Jie that local government debt shouldn’t be bailed out, or benefit from assumptions it will be.

With economic growth accelerating for a second-straight quarter to 6.9% through March, policy makers have more room to cut leverage and rein in risks. A credit surge since 2014 that underpinned growth has also fueled a further buildup in borrowing. Total debt rose to 258% of economic output last year from 161% in 2008, Bloomberg Intelligence estimates show. Lou said government debt remains broadly safe, but borrowing levels are poised to keep climbing given increased investment in substandard public-private partnership projects.

Great long read on India and its region.

• Everything Gets Worse – Pakistan vs. India (Bhandari)

When Narendra Modi announced on 8th November 2016 that he was demonetizing 86% of the monetary value of all currency in circulation, he gave three major reasons for doing so: to end corruption, to end terrorism and to eliminate counterfeit currency. Ironically, all three are now in far worse condition than they were previously, and even worse than the predictions I made. Many ATMs in India still dispense no cash. The economy is in shatters. This had to happen, as any new cash is rapidly moving under the carpets of the financial powerful that hoard currency. Small businesses are traumatized by the lack of access to cash – many are closing for good. People continue to avoid making non-essential purchases. Even food demand has failed to recover. Poor people very likely are still forced to go to bed half-hungry.

No-one knows whether there are famines in parts of India, as none of the mainstream media are covering the issue. Not unlike North Koreans or the Chinese during the times of Mao, Indians today, particularly members of the so-called educated class, simply cannot see what Modi or their nationalistic paradigm does not want them to see. Indian banks and other financial institutions are extremely unethical. Since privatization was implemented in the 1990s, they have charged fees and commissions for accounts that were never agreed upon. Indians never fight, so this continues. After the demonetization exercise, these mysterious charges have started to appear more often. Then they deduct certain services and financial taxes, and most people don’t make the effort to try to understand them. Indians are getting very tired of the banks – not for moral, but simply for financial reasons.

Bank websites are extremely unwieldy. They require a sequence of passwords and OTPs (one time pad codes), which have an automatic expiry date. Getting the whole sequence right to make an online payment without having these websites freeze during the procedure leaves one with a sense of accomplishment. Most people prefer to walk down to their banks to get bank officials to perform such online transactions. India is simply not ready for the digital age. This experiment in going cashless will end in a disaster. Similar to every tyrant, Modi likes to think that tax collection should be at the heart of society. He imagines a society in which subjects dance around the state. The problem is, one can perfect the tax system or minimize corruption, but with a per capita GDP of $1,718, India simply does not have the required productivity.

Anything you do can and will be used against you: The more such surplus it has, the less debt relief will be needed.

• Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

Discussions between Greece’s European creditors and the IMF on additional debt relief for the Mediterranean euro region member will be difficult because of political hurdles within the 19-nation bloc, though a solution is on the horizon, Eurogroup Chairman Jeroen Dijsselbloem said. “Greece: We’re very close, it’s really the last stretch,” he said in a Bloomberg Television interview on Friday in Washington with Francine Lacqua and Tom Keene. “We have a full agreement on the major reforms. How they are to be designed, when they are to be implemented, the size of them.”

IMF Managing Director Christine Lagarde said Friday she had “constructive discussions” with Greek Finance Minister Euclid Tsakalotos in preparation for the return of bailout auditors to Athens after euro-area finance ministers reached a tentative agreement on the measures Greece needs to implement to qualify for the next tranche of emergency loans. Dijsselbloem met Tsakalotos earlier on Friday in Washington. “That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

The Hellenic Statistical Authority on Friday unveiled data on last year’s primary surplus, which Eurostat is expected to validate on Monday. The surplus was 3.9% according to the European Union’s statistics office methodology, or 4.2% according to what has been agreed in the bailout program. The bailout target was for a primary surplus of 0.5% of GDP. In spite of its better-than-expected primary surplus last year, the IMF is not convinced Greece will be able to maintain that level of performance for 2018 and beyond. The fund estimates that at least half of the primarily surplus for 2016 came from one-off measures rather than structural changes that will continue delivering results in the years to come, according to a person familiar with its analysis. That has prompted the fund to demand more austerity measures.

Groundhog man.

• Schaeuble Says Greece to Blame for Delays in Bailout Program

German Finance Minister Wolfgang Schaeuble said the Greek government bore responsibility for current delays in the country’s bailout program. Greece is to blame that its creditors didn’t return to Athens during the Greek Easter break to finish negotiations on steps the nation must take to qualify for the next tranche of emergency loans, Schaeuble told reporters Friday on the sidelines of the IMF spring meetings. IMF European Department head Poul Thomsen said at a media briefing there’s been enough progress recently to send back a mission to Greece. Greece and its international creditors struck a tentative agreement at a meeting of euro-area finance ministers in Malta earlier this month, breaking the latest deadlock over the country’s rescue and paving the way for about €7 billion in aid for Athens.

Although the decision represents progress, the euro area won’t unlock the payout until their audit in Athens is concluded. “It would have been possible to continue the mission in Athens immediately in the week after Malta,” said Schaeuble. “This was not possible during the Greek Easter break.” In a statement on Friday, IMF Managing Director Christine Lagarde said she had a “constructive dialogue” with Greek Finance Minister Euclid Tsakalotos “in preparation for the return of the mission to discuss the two legs of the Greece program: policies and debt relief.” The IMF isn’t holding back progress, said Schaeuble. “The IMF isn’t delaying this process at all,” he said.

The worst thing Greece could do.

• Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

Greece far exceeded its international lenders’ budget demands last year, official data showed on Friday, posting its first overall budget surplus in 21 years even when debt repayments are included. The primary surplus – the leftover before debt repayments that is the focus of IMF-EU creditors – was more than eight times what they had targeted. Data released by Greek statistics service ELSTAT – to be confirmed on Monday by the EU – showed the primary budget surplus at 3.9% of GDP last year versus a downwardly revised 2.3% deficit in 2015. This was calculated under European System of Accounts guidelines, which differ from the methodology used by Greece’s in bailout deliberations.

Under EU-IMF standards, the surplus was even larger. Government spokesman Dimitris Tzanakopoulos said the primary budget surplus under bailout terms reached 4.19% of GDP last year versus the 0.5% of GDP target. “It is more than eight times above target,” Tzanakopoulos said in a statement. “Therefore, the targets set under the bailout program for 2017 and 2018 will certainly be attained.” Debt-strapped Greece and its creditors have been at odds for months over the country’s fiscal performance, delaying the conclusion of a key bailout review which could unlock needed bailout funds. The IMF, which has reservations on whether Greece can meet high primary surplus targets, has yet to decide if it will fund Greece’s current bailout, which expires in 2018.

The surplus kills the economy even more.

• Greek Primary Surplus Chokes Market (K.)

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion. The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors.

There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure. The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor lightening the country’s debt load. It is no coincidence that German Finance Minister Wolfgang Schaeuble noted in Washington that over the last couple of years, Greek government deficit forecasts are more realistic than those of the IMF.

Skin in the game.

• On Neocons and their Mental Defects (Taleb)

So we tried that thing called regime change in Iraq, and failed miserably. We tried it in Libya, and now there are now active slave markets in the place. But we satisfied the objective of “removing a dictator”. By the exact same reasoning, a doctor would inject a patient with “moderate” cancer cells “to improve his cholesterol numbers”, and claim victory after the patient is dead, particularly if the post-mortem shows remarkable cholesterol readings. But we know that doctors don’t do that, or, don’t do it in such a crude format, and that there is a clear reason for it. Doctors usually have some skin in the game. And don’t give up on logic, intellect and education, because a tight but higher order logical reasoning would show that the logic of advocating regime changes implies also advocating slavery.

So these interventionistas not only lack practical sense, and never learn from history, but they even make mistakes at the pure reasoning level, which they drown in some form of semi-abstract discourse. The first flaw is that they are incapable in thinking in second steps and unaware of the need for it –and about every peasant in Mongolia, every waiter in Madrid, and every car service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single dimensional representations –like multidimensional health and its stripped, cholesterol-reading reduced representation. They can’t get the idea that, empirically, complex systems do not have obvious one dimensional cause and effects mechanisms, and that under opacity, you do not mess with such a system.

An extension of this defect: they compare the actions of the “dictator” to the prime minister of Norway or Sweden, not to those of the local alternative. And when a blow up happens, they invoke uncertainty, something called a Black Swan, not realizing that one should not mess with a system if the results are fraught with uncertainty, or, more generally, avoid engaging in an action if you have no idea of the outcomes. Imagine people with similar mental handicaps, who don’t understand asymmetry, piloting planes. Incompetent pilots, those who cannot learn from experience, or don’t mind taking risks they don’t understand, may kill many, but they will themselves end up at the bottom of, say, the Atlantic, and cease to represent a threat to others and mankind.

So we end up populating what we call the intelligentsia with people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth. In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and too little accountability. Now some innocent people, Yazidis, Christian minorities, Syrians, Iraqis, and Libyans had to pay a price for the mistakes of these interventionistas currently sitting in their comfortable air-conditioned offices. This, we will see, violates the very notion of justice from its pre-biblical, Babylonian inception. As well as the ethical structure of humanity.

Just a week ago we commemorated a man on a cross whose image we remember but whose teachings we’ve forgotten.

• 28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

Almost 30 migrants have been found dead in a boat drifting off the coast of Libya as the number of refugees dying in attempts to reach Europe reach record highs. Fishermen found the bodies of 28 people, including four children, in waters near the smuggling hub of Sabratha after more than 8,300 asylum seekers were rescued over the Easter weekend. “Their boat stopped in the middle of the water because the engine was broken,” said Ahmaida Khalifa Amsalam, the interior ministry’s security commander. He said the victims appeared to have died of thirst and hunger after their vessel was left drifting in the Mediterranean.

They were buried in a cemetery dedicated to migrants whose bodies are regularly washed up on the coast of Libya, which remains embroiled in a bloody civil war six years after the UK helped overthrow Muammar Gaddafi. Smugglers have increasingly resorted to packing migrants into flimsy dinghies that are unable to survive the crossing to Europe, with some being intercepted and forced back by the Libyan coastguard, others being rescued by EU officials and aid agencies, and many sinking. Tuesday’s tragic discovery was the latest incident of refugees being found dead inside boats, with a worrying trend emerging suggesting engines are being removed or sabotaged at sea.

Debt Rattle December 23 2016

Dec 232016

December 23, 2016 Posted by Raúl Ilargi Meijer at 9:53 am Finance Tagged with: crisis, Greece, neocons, NGOs, refugees, rescue, RussiaDidIt, securitization, smog, trade, Trump 3 Responses »

Ben Shahn Quick lunch stand in Plain City, Ohio 1938

• Donald Trump Can’t Stop The Next Financial Crisis – Jim Rickards (MW)

• “Russia Did It” – The Last Stand Of The Neocons (GEFIRA)

• 94% Of All New Jobs Created During Obama Era Were Part-Time Or Contract (IC)

• World Trade Falls to 2014 Level, Trump “Trade War” Might Make it Worse (WS)

• Central Banks Have Cut Interest Rates 690 Times Since Lehman Brothers (CNBC)

• Italian Government Rides To Rescue Of Stricken Bank Monte Dei Paschi (R.)

• Deutsche Bank, Credit Suisse Agree Billion-Dollar Fines With US (CNBC)

• US Sues Barclays For Alleged Mortgage Securities Fraud (R.)

• Why The Chinese Are Still Snapping Up US Commercial Property (CNBC)

• EU Plans To ‘Revitalize’ Complex Financial Products (EUO)

• Ron Paul: “We Don’t Have Very Much Room For Condemning Anybody Else” (ZH)

• Is Obama a Russian Agent? (Dmitry Orlov)

• Air Pollution Cause Of One In Three Deaths In China (SCMP)

• 1000s Of Refugees Left In Greek Cold, UN And EU Accused Of Mismanagement (G.)

• The Automatic Earth in Greece: Big Dreams for 2017 (Automatic Earth)

“Policies that could prevent the crisis [..] include reinstatement of the Glass-Steagall separation of investment and commercial banking, breaking up big banks, banning most derivatives, and tougher law enforcement of bank wrongdoing.”

• Donald Trump Can’t Stop The Next Financial Crisis – Jim Rickards (MW)

James Rickards sees threats in many places. In his latest book, “The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis,” he paints a picture of how that crisis will unfold. He argues that rather than pumping the financial system with liquidity, as happened in 2008, “elites” will freeze the financial plumbing until the crisis has passed. That means banks will close, as will exchanges. Money-market funds will be inaccessible. Forget trying to get your hands on money. Rickards, who was the principal negotiator of the 1998 bailout of Long-Term Capital Management as the hedge fund’s general counsel, calls this new world “ice-nine,” after a fictitious substance in Kurt Vonnegut’s “Cat’s Cradle.” Freezing customer funds in bank accounts is what happened in Cyprus is 2012 and Greece in 2015, he says. In the U.S., the Securities and Exchange Commission adopted a rule in 2014 that lets money-market funds suspend redemptions.

MarketWatch: Why do you believe a financial crisis is coming in 2018, and what do you see as the likely triggers? James Rickards: A financial crisis is certainly coming. In “The Road to Ruin,” I use 2018 as a target date and device because the two prior systemic crises, 1998 and 2008, were 10 years apart. I extended the timeline 10 years into the future from the 2008 crisis to maintain the 10-year tempo, and this is how I arrived at 2018. Yet I make the point in the book that the exact date is unimportant. What is most important is that the crisis is coming and the time to prepare is now. It could happen in 2018, 2019, or it could happen tomorrow. The conditions for collapse are all in place. It’s simply a matter of the right catalyst and array of factors in the critical state. Likely triggers could include a major bank failure, a failure to deliver physical gold, a war, a natural disaster, a cyber–financial attack and many other events. The trigger does not matter. The exact timing does not matter. What matters is that the crisis is inevitable and coming soon. Investors need to prepare.

MW : Is this likely to be on the scale of the 2008 financial crisis? Or what is a better comparison? J.R.: The new crisis will be of unprecedented scale. This is because the system itself is of unprecedented scale and interconnectedness. In complex dynamic systems that reach the critical state, the most catastrophic event that can occur is an exponential function of scale. This means that if you double the system, you do not double the risk; you increase it by a factor of five or 10. Since we have vastly increased the scale of the financial system since 2008, with larger banks, greater concentration of banking assets in fewer institutions, larger derivatives positions, and $70 trillion of new debt, we should expect the next crisis to be much worse than the last. There is no comparison short of wartime exigencies such as 1914. The next crisis will be of unprecedented scale and damage.

MW : On the flip side, what could prevent this crisis? And how do you respond to those who say this is just fear-mongering and a conspiracy theory? What are they missing? J.R.: Policies that could prevent the crisis are spelled out clearly in the book. These include reinstatement of the Glass-Steagall separation of investment and commercial banking, breaking up big banks, banning most derivatives, and tougher law enforcement of bank wrongdoing. The book also explains clearly why the dysfunctions in the system are not a “conspiracy” but the workings of like-minded individuals operating in a closed loop lacking cognitive diversity. I am not a fear-monger; people are already afraid, [and] I’m just trying to shed some light on the situation, which is why readers have responded so positively to the book. The critics do not have a firm grasp of the statistical properties of risk. They are clinging to obsolete equilibrium models instead of embracing more accurate models based on complexity theory and behavioral psychology.

“..the European establishment is simultaneously bombing a country and importing the country’s inhabitants..”

• “Russia Did It” – The Last Stand Of The Neocons (GEFIRA)

By the 2000s, Neocons had taken over the Republican Party in the US and the Labour Party in the UK and could count on allies in Italy (Berlusconi) and Spain (Aznar). In the following decade, Neocon ideology spread virulently, substituting for the failed experiment of military intervention to overthrow non-cooperating governments with covert operations funding and/or arming local groups in Libya, Syria,Tunisia Egypt, Georgia, and Ukraine. Neocon adherents took over the US state department, and their grip on it was strengthened by the appointment of Barack Obama as assistant to Victoria Nuland, Secretary of State for European affairs, wife of Robert Kagan, who is in turn a top Neocon ideologist alongside Paul Wolfowitz. They also created the narrative spread and reinforced by the mainstream media, which expose the alleged crimes of non-cooperating regimes in Syria, Russia and Libya, while ignoring the anti “democratic” behavior by friendly dictatorships such as Saudi Arabia’s kings.

The mission however never changed. What changed is the mood of Western citizens about the government changes and state-building projects of the Western leadership; as the economic and human cost grew endlessly, the Western public opinion has become fed up with interventionism around the world. The British Labour party was the first to face the malcontents: Blairites are being ousted in favour of anti-NATO, sworn pacifist Jeremy Corbyn. Then Donald Trump won the US election with his “America First” i.e. a policy of “non-interventionism and protectionism”, defeating Hillary’s hawkish one, publicly endorsed by Kagan and Wolfowitz; Sarkozy and Juppè were defeated in the primaries in France by Fillon, who is advocating the end of the trade war against big bad Neocon target Russia. The Neocon-backing Western establishment is facing political upheaval all over Europe and the US.

These revolutions are not mere popular movements. Trump’s election is the handing over of power from one influential group to another because a part of the establishment has become fully aware of the problems Europe and the US are facing. After a fourteen-year war on terror in Afghanistan and Iraq the bloodshed spilled over into the streets of Paris and Berlin. The killing of civilians in the streets in Europe was not supposed to happen after the eradication of Al Qaeda and the alleged elimination of its leader Osama Bin Laden. Or should we rather say European insanity is spilling over, as the European establishment is simultaneously bombing a country and importing the country’s inhabitants? What do the Western leadership expect to have on their hands? Meanwhile Russia is reemerging as a more successful international actor.

Echo chambers are us.

• 94% Of All New Jobs Created During Obama Era Were Part-Time Or Contract (IC)

A new study by economists from Harvard and Princeton indicates that 94% of the 10 million new jobs created during the Obama era were temporary positions. The study shows that the jobs were temporary, contract positions, or part-time “gig” jobs in a variety of fields. Female workers suffered most heavily in this economy, as work in traditionally feminine fields, like education and medicine, declined during the era. The research by economists Lawrence Katz of Harvard University and Alan Krueger at Princeton University shows that the proportion of workers throughout the U.S., during the Obama era, who were working in these kinds of temporary jobs, increased from 10.7% of the population to 15.8%.

Krueger, a former chairman of the White House Council of Economic Advisers, was surprised by the finding. The disappearance of conventional full-time work, 9 a.m. to 5 p.m. work, has hit every demographic. “Workers seeking full-time, steady work have lost,” said Krueger. Under Obama, 1 million fewer workers, overall, are working than before the beginning of the Great Recession. The outgoing president believes his administration was a net positive for workers, however. “Since I signed Obamacare into law (in 2010), our businesses have added more than 15 million new jobs,” said Obama, during his farewell press conference last Friday.

It’s going to keep falling no matter what. And regaining some domestic manufacturing capacity is never a bad thing. If you focus of producing essentials, that is.

• World Trade Falls to 2014 Level, Trump “Trade War” Might Make it Worse (WS)

“If you get into a trade war with China, sooner or later we’ll have to come to grips with that,” Carl Icahn, now special advisor to President-Elect Trump, told CNBC on Thursday. “I remember the day something like that would really knock the hell out of the market.” A trade war with China surely would be another wall of worry for stocks to climb. Trump’s rhetoric against China, each morsel packaged into 140 characters or less, has already recreated much-needed turbulence [read… Trump Tweets about China, US Businesses Freak out]. “But maybe if you’re going to do it,” Icahn said about the looming trade war with China, “you should get it over with, right?”

This comes after rumors emerged that Trump’s transition team is chewing over the idea to impose import tariffs of up to 10%, “according to multiple sources,” including a “senior Trump transition official,” CNN reported. The idea is to boost US manufacturing. The new tariffs could be imposed by executive order or by Congress as part of broader tax reform legislation. The 10% would be an uptick from the 5% tariff that incoming White House Chief of Staff Reince Priebus had put on the table last week, in “meetings with key Washington players,” two sources “who represent business interests in Washington” told CNN. These tariffs would be in line with Trump’s campaign motto of “America First.” Other countries would, as they always do, retaliate. Hence the term “trade war.”

Countries will be careful not to escalate, but these things can escalate nevertheless, because no one wants to seem weak and back off. Either way, it would pull the rug out from under world trade. But world trade, a reflection of the health of the global goods-producing economy, is already in bad shape. For the past two years, it has been languishing in a condition we now call the Great Stagnation. The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released the preliminary data of its Merchandise World Trade Monitor for October. World trade isn’t falling off a cliff, as it had done during the Great Recession, when global supply chains froze up overnight. But since November 2014, it has gone absolutely nowhere:

“Is There A Way Out?” Not for most. And do give the ECB a special place in this: they are responsible for setting one single rate in countries that need completely different rates.

• Central Banks Have Cut Interest Rates 690 Times Since Lehman Brothers (CNBC)

The top 50 central banks around the world have seen a total of 690 interest rate cuts since the collapse of Lehman Brothers in September 2008, according to data from JP Morgan. While this number means one rate cut every three trading days, analysts have warned that central banks may start to run out of ammunition soon. “Essentially these rate cuts came into effect to try and stimulate economic growth and to prop up economies post the financial crisis,” Alex Dryden, global market strategist at JP Morgan Asset Management, told CNBC via email. However, he warned that central banks are running out of room to maneuver.

“The Bank of Japan, for example, own over 45% of the government bond market, over 65% of the domestic ETF market and are a top 10 shareholder in 90% of listed firms. They have also cut rates into negative territory. There isn’t much more they can do.” Markets, however, continue to ride the wave of uncertainty and speculation over whether the world’s central banks will either continue to pump in more and more cash into the economy through bond-buying programs known as QE or conventional ways such as lowering interest rates to stimulate borrowing. But as we delve deeper into this world of ultra-low interest rate and easy monetary policy, there are other areas of the economy that could see a knock-on effect.

This raises a very big question – will the global economy ever exit this low interest rate environment? “No easy way out. The world has changed and the level of neutral interest rates has fallen for most countries,” Jan von Gerich, chief economist at Nordea, told CNBC via email. Gerich further explained that the way inflation is responding to growth seems to have changed, which makes monetary policy considerations harder for central bankers. “The situation varies a lot, though. The Fed is gradually finding at least a partial way out while it is hard to see the ECB raising rates before the next recession arrives.”

Oh, sweet Jesus: “..allow Italy’s third-largest bank to finally return to operate at full throttle to support the economy..”

• Italian Government Rides To Rescue Of Stricken Bank Monte Dei Paschi (R.)

The Italian government approved a decree on Friday to bail out Monte dei Paschi di Siena after the world’s oldest bank failed to win investor backing for a desperately needed capital increase. Looking to end a protracted banking crisis that has gummed up the economy, Prime Minister Paolo Gentiloni said his Cabinet had authorized a €20 billion fund to help lenders in distress – first and foremost Monte dei Paschi. Within minutes of the late-night Cabinet meeting ending, the country’s third largest lender issued a statement saying it would formally request state aid, opening the way for possibly the biggest Italian bank nationalization in decades. The government has said its long-awaited salvage operation will work within EU rules, meaning some Monte dei Paschi bondholders will be forced to accept losses to ensure the taxpayer does not pick up all of the bill.

However, the government and Monte dei Paschi promised protection for around 40,000 retail savers who had bought the bank’s junior debt. Many of the high street investors say they were unaware of the risks when they purchased the paper. “Today marks an important day for Monte dei Paschi, a day that sees it turn a corner and be able to reassure its depositors,” said Gentiloni, who only took office last week and has made the bank rescue his first priority. [..] The collapse of Monte dei Paschi would have threatened the savings of thousands of Italians and could have had devastated the wider banking sector, which is saddled with €356 billion of bad loans – a third of the euro zone’s total. [..] The government said full details of the rescue plan have yet to be worked out, but it outlined the contours in a statement.

It said the bank’s Tier 1 bonds, which are mostly held by professional investors, would be converted into shares at 75% of their nominal value. Tier 2 bonds, which are mostly in the hands of retail investors, will be converted instead at 100% of their face value. To further insulate small savers from losses, Monte dei Paschi will offer to swap the shares they end up with as a result of the forced conversion with regular bonds and sell the same shares to the state instead. “The rescue will require a (new) business plan that European authorities will need to approve and that will allow Italy’s third-largest bank to finally return to operate at full throttle to support the economy and with the full confidence of its depositors,” said Economy Minister Pier Carlo Padoan.

Where are the indictments?

• Deutsche Bank, Credit Suisse Agree Billion-Dollar Fines With US (CNBC)

Deutsche Bank will be hoping for a fresh start in 2017 after reaching a $7.2 billion deal with U.S. authorities to settle allegations of the mis-selling of mortgage-backed securities (MBS). Germany’s largest lender said on Friday morning it had agreed ‘in principle’ to pay a $3.1 billion civil fine to be supplemented with the payment of $4.1 billion in consumer relief overtime. The announcement of the fine comes amid a raft of banking stories related to the mis-selling of MBS which hit the wires before Friday’s European market open. This included news that U.S. federal prosecutors would sue Britain’s Barclays bank and that Credit Suisse had reached a provisional $5.3 billion deal, meaning the Swiss bank will take a pre-tax charge of about $2 billion.

Of the total amount demanded of Credit Suisse, $2.48 billion would be an immediate fine to settle the claims and an additional $2.8 billion would be paid over five years for consumer relief. Deutsche Bank’s agreement follows months of negotiations with the U.S.’s Department of Justice (DoJ) and ranks as the third-highest penalty imposed to date on a bank to settle claims of mis-sold mortgage-backed instruments. Although the $7.2 billion payment is far from negligible, investors may take some cold comfort from the fact it is less than $16.7 billion that Bank of America was required to stump up in August 2014 and the $9.0 billion charged to JPMorgan Chase in November 2013. Furthermore, of the full amount, only the $3.1 billion civil fine component is required to be imminently delivered in cash.

Again, where are the indictments?

• US Sues Barclays For Alleged Mortgage Securities Fraud (R.)

The U.S. Department of Justice on Thursday sued Barclays for fraud in the sale of mortgage securities in the run-up to the financial crisis. The British bank deceived investors about the quality of loans underlying tens of billions of dollars of mortgage securities between 2005 and 2007, according to the lawsuit, which was filed in U.S. district court in Brooklyn, New York. Loans had been made to borrowers with no ability to repay and were based on inflated home appraisals, the complaint said. Barclays said in a statement that the claims in the lawsuit are “disconnected from the facts” and that it has an obligation to defend against “unreasonable allegations and demands.”

In terms of demands, Barclays was apparently referring to negotiations with the Justice Department to settle the claims without a case being filed. “Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity,” the statement said. The bank’s U.S.-traded shares were down 1.7 percent at $11.08 shortly before the close of the market. Barclays is among a number of European banks that have been under investigation for misconduct in the sale of mortgage securities, which contributed to the 2008 financial crisis.

One word: Dollar.

• Why The Chinese Are Still Snapping Up US Commercial Property (CNBC)

Interest in U.S. commercial real estate is perking up, particularly from China, as expectations of pro-growth policies from President-elect Donald Trump spark demand for dollar-denominated assets. “(Investors) are seeing the U.S.commercial real estate marketplace as really standing out on a global basis,” said Hessam Nadji, president and chief executive at commercial real estate firm Marcus and Millichap. “It’s not being overbuilt; it’s been very well balanced in this particular cycle in terms of loans that are not going up, the leverage that was very well balanced. They’re at much lower risk at this stage of recovery than we’ve seen in the past,” he told CNBC’s The Rundown. Concerns over the dollar’s appreciation are also prompting some motivation for capital allocation into the U.S. “particularly because the Chinese economy is slowing” and as the yield profile of commercial real estate is competitive, Nadji added.

We don’t solve our problems, we package them.

• EU Plans To ‘Revitalize’ Complex Financial Products (EUO)

The EU is trying to “revitalise” a market for controversial financial products, but one of the goals appears to already have been achieved without the EU’s help. Securitisation is the packaging of loans, mortgages, or other contractual debts into securities that can then be sold on the market, together with the risk attached to those debts. It had an instrumental role in the financial crisis of 2008, but the European Commission says giving the securitisation market a boost can help the real economy. The commission has not given a target figure of when “revitalisation” will have been achieved, but spoke in a press release of going back to the “pre-crisis average”.

The commission did not want to comment on the record, but one commission official said that if the market would return to average pre-crisis issuance levels, this would generate €100-€150 billion in additional funding for the economy. “This would already be a major achievement for the securitisation markets,” the commission official said. EUobserver looked at how average issuance levels have done so far, and found that more securities have been created through securitisation since the crisis than before the crisis. This website collected data from the Association for Financial Markets in Europe (AFME), a lobby group for the financial service sector, and the Securities Industry and Financial Markets Association, its US-based counterpart.

Taking a very narrow view, the “pre-crisis” years are 1996-2006. The average issuance of securities in Europe was €168 billion. When including 2007, the average was €203 billion. When including 2008 – when the financial crisis was in full swing – the average was €251 billion. Last week, AFME released data for the third quarter of 2016. The first three quarters of 2016 were the best three quarters since 2012. Taking the most recent data into account, the average annual issuance of securitisation since 2009, is €270 billion. Last year the figure was €216 billion. Even when correcting for inflation, the post-crisis period is already better than the pre-crisis period. Converting the averages to today’s prices, the average since 2009 is €282 billion, compared to a 1996-2007 average of €244 billion.

“I think the spying and interference is sort of the nature of our governments.”

• Ron Paul: “We Don’t Have Very Much Room For Condemning Anybody Else” (ZH)

When asked whether all the “Russian hacking” allegations were just a simple “political stunt” or whether a serious investigation needed to be conducted, Ron Paul offered up a startling bit of reality pointing out that America has a long history of interfering with elections and even invading countries “to have our guy in.” We suspect the following response was a bit more truth than Fox Business News expected.

“I think it is politics more than anything else. It’s really is nothing new. It’s like, guess what – somebody might have done A, B, C.” “The very rarely, if ever, compare what we do with election around the world. We are interfering all the time.” “I’m sure the Russians are interfering. But when you lose, you can jump on that and make a big point of it. But I don’t think it made any difference. I think it’s insignificant.” “If you review the history of how many elections we’ve been involved with, how many countries we’ve invaded and how many people we’ve killed to have our guy in, I’ll tell you what – we don’t have very much room for condemning anybody else.” “I think the spying and interference is sort of the nature of our governments. That’s why I’d like to see government much smaller.”

HA!

• Is Obama a Russian Agent? (Dmitry Orlov)

Sometimes a case looks weak because there is no “smoking gun”—no obvious, direct evidence of conspiracy, malfeasance or evil intent—but once you tally up all the evidence it forms a coherent and damning picture. And so it is with the Obama administration vis à vis Russia: by feigning hostile intent it did everything possible to further Russia’s agenda. And although it is always possible to claim that all of Obama’s failures stem from mere incompetence, at some point this claim begins to ring hollow; how can he possibly be so utterly competent… at being incompetent? Perhaps he just used incompetence as a veil to cover his true intent, which was always to bolster Russia while rendering the US maximally irrelevant in world affairs. Let’s examine Obama’s major foreign policy initiatives from this angle.

Perhaps the greatest achievement of his eight years has been the destruction of Libya. Under the false pretense of a humanitarian intervention what was once the most prosperous and stable country in the entire North Africa has been reduced to a rubble-strewn haven for Islamic terrorists and a transit point for economic migrants streaming into the European Union. This had the effect of pushing Russia and China together, prompting them to start voting against the US together as a block in the UN Security Council. In a single blow, Obama assured an important element of his legacy as a Russian agent: no longer will the US be able to further its agenda through this very important international body.

Next, Obama presided over the violent overthrow of the constitutional government in the Ukraine and the installation of an American puppet regime there. When Crimea then voted to rejoin Russia, Obama imposed sanctions on the Russian Federation. These moves may seem like they were designed to hurt Russia, but let’s look at the results instead of the intentions. First, Russia regained control of an important, strategic region. Second, the sanctions and the countersanctions allowed Russia to concentrate on import replacement, building up the domestic economy. This was especially impressive in agriculture, and Russia now earns more export revenue from foodstuffs than from weapons. Third, the severing of economic ties with the Ukraine allowed Russia to eliminate a major economic competitor.

Fourth, over a million Ukrainians decided to move to Russia, either temporarily or permanently, giving Russia a major demographic boost and giving it access to a pool of Russian-speaking skilled labor. Most Ukrainians are barely distinguishable from the general Russian population.) Fifth, whereas before the Ukraine was in a position to extort concessions from Russia by playing games with the natural gas pipelines that lead from Russia to the European Union, now Russia’s hands have been untied, resulting in new pipeline deals with Turkey and Germany. In effect, Russia reaped all the benefits from the Ukrainian stalemate, while the US gained an unsavory, embarrassing dependent.

Worse than smoking.

• Air Pollution Cause Of One In Three Deaths In China (SCMP)

Smog is related to nearly one-third of deaths in China, putting it on a par with smoking as a threat to health, according to an academic paper based on the study of air pollution and mortality data in 74 cities and published in an international journal. The findings by Nanjing University’s School of the Environment, which were published in the November edition of the journal the Science of the Total Environment, provides the latest scientific estimates of the health cost of China’s notorious smog. The latest bout of smog began last Friday, affecting about half a billion people on the mainland, with the severest impact in the last three days. Previous research work have found equally alarming results about the country’s toxic air.

The International Energy Agency published its first study on air pollution in June and estimated that severe air pollution has shortened life expectancy in China by an average 25 months. An academic paper co-authored by researchers from MIT in the US, Tsinghua University and Peking University in China, plus the Hebrew University of Jerusalem in 2013 concluded that bad air has cut life expectancy by an average of 5.5 years in the north of the country. There are so far no concrete or widely agreed estimates on the impact of air pollution on health in China partly because it is scientifically complicated to measure and also because there is little historical precedent for prolonged exposure to such high levels of air pollution.

The six researchers from Nanjing University said they conducted the study because air pollution was the “most severe and worrisome environmental problem in China”, but knowledge of its health effects was insufficient. When they looked into 3.03 million deaths in 2013 in 74 cities in the Beijing-Tianjin-Hebei region and the Yangtze River Delta and Pearl River Delta, they found 31.8 per cent could be linked to PM 2.5 pollution – the tiny smog particles most hazardous to health.

Yeah, it’s bitter. Still, as I said yesterday on FB: “Right up the alley of my -repeat- article and appeal yesterday. Only, the Guardian itself runs a fund now. So it has reason to publish this. The problem: the paper supports 3 NGOs, all British. As if they know better than Greeks what to do in Greece. It’s a broken record problem. Too much money gets wasted on hubris and 1001 -repeat- preventable fuck-ups.”

• 1000s Of Refugees Left In Greek Cold, UN And EU Accused Of Mismanagement (G.)

The UN refugee agency and the EU’s aid department have been accused by other aid groups of mismanaging a multimillion-pound fund earmarked for the most vulnerable refugees in Europe, leaving thousands sleeping in freezing conditions in Greece. The Greek government, which has ultimate jurisdiction over camp activities, has also been criticised for failing to use nearly €90m (£75m) of separate EU funding to adequately improve conditions at the camps before the onset of winter. No single actor has overall control of all funding and management decisions in the camps, allowing most parties to distance themselves from blame.

The EU aid department, known as Echo, has given UNHCR more than €14m since April to help prepare roughly 50 refugee camps for the winter in Greece, where an estimated 50,000 mainly Syrian refugees have been stranded since the adoption of new European migration policies in March. A further €24m has been given to UNHCR for other projects. Both organisations stand accused by other aid groups of squandering this money, after failing to properly “winterise” or evacuate dozens of camps before snow fell in Greece earlier in December. In addition to providing warmer bedding and clothes, UNHCR was expected to use this money to move people from tents to heated containers or formal housing; heat warehouses where other refugees are living; provide a consistent supply of hot water; and install insulated flooring for anyone still left in tents.

Months after the funds were dispersed, roughly half of those living in camps had yet to be transferred to formal housing by the onset of winter. Of the 45 camps that were still active at the start of the month, the Guardian visited or was made aware of at least 15 camps that had yet to be properly adapted by the time snow fell in northern Greece at the start of December. UNHCR admitted it was itself aware of only eight camps where all the residents have been moved out of tents and into prefabricated containers.

Because of all that goes wrong in the NGO structure, we support this:

• The Automatic Earth in Greece: Big Dreams for 2017 (Automatic Earth)

Both Konstantinos and myself -and all the other volunteers at O Allos Anthropos- want to thank you so much for all the help you’ve given over the past year -and in 2015-. We’re around $30,000 for 2016 alone, another $5000 since my last article 4 weeks ago. I swear, for as long as I live, this will never cease to amaze me. And then of course what happens is people start thinking and dreaming about what more they can do for those in peril. Wouldn’t you know…

A Merry Christmas to all of you, to all of us. Very Merry. God bless us, every one. Thank you for everything.

If I may make a last suggestion, please forward this ‘dream’ to anyone you know -and even those you don’t-, by mail, Twitter, Facebook, Instagram, word of mouth, any which way you can think of. Go to your local mayor or town council, suggest they can help and get -loudly- recognized for it. There may be a dream involved for 2017, but that was our notion a year ago as well, and look what we’ve achieved a year later: it is very real indeed. And anyone, everyone can become part of that reality for just a few bucks. If the institutions won’t do it, perhaps the people themselves should. That doesn’t even sound all that crazy or farfetched. There’s a lot of us.

Konstantinos Polychronopoulos on Lesbos Dec 2015

Debt Rattle July 27 2016

Jul 272016

July 27, 2016 Posted by Raúl Ilargi Meijer at 9:12 am Finance Tagged with: Abe, bees, Brexit, Deutsche, DNC, Hillary, Hong Kong, LUCA, neocons, nyet, oil, shadow banks, WMP 5 Responses »

John Vachon Five o’clock crowds, Chicago 1941

• Japan PM Unveils More Than $266 Billion Stimulus (AFP)

• Deutsche Bank’s Q2 Net Income Plunges Nearly 100% Year-On-Year (CNBC)

• China’s Debt Problem May Be Worse Than Expected, Moody’s Warns (CNBC)

• China Stocks Tumble on Report of Wealth Management Product Curbs (BBG)

• Hong Kong Imports/Exports Plunge in Line with Japan and China (R.)

• A Refinery-Driven Correction Is Upon Us’ (BBG)

• Cameron Was Right, Britain Is Broken (G.)

• Kremlin Says Idea It Hacked Democratic Party Emails Absurd (R.)

• Assange: “A Lot More Material” Will Be Released (ZH)

• The Neocons Are Backing Hillary Clinton (Intercept)

• The Odious Versus the Tedious (Kunstler)

• Auckland House Prices Must Deliberately Be Reduced By 50% – NZ Greens (RNZ)

• Catalonia Tells Spain It Will Push For Secession With Or Without Assent (G.)

• We Love To Talk Of Terror (Robert Fisk)

• The Power of “Nyet” (Dmitry Orlov)

• Leading Insecticide Cuts Bee Sperm By 40%, Lifespan By A Third (G.)

• LUCA: The Ancestor Of All Living Things On Earth (IBT)

Abenomics must end in full-blown madness.

• Japan PM Unveils More Than $266 Billion Stimulus (AFP)

Japan on Wednesday announced a whopping economic stimulus package worth more than 28 trillion yen ($266 billion), media reported, to boost the stumbling economy. Prime Minister Shinzo Abe announced the package in a speech in southwestern Japan, giving few details except to say it would include about 13 trillion yen in government spending, according to Jiji Press news agency.

“..scrapping dividend payments to shareholders, thousands of job cuts and asset sales…”

• Deutsche Bank’s Q2 Net Income Plunges Nearly 100% Year-On-Year (CNBC)

Deutsche Bank, the German bank which is an important part of the global financial system, announced revenue and income falls Wednesday which could add further concerns for investors made jittery by a combination of Brexit and previous issues at the bank. Its second-quarter net income was down 98% from the same period in the previous year, to 20 million euros ($22 million), as it exited parts of its business while revenues were down 20% to 7.4 billion euro. Further cuts may be needed, John Cryan, chief executive of Deutsche Bank, warned. “If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring,” he said in a statement.

Deutsche’s CET1 ratio – a key measure of financial strength – improved slightly to 10.8%. The bank, one of Germany’s largest lenders, has lost around 40% of its market value this year as concerns mount about its capital position and $14 billion in fines over past misconduct. John Cryan, the bank’s co-chief executive who was appointed in July last year, has embarked on a drastic plan to meet its capital targets, including scrapping dividend payments to shareholders, thousands of job cuts and asset sales. Raising new capital is likely to be difficult because of the bank’s holdings of debt for some of the worse off euro zone countries.

As I’ve said 100 times: “China’s “shadow banking” system is masking the rise in indebtedness..”

• China’s Debt Problem May Be Worse Than Expected, Moody’s Warns (CNBC)

China’s “shadow banking” system is masking the rise in indebtedness in China, Moody’s Investors Service said in a report Wednesday. The rating agency said overall leverage in China’s economy continued to rise with credit growth outpacing the rise in nominal GDP. “The growth in overall leverage may be understated, because some of the fastest growing components of shadow banking are not included in TSF (total social financing),” said Michael Taylor, Moody’s chief credit officer for Asia Pacific. The credit growth was measured using TSF, an economic barometer of total fundraising by Chinese non-state entities, including individuals. It didn’t, however, include all shadow banking activities, which have grown in recent years.

“We estimate the potential understatement to be significant, amounting to at least RMB16 trillion ($2.4 trillion) or 23% of GDP at end-2015, equivalent to around one-third of shadow banking,” Taylor added. Moody’s said TSF flows were being sustained by formal bank credit flows supported by accommodative monetary policy. The increasing leverage was worrying. “The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said Stephen Schwartz, a Moody’s senior vice president.

Shadow banks and their ‘wealth’ products.

• China Stocks Tumble on Report of Wealth Management Product Curbs (BBG)

Chinese stocks slumped the most in six weeks amid concern regulators are moving to limit equity investments by some wealth-management products. The Shanghai Composite Index fell 1.6% at the mid-day break, reversing a gain of as much as 0.2%. The Shenzhen Composite Index lost 3%, while the ChiNext Index of small-company shares sank 4%, the most since June 13. China’s banking regulator is considering tightening curbs on the nation’s $3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.

“There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming at Hengsheng Asset Management. “Under such circumstances, Chinext is especially vulnerable, given its high valuations and the recent gains.” The China Banking Regulatory Commission met with some banks this month on the rule revision and a final version hasn’t been drafted, the 21st Century Business Herald report said. China’s watchdogs have signaled they’re paying closer attention to the fund managers and brokerages who funnel the nation’s household savings into investments from stocks to bonds and derivatives.

The China Securities Regulatory Commission this month issued guidelines curbing the use of leverage by structured asset management plans. Li Chao, vice chairman of the regulator, told a gathering of firms in the northeastern city of Harbin last week to do better due diligence on prospective clients when arranging initial public offerings, secondary share sales and bond issues, people familiar with the matter said.

Hong Kong=Japan=China. Exact same pattern. World trade collapsing. If Hong Kong weren’t so dependent on imports, those would fall much more than 5.6%. “Domestic exports to the United Kingdom [..] plunged 48.2% in June.”

• Hong Kong Imports/Exports Plunge in Line with Japan and China (R.)

Hong Kong’s total exports in June fell for the 14th straight month, dampened by a slowdown in China, with the city’s factories bracing for more pain in coming months from the impact of Brexit. Open and trade-dependent economies in Asia such as Hong Kong are expected to be among the most vulnerable to a slowdown in global trade from Britain’s shock vote to leave the European Union as the effects filter through factory supply chains, analysts say. Hong Kong’s total exports in June fell 1% from a year earlier to HK$296.5 billion ($38.2 billion), government data showed on Tuesday. Total imports fell 0.9%, in its 17th straight month of decline, to HK$342.1 billion. In May, annual exports slipped 0.1% while imports dropped 4.3%.

For the first half of 2016, total exports value dropped 3.9%, while imports fell 5.6%. The city recorded a visible trade deficit of HK$199.6 billion for the first half period, equivalent to 10.8% of the value of imports. “Looking ahead, the external trading environment remains challenging given the uncertainties associated with the outcome of the UK referendum in favor of leaving the EU, slow recovery in the advanced markets, monetary policy divergence among major central banks and heightened geopolitical tensions in various regions,” the government said, adding it will monitor the situation closely. Domestic exports to the United Kingdom, which accounted for 2.2% of the total, plunged 48.2% in June.

Well, not really, it’s all just about demand.

• A Refinery-Driven Correction Is Upon Us’ (BBG)

Gear up for a fall in oil prices. The global oil market is “severely oversupplied” with gasoline — with stocks at a five-year high — serving as a blow to crude prices from next month, reckon Morgan Stanley analysts led by Adam Longson. In a report published on Sunday, the analysts foresee “worrisome trends” for oil supply and demand, led by refineries generating too much gasoline in recent months. Faced with the need to cut back on capacity utilization to protect profit margins, these refineries are set to crimp crude oil purchases and drag prices lower, the analysts say. “Crude oil demand is trending below refined product demand for the first time in three years,” they write.

“Refineries are the true consumer of crude oil, and crude oil demand is ultimately more important than aggregate refined product demand for oil balances. Given the oversupply in the refined product markets, fading refinery margins, and economic run cuts, we expect crude oil demand to deteriorate further over the coming months.” A glut of gasoline could weigh significantly on oil prices, which have been lifted in recent weeks by supply disruptions and healthy petrol demand in emerging markets. Excess gasoline also means that refiners may close their doors sooner and for longer than usual during their traditional summer production shutdown, taking further demand out of the market.

Reading through a piece like this, it becomes even more surprising that Brexit was a surprise to so many Brits.

• Cameron Was Right, Britain Is Broken (G.)

In opposition, David Cameron battered Gordon Brown with two words: Broken Britain. It was his Murdoch-inspired catchphrase for hoodies scrapping in gangs, Neets necking alcopops, teenagers ending up pregnant. It set the framework for Iain Duncan Smith’s welfare reforms. Broken Britain summed up the dark side of the New Labour era: a busted social contract and a class wantonly sponging off the rest of society. It always struck me as the right phrase for the wrong target. The real Broken Britain is the one revealed over the past four days in two reports from MPs. It is workers urinating into bottles at the “Victorian workhouse” of Sports Direct, because their toilet breaks are restricted. It is women being offered permanent jobs in return for sexual favours.

It is BHS, a high-street chain nearly as old as the Queen, effectively killed by two “plundering” owners. It is 10,000 shop workers who will shortly be out on the streets, and 20,000 pension-scheme members who must now worry over how much they’ll have to live on in their old age. The riots of 2011 were taken by Cameron as proof he’d been right all along: “Irresponsibility. Selfishness. Behaving as if your choices have no consequences … Reward without effort. Crime without punishment. Rights without responsibilities.” This is Philip Green and Mike Ashley summed up – along with all the well-heeled consultants, directors and credulous politicians (including Cameron) who applauded and subsidised them on their way, bought off with fat fees and cheap photo-ops.

The rioting kids who stole bottles of water and robbed tellies from their local Argos were given prison sentences worth a total of 1,200 years. By contrast, Green and Ashley weren’t even going to bother facing MPs. Only after five months of back and forth did Sports Direct’s Ashley get in the chauffeured car down to Westminster. Green went one better, demanding that Frank Field resign from the BHS inquiry – then rocking up to parliament and telling MPs to stop looking at him. Such prickliness from a multibillionaire would have been funny had it not been for the thousands of families whose lives he’d just ruined.

Wow. I found a few sentences at Reuters that sound somewhat sensible on the topic. “If the Russians hadn’t hacked us (for which we have no proof), Americans would have never found out about what we did.” Dumb f**ks!

• Kremlin Says Idea It Hacked Democratic Party Emails Absurd (R.)

“We are again seeing these maniacal attempts to exploit the Russian theme in the U.S. election campaign,” Kremlin spokesman Dmitry Peskov told reporters when asked about the leaked emails. “This is not breaking new ground, this is an old trick which is being played again. This is not good for our bilateral relations, but we understand that we simply have to get through this unpleasant period.” U.S. Secretary of State John Kerry said earlier on Tuesday he had raised the hacking issue at a meeting in Laos with Russian Foreign Minister Sergei Lavrov. “I don’t want to use four-letter words,” was Lavrov’s only response to reporters when asked whether Russia was responsible for the email hack.

Earlier this month, Carter Page, a foreign policy adviser to Trump, visited Moscow, where he gave a lecture complaining that Western governments had often had a hypocritical focus on democratization in the post-Soviet world. Analysts say the Kremlin would welcome a Trump win because the billionaire U.S. businessman has repeatedly praised Putin, spoken of wanting to get along with Russia, and has said he would consider an alliance with Moscow against Islamic State. Trump’s suggestion he might abandon NATO’s pledge to automatically defend all alliance members is also likely to have gone down well in Moscow, where the military alliance is cast as an outdated Cold War relic.

“Assange told CNN that Democratic Party officials were using the specter of Russian involvement to distract from the content of the emails..”

• Assange: “A Lot More Material” Will Be Released (ZH)

One month ago, when Wikileaks’ Julian Assange told ITV’s Richard Peston that he would publish “enough evidence” to indict Hillary Clinton, few took him seriously. And while Hillary has not been indicted – yet – last Friday’s leak has already managed to wreak havoc and has led to revelations of cronyism and collusion within the Democratic party and the media, the resignation of the DNC Chair Debbie Wasserman Schultz, as well as chaos on the first day of the Democratic convention. Hence, why we believe Assange will be taken more seriously this time. Earlier today, Assange told CNN that Wikileaks might release “a lot more material” relevant to the US electoral campaign. Assange spoke to CNN following the release of nearly 20,000 hacked Democratic National Committee emails.

The topic then turned to the topic du jour: “did Putin do it”? Assange refused to confirm or deny a Russian origin for the mass email leak, saying Wikileaks tries to create ambiguity to protect all its sources. “Perhaps one day the source or sources will step forward and that might be an interesting moment some people may have egg on their faces. But to exclude certain actors is to make it easier to find out who our sources are,” Assange told CNN. The Kremlin has rejected allegations its behind the hacking, calling suggestions it ordered the release of the emails to influence US politics the “usual fun and games” of the US election campaigns, while the Russian foreign minister had an even simpler reaction to the same question: “I don’t want to use four-letter words.”

Dmitry Peskov, the Kremlin spokesman, added, “This is not really good for bilateral relations.” All of this now appears to be irrelevant, and as we speculated earlier, the “anti-Russia” narrative is now in motion and moments ago Obama said that it’s ‘possible’ Putin is trying to sway vote for Trump. Which brings us to the next point: speaking from the Ecuadorian embassy in London, where he faces extradition over sexual assault allegations, Assange told CNN that Democratic Party officials were using the specter of Russian involvement to distract from the content of the emails, which have had tumultuous affect on the party at the start of its national convention [..]

And you think Trump is the danger? These are the people who shed blood around the globe. These are the people responsible for the terrorist attacks against the west.

• The Neocons Are Backing Hillary Clinton (Intercept)

As Hillary Clinton puts together what she hopes will be a winning coalition in November, many progressives remain wary — but she has the war-hawks firmly behind her. “I would say all Republican foreign policy professionals are anti-Trump,” leading neoconservative Robert Kagan told a group gathered around him, groupie-style, at a “foreign policy professionals for Hillary” fundraiser I attended last week. “I would say that a majority of people in my circle will vote for Hillary.” As the co-founder of the neoconservative think tank Project for the New American Century, Kagan played a leading role in pushing for America’s unilateral invasion of Iraq, and insisted for years afterwards that it had turned out great.

Despite the catastrophic effects of that war, Kagan insisted at last week’s fundraiser that U.S. foreign policy over the last 25 years has been “an extraordinary success.” Republican presidential nominee Donald Trump’s know-nothing isolationism has led many neocons to flee the Republican ticket. And some, like Kagan, are actively helping Clinton, whose hawkishness in many ways resembles their own. The event raised $25,000 for Clinton. Two rising stars in the Democratic foreign policy establishment, Amanda Sloat and Julianne Smith, also spoke.

The way they described Clinton’s foreign policy vision suggested that if elected president in November, she will escalate tensions with Russia, double down on military belligerence in the Middle East and generally ignore the American public’s growing hostility to intervention. Sloat, the former deputy assistant secretary of state in the Bureau of European and Eurasian Affairs, boasted that Clinton will be “more interventionist and forward-leaning than Obama’s been” in Syria. She also applauded Clinton for doing intervention the right way, through coalitions instead of the unilateral aggression that defined the Bush years.

“What higher service to democracy than to expose the anti-democratic workings of the party that affects to call itself Democratic? ”

• The Odious Versus the Tedious (Kunstler)

You thought the Republican convention was a ghastly spectacle of royal Trumpery (and Iago-style backstabbing featuring the arch-asshole Ted Cruz)? Now comes the Democratic Annunciation of I’m-With-Her-It’s-My-Turn, the incarnation of crony corruption in our late-state Republic of Racketeering. Remember that old movie, The Exorcist, with its demonic spewage of projectile vomit. Expect something like that on the grand scale in Philadelphia this week as the Exalted-Breaker-of-Glass-Ceilings steps forth to accept her victory tiara.

The New York Times is blaming the Ruskies for releasing those thousands of new emails disclosing the perfidy of the Democratic National Committee staff in pimping for Hillary against Bernie and trafficking with the major network news operations to manage and spin things Her way — and especially to rig the electoral machinery against Sanders. How much will his supporters Feel the Bern this week in Philly as the party attempts to put on an appearance of unity (Ha!) behind HRC? How can it conceivably be possible now for Bernie to stand by her side for the crucial unity photo op? I suspect he’d rather chew his right arm off.

For my money, the Ruskies should get the Nobel Peace Prize if they were behind the email release. What higher service to democracy than to expose the anti-democratic workings of the party that affects to call itself Democratic? The sudden appearance of 20,000 smoking guns made party chairperson Debbie Wasserman-Schultz vamoose faster than you can say Debbie Wasserman Schultz, though her replacement, Donna Brazile is every inch just another blatant HRC foot-soldier. Perhaps she’ll have to orchestrate the proceedings with smoke signals or invisible ink instead of emails.

As the conventions rolled out, the aggregate miasma we call the news industry resorted to that tired trope of Optimism Versus Pessimism. Translation: you can’t handle the truth so somebody please bring out the rainbow-leaping unicorns. The American zeitgeist is a tattered garment worn by a three hundred pound tranny in a diabetic coma. It’s probably beyond salvation at this point. Somebody please put it out of its misery. Hence: Trump Versus Hillary, the odious versus the tedious, the election to end all elections.

This makes too much sense.

• Auckland House Prices Must Deliberately Be Reduced By 50% – NZ Greens (RNZ)

Auckland house prices should be deliberately reduced by up to 50% over a period of time to make the market affordable again, Greens co-leader Metiria Turei says. The average house price in Auckland has risen to nearly $1 million, or 10 times the median household income. Ms Turei said the only way to reverse that was to slowly bring prices back down to three or four times the median household income. She told Morning Report the Green Party was considering what timeframe would work without crashing the market and hurting people who already owned homes. “The only way to prevent a bust, and to protect families in the short and long term is to lay out a comprehensive plan, which means using every comprehensive tool that we’ve got so that we can slowly bring down house prices so that they’re reasonable.”

The Auckland Council’s chief economist had suggested bringing prices down to five times the median household income by 2030, she said. Labour leader Andrew Little said Ms Turei’s declaration that Auckland house prices should be deliberately reduced was irresponsible. There was no way a Labour-led government would consider the idea, he said. “We have a very clear plan. It’s not about crashing house prices. It’s about stabilising prices. “We don’t want to cause undue economic harm to those who – in good faith – have bought homes, entered into mortgages. That’s not a responsible approach.”

“Last month, Spain’s interior minister, Jorge Fernández Díaz, and the head of Catalonia’s anti-fraud office, Daniel de Alfonso, were apparently recorded discussing possible investigations that could be launched against pro-independence politicians in the region.”

• Catalonia Tells Spain It Will Push For Secession With Or Without Assent (G.)

The Catalan government has intensified its war of words with Spain by vowing to use its democratic mandate to forge a separate Catalan state with or without the approval of Madrid. Catalonia is preparing to defy Spain’s constitutional court this week by debating the conclusions of a working group on sovereignty, nine months after the Catalan parliament put forward a resolution calling for the “beginning of a process of the creation of an independent Catalan state”. Carme Forcadell, the president of the parliament, and Raül Romeva, the minister of foreign affairs, told the Guardian enduring hostility from Madrid had left Catalonia with no choice but to press ahead with the independence agenda.

“The [Spanish state] has left us feeling that we just don’t have an alternative,” Romeva said. “We have always said that we would have preferred a Scottish-type scenario, where we could negotiate with the state and hold a coordinated and democratic referendum. We keep talking to Madrid, but all we get back from them is an echo.” Forcadell pointed to a recent scandal as evidence of the Spanish government’s attitude towards Catalonia. Last month, Spain’s interior minister, Jorge Fernández Díaz, and the head of Catalonia’s anti-fraud office, Daniel de Alfonso, were apparently recorded discussing possible investigations that could be launched against pro-independence politicians in the region.

Forcadell said she was incredulous at the idea that the acting Spanish government, led by Mariano Rajoy, could simply brush aside the alleged incident and say nothing was going on. “How can they say that when the interior minister, who’s meant to defend the interests of all citizens, is caught conspiring to find evidence against citizens solely because they think differently? How can absolutely nothing come of that? We don’t understand it,” she said.

The power of words.

• We Love To Talk Of Terror (Robert Fisk)

The frightful and bloody hours of Friday night and Saturday morning in Munich and Kabul – despite the 3,000 miles that separate the two cities – provided a highly instructive lesson in the semantics of horror and hypocrisy. I despair of that generic old hate-word, “terror”. It long ago became the punctuation mark and signature tune of every facile politician, policeman, journalist and think tank crank in the world. Terror, terror, terror, terror, terror. Or terrorist, terrorist, terrorist, terrorist, terrorist. But from time to time, we trip up on this killer cliché, just as we did at the weekend. Here’s how it went. When first we heard that three armed men had gone on a “shooting spree” in Munich, the German cops and the lads and lassies of the BBC, CNN and Fox News fingered the “terror” lever.

The Munich constabulary, we were informed, feared this was a “terrorist act”. The local police, the BBC told us, were engaged in an “anti-terror manhunt”. And we knew what that meant: the three men were believed to be Muslims and therefore “terrorists”, and thus suspected of being members of (or at least inspired by) Isis. Then it turned out that the three men were in fact only one man – a man who was obsessed with mass killing. He was born in Germany (albeit partly Iranian in origin). And all of a sudden, in every British media and on CNN, the “anti-terror manhunt” became a hunt for a lone “shooter”. One UK newspaper used the word “shooter” 14 times in a few paragraphs.

Somehow, “shooter” doesn’t sound as dangerous as “terrorist”, though the effect of his actions was most assuredly the same. “Shooter” is a code word. It meant: this particular mass killer is not a Muslim. [..] It all comes down to the same thing in the end. If Muslims attack us, they are terrorists. If non-Muslims attack us, they are shooters. If Muslims attack other Muslims, they are attackers. Scissor out this paragraph and keep it beside you when the killers next let loose – and you’ll be able to work out who the bad guys are before the cops tell you.

More power of words.

• The Power of “Nyet” (Dmitry Orlov)

The way things are supposed to work on this planet is like this: in the United States, the power structures (public and private) decide what they want the rest of the world to do. They communicate their wishes through official and unofficial channels, expecting automatic cooperation. If cooperation is not immediately forthcoming, they apply political, financial and economic pressure. If that still doesn’t produce the intended effect, they attempt regime change through a color revolution or a military coup, or organize and finance an insurgency leading to terrorist attacks and civil war in the recalcitrant nation. If that still doesn’t work, they bomb the country back to the stone age. This is the way it worked in the 1990s and the 2000s, but as of late a new dynamic has emerged.

In the beginning it was centered on Russia, but the phenomenon has since spread around the world and is about to engulf the United States itself. It works like this: the United States decides what it wants Russia to do and communicates its wishes, expecting automatic cooperation. Russia says “Nyet.” The United States then runs through all of the above steps up to but not including the bombing campaign, from which it is deterred by Russia’s nuclear deterrent. The answer remains “Nyet.” One could perhaps imagine that some smart person within the US power structure would pipe up and say: “Based on the evidence before us, dictating our terms to Russia doesn’t work; let’s try negotiating with Russia in good faith as equals.”

And then everybody else would slap their heads and say, “Wow! That’s brilliant! Why didn’t we think of that?” But instead that person would be fired that very same day because, you see, American global hegemony is nonnegotiable. And so what happens instead is that the Americans act baffled, regroup and try again, making for quite an amusing spectacle.

But it’s a billion-dollar industry!

• Leading Insecticide Cuts Bee Sperm By 40%, Lifespan By A Third (G.)

The world’s most widely used insecticide is an inadvertent contraceptive for bees, cutting live sperm in males by almost 40%, according to research. The study also showed the neonicotinoid pesticides cut the lifespan of the drones by a third. The scientists say the discovery provides one possible explanation for the increasing deaths of honeybees in recent years, as well as for the general decline of wild insect pollinators throughout the northern hemisphere. Bees and other insects are vital for pollinating three-quarters of the world’s food crops but have been in significant decline, due to the loss of flower-rich habitats, disease and pests and the use of pesticides.

Neonicotinoids were banned from use on flowering crops in the EU in 2013. The UK opposed the ban and allowed a limited “emergency” lifting of the ban in 2015, but has refused further suspensions this year. There is clear scientific evidence that neonicotinoids harm bees, but there is only a little research showing the pesticides harm the overall performance of colonies. Previous work has shown that neonicotinoids reduce the number of bumblebee queens produced and severely cuts the survival and reproduction of honeybee queens. But the new research, led by Lars Straub at the University of Bern, Switzerland and published in the journal Proceedings of the Royal Society B, is the first to test how neonicotinoids affect male bee fertility.

We’re really killing off our own family.

• LUCA: The Ancestor Of All Living Things On Earth (IBT)

The planet we live on is home to an estimated 10 million species of living organisms. Hard as it may be to fathom, the immense diversity of life we see around us today – from the bacteria living in the garden soil to the majestic blue whale inhabiting the deep blue seas – all evolved from one single-celled ancestor that lived, and died, billions of years ago. In a paper published Monday in the journal Nature Microbiology, researchers have described, in unprecedented detail, this Last Universal Common Ancestor, or LUCA, which was only “half alive.” This ancestor – a single-cell, bacterium-like organism – is believed to have existed roughly four billion years ago, when Earth was just over 500 million years old. LUCA, the researchers say, was the common point of origin for three great domains of life — bacteria, archaea, which are bacteria-like single-cell prokaryotes, and the eukaryotes, a domain that includes all plants and animals.

Phylogeny for LUCA’s genes: In the two-domain tree of life, eukaryotes stem from prokaryotes, so the last universal common ancestor, LUCA, is the ancestor of archaea and bacteria.

“We are seeing something for which there was previously no evidence,” co-author William Martin from the Heinrich Heine University in Düsseldorf, Germany, told the Washington Post. “Just by asking the right questions of genome data, we were able to obtain some very interesting answers that also mesh well with what we know from geochemistry.” In order to get a clear picture of what LUCA was like, the researchers examined over six million protein-coding genes found in the present-day bacteria and archaea. After analyzing the DNA sequence of each gene and determining whether these genes were present in both bacteria and archaea, the researchers identified 355 gene “clusters” that were probably present in LUCA. “It was flabbergasting to us that we found as many as we did,” Martin told New Scientist.

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