NSA Archives - Page 2 of 3 - The Automatic Earth

Edward Snowden @Snowden: “In light of today’s attack, Congress needs to be asking @NSAgov if it knows of any other vulnerabilities in software used in our hospitals.”

• Hackers Hit Dozens of Countries Exploiting Stolen NSA Tool (NYT)

Hackers exploiting malicious software stolen from the National Security Agency executed damaging cyberattacks on Friday that hit dozens of countries worldwide, forcing Britain’s public health system to send patients away, freezing computers at Russia’s Interior Ministry and wreaking havoc on tens of thousands of computers elsewhere. The attacks amounted to an audacious global blackmail attempt spread by the internet and underscored the vulnerabilities of the digital age. Transmitted via email, the malicious software locked British hospitals out of their computer systems and demanded ransom before users could be let back in – with a threat that data would be destroyed if the demands were not met.

By late Friday the attacks had spread to more than 74 countries, according to security firms tracking the spread. Kaspersky Lab, a Russian cybersecurity firm, said Russia was the worst-hit, followed by Ukraine, India and Taiwan. Reports of attacks also came from Latin America and Africa.[..] The hackers’ weapon of choice on Friday was Wanna Decryptor, a new variant of the WannaCry ransomware, which encrypts victims’ data, locks them out of their systems and demands ransoms. Researchers said the impact and speed of Friday’s attacks had not been seen in nearly a decade, when the Conficker computer worm infected millions of government, business and personal computers in more than 190 countries, threatening to overpower the computer networks that controlled health care, air traffic and banking systems over the course of several weeks.

One reason the ransomware on Friday was able to spread so quickly was that the stolen N.S.A. hacking tool, known as “Eternal Blue,” affected a vulnerability in Microsoft Windows servers. Hours after the Shadow Brokers released the tool last month, Microsoft assured users that it had already included a patch for the underlying vulnerability in a software update in March. But Microsoft, which regularly credits researchers who discover holes in its products, curiously would not say who had tipped the company off to the issue. Many suspected that the United States government itself had told Microsoft, after the N.S.A. realized that its hacking method exploiting the vulnerability had been stolen.

Privacy activists said if that were the case, the government would be to blame for the fact that so many companies were left vulnerable to Friday’s attacks. It takes time for companies to roll out systemwide patches, and by notifying Microsoft of the hole only after the N.S.A.’s hacking tool was stolen, activists say the government would have left many hospitals, businesses and governments susceptible. “It would be deeply troubling if the N.S.A. knew about this vulnerability but failed to disclose it to Microsoft until after it was stolen,” Patrick Toomey, a lawyer at the American Civil Liberties Union, said on Friday. “These attacks underscore the fact that vulnerabilities will be exploited not just by our security agencies, but by hackers and criminals around the world.”

Don’t just blame the hospitals. Blame the government that squeezes them so dry they have to choose patients over computers.

• UK Health Service, Targeted in Cyberattack, Ignored Warnings for Months (NYT)

Britain’s National Health Service ignored numerous warnings over the last year that many of its computer systems were outdated and unprotected from the type of devastating cyberattack it suffered on Friday. The attack caused some hospitals to stop accepting patients, doctor’s offices to shut down, emergency rooms to divert patients, and critical operations to be canceled as a decentralized system struggled to cope. At some hospitals, nurses could not even print out name tags for newborn babies. At the Royal London Hospital, in east London, George Popescu, a 23-year-old hotel cook, showed up with a forehead injury. “My head is pounding and they say they can’t see me,” he said. “They said their computers weren’t working. You don’t expect this in a big city like London.”

In a statement on Friday, the N.H.S. said its inquiry into the attack was in its early phases but that “at this stage we do not have any evidence that patient data has been accessed.” Many of the N.H.S. computers still run Windows XP, an out-of-date software that no longer gets security updates from its maker, Microsoft. A government contract with Microsoft to update the software for the N.H.S. expired two years ago. Microsoft discontinued the security updates for Windows XP in 2014. It made a patch, or fix, available in newer versions of Windows for the flaws that were exploited in Friday’s cyberattacks. But the health service does not seem to have installed either the newer version of Windows or the patch.

“Historically, we’ve known that N.H.S. uses computers running old versions of Windows that Microsoft itself no longer supports and says is a security risk,” said Graham Cluley, a cybersecurity expert in Oxford, England. “And even on the newest computers, they would have needed to apply the patch released in March. Clearly that did not happen, or the malware wouldn’t have spread this fast.” Just this month, a parliamentary research briefing noted that cyberattacks were viewed as one of the top threats facing Britain. The push to make medical records systems more interconnected might also make the system more vulnerable to attack. Britain plans to digitize all patient records by 2020.

The anti-Trump battle will be fought with financial weapons. And the Donald is walking into that trap.

• Hurricane Bearing Down on the Casino (Stockman)

Yesterday I said the Donald was absolutely right in canning the insufferable James Comey, but that he has also has stepped on a terminal political land-mine. And he did. That’s because the entire Russian meddling and collusion narrative is a ridiculous, evidence-free attempt to re-litigate the last election. And now that the powers that be have all the justification they need. And what is already an irrational witch-hunt will be quickly turned into a scorched-earth assault on a sitting president. I have no idea how this will play out, but as a youthful witness to history back in 1973-1974 I observed Tricky Dick’s demise in daily slow motion. But the most memorable part of the saga was how incredibly invincible Nixon seemed in early 1973. Nixon started his second term, in fact, with a massive electoral landslide, strong public opinion polls and a completely functioning government and cabinet.

Even more importantly, he was still basking in the afterglow of his smashing 1972 foreign policy successes in negotiating detente and the anti-ballistic missile (ABM) treaty with Brezhnev and then the historic opening to China on his Beijing trip. So I’ll take the unders from anyone who gives the Donald even the 19 months that Nixon survived. After all, Trump lost the popular vote, is loathed by official Washington, barely has a functioning cabinet and is a whirling dervish of disorder, indiscipline and unpredictability. To be sure, the terms of the Donald’s eventual exit from the Imperial City will ultimately by finalized by the 46th President in waiting, Mike Pence. But I’m pretty sure of one thing: Between now and then, there is not a snow ball’s chance in the hot place that Donald’s severance package will include the ballyhooed Trump Tax Cut and Fiscal Stimulus.

Markets slipped today because of carnage in the retail sector (which I’ve been warning readers about). But these fantasies are apparently still “priced-in” to a market that has now become just plain stupid. What is surely coming down the pike after the Comey firing, however, is just the opposite. That is, Washington will soon become a three-ring circus of investigations of Russia-gate and the “hidden” reasons for Trump’s action. The Imperial City will get embroiled in bitter partisan warfare and the splintering of the GOP between its populist and establishment wings. In that context, what passes for “governance” will be reduced to a moveable Fiscal Bloodbath that cycles between debt ceiling showdowns and short-term continuing resolution extensions.

The swamp that can’t be drained without causing explosions.

• $500 Trillion in Derivatives “Remain an Important Asset Class” – NY Fed (WS)

Economists at the New York Fed included this gem in their report on a two-day conference on “Derivatives and Regulatory Changes” since the Financial Crisis: “Though the notional amount [of derivatives] outstanding has declined in recent years, at more than $500 trillion outstanding, OTC derivatives remain an important asset class.” An important asset class. A hilarious understatement. Let’s see… the “notional amount” of $500 trillion is 25 times the GDP of the US and about 7 times global GDP. Derivatives are not just an “important asset class,” like bonds; they’re the largest “financial weapons of mass destruction,” as Warren Buffett called them in 2003.

Derivatives are used for hedging economic risks. And they’re used as “speculative directional exposures” – very risky one-sided bets. It’s all tied together in an immense and opaque market interwoven with the banks. The New York Fed: The 2007-09 financial crisis highlighted weaknesses in the over-the-counter (OTC) derivatives markets and the increased risk of contagion due to the interconnectedness of market participants in these markets. This chart from the New York Fed shows how derivatives ballooned 150% – or by $360 trillion – in less than four years before the Financial Crisis. They ticked down during the Financial Crisis, then rose again during the Fed’s QE to peak at $700 trillion. After the end of QE, they declined, but recently ticked up again to $500 trillion. I added in red the Warren Buffett moment:

The vast majority of the derivatives are interest rate and credit contracts (dark blue). Banks specialize in that. For example, according to the OCC’s Q4 2016 Report on Derivatives, JPMorgan Chase holds $47.5 trillion of derivatives at notional value and Citibank $43.9 trillion. The top 25 US banks hold $164.7 trillion, or 8.5 times US GDP. So even a minor squiggle could trigger some serious heartburn.

Try use “normal” and “derivatives” in one sentence and put on a straight face.

• The Great Misconception of a Return to “Normal” (Econimica)

Since 2009, there has been ongoing discussion of the size & composition of major central bank balance sheets (I’m focusing on the Federal Reserve Bank, European Central Bank, and the Bank of Japan) but little discussion of why these institutions felt (and continue to feel) compelled to “buy” assets. The chart below highlights the ongoing collective explosion of these bank “assets” since 2009 after a previous period of relative stability. These institutions clearly have the capability and willingness to digitally conjure “money” from nothing and have felt compelled to remove over $10 trillion worth of assets from the markets since 2009. This swap of illiquid assets for liquid cash had (and continues to have) the effect of squeezing the prices of the remaining assets higher (more money chasing fewer assets=price appreciation).

A prime example of that squeeze, the US stock market total valuation (represented by the Wilshire 5000, below) is $10 trillion higher than the “bubble” peak of 2008…and $11 trillion higher than the 2001 “bubble” peak. Likewise, US federal debt since 2008 has increased by…you guessed it, $10 trillion. The narrative seems to be that 2009 was a one off event and that the central banks role was and still is to “stabilize” the situation until things “normalize”. But right there…that idea that 2009 was a “one-off” or “abnormal” couldn’t be more wrong. So what is “normal” growth, at least from a consumption standpoint? Normal is never the same twice…it is ever changing and must be constantly rediscovered.

To determine “normal” growth in consumption, all we need do is figure the change in the quantity of consumers (annual population growth) and the quality of those consumers (their earnings, savings, and utilization of credit). The chart below details the ever changing “normal” that is the annual change in the under 65yr/old global population broken down by wealthy consuming nations (blue line) and the rest of the (generally poor) world (red line). The natural rate of growth in consumption has been declining ever since 1988 (persistently less growth in the population on a year over year basis)…but central banks and central governments have substituted interest rate cuts and un-repayable debt to maintain an unnaturally high consumption growth rate.

If we don’t put a stop to this, we have no chance. This is where it all begins and ends.

• US Nears $100 Billion Arms Deal For Saudi Arabia (R.)

The United States is close to completing a series of arms deals for Saudi Arabia totaling more than $100 billion, a senior White House official said on Friday, a week ahead of President Donald Trump’s planned visit to Riyadh. The official, who spoke to Reuters on condition of anonymity, said the arms package could end up surpassing more than $300 billion over a decade to help Saudi Arabia boost its defensive capabilities while still maintaining U.S. ally Israel’s qualitative military edge over its neighbors. “We are in the final stages of a series of deals,” the official said. The package is being developed to coincide with Trump’s visit to Saudi Arabia. Trump leaves for the kingdom on May 19, the first stop on his maiden international trip.

Reuters reported last week that Washington was pushing through contracts for tens of billions of dollars in arms sales to Saudi Arabia, some new, others already in the pipeline, ahead of Trump’s visit. The United States has been the main supplier for most Saudi military needs, from F-15 fighter jets to command and control systems worth tens of billions of dollars in recent years. Trump has vowed to stimulate the U.S. economy by boosting manufacturing jobs. The package includes American arms and maintenance, ships, air missile defense and maritime security, the official said. “We’ll see a very substantial commitment … In many ways it is intended to build capabilities for the threats they face.” The official added: “It’s good for the American economy but it will also be good in terms of building a capability that is appropriate for the challenges of the region. Israel would still maintain an edge.”

How many executives in jail, you said?

• Wells Fargo Bogus Accounts Balloon To 3.5 Million (R.)

Wells Fargo may have opened as many as 3.5 million unauthorized customer accounts, far more than previously estimated, according to lawyers seeking approval of a $142 million settlement over the practice. The new estimate was provided in a filing late Thursday night in the federal court in San Francisco, and is 1.4 million accounts higher than previously reported by federal regulators, in what became a national scandal. Keller Rohrback, a law firm for the plaintiff customers, said the higher estimate reflects “public information, negotiations, and confirmatory discovery.” The Seattle-based firm also said the number “may well be over-inclusive, but provides a reasonable basis on which to estimate a maximum recovery.”

Wells Fargo spokesman Ancel Martinez in an email said the new estimate was “based on a hypothetical scenario” and unverified, and did not reflect “actual unauthorized accounts.” Nonetheless, it could complicate Wells Fargo’s ability to win approval for the settlement, which has drawn opposition from some customers and lawyers who consider it too small. “This adds more credence to the fact there is not enough information to assess whether the settlement is fair and adequate,” Lewis Garrison, a partner at Heninger Garrison Davis in Birmingham, Alabama who represents some objecting customers, said in an interview. U.S. District Judge Vince Chhabria in San Francisco is scheduled to consider preliminary approval at a May 18 hearing. The accounts scandal mushroomed after Wells Fargo agreed last September to pay $185 million in penalties to settle charges by authorities including the U.S. Consumer Financial Protection Bureau.

They better be thorough, or individual countries must each formulate their own responses.

• EU To Decide Future Of Uber, Airbnb In Europe (NE)

An opinion issued by the European Court of Justice on May 11 could prevent people from using or working for services such as Uber and Airbnb. The opinion from the Advocate General of the European Court of Justice follows a case that has been brought by Spanish taxi drivers against the ride sharing service Uber. It found that Uber should be regulated like a transportation company, not as an “information society service”. If the opinion is upheld, these services could be required to apply for specific licences or be restricted in number as is the case with taxis in various European cities in an attempt to keep prices artificially high.

The court is slated to deliver a final ruling on whether Uber should be classified as a transport company or as a passive internet intermediary, in the coming months. Usually, the judges follow the opinion of the Advocate General. It remains to be seen whether the case will impact other so-called sharing economy services as Airbnb. Speaking after the opinion was issued, Dan Dalton, European Conservatives and Reformists (ECR) spokesman on the EU internal market said: “The opinion given today has huge implications for innovative, consumer driven digital services all across Europe… It is right that there are safeguards for consumers, but applying analogue era regulation to the digital world only strangles innovation and entrenches privileged monopolies.”

Beppe always had one goal first: get rid of corruption. The WSJ can talk all it wants about M5S teething problems, but there are bigger issues here.

• A Populist Storm Stirs in Italy (WSJ)

Europe’s establishment breathed a sigh of relief after the pro-European Union centrist Emmanuel Macron was elected French president this week. But another populist storm is brewing in Italy, where the euroskeptic 5 Star Movement has remained strong. Fueled by discontent with slow growth, high unemployment and disillusionment with mainstream politicians, 5-Star has won local elections in Rome, Turin and elsewhere, partly on the strength of its leaders’ call for a referendum on Italy’s use of the European single currency. Pollsters say about 30% of Italian voters support the movement founded by comedian Beppe Grillo, a level of popularity that has stood firm despite a series of high-profile stumbles, especially by its mayor in Rome.

The self-described association of free citizens has replaced the center-left Democratic Party at the top of most polls ahead of national elections to be held by May 2018. Now, the group that has flouted the rules of the game for establishment parties in Italy is experiencing growing pains as it prepares for the possibility of taking power. The prospect of Mr. Grillo and his supporters winning and forming a government has made investors nervous and pushed up yields on Italian bonds in recent months. On Friday, the spread between Italian and German 10-year sovereign bond yields was 1.85 percentage points, nearly five times the corresponding spread between French and German bonds.

Mr. Grillo and 5 Star waged a successful campaign to block constitutional changes sought by former Democratic Italian Prime Minister Matteo Renzi, effectively forcing him from office in December. Since then, a caretaker government has run Italy. The movement has vowed to institute tougher anticorruption laws and deliver a minimum guaranteed income for all working-age and retired Italians if it emerges from upcoming elections as head of a minority government or in a governing coalition with other euroskeptic parties.

There is no support for a beefed up EU or eurozone. Besides, Macron will be fighting the unions over the summer.

• Macron To Visit Germany To Seek Support For A Beefed Up Eurozone (G.)

Emmanuel Macron will take power as French president on Sunday and immediately face the twin challenges of European Union reform and loosening strict labour laws in France. After walking up the red carpet to the Élysée Palace on Sunday morning, being briefed on the nuclear deterrent by the outgoing Socialist leader François Hollande, and making his first speech, Macron will on Monday fly to Berlin to meet the German chancellor, Angela Merkel. It is traditional for French leaders to make Berlin their first European trip. The pro-European centrist Macron wants to boost the French-German motor at the heart of Europe and press for closer cooperation, including creating a parliament and budget for the eurozone. Merkel welcomed Macron’s decisive election victory over the far-right Marine Le Pen, saying he carried “the hopes of millions of French people and also many in Germany and across Europe”.

But if Macron is to push for eurozone reform, he must also prove to Berlin and other European allies that he can deliver the changes he has promised on France’s sluggish economy and deficit problem. The German finance minister, Wolfgang Schäuble, in an interview with the weekly Spiegel, kept up his country’s pressure on France to reduce its budget deficit to the EU ceiling of 3%. “France can make it,” he said. Macron, 39, France’s youngest elected leader, vowed during his campaign that he would immediately loosen France’s rigid labour regulations, giving businesses more power over setting working hours and deciding working conditions. He said that if needed, he would push through these changes by decree soon after taking office. Trade unions and leftwing demonstrators are warning of street protests if changes are not handled carefully.

Jim waxes nostalgic on Nixon.

• Blood Sports (Jim Kunstler)

I remember that sweaty August day that he threw in the towel. (I was a young newspaper reporter when newspapers still mattered.) It was pretty much a national orgasm. “NIXON RESIGNS!” the headlines screamed. A moment later he was on the gangway into the helicopter for the last time. Enter, stage right, the genial Gerald Ford…. Forgive me for getting caught up in the very nostalgia I castigate. And now here we are in the mere early months of Trumptopia about to hit the replay button on a televised inquisition. In my humble opinion, Donald Trump is a far more troubling personality than Tricky Dick ever was, infantile, narcissistic, at times verging on psychotic, but the RussiaGate story looks pretty flimsy. At this point, after about ten months of NSA-FBI investigation, nothing conclusive has turned up about Trump’s people “colluding” with Russia to gain unfair advantage in the election against You-Know-Who.

Former NSA chief James Clapper has publicly stated twice in no uncertain terms that there’s no evidence to support the allegations (so far). And there remains the specter of the actual content of the “collusion” — conveniently ignored by the so-called “Resistance” and its water-carriers at The New York Times — the hacked emails that evince all kinds of actual misbehavior by Secretary of State HRC and the DNC. The General Mike Flynn episode seems especially squishy, since it is the routine duty of incoming foreign affairs officials to check in with the ambassador corps in Washington. Why do you think nations send ambassadors to other countries? The upshot of all this will be a political circus for the rest of the year and the abandonment of any real business in government, at a moment in history when some very weighty black swans circle above the clouds waiting to crash land. Enjoy the histrionics if you dare, and pay no attention to collapsing economy as it all plays out.

Draghi need to buy Greek bonds, and bring down those rates.

• Greece and the Bond Market. Friends Reunited? (BBG)

Greece is considering tapping the capital markets for the first time in three years. Let’s hope its second attempt to regain market access goes more smoothly for investors than its first. A bond sale in July or September is being considered – if a deal on debt relief is reached, and the ECB adds Greek debt to the shopping list of securities it can buy through its quantitative easing program, according to the Wall Street Journal. The news comes as the U.S. presses European officials to ease Greece’s debt burden at informal talks during the Group of Seven gathering currently taking place in Italy.Investors can be forgiven if they feel a sense of déjà vu.In April 2014, Greece sold €3 billion of 4.75% bonds repayable in 2019 in its first issue for almost four years.

The country had sought to raise €2.5 billion; orders from more than 550 investors, though, exceeded €20 billion, and, five months later, the bond was increased by a further €1 billion. The then PM Antonis Samaras called the sale “one more decisive step toward exiting the crisis.”Except … it turned out Greece was about to get worse, not better. The day after the sale, the price of the bonds slipped by a bit more than half a point. By the end of the year, they’d lost almost 20% of their value. And by the middle of 2015, they slumped to as low as 40% of face value as the government was forced to introduce capital controls in an effort to stanch the flood of money leaving the country’s banking system. The bond price recovered as the Greek government dropped its defiance against the terms demanded by its lenders, implemented pension and labor market reforms and accelerated the sale of government assets.

Does Brussels really want China to buy up Greece?

• China’s Xi Offers Indebted Greece Strong Support (R.)

Chinese President Xi Jinping offered the prime minister of deeply indebted Greece strong support on Saturday, saying the two countries should expand cooperation in infrastructure, energy and telecommunications. Xi told Prime Minister Alexis Tsipras that Greece was an important part in China’s new Silk Road strategy. “At present, China and Greece’s traditional friendship and cooperation continues to glow with new dynamism,” China’s Foreign Ministry cited Xi as saying. Cooperation in infrastructure, energy and telecommunications should be “deep and solid”, Xi added, without giving details. Tsipras is in Beijing to attend a summit to promote Xi’s vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment called the Belt and Road initiative.

Greek infrastructure development group Copelouzos has signed a deal with China’s Shenhua Group to cooperate in green energy projects and the upgrade of power plants in Greece and other countries, the Greek company said on Friday. The deal will involve total investment of €3 billion, Copelouzos said in a statement, without providing further details. China has been investing heavily in Greece in recent years. Its biggest shipping company, COSCO Shipping, bought a majority stake in Piraeus Port Authority last year under a plan to turn Greece into a transhipment hub for rapidly growing trade between Asia and Eastern Europe. Xi said China and Greece should focus their efforts on turning the Piraeus port into an important international transhipment hub and key part of the new Silk Road, the Chinese ministry said.

Yanis says Greece’s future is Kosovo, Steve Keen said Somalia. They’re both right.

• Varoufakis Accuses Tsipras, Tsakalotos Of Giving In To Creditors (K.)

In an interview Friday on Skai TV, former finance minister Yanis Varoufakis hit out at his erstwhile government colleagues, accusing both his successor Euclid Tsakalotos and Prime Minister Alexis Tsipras of giving in to the country’s international creditors. “There is no new agreement, just a new surrender,” he said of the latest deal with Greece’s lenders. “The first memorandum burned Papandreou, the second Samaras, the third Tsipras. The fourth will require a new prime minister,” he said. As for Greece’s prospects, his prediction was bleak. “We will become Kosovo, a protectorate run by an employee of the European Union.”

Never seen a more broken record.

• IMF, Eurozone Say Need More Time To Reach Greek Debt Relief Deal (R.)

The IMF and eurozone government lenders need more time to reach an agreement on debt relief for Greece because the eurozone is still not sufficiently clear in its intentions, IMF chief Christine Lagarde said on Friday. Top eurozone officials and Lagarde met on Friday morning to discuss debt relief for Athens which eurozone finance ministers, or the Eurogroup, promised in May 2016, but under strict conditions. “We will carry on working on this debt relief package. There is not enough clarity yet. Our European partners need to be more specific in terms of debt relief, which is an imperative,” Lagarde told reporters in the city of Bari in Italy. German Finance Ministers Wolfgang Schaeuble, also at the meeting of the G7 advanced economies in Bari, asked if he would be prepared to ease the conditions for debt relief, said: “We are prepared to stick to what we have agreed in May 2016. That is the basis on which we are working … I am still in favor of getting a solution, at least a political solution, in the Eurogroup on the 22nd of May.”

Debt Rattle April 15 2017

Apr 152017

April 15, 2017 Posted by Raúl Ilargi Meijer at 8:48 am Finance Tagged with: hacking, Le Pen, manipulator, multi-family, NSA, refugees, rents, Saudi, shadows, SWIFT, Syria, Trump 6 Responses »

Copenhagen 1965

• US Urges China to Open Trade After Sparing It Manipulator Tag (BBG)

• US: China, Germany Must Do More To Cut Trade Surpluses (AFP)

• China Shadow Banking Rebounds In March, Household Loans Surge (R.)

• Record High US Multi-Family Construction Set To Wreak Havoc On Rents (ZH)

• Falling US Retail Sales Cast Doubt On Further Fed Interest Rate Rise (G.)

• Leaked NSA Malware Threatens Windows Users Around The World (IC)

• Hackers Release Files Indicating NSA Hacked SWIFT, Global Bank Transfers (R.)

• The ‘Smoking-Gun’ Quote On The Recent Syrian Gas-Attack (Zuesse)

• US Insurers Sue Saudis for $4.2 Billion Over 9/11 (TAM)

• Understanding Land Value Taxation (Walker)

• Le Pen Ready to Be ‘Crucified’ for France (BBG)

• French Prosecutors Seek To Lift Le Pen Immunity Over Expenses Inquiry (AFP)

• More Than 2,000 Migrants Rescued In Dramatic Day In Mediterranean (R.)

Step away from the confrontation and still get what you want. Maybe not that stupid.

• US Urges China to Open Trade After Sparing It Manipulator Tag (BBG)

The U.S. stopped short of branding China a currency manipulator, but urged the world’s second-largest economy to let the yuan rise with market forces and embrace more trade. No major trading partner is manipulating its currency for an unfair trade advantage, according to the first foreign-currency report released by the Treasury Department under President Donald Trump on Friday. It kept China, South Korea, Japan, Taiwan, Germany and Switzerland on its foreign-exchange monitoring list. “China currently has an extremely large and persistent bilateral trade surplus with the United States, which underscores the need for further opening of the Chinese economy to American goods and services,” as well as quicker reforms to boost household consumption, according to the Treasury report.

Trump declared on Wednesday that he’ll back away from a campaign promise to name China a currency manipulator, a move that would have created friction between the world’s largest economies as they try to boost trade cooperation and address North Korea’s nuclear threat. Trump, in a Wall Street Journal interview, said China hasn’t manipulated the yuan for months, while accusing nations that he didn’t identify of devaluing their currencies and saying the dollar is getting too strong.

Germany must increase domestic demand? How? Housing bubble?

• US: China, Germany Must Do More To Cut Trade Surpluses (AFP)

Even though China has not moved to keep its currency weak in the past three years, the country “has a long track record of engaging in persistent, large-scale, one-way foreign exchange intervention, doing so for roughly a decade,” the Treasury Department said. That “distortion in the global trading system… imposed significant and long-lasting hardship on American workers and companies.” With a trade surplus in goods with the United States of $347 billion last year, and continued policies that restrict free trade and foreign investment, “Treasury will be scrutinizing China’s trade and currency practices very closely.” The large goods surplus “underscores the need for further opening of the Chinese economy to American goods and services, as well as faster reform to rebalance the Chinese economy toward greater household consumption.” Beijing also will need to prove that the recent stance of not trying to weaken the currency is “a durable policy shift,” even if the renminbi begins to appreciate again.

The Treasury Department said Germany should take steps, notably spending policies, “to encourage stronger domestic demand growth,” something the country’s trading partners and the IMF have been urging for some time. Increased demand “would place upward pressure on the euro… and help reduce its large external imbalances,” increasing domestic consumption, including of imported goods. Those imbalances include its $65 billion goods trade surplus with the United States last year, and what the department calls “the world?s largest current account surplus at close to $300 billion.” The report also called on Japan to do more “to revive domestic demand and combat low inflation while avoiding a return to export-led growth.” This would include more “flexible” government spending policies, and continued reforms to boost the labor market and increase productivity of the Japanese economy.

“Social financing”. Sure. Sounds good, right? But it‘s all shadows.

• China Shadow Banking Rebounds In March, Household Loans Surge (R.)

China’s banks unexpectedly extended less credit in March than in the previous month as the government tries to contain the risks from an explosive build-up in debt and an overheating housing market. But aggregate financing, which includes bank loans as well as off-balance sheet lending, surged in March and was a record in the first quarter, raising doubts about the effectiveness of official efforts so far to clamp down on risks in the financial system. A surge in household lending in March also added to worries about whether authorities will be able to get the frenzied property market under control, even as cities roll out increasingly stringent curbs on home buying.

The central bank has raised interest rates on money market instruments and special short- and mid-term loans several times in recent months, most recently in mid-March, to contain debt risks and discourage speculation, though it is treading cautiously to avoid hurting economic growth. Outstanding bank loans grew at the slowest pace since July 2002 in March at 12.4%, while M2 money supply growth hit a more than 6-month low, reflecting the moderately tighter policy stance by the People’s Bank of China (PBOC). On the surface, the level of March new loans fell, also suggesting authorities are making some headway in weaning borrowers off endless cheap credit and coaxing debt-laden companies to deleverage.

China’s banks made 1.02 trillion yuan ($148.15 billion) in new loans in March, data showed on Friday, down from 1.17 trillion yuan in February and well below the 1.25 trillion yuan that analysts had predicted in a Reuters poll. However, banks still extended the third highest loans on record for a single quarter, totaling 4.22 trillion yuan in January-March. The first quarter is usually the busiest of the year for Chinese banks, when they have a fresh annual quota and look to lock up key clients. Loans to households surged to 797.7 billion yuan in March, according to Reuters calculations using PBOC data, accounting for 78% of all new loans in the month. That was much higher than either January or February and even the 50% of new loans in 2016.

[..] China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, rocketed to 2.12 trillion yuan in March from 1.15 trillion yuan in February. For the first quarter, TSF reached a record 6.93 trillion yuan – roughly equivalent to the size of Mexico’s economy – and well above last year’s first quarter total. For analysts, that suggests a surge in off-balance sheet lending, likely in the less regulated shadow banking system, despite repeated attempts by authorities to target riskier lending in past years. Loans to companies totaled 368.6 billion yuan in March, less than half the amount of household lending, PBOC data showed. That could be an ominous signal for the economy, unless firms were finding other sources of funding.

Bubble dynamics.

• Record High US Multi-Family Construction Set To Wreak Havoc On Rents (ZH)

Softening apartment rents, particularly in the massively over-priced, millennial safe-spaces of New York City and San Francisco, have been a frequent topic of conversation for us over the past several quarters…Now, a new report from Goldman’s Credit Strategy Team, led by Marty Young, helps to highlight some of the key data points that suggest that sinking rent will likely not be just an ephemeral problem. To start, an just like almost any bubble, sinking rents are the symptom of a massive, multi-year supply bubble in multi-family housing units sparked by, among other things, cheap borrowing costs for commercial builders. Per the chart below, multi-family units under construction is now at record highs and have eclipsed the previous bubble peak by nearly 40%.

Rents have already started to rollover but we suspect the correction has only just begun.

Consumer spending falls = money velocity goes down = deflation.

• Falling US Retail Sales Cast Doubt On Further Fed Interest Rate Rise (G.)

Falling retail sales and lower inflation in the US have added to signs that the world’s biggest economy has lost momentum in recent months, casting doubt over how many more times the Federal Reserve will raise interest rates this year. Stronger takings at clothing and electronics stores in March were not enough to offset a continued drop in demand for cars, according to figures from the US government (pdf). As a result, retail sales fell for the second month running. The 0.2% drop was deeper than forecasts in a Reuters poll of economists and followed a bigger than previously reported decline of 0.3% in February. Sales were also hurt by lower demand for building materials in March, chiming with a sharp slowdown in construction hiring as parts of the US were hit by severe snowstorms. Petrol station takings also dipped in March as fuel prices fell.

The few bright spots were a 2.6% rise in takings at electronics and appliance stores and a 1% rise in clothing sales. The drop in fuel prices in March echoed a pattern seen in the UK following a fall in global oil prices last month. Cheaper pump prices were also a key factor in softer US inflation. A measure of prices in the US fell for the first time in more than a year, dipping 0.3% in March, according to figures from the Labor Department. It said falling fuel prices and mobile phone charges drove the decline in the consumer price index (CPI) and were only partially offset by rising food prices. As a result, inflation – or the pace of price changes over a year – eased to 2.4% in March from 2.7% in February. Core inflation, which strips out volatile food and energy prices, eased to 2% from 2.2% in February and was the weakest since November 2015.

The retail sales and inflation data follow news of a sharp slowdown in job creation in the US in March as the poor weather, a government hiring freeze and a faltering retail sector all appeared to put a chill on President Donald Trump’s promise to boost hiring. But the unemployment rate declined to 4.5%, the lowest rate in a decade. The latest indications that the economy slowed in the opening months of the year will give policymakers at the US central bank more to debate as they decide when to next raise interest rates.

“Hacker Fantastic @hackerfantastic: This is really bad, in about an hour or so any attacker can download simple toolkit to hack into Microsoft based computers around the globe.”

• Leaked NSA Malware Threatens Windows Users Around The World (IC)

The ShadowBrokers, an entity previously confirmed by The Intercept to have leaked authentic malware used by the NSA to attack computers around the world, today released another cache of what appears to be extremely potent (and previously unknown) software capable of breaking into systems running Windows. The software could give nearly anyone with sufficient technical knowledge the ability to wreak havoc on millions of Microsoft users. The leak includes a litany of typically codenamed software “implants” with names like ODDJOB, ZIPPYBEER, and ESTEEMAUDIT, capable of breaking into — and in some cases seizing control of — computers running version of the Windows operating system earlier than the most recent Windows 10.

The vulnerable Windows versions ran more than 65% of desktop computers surfing the web last month, according to estimates from the tracking firm Net Market Share. The crown jewel of the implant collection appears to be a program named FUZZBUNCH, which essentially automates the deployment of NSA malware, and would allow a member of agency’s Tailored Access Operations group to more easily infect a target from their desk. According to security researcher and hacker Matthew Hickey, co-founder of Hacker House, the significance of what’s now publicly available, including “zero day” attacks on previously undisclosed vulnerabilities, cannot be overstated:

“I don’t think I have ever seen so much exploits and 0day [exploits] released at one time in my entire life,” he told The Intercept via Twitter DM, “and I have been involved in computer hacking and security for 20 years.” Affected computers will remain vulnerable until Microsoft releases patches for the zero-day vulnerabilities and, more crucially, until their owners then apply those patches. “This is as big as it gets,” Hickey said. “Nation-state attack tools are now in the hands of anyone who cares to download them…it’s literally a cyberweapon for hacking into computers…people will be using these attacks for years to come.”

Russia and China are close to launching their own competitor to SWIFT. Good timing. This is nuts.

• Hackers Release Files Indicating NSA Hacked SWIFT, Global Bank Transfers (R.)

Hackers released documents and files on Friday that cybersecurity experts said indicated the U.S. National Security Agency had accessed the SWIFT interbank messaging system, allowing it to monitor money flows among some Middle Eastern and Latin American banks. The release included computer code that could be adapted by criminals to break into SWIFT servers and monitor messaging activity, said Shane Shook, a cyber security consultant who has helped banks investigate breaches of their SWIFT systems. The documents and files were released by a group calling themselves The Shadow Brokers. Some of the records bear NSA seals, but Reuters could not confirm their authenticity. Also published were many programs for attacking various versions of the Windows operating system, at least some of which still work, researchers said.

In a statement to Reuters, Microsoft, maker of Windows, said it had not been warned by any part of the U.S. government that such files existed or had been stolen. “Other than reporters, no individual or organization has contacted us in relation to the materials released by Shadow Brokers,” the company said. The absence of warning is significant because the NSA knew for months about the Shadow Brokers breach, officials previously told Reuters. Under a White House process established by former President Barack Obama’s staff, companies were usually warned about dangerous flaws. Shook said criminal hackers could use the information released on Friday to hack into banks and steal money in operations mimicking a heist last year of $81 million from the Bangladesh central bank. “The release of these capabilities could enable fraud like we saw at Bangladesh Bank,” Shook said. The SWIFT messaging system is used by banks to transfer trillions of dollars each day.

“..if those analysts were properly consulted about the claims in the White House document they would have not approved the document going forward.”

• The ‘Smoking-Gun’ Quote On The Recent Syrian Gas-Attack (Zuesse)

After detailed decimation of President Trump’s ‘intelligence’ ‘justifying’ his invasion of Syria, the MIT specialist on such intelligence-analysis, Dr. Theodore Postol, concludes:

“I have worked with the intelligence community in the past, and I have grave concerns about the politicization of intelligence that seems to be occurring with more frequency in recent times – but I know that the intelligence community has highly capable analysts in it. And if those analysts were properly consulted about the claims in the White House document they would have not approved the document going forward. I am available to expand on these comments substantially. I have only had a few hours to quickly review the alleged White House intelligence report.

But a quick perusal shows without a lot of analysis that this report cannot be correct, and it also appears that this report was not properly vetted by the intelligence community. This is a very serious matter. President Obama was initially misinformed about supposed intelligence evidence that Syria was the perpetrator of the August 21, 2013 nerve agent attack in Damascus. This is a matter of public record. President Obama stated that his initially false understanding was that the intelligence clearly showed that Syria was the source of the nerve agent attack.

This false information was corrected when the then Director of National Intelligence, James Clapper, interrupted the President while he was in an intelligence briefing. According to President Obama, Mr. Clapper told the President that the intelligence that Syria was the perpetrator of the attack was “not a slamdunk.” The question that needs to be answered by our nation is how was the president initially misled about such a profoundly important intelligence finding?

The U.S. ‘news’media hid from the public Dr. Postol’s disproof of the Obama regime’s still-continuing assertions that the 21 August 2013 sarin attack was from Syria’s government instead of from the ‘moderate rebels’ (jihadists) whom the U.S. supported. Will they hide from the U.S. public his disproof of the U.S. regime’s latest such scam backing the actual perpetrators of a war-crime — will they do now as they did then?

This issue presents a challenge to the U.S. ‘news’ media, to finally show some integrity, some honor, and expose the operations of the gang at the U.S. government’s top, instead of simply continuing to pump that gang’s propaganda. Without the continuing cooperation of America’s ‘news’media, we would not now be heading toward World War III — global nuclear war. What would be the time when these ‘news’media will do their job, instead of do what they’re being paid to do, if that time is not now.

Even more lobbyists needed?!

• US Insurers Sue Saudis for $4.2 Billion Over 9/11 (TAM)

Last year’s Justice Against Sponsors of Terrorism Act (JASTA), a bill which allowed Americans to sue Saudi Arabia in US court over their involvement in 9/11, has yielded another major lawsuit yesterday, a $4.2 billion suit filed by over two dozen US insurers related to losses sustained because of the 2001 attack. The lawsuit is targeting a pair of Saudi banks, and a number of Saudi companies with ties to the bin Laden family, accusing them of various activities in support of al-Qaeda in the years ahead of 9/11, and subsequently having “aided and abetted” the attack. The biggest target is the Saudi National Commercial Bank, which is majority state-owned.

The Saudi government heavily pressured the Obama Administration to block the JASTA last year, threatening to crash the US treasury market if it led to lawsuits, but overwhelming Congressional support still got it passed into law. While there were more than a few lawsuits already filed in the past several weeks related to JASTA, this is by far the biggest, and most previous lawsuits are still in limbo as the court and lawyers try to combine them into various class action groups. Historically, US sovereign immunity laws have prevented suits against the Saudi government related to overseas terrorism. With the release of the Saudi-related portions of the 9/11 Report last year, however, such suits were inevitable, and the federal government could no longer protect the Saudis from litigation.

Everybody should know this.

• Understanding Land Value Taxation (Walker)

Back in the 18th and 19th centuries, economists took a dim view of landowners. Influential theorists like Adam Smith, David Ricardo and John Stuart Mill saw them as a drag on economic activity, primarily because they reduced the value of other people’s economic activity (through rent) without any incentive to make an economic contribution themselves. In the late 1800s, American social theorist and economist Henry George started a movement arguing for a single land value tax (LVT) – on the unimproved value of land – to replace other forms of taxation. It was rooted in the idea that if economic activity (labour, trade etc.) is the source of tax revenues, tax inevitably becomes a drag on the very thing that creates it. And while productive members of society earn money to pay their taxes, landowners are unproductive earners who pay their taxes through land rent, which is paid by people who generate economic activity.

Rent and taxes are a ‘double whammy’ on productive people. While productive members of society earn money to pay their taxes, landowners are unproductive earners who pay their taxes through land rent, which is paid by people who generate economic activity. That means rent – like taxes – is a drag on the economy. But unlike taxes, which can be used to stimulate economic activity through public spending, rent disappears into landlords’ pockets. So apart from the relatively small economic impact from landlords’ spending, their rent takes value out of the economy and delivers little value back to it. Understandably, the Georgists (Henry George’s LVT supporters) are still going strong today.

The Vichy comment looks odd; why go there? But do remember: French polls are meaningless by now.

• Le Pen Ready to Be ‘Crucified’ for France (BBG)

Far-right candidate Marine Le Pen pulled all the stops to stem her slide in the polls, saying she’s willing to be “crucified” for her stance on absolving France for the wartime deportation of Jews, and pledging to protect the country from Islamic fundamentalists. In a wide-ranging interview Friday on France Info radio nine days before the first round of the presidential vote, the 48-year-old anti-immigration candidate expressed disappointment at what she said was U.S. President Donald Trump going back on campaign promises, while focusing mainly on well-worn themes that most strike a chord with her electorate: Islam, immigration, national identity and terrorism.

“I don’t want France to be damaged, to be humiliated, that it be held responsible when it is not responsible,” Le Pen said. “People can crucify me, I will not change my mind, I will always defend France.” The National Front candidate’s lead in the polls has been whittled away over the last few weeks, leaving her struggling to regain momentum. First-round support for both Le Pen and centrist Emmanuel Macron slipped 0.5 points to respectively 23.5% and 22.5%, according to a daily rolling poll by Ifop on Thursday. Le Pen was at 26.5% in mid-March. [..] In the radio interview, Le Pen maintained her contention that France had no responsibility for the 1942 roundup of Jews in and around Paris by French police at the request of the German occupying forces to be sent to concentration camps.

The candidate, who first made that comment on April 9, was reverting to the long-established party line that shuns any hint of repentance. Le Pen said she is “extremely sensitive to the martyrdom of the Jews,” adding that the only issue was “juridical,” whether the Vichy regime was France or not. “I consider that Vichy was not France. French people can commit crimes without France being criminal.” In the interview, Le Pen criticized Trump for changing his mind on the U.S.’s global role after he said on Wednesday that the North Atlantic Treaty Organization was “no longer obsolete” in fighting terrorism. “Undeniably he is in contradiction with the commitments he had made,” Le Pen said. Trump had said in January that NATO was “obsolete.” Among her key proposals is for France to quit the alliance.

9 days before an election. They’re trying to make her win?!

• French Prosecutors Seek To Lift Le Pen Immunity Over Expenses Inquiry (AFP)

French prosecutors have asked the European parliament to lift the immunity of the far-right presidential candidate Marine Le Pen over an expenses scandal, deepening her legal woes on the eve of the election. The move comes just nine days before France heads to the polls for a highly unpredictable vote, with Le Pen – who heads the Eurosceptic Front National (FN) – one of the frontrunners in the 23 April first round. The request was made at the end of last month after Le Pen, who is a member of the European parliament, invoked her parliamentary immunity in refusing to attend questioning by investigating magistrates. The prosecutors also made a similar request regarding another MEP from Le Pen’s party, Marie-Christine Boutonnet, who also avoided questioning.

Le Pen, who has denied misusing parliamentary funds, shrugged off the move. “It’s totally normal procedure, I’m not surprised,” she told France Info radio. The case was triggered by a complaint from the European parliament, which accuses the FN of defrauding it to the tune of about €340,000 (£290,000). The parliament believes the party used funds allotted for parliamentary assistants to pay FN staff for party work in France. In February, it said it would start docking Le Pen’s pay unless she paid the money back. The allegations appear to have had little impact on Le Pen’s campaign, dwarfed by the bigger scandal engulfing her conservative rival François Fillon.

A day like so many others.

• More Than 2,000 Migrants Rescued In Dramatic Day In Mediterranean (R.)

More than 2,000 migrants trying to reach Europe were plucked from the Mediterranean on Friday in a series of dramatic rescues and one person was found dead, officials and witnesses said. An Italian coast guard spokesman said 19 rescue operations by the coast guard or ships operated by non-governmental organizations had saved a total of 2,074 migrants on 16 rubber dinghies and three small wooden boats. The medical charity Medecins Sans Frontieres (MSF) said in a tweet that one teenager was found dead in a rubber boat whose passengers were rescued by its ship Aquarius. “The sea continues to be a graveyard,” MSF said in a Tweet. The coast guard spokesman confirmed that one person had died but gave no details. MSF said two of their ships, Aquarius and Prudence, had rescued about 1,000 people in nine boats.

Desperate refugees struggled to stay afloat after they slid off their rubber boat during a rescue operation by the Phoenix, a ship of the rescue group Migrant Offshore Aid Station (MOAS). Video footage showed rescuers jumping into the water off the coast of Libya to help them. “In 19 years of covering the migration story, I have never experienced anything like today,” said Reuters photographer Darrin Zammit Lupi, who was aboard the Phoenix. In one operation, the Phoenix rescued 134 people, all from sub-Saharan counties, he said. Those rescued by the MOAS and MSF ships were transferred to Italian coast guard ships, which had rescued other migrants, to be taken to Italian ports. According to the International Organisation for Migration, nearly 32,000 migrants have arrived in Europe by sea so far this year. More than 650 have died or are missing.

Debt Rattle November 20 2016

Nov 202016

November 20, 2016 Posted by Raúl Ilargi Meijer at 10:15 am Finance Tagged with: amateurs, bailout, basic income, Brexit, deflation, Italy, NSA, Obama, pardon, Snowden, water 3 Responses »

Wynand Stanley Cadillac touring car at Yosemite in snow 1919

• Peak & Decline of International Reserves: Massive Asset Deflation Ahead (SRSR)

• “Developed Countries’ Currencies Solely Driven By Politics” (CNBC)

• How A Universal Basic Income Would Transform Society (Agnos)

• End London’s Role as a Clearing-House for Dirty Money (G.)

• Europe’s Leaders To Force Britain Into Hard Brexit (O.)

• Italy’s Crisis Turns into a Multi-Headed Hydra (DQ)

• Italian Banks ‘Not Necessarily Bankrupt’ But Awfully Close (NYT)

• ‘Political Amateurs Are Conquering The World’ – Beppe Grillo (EN)

• Bruegel Institute Chief: 4th Bailout Seems Inevitable for Greece (GR)

• Slovenia Adds Water To Constitution As Fundamental Right For All (AFP)

• EU Ministers At Odds Over Immigration, No Compromise In Sight (R.)

• Pentagon and Intelligence Chiefs Urge Obama To Remove NSA Chief (WaPo)

• Obama Claims He Cannot Pardon Snowden but He Knows That’s Not True (TD)

Causation and correlation of energy and economics are not nearly as clear as implied here, but the trends are interesting.

• Peak & Decline of International Reserves: Massive Asset Deflation Ahead (SRSR)

The world is sitting at the edge of a massive deflationary cliff. Even though Central Banks are desperately trying to keep the world’s financial assets from plunging down into the great depression below, signs suggest they are losing the battle. One critical sign is the peak and decline of International Reserves. Hugo Salinas Price has been keeping an eye on International Reserves for quite some time. In his recent article, A Reversal In The Trend Of International Reserves, he stated the following:

International Reserves peaked on August 1, 2014, at $12.032 Trillion dollars, and as of October 28, 2016 they stood at $11.066 Trillion dollars. International Reserves stood at about $10 Trillion in 2011, but the rate of growth slacked off; the weekly increases in Reserves (which Bloomberg used to publish every Friday) stalled and became smaller, week by week. As mid-2014 came around, the increases were quite small. It was clear that the trend was for ever-smaller increases, and that could only mean that finally there would be no increase, which would be immediately followed by decreases in the total of International Reserves held by Central Banks. That is exactly what took place.

Hugo Salinas Price explains in the article, “that the increases of International Reserves take place when the Reserve Currency issuing countries effect payments to the rest of the world.” Basically, countries such as the United States that run trade deficits, exchange fiat money or Treasuries for goods from other countries. This shows up as an increase in International Reserves. Now, what is important to understand about the chart above is the timing of the PEAK & DECLINE of International Reserves. I had an email exchange with Mr. Salinas on what I believe was the leading factor in why the International Reserves peaked and declined. When I went back and looked at a five-year price chart of a barrel of oil (West Texas), I found a very interesting coincidence:

The price of a barrel of West Texas Crude fell below $100 starting at the beginning of August, 2014…. TO THE DATE. Even though the oil price had traded between $85-$100 over the past three years, it averaged over $95. However, by the end of 2014, it had fallen by more than half. This had a profound impact on International Reserves as the low oil price gutted the energy-commodity-goods producing countries. These are the countries that hold the majority of International Reserves. So, as the price of oil continued to stay below $50 a barrel, these countries had to sell Bonds and acquire cash to fund their own domestic account deficits. Thus, the peak and decline of International Reserves occurred right at the same time, the peak and decline of high oil prices. THIS IS NO COINCIDENCE.

Free markets still exist in name though…

• “Developed Countries’ Currencies Solely Driven By Politics” (CNBC)

The G10 currency market is driven solely by political events, one strategist told CNBC Friday. Dominic Bunning, FX Strategist at HSBC said that whereas a range of events had impacted the performance of G10 currency pairs, now it is only politics. “In G10, everything is driven by politics. We used to think about economics and cyclical stories and structural stories and balance of payments etc but now all we care about is politics,” Bunning said. He explained that if you have a strong political view then you make trading decisions on the basis of that. “If you think the euro zone is going to break up then by all means sell the euro,” Bunning said, while warning that he doesn’t have a strong view on euro.

On sterling however, Bunning said the weakness is likely to continue. “We still think there is a strong weakness in sterling even though it is relatively lower because the political outlook in the UK is very challenging.” The G10 currencies are the U.S. dollar, the euro, the pound, the yen, the Swedish krona, the Norwegian krone, the Australian dollar, the New Zealand dollar, the Swiss franc and the Canadian dollar. A number of these currencies have seen a lot of volatility since the start of the year owing to political uncertainties in their respective countries or on a global level. The biggest events this year have been the U.K.’s vote to leave the European Union and the U.S. presidential elections.

While sterling is down more than 16% since the Brexit vote on June 23, the euro has been on its worst losing streak since the currency arrived in 1999. The dollar, meanwhile, has been seeing some strength, rising to a 14-year high against a basket of currencies on the growing perception that the economic policies of U.S. President-elect Donald Trump will push up consumer prices. While traders are growing more bullish on the dollar, HSBC’s Bunning warned that it is not great for emerging market currencies. “You need to be selective in terms of your currency choices. I don’t think it’s a dollar bull run against everything but I do think if you look at the outlook for emerging market currencies, particularly the high-yield currencies at the moment, it is very hard to have a positive currency view.”

Plenty of lofty ideals and ideas out there, but UBI, if it does at all, will happen only out of necessity.

• How A Universal Basic Income Would Transform Society (Agnos)

No child’s dream is to make lots of money. We certainly aren’t born with any innate need for money itself. But at some point in our lives, we are introduced to money and the need to earn it. For many, it comes at a time when we are just beginning to learn about the world and what excites us. We start to open the doors to all of life’s possibilities, when the adult in the room says, “It’s really nice that you want to feed people in need, but what are you going to do to earn a living?” “You mean I can’t actually do what I really want to do?” we wonder. With a universal basic income (UBI) – where the government replaces all other forms of monetary assistance with a yearly stipend given to every adult of say, $20,000 per year – this would all change.

For the first time in human history, people would be able to make their childhood wishes a reality, instead of being forced to work in jobs they are aren’t passionate about just to survive. Today, humanity has the ability to create a world of sustainable abundance where everyone has access to everything they need and much of what they desire. But this requires a shift in long held societal views. Changing the view that money is a reward for hard work and private property is an extension of the self will be difficult. A shift in mindset is needed to see everyone as inherently worthy, rather than in terms of their ability to produce. For this reason, it is important to understand the philosophical justification for a UBI, as it reveals some of the deep underlying flaws of our capitalistic economy and the way it views human nature. Given these flaws, how we fund a UBI will go a long way toward the effectiveness of the shift in mindset from an age of ownership to an age of access.

Let us stop and imagine what we might do if we no longer had to work in order to meet our basic needs. Presently, we are all burdened with the stress that comes with knowing that failure to earn a living could result in social isolation. Imagine the psychological shift in knowing that no matter what happened, you would always have a roof over your head and food to eat without having to give away your precious time and energy. How would not having to work to survive change your day to day life? What would you do instead? A UBI has the potential to unleash unimaginable amounts of human time, energy, creativity, and passion that has the potential to radically transform society. Instead of everyone working to survive, people would have the means to pursue their own dreams, and to spend more quality time with their family, friends, and community.

The Heart of Darkness.

• End London’s Role as a Clearing-House for Dirty Money (G.)

The National Crime Agency says up to £90bn is laundered through the UK each year, while an estimated £120bn worth of UK property is owned by offshore shell companies. Some 75% of properties whose owners are under investigation for corruption made use of offshore corporate secrecy to hide their identities. And according to the director of the National Crime Agency, “the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK.” Those assets are far too often being extracted from developing nations desperately in need of tax revenues. A century on from Heart of Darkness, the Democratic Republic of the Congo still ranks near the bottom of the UN Human Development Index, with one in seven children dead before the age of five.

And, as in Conrad’s time, London’s imperial connections are helping to facilitate the exploitation of this asset-rich nation. Diamond and mineral wealth is being extracted by political elites, funnelled via London to old remnants of empire in the overseas territories, then repatriated via Kensington townhouses back to the UK. Our financial, accountancy and property agents are the beneficiaries, the people of the DRC and househunters of London the losers. [..] We are told that much of London’s success is because of its unimpeachable legal system and absence of corruption. But that is no good if, under the banner of the rule of law, we are also aiding and abetting exploitation. In Surrey mansions and Mayfair sit the lost wealth, the never-built hospitals and unopened schools of too many developing nations.

“.. the only way to deal with Brexit is hard Brexit. Otherwise we would be seen to be giving in to a country that is leaving. That would be fatal.”

• Europe’s Leaders To Force Britain Into Hard Brexit (O.)

European leaders have come to a 27-nation consensus that a “hard Brexit” is likely to be the only way to see off future populist insurgencies, which could lead to the break-up of the European Union. The hardening line in EU capitals comes as Nigel Farage warns European leaders that Marine Le Pen, leader of the Front National, could deliver a political sensation bigger than Brexit and win France’s presidential election next spring – a result that would mean it was “game over” for 60 years of EU integration. According to senior officials at the highest levels of European governments, allowing Britain favourable terms of exit could represent an existential danger to the EU, since it would encourage similar demands from other countries with significant Eurosceptic movements.

One top EU diplomat told the Observer: “If you British are not prepared to compromise on free movement, the only way to deal with Brexit is hard Brexit. Otherwise we would be seen to be giving in to a country that is leaving. That would be fatal.” The latest intervention by Farage will only serve to fuel fears in Europe that anti-EU movements have acquired a dangerous momentum in countries such as France and the Netherlands, following the precedent set by the Brexit vote. Ukip’s interim leader, who predicted both the vote for Brexit and Donald Trump’s US victory, said that while Le Pen was still more likely to be runner-up to an establishment candidate next May, she now had to be taken seriously as a potential head of state. “She will clearly win through to the second round. And after what has happened elsewhere, only a fool would say she would have no chance of winning overall. France is a deeply, deeply unhappy country. If she were to win, it would be game over for the EU.”

“It’s a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one..”

• Italy’s Crisis Turns into a Multi-Headed Hydra (DQ)

Bank stocks have surged just about everywhere since Trump’s election, with one exception: Italy. In the last month only one large Italian bank has seen its shares rise, and that’s the 500-year old bank at the center of Italy’s banking crisis, Monte dei Paschi di Siena, whose nearly worthless shares jumped to €0.24. Shares of Italy’s other large banks have suffered heavy losses. Over the past week alone, shares of Italy’s largest bank, Unicredit, plunged 15%, as did the shares of Banca Popular and UBI Banca. Shares of Italy’s second largest bank, Intesa Sanpaolo, fell just under 10%. The recent losses compound what’s been a miserable year for Italy’s banking stocks. The best performing stock is the investment bank Mediobanca, which is down a mere 24% for 2016. During the same period, Unicredit has shed over 60%, UBI Banca 65%, Banco Popolare 80%, and Monte dei Paschi 85%.

It’s not just banks’ shares that are flashing all the wrong signals. UniCredit’s five-year credit default swap surged to 221.2 basis points on Friday, meaning it now costs €221,200 to insure €10 million of UniCredit’s debt against default over five years. As with all major crises, Italy’s current predicament is a multi-headed hydra. It’s a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. Italy’s economy has been in reverse ever since it joined the euro 17 years ago. Since 2007, its GDP has shrunk by a staggering 10%. In the meantime its public debt has continued to grow, reaching 135% of GDP today, the highest level of any Eurozone country with the exception of Greece. And now the yield on Italy’s 10-year bond is on the rise, hitting 2.09% on Friday in a NIRP world, its highest point in over 13 months.

If Renzi loses the referendum next month, how much longer can this can be kicked?

• Italian Banks ‘Not Necessarily Bankrupt’ But Awfully Close (NYT)

Victor Massiah has grown weary of talk that the Italian banking system is so threadbare and stuffed with terrible loans that it threatens Europe with another financial crisis. The mansion that serves as local headquarters for the bank he runs, UBI Banca, one of Italy’s largest lenders, does not feel like a place on the verge of running out of money. An inlaid marble fireplace sits in a conference room beneath wooden beams worthy of a castle. A statue of the Greek goddess Athena stands triumphantly over a staircase. “As you can see,” he says, sweeping a hand across the scene, “we’re not necessarily bankrupt.” Among policy makers alert for signs of the next financial disaster, Italy’s mountain of uncollectable bank debt is a subject discussed in tones ordinarily reserved for piles of plutonium.

Its banks seem at once too big to fail and eminently capable of doing so, menacing the global economy. For years, Italian lenders have muddled through, hoping time would cure their afflictions. But Italy’s economy has been terminally weak, not growing at all over a recent 13-year stretch. Bad loans have festered. Good loans have deteriorated. Italy’s problems are Europe’s problems. Nearly one-fifth of all loans in the Italian banking system are classified as troubled, a toll worth €360 billion, at the end of last year, according to the International Monetary Fund. That represents roughly 40% of all the bad loans within the countries sharing the euro. In recent weeks, the world’s focus has shifted to Germany’s largest lender, Deutsche Bank, on fears that it could be forced to seek a rescue.

But if Deutsche has become the crisis of the moment, Italy is the perpetual threat that could, at any moment, present the world with an unpleasant surprise potent enough to send legions of officials descending on Rome to try to contain the damage. The Italian government has sought to spend more money to spur the economy. But European leaders, led by Germany, have enforced rules limiting budget deficits. And Italian banks have held tight to cash and are reluctant to lend, starving an already anemic economy of capital. All of which leaves Italy and Europe, and to some extent the global economy, with a formidable conundrum. Europe may never regain economic vigor so long as Italy’s banks are a slow-motion emergency. But Italy’s banks cannot get healthy without growth. And Italy’s economy can’t grow without healthy banks.

One of the few thinking men left in Europe.

• > ‘Political Amateurs Are Conquering The World’ – Beppe Grillo (EN)

euronews “Beppe Grillo, our meeting takes place at a time that, without undue exaggeration, can be labelled ‘historic’. That’s to say, the election of Donald Trump to the presidency of the United States. What’s your take on that?” Beppe Grillo, Leader of the Five Star Movement “It’s an extraordinary turning point. This corn cob – we can also call Trump that in a nice way – doesn’t have particularly outstanding qualities. He was such a target for the media, with such terrifying accusations of sexism and racism, as well as being harassed by the establishment – such as the New York Times – but, in the end, he won. “That is a symbol of the tragedy and the apocalypse of traditional information. The television and newspapers are always late and they relay old information.

They no longer anticipate anything and they’re only just understanding that idiots, the disadvantaged, those who are marginalised – and there are millions of them – use alternative media, such as the Internet, which passes under the radar of television, a medium people no longer use. “With Trump, exactly the same thing has happened as with my Five Star Movement, which was born of the Internet: the media were taken aback and asked us where we were before. We gathered millions of people in public squares and they marvelled. We became the biggest movement in Italy and journalists and philosophers continued to say that we were benefitting from people’s dissatisfaction. We’ll get into government and they’ll ask themselves how we did it.”

euronews “There is a gap between giving populist speeches and governing a nation.” Beppe Grillo “We want to govern, but we don’t want to simply change the power by replacing it with our own. We want a change within civilisation, a change of world vision. “We’re talking about dematerialised industry, an end to working for money, the start of working for other payment, a universal citizens revenue. If our society is founded on work, what will happen if work disappears? What will we do with millions of people in flux? We have to organise and manage all that.”

euronews “Do you think appealing to people’s emotions is enough to get elected? Is that a political project?” Beppe Grillo “This information never ceases to make the rounds: you don’t have a political project, you’re not capable, you’re imbeciles, amateurs… “And yet, the amateurs are the ones conquering the world and I’m rejoicing in it because the professionals are the ones who have reduced the world to this state. Hillary Clinton, Obama and all the rest have destroyed democracy and their international policies. “If that’s the case, it signifies that the experts, economists and intellectuals have completely misunderstood everything, especially if the situation is the way it is. If the EU is what we have today, it means the European dream has evaporated. Brexit and Trump are signs of a huge change. If we manage to understand that, we’ll also get to face it.”

Europe’s MO. Keep squeezing.

• Bruegel Institute Chief: 4th Bailout Seems Inevitable for Greece (GR)

Bruegel Institute Chief Zsolt Darvas said that there are two possible solutions for Greece’s debt problems following 2018. One is huge debt restructuring or a fourth bailout program for the country. Speaking with Greek daily Ta Nea, the Hungarian economist said that even if Greece has the expected development for 2017-2018, debt will still be at a high rate. He does not believe that Greece will be able to borrow from the markets at a reasonable rate under the current circumstances. Darvas expects to see some form of debt restructuring within a time framework to bond maturation, along with a lowering or freezing of interest rates. He said that this per se may still not be enough for Greece to avoid a fourth bailout program.

Regarding investments, Darvas said that the height of Greece’s debt is not helping draw investors. Another problem is the excessive bureaucracy. The OECD indexes also show Greece’s weaknesses. When asked about U.S. President Barack Obama’s support for debt relief for Greece, Darvas said that he fears that Obama cannot influence European decisions regarding Greece. In the past, there were no results when he or other members of the government called for debt relief. He considers this unlikely to change. He does not believe that there will be any decision regarding debt relief until after the German elections.

Every country, every society, should make protection of basic needs their number one priority. They are indeed ‘not a market commodity’.

• Slovenia Adds Water To Constitution As Fundamental Right For All (AFP)

Slovenia has amended its constitution to make access to drinkable water a fundamental right for all citizens and stop it being commercialised. With 64 votes in favour and none against, the 90-seat parliament added an article to the EU country’s constitution saying “everyone has the right to drinkable water”. The centre-right opposition Slovenian Democratic party (SDS) abstained from the vote saying the amendment was not necessary and only aimed at increasing public support. Slovenia is a mountainous, water-rich country with more than half its territory covered by forest.

“Water resources represent a public good that is managed by the state. Water resources are primary and durably used to supply citizens with potable water and households with water and, in this sense, are not a market commodity,” the article reads. The centre-left prime minister, Miro Cerar, had urged lawmakers to pass the bill saying the country of two million people should “protect water – the 21st century’s liquid gold – at the highest legal level”. “Slovenian water has very good quality and, because of its value, in the future it will certainly be the target of foreign countries and international corporations’ appetites. “As it will gradually become a more valuable commodity in the future, pressure over it will increase and we must not give in,” Cerar said.

Only Greece and Italy need worry about this now. The rest can sit pretty. It’ll cost them the EU though.

• EU Ministers At Odds Over Immigration, No Compromise In Sight (R.)

European Union interior ministers were at odds on Friday over how to handle immigration, with heated discussions between states who want more burden sharing and those who oppose any kind of obligatory relocation. “We are looking for compromises but at the moment they are not there,” said Thomas De Maiziere of Germany, which last year took in about 900,000 migrants and refugees. The ministers disagreed over a proposal by the EU’s current chair Slovakia on reforming the bloc’s asylum system, which collapsed last year as 1.3 million refugees and migrants from the Middle East and Africa reached Europe and member states quarrelled over how to handle the influx.

Overall, the arrivals have decreased from last year but they continue unabated in Italy and tens of thousands of people are still stuck in Greece and Italy, sometimes in dire conditions. Despite agreeing last year to relocate 160,000 people from Italy and Greece, eastern European countries, including Slovakia, Poland and Hungary, have refused to take any in. “We cannot pretend that the quotas as we know them now are working,” said Robert Kalinak of Slovakia. “The 160,000 is only a very small part of the million that came to Europe last year and we only relocated less than 10,000 people. Even those who were for this system were not successful. We want to come up with a system that would be effective.”

The mess below the surface.

• Pentagon and Intelligence Chiefs Urge Obama To Remove NSA Chief (WaPo)

The heads of the Pentagon and the nation’s intelligence community have recommended to President Obama that the director of the National Security Agency, Adm. Michael S. Rogers, be removed. The recommendation, delivered to the White House last month, was made by Defense Secretary Ashton B. Carter and Director of National Intelligence James R. Clapper Jr., according to several U.S. officials familiar with the matter. Action has been delayed, some administration officials said, because relieving Rogers of his duties is tied to another controversial recommendation: to create separate chains of command at the NSA and the military’s cyberwarfare unit, a recommendation by Clapper and Carter that has been stalled because of other issues.

The news comes as Rogers is being considered by President-elect Donald Trump to be his nominee for director of national intelligence to replace Clapper as the official who oversees all 17 U.S. intelligence agencies. In a move apparently unprecedented for a military officer, Rogers, without notifying superiors, traveled to New York to meet with Trump on Thursday at Trump Tower. That caused consternation at senior levels of the administration, according to the officials, who spoke on the condition of anonymity to discuss internal personnel matters. [..] Carter has concerns with Rogers’s performance, officials said. The driving force for Clapper, meanwhile, was the separation of leadership roles at the NSA and U.S. Cyber Command, and his stance that the NSA should be headed by a civilian.

[..] Rogers, 57, took the helm of the NSA and Cyber Command in April 2014 in the wake of revelations by a former intelligence contractor of broad surveillance activities that shook public confidence in the agency. The contractor, Edward Snowden, had secretly downloaded vast amounts of digital documents that he shared with a handful of journalists. His disclosures prompted debate over the proper scale of surveillance and led to some reforms. But they also were a black eye for an agency that prides itself on having the most skilled hackers and cybersecurity professionals in government. Rogers was charged with making sure another insider breach never happened again. Instead, in the past year and a half, officials have discovered two major compromises of sensitive hacking tools by personnel working at the NSA’s premier hacking unit: the Tailored Access Operations. One involved a Booz Allen Hamilton contractor, Harold T. Martin III, who is accused of carrying out the largest theft of classified government material.

Even if he would pardon Snowden, Manning, Assange, what would their lives look like?

• Obama Claims He Cannot Pardon Snowden but He Knows That’s Not True (TD)

In a big interview with the German media outlet Der Spiegel, President Obama was asked about his interest in pardoning Ed Snowden in response to the big campaign to get him pardoned. Obama’s response was that he could not, since Snowden has not been convicted yet: ARD/SPIEGEL : Are you going to pardon Edward Snowden? Obama:” I can’t pardon somebody who hasn’t gone before a court and presented themselves, so that’s not something that I would comment on at this point. I think that Mr. Snowden raised some legitimate concerns. How he did it was something that did not follow the procedures and practices of our intelligence community. If everybody took the approach that I make my own decisions about these issues, then it would be very hard to have an organized government or any kind of national security system.

At the point at which Mr. Snowden wants to present himself before the legal authorities and make his arguments or have his lawyers make his arguments, then I think those issues come into play. Until that time, what I’ve tried to suggest – both to the American people, but also to the world – is that we do have to balance this issue of privacy and security. Those who pretend that there’s no balance that has to be struck and think we can take a 100-percent absolutist approach to protecting privacy don’t recognize that governments are going to be under an enormous burden to prevent the kinds of terrorist acts that not only harm individuals, but also can distort our society and our politics in very dangerous ways. And those who think that security is the only thing and don’t care about privacy also have it wrong.”

This is simply incorrect – as is known to anyone who remembers the fact that Gerald Ford pardoned Richard Nixon before he had been indicted. And it appears that the President knows this. Because, as the Pardon Snowden campaign points out, Obama pardoned three Iranian Americans who had not yet stood trial. That happened this year. So for him to say it’s impossible to pardon someone who hasn’t gone before the court is simply, factually, historically wrong. And there’s a Supreme Court ruling that makes this abundantly clear. 150 years ago, in the ruling on Ex Parte Garland, the Supreme Court stated: “The power of pardon conferred by the Constitution upon the President is unlimited except in cases of impeachment. It extends to every offence known to the law, and may be exercised at any time after its commission, either before legal proceedings are taken or during their pendency, or after conviction and judgment. The power is not subject to legislative control.”

‘Old’ media write their own death warrant.

• The Real Fake News List (Liberty Report)

We’ve seen the make-shift “fake news” list created by a leftist feminist professor. Well, another fake news list has been revealed and this one holds a lot more water. This list contains the culprits who told us that Iraq had weapons of mass destruction and lied us into multiple bogus wars. These are the news sources that told us “if you like your doctor, you can keep your doctor.” They told us that Hillary Clinton had a 98% chance of winning the election. They tell us in a never-ending loop that “The economy is in great shape!” This is the real Fake News List (and it’s sourced):

Debt Rattle October 16 2016

Oct 162016

October 16, 2016 Posted by Raúl Ilargi Meijer at 11:30 am Finance Tagged with: Brexit, cyber war, Dakota, Erdogan, Hillary, NSA, RBS, Trump, vultures 4 Responses »

‘Papa says they won’t hurt us’

• RBS ‘Dash For Cash’ Scandal: 500 Firms Suing Bank Turn On Regulator (Herald)

• Scrambled Brexit Communications Worry UK Bankers (BBG)

• Fresh British Veg ‘Could Be Wiped Out By Brexit’ (Sky)

• Athens Protests Victoria Nuland Statement On Treaty Of Lausanne (Kath.)

• Trump’s Refusal To Accept Intelligence Briefing On Russia Stuns Experts (WaPo)

• Russia Slams ‘Unprecedented’ US Threats Over Cyber Attacks (AFP)

• Builder-in-Chief: Erdogan’s Real-Estate Dream Drifts to Syria (BBG)

• Amy Goodman Faces Prison for Reporting on Dakota Access Pipeline (Nation)

• On The Brink, But Africa’s Reviled Vultures Vital In Fight Against Disease (G.)

“..the bank and its senior executives had no scruples about effectively looting cash and assets from business customers..”

• RBS ‘Dash For Cash’ Scandal: 500 Firms Suing Bank Turn On Regulator (Herald)

A group of almost 500 businesses suing the Royal Bank of Scotland for allegedly destroying their firms and seizing their assets is threatening legal action against the Financial Conduct Authority if it does not immediately publish its long-awaited report into the scandal. The central allegation of the so-called “Dash for Cash” scandal was that firms – in some cases healthy ones – were preyed on by RBS which effectively bankrupted the companies, bought the assets and made a profit from their suffering. RBS denies the allegations. David Stewart, spokesman for the RBS GRG Business Action Group, said:“Unless the FCA gives an immediate commitment to publishing the Section 166 report, we will initiate judicial review proceedings against them.” The FCA, the financial regulator, launched a probe into the Dash for Cash scandal in January 2014.

The report, produced by consultants Promontory and Mazars, was handed to the FCA in late summer but the regulator only confirmed receipt on October 5. “We understand the S166 report recommends a compensation scheme for affected firms,” said Stewart. “It is essential that this scheme is independent and judicial, with full redress for consequential losses, and that it is not overseen by the FCA. We have no confidence in the regulator, given its previous compensation schemes have failed so many victims.” The FCA stated: “There are a number of steps for the FCA to complete before we are in a position to share our final findings, which will include an assessment of all relevant material, of which the skilled person’s report is one. This has been a complex and lengthy review – it is therefore important that we do not rush the final stages of this process.”

[..] Kalvin Chapman, a partner at lawyers Muldoon Britton, said the Dash for Cash email sent out by RBS regional director Rhydian Davies on October 9, 2008 proves that the bank and its senior executives had no scruples about effectively looting cash and assets from business customers of RBS, NatWest and Ulster Bank. “It only cared about scalping customers and bleeding them dry,” said Chapman.

Yay! More finger pointing opportunities. Blame thy neighbor!

• Scrambled Brexit Communications Worry UK Bankers (BBG)

A British bank executive recently approached Prime Minister Theresa May’s office with a question. The Treasury said it was the point of contact for discussing Brexit issues. The Department for Exiting the European Union said the same thing. Who was right? Neither, he was told. Talk to us instead. That story, retold by a banker who asked to remain anonymous, is symptomatic of industry complaints about engaging with May’s government as it begins pulling Britain out of the European Union. May has already put financiers on notice that they’re losing their privileged perch in policy making considerations, so the communications confusion only serves to deepen their anxiety.

“The government needs to develop a more strategic and joined-up approach around financial services,” said Andrew Gray, head of Brexit for U.K. financial services at PricewaterhouseCoopers in London. “There are a number of different government departments seeking to get their voices heard on Brexit, and that’s resulting in some rather mixed messages being delivered.” The portrait of bungled communications, which could prompt banks to accelerate the movement of highly paid jobs from London, emerged from interviews with government officials, bankers and lobbyists. Financial services account for almost 12% of the economy, more than 1 million jobs and over 60 billion pounds ($73 billion) of annual tax revenue.

In case you still weren’t clear on what’s wrong with Britain: “This is good work, normal work for us,” he said with a smile. “It is not hard.” but “It’s unskilled labour so [locals] do not want to do that kind of work.”

• Fresh British Veg ‘Could Be Wiped Out By Brexit’ (Sky)

A leading farmer has warned that British vegetables will disappear from supermarket shelves if post-Brexit immigration controls prevent thousands of Eastern Europeans from working in the UK. Guy Poskitt, who grows 80,000 tons of carrots and parsnips a year in Yorkshire, says it is impossible to find enough British labourers to do the work. Last year the number of EU nationals in the UK rose by an estimated 180,000 but the Government is committed to reducing total immigration to the tens of thousands. “If you took migrant workers out of the supply chain you would within five days have no fresh British produce on the supermarket shelves,” Mr Poskitt claimed.

He told Sky News he pays agencies £9.50 per hour for temporary labourers and that without workers from Eastern Europe the industry would collapse. “[My business] would have to close; we could not serve our customers without the availability of migrant workers,” he said. Picking pumpkins from a nearby field for supply to major supermarkets, a group of Czech labourers said they are puzzled about why some people say they are no longer welcome. “I take home £50 or £60 a day here but just £30 for work in Prague,” said 21-year-old Patrick Dumka, as he stood in the muddy field that is his workplace for nine hours a day. He picks more than 1,000 pumpkins during each shift in all weathers, taking just an hour’s rest in a makeshift shelter, and joked that the British are too lazy to do the work.

“This is good work, normal work for us,” he said with a smile. “It is not hard.” Mark Straw whose firm Abbey Personnel Services supplies labourers to Yorkshire farms claims there is no alternative to Eastern European labour. From his office in Selby he hires and transports 200 Eastern Europeans to work each day, and says locals will not take the jobs on offer in agriculture. “It’s outdoor, it’s physical, you would say that there are little prospects for advancement,” he explained. “It’s unskilled labour so [locals] do not want to do that kind of work.”

You do realize that a Hillary vote is a vote for Nuland, right?! Secretary of State has been mentioned for her.

• Athens Protests Victoria Nuland Statement On Treaty Of Lausanne (Kath.)

Greek Ambassador to the USA Theocharis Lalacos has lodged a complaint with US Assistant Secretary of State Victoria Nuland in reaction to the US State Department’s response to a question on the Treaty of Lausanne. Questioned by a Greek journalist earlier this month about Turkish President Recep Tayyip Erdogan’s controversial comments on the 1923 peace pact which set the borders of modern Turkey, the State Department issued a written statement urging Athens and Ankara to work together in order to maintain good-neighborly relations and safeguard peace in the region. Diplomatic sources said the Greek ambassador protested to Nuland that the vague statement issued by the US State Department had caused unnecessary concern among the Greek public.

Lalacos suggested that US officials should instead have urged all sides to respect international law, according to the same sources. He allegedly said that the Lausanne Treaty concerns all states in the region, and not just Greece. Sources said Nuland vowed to investigate the issue further. “In Lausanne, we gave away the islands that you could shout across to,” Erdogan said on September 29, referring to Greek islands located in the Aegean Sea close to the Turkish coastline.

CIA and NSA are not be doubted. Nobody ever did before. They don’t have to present any proof either. And they’re fully impartial at all times.

• Trump’s Refusal To Accept Intelligence Briefing On Russia Stuns Experts (WaPo)

Former senior U.S. national security officials are dismayed at Republican presidential candidate Donald Trump’s repeated refusal to accept the judgment of intelligence professionals that Russia stole files from the Democratic National Committee computers in an effort to influence the U.S. election. The former officials, who have served presidents in both parties, say they were bewildered when Trump cast doubt on Russia’s role after receiving a classified briefing on the subject and again after an unusually blunt statement from U.S. agencies saying they were “confident” that Moscow had orchestrated the attacks. “It defies logic,” retired Gen. Michael Hayden, former director of the CIA and the National Security Agency, said of Trump’s pronouncements.

Trump has assured supporters that, if elected, he would surround himself with experts on defense and foreign affairs, where he has little experience. But when it comes to Russia, he has made it clear that he is not listening to intelligence officials, the former officials said. “He seems to ignore their advice,” Hayden said. “Why would you assume this would change when he is in office?” Several former intelligence officials interviewed this week believe that Trump is either willfully disputing intelligence assessments, has a blind spot on Russia, or perhaps doesn’t understand the nonpartisan traditions and approach of intelligence professionals.

[..] During the second presidential debate, Trump ignored what a U.S. government official said the candidate learned in a private intelligence briefing: that government officials were certain Russia hacked the DNC. That conclusion was followed by a public and unequivocal announcement by the Office of the Director of National Intelligence and the Department of Homeland Security that Russia was to blame.

Crazy US allegations will come home to roost. And bite.

• Russia Slams ‘Unprecedented’ US Threats Over Cyber Attacks (AFP)

The Kremlin on Saturday slammed Washington for its “unprecedented” threats against Moscow over an alleged series of cyber attacks and vowed to respond. Last week, Washington formally accused the Russian government of trying to “interfere” in the 2016 White House race through cyber attacks on American political institutions. And on Friday, US Vice President Joe Biden told NBC a “message” would be sent to Russian President Vladimir Putin over the alleged hacking, with the channel saying the CIA was preparing a retaliatory cyber attack “designed to harass and ’embarrass’ the Kremlin leadership.” Kremlin spokesman Dmitry Peskov immediately denounced Biden’s remarks, saying Moscow would take precautions to safeguard its interests in the face of the increasing “unpredictability and aggressiveness of the United States”.

“The threats directed against Moscow and our state’s leadership are unprecedented because they are voiced at the level of the US vice president,” RIA Novosti news agency quoted him as saying. “To the backdrop of this aggressive, unpredictable line, we must take measures to protect (our) interests, to hedge risks.” And Kremlin aide Yuri Ushakov vowed Moscow would respond to any US cyber attacks, saying such threats were “borderline insolence”, the news agency said. In the NBC interview, excerpts of which were released late Friday, Biden said Washington would respond “at the time of our choosing and under the circumstances that have the greatest impact.” Earlier this week Russian Foreign Minister Sergei Lavrov shrugged off the US allegations, telling CNN the hacking claims were “flattering” but baseless, with not a “single fact” to prove it.

How Erdogan plans to conquer Kurdish land.

• Builder-in-Chief: Erdogan’s Real-Estate Dream Drifts to Syria (BBG)

Turkey’s president looks at northern Syria and sees what others don’t: a massive real estate project. Recep Tayyip Erdogan, whose army is attempting to clear 5,000 square kilometers in northern Syria of Islamic State, talks about building entire cities when his soldiers’ work is done. In regular addresses, he describes a future in which refugees return home to Turkish-built apartment blocks supplemented by Turkish-built schools and social facilities. That may be the only way to get some of the nearly 3 million Syrians in Turkey to return home and begin reconstructing their country, he says. Erdogan’s vision points to a long-term commitment to carve out an area under Turkish influence, free from jihadists and Kurdish groups, making this operation one of its largest foreign interventions since the collapse of the Ottoman Empire.

To achieve it, Turkey needs to overcome daunting security risks, financing and logistical challenges, not to mention political battles with other parties including Russia, Iran and a Syrian regime hostile to Turkey’s meddling. “Erdogan has engaged the country in a very long adventure,” said Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara. “Turkey will have to maintain its troops there for years to come if it wants to keep that area off limits to hostile groups.” If successful, the plan could offer a boon to Turkish contractors. He already has one volunteer: the state agency known as TOKI, a colossus responsible for building about 10% of Turkey’s housing units every year.

“We have a problem at our doorstep,” Ergun Turan, TOKI’s president, said in an interview in Ankara on Sept. 20. “If our state asks us to, we will do it. And we’ll do it with ease.” In a bid to drum up support for Turkey’s deeper involvement, Erdogan is making the case that resettling refugees would mitigate the politically fraught issue of migration to Europe. EU leaders turned to Turkey for help last year after almost a million people streamed across its land and sea borders into Greece. “Refugee problems will go away automatically when the Syrian people get the opportunity to live on their own lands in safety,” Erdogan said in Ankara last month.

There’s a lot of shameful and shameless America out there.

• Amy Goodman Faces Prison for Reporting on Dakota Access Pipeline (Nation)

This Monday afternoon, as the sun hits its peak over Mandan, North Dakota, the award-winning journalist, and host of Democracy Now!, Amy Goodman will walk into the Morton County–Mandan Combined Law Enforcement and Corrections Center and turn herself in to the local authorities. Her crime: good, unflinching journalism. Goodman had the audacity to commit this journalism on September 3, when she was in North Dakota covering what she calls “the standoff at Standing Rock”: the months-long protests by thousands of Native Americans against the Dakota Access Pipeline. The $3.8 billion oil pipeline is slated to carry barrel after barrel of Bakken crude through sacred sites and burial grounds of the Standing Rock Sioux tribe, and tribe members fear it could pollute the Missouri River, the source not only of their water but of millions of others’, should the pipe ever rupture.

Their protests, which began in April and ballooned through the summer months, represent the largest mobilization of Native American activists in more than 40 years—and one of the most vital campaigns for environmental justice in perhaps as long. Goodman’s arrival at the main protest site, the Sacred Stone Spirit Camp, was significant. At the time, not a single one of the major broadcast networks had sent a reporter to cover the Standing Rock mobilization; none had even bothered to mention it on the air. But there was Goodman, standing at the edge of a grassy plain that was in the process of being churned into gullies of dirt, reporting on one of the most significant stories of the day. Clutching a large microphone, she captured the scene as hundreds of protesters tried desperately to stop a crew of bulldozers from tearing up the earth—the earth, they said, that belongs to nobody—only to be confronted by a force of private security contractors wielding attack dogs and pepper spray.

“People have gone through the fence, men, women, and children,” Goodman reported, her voice taut, then rising, louder and more intense. “The bulldozers are still going, and they’re yelling at the men in hard hats. One man in a hard hat threw one of the protesters down…!” As Goodman narrated, a security contractor, burly in a deep blue shirt, could be seen belly-flopping a man onto the ground. Protesters streamed in to help him, stumbled over mounds of newly churned dirt, faced off with contractors whose faces were hidden behind oversized sunglasses. The scene was full of movement. Overhead, a helicopter hovered, circled, while back on the ground, protesters began to report burning eyes, and dogs—dogs lurching at protesters, dogs straining against their leashes, dogs with mouths open, mouths biting.

Mankind is a real smart species. We’ll kill everything here and then fly to Mars.

• On The Brink, But Africa’s Reviled Vultures Vital In Fight Against Disease (G.)

Vultures are rarely viewed as the poster boys and girls of the natural world. They have repulsive eating habits and are strikingly ugly. Nevertheless, they play a critical role in maintaining the ecological health of many parts of the world. Vultures consume animal carcasses more effectively than any other scavengers and because their digestive juices contain acids that neutralise pathogens such as cholera and rabies they prevent diseases spreading. They act as dead-end hosts for numerous unpleasant ailments. But many ecologists are now warning that vultures across the planet are under serious threat thanks to habitat loss, deliberate and accidental poisoning, and use of the birds’ body parts as traditional medicine cures.

All these risks will be emphasised by British photographer Charlie Hamilton James in a series of images that will be shown as part of the Wildlife Photographer of the Year exhibition, which opens at the Natural History Museum this week. His photographs of vultures – and the growing environmental risks that threaten to wipe them out – have won Hamilton James the exhibition’s wildlife photojournalist of the year award. “I like underdogs,” he said last week. “That is why I like vultures. The trouble is that vultures are now under such stress in the wild – for several reasons. They are facing a massive catastrophe yet they do so much for the environment and do so much to contain disease.”

Vultures are one of the fastest declining groups of animals in the world. In India, all nine species of the bird are threatened with extinction, largely through the indiscriminate use of diclofenac, a common anti-inflammatory drug administered to livestock but which is lethal for the vultures that eat the corpses of cattle. “There is now a real danger that a disease like rabies will spread because there are hardly any vultures left to clean up corpses left in the open,” Hamilton James said.

Cape vultures at their artificial nesting cliff at the VulPro facility in Magaliesburgcorrect, South Africa. Photograph: Charlie Hamilton James

Debt Rattle November 29 2015

Nov 292015

November 29, 2015 Posted by Raúl Ilargi Meijer at 9:07 am Finance Tagged with: Black Friday, China, green energy, ISIS, metadata, NSA, property, Putin, refugees, Turkey 9 Responses »

Edwin Rosskam Provincetown, Massachusetts 1937

• US Black Friday Sales Fall 10% From Last Year (AP)

• China’s Shadow Banking Risk Shifts To Booming Bond Market (Reuters)

• Chinese Pull Back From US Property Investments (WSJ)

• Chinese Cash Floods US Real Estate Market (NY Times)

• Giant ‘Green Energy’ Boondoggle Flops in Spain (Tenebrarum)

• How Green Energy Really Works (Tenebrarum)

• Kremlin Says Putin ‘Fully Mobilized’ To Tackle Threat From Turkey (Reuters)

• Vladimir Putin Announces Russian Sanctions Against Turkey (Guardian)

• Iraqi Politician Claims Turkey Lets ISIL Sell Oil for $20 a Barrel (Sputnik)

• BAE Sets Its Sights on Tank and Ammo Exports (Bloomberg)

• Somali Victims Of US Drone Strike Take Legal Action Against Netherlands (VK)

• Pope Francis to Head to War Zone in Central African Republic (WSJ)

• Over 1 Million Children Need Urgent Aid In Central African Republic (Reuters)

• Dijsselbloem Warns Of Mini-Schengen Over Refugee Issue (Reuters)

• How A Secretive Elite Created The EU To Build A World Government (Sked)

• ‘Snowden Effect’: NSA Authority to Collect Bulk Phone Metadata Ends (Intercept)

• Paris Climate Activists Put Under House Arrest Using Emergency Laws (Guardian)

• FYROM/Greece Border Tension Peaks As Fence Erected (Kath.)

• Life In A Refugee Camp: ‘The Cold And Fear Get In Your Bones’ (Guardian)

For once they don’t blame the weather: it’s Halloween who dunnit!

• US Black Friday Sales Fall 10% From Last Year (AP)

Total sales in the US on Black Friday fell 10% to $10.4bn this year, down from $11.6bn in 2014, according to research firm ShopperTrak. The decline in sales on the traditional busiest shopping day of the year has been blamed on shops opening the day before. But this year, sales on Thanksgiving also dropped, and by the same percentage, to $1.8bn. A big reason for the decline is increased online shopping, as Americans hunt down deals on their smartphones, tablets and computers. Many retailers are also offering bargains long before Thanksgiving, limiting the impact of Black Friday specials. Online retailers have been bombarding customers with email discounts and bargains for weeks. Online sales jumped 14.3% on Friday compared with last year, according to Adobe, which tracked activity on 4,500 retail websites.

Email promotions drove 25% more sales compared with 2014, the company said. Brick-and-mortar retailers saw fewer customer visits on Thanksgiving and Black Friday, compared with last year, according to Kevin Kearns, ShopperTrak’s chief revenue officer. “Shoppers are researching products ahead of time, targeting their store visits, and arriving in store with the intention of making a purchase,” Kearns said. The drop in Thanksgiving Day visits may also reflect a “social backlash” against stores opening on that day, Kearns said. Chris Christopher, director of consumer economics at consulting firm IHS, said many retailers’ warehouses and store shelves were overstocked heading into the fall. That prompted many to offer deep discounts as early as the beginning of this month. “The price discounting has been creeping toward Halloween,” he said.

Lovely. PIMCO’s getting their share of the China casino. WMP=Weapons of Mass Ponzi?!

• China’s Shadow Banking Risk Shifts To Booming Bond Market (Reuters)

A year after China’s financial regulators squared up to the systemic perils of “shadow banking”, the threat is shifting to a booming corporate bond market, and risky borrowers’ debt is finding its way into products aimed at retail investors. An opaque network of trust companies and non-bank lenders had grown their annual market to a hefty 2.9 trillion yuan ($450 billion) in loans before regulators stepped in, spooked by rising defaults on wealth-management products (WMPs) backed by such high-interest shadow lending. Now the high-risk borrowers who took those loans, such as unlisted real-estate firms struggling with a stagnant property market and financing companies backing shoddy local government investment, are finding a new avenue of funding after regulators began allowing unlisted companies to issue bonds on public exchanges.

New corporate bond issuance leaped to 914 billion yuan in the third quarter, accounting for 29% of all new credit, up from 381 billion yuan and just 8% in the first. And the profile of new borrowers looks strikingly like the patrons of the shadow banking set. Of the 57 firms posting bond listing announcements in Shanghai in October, 23 were local-government-owned project or infrastructure investment firms. Beijing engineered the freeing up of the bond markets as a transparent alternative funding route, and the credit crunch that followed its clampdown on shadow banking guaranteed a high take-up. But wealth managers are now turning these bonds into leveraged high-yielding products and selling them to investors desperate for returns after a real-estate slump and summer stock-market crash.

Data from CN Benefit, a research firm tracking wealth management sales, shows that 60% of new bank wealth-management products (WMPs) were linked to debt and money market instruments in September, up from less than half in the first quarter. Demand is hot for these products, and the higher the yield, the higher the risk, which is amplified if the fund’s assets are partly bought on credit, or leveraged. Colight Asset Management, a private fund offering bond-backed WMPs, raised more than 40 million yuan in just four days in November from an 8.7% yielding, 400% leveraged bond-based product, according to customer service staff member Chen Xun. Much bigger companies such as PIMCO and the Agricultural Bank of China also offer similar high-yielding leveraged products.

Investors, however, assume that products offered by big names are relatively safe. “The risk of default is very slim,” said a 45 year-old business manager in Shanghai surnamed Pan who invests in WMPs on an exchange backed by China’s second-largest insurer, Ping An Group. “I’m sure such a big company as Ping An will make sure investors can get their money back.”

Nothing better than two main US media contradicting each other on the same day. Here’s the WSJ….

• Chinese Pull Back From US Property Investments (WSJ)

Karen Xu, a Shanghai resident looking to invest in U.S. real estate, decided this spring to seek a Miami one-bedroom condominium in the $500,000-to-$750,000 price range. China’s economic slowdown has since changed her mind. “I don’t think I’ll be investing in the U.S. right now,” said Ms. Xu, who works at an investment consulting firm. “Maybe I’ll wait another five years, or invest in China.” Capping a five-year real-estate binge, Chinese nationals surpassed Canadian snowbirds as the top foreign buyers of U.S. homes for the year that ended in March—the most recent annual data—scooping up everything from $500,000 condos in New Jersey to $3 million vacation homes in California to $13 million Manhattan condos.

But in recent weeks, some Chinese buyers have started to pull back, scared off by China’s stock-market selloff, slowing economic growth, currency devaluation and tightened restrictions on capital outflows. On Friday, China’s benchmark stock index fell by 5.5%, its biggest daily slide since August, as Beijing authorities stepped up a crackdown on the securities industry. “We are ready to embrace a winter for Chinese buyers in the next one year, two years,” said Daniel Chang, a New York City-based broker at Sotheby’s International Realty. Mr. Chang, who sells properties in the $2 million-to-$10 million range, said about half of the clients served by his team are Chinese.

Interest from Chinese buyers “went dark” for several weeks after stocks becan their sharp fall, said Tom Mitchell, president and chief operating officer of Tri Pointe Group, a home builder in Irvine, Calif. China’s main stock index, the Shanghai Composite Index, is down 38% since its June peak. Foreign Chinese buyers make up about 30% of customers in a handful of the company’s developments in Orange County and the San Francisco area. Price increases there, he said, have prompted clients to “pause and think.” Zhang Xin, chief executive of SOHO China, a real-estate developer, said last month she wouldn’t buy overseas real estate today because many cities abroad are too pricey.

…..and next is the NY Times. Which more or less says the exact opposite.

• Chinese Cash Floods US Real Estate Market (NY Times)

In London, Chinese investors are purchasing high-end apartments in wealthy neighborhoods and big skyscrapers in the financial district. In Canada, they are paying $1 million for modest Vancouver bungalows. In Australia, a Chinese sovereign wealth fund bought nine office towers, one of the biggest real estate transactions in that nation’s history. In the United States, the home-buying spree began on the coasts, where Chinese buyers snapped up luxury condos in Manhattan and McMansions in Silicon Valley, pushing up home values in big cities. It is now spreading to the middle of the country, where prices are more modest and have room to run.

The homes here in Corinth will feature two master suites, one for the buyers, the other for aging parents. A concierge service will help new arrivals from overseas order Internet service and pay electric bills. Chauffeurs will ferry homeowners until they learn to navigate the loops and spurs of Texas freeways. “When Chairman Zhang saw the strength of the Texan economy, he decided it was time that the Asian community should be presented an opportunity to invest in the American Dream”, marketing materials for the development read. The great property rush is part of the tidal wave of Chinese money that is pouring into the global economy and reshaping financial markets. In residential and commercial real estate, the new flow of cash is upending the traditional dynamics of buying and selling.

This year, Chinese families represented for the first time the largest group of overseas home buyers in the United States. Big spenders on new homes are helping prop up local economies in the Midwest. But in dense areas like San Francisco and Manhattan, they are also affecting the affordability and availability of housing, as demand outpaces supply and bidding wars ensue.

Abengoa’s bankruptcy may be a turning point in ‘green’ energy subsidies.

• Giant ‘Green Energy’ Boondoggle Flops in Spain (Tenebrarum)

[..] since Spain’s government and banking system are de facto insolvent and their temporary rescue has been tied to conditions, Spain can no longer subsidize many of the pet projects of social engineers and the vast hordes of cronies they have hitherto kept in bread by enlisting the involuntary help of taxpayers. In a way, it is a case of socialism running out of people to loot. Solar energy has surely come a long way in recent years, as technological progress has undoubtedly improved its economics. Evidently though, the improvement isn’t sufficient yet to make it actually viable. One would think that it makes sense to deploy it in places that are sunny most of the time (such as, well, Spain), but even there, it evidently depends on subsidies.

People often forget that it actually costs energy to produce solar panels. Whether they will in turn produce enough energy during their lifetime to make this investment viable remains questionable. It remains questionable precisely because so many companies in the sector depend both directly and indirectly on a vast variety of government subsidies (including the introduction of inane trade barriers to the detriment of consumers). With the subsidization scam in Spain reaching its limit, it turns out that not even sunny climes can keep solar boondoggles afloat. In the current case, a cool $29 billion (€27.3 bn.) in liabilities have just been exposed to intense vaporization danger, as “green energy” company Abengoa has finally filed for bankruptcy. It is the by far biggest bankruptcy in Spain’s history. 24,000 employees will have to look for a new job.

The sovereign wealth fund of oil junkie Norway holds 2.7% of the company’s shares, an investment it will now have to write off. More than 200 banks are creditors of Abengoa, with total exposure of €20.2 billion. Abengoa’s business activities are described as “renewable electricity generation, converting biomass into biofuel and desalination of seawater” – practically a what’s what list of businesses that cannot possibly survive without subsidies. Abengoa incidentally provides an excellent illustration of Austrian Business Cycle Theory, as more than 20 giant ongoing construction projects the company has initiated will remain incomplete. These empty shells are testament to the fact that there is a big difference between money and real capital. Banks and investors had no problem providing the company with money (much of it created from thin air), lending it huge sums. But the economy’s pool of real funding has proved unable to support the company’s investments.

[..] US taxpayers are on the hook as well in this “Spanish Solyndra”. According to the US media: “When the Free Beacon interviewed a pair of former Abengoa managers last year, one predicted that the company would go under. “This company eventually will go bankrupt. The question is at what expense to the United States people and government,” said Mike Alhalabi, formerly the senior lead mechanical engineer at Abener, a subsidiary of Abengoa. The cost to U.S. taxpayers could be enormous. Abengoa has received nearly $3 billion in loan guarantees from the Department of Energy, as well as more than $100 million in federal grants.

This goes a bit far for my taste, but the propaganda behind green energy certainly needs more scrutiny. To blame it on ‘leftists’ is weird, though. It’s about everyone with their hands in the public till.

• How Green Energy Really Works (Tenebrarum)

Businesses that cannot possibly survive without subsidies are ipso facto not economically viable. In spite of all the high-minded pronouncements about the “need to save the planet” and how this valiant effort can allegedly be “combined with economic growth”, their existence serves primarily one function: to distribute money looted from taxpayers and consumers to assorted cronies of the political class, who in turn provide the latter with kickbacks. That is all there is to it.

Surely no-one is so naïve as to believe that modern-day politicians, whose horizon and time preferences never stretch beyond the next election date, are really concerned about what might happen to the planet a century hence (not to mention that the entire “climate change” religion seems to be little more than an elaborate hoax). With Abengoa’s bankruptcy we are once again presented with a bill that serves as a stark reminder how much scarce capital has been wasted on such schemes.

Ultimately it is little more than a modern form of highway robbery, clad in highly effective propaganda. Many people feel guilty about “consumerism”, believing that it must be true that prosperity and progress are somehow sinful. In reality, environmentalism has long become the home of a great many authoritarian leftists after they lost their former sugar daddy in Moscow in 1990.

They are trying – very successfully it saddens us to admit – to undermine free market capitalism by appealing to people’s sense of guilt and their innate need to receive absolution for their sins. And they have of course found out that their new sugar daddy is much better than their old one, as there is far more wealth ready to be looted and everybody involved is quite happy to get a cut. Occasionally reality has a habit of interfering, but that won’t stop them, at least not yet.

“The circumstances are unprecedented. The gauntlet thrown down to Russia is unprecedented. So naturally the reaction is in line with this threat.”

• Kremlin Says Putin ‘Fully Mobilized’ To Tackle Threat From Turkey (Reuters)

President Vladimir Putin is fully mobilized to tackle what the Kremlin regards as an unprecedented threat from Turkey following the shooting down of one of its warplanes by a Turkish F-16, the Russian leader’s spokesman said on Saturday. In comments which underscore how angry the Kremlin still is over the incident, Dmitry Peskov, Putin’s spokesman, called the behavior of the Turkish air force “absolute madness” and said Ankara’s subsequent handling of the crisis had reminded him of the “theater of the absurd.” “Nobody has the right to traitorously shoot down a Russian plane from behind,” Peskov told Russia’s “News on Saturday” TV program, calling Turkish evidence purporting to show the Russian SU-24 jet had violated Turkish air space “cartoons”.

Peskov said the crisis had prompted Putin, whose ministers are preparing retaliatory economic measures against Turkey, to “mobilize” in the way an army does in tense times. “The president is mobilized, fully mobilized, mobilized to the extent that circumstances demand,” said Peskov. “The circumstances are unprecedented. The gauntlet thrown down to Russia is unprecedented. So naturally the reaction is in line with this threat.” Peskov said Putin was aware of a Turkish request for him to meet President Tayyip Erdogan on the sidelines of the Paris climate change conference next week but gave no indication of whether such a meeting would take place. Erdogan on Saturday said the Paris summit could be a chance to repair Ankara’s relations with Russia.

Peskov denied Turkish press reports which said Moscow and Ankara had struck a deal for their warplanes to stop flying along the Syrian-Turkish border, saying military ties between the two countries had been severed and a hot line meant to avoid misunderstandings among their pilots dismantled. Peskov, according to the TASS news agency, also spoke of how Erdogan’s son had a “certain interest” in the oil industry. Putin has said oil from Syrian territory controlled by Islamic State militants is finding its way to Turkey. Erdogan has spoken of slander and asked anyone making such accusations to back up their words with evidence. Peskov said he “noted” that Turkey’s newly-appointed energy minister, Berat Albayrak, was Erdogan’s son-in-law. Peskov said there could be up to 200,000 Turkish citizens on Russian soil. “What’s important is that everyone who is able to use their influence to guarantee at least some predictability in the pattern of Turkey’s behavior,” said Peskov. “Russian planes should never be shot down.”

Read contradictory reports on whether Turkish workers now in Russia would be sent back.

• Vladimir Putin Announces Russian Sanctions Against Turkey (Guardian)

Russia has announced a package of economic sanctions against Turkey in retaliation for the shooting down of a Russian jet four days ago on the Syrian-Turkish border. President Vladimir Putin signed a decree outlining the curbs and the details were posted on the Kremlin’s website. Among the measures announced were restrictions on imports of some Turkish goods, a ban on charter flights between the two countries and an an end to Russian tour operators selling trips to Turkey. It also said Turkish companies operating in Russia and Turkish staff employed by Russian companies will face restrictions and ordered the government to prepare a list of goods, businesses and jobs that would be affected.

Putin’s spokesman, Dmitry Peskov, said there are close to 90,000 Turkish nationals working in Russia. Taking family members into account, that figure rises to 200,000. Russia is Turkey’s second largest trading partner and more than three million Russian tourists visited Turkey last year. The decree, which came into force immediately, was called: “On measures to ensure Russia’s national security and protect Russian citizens from criminal and other illegal activities, and the application of special economic measures against Turkey.” On Friday, Russia reinstated the need for visas to travel between the two countries.

Erdogan gets more exposed by the day. Russia hasn’t even started yet. They know exactly what is going on.

• Iraqi Politician Claims Turkey Lets ISIL Sell Oil for $20 a Barrel (Sputnik)

Turkey allows the Islamic State terrorist group to sell Iraqi and Syrian oil for just $20 a barrel, Iraq’s former National Security Adviser Mowaffak al-Rubaie wrote on Saturday. In a statement posted on his Facebook page al-Rubaie, who is also a leader of the Law-Governed State parliamentary coalition, outlined Ankara’s four-pronged support for the Islamic militants, with the illegal oil trade topping the list. “First and foremost, the Turks help the militants sell stolen Iraqi and Syrian oil for $20 a barrel, which is half the market price,” Mowaffak al-Rubaie wrote.

Turkey in general, and Istanbul in particular, is also a place where ISIL commanders recruit local migrants and take them to Mosul in Iraq or Raqqa in Syria, he noted. “Each month hundreds of radicals cross the Turkish border, while the local law enforcers pretend they just don’t see,” Mowaffak al-Rubaie wrote, adding that many wounded ISIL fighters were apparently undergoing treatment in Turkish hospitals. During a joint news conference with French President Francois Hollande in Moscow earlier this week, President Vladimir Putin mentioned the massive supplies of Syrian oil being sent to Turkey by the Islamic State terrorist group.

Yesss! Let’s invest in killing ‘them’! The globe’s no. 1 growth industry. The only one, as a matter of fact.

• BAE Sets Its Sights on Tank and Ammo Exports (Bloomberg)

BAE Systems is merging its munitions and combat vehicles arms in the U.K. in an effort to sharpen its focus on export deals following Britain’s withdrawal from ground offensives in Iraq and Afghanistan. The move, to be completed by Jan. 1, will combine the units under a new Land U.K. sector led by former Combat Vehicles U.K. head Jennifer Osbaldestin, BAE confirmed to Bloomberg on Friday. A revised strategy will be outlined in the first quarter and include an export-market appraisal, it said. No jobs will go.
After a surge in Britain’s investment in military vehicles and ammunition at the height of Mideast desert wars, the balance of spending on BAE products has switched to air and maritime projects such as the Eurofighter Typhoon and Type 26 frigate.

New strike brigades announced by the government this week will use Scout armored vehicles ordered from General Dynamics Corp. “It makes good sense for us to have one interface with the Ministry of Defence, but also both businesses have export potential and when you are looking to secure a land deal you would at the same time be determining what you could offer in ammunition,” BAE spokeswoman Rachael Gordon said. The merged operation will remain within the London-based company’s Platforms & Services U.K. business unit. BAE said in its annual report published in March that it’s seeking a contract to upgrade Britain’s Challenger 2 battle tank, which Monday’s defense review confirmed as a cheaper option than purchasing new vehicles, reflecting limits on ground-equipment spending.

if they succeed, the financial flood gates are open.

• Somali Victims Of US Drone Strike Take Legal Action Against Netherlands (VK)

Two Somali victims of a US drone strike take legal action against the Netherlands. In January 2014, both men were hit by an American missile and lost two young daughters. One nomad lost his leg and their livestock was mostly annihilated. The Somalis and their lawyers hold the Netherlands co-responsible for the attack by the Americans, they said to reporters of De Volkskrant. The 2014 American drone strike targeted a convoy of cars transporting members of the Somali terrorist organization Al Shabaab. According to CNN, the intended target of the attack was Ahmed Godane. He remained unharmed, but other Al Shabaab members were killed. The nomads and their children and cattle were in the area when the missiles struck. No civilian casualties were reported by Western media or the US government.

The nomads are represented by two Dutch lawyers, Göran Sluiter and Liesbeth Zegveld. This is the first time that victims of an American drone strike apply to a Dutch court. They claim that the Netherlands are co-responsible for the attack since the Dutch provide important intelligence about Somali communications to the US. Documents leaked by former NSA-contractor Edward Snowden have already shown that telecommunication intercepted by the Netherlands plays an important part in American covert operations in Somalia. The Dutch military intelligence agency MIVD has intercepted millions of telephone calls and text messages by Somalis over the past few years, using a satellite receiver in the small town of Burum in the Friesland province. This was done as part of the anti-piracy operation ‘Ocean Shield’, in which the Netherlands participate.

The communication’s ‘meta data’, such as which number called which other number and for how long, were shared with the Americans. As the Americans had little useful intelligence on Somalia, the NSA also provided Dutch military intelligence service MIVD with special interception technology for listening in on telephone traffic from ships off the coast of Somalia. Secret documents published on the website The Intercept reveal how in more than fifty percent of the cases the Americans choose targets in Yemen and Somalia on the basis of meta data. Telecommunication intercepted by foreign parties is crucial in this, as the documents reveal: signal intelligence ‘is often provided by foreign partners.’ ‘By providing these telecom data, the Netherlands are supporting these American strikes to a considerable extent,’ says Sluiter, one of the lawyers. ‘Even more so: without the Dutch support the US could never have realized their drone program in those areas.’

“I want to go to Central Africa,” the pope told the pilot of his flight to Africa last Wednesday, according to the Vatican newspaper, “and if you’re not able to take me, give me a parachute.”

• Pope Francis to Head to War Zone in Central African Republic (WSJ)

Pope Francis will fly Sunday to the war-torn capital of the Central African Republic, making a trip that has been in doubt for security reasons until practically the last minute, the Vatican spokesman said Saturday evening. “We will the take the plane and fly to Bangui” according to schedule, Father Federico Lombardi said. The confirmation came at the end of a day in which the pope honored Christian martyrs in Uganda, met with young people there and greeted local clergy. The Central African Republic has been beset since 2013 by civil war that has taken on a religious profile, with armed groups divided between Muslims and Christians.

Bangui’s Muslim quarter has been especially hard hit, under siege from Christian militias and effectively off-limits to non-Muslims since September. The pope plans to visit a mosque in the Muslim neighborhood as part of his effort to promote reconciliation, which will also include a meeting with local Christian and Muslim dialogue partners. “I want to go to Central Africa,” the pope told the pilot of his flight to Africa last Wednesday, according to the Vatican newspaper, “and if you’re not able to take me, give me a parachute.”

We screwed up that region too.

• Over 1 Million Children Need Urgent Aid In Central African Republic (Reuters)

More than a million children in the Central African Republic are in urgent need of humanitarian aid while almost half of those under five are malnourished, the United Nations said on Friday ahead of Pope Francis’ visit to the conflict-torn country. The majority Christian nation plunged into tumult when mostly Muslim Seleka rebels briefly seized power in a 2013 coup. Sectarian violence has plagued the country since and fresh fighting broke out in Bangui two months ago, the worst violence in the capital this year, when the murder of a Muslim man triggered reprisal attacks on a largely Christian neighborhood. Some two million children have been affected by violence which first broke out in December 2012, and 1.2 million now need urgent aid, said the U.N. children’s agency, UNICEF.

“The violence that has plagued this country has had a devastating impact on the lives of children,” said Mohamed Fall, UNICEF representative in the Central African Republic. “The humanitarian needs are overwhelming, to meet them we need access and we need greater international support.” The conflict has uprooted 400,000 people within the country and forced half a million to seek refuge in neighboring countries, while recent insecurity and attacks on convoys have hindered aid deliveries and lifesaving activities, UNICEF said. Clashes between mainly Christian anti-balaka militias and mainly Muslim Seleka factions initially cast doubt on the pope’s visit, and risk derailing internationally-backed elections now due on Dec. 27 after being postponed in October due to violence.

Pope Francis is due to arrive in the country on Sunday, and Central Africans on both sides of the religious chasm, even the Seleka, have rallied behind the visit, reducing the risk that his presence could add fuel to the fire of communal tensions. “We are hopeful that … the Pope’s visit will promote reconciliation in a country that is in desperate need of peace,” Fall added.

When did it get normal for a finance minister to comment on purely political issues?

• Dijsselbloem Warns Of Mini-Schengen Over Refugee Issue (Reuters)

Eurogroup President Jeroen Dijsselbloem warned that countries which fail to adequately guard Europe’s borders and do not take in a fair share of refugees could find themselves outside the borders of a future “mini-Schengen” zone. In an interview in Belgian business dailies De Tijd and L’Echo on Friday, Dijsselbloem, who is also the Dutch finance minister, said the EU’s passport-free Schengen zone could not work if only a few countries gave shelter to refugees. “There are a few countries that are carrying the heaviest burden in the asylum crisis, taking in the most refugees,” he told the papers, naming Sweden, Germany, Austria, Belgium and the Netherlands. “Some countries are now saying, ‘It’s not our problem. It’s yours. Good luck.’ That places our solidarity under huge pressure,” he said.

Many members of the 26-country Schengen zone, particularly poorer Eastern European ones, oppose a European Commission plan to distribute refugees who have arrived in Europe since the start of the year. Poland’s newly-elected government has said the risk of militant attacks in the wake of the Paris shootings makes it harder for it to shelter asylum seekers fleeing war and poverty in the Middle East. Dijsselbloem said his aim was to preserve the Schengen zone, but if countries did not shoulder their fair share, others would have to go it alone, since the migrant influx would otherwise endanger their generous welfare states. “To preserve them, you need to guard the external borders. (Otherwise) loads of people come and demand support and they blow the system up. That is what is happening now in the Netherlands,” he said.

He called for more joint investment in guarding the EU’s external borders and for more support for refugee camps in Turkey and Lebanon. “If we do not do it in the external borders of the EU’s 28 members, or in the Schengen zone, then maybe we will have to do it on the level of a mini-Schengen zone,” he said, adding he wanted to avoid that outcome. The Netherlands first floated the idea of a passport-free inner core earlier this month, though Germany, without which such a plan would be unworkable, immediately distanced itself from the proposals. On Wednesday, Jean-Claude Juncker, the head of the EU’s executive, warned that the fate of the Schengen zone was bound up with that of the euro single currency: the one would not survive the failure of the other. Schengen consists of 22 countries in the European Union along with Norway, Iceland, Switzerland and Liechtenstein.

Alan Sked is the original founder of Ukip.

• How A Secretive Elite Created The EU To Build A World Government (Sked)

As the debate over the forthcoming EU referendum gears up, it would be wise perhaps to remember how Britain was led into membership in the first place. It seems to me that most people have little idea why one of the victors of the Second World War should have become almost desperate to join this “club”. That’s a shame, because answering that question is key to understanding why the EU has gone so wrong. Most students seem to think that Britain was in dire economic straits, and that the European Economic Community – as it was then called – provided an economic engine which could revitalise our economy. Others seem to believe that after the Second World War Britain needed to recast her geopolitical position away from empire, and towards a more realistic one at the heart of Europe.
‘
Neither of these arguments, however, makes any sense at all. The EEC in the 1960s and 1970s was in no position to regenerate anyone’s economy. It spent most of its meagre resources on agriculture and fisheries and had no means or policies to generate economic growth. When growth did happen, it did not come from the EU. From Ludwig Erhard’s supply-side reforms in West Germany in 1948 to Thatcher’s privatisation of nationalised industry in the Eighties, European growth came from reforms introduced by individual countries which were were copied elsewhere. EU policy has always been either irrelevant or positively detrimental (as was the case with the euro). Nor did British growth ever really lag behind Europe’s. Sometimes it surged ahead.

In the 1950s Western Europe had a growth rate of 3.5%; in the 1960s, it was 4.5%. But in 1959, when Harold Macmillan took office, the real annual growth rate of British GDP, according to the Office of National Statistics, was almost 6%. It was again almost 6% when de Gaulle vetoed our first application to join the EEC in 1963. In 1973, when we entered the EEC, our annual national growth rate in real terms was a record 7.4%. The present Chancellor would die for such figures. So the economic basket-case argument doesn’t work.

What about geopolitics? What argument in the cold light of hindsight could have been so compelling as to make us kick our Second-World-War Commonwealth allies in the teeth to join a combination of Belgium, the Netherlands, Luxembourg, France, Germany and Italy? Four of these countries held no international weight whatsoever. Germany was occupied and divided. France, meanwhile, had lost one colonial war in Vietnam and another in Algeria. De Gaulle had come to power to save the country from civil war. Most realists must surely have regarded these states as a bunch of losers. De Gaulle, himself a supreme realist, pointed out that Britain had democratic political institutions, world trade links, cheap food from the Commonwealth, and was a global power. Why would it want to enter the EEC?

Think it’ll stop them?

• ‘Snowden Effect’: NSA Authority to Collect Bulk Phone Metadata Ends (Intercept)

The National Security Agency no longer has legal authority to collect phone metadata in bulk as of midnight, Saturday, November 28. The executive branch previously claimed the government possessed such authority under Section 215 of 2001’s USA PATRIOT Act, which gave the FBI power to demand “any tangible things” needed “for an investigation to obtain foreign intelligence information.” The FBI was thus able to obtain the phone records of millions of Americans from U.S. telecommunications companies and turn them over to the NSA. The USA FREEDOM Act, signed into law on June 2 earlier this year, gave the executive branch 180 days to wind down the bulk collection program.

According to the Tumblr of the Office of the Director of National Intelligence, the government is “prohibited from collecting telephone metadata records in bulk” starting November 29. The executive branch will now be able to obtain phone metadata by asking the U.S. Foreign Intelligence Surveillance Court to order telecommunications companies to turn over specific records. The end of the bulk collection program is a modest but real victory for former NSA contractor and whistleblower Edward Snowden, who provided documents concerning the program to Laura Poitras and Glenn Greenwald, co-founding editors of The Intercept. The first article by Greenwald based on the documents leaked by Snowden, published on June 6, 2013, was about the bulk collection program.

The future is one long state of emergency.

• Paris Climate Activists Put Under House Arrest Using Emergency Laws (Guardian)

At least 24 climate activists have been put under house arrest by French police, accused of flouting a ban on organising protests during next week’s Paris climate summit, the Guardian has learned. One legal adviser to the activists said many officers raided his Paris apartment and occupied three floors and a staircase in his block. French authorities did not respond to requests for comment but lawyers said that the warrants were issued under state of emergency laws, imposed after the terror attacks that killed 130 people earlier this month. The author and climate change campaigner, Naomi Klein, accused French authorities of “a gross abuse of power that risks turning the summit into a farce”.

“Climate summits are not photo opportunities to boost the popularity of politicians,” she told the Guardian. “Given the stakes of the climate crisis, they are by their nature highly contested. That is democracy, messy as it may be. The French government, under cover of anti-terrorism laws, seems to be trying to avoid this, shamefully banning peaceful demonstrations and using emergency powers to pre-emptively detain key activists.” Since Thursday, three people have been placed under house arrest in Rens, two in Paris, two in Rouen and one in Lyons, according to campaigners. They may now only leave their houses to sign a post office register verifying their whereabouts, three times a day.

Stop Making Sense: “There is no doubt that many of the ‘fighters’ returning from Syria take the Balkan route,” he said. “Maybe one in every 100,000.”

• FYROM/Greece Border Tension Peaks As Fence Erected (Kath.)

Tensions peaked at Greece’s border with the Former Yugoslav Republic of Macedonia over the weekend after the FYROM army started building a border fence to keep out would-be migrants. FYROM border guards were photographed by foreign news agencies as they erected a 2.5-meter-high fence along the Greek border on Saturday. A FYROM army source quoted by Agence France-Presse said the crossing from Greece to FYROM would remain open and that the fence was aimed at ensuring migrants did not try to slip across at other spots. FYROM authorities had indicated in recent weeks that they might build a fence to limit the number of migrants pouring into their country from Greece and border guards recently started filtering the migrants they allow through, granting entry only to people from Syria, Iraq and Afghanistan.

As a result, hundreds of migrants from other countries, including Iran and Pakistan, have gathered in and around the Greek border town of Idomeni, protesting and demanding passage. In a recent interview with Kathimerini and other Greek media, FYROM’s Foreign Minister Nikola Poposki said that the EU’s border monitoring agency Frontex should establish a presence at Greece’s border with FYROM. He suggested that jihadists were slipping through. “There is no doubt that many of the ‘fighters’ returning from Syria take the Balkan route,” he said. “Maybe one in every 100,000.” The tensions over the weekend coincided with yesterday’s EU leaders’ summit on the refugee crisis, which focused also on the role of Turkey, a key transit country for migrants heading toward Europe via Greece.

And this is not the Balkans, it’s France and Britain.

• Life In A Refugee Camp: ‘The Cold And Fear Get In Your Bones’ (Guardian)

“I was not born to live here like this,” says Ali. “I have three languages but I really want to learn Japanese. I love Japanese movies.” Ali is from Iran. He says he is not alone, but he seems very alone. We are in a refugee camp at Grande–Synthe, a Dunkirk suburb, sitting under a tarpaulin while people wait to see a doctor. But to describe this as a camp is wrong. This is a swamp. There are no basic facilities. None. It’s a field of mud and tattered tents. I am surrounded by people waiting to see a doctor holding little tickets, eyeing each other with suspicion. This, at least, is better than where I have just been, where I found Afghans sleeping in a ditch. The people I am with are worried about the children, aged as young as 10 and 11, they have seen there; “unaccompanied minors” with scabies.

Ali babbles to me non-stop about how he is all right, really. But no one here is. In June, there were maybe 150 people camped out. Now there are more than 10 times as many, predominantly Kurds. Families are arriving all the time. The average refugee is a young man, it’s true, but there are more and more women and children. A boy of seven pulls out his prize possession to show us – a tiny fire truck. Women sit in tents frying potatoes. They smile and chat, but everyone is cold. Everything is wet. Everyone has a story of how they got here. Some show me on their phones images of them getting out of flimsy dinghies – their witnesses to trauma. As they have journeyed from Syria or Eritrea, fleeing Islamic State, torture, unimaginable darkness, the phones are their lifelines. They connect them back to where they have come from and to a world they are now locked out of.

This is limbo. Limbo comes from limbus meaning the edge, the border of hell, and this is as close as I have ever been. Thankfully I am here with Doctors of the World (part of the Médecins du Monde Network), one of the Guardian’s refugee appeal charities, which has provided medical help on the ground in Calais since 2003. The director of the charity, Leigh Daynes, is shocked by what he is seeing – and he is a veteran of Darfur and Haiti. Every day, the charity runs the gauntlet of racism and aggression to get the most basic of care into the camps. Political rhetoric has successfully dehumanised these people as someone else’s problem. We don’t want them, the French don’t want them. Money has been spent on building higher, flesh-ripping fences. So here they fester. Human detritus.

Debt Rattle May 18 2015

May 182015

May 18, 2015 Posted by Raúl Ilargi Meijer at 9:50 am Finance Tagged with: Antarctic, China, El Nino, endgame, eurozone, Greece, NSA, Putin, Q Ratio, TPP, UK 2 Responses »

Harris&Ewing Car exterior. Washington & Old Dominion R.R. 1930

• Q Ratio: Today’s Stock Market Has at Least One Similarity to 1929 (Bloomberg)

• Greece’s Debt Battle Exposes Deeper Eurozone Flaws (WSJ)

• Would Staying In The Euro Be A Catastrophe For Greece? (Guardian)

• Greek Endgame Nears for Tsipras as Bank Collateral Hits Buffers (Bloomberg)

• Greek Lessons for UK’s David Cameron (WSJ)

• David Blanchflower: Bank of England In Cloud-Cuckoo Land On Wages (Independent)

• UK Police Warn Big Budget Cuts Will Lead To ‘Paramilitary’ Force (Guardian)

• If Numbers Don’t Lie Then… (Mark St. Cyr)

• China Home Prices Drop Over 6% In April (Reuters)

• China Struggles To Make Its Debt Problems Go Away (MarketWatch)

• Merkel Under Pressure To Reveal Extent Of German Help For US Spying (Reuters)

• A Diplomatic Victory, and Affirmation, for Putin (NY Times)

• The Democratic Party Would Triangulate Its Own Mother (Matt Taibbi)

• TPP: Fast-Track Measure Will Pass ‘This Week’, McConnell Says (Guardian)

• The American Press Tried To Discredit Seymour Hersh 40 Years Ago, Too (Ames)

• Huge El Niño Becoming More Likely In 2015 (Slate)

• Antarctic Larsen B Ice Shelf In Last Throes Of Collapse (Livescience)

“It is very strongly indicated .. that we’re looking at a stock market which is something like 80% over-priced.”

• Q Ratio: Today’s Stock Market Has at Least One Similarity to 1929 (Bloomberg)

If you sold every share of every company in the U.S. and used the money to buy up all the factories, machines and inventory, you’d have some cash left over. That, in a nutshell, is the math behind a bear case on equities that says prices have outrun reality. The concept is embodied in a measure known as the Q ratio developed by James Tobin, a Nobel Prize-winning economist at Yale University who died in 2002. According to Tobin’s Q, equities in the U.S. are valued about 10% above the cost of replacing their underlying assets – higher than any time other than the Internet bubble and the 1929 peak. Valuation tools are being dusted off around Wall Street as investors assess the staying power of the bull market that is now the second longest in 60 years.

To Andrew Smithers, the 77-year-old former head of SG Warburg’s investment arm, the Q ratio is an indicator whose time has come because it illuminates distortions caused by quantitative easing. “QE is a very dangerous policy, in my view, because it has pushed asset prices up and high asset prices, we know from history, are very dangerous,” Smithers, of Smithers & Co. in London, said in a phone interview. “It is very strongly indicated by reliable measures that we’re looking at a stock market which is something like 80% over-priced.” Acceptance of Tobin’s theory is at best uneven, with investors such as Laszlo Birinyi saying the ratio is useless as a signal because it would have kept you out of a bull market that has added $17 trillion to share values. Others see its meaning debased in an economy whose reliance on manufacturing is nothing like it used to be.

To Smithers, the ratio’s doubling since 2009 to 1.10 is a symptom of companies diverting money from their businesses to the stock market, choosing buybacks over capital spending. Six years of zero-percent interest rates have similarly driven investors into riskier things like equities, elevating the paper value of assets over their tangible worth, he said. Standard & Poor’s 500 Index members last year spent about 95% of their profits on buybacks and dividends, with stock repurchases exceeding $2 trillion since 2009, data compiled by S&P Dow Jones Indices show. In the first four months of this year, almost $400 billion of buybacks were announced, with February, March and April ranking as three of the four busiest months ever, according to data compiled by Birinyi Associates Inc.

“Our discussions on the Greek side progressed a lot more easily than the discussions on the European side..”

• Greece’s Debt Battle Exposes Deeper Eurozone Flaws (WSJ)

Since there is no international bankruptcy court, sovereign restructurings always face political challenges as the debtor and creditor countries’ taxpayers, and the shareholders of private lending institutions all duke it out to determine how to distribute the losses. But in this case, it’s further complicated by the close financial integration between eurozone member countries. It brings a heightened level of contagion risk to the table – the idea that investors in other eurozone countries’ bonds will sell them to cover losses incurred in Greece and unleash a vicious cycle of market pressure. To forestall that risk, eurozone authorities were always reluctant to let private-sector creditors suffer big “haircuts” on their investments – which inevitably translated into a bigger burden for taxpayers.

Yet there were no pan-European political institutions to pool fiscal resources and automatically apportion how to share those burdens. Without a U.S.-style centralized federal government, the 17 member states would fight over every dollar. The result was something close to paralysis. “The technological and capital market integration was so advanced, and the world was so fragile after the 2008 crisis, that in order to really create freedom of decision-making in Greece you needed a huge amount of institutional buffers that weren’t there — buffers against contagion,” says Georgetown law professor Anna Gelpern, a long-time scholar of sovereign debt markets.

It’s tempting to suggest that bankers and hedge funds exploited this dysfunction at taxpayers’ expense. But one fund manager who participated in the private sector involvement, or PSI, talks of 2012, complained that even when the creditor committee was poised to sign a deal, the 16 EU finance ministers couldn’t agree on the terms among themselves. “Our discussions on the Greek side progressed a lot more easily than the discussions on the European side,” he said. This tortured process looms over the eurozone’s future, even if Greece finally gets a successful debt restructuring. The same flawed structure means that contagion could rear its head again in Portugal – or worse, in Spain or Italy – currently low bond yields could spike again and the panic that of 2012 could return.

While we are a long ways from those levels, this month’s rapid selloff in the region’s bond markets hints at how quickly things could unwind. For now, the ECB’s massive bond-buying program functions as the de facto institutional buffer that the eurozone politicians failed to build. But its powers aren’t limitless – the ECB can only act within a narrow mandate of achieving price stability and suffers internal political divisions of its own. Such alternative “buffer institutions are cushions to buy space to find a political solution,” said Ms. Gelpern. “If you run through those buffers without getting a political solution, then the system is going to crack. We are closer than ever to that.”

It would if the German attitude towards power doesn’t change.

• Would Staying In The Euro Be A Catastrophe For Greece? (Guardian)

Yanis Varoufakis rues the day when Greece joined the euro. The Greek finance minister says his country would be better off if it was still using the drachma. Deep down, he says, all 18 countries using the single currency wish that the idea had been strangled at birth but understand that once you are in you don’t get out without a catastrophe. All of that is true, and explains why Greece is involved in a game of chicken with all the other players in this drama: the International Monetary Fund, the European commission, the European Central Bank and the German government. Varoufakis wants more financial help but not if it means sending the Greek economy into a “death spiral”. Greece’s creditors will not stump up any more cash until Athens sticks to bailout conditions that Varoufakis says would do just that.

Things will come to a head this summer because it is clear Greece cannot make all the debt repayments that are coming up. It has to find €10bn (£7.3bn) in redemptions to the IMF, the ECB and other bondholders before the end of August and the money is not there. Greece’s creditors know that and are prepared to let the government in Athens stew. They know that Greece really has only two choices: surrender or leave the euro, and since it has said it wants to stay inside the single currency, they expect the white flag to be fluttering any time soon. Greece’s willingness to go ahead with the privatisation of its largest port, Piraeus, will be seen as evidence by the hardliners in Brussels and Berlin that they have been right to take a tough approach in negotiations with the Syriza-led government.

But before he admits he has lost the game of chicken, Alexis Tsipras, the Greek prime minister, should think hard about Varoufakis’s analysis. Was it a mistake for Greece to join the euro? Clearly, the answer is yes. Would Greece be better off with the drachma? Given that the economy has shrunk by 25% in the past five years and is still shrinking, again the answer is yes. Can you leave the euro and return to the drachma without a catastrophe? Undoubtedly there would be massive costs from doing so, including credit controls to prevent currency flight, and a profound shock to business and consumer confidence. There are also the practical difficulties involved in substituting one currency for another.

In a way, though, this is not the question the Greek government should be asking itself. Greece has been suffering an economic catastrophe since 2010. It is suffering from an economic catastrophe now and will continue to suffer from an economic catastrophe if it stays in the euro without generous debt forgiveness and policies that facilitate, rather than impede, growth. So the real question is not whether leaving the euro would be a catastrophe, because it would. The real question is whether it would be more of a catastrophe than staying in.

Turning into a long endgame.

• Greek Endgame Nears for Tsipras as Bank Collateral Hits Buffers (Bloomberg)

Greek banks are running short on the collateral they need to stay alive, a crisis that could help force Prime Minister Alexis Tsipras’s hand after weeks of brinkmanship with creditors. As deposits flee the financial system, lenders use collateral parked at the Greek central bank to tap more and more emergency liquidity every week. In a worst-case scenario, that lifeline will be maxed out within three weeks, pushing banks toward insolvency, some economists say. “The point where collateral is exhausted is likely to be near,” JPMorgan Chase Bank analysts Malcolm Barr and David Mackie wrote in a note to clients May 15. “Pressures on central government cash flow, pressures on the banking system, and the political timetable are all converging on late May-early June.”

European policy makers are losing patience with Tsipras who said as recently as May 14 that he won’t compromise on any of his key demands. While talks are centering on whether to give Greece more money, the European Central Bank could raise the stakes if it increases the discount on the collateral Greek banks pledge in exchange for cash under its Emergency Liquidity Assistance program. Such a move might inadvertently prompt a further outflow of bank deposits and pressure Tsipras to choose between doing a deal and putting his country on the road to capital controls. “We are in an endgame,” ECB Executive Board member Yves Mersch said Saturday. “This situation is not tenable.”

The arithmetic goes as follows: Greek lenders have so far needed about €80 billion under the ELA program. Banks have enough collateral to stretch that lifeline to about €95 billion under the terms currently allowed by the ECB, a person familiar with the matter said. With the central bank raising the ELA by about €2 billion every week, that could take banks to the end of June. A crunch will come if the ECB increases the haircut on Greek collateral to levels not seen since last year. That could be prompted by anything from a complete breakdown in talks to a missed debt payment, the official said. A continuation of the current impasse could even be all that’s needed, the official said. An increased haircut would reduce the ELA limit to about €88 billion, the person said. While that gives banks about four weeks before hitting the buffers, the leeway is so limited that Greece might need to impose capital controls, limiting transactions such as ATM withdrawals, to conserve the cushion.

Nice comparison.

• Greek Lessons for UK’s David Cameron (WSJ)

David Cameron and Alexis Tsipras are miles apart politically, but they share more in common than either may care to admit. Both the U.K. and Greek prime ministers took office after elections in which their parties secured just 37% of the vote. Both claim a strong mandate to reform their country’s relationship with the European Union—and boast that their real aim is to reform the EU itself. Both face pressure from party hard-liners who would rather risk a permanent rupture than accept any compromise. And both leaders believe the rest of Europe will do anything to avoid such a rupture and so will ultimately have to accept their demands. Mr. Tsipras will find out soon enough if his assessment was right: Greece’s debt negotiations are approaching their drop-dead moment when failure to agree on a new funding deal will push the government into a messy default.

But Mr. Cameron’s EU odyssey has only just begun: He must now follow through on his election pledge to hold a referendum on Britain’s continued membership of the EU by the end of 2017. The stakes could hardly be higher. Many analysts think a Greek euro exit would be destabilizing but ultimately containable. But a British exit from the EU would diminish the union in the eyes of the world, weakening its capacity to secure trade deals, deepen the European single market and to confront threats from Russia and the Mediterranean. Just as Mr. Tsipras says he wants to keep Greece in the euro, Mr. Cameron has no desire to lead the U.K. out of the EU. And as in Greece, there is little public appetite for an exit. A recent poll showed British voters back EU membership by 45%—against 33% who want out—rising to 56% to 20% if Mr. Cameron can renegotiate the terms of membership.

Like Mr. Tsipras, Mr. Cameron’s problem lies with his party, not the public. Up to a quarter of his 331 parliamentarians look certain to campaign to leave the EU since their demands for opt-outs for large swaths of EU law, a U.K. veto on future EU rules and an end to the right of EU citizens to seek work in the U.K. can never be met. Mr. Cameron’s objective is to avoid an even bigger split that would damage his authority and could become permanent. For a prime minister who has bet his country’s strategic future on his ability to renegotiate the terms of EU membership, the lack of detailed planning is striking. U.K. officials say that as things stand, Downing Street has no clear process, no team, no detailed policy proposals, no clear view on what is needed to declare the renegotiation a success and no decision on the timing of the referendum.

“There is no such thing as an expansionary fiscal contraction.”

• David Blanchflower: Bank of England In Cloud-Cuckoo Land On Wages (Independent)

In his reply to a letter from the Monetary Policy Committee this week outlining why CPI inflation was 2% below the target he had set for them, the Chancellor made clear there was more austerity heading everyone’s way. “Ultimately, the credibility of our economic policy rests on the strength of our public finances. This new Government now has a clear mandate to take the steps needed to return them to surplus and ensure continued economic security.” Here we go again, and this time he thinks he has a “mandate’ to slash and burn. It really is amazing that he hasn’t learnt from his past errors. In 2010 George Osborne imposed austerity and the economy stalled for two years; he relaxed austerity and went to plan B, and growth picked up.

So Slasher Osborne is back to his old tricks. Sadly for Slasher this time he has a slowing economy to deal with, rather than the rapidly growing one he inherited in 2010. Now the bond markets really do seem to be in free-fall, just as they weren’t in 2010. As the Governor of the Bank of England, Mark Carney, made clear in his press conference this week, “there is persistent fiscal drag … just as there has been over the last several years”. That’s one of the headwinds that weighs on the economy. The headwinds are once again going to become hurricane force. Hurricane Slasher is heading your way. Austerity is likely to smash growth once again. It seems almost inevitable that monetary policy will have to compensate for such tightening, so I fully expect the next interest rate move to be downwards, with another significant round of quantitative easing, if this austerity is implemented.

There is no such thing as an expansionary fiscal contraction. Just to remind readers, GDP growth was 1% in Q2 2010 and 0.3% in Q1 2015, the latest data that we have. To put this in context, the first chart plots quarterly GDP growth rates for the 19 EU countries that to this point have produced estimates. The UK’s growth rate of 0.3% is below both the EU and the eurozone averages of 0.4%, and is growing at half France’s growth rate of 0.6%. The UK ranks joint 11th with Belgium, Germany and Italy. There are several other countries who are yet to report for 2015 but whose growth rates for Q4 2014 were higher than 0.3%: the Czech Republic, Denmark, Luxembourg, Malta, Poland and Sweden, plus two non-EU members, Norway and Switzerland. The UK is now one of the slowest-growing European economies.

A very valuable insight: “You police by consent by having a relationship with local communities.”

• UK Police Warn Big Budget Cuts Will Lead To ‘Paramilitary’ Force (Guardian)

Police will be forced to adopt a “paramilitary” style of enforcement if the government inflicts big budget cuts on them, the head of the police officers’ organisation has warned. Steve White, chair of the Police Federation, said his 123,000 members, from police constables to inspectors, fear a move towards a more violent style of policing as they try to keep law and order with even fewer officers than now. White told the Guardian that more cuts would be devastating: “You get a style of policing where the first options are teargas, rubber bullets and water cannon, which are the last options in the UK.” White said cuts would see the bedrock principle of British law enforcement, policing by consent, ripped apart. The week ahead sees the federation stage its annual conference, which starts on Tuesday 19 May.

The key day will be Wednesday when the home secretary, Theresa May, will address rank-and-file officers. Last year May stunned delegates with a speech telling them to reform or be taken over by government, and telling them policing was failing too often. Police leaders have a fine line to walk in opposing cuts. Rank-and-file members are furious at the effects of austerity on their terms and conditions, as well as falling officer numbers nationally. But May and her advisers believe some members of the police force use over-the-top rhetoric in predictions that cuts would lead to chaos on the streets, and instead believe they should squeeze maximum value out of the public money given. White said police had already endured five years of austerity and were braced for more “swingeing cuts” after the election of a Conservative government with a majority.

White said that since 2010, when the Conservative-led coalition started slashing its funding to police by 20%, the service had been cut by 17,000 officers and 17,000 civilian staff, but had managed to limit the effect on the public. He said the service was now “on its knees”, with some internal projections within policing of a further 20% to 25% of cuts by the end of the next parliament in 2020. This would lead to more than 15,000 officers disappearing off the streets, only being seen when responding to crime or serious events such as disorder on the streets. White said: “You are left with a police service who you only speak to in the direst of circumstances, a police service almost paramilitary in style.”

“You police by consent by having a relationship with local communities. “If you don’t have a relationship, because the officers have been cut, you will lose the consent which means the face and style of policing changes. “The whole service, from top to bottom, is deeply concerned about the ability to provide the service that the public have come to expect over the next five years.”

First, falling gas prices were supposed to boost the economy. Now rising prices are to do the same thing.

• If Numbers Don’t Lie Then… (Mark St. Cyr)

One argument now being proposed to help bolster the projections that Q2 will be closer to 3% as opposed to the abysmal print of Q1 is (even as the Atlanta Fed. is now predicting the same if not worse) that this jump will be fueled by (wait for it…) “Cap-ex spending relating to the bump up in crude prices over the recent weeks…” (insert rimshot here) This wasn’t coming from some ancillary small fund manager. This line of thought and analysis was coming from one of our “too big to fail” taxpayer-funded bail-out houses of financial acumen. As this “insight” was simultaneously broadcast throughout television and radio, heralded as “This is why we have people like you on – for exactly this type of insightful analysis and perspective.” I couldn’t help myself but to agree.

For this is what “financial” brilliance across the financial media now represents: Financial spin. My analysis? With analysis like this? Taxpayers better get ready – again! This objective “seasoned” analysis is being professed by one of the same that expected the prior GDP print to show “great improvement” based on “the gas savings made possible from lower crude prices.” The result? If the build in inventory hadn’t been “adjusted” in formulations Pythagoras would marvel at – the print would have been negative. So now you’re being led to believe with the recent rise in crude prices: drillers, refiners, etc., etc., are going to load up on cap-ex only months after many have scuttled rigs, buildings, employees, and more? Again, soon enough to effect Q2?

If cap-ex can be effected that soon, and to that degree as to pull GDP prints from near negative to 3% in a single quarter all by itself – as every other macro data point is collapsing? Why would lower gas prices have ever been wanted let alone touted as “good for the economy?”I’ll just remind you that this “insightful analysis” was coming from one of the many who loved to tout endlessly how the U.S. economy is based on “consumer spending” and “more money in consumers wallets based on lower prices at the pump was inevitable.”

All I’ll ask is: when does “inevitable” materialize? Before? Or, after the next revisions? Again, now since it’s been shown that the “inevitable consumer” spent nothing of their gas savings to help prop up the prior GDP. (sorry I forgot, yes they did in higher health insurance costs) Where the case was made to bludgeon any doubters of their analysis: i.e., “lower crude prices resulting in lower gas prices = more consumer spending.” We are now supposed to embrace the inverted narrative where: “GDP for Q2 will show growth of around 3% based on higher crude prices resulting in increased cap-ex?”

Still, nothing the media can’t put a positive spin on.

• China Home Prices Drop Over 6% In April (Reuters)

Average new home prices in China’s 70 major cities dropped 6.1% last month from a year ago, the same rate of decline as in March, according to Reuters calculations based on official data published today. But nationwide prices steadied from March, further narrowing from a 0.1% fall in the previous month. Beijing saw prices rise, albeit modestly, for the second month in a row, while those in Shanghai rose for the first time in 12 months. But prices in many smaller cities, which account for around 60% of national sales, continued to fall. Analysts said that property investment, which comprises around 20% of China’s GDP, may grow less than 5% this year, compared with 10.5% in 2014, knocking 1 %age point off economic growth.

Data last week showed home sales measured by floor area rebounded 7.7% in April from a year ago, the first growth since November 2013. But property investment growth continued to slow in the first four months of 2015 to the lowest since May 2009 as new construction slumped, impacting demand for everything from steel and cement to appliances and furniture. However, government measures seem to be slowing enticing some buyers back into the market. Mortgages rose 2.1% in the months from Janaury to April from the same time a year earlier. China relaxed tax rules and downpayment requirements on second homes in late March. Earlier this month, the central bank cut interest rates for the third time since November to lower companies’ borrowing costs and stimulate loan demand.

“..the interest-cost burden of servicing debt has risen to 15% of GDP.”

• China Struggles To Make Its Debt Problems Go Away (MarketWatch)

China’s latest plan to tackle its local-government-debt problem appears to be pretending there isn’t one. This might actually stave off a wave of unpleasant corporate busts and bankruptcies, but investors need to be alert for other signs of distress in China’s repressed financial system. In recent weeks, plans floated to address local government debt — estimated to be some 22 trillion yuan ($3.54 trillion) — have included swapping loans for bonds and even potential quantitative easing by the central bank. But as these initiatives appeared to lose steam, it emerged Friday that Beijing had reverted to a more traditional plan: Tell banks to keep lending to insolvent state projects and roll over such loans.

The directive was jointly issued by the Ministry of Finance, the banking regulator and the central bank, saying that financial institutions should keep extending credit to local-government projects, even if borrowers are unable to make payments on existing loans. The positive take is that this latest maneuver postpones a painful debt reckoning and will help protect the property market and broader economy from another leg down after more weak economic data for April. Caution is understandable, as local-government debt presents numerous contagion risks. SocGen describes it as the “critical domino” in the chain of China’s credit risk. This is not just because of the size of the problem, but also due to the labyrinth of funding which straddles special-purpose-funding vehicles and the shadow-banking market.

Further, local governments are inextricably linked to the property market, as they rely on land sales for their revenue. So if the implicit guarantee on state debt were to be removed at the local-government level, the potential for a messy unraveling looks high. It’s also easy to see how this represents a larger systematic risk, as Fitch estimates banks’ total exposure to property could exceed 60% of credit if non-loan financing is also taken into account. Yet any relief that funding taps will not be switched off will also be balanced by concerns over the dangers of building up an even larger debt burden. Fitch warns that the more authorities permit loans by weak entities to be rolled over, the greater the build-up and cost of servicing that debt, and the greater the strain on banks and the overall economy. They calculate that the interest-cost burden of servicing debt has risen to 15% of GDP.

Apparently, the BND now claims it was instrumental in catching Osama Bin Laden. Get in line!

• Merkel Under Pressure To Reveal Extent Of German Help For US Spying (Reuters)

The German chancellor, Angela Merkel, is coming under increasing pressure to divulge a list of targets, including the IP addresses of individual computers, that German intelligence tracked on behalf of the US National Security Agency (NSA). Critics have accused Merkel’s staff of giving the BND foreign intelligence agency the green light to help the NSA spy on European firms and officials. The scandal has strained relations between Merkel’s conservative Christian Democratic Union and its junior coalition partner, the Social Democrats, whose leader, Sigmar Gabriel, has publicly challenged her over the affair.

Gabriel told the German newspaper Bild am Sonntag that parliament needed to see the list, which contains names, search terms and IP addresses. The government has said it must consult the US before revealing the list, whose contents are thought crucial to establishing whether the BND was at fault in helping the NSA. Gabriel, who is also Germany’s vice-chancellor, said: “Imagine if there were suspicions that the NSA had helped the BND to spy on American firms. Congress wouldn’t hesitate for a second before looking into the documents.”

Big victory indeed. That’s why we read so little about it.

• A Diplomatic Victory, and Affirmation, for Putin (NY Times)

For Russia, victory came three days after Victory Day, in the form of Secretary of State John Kerry’s visit this week to the Black Sea resort city of Sochi. It was widely interpreted here as a signal of surrender by the Americans — an olive branch from President Obama, and an acknowledgment that Russia and its leader are simply too important to ignore. Since the seizure of Crimea more than a year ago, Mr. Obama has worked aggressively to isolate Russia and its renegade president, Vladimir V. Putin, portraying him as a lawless bully atop an economically failing, increasingly irrelevant petrostate. Mr. Obama led the charge by the West to punish Mr. Putin for his intervention in Ukraine, booting Russia from the Group of 8 economic powers, imposing harsh sanctions on some of Mr. Putin’s closest confidants and delivering financial and military assistance to the new Ukrainian government.

In recent months, however, Russia has not only weathered those attacks and levied painful countersanctions on America’s European allies, but has also proved stubbornly important on the world stage. That has been true especially in regard to Syria, where its proposal to confiscate chemical weapons has kept President Bashar al-Assad, a Kremlin ally, in power, and in the negotiations that secured a tentative deal on Iran’s nuclear program. Mr. Putin, who over 15 years as Russia’s paramount leader has consistently confounded his adversaries, be they foreign or domestic, once again seems to be emerging on top — if not as an outright winner in his most recent confrontation with the West, then certainly as a national hero, unbowed, firmly in control, and having surrendered nothing, especially not Crimea, his most coveted prize.

“..you’ve been had.”

• The Democratic Party Would Triangulate Its Own Mother (Matt Taibbi)

Barack Obama made headlines this week by taking on Sen. Elizabeth Warren in a dispute over our latest labor-crushing free trade deal, the Trans-Pacific Partnership. The president’s anger over Warren’s decision to lead the Senate in blocking his authority to fast-track the TPP was heavily covered by the Beltway media, which loves a good intramural food fight. It was quite a show, which was the first clue that something wasn’t quite right in this picture. The Beltway press made a huge spectacle out of how the “long-simmering” Obama-Warren “feud” had turned “personal.”

And there were lots of suggestions that the president, in his anger toward Warren, simply let his emotions get the best of him – that he let slip impolitic and perhaps sexist words in his attacks on Warren, whom he described as “absolutely wrong” and “a politician like everyone else.” Reuters, taking the cheese all the way with this “it just got personal” storyline that people on both sides of the Warren-Obama spat have been pimping to us reporters all week, quoted observers who put it like this: The president miscalculated in making this about Elizabeth Warren, that backfired badly. It only served to raise awareness of the issue and drive people away from his position,” said Chris Kofinis, a Democratic strategist who has worked with labor unions opposed to the pact. “It never makes sense to make these kinds of issues personal,” he said.

Politicians do get angry. They even sometimes get angry in public. They are, after all, human, in some cases anyway. But politicians mostly only take their masks off when cornered: stuck in a televised argument with an expert irritant, called to speak in a legislative chamber just as that nagging case of intermittent explosive disorder kicks in, surprised by a ropeline question on the campaign trail, etc. But if you think that Barack Obama, one of the coolest cucumbers ever to occupy the White House, sat down for a scheduled interview in front of a professional softballer like ex-Times and current Yahoo pundit Matt Bai – a setup that’s the presidential media equivalent of a spa treatment – and just suddenly “lost it” in a discussion about the TPP, you’ve been had.

GOP praise for Obama. Can’t be a good sign.

• TPP: Fast-Track Measure Will Pass ‘This Week’, McConnell Says (Guardian)

Republican majority leader Mitch McConnell said on Sunday the Senate will pass “fast-track” authority to negotiate major trade deals this week, despite opposition to the measure from many of President Barack Obama’s fellow Democrats. “Yes, we’ll pass it. We’ll pass it later this week,” McConnell said in an interview with ABC. The trade issue has made unlikely allies of the Republican majority leader and the Democratic president. McConnell said on Sunday that Obama has “done an excellent job” on the trade issue. The Senate voted last week to consider the fast-track measure, two days after Democrats had blocked debate on the bill, which would clear the way for a 12-nation Pacific trade agreement.

The strong support on the second vote suggested senators were unlikely to reject the trade measure. Heated debate is still expected in the Senate over amendments and later in the House of Representatives, where many Democrats staunchly oppose the Trans-Pacific Partnership on fears trade liberalisation will cost US jobs. The Republican representative Paul Ryan said on CNN that he was confident the measure would pass the House. “We will have the votes,” said Ryan, who is chairman of the House ways and means committee. “We’re doing very well. We’re gaining a lot of steam and momentum.”

How many investigative journalists are left?

• The American Press Tried To Discredit Seymour Hersh 40 Years Ago, Too (Ames)

Seymour Hersh found himself in the middle of an F-5 shitstorm this week after breaking his biggest blockbuster story of the Obama Era, debunking the official heroic White House story about how Navy SEALs took out Osama Bin Laden in a daring, secret nighttime raid in the heart of Pakistan. According to Hersh’s account, OBL was given up by one of his Pakistani ISI prison wardens—our Pakistaini allies had been holding him captive since 2006, with backing from our Saudi allies, to use for leverage. Hersh’s account calls into question a lot of things, starting with the justification for the massive, expensive, and brutal US GWOT military-intelligence web, which apparently had zilch to do with taking out the most wanted terrorist in the world. All it took, says Hersh, was one sleazy Pakistani ISI turncoat walking into a CIA storefront in Islamabad, handing them the address to Bin Laden’s location, and picking up his $25 million bounty check. About as hi-tech as an episode of Gunsmoke.

The celebrated Navy SEAL helicopter raid and killing of OBL was, according to Hersh, a stage production co-directed by the US military and Pakistan’s intelligence agency, who escorted the SEALs to Bin Laden’s room, pointed a flashlight at the captive, and watched the SEALs unload hot lead on the old cripple, turning him into spaghetti bolognese. (Raising other disturbing questions—such as, why would the White House want to silence forever the one guy with all the names, the most valuable intelligence asset in the world… unless of course that was the whole point of slaughtering him in his Abbottabad cell? Which leads one to wonder why the US wanted to make sure Bin Laden kept his secrets to himself, should one bother wondering.)

Hersh has pissed off some very powerful people and institutions with this story, and that means the inevitable media pushback to discredit his reporting is already underway, with the attacks on Hersh led by Vox Media’s Max Fisher, CNN’s Peter Bergen, and even some on the left like Nation Institute reporter Matthieu Aikins. Yesterday Slate joined the pile-on, running a wildly entertaining, hostile interview with Hersh. Such attacks by fellow journalists on a Sy Hersh bombshell are nothing new—in fact, he used to relish them, and probably still does. He got the same hostile reaction from his media colleagues when he broke his biggest story of his career: The 1974 exposé of the CIA’s massive, illegal domestic spying program, MH-CHAOS, which targeted tens, maybe hundreds of thousands of Americans, mostly antiwar and leftwing dissidents.

Hersh is better known today for his My Lai massacre and Abu Ghraib exposés, but it was his MH-CHAOS scoop, which the New York Times called “the son of Watergate,” that was his most consequential and controversial—from this one sensational exposé the entire intelligence apparatus was nearly taken down. Hersh’s exposés directly led to the famous Church Committee hearings into intelligence abuses, the Rockefeller Commission, and the less famous but more radical Pike Committee hearings in the House, which I wrote about in Pando last year. These hearings not only blew open all sorts of CIA abuses, assassination programs, drug programs and coups, but also massive intelligence failures and boondoggles.

“At the top end, this El Niño could be the strongest in recorded history.”

• Huge El Niño Becoming More Likely In 2015 (Slate)

For the first time since 1998—the year of the strongest El Niño on record, which played havoc with the world’s weather patterns and was blamed for 23,000 deaths worldwide—ocean temperatures in all five El Niño zones have risen above 1 degree Celsius warmer than normal at the same time. That’s the criteria for a moderately strong event, and the latest forecast models are unanimous that it’s going to keep strengthening for the rest of the year. A sub-surface wave of warm water is driving this trend, which has reached off-the-charts levels during the first four months of 2015. That data was enough for Australia’s Bureau of Meteorology to officially upgrade the Pacific Ocean to El Niño conditions this week. David Jones, head of climate monitoring for the BOM, told reporters that the 2015 El Niño is shaping up to be “quite a substantial event … not a weak one or a near miss.”

The U.S. weather service, which uses slightly different criteria, declared official El Niño conditions back in March. The U.S. updated its outlook on Thursday, boosting odds of a continuation of El Niño until this summer to around 90%—what they called a “pretty confident forecast.” Autumn outlooks made this time of year normally have an error of plus-or-minus 0.6 degrees Celsius, meaning the current forecast of a 2.2 degree warming of the tropical Pacific by December essentially locks in a strong event. At the low end, we can expect the biggest El Niño since the last one in 2009-2010, a moderately strong event. At the top end, this El Niño could be the strongest in recorded history.

“The Larsen B ice shelf existed for 12,000 years before it fell apart in 2002..”

• Antarctic Larsen B Ice Shelf In Last Throes Of Collapse (Livescience)

A vast Antarctica ice shelf that partly collapsed in 2002 has only a few years left before it fully disappears, according to a new study. Radar data reveals that the Larsen B ice shelf could shatter into hundreds of icebergs by 2020, researchers reported Thursday (March 14) in the journal Earth and Planetary Science Letters. “It’s really startling to see how something that existed on our planet for so long has disappeared so quickly,” lead study author Ala Khazendar, a scientist at NASA’s Jet Propulsion Laboratory in Pasadena, California, told Live Science. An ice shelf is like a floating ice plateau, fed by land-based glaciers. The Larsen B ice shelf existed for 12,000 years before it fell apart in 2002, separate studies showed.

The ice shelf is on the Antarctica Peninsula, the strip of land that juts northward toward South America. Larsen B is about half the size of Rhode Island, some 625 square miles (1,600 square kilometers). Because the ice shelf is already in the ocean, its breakup won’t further boost sea level rise. But Khazendar and his co-authors also discovered that the glaciers feeding into Larsen B’s remaining ice shelf have dramatically thinned since 2002. “What matters is how much more ice the glaciers will dump into the ocean once this ice shelf is removed,” Khazendar said. “Some of these glaciers are most likely already contributing to sea level rise because they are in the process of accelerating and thinning.”

The Leppard and Flask glaciers thinned by 65 to 72 feet (20 to 22 meters) between 2002 and 2011, the new study reported. The fastest-moving part of Flask Glacier sped up by 36%, to a speed of 2,300 feet (700 m) a year. The glaciers that were behind the vanished section of the Larsen B ice shelf sped up by as much as 8 times their former rate after the ice crumbled over a six-week period in 2002, earlier studies showed. The northwestern part of the Larsen B ice shelf is also becoming more fragmented, the researchers said. But the southeastern part is cracking up. A huge rift has appeared just 7.5 miles (12 km) from the grounding line, where the ice loses contact with the ground and starts floating on the ocean, the study reported. This crack marks where the ice shelf may start to break apart, the researchers said.

Debt Rattle May 15 2015

May 152015

May 15, 2015 Posted by Raúl Ilargi Meijer at 10:04 am Finance Tagged with: bubbles, China, Draghi, EU, fear, Fraud, goldfish, Greece, NSA, reforms, risk, Syriza, TPP 1 Response »

G. G. Bain Police machine gun, New York 1918

• Every Speculative Bubble Rests On Some Kind Of A Fairy Tale (G&M)

• Banks Seek Waivers Ahead Of Forex Guilty Pleas (Reuters)

• How China’s Banks Hide Trillions In Credit Risk – Full Frontal (Zero Hedge)

• Max Keiser: ‘Britain Is The Epicentre Of Financial Fraud’ (Newsweek)

• EU Prevents Greece From Implementing Reforms: Varoufakis (EFE)

• Varoufakis Refuses Any Bailout That Would Send Greece In ‘Death Spiral’ (Guar.)

• Greece To Privatize Port, Airports In Concession To Creditors (Bloomberg)

• Varoufakis Says Debt Swap Fills Draghi’s ‘Soul With Fear’ (Reuters)

• Greek Government Defends Itself Over Central Bank Tensions (Reuters)

• Syriza Highlights ‘Red Lines’ In Negotiations, Calls On People (Kathimerini)

• Syriza and Greece: Dancing with Austerity (Village.ie)

• Greece Signs EBRD Deal Worth €500 Million A Year (Reuters)

• You Can’t Read The TPP, But These Huge Corporations Can (Intercept)

• Secrets, Betrayals and Merkel’s Risky Silence in the NSA Scandal (Spiegel)

• Flash Crash Patsy Complained Over 100 Times About Real Market Manipulators (ZH)

• Monsanto’s Syngenta Gambit Hinges On Sale Of Seed Businesses (Reuters)

• A Third Of Europe’s Birds Is Under Threat (Guardian)

• Your Attention Span Is Now Less Than That Of A Goldfish (OC)

“Every speculative bubble rests on some kind of a fairy tale.. And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start.”

• Every Speculative Bubble Rests On Some Kind Of A Fairy Tale (G&M)

Government bonds regarded as among the safest in the developed world have become subject to violent price swings typically associated with more speculative assets. Yields on German 10-year bunds, the benchmark for the euro zone, shot up more than 20% at one point Tuesday, in a selloff described by Goldman Sachs analysts as “vicious.” As recently as last month, the same debt reached a record-low yield of 0.05%. At the other end of the confidence scale, Greek bonds strengthened slightly, reflecting renewed optimism that the embattled leftist government could cobble together a deal with euro-zone finance ministers that would get the bailout cash flowing again into its nearly empty coffers. But deal or no deal, the chances of a Greek default remain high. And despite the efforts of European authorities to contain any fallout and safeguard the euro, a spillover to other battered members of the euro club can’t be ruled out.

“There are a lot of rotten assets out there, and ultimately you have to have a reckoning,” warned Alex Jurshevski at Recovery Partners, who advises governments and corporations on debt restructuring. Although most analysts doubt this would trigger a seismic global financial shock, the risk of contagion is more than trivial, as underscored by the current sovereign-bond rout – with a loss in value of about $450-billion across global markets in just three weeks. “There’s a lot of risk in any of the markets that have been subjected to artificial downward pressure on interest rates,” Mr. Jurshevski said. Worries about sovereign debt have been around since European nations first latched on to this instrument as a relatively low-cost way of meeting the high costs of waging wars and undertaking other expensive projects.

Within four years after the newly minted Bank of England issued such bonds in 1694, government debt ballooned to £16-million from £1.25-million. By the middle of last year, government-related debt around the world totalled $58-trillion (U.S.), a 76% increase since the end of 2007, according to a report by McKinsey Global Institute aptly titled “Debt and (not much) deleveraging.” The ratio of all debt to GDP jumped 17 %age points to a whopping 286%. Since the Great Recession, debt has been expanding faster than the economy in every developed nation on the planet, led by a huge expansion of public-sector borrowing.

“Every speculative bubble rests on some kind of a fairy tale, a story the bubble participants believe in and use as rationalization to buy extremely overvalued stocks or bonds or real estate,” Mr. Vogt argued. “And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start. I think we are very close to this pivotal moment in financial history.”

Commit to crimes and demand BAU in the same breath.

• Banks Seek Waivers Ahead Of Forex Guilty Pleas (Reuters)

Banks want assurances from U.S. regulators that they will not be barred from certain businesses before agreeing to plead guilty to criminal charges over the manipulation of foreign exchange rates, causing a delay in multibillion-dollar settlements, people familiar with the matter said. In an unprecedented move, the parent companies or main banking units of JPMorgan Chase, Citigroup, RBS, Barclays and UBS are likely to plead guilty to rigging foreign exchange rates to benefit their transactions. The banks are also scrambling to line up exemptions or waivers from the Securities and Exchanges Commission and other federal regulators because criminal pleas trigger consequences such as removing the ability to manage retirement plans or raise capital easily.

In the past, waivers have generally been granted without a hitch. However, the practice has become controversial in the past year, particularly at the SEC, where Democratic Commissioner Kara Stein has criticized the agency for rubber stamping requests and being too soft on repeat offenders. Negotiating some of the waivers among the SEC’s five commissioners could prove challenging because many of these banks have broken criminal or civil laws in the past that triggered the need for waivers. Many of the banks want an SEC waiver to continue operating as “well-known seasoned issuers” so they can sell stocks and debt efficiently, people familiar with the matter said.

Such a designation allows public companies to bypass SEC approval and raise capital “off the shelf” – a process that is speedier and more convenient. Several of the people said another waiver being sought by some banks is the ability to retain a safe harbor that shields them from class action lawsuits when they make forward-looking statements. The banks involved are also seeking waivers that will allow them to continue operating in the mutual fund business, sources said. At least some of the waivers at issue in the forex probe will need to be put to a vote by the SEC’s five commissioners. No date has been set yet..

“..loan loss reserves aren’t even sufficient to cover NPLs + special mention loans, let alone defaults on a portion of the 38% of credit risk carried off the books..”

• How China’s Banks Hide Trillions In Credit Risk – Full Frontal (Zero Hedge)

There are several takeaways here. First – and most obvious – is the fact that accurately assessing credit risk in Chna is extraordinarily difficult. What we do know, is that between forced roll-overs, the practice of carrying channel loans as “investments” and “receivables”, inconsistent application of loan classification norms, and the dramatic increase in off balance sheet financing, the ‘real’ ratio of non-performing loans to total loans is likey far higher than the headline number, meaning that as economic growth grinds consistently lower, the country’s lenders could find themselves in deep trouble especially considering the fact that loan loss reserves aren’t even sufficient to cover NPLs + special mention loans, let alone defaults on a portion of the 38% of credit risk carried off the books.

The irony though is that while China clearly has a debt problem (282% of GDP), it’s also embarking on a concerted effort to slash policy rates in an effort to drive down real rates and stimulate the flagging economy, meaning the country is caught between the fallout from a shadow banking boom and the need to keep conditions loose because said boom has now gone bust, dragging credit growth down with it. In other words, the country is trying to deleverage and re-leverage at the same time. A picture perfect example of this is the PBoC’s effort to facilitate a multi-trillion yuan refi program for China’s heavily-indebted local governments. The idea is to swap existing high yield loans (accumulated via shadow banking conduits as localities sought to skirt borrowing limits) for traditional muni bonds that will carry far lower interest rates.

So while the program is designed to help local governments deleverage by cutting hundreds of billions from debt servicing costs, the CNY1 trillion in new LGB issuance (the pilot program is capped at 1 trillion yuan) represents a 150% increase in supply over 2014. Those bonds will be pledged as collateral to the PBoC for cheap cash which, if the central bank has its way, will be lent out to the real economy. So again, deleveraging and re-leveraging at the same time. This is just one of many ‘rock-hard place’ dynamics confronting the country as it marks a difficult transition from a centrally planned economy based on credit and investment to a consumption-driven model characterized by the liberalization of interest and exchange rates.

‘If you see me walking the streets of your town, then you’re probably screwed’.

• Max Keiser: ‘Britain Is The Epicentre Of Financial Fraud’ (Newsweek)

A general election, Benjamin Disraeli once observed, “inflames the passions of every class of the community. Even the poor,” he added, “begin to hope.” In 2015, Max Keiser argues, the power of global markets has rendered election fever something of an anachronism: “Tony Blair personified the shift away from democracy, towards control by bankers.” In modern politics, the prime minister “is really taking orders from finance”. “What if Miliband had won?” “There’s an impending scheme called TTIP (Transatlantic Trade and Investment Partnership, a proposed EU-US agreement) whereby all complaints – against US companies fracking in Britain, say – would go to a global tribunal, moderated by corporations. They don’t care who the prime minister is. “Why should we?” David Cameron’s role, “is being eroded to the point of insignificance”.

Keiser, 55, is a New York University graduate and former high-achieving Wall Street trader whose mischievous wit and renegade instincts have made him one of the most widely viewed broadcasters on the planet. His flagship show, Keiser Report, is carried by Russian state-funded channel RT; for that alone, some fellow-Americans consider him a traitor. But Keiser connects with a predominantly youthful audience otherwise indifferent to economics. “Rage against kleptocrats is building incrementally,” says Keiser, a tireless scourge of JP Morgan, Lehman Brothers and HSBC. “All over the world, people have had enough.” Untroubled by controversy, Keiser conducted the 2011 interview with Roseanne Barr during which she explained that a fitting reward for “banksters” would be to bring back the guillotine.

He once advised Cameron to “go back to Eton and get some of that back-stall shower pleasure”. When we first met, three years ago, just after Keiser moved to London with co-presenter and wife Stacy Herbert, he told me that the modern voter was worse off than a medieval serf. “Back then,” he said, “at least the process of theft was transparent. The barons whacked you over the head, then took all your money. The mode of larceny has changed, that’s all.” What he calls “the Thatcher-Reagan market model” has, he says, “been consigned to the dustbin. There’s no growth. There’s quantitative easing, which causes deflation. The global economy is collapsing.”

The EU, as Keiser likes to describe it, “poses as an elite club; actually it’s a leper colony where everyone’s comparing who has the most fingers left”. “Could France, say, go bankrupt?” “Absolutely. The forces killing Greece are active in France, Italy and Spain.” The EU, he says, “could be viewed as The Fourth Reich. Germany is a superpower. The Greek crisis is great for them – it keeps the euro low and German exports cheap. When countries like France go broke, EU federalisation will proceed through Berlin.”

“So far, none of the many planned reforms have been implemented because the partners first wanted a broad and comprehensive agreement..”

• EU Prevents Greece From Implementing Reforms: Varoufakis (EFE)

Greek Finance Minister Yanis Varoufakis said on Thursday that its European partners have prevented the Greek government from legislating many necessary reforms, and stressed that he would only sign an agreement that aims at economic sustainability, Efe news agency reported. So far, none of the many planned reforms have been implemented because the partners first wanted a broad and comprehensive agreement, and believed that any legislation would constitute a unilateral act, Varoufakis argued at a conference organised in the Greek capital by The Economist weekly.

The minister said that from the beginning, creditors rejected proposals to negotiate and regulate in parallel, an action that, in his view, would have helped to create confidence between Greece and its partners. Varufakis stressed that Greece was determined to reform everything in the country, noting that if Greece did not reform, it would sink. However, he stressed that he would not sign any agreement inconsistent with macroeconomics or unsustainable, and accepting conditions that cannot be met, such as had been down in the past. The error of the past, he explained, was that every negotiation looked only for what to do to make the next bailout payment instead of seeking solutions to pursue economic recovery.

Oh boy: “[Draghi] received a rapturous welcome from Christine Lagarde, who introduced him as “maestro” – the nickname once given to Alan Greenspan. “Those who know you understand that you are a man of outstanding insight, fierce determination, and above all, courage.”

• Varoufakis Refuses Any Bailout That Would Send Greece In ‘Death Spiral’ (Guar.)

Greece’s embattled finance minister, Yanis Varoufakis, stepped up his war of words with eurozone policymakers on Thursday, saying he wished his country still had the drachma, and would not sign up to any bailout plan that would send his country into a “death spiral”. With Greece facing a severe cash crisis as it struggles to secure a rescue deal from its creditors, Varoufakis – who has been officially sidelined from the debt negotiations – told a conference in Athens that he would reject any agreement in which “the numbers do not add up”. Greek GDP figures, published on Wednesday, revealed that the economy has already returned to recession. “I wish we had the drachma, I wish we had never entered this monetary union,” Varoufakis said.

“And I think that deep down all member states with the eurozone would agree with that now. Because it was very badly constructed. But once you are in, you don’t get out without a catastrophe”. He also warned that a mooted proposal for a bond swap, to ease Athens’ cash-crunch, was likely to be rejected, because it struck “fear into the soul” of European Central Bank president Mario Draghi. Despite his comments Greece on Thursday offered a concession to its international lenders by pushing ahead with the sale of its biggest port, Piraeus. Greece has asked three firms to submit bids for a majority stake in the port, a senior privatisation official told Reuters, unblocking a major sale of a public asset as creditors demand economic reforms from Athens.

Draghi, who was in Washington on Thursday to deliver a lecture on monetary policy, pointedly failed to mention the ongoing Greek crisis. He received a rapturous welcome from Christine Lagarde, the managing director of the International Monetary Fund, who introduced him as “maestro” – the nickname once given to Federal Reserve chairman Alan Greenspan. “Those who know you understand that you are a man of outstanding insight, fierce determination, and above all, courage. You can call a spade a spade without putting any of your cards on the table,” she said.

“It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government..”

• Greece To Privatize Port, Airports In Concession To Creditors (Bloomberg)

Greece will continue with efforts to privatize the country’s largest port and regional airports as it seeks ways to attract investment for other state assets, Economy Minister George Stathakis said, in a government concession in talks with its creditors. The privatization process that is already underway for the Piraeus Port Authority, operator of Greece’s largest harbor, and for 14 regional airports will continue, Stathakis said today in an interview in Tbilisi, Georgia. “We’re trying to revise some elements of these privatizations in order to improve them and I think we’ll get a sensible agreement for both.” A sale of the Piraeus Port would be a reversal on the part of Greece’s Syriza party-led government, which had earlier pledged to block such moves.

As part of ongoing negotiations to unlock aid to Europe’s most-indebted nation, Greek’s European creditors have asked for more specific policy proposals in areas including labor market deregulation, a pension-system overhaul, sales tax reform and privatization of state-held assets. Still, Stathakis said the government doesn’t plan to sell other assets at the moment.The Piraeus Port sale “is part of the bailout negotiations,” and the fact that the government “agrees to privatize the port is a compromise to creditors,” government spokesman Gabriel Sakellaridis told reporters in Athens Thursday. A venture led by Fraport won the right in November 2014 to use, operate and manage the 14 regional airports after it offered €1.2 billion for 40 years and promised to pay an annual, guaranteed leasing fee of €22.9 million.

Fraport also pledged to make €330 million in investments over the next four years. Greece is talking to Fraport and a decision should be reached “very soon.” It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government such as water companies, the post office or Public Power Corp, Stathakis said. “We’re trying to work on a different model than privatizing to attract capital and investment such as for the country’s railways and other ports” and Greece is looking at “alternative options to 100% privatization.” The sale of land at Hellenikon, site of Athens’s old airport that is Europe’s largest unused tract of urban real estate, “is an issue under discussion,” Stathakis said. A venture led-by Lamda Development last year agreed to buy the property for €915 million while also committing to spend €1.2 billion on infrastructure at the site.

“..such a swap of our own new bonds with these bonds … would feed Mr. Weidmann with excuses to create problems with the ECB’s QE.”

• Varoufakis Says Debt Swap Fills Draghi’s ‘Soul With Fear’ (Reuters)

Repayment of what Greece owes to the ECB should be pushed into the future, but it is not an option because it fills ECB chief Mario Draghi’s “soul with fear”, Greece’s finance minister said on Thursday. Yanis Varoufakis said Draghi, president of the ECB, cannot risk irritating Germany with such a debt swap because of Berlin’s objection to his bond-buying program. Varoufakis first raised the idea of swapping Greek debt for growth-linked or perpetual bonds when his leftist government came to power earlier this year, But Athens has since dropped the proposal after it got a cool reception from eurozone partners.

The outspoken minister, who has been sidelined in talks with EU and IMF lenders, brought it up again on Thursday, saying €27 billion of bonds owed to the ECB after €6.7 billion worth are repaid in July and August should be pushed back. “What must be done (is that) these €27 billion of bonds that are still held by the ECB should be taken from there and sent overnight to the distant future,” he told parliament. “How could this be done? Through a swap. The idea of a swap between the Greek government and the ECB fills Mr. Draghi’s soul with fear. Because you know that Mr. Draghi is in a big struggle against the Bundesbank, which is fighting against QE. Mr. Weidmann in particular is opposing it.”

Varoufakis was referring to the ECB’s quantitative easing (QE) or bond-buying plan and Bundesbank President Jens Weidmann’s unabashed criticism of it. Varoufakis said the bond-buying plan is “everything for Mr. Draghi” but that “allowing such a swap of our own new bonds with these bonds … would feed Mr. Weidmann with excuses to create problems with the ECB’s QE.” Prime Minister Alexis Tsipras’s government stormed to power in January promising it would end austerity and demand a debt writeoff from lenders to make the country’s debt manageable. It has spoken little about debt relief in recent months as it tries to focus on reaching a deal with lenders on a cash-for-reforms deal, which has proved difficult amid a deadlock on pension and labor issues.

I have the impression Syriza is being very polite on this issue.

• Greek Government Defends Itself Over Central Bank Tensions (Reuters)

Greece’s leftist government on Thursday sought to deflect criticism over tensions with the Bank of Greece, saying it respected the bank’s independence but was free to castigate the governor for actions he took as finance minister. Governor Yannis Stournaras’s relations with the government have come under scrutiny in recent days after a newspaper accused him of undermining Greece’s talks with creditors and government officials openly criticized him on other issues. “The Greek government hasn’t opened any issue with Mr. Stournaras. If issues have surfaced, it wasn’t due to the government’s initiative,” government spokesman Gavriil Sakellaridis told reporters. “The issue of the central bank’s independence, which is fully respected by the Greek government, is above all an issue for the central bank to defend.” [..]

Stournaras was appointed central bank governor last June. Before that he was finance minister in the conservative-led government, where he spearheaded Greece’s return to the bond markets in April 2014 after a four-year exile. But he also drew criticism from anti-bailout groups for implementing harsh spending cuts demanded by the EU and IMF. Energy Minister Panagiotis Lafazanis this week was quoted as saying Stournaras’s role in winding down ATEbank – a small lender that gave loans to farmers – in 2012 was a “scandal.” “The criticism by Mr. Lafazanis towards Mr. Stournaras refers to the period that he was finance minister,” Sakellaridis said. “Obviously, today he is a central banker but there can be and should be political criticism over the period that he was a finance minister.”

Interior Minister Nikos Voutsis this week also questioned why Stournaras – who suggested Greece tap an IMF holding account to repay €750 million to the fund this week and avoid default – had not mentioned the funds earlier. The latest tensions flared when the Efimerida ton Syntakton newspaper reported over the weekend the Bank of Greece in an e-mail to journalists leaked economic data including deposit outflows during Tsipras’s first 100 days in power. Hours later, officials at Tsipras’s office called on the central bank to deny the report, saying the report, if true, “constitutes a blow to the central bank’s independence.” The Bank of Greece has denied that either Stournaras’s office or the bank’s press office sent such an e-mail.

“Now is the time for the people to join the battle..”

• Syriza Highlights ‘Red Lines’ In Negotiations, Calls On People (Kathimerini)

Even as negotiations with Greece’s creditors enter a critical phase, the political secretariat of SYRIZA has indicated that the party will not back down from its so-called red lines, reaffirming pre-election promises to protect pensioners and workers. In a statement issued late on Thursday after a stormy session of senior party cadres, the secretariat said, “the red lines of the government are also red lines of the Greek people, expressing the interests of workers, the self-employed, pensioners, farmers and young people.” Underlining the need for the debt-racked country to return to a path of growth and social justice, the statement referred to “the persistence of creditors on enforcing the memorandum program of the Samaras government” whom it accused of exercising pressure through politics and by restricting liquidity.

The fixation on austerity was “paving the way for the far-right,” it added. The secretariat stressed that the demands of creditors “cannot be accepted, adding that SYRIZA MPs and officials would continue efforts to inform the Greek people and to invite them to join “a mobilization toward the victory of democracy and dignity.” “Now is the time for the people to join the battle,” it said. The statement followed a feverish session during which Deputy Prime Minister Yiannis Dragasakis is said to have come under fire by many SYRIZA officials for making concessions to creditors. Senior SYRIZA MP and Parliament Speaker Zoe Constantopoulou was said to be among those who claimed the government has ceded too much ground from its pre-election pledges.

Excellent longish essay. “We come with arguments, they reject them, then they say, ‘you’re wasting time’. What does that mean? It’s just saying, agree with us. You’re wasting time between getting elected and doing what we say”.

• Syriza and Greece: Dancing with Austerity (Village.ie)

Dimitrios Tzanakopoulos is Alexis Tsipras’ Chief of Staff. A serious Marxist theorist with an utterly coherent anti-capitalist worldview, he is at the very heart of the new government, directing the affairs of the Prime Minister’s office. He remains “optimistic that there will be a deal” with the partners. “Europe needs to ask if austerity is the future. If not, there must be a solution to these social catastrophes. SYRIZA has promised to find one and this is what we will do”. In many ways the government’s line in negotiations mirrors his Althusserian politics. It views instability as the most important threat for the ruling class and capital accumulation. The election of SYRIZA brought such instability, inserting an unpredictable and politically divergent player into decision-making in Europe.

So, the logic goes, the number one goal of European elites will be to overthrow the government. Not by violent means but by a soft coup, which they are currently attempting to execute by combination of economic strangulation and political humiliation. This instability thesis is a profound challenge to the dominant narrative of capitalism today, which sees it as a system based on risk and reward. But actually it has a long history as a critique, with even moderate figures like Keynes noting instability’s effects on the “animal spirits” of the economy. The prevalence of the word “confidence” in contemporary discourse evidences the degree to which economic and financial players value security. Therefore if they cannot overthrow SYRIZA, and if no capitulation is forthcoming, the team around Alexis Tsipras believe that European elites and the IMF will compromise.

This is because the third option, the last on the table, brings about an explosion of instability: the threat of Grexit from the eurozone. This opinion is shared by Loudovikos Kotsonopoulos, party intellectual and senior advisor in the Economy Ministry. “My prediction is that there will be a compromise. European elites fear a geopolitical realignment. It is very difficult for the European Union to suffer a defeat of such magnitude as a departure of one of its members. Until now the only direction was countries coming into the EU. If this ceased to be the only option it would have significant ramifications. I’m not sure that they can manage such a defeat, and neither are they. But they know as well that we are in trouble if we exit the euro. So it is tense. What are the sides going to give? And how can this be presented as a victory for both?”.

Dimitris Ioannou, writer for party publication Enthemata, is more sceptical about a compromise. “We come with arguments, they reject them, then they say, ‘you’re wasting time’. What does that mean? It’s just saying, agree with us. You’re wasting time between getting elected and doing what we say”.

Peanuts, but nice peanuts.

• Greece Signs EBRD Deal Worth €500 Million A Year (Reuters)

Greece signed an investment deal worth up to €500 million a year with the European Bank for Reconstruction and Development (EBRD) on Thursday, gaining a rare financial endorsement from the region for its attempts to remain solvent.The EBRD and Greece formally signed the five-year agreement at the development bank’s annual meeting in Georgia. It was approved by the bank’s shareholders in March.“It could help the country’s economic recovery significantly,” Greece’s Economy Ministry said in a statement.The ministry added it should boost the funding options of Greek businesses, especially the small and medium-sized ones that have been hit the hardest by the country’s economic crisis.

The EBRD’s decision to start lending in Greece comes after years of debate at the bank about whether a member of the world’s most advanced monetary union fits with the bank’s role of helping countries make the transition to market economies.The head of the bank, Suma Chakrabarti, has said he hopes to have the first Greek projects in place in coming months but admits Athens leaving the euro would complicate things.New EBRD forecasts on Thursday predicted Greece’s economy would stagnate this year and the bank’s staff warned if it left the euro, the situation would be far worse both for itself and the countries around it.

Congress can’t even read it unhindered. But GE, Apple, Nike and Walmart can.

• You Can’t Read The TPP, But These Huge Corporations Can (Intercept)

[..] who can read the text of the TPP? Not you, it’s classified. Even members of Congress can only look at it one section at a time in the Capitol’s basement, without most of their staff or the ability to keep notes. But there’s an exception: if you’re part of one of 28 U.S. government-appointed trade advisory committees providing advice to the U.S. negotiators. The committees with the most access to what’s going on in the negotiations are 16 “Industry Trade Advisory Committees,” whose members include AT&T, General Electric, Apple, Dow Chemical, Nike, Walmart and the American Petroleum Institute. The TPP is an international trade agreement currently being negotiated between the US and 11 other countries, including Japan, Australia, Chile, Singapore and Malaysia.

Among other things, it could could strengthen copyright laws, limit efforts at food safety reform and allow domestic policies to be contested by corporations in an international court. Its impact is expected to be sweeping, yet venues for public input hardly exist. Industry Trade Advisory Committees, or ITACs, are cousins to Federal Advisory Committees like the National Petroleum Council that I wrote about recently. However, ITACs are functionally exempt from many of the transparency rules that generally govern Federal Advisory Committees, and their communications are largely shielded from FOIA in order to protect “third party commercial and/or financial information from disclosure.” And even if for some reason they wanted to tell someone what they’re doing, members must sign non-disclosure agreements so they can’t “compromise” government negotiating goals. Finally, they also escape requirements to balance their industry members with representatives from public interest groups.

Angela needs to be careful.

• Secrets, Betrayals and Merkel’s Risky Silence in the NSA Scandal (Spiegel)

The world of politics abounds with tales of secrets and betrayals, of collective silence and the indiscretion of individuals. Tales of trust and mistrust. The shadowy world of espionage is no different — its secrets and betrayals legendary. But Sigmar Gabriel’s treachery stands out nonetheless. The German vice chancellor recently announced that Angela Merkel had twice assured him that the NSA and Germany’s foreign intelligence agency, the Bundesnachrichtendienst (BND), had never spied on German companies. In fact, in 2008 the Americans began reneging on agreements and going too far – much too far. They spied on aviation giant Airbus, among others. In August 2013, Angela Merkel had her then Chief of Staff Ronald Pofalla announce that the NSA was doing “nothing that damaged German interests.”

In fact, the Chancellery knew better. But Merkel refrained from taking action, opting instead to navigate her way through the situation by saying nothing. Nearly two years ago, after the information leaked by Edward Snowden first surfaced, she said she didn’t really know what it was all about. The message she’s been conveying ever since is that it’s all terribly technical and not all that important, really. The chancellor’s strategy had the desired effect. The public saw her as a victim. The general election in 2013 should have been dominated by the NSA spying scandal, but Merkel emerged unscathed, triumphant. Newspapers like the conservative Frankfurter Allgemeine Zeitung naively wrote that secret services just happen to spy — and, after all, we need intelligence, so what is one to do?

But the intelligence services and the US had overreached. Merkel could have told them exactly how far was too far. She could have backed their activities and at the same time made sure they didn’t get out of hand. In other words, she could have taken charge. When Merkel assumed office in 2005, she took an oath vowing to protect the German people from harm. It’s her job to protect German companies and the public when US secret services act as though Germany is not a sovereign nation. But people in power often fail to notice when the very quality that brought about their rise to the top turns into a weakness, a danger and even their ultimate undoing.

Merkel tends to lead by stealth. She doesn’t care for rhetoric and confrontation and she avoids quick decisions. These might not be bad qualities, but they don’t suit a head of government. Many of her predecessors loved nothing more than decisiveness and debate. It was why they sought power in the first place. But Merkel seems to worry that she will make enemies with plain speaking, so she chooses to remain close-lipped in crises such as this one.

“As for Sarao’s complaints going anywhere else: fear not, they will – just as soon as the market crashes.”

• Flash Crash Patsy Complained Over 100 Times About Real Market Manipulators (ZH)

Several weeks ago, when the CFTC and DOJ’s laughable attempt to scapegoat the May 2010 flash crash on the actions of a live-in-his-parents-basement UK trader, we explained “Why Sarao Is The Flash Crash Patsy: He Threatened To Expose The “Mass Manipulation Of High Frequency Nerds.” It now turns out that he not only threatened to expose the real market manipulators, but he acctually did it. More than 100 times.

Navinder Singh Sarao, the trader arrested last month on U.S. charges he manipulated futures prices and contributed to the May 2010 “flash crash,” leveled claims of similar misconduct against other traders before his arrest. Mr. Sarao complained to the Chicago Mercantile Exchange, where he traded futures contracts, more than 100 times over the past several years about traders he believed were engaging in manipulative conduct, people familiar with the matter said. His last complaint came just weeks before he was arrested on Justice Department charges, one of the people said.

Previously released documents have shown Mr. Sarao urging exchanges to target high-frequency trading practices he viewed as manipulative, but the frequency and extent of his complaints weren’t known. His complaints underscore the extent to which Mr. Sarao viewed his own trading as a legitimate counter to other high-speed traders. Mr. Sarao appears to have filed an unusually large volume of complaints. “That would be considered a high number,” said Ray Cahnman, a longtime futures trader and chairman of the proprietary trading firm Transmarket. “Most people would break down before they get to 100 because they realize the complaints aren’t going anywhere,” he said.

Sarao’s complaints got him somewhere: straight to prison. And now we know why. As for Sarao’s complaints going anywhere else: fear not, they will – just as soon as the market crashes. Because not only will the next market crash be epic, it will be blamed entirely on the same HFTs that for the past 7 years worked in tandem with the central banks – the source of all capital misallocation decisions – in the creation of the biggest asset bubble of all time.

You may know Syngenta under any one of these names: Imperial Chemical Industries, Novartis, AstraZeneca, Geigy, Sandoz, Ciba.

• Monsanto’s Syngenta Gambit Hinges On Sale Of Seed Businesses (Reuters)

U.S. seeds giant Monsanto is trying to line up buyers for assets worth up to $8 billion to appease competition authorities before making a fresh takeover approach for Swiss Syngenta, possibly within three weeks, industry sources said. Monsanto is expected to tap German chemicals group BASF, an existing joint venture partner, as it seeks a buyer for the U.S. seeds business of Syngenta, which can’t be part of its proposed takeover, sources said. The St. Louis-based group is after Syngenta for its industry-leading crop chemicals, driven by the idea that seeds and pesticides will be better sold and developed together.

Monsanto produces glyphosate, or Roundup, the world’s most widely used broad-spectrum herbicide, and has engineered a range of proprietary crops that resist it. Syngenta closely integrated its seeds and crop chemicals operations in 2011 and Monsanto is expected to unravel some of the main strategic decisions that shaped the group over the last four years – selling off seeds and merging Syngenta’s crop chemicals with Monsanto’s seeds. Global antitrust authorities are expected to demand remedies to reshape the balance of power in the crop protection industry before any combination is allowed.

Syngenta’s management will not want to be seen backing a deal that is then shot down by antitrust watchdogs, two industry sources said. Monsanto commands about a quarter of the $40 billion global seeds market while Syngenta’s own seeds business has a global market share of 8%. The Swiss group’s seeds business could be worth between $6 billion and more than $8 billion, according to analysts. It will have to be sold because authorities are expected to block Monsanto from entrenching its dominance of the U.S. soy and corn seeds market.

“Of 804 natural habitats assessed by the European Environment Agency for the report, 77% were deemed to be in a poor condition..”

• A Third Of Europe’s Birds Under Threat (Guardian)

One in three European birds is endangered, according to a leaked version of the most comprehensive study of Europe’s wildlife and natural habitats ever produced. The EU State of Nature report, seen by the Guardian, paints a picture of dramatic decline among once common avian species, and also warns that ecosystems are struggling to cope with the impact of human activity. Turtle dove populations have plunged by 90% or more since 1980 and could soon be placed on the International Union for the Conservation of Nature’s (IUCN) ‘red list’ of threatened species. Numbers of skylark and ortolan bunting, a songbird illegally hunted and eaten whole in France, have fallen by around half.

Of 804 natural habitats assessed by the European Environment Agency for the report, 77% were deemed to be in a poor condition, with almost a third having deteriorated since a study in 2006. Just 4% were found to be improving. The wide-ranging technical survey made use of data compiled by 27 EU countries between 2007-2012, and will be released by the European Commission later this year. “The report clearly shows that Europe’s wildlife and natural habitats are in crisis,” said Andreas Baumueller, the head of WWF Europe’s natural resources unit. “Our habitats are slowly dying and our natural capital – reflected by species such as birds and butterflies – is being put under enormous pressure from unsustainable agriculture and land use policies.”

The study finds that intensive farming and changes to natural terrain pose the greatest threat to Europe’s flora and fauna, even though biodiversity loss costs the EU an estimated €450bn per year, or 3% of GDP. Agriculture accounts for two-thirds of EU land use. The destruction or conversion of grasslands, heathlands and scrub to grow more crops – often using pesticides – has decimated many bird populations. Monoculture farming, changes in grazing regimes, and the removal of natural vegetation and landscape have added to the pressure. The report also lists changes to waterways, fragmentation of habitats and human activities such as hunting, trapping, poisoning and poaching as specific threats to birdlife.

Ha!

• Your Attention Span Is Now Less Than That Of A Goldfish (OC)

People now have shorter attention spans than goldfish — and our always-on portable devices may be to blame, a new study suggests. The study from Microsoft draws on surveys of more than 2,000 Canadians who played games online in order to determine the impact that pocket-sized devices and the increased availability of digital media and information are having on everyday life. Researchers also did in-lab monitoring, using electroencephalograms (EEGs) to monitor brain activity of 112 people. Among the findings of the 54-page study was that, thanks to our desire to always be connected, people can multi-task like never before. However, our attention spans have fallen from an average of 12 seconds in the year 2000 to just eight seconds today.

A goldfish is believed to have a nine-second attention span on average, the study says. “Canadians with more digital lifestyles (those who consume more media, are multi-screeners, social media enthusiasts, or earlier adopters of technology) struggle to focus in environments where prolonged attention is needed,” reads the study. “While digital lifestyles decrease sustained attention overall, it’s only true in the long-term. Early adopters and heavy social media users front load their attention and have more intermittent bursts of high attention. They’re better at identifying what they want/don’t want to engage with and need less to process and commit things to memory.”

Microsoft’s data is supported by similar findings released by the National Centre for Biotechnology Information and the National Library of Medicine in the U.S. Among the most concerning findings of the study is our declining ability to sustain our focus during repetitive activities: 44% of respondents said they had to concentrate really hard to stay focused on tasks, while 37% said they were unable to make the best use of their time, forcing them to work late evenings and or weekends.

Debt Rattle May 12 2015

May 122015

May 12, 2015 Posted by Raúl Ilargi Meijer at 10:03 am Finance Tagged with: bond selloff, China, default, forex rigging, Greece, Grexit, guilty plea, mangroves, NSA, pope, Russia 6 Responses »

G. G. Bain Temporary footpath, Manhattan Bridge 1908

• Fed Said To Have Emergency Plan To Intervene If US Defaulted On Debt (Reuters)

• 5 Major Banks in Unprecedented Guilty Plea On Forex Rigging (Reuters)

• US Companies Hoarding $1.7 Trillion In Cash (FT)

• That Bond Selloff Cost How Much? (CNBC)

• The Lessons For Greece’s Economy From 70 Currency Union Breakups (Bloomberg)

• This One Chart Proves The Grexit Is Desirable, And Inevitable (Raas)

• Greece Two Weeks From Cash Crisis – Yanis Varoufakis (BBC)

• Of Rules And Order: German Ordoliberalism (Economist)

• Some Eurozone Banks ‘Just As Likely To Fail’ As Before 2008 Crisis (Guardian)

• China’s Banks Obscure Credit Risk, Face “Insolvency” In Property Downturn (ZH)

• Next Up for China’s Central Bank: How to Get Loans to Small Firms (WSJ)

• During One Hour Every Day, China’s Stock Rally Falls Apart (Bloomberg)

• David Cameron May Bring EU Referendum Forward To 2016 (Guardian)

• Muskular Magic (Jim Kunstler)

• Why NSA Surveillance Is Worse Than You’ve Ever Imagined (Reuters)

• Finance Deserves Its Corrupt Reputation (Doctorow)

• Kerry to Meet Putin in Russia for the First Time in Two Years (Bloomberg)

• Sri Lanka First Nation In The World To Protect All Its Mangroves (Guardian)

• Ice Loss In West Antarctica Is Speeding Up (Guardian)

• ‘Many Powerful People Don’t Want Peace,’ Pope Tells Children (RT)

• Water: The Weirdest Liquid On The Planet (Guardian)

More bailouts?!

• Fed Said To Have Emergency Plan To Intervene If US Defaulted On Debt (Reuters)

The Federal Reserve drew up extensive plans for handling a U.S. debt default that included scheduling deferred payments and lending cash to investors, according to a lawmaker who cited Fed documents. America courted disaster in 2011 and 2013 when political fights over the national debt nearly left the federal government unable to pay its bills. Analysts and officials warned that missing payments could lead to economic calamity, and details have only slowly emerged over how financial officials braced for the unthinkable. In a June 2014 letter to Treasury Secretary Jack Lew seen by Reuters on Monday, Republican Representative Jeb Hensarling of Texas said his staff had reviewed the Fed’s unclassified plans for how to handle a default.

The plans included scheduling new payment dates for defaulted securities, Hensarling said in the letter which was also signed by Republican Representative Patrick McHenry of North Carolina. The New York Fed, which carries out the will of the Fed in financial markets, would also conduct “business as usual” with regard to accepting Treasury securities as collateral, according to the letter. The plans continue to be relevant to investors because debt ceiling debates have become a perennial danger from Washington. The Treasury is currently scraping up against an $18.1 trillion borrowing cap, and the Congressional Budget Office estimates the government could struggle to pay bills by October or November if Congress and the White House do not agree to lift the cap.

Let’s see prison terms.

• 5 Major Banks in Unprecedented Guilty Plea On Forex Rigging (Reuters)

The parent companies or main banking units of as many as five major banks, rather than their smaller subsidiaries, are expected to plead guilty to U.S. criminal charges over manipulation of foreign exchange rates, people familiar with the matter said. A handful of banks will likely resolve forex-rigging investigations by the U.S. Justice Department as soon as this week: JPMorgan Chase, Citigroup, British banks Royal Bank of Scotland and Barclays and Swiss bank UBS. It would be unprecedented for parent companies or main banking units, rather than smaller subsidiaries, of so many major banks, to plead guilty to criminal charges in a coordinated action, the people said.

If parent companies of U.S.-based JPMorgan and Citigroup plead guilty, it would be the first time in decades that a major American financial institution has done so. Last year, when Swiss bank Credit Suisse pleaded guilty in the United States to helping wealthy Americans evade taxes, it became largest institution in over 20 years to plead to criminal wrongdoing. It was soon followed by French banking giant BNP Paribas. U.S. authorities, fearing unintended reverberations such as the layoffs of innocent employees, have rarely sought criminal convictions against major global financial institutions and instead have allowed their smaller foreign subsidiaries to take the bullet.

Guilty pleas trigger a cascade of consequences. Banks may have to negotiate regulatory exemptions to avoid serious disruptions of business. It has been called the “Arthur Andersen effect” after the demise of the big 5 accounting firm after its indictment in 2002 over charges related to Enron’s accounting scandal. Some 28,000 employees at the firm lost their jobs.

The US economy could use that cash, but “64% of the cash, or about $1.1tn, was held overseas..”

• US Companies Hoarding $1.7 Trillion In Cash (FT)

Just five US companies are hoarding nearly half a trillion dollars as the country’s tax code and a tepid global economy deter businesses from spending their overseas cash piles. Apple, Microsoft, Google, Pfizer and Cisco are sitting on $439bn of cash — accounting for more than a quarter of the total $1.73tn being held by US groups, according to Moody’s Investor Services. The top 50 together hold almost $1.1tn, with the iPhone maker alone accounting for more than a 10th of the cash reserves. The Moody’s analysis showed 4% growth in the cash on corporate balance sheets of the companies it covers, excluding the financial sector, over the past year. The growing cash piles underline the reluctance of boardrooms to repatriate money held abroad even as they tap debt markets to fund record spending on dividends, buybacks and acquisitions.

Moody’s estimated that 64% of the cash, or about $1.1tn, was held overseas, up from $950bn or 57% a year ago. “There has been little progress toward corporate tax reform that would incentivise US companies to permanently repatriate funds held overseas,” said Richard Lane of Moody’s. Economists with Goldman Sachs said they saw such reform as “unlikely” to happen this year or next. Cheap borrowing costs have kept companies from dipping into foreign cash, as executives seek to avoid a tax bill on profits earned abroad. Instead, Oracle, AT&T, AbbVie and Microsoft have completed multibillion-dollar debt issuances ahead of a recent sell-off in Treasury markets, as investors prepare for the Federal Reserve to lift rates. That could change if borrowing costs rise. Activist shareholders continue to press companies to return cash — in the form of buybacks and dividends — on which S&P 500 constituents are set to spend $1tn this year.

“It’s still saying after being in crisis for so long, the economy cannot post any nominal growth over the next 10 years.”

• That Bond Selloff Cost How Much? (CNBC)

Amid a sharp selloff in the bond market, players in Europe’s low-yielding papers have gotten their fingers burned, big time. It’s “ugly bond math,” Hans Mikkelsen at Bank of America Merrill Lynch, said in a note last week. The 30-year German bund prices declined around 12% over a two-week period, with a 53-basis-point increase in yield, which tots up roughly 25 years’ worth of yield, he calculated. That compares with a typical high-yield bond, for which a 53-basis-point rise in yield would suggest an around 2.3% price fall, erasing only around a third of a year’s worth of yield, Mikkelsen said. Bond prices move inversely to yields. Bond yields have moved even further since that report was written.

Germany’s bonds have taken the brunt of the selloff, with the 30-year yielding around 1.22%, up from 0.436% on April 20, while the benchmark 10-year’s yield is around 0.603%, up from around 0.077% on April 20. That’s not terribly surprising, Bastien Drut, a strategist at Amundi, said in a blog post last week. “After more than five quarters of declining German yields, it is logical to be seeing some profit-taking,” he said. “This is even easier to understand since long-term rates were quickly moving towards negative territory.” Players in negative-yield bonds are also smarting. While bondholders may hold those securities for a variety of reasons, some clearly bought in hopes their yields would get even more negative.

It’s essentially a buy high and sell higher play. Or in less flattering terms, it could be called a greater fool theory. But the greater fool may have left the building. Switzerland’s 10-year bond has a bid-ask spread of 0.053-0.087%, turning positive after trading around a negative 0.184% on April 20. “For me, it has seemed strange why people would give money to a government and say ‘please lose money for me and I’ll take it back five years later,'” Nizam Idris, head of strategy, fixed income and currencies at Macquarie, said. “It’s still saying after being in crisis for so long, the economy cannot post any nominal growth over the next 10 years.”

“.. the evidence from the past suggests there could be a strong rebound [..] A lot depends on how the transition is managed.“

• The Lessons For Greece’s Economy From 70 Currency Union Breakups (Bloomberg)

The hardliners in Athens may have a point. History suggests Greece leaving the euro wouldn’t make catastrophe inevitable, suggests Adam Slater at Oxford Economics. More than 70 countries and territories have quit currency unions since 1945 and yet only a small minority have then suffered large losses in output, he said in a recent study. Most of these, such as in the former Yugoslavia, can be explained by other shocks like civil war. While Greece’s gross domestic product could still slump about 10%, the decline could be limited and the economy may have undetected advantages that allow a decent recovery. “The most likely outcome if it leaves is that there will be a significant initial drop in GDP, but the evidence from the past suggests there could be a strong rebound,” said Slater. “A lot depends on how the transition is managed.”

Czechoslovakia, for example, dissolved its monetary union in 1993 over the span of just five weeks. The output of Slovakia fell less than 4% that year and was 10% higher than it had been in 1992. Slater’s calculations show that in economies changing currency unions, median growth averaged 2.7% in the year of the breakup and 3.2% from the year before cessation to the year after it. Overall, growth was positive in about two-thirds of the exits and negative in about a third for the year it occurred. Very negative outcomes with output crashing 20% or more occurred just 8% of the time. Latvia suffered the most when it went solo from the Soviet Union. Oman fared the best. “Output can be surprisingly resilient in the face of currency union exits and the severe financial crises that sometimes accompany them,” said Slater.

So how would Greece fare? Slater reckons it would benefit as a weaker exchange rate spurs exports and monetary conditions loosen. By defaulting, the government could also find fiscal space to recapitalize banks and any stock slide is unlikely to hurt households given just 2% of their financial assets are in equities. Once the shock of Grexit has passed, markets could even rally. Such an argument gives support to those Greeks who argue they could walk from the euro with little long-term cost to their economy. “There is an upside risk — if reasonably well organized, historical experiences suggest Grexit might see a much smaller initial drop,” said Slater. “There could also be some upside in financial markets.”

“The road to growth is through a managed bankruptcy and fresh start.”

• This One Chart Proves The Grexit Is Desirable, And Inevitable (Raas)

Saturday 9th May, or as I’ve been calling it, G-Day, has come and gone without the invasion of Europe by the New Drachma. Having predicted May 9 as the day, I now say “I was wrong … about the date.” Yet the conditions for a Greek Exit from the Euro are as strong today as they ever were, and getting stronger by the day. In my previous post predicting May 9 as G-Day, I listed six reasons why Grexit is inevitable. The passing of the 9th without a Grexit does not in any way invalidate any of those reasons. Now I’ll add another reason; it is the only way that Greece will rebuild the Greek economy and get the country back to work. And until the country gets back to work, there will be no future for Greece. This chart, from the National Party (the ruling party) of New Zealand shows why Greece must leave the Euro, and why it will be a good thing. Look closely at this chart:

Now what does this tell us? Here are some quick observations:
• New Zealand almost when broke in 1984, and in the space of 3 – 4 years, after restructuring its economy, went from being the 24th least open economy in the OECD to being the 1st, most open economy. And the economy grew nicely, after weathering the terrible pain of the restructuring.
• Ireland has stuck with the Troika’s demands and programme, and remains in trouble.
• Iceland, after defaulting and being locked out of the international capital markets and the initial pain, has now enjoyed multiple years of solid economic growth, and is now #1 on this chart of levels of employment.
• Meanwhile Greece is right there at the bottom. It knows that it can follow Ireland and spend another decade handing over assets to the loan sharks, sorry, the Troika and the loan sharks they represent, or it can take the Iceland approach and see renewed economic growth, quickly.

The road to growth is through a managed bankruptcy and fresh start. People can do this, and so can companies. As for lending to people, in the United Kingdom the FCA (Financial Conduct Authority) requires lenders to ensure that their clients are actually able to repay, and to ensure that the loan will not result in undue hardship. So why didn’t those lending to Greece, or to be more accurate, buying Greek bonds and therefore making an affirmative investment, confirm that their investment would be able to be repaid without undue hardship?

Before June 1.

• Greece Two Weeks From Cash Crisis – Yanis Varoufakis (BBC)

Greece’s finance minister says his country’s financial situation is “terribly urgent” and the crisis could come to a head in a couple of weeks Yanis Varoufakis gave the warning after eurozone finance ministers met in Brussels to discuss the final €7.2bn tranche of Greece’s €240bn EU/IMF bailout. Ministers said Greece had made “progress” but more work was needed. The Greek government is struggling to meet its payment obligations. Earlier, Greece began the transfer of €750m in debt interest to the IMF – a day ahead of a payment deadline. “The liquidity issue is a terribly urgent issue. It’s common knowledge, let’s not beat around the bush,” Mr Varoufakis told reporters in Brussels. “From the perspective [of timing], we are talking about the next couple of weeks.”

Greece has until the end of June to reach a reform deal with its international creditors. Its finances are running so low that it has had to ask public bodies for help. The crisis has raised the prospect that Greece might default on its debts and leave the euro. The eurozone is insisting on a rigorous regime of reforms, including cuts to pensions, in return for the bailout, but Greece’s anti-austerity Syriza-led government is resisting the tough terms. In a statement, the eurozone finance ministers said they “welcomed the progress that has been achieved so far” in the negotiations, but added: “We acknowledged that more time and effort are needed to bridge the gaps on the remaining open issues.”

Eurogroup chairman Jeroen Dijsselbloem said there had to be a full deal on the bailout before Greece received any further payments. “There are time constraints and liquidity constraints and hopefully we will reach an agreement before time runs out and before money runs out,” he said. There had been fears that Greece would default on its IMF debt repayment due on Tuesday. However, a Greek finance ministry official was quoted as saying that the order for repayment had been executed on Monday. Almost €1bn has been handed over to the IMF in interest payments since the start of May. It is unclear how the government came up with the funds, but the mayor of Greece’s second city Thessaloniki revealed last week that he had handed over cash reserves in response to an appeal for money.

Whaddaya know, a useful article from the Economist.

• Of Rules And Order: German Ordoliberalism (Economist)

“No matter what the topic, it’s four to one against me,” laments Peter Bofinger, one of the five members of Germany’s Council of Economic Experts, which advises the government. The other four, he says, consider deficits and debt bad, oppose the European Central Bank’s quantitative easing as “monetary meddling” and believe austerity is the answer to the euro crisis. In Germany, says Mr Bofinger, “I’m the last Keynesian—and I feel like the last Mohican.” The relationship between Mr Bofinger and his colleagues mirrors the gap that exists between German and Anglo-Saxon (or Latin) views of economics. German thinking on economics has long differed from the mainstream in other countries, including other euro-zone members.

In the past six years of euro crisis, the gap has become larger, more visible and more controversial. Sebastian Dullien of the European Council on Foreign Relations, a think-tank, says that this amounts to a “decoupling” of Germany from the rest of the world. Such a stance leaves economists outside Germany bewildered. Why are Germans sceptical of attempts by the ECB to pep up Europe’s economies? Why do they insist on fiscal austerity in countries where demand is collapsing? And why are they obsessed with rules for their own sake, as opposed to their practical effects? The answers are rooted in German intellectual history, especially in ordoliberalism.

This is an offshoot of classical liberalism that sprouted during the Nazi period, when dissidents around Walter Eucken, an economist in Freiburg, dreamed of a better economic system. They reacted against the planned economies of Nazi Germany and the Soviet Union. But they also rejected both pure laissez-faire and Keynesian demand management. The result was a school that was close both in personal contacts and in its content to the Austrian school associated with Friedrich Hayek. The two shared a view that deficit spending for demand management was foolish. Ordoliberalism differed, however, in believing that capitalism requires a strong government to create a framework of rules which provide the order (ordo in Latin) that free markets need to function most efficiently.

Quite a few, actually.

• Some Eurozone Banks ‘Just As Likely To Fail’ As Before 2008 Crisis (Guardian)

Almost eight years after the collapse of Lehman Brothers some eurozone banks are just as vulnerable to collapse as they were before crisis hit in 2008, according to research by a UK-based academic published on Tuesday. “Our findings indicate that despite all the efforts to improve the resilience of banking, some banks are as vulnerable today as they were before the last banking crisis, they are just as likely to fail,” said Nikos Paltalidis, of the University of Portsmouth Business School. “In case of a financial or economic shock, we found that banks would experience losses big enough to reduce their capital below the required regulatory minimum, because the quality of equity on the biggest European lenders is not sufficient to mitigate systemic crisis,” he said.

In the immediate aftermath of the collapse of Lehman in September 2008, a number of governments bailed out their banks, including in the UK where Lloyds Banking Group and Royal Bank of Scotland received a £65bn capital injection . Paltalidis did not scrutinise the UK banking sector but found that a shock in sovereign debt markets across the eurozone would spread fastest around the system to cause losses for the banking industry. He said holdings of government bonds inside eurozone banks were now the biggest proportion of their assets since 2006. The report concludes: “It is evident from the results that the European banking system remains highly vulnerable and conducive to financial contagion implying that the new capital rules have not substantially reduced systemic risks, and hence, there is a need for additional policies in order to increase the resilience of the sector”.

$28 trillion in debt.

• China’s Banks Obscure Credit Risk, Face “Insolvency” In Property Downturn (ZH)

Data released on Friday by state regulators showed that China’s non-performing loans rose 141 billion yuan during Q1, marking the sharpest quarterly increase on record and bringing the total to 983 billion. NPLs have been on the rise in China for quite some time, and as we discussed at the end of March, the pace at which loans to the manufacturing sector have sourced has quickened in the face of the country’s slumping economy, leading the nation’s largest lenders to slash payout ratios. Anxiety over bad debt has only increased in recent weeks after a subsidiary of state-run China South Industries Group was allowed to default without government intervention suggesting that Beijing is willing to let small state-affiliated companies go if the risk to the system is deemed appropriately negligible.

The trend is especially worrisome given the sheer size of China’s debt load (a topic we first discussed years ago) which, at $28 trillion, totals more than 280% of GDP. Among that debt is some $364 billion in property loans (i.e. debt backed by property collateral) and according to Fitch, that’s not necessarily a good thing given the country’s slumping real estate sector, which saw developer Kaisa default earlier this year. The worry is that the preponderance of property loans on banks’ books serves to spread real estate risk to the economy writ large. In fact, Fitch says a lengthy downturn for China’s property market could render some large lenders insolvent given their exposure. Via Fitch:

Property exposure is the biggest threat to the viability of China’s banks because of the banking system’s reliance on real estate collateral and the strong linkages between property and other parts of the economy, Fitch Ratings says in a new special report. The agency estimates that for Fitch-rated banks, loans secured by property – residential mortgages and corporate loans backed by property – have increased 400% since end-2008, compared with 260% for loans overall. Loans secured by property now make up 40% of total loans in these banks. Residential mortgages have more than tripled since end-2008, and corporate loans secured with property have increased almost five-fold in the same period.

That’s what the shadow banks do…

• Next Up for China’s Central Bank: How to Get Loans to Small Firms (WSJ)

Having delivered an interest-rate cut to help big state-owned companies and local governments cope with debilitating debt, China’s central bank is grappling with another thorny task: how to steer credit to the private businesses Beijing deems crucial to growth. The quarter-percentage-point reduction in benchmark lending and deposit rates on Sunday was primarily aimed at addressing debt-repayment problems that are increasingly weighing on the Chinese economy. But the rate action is likely to bring less benefit to the small companies that Beijing is counting on to shift to a more sustainable growth path, largely because Chinese banks remain reluctant to lend to them.

To prod banks to make credit more accessible for borrowers the government wants to promote, the People’s Bank of China will speed up “targeted” measures in the coming months, according to PBOC officials and economists, giving banks more liquidity on the condition that they lend more to these groups. Looking ahead, “targeted policy tools will likely play a bigger role,” said China economist Haibin Zhu at J.P. Morgan. But even within the central bank, it’s an open question how effective such measures will be. For most of last year, the PBOC had resisted “big-bang” stimulus such as interest-rate cuts to avoid adding to China’s debt burdens. Instead, it took a number of tailored measures such as cutting the amount of rainy-day reserves and providing lower-interest-rate loans only for banks that cater to small and agricultural businesses.

However, those efforts haven’t paid off in any meaningful way, say bankers and analysts, as small corporate borrowers still find it hard to get loans, especially from large banks that see them as riskier than bigger companies. Li Qiang, at Guangrao Rural Commercial Bank in Shandong province, which specializes in lending to private businesses, said big banks in the region have all but stopped making new loans to factory owners and other private companies, and their reluctance has also made smaller banks like his more cautious. “Banks are worried about rising credit risks,” he said. These days, Mr. Li is spending most of his time persuading his clients to pay back loans on time. “It’s very difficult for businesses to obtain new credit.”

Insane.

• During One Hour Every Day, China’s Stock Rally Falls Apart (Bloomberg)

It’s the most dangerous hour in the Chinese stock market – when the world’s biggest boom suddenly goes bust. The time is 1:20 to 2:20 p.m., and its losses stand out in a rally that added 545 points, or 15%, to the Shanghai Composite Index over the past 30 days. In that hour alone, the equity gauge dropped 359 points. It fell in 19 of 30 sessions, the most consistent declines among rolling one-hour periods when the Shanghai bourse was open for trading. So what’s behind the losses? Hao Hong at Bocom International says large Chinese institutions are probably choosing that time to place sell orders as they gradually re-balance portfolios to accommodate a 109% surge in Shanghai shares over the past year.

A competing theory comes from William Wong at Chinese brokerage Shenwan Hongyuan. He says overseas investors may be reducing their positions, with orders getting executed late in the Shanghai day as European money managers start to wake up. Of course, patterns like these tend to eventually self-correct as more investors catch on. “Definitely people are looking at it,” said Brett McGonegal at Reorient Group, a Hong Kong-based advisory firm. “Once the needle moves, you have a lot more that goes behind it. Computers pick it up very quickly.”

The declines may lure traders of index futures, contracts that make it easy to place leveraged bets on intraday swings, according to Bocom’s Hong. In China’s cash equities market, where the Shanghai Composite rose 3% on Monday, investors aren’t allowed to trade the same shares more than once in a single day. Whatever the trend’s staying power, it’s yet another example of how volatile Chinese stocks have become as investors grapple over what’s in store for the nation’s longest bull market.

Expected. But a great risk this will backfire. See Nicola Sturgeon’s demand for a double-lock.

• David Cameron May Bring EU Referendum Forward To 2016 (Guardian)

David Cameron is drawing up plans to bring forward an in/out referendum on Britain’s membership of the European Union by a year to 2016 in order to avoid a politically dangerous clash with the French and German elections in 2017. As the prime minister declared that he had a mandate from the electorate to renegotiate the terms of Britain’s membership, government sources said Downing Street was keen to move quickly on the timing of the referendum. “The mood now is definitely to accelerate the process and give us the option of holding the referendum in 2016,” one source said. “We had always said that 2017 was a deadline rather than a fixed date.”

George Osborne, the chancellor, will meet other European finance ministers at a summit in Brussels on Tuesday. The issue of Britain’s membership of the EU is not on the official agenda, but it is expected to be raised informally. A parliamentary bill to approve the referendum will be included in the Queen’s speech on 27 May. The bill will be formally tabled in the House of Commons shortly afterwards to ensure that the prime minister has the option of holding the referendum next year. Government sources say there are key factors that could accelerate the momentum towards a 2016 referendum. The early introduction of the bill – and the Tories’ surprise parliamentary majority – will mean that it could enter the statute book by the end of this year if it is given a reasonably easy ride in the House of Lords.

If peers break with the Salisbury convention, which says that the upper house should not delay measures in the winning party’s election manifesto, then the government would have to force the bill through using the Parliament Act. This would take place a year after the bill’s second reading in the Commons which means the prime minister could override the Lords in June 2016. This means the referendum could be held in July or after the summer break in September 2016.

“They believe, as Musk himself often avers, that Tesla cars “don’t burn hydrocarbons.” That statement is absurd, of course, and Musk, who holds a degree in physics from Penn, must blush when he says that. ”

• Muskular Magic (Jim Kunstler)

Elon Musk, Silicon Valley’s poster-boy genius replacement for the late Steve Jobs, rolled out his PowerWall battery last week with Star Wars style fanfare, doing his bit to promote and support the delusional thinking that grips a nation unable to escape the toils of techno-grandiosity. The main delusion: that we can “solve” the problems of techno-industrial society with more and better technology. The South African born-and-raised Musk is surely better known for founding Tesla Motors, maker of the snazzy all-electric car. The denizens of Silicon Valley are crazy about the Tesla. There is no greater status trinket in Northern California, where the fog of delusion cloaks the road to the future. They believe, as Musk himself often avers, that Tesla cars “don’t burn hydrocarbons.” That statement is absurd, of course, and Musk, who holds a degree in physics from Penn, must blush when he says that.

After all, you have to plug it in and charge somewhere from the US electric grid. Only 6% of US electric power comes from “clean” hydro generation. Another 20% is nuclear. The rest is coal (48%) and natural gas (21%) with the remaining sliver coming from “renewables” and oil. (The quote marks on “renewables” are there to remind you that they probably can’t be manufactured without the support of a fossil fuel economy). Anyway, my point is that the bulk of US electricity comes from burning hydrocarbons, and then there is the nuclear part which is glossed over because the techno-geniuses and politicians of America have no idea how they are going to de-commission our aging plants, and no idea how to safely dispose of the spent fuel rod inventory simply lying around in collection pools. This stuff is capable of poisoning the entire planet and we know it.

The PowerWall roll out highlighted the “affordability” of the sleek lithium battery at $3,500 per unit. The average cluck watching Musk’s TED-like performance on the web was supposed to think he could power his home with it. Musk left out a few things. Such as: you need the rooftop solar array to feed the battery. Figure another $25,000 to $40,000 for that, depending on whether they are made in China (poor quality) or Germany, or in the USA (and installation is both laborious and expensive). Also consider that you need a charge controller and inverter to manage the electric flow and convert direct current (DC) from the sun into usable alternating current (AC) for your house — another $3,500. So, the cost of hanging a solar electric system on your house with all its parts is more like fifty grand.

What happens when the solar panels, battery, etc., reach the end of their useful lives, say 25 years or so, when there is no more fossil fuel (or an industry capable of providing it economically). How will you fabricate the replacement parts? By then the techno-wizards will have supposedly “come up with” a magic energy rescue remedy. Stand by on that, and consider the possibility that you will be disappointed with how it works out.

If they can, they will..

• NSA Surveillance Is Worse Than You’ve Ever Imagined (Reuters)

Last summer, after months of encrypted emails, I spent three days in Moscow hanging out with Edward Snowden for a Wired cover story. Over pepperoni pizza, he told me that what finally drove him to leave his country and become a whistleblower was his conviction that the National Security Agency was conducting illegal surveillance on every American. Thursday, the Second Circuit Court of Appeals in New York agreed with him. In a long-awaited opinion, the three-judge panel ruled that the NSA program that secretly intercepts the telephone metadata of every American — who calls whom and when — was illegal. As a plaintiff with Christopher Hitchens and several others in the original ACLU lawsuit against the NSA, dismissed by another appeals court on a technicality, I had a great deal of personal satisfaction.

It’s now up to Congress to vote on whether or not to modify the law and continue the program, or let it die once and for all. Lawmakers must vote on this matter by June 1, when they need to reauthorize the Patriot Act. A key factor in that decision is the American public’s attitude toward surveillance. Snowden’s revelations have clearly made a change in that attitude. In a PEW 2006 survey, for example, after the New York Times’ James Risen and Eric Lichtblau revealed the agency’s warrantless eavesdropping activities, 51% of the public still viewed the NSA’s surveillance programs as acceptable, while 47% found them unacceptable. After Snowden’s revelations, those numbers reversed. A PEW survey in March revealed that 52% of the public is now concerned about government surveillance, while 46% is not.

Given the vast amount of revelations about NSA abuses, it is somewhat surprising that just slightly more than a majority of Americans seem concerned about government surveillance. Which leads to the question of why? Is there any kind of revelation that might push the poll numbers heavily against the NSA’s spying programs? Has security fully trumped privacy as far as the American public is concerned? Or is there some program that would spark genuine public outrage? [..] One reason for the public’s lukewarm concern is what might be called NSA fatigue. There is now a sort of acceptance of highly intrusive surveillance as the new normal, the result of a bombardment of news stories on the topic.

I asked Snowden about this. “It does become the problem of one death is a tragedy and a million is a statistic,” he replied, “where today we have the violation of one person’s rights is a tragedy and the violation of a million is a statistic. The NSA is violating the rights of every American citizen every day on a comprehensive and ongoing basis. And that can numb us. That can leave us feeling disempowered, disenfranchised.”

” When you teach your students that it’s “economically rational” to commit crimes where the fines for misconduct are lower than the expected return on the crime, you instill a professional ethic that has no room for morals.”

• Finance Deserves Its Corrupt Reputation (Doctorow)

Harvard/Chicago economist Luigi Zingales published a sharply argued, searing paper about the finance industry’s reputation for corruption and social uselessness, concluding that it’s largely deserved and that academic economists have a role to play in reforming it. It’s not just that finance is corrupt, or that it captures its regulators, or that it routinely bilks its least-sophisticated customers, and is complicit in frauds perpetrated by politicians against the taxpayer. Lots of industries fit that bill – but finance is much better at it than those industries, and they do it more, and more egregiously.

Implicit in Zingales’s paper is that it’s not good for finance to be universally loathed and mistrusted. It’s the same specter that haunts Piketty’s Capital, the threat of the guillotines, or at least, Glass–Steagall. Most refreshing is the prescription for academia, to be “watchdogs, not lapdogs” to finance, to be bold about policy prescriptions even if they are politically inconceivable. He cites research that puts the “Efficient Market Hypothesis” at the core of financial malfeasance. When you teach your students that it’s “economically rational” to commit crimes where the fines for misconduct are lower than the expected return on the crime, you instill a professional ethic that has no room for morals.

As finance academics, we should care deeply about the way the financial industry is perceived by society. Not so much because this affects our own reputation, but because there might be some truth in all these criticisms, truths we cannot see because we are too embedded in our own world. And even if we thought there was no truth, we should care about the effects that this reputation has in shaping regulation and government intervention in the financial industry. Last but not least, we should care because the positive role finance can play in society is very much dependent upon the public perception of our industry.

When the anti-finance sentiment becomes rage, it is difficult to maintain a prompt and unbiased enforcement of contracts , the necessary condition for competitive arm’s length financing. Without public support, financiers need a political protection to operate, but only those financiers who enjoy rents can afford to pay for the heavy lobbying. Thus, in the face of public resentment only the noncompetitive and clubbish finance can survive.

Kerry kowtows and Bloomberg cites Breedlove on new Russian offensives? Whatever. “Kerry last met with Putin in May 2013, before relations took a turn for the worse when Russia gave asylum to Edward Snowden.”

• Kerry to Meet Putin in Russia for the First Time in Two Years (Bloomberg)

U.S. Secretary of State John Kerry will fly to Russia to meet with President Vladimir Putin for their first direct talks after two years filled with tension over Ukraine and other conflicts. Putin plans to receive Kerry on Tuesday in Sochi, the site of the 2014 Winter Olympics, the U.S. State Department announced on Monday. The top U.S. diplomat will have an opportunity to probe Putin, whose actions are drawing more attention to the inner workings of the Kremlin than at any time since the end of the Cold War. U.S. officials and analysts are trying to assess how much muscle-flexing the Russian leader plans in Europe and elsewhere as he seeks to reestablish Russia as a major power.

“Putin wants to end his isolation, this is not something which he feels comfort about,” Alexander Baunov, a senior associate at the Carnegie Moscow Center, said by e-mail. “Kerry’s goal is to see whether Putin is serious about peace in Ukraine.” In addition to Ukraine, Kerry and Putin are likely to discuss the negotiations for an Iran nuclear deal, efforts to end civil wars in Yemen and Syria, where Russia is embattled ruler Bashar al-Assad’s staunchest ally, and counterterrorism activities. Kerry will stop in Sochi on his way to a NATO foreign ministers meeting in Turkey, where the allies’ discussion will include the prospects for a new flare-up of fighting in Ukraine and steps to prevent alliance members such as the Baltic states from facing aggression by Russia.

U.S. officials such as Air Force General Philip Breedlove, NATO’s top commander, have said Russian-backed Ukrainian rebels have been using a lull in fighting under a cease-fire agreed to in February to prepare for a possible new offensive. Breedlove said the U.S. needs to increase its deterrence efforts in order to manage Putin’s “opportunistic confidence.” The U.S.’s intelligence assessment is that a renewed offensive by Ukrainian rebels is coming, and could be aimed at the southeastern port city of Mariupol, said U.S. officials who spoke on condition of anonymity to discuss classified assessments. Kharkiv in the northeast, Ukraine’s second-largest city, is also also a possibility because attention is so focused on the land corridor to Crimea, the officials said.

Girl Power!

• Sri Lanka First Nation In The World To Protect All Its Mangroves (Guardian)

More than half the world’s mangroves have been lost over the last century but all of those surviving in Sri Lanka, one of their most important havens, are now to be protected in an unprecedented operation. The organiser of the project, the biggest of its kind, see the role of women as the key to its success. Mangroves are an important protection against climate change as they sequester up to five times more carbon than other forests, area for area. They protect coastlines against flooding, including tsunamis, and provide vital habitat for marine animals, especially crabs, shrimp and juvenile fish. In an initiative designed to prevent any more being cut down in Sri Lanka and to boost some of the poorest communities in the world, women will be offered small loans and training to start businesses.

In return for the microloans, 15,000 women – including thousands of widows from the civil war – will be expected to stop using the trees for firewood and to guard the forests near their homes. Conservationists behind the scheme, which is backed by the Sri Lankan government, believe the focus on the women will bring huge benefits to living standards in coastal communities. Moreover, they are convinced it is the most effective way to get the coastal communities to care for their mangroves instead of hacking them down for firewood. “We have discovered that if you want a project to succeed, have the women of the community run it,” said Anuradha Wickramasinghe, chairman of the Sri Lankan NGO Sudeesa. “Other conservation organisations have found the same thing. “It’s in our culture. The mother is the central. Even in my own family, my mother and my wife, it’s the same.

“..the western part of Antarctica is losing mass at 121 billion tons (gigatons) a year..”

• Ice Loss In West Antarctica Is Speeding Up (Guardian)

As I’ve previously noted, one of the most challenging problems in climate science deals with how to measure the Earth’s system. Whether ocean temperatures, atmospheric temperatures, sea level, ice extent or other characteristics, measurements have to be made with sufficient accuracy and geographical coverage so that we can calculate long-term trends. In some parts of the planet, the measurements are particularly daunting because of the ruggedness of the terrain and the hostility of the environment. This brings us to a new study just published on Antarctic ice loss by Christopher Harig and Frederik Simons of Princeton. They work in the Princeton Polar Ice program. This study used satellite measurements to determine the rate of mass loss from this large ice sheet.

The ice sheet has two parts, a stable and large eastern part and a smaller and less stable western portion. The impact of climate change on these portions is different. The western part is losing mass at an increasing rate over the past years. In the east, however, the information is less clear. Increased precipitation (snowfall) is adding to the ice there, even while portions of the ice are warming. The satellite method that these authors used actually measures the gravitational pull of the ice on two orbiting satellites. The huge ice sheet has such a large mass that it attracts objects toward it. As the ice melts and flows into the oceans, the attraction decreases – it is this change that is measured. The satellites are part of the Gravity Recovery and Climate Experiment (GRACE) project.

In the past, the satellites could only be used to make gross measurements over large areas. Their ability to separate what is happening in different regions is very limited. For such local measurements, other techniques had to be used. The new paper provides an improvement to the resolution of GRACE. They find that the western part of Antarctica is losing mass at 121 billion tons (gigatons) a year. This rate has increased recently. In particular, in one region (the Amundsen Sea coast, the ice loss has doubled in the past six years). In the east, there is a small mass gain (approximately 30 gigatons a year). This mass gain partially offsets what is happening in the west but there is still a large loss of water to the sea each year.

“the industry of death, the greed that harms us all, the desire to have more money.”

• ‘Many Powerful People Don’t Want Peace,’ Pope Tells Children (RT)

The “industry of death” exists in the world as many people in power live off war, Pope Francis told Italian schoolkids in the Vatican on Monday. “Many powerful people don’t want peace because they live off war,” the Pontiff said as he met with pupils from Rome’s primary schools in the Nervi Audience Hall. Talking to children during the audience organized by the Peace Factory Foundation, he explained that every war has the arms industry behind it. “This is serious. Some powerful people make their living with the production of arms and sell them to one country for them to use against another country,” the Pope was cited by AGI news agency as saying. The head of the Catholic Church labeled the arms trade “the industry of death, the greed that harms us all, the desire to have more money.”

“The economic system orbits around money and not men, women,” he told 7,000 kids present at the audience. Despite the fact that wars “lose lives, health, education,” they are being waged to defend money and make even more profit, the Pope said. “The devil enters through greed and this is why they don’t want peace,” 78-year-old Francis said. “There can be no peace without justice,” the Pope said and asked the children to repeat those words out loud three times. “Peace must be built day by day and even if, one day in the future, we can say that there will finally be no more wars, then too peace will be built day by day because peace is not an industrial product, it is artisanal: it is built day by day through our mutual love, our closeness,” he said.

FYI.

• Water: The Weirdest Liquid On The Planet (Guardian)

Water is the only substance on Earth whose chemical formula has entered the vernacular. We all know H2O, even if we don’t understand precisely what it means. But if it sounds simple, the reality is different. This common, seemingly boring substance baffles and confuses anyone who peers at it for long enough. Water breaks all the rules. Since the 19th century, chemists have developed a robust framework to describe what liquids are and what they can do. Those ideas are almost useless at explaining the weird behaviour of water. Its strangeness underlies what happens every time you drop an ice cube into a drink. Think about it for a moment: in front of you is a solid, floating on its liquid. Solid wax doesn’t float on melted wax; solid butter doesn’t float on melted butter in a hot saucepan; rocks don’t float on lava when it spews out of a volcano.

Ice floats because water expands when it freezes. If you’ve left a bottle of fizz in the freezer overnight, you’ll know that this expansion is a powerful force: strong enough to shatter glass. This seems like a small and inconsequential curiosity, but this anomaly – one of water’s plethora of strange and unique behaviours – has shaped our planet and the life that exists on it. Through aeons of cycles of freezing and melting, water has seeped into giant boulders, cracked those rocks apart and broken them up into soil. Ice floats in our drinks, but also across our oceans as sea ice and glittering icebergs. In frozen lakes and rivers, the ice does more than decorate the surface; it insulates the water underneath, keeping it a few degrees above freezing point, even in the harshest of winters.

Water is at its most dense at 4C and, at that temperature, will sink to the bottom of a lake or river. Because bodies of water freeze from the top down, fish, plants and other organisms will almost always have somewhere to survive during seasons of bitter cold, and be able to grow in size and number. Over geological time, this oddity has allowed complex life to survive and evolve despite the Earth’s successive ice ages, periods when fragile life forms would have otherwise been wiped out on the desiccated, frozen ground and – if water behaved like a normal liquid – in solidified seas, too. This, though, is just the start. Take a glass of water and look at it now. Perhaps the strangest thing about this colourless, odourless liquid is that it is a liquid at all.

If water followed the rules, you would see nothing in that glass and our planet would have no oceans at all. All of the water on Earth should exist as only vapour: part of a thick, muggy atmosphere sitting above an inhospitable, bone-dry surface. A water molecule is made from two very light atoms – hydrogen and oxygen – and, at the ambient conditions on the surface of the Earth, it should be a gas. Hydrogen sulphide (H2S), for example, is a gas, even though it is twice the molecular weight of water. Other similar-sized molecules – such as ammonia (NH3) and hydrogen chloride (HCl) – are also gases. If you thought that was strange, how about this: hot water freezes faster than cold water. It’s a peculiarity known as the Mpemba effect, after a Tanzanian high-school student named Erasto B Mpemba, who found in 1963 that hot ice-cream mix froze faster than a colder mix in a classroom experiment. Though ridiculed by his teacher, Mpemba was not alone in noticing this peculiar effect of water – Aristotle, Francis Bacon and René Descartes have all written about it.

To understand why water bends all the rules, think about how an insect – a water strider, say – can zip along the surface of a pond. It doesn’t fall into the depths because of the water’s surface tension, which is immense when compared with that of other liquids. This comes about because of the intriguing ability of water molecules to stick to each other. In the liquid form, the hydrogen atoms of one water molecule are attracted to the oxygen atom of another molecule. Each water molecule can form up to four of these hydrogen bonds and, collectively, they give water a cohesiveness unique in liquids. This explains why water is a liquid on the surface of the Earth: the hydrogen bonds hold the molecules together in such a way that more energy than normal is needed to separate them, for example if you want to boil the liquid into a gas.

Debt Rattle May 5 2015

May 052015

May 5, 2015 Posted by Raúl Ilargi Meijer at 10:39 am Finance Tagged with: elections, euro, Greece, IMF, liquidity, Merkel, NSA, royal baby, uninsured 8 Responses »

Jack Delano Row houses, Baltimore 1940

• Liquidity Drought Could Spark Market Bloodbath, Warns IIF (Telegraph)

• “Nor Any Drop To Drink,” Citi Maps The Liquidity Paradox (Zero Hedge)

• Economic Policy Turned Inside Out (Stephen Roach)

• Most Greeks Want Euro Even With New Bailout Deal (Kathimerini)

• Deal Or No Deal, Greece Still Faces Bankruptcy (CNBC)

• France’s Far-Right Leader: EU Is Mocking Greece (CNBC)

• IMF Takes Hard Line On Aid As Greek Surplus Turns To Deficit (FT)

• Pension, Labor Disputes Dog Greek Talks As Cash Dwindles (Reuters)

• Greece Vows To Pay Debts As It Awaits Handout From Creditors (Guardian)

• Pressure Grows In Greek Talks (Kathimerini)

• Greek Talks Drag On as New EU Data Set to Underscore Crisis (Bloomberg)

• Juncker: If Greece Leaves, Anglo-Saxons Will Try To Break Up Eurozone (EurActiv)

• Greece Plan Health Booklets For The Uninsured (Kathimerini)

• China’s Crazy Stock Market, Charted (Bloomberg)

• ECB Said to Consider Delegating Powers to Ease Oversight Burden (Bloomberg)

• Australia Cuts Benchmark Interest Rate to Record Low 2% (AP)

• All The British Parties Are Eurosceptic Now (Münchau)

• Russell Brand Has Endorsed Labour – And The Tories Should Be Worried (Guardian)

• Intelligence Scandal Puts Merkel in a Tight Place (Spiegel)

• Frankly My Dear, I Don’t Give a Damn (Thad Beversdorf)

• Fukushima’s “Caldrons of Hell”: 300 Tons of Highly Radioactive Water Daily (GR)

• The Other Royal Baby Was Born on the High Seas (Daily Beast)

“Once you bring the rapid change in major benchmark prices and a change in the architecture of the global financial system together, you could end up with outcomes that are pretty painful, and certainly unknowable.”

• Liquidity Drought Could Spark Market Bloodbath, Warns IIF (Telegraph)

Investors face a “painful” adjustment in a world of evaporating liquidity and higher US interest rates that will trigger huge market swings with potentially catastrophic consequences, the Institute of International Finance has warned. Timothy Adams, the chief executive of the IIF, which represents the world’s biggest banks, described liquidity as the “top issue” at high level meetings of central bankers, chief executives and other financial institutions. He warned that the raft of regulation introduced in the wake of the 2008 crisis could potentially cause market gyrations larger than last October’s “flash crash” in US Treasuries. While Mr Adams supports tougher rules that have made the banks more resilient, he said a complex web of regulatory reform may have left banks less able to respond to the next crisis.

“There’s just less capacity for making markets,” he said. “Officials will say: we expect some volatility and this was part of this broader scheme of regulatory reform. But for the private sector there is this issue of: is the total effect of all of these various regulatory changes likely to produce outcomes larger than each individual regulatory reform and its consequences? “The cumulative unintended could end up being much larger than the one-off intended – we just don’t know.” Market liquidity, or the ease with which an investor can quickly buy or sell a security without moving its price, has evolved since the financial crisis. Investment banks, which traditionally supported liquidity in times of stress, have been shrinking their activities. Corporate bond inventories have fallen by 75pc in the US and 50pc in Europe since 2007, according to IIF data.

While much of this has been driven by banks unwinding large credit books, regulation has also discouraged them from holding large quantities of bonds that could help cushion violent swings in prices. Mr Adams said a “dramatic revolution” of the players and risks of market making had also pushed risk “out into the shadows” of non-bank lending. “We’ve rewired and re-engineered the global financial regulatory system and as a result we’re having profound impacts on institutional arrangements. At the same time we’ve had this rapid change in benchmark prices such as a 50pc drop in the price of oil, a rapid change in the dollar and other exchange rates and another drop in commodity prices,” he said. “Once you bring the rapid change in major benchmark prices and a change in the architecture of the global financial system together, you could end up with outcomes that are pretty painful, and certainly unknowable.”

“..the very same investors who are buying today seem deeply concerned about their ability to get out tomorrow”

• “Nor Any Drop To Drink,” Citi Maps The Liquidity Paradox (Zero Hedge)

The lack of liquidity in corporate credit markets couldn’t come at a worse time. Yield-starved investors have been herded into corporate debt after central banks drove yields on risk-free assets into the ground, leaving market participants with little choice but to venture into IG and then into HY. Corporations have been more than happy to oblige by issuing record amounts of debt (the proceeds from which are plowed into buybacks) at what, to management teams, seem like bargain-basement borrowing costs, but what to investors look like great income-generating opportunities compared to the growing number of government bonds that actually have a negative carry. And so, with the entire financial universe suddenly fixated on liquidity (or a lack thereof), we bring you the following from Citi’s Matt King:

From the BIS to BlackRock, and Jamie Dimon to Jose Vinals, everyone seems to be talking about market liquidity. Chiefly they seem to be fretting about a lack of it. Primary markets might be wide open, thanks in large part to the largesse of central banks, but the very same investors who are buying today seem deeply concerned about their ability to get out tomorrow… We take issue with the widespread notion that the problem is solely due to regulators having raised the cost of dealer balance sheet, and could be ameliorated if only there were greater investment in e-trading or a rise in non-dealer-to-non-dealer activity.

To be sure, we see the growth in regulation – leverage ratio and net stable funding ratio (NSFR) in particular – as one of the main reasons why rates markets are now starting to be afflicted, and indeed we expect further declines in repo volumes to add to such pressures. But illiquidity is a growing concern even in markets like equities and FX, which use barely any balance sheet at all, and where e-trading is the already the norm rather than the exception. Instead, we argue that in addition to bank regulations, there is a broad-based problem insofar as the investor base across markets has developed a greater tendency to crowd into the same trades, to be the same way round at the same time.

This “herding” effect leads to markets which trend strongly, often with low day-to-day volatility, but are prone to air pockets, and ultimately to abrupt corrections. E-trading if anything reinforces this tendency, by creating the illusion of lliquidity which evaporates under stress. To date, the air pockets and flash crashes represent little more than a curiosity, having mostly been resolved very quickly, and having had little or no obvious feed-through to longer-term market dynamics, never mind to the real economy.

But we think ignoring them would be a mistake. Each has occurred against a largely benign economic backdrop, with little by way of a fundamental driver. And yet with each one, investors’ nervousness about the risk of illiquidity is likely to have been reinforced. When the time comes that investors do see a fundamental reason all to sell – most obviously because they start to doubt the extent of central banks’ support – their desire to be first through the exit is liable to be even greater.

“Despite the abject failure of Japan’s approach, the rest of the world remains committed to using monetary policy to cure structural ailments.”

• Economic Policy Turned Inside Out (Stephen Roach)

The world economy is in the grips of a dangerous delusion. As the great boom that began in the 1990s gave way to an even greater bust, policymakers resorted to the timeworn tricks of financial engineering in an effort to recapture the magic. In doing so, they turned an unbalanced global economy into the Petri dish of the greatest experiment in the modern history of economic policy. They were convinced that it was a controlled experiment. Nothing could be further from the truth. The rise and fall of post-World War II Japan heralded what was to come. The growth miracle of an ascendant Japanese economy was premised on an unsustainable suppression of the yen. When Europe and the United States challenged this mercantilist approach with the 1985 Plaza Accord, the Bank of Japan countered with aggressive monetary easing that fueled massive asset and credit bubbles.

The rest is history. The bubbles burst, quickly bringing down Japan’s unbalanced economy. With productivity having deteriorated considerably – a symptom that had been obscured by the bubbles – Japan was unable to engineer a meaningful recovery. In fact, it still struggles with imbalances today, owing to its inability or unwillingness to embrace badly needed structural reforms – the so-called “third arrow” of Prime Minister Shinzo Abe’s economic recovery strategy, known as “Abenomics.” Despite the abject failure of Japan’s approach, the rest of the world remains committed to using monetary policy to cure structural ailments. The die was cast in the form of a seminal 2002 paper by US Federal Reserve staff economists, which became the blueprint for America’s macroeconomic stabilization policy under Fed Chairs Alan Greenspan and Ben Bernanke.

The paper’s central premise was that Japan’s monetary and fiscal authorities had erred mainly by acting too timidly. Bubbles and structural imbalances were not seen as the problem. Instead, the paper’s authors argued that Japan’s “lost decades” of anemic growth and deflation could have been avoided had policymakers shifted to stimulus more quickly and with far greater force.

They’ve voted without realizing the consequences.

• Most Greeks Want Euro Even With New Bailout Deal (Kathimerini)

The majority of Greeks want the country to stay in the eurozone should ongoing negotiations with foreign creditors fail, even if that means signing a new bailout deal, a new survey has found. Asked whether they want to keep the euro or return to the drachma, 66.5% said they preferred the common currency over 27% who would prefer a return to the nation’s old currency. A smaller majority, 55.5% over 35%, were in favor of euro membership if that entailed signing up to a new memorandum. The opinion poll by the research institute of the University of Macedonia was commissioned by Skai TV.

The survey also featured a breakdown by political party of those in favor of euro membership: 53.5% of SYRIZA voters want in, compared to 92.5 of New Democracy, 100% of To Potami and PASOK, 36.5 of Independent Greeks and 27.5% of Communist Party (KKE). Golden Dawn voters were evenly split, the poll said. On the prospect of a new memorandum as a prerequisite for euro membership, support among SYRIZA voters fell to 34 voters compared to 58% who would rather return to the drachma. Backing was at 95.5 among ND voters, 90 for PASOK, 83.5 for To Potami, 37.5 for Independent Greeks, 6 for KKE and 58.5 for GD.

“I might not be right this year, but ultimately Greece will have to default..”

• Deal Or No Deal, Greece Still Faces Bankruptcy (CNBC)

Despite hopes that Greece and its lenders will come to some agreement in May, not everyone is convinced that a deal – which could unleash a last tranche of much-needed bailout aid – can resolve the country’s looming debt problem. Talks over reforms Greece has to make in return for aid continued this weekend after months of wrangling which have led to growing fears that the country could default, or even exit the euro zone – a scenario dubbed a “Grexit.” “I think the end of the road is still bankruptcy for Greece,” Steen Jakobsen, chief economist at Saxo Bank, told CNBC Monday. “Whether it becomes a Grexit is a different story but I think they’re just playing for time.” He added that the Greek problem likely had two solutions.

“(Firstly) by defaulting, which I think will happen in the bankruptcy case. Or you can grow yourself out of it,” Jakobsen said. “But in no shape or form is Greece willing or able to enact a program that is going to set growth in motion.” The comments come after several days of technical talks between Greece and the so-called Brussels Group, made up of the bodies overseeing Greece’s bailout program, the IMF, ECB and European Commission. On Monday, Greece’s Labour Minister Panos Skourletis told Mega TV that the country had chosen to meet its debt payments and reach an agreement with its lenders, Reuters reported. An agreement with lenders on reforms could see Greece receive a vital last tranche of bailout aid worth €7.2 billion that it desperately needs to make loan repayments to the IMF and ECB in the next few months.

The next key date for Greece and its lenders is the Eurogroup meeting of euro zone finance ministers on May 11, and Greece’s Prime Minister Alexis Tsipas hopes a deal can be reached by then. But comments by Labour Minister Skourletis reflected the stumbling blocks between Greece and its lenders over reforms. He said the IMF was unyielding on its demands for labour reforms, including pensions cuts, mass layoffs and resisting a plan by the leftist-led government to raise the minimum wage, Reuters reported. The Greek government, led by the leftist Syriza party, wants to relax austerity measures to ease financial pressure on the public, but its lenders insist that it must cut spending and adhere to austerity measures.

As discussions drag on, time is running out. Greece has a loan repayment of €744 million due to the IMF on May 12 and more repayments totaling over €1 billion in June. Against this backdrop of pressing repayments, Jakobsen said he believed that Greece would still have to default. “I might not be right this year, but ultimately Greece will have to default because the burden on the economy and corporations in Greece is so large that it’s impossible to sustain without deep-rooted reform, which certainly Syriza is not standing for,” he said.

“..the euro and austerity are indissolubly linked..”

• France’s Far-Right Leader: EU Is Mocking Greece (CNBC)

France’s far-right Front National party leader, Marine Le Pen, has said that the tense talks over the debt deal with Greece has revealed the “real face” of European Union which has “brushed aside” the wishes of the Greek people. Le Pen, who described herself as a “ferocious” opponent to the EU, described the group as a “Euro dictatorship” and insisted that it was up to the Greek government to take responsibility of its future. “I think that Greece, by saying that it will not quit the euro, in reality it’s making promises that it cannot keep. For the simple reason that the euro and austerity are indissolubly linked,” Le Pen told CNBC.

Greece has been in talks with its euro zone creditors for months, as the country is running out of cash and needs a last tranche of bailout aid in order to meet debt repayments and to pay its domestic wages and pension bill this month. Greek Prime Minister Alexis Tsipras has reshuffled the team which is handling its fraught bailout negotiations, widely seen as a way to push outspoken Greek Finance Minister Yanis Varoufakis to the sidelines. “It (the EU) mocks and brushes aside the popular wish expressed in the Greek elections and it seeks to impose a policy of austerity, the continuity of policy of austerity which the Greek people no longer want. And confronted with the choice, who will win? Democracy or Euro-Dictatorship? It’s up to the Greek government to take up its responsibilities,” she said.

Just two weeks ago, the IMF was playing the good cop part.

• IMF Takes Hard Line On Aid As Greek Surplus Turns To Deficit (FT)

Greece is so far off course on its $172bn bailout programme that it faces losing vital International Monetary Fund support unless European lenders write off significant amounts of its sovereign debt, the fund has warned Athens’ eurozone creditors. The warning, delivered to eurozone finance ministers by Poul Thomsen, head of the IMF’s European department, raises the prospect that it may hold back its portion of a €7.2bn tranche of bailout aid that Greece is desperately attempting to secure to avoid bankruptcy. Half of the €7.2bn, which is the subject of intense negotiations between Athens and its creditors in Brussels-based talks that resumed on Monday, is due to come from the IMF. Without the funds, Greece is expected to run out of cash this month.

Eurozone creditors, who hold the vast bulk of Greek debt, are adamantly opposed to debt relief. But IMF support is crucial both for its funds and to sustain political backing for the Greece bailout, particularly in Germany. According to two officials present at a contentious meeting of eurozone finance ministers in Riga last month, Mr Thomsen said initial data the IMF had received from Greek authorities showed Athens was on track to run a primary budget deficit of as much as 1.5% of gross domestic product this year.
Under existing bailout targets, Athens was supposed to run a primary surplus — government receipts net of spending, excluding interest payments on sovereign debt — of 3% of GDP in 2015.

With the large surplus now turning into a sizeable deficit, Greece’s debt levels would begin to spike again. This would force either Athens to take drastic austerity measures or eurozone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sustainable path, the IMF believes. Officials said Mr Thomsen specifically mentioned the need for debt relief during the three-hour meeting. “The IMF thinks the gap between the two realities is very large right now,” said one senior official involved in the talks. He noted that both Athens, which was resisting new economic reforms, and eurozone creditors would probably fight the IMF on the issue.

“The IMF is the most inflexible side … the most extreme voices of the Brussels Group..”

• Pension, Labor Disputes Dog Greek Talks As Cash Dwindles (Reuters)

Wide differences over pension and labor reforms continued to dog intensive negotiations between Greece’s leftist government and its international creditors despite progress in other areas as the country’s cash position becomes increasingly critical. Government spokesman Gabriel Sakellaridis sounded the alarm on Monday, saying that while Athens intended to meet all its payment obligations, including nearly 1 billion euros to the IMF in May, it needed fresh funds before the end of the month. “Liquidity is a pressing issue,” Sakellaridis told a news conference. “The Greek government is not waiting until the end of May for a liquidity injection. It expects this liquidity to be offered to the Greek economy as soon as possible.”

Labor Minister Panos Skourletis said the IMF, Greece’s second biggest creditor after euro zone governments, was insisting on tough policy conditions for an interim deal to unlock frozen bailout aid. The global lender was unyielding in demands for pensions cuts, rules to ease mass layoffs of private sector workers and opposition to a government plan to raise the minimum wage, Skourletis told Mega TV. “They are asking us to not touch anything (of the austerity measures) that have ruined Greek people’s lives in the last five years,” he said. “The IMF is the most inflexible side … the most extreme voices of the Brussels Group,” the minister said. “But there are also calmer voices.” Greece faces repayments to the IMF totaling 970 million euros by May 12. It has been borrowing from municipalities and government entities to meet obligations.

Intensive talks on an interim deal between a reshuffled Greek negotiating team and representatives of the European Commission, the European Central Bank and the IMF, renamed the “Brussels Group”, have been under way since last Thursday. A European Commission spokesman said the negotiators worked through the weekend. Talks were “constructive” but work remains, he said, declining to give details. The aim is to achieve a technical-level accord that would enable euro zone finance ministers to declare when they meet on May 11 that there is a prospect of concluding the bailout review successfully. That could give the ECB grounds to permit Greek banks to buy more short-term treasury bills, easing the government’s cash crunch.

A very suggestive headline from the Guardian.

• Greece Vows To Pay Debts As It Awaits Handout From Creditors (Guardian)

Greece has vowed to honour heavy debt repayments over the coming weeks but says it is counting on international creditors to release billions of euros in rescue funds before the end of the month as crisis talks between the two sides grind on. But as the European commission described discussions over the long weekend as constructive, albeit with more work to be done, one Greek minister criticised the International Monetary Fund’s “extreme” demands for austerity cuts. Greece’s creditors are demanding reforms in exchange for bailout money, but the government of the prime minister, Alexis Tsipras, recently elected on an anti-austerity ticket, has said it will resist significant changes to pensions or the labour market.

On Monday, the Greek labour minister, Panos Skourletis, singled out the IMF as “inflexible” and “extreme”, saying the creditor was demanding pension cuts and opposing a government plan to raise the minimum wage. “They are asking us to not touch anything [of the austerity measures] that have ruined Greek people’s lives in the last five years,” Skourletis told Mega TV. “The IMF is the most inflexible side … the most extreme voices of the Brussels group” of creditors, he said. “But there are also calmer voices.” Greece owes money to the Brussels Group – the IMF, European commission and ECB – following its two bailouts in 2010 and 2012.

A further €7.2bn (£5.3bn) in bailout money is still to be paid out and fears are growing that without it Greece will default on its debts, potentially precipitating the country’s exit from the euro. The most pressing of its obligations are payments to the IMF totalling almost €1bn by 12 May. But Skourletis tried to sound a note of reassurance that payments would be met. “The country has chosen to pay its obligations and reach an agreement [with lenders]. We are trying to have the money,” he said.

The IMF wants Europe to provide debt relief. And get paid in full itself.

• Pressure Grows In Greek Talks (Kathimerini)

As negotiations continue at the technical level in Brussels, Greek government officials have significant meetings planned on Tuesday in European capitals in a bid to tackle the country’s looming cash crunch even as the IMF raises the pressure. The IMF reportedly suggested that it would pull out of Greece’s loan program if steps are not taken to lighten the country’s huge debt burden. Of the €7.2 billion installment in pending aid that Greece has been seeking to secure from creditors, €3.5 billion is an IMF tranche. A report in Monday’s Financial Times said that IMF official Poul Thomsen warned eurozone finance ministers at a summit in Riga last month that Greece would post a primary deficit of up to 1.5% of gross domestic product.

This contrasts sharply with a target set by creditors of 3% of GDP which Greece wants to reduce to 1.5% of GDP. Billions of euros in measures would be required to plug the gap. But, according to the report, Thomsen underlined the need for debt relief. Shortly after reports that the IMF has upped the pressure in debt talks, Tsipras “discussed matters relating to the current negotiations” with the Fund’s chief Christine Lagarde, his office said. The development comes as Greece aims to seek a liquidity boost from another of its creditors, the European Central Bank. Deputy Prime Minister Yiannis Dragasakis is to meet with ECB President Mario Draghi in Frankfurt on Tuesday afternoon along with Euclid Tsakalotos, the alternate foreign minister who has been tasked with “coordinating” Greece’s negotiating team.

The visit comes just a day before the ECB’s governing council is to decide on whether to extend more emergency liquidity to Greece even as speculation mounts that the ECB will up pressure on Greece by increasing the haircut on collateral that is accepted in exchange for funding. Athens has a much more optimistic plan in mind: It aims to push the ECB to raise the ceiling on the amount of treasury bills Greece is allowed to issue. As Dragasakis and Tsakalotos meet with Draghi in Frankfurt, Greece’s Finance Minister Yanis Varoufakis is due in Paris Tuesday morning for talks with his French counterpart Michel Sapin. He is then to fly to Brussels for talks with European Economic and Monetary Affairs Commissioner Pierre Moscovici.

“.. it also provides Greece with some bargaining power when they negotiate the primary surplus for this year and next.”

• Greek Talks Drag On as New EU Data Set to Underscore Crisis (Bloomberg)

Greece’s talks with international creditors dragged on as the European Commission prepares new forecasts that are expected to underscore the scale of the crisis facing the country’s government. While officials on all sides have reported progress, six days of talks have yet to provide the breakthrough Greece needs to guarantee the flow of liquidity to its banks. The prolonged cash squeeze is threatening the country’s fragile recovery, with a person familiar with the talks saying that the Commission is likely to slash its growth and budget estimates when it releases new figures on Tuesday. The fiscal noose is tightening after weeks of brinkmanship and Prime Minister Alexis Tsipras needs to show European officials that he’s willing to find a compromise if he’s to head off the risk of capital controls.

At the same time, the weakening economic outlook may give his negotiating team more leeway to argue that Greece can’t meet the budget targets demanded by its creditors. “Greek economic conditions are deteriorating quite fast,” said Frederik Ducrozet at Credit Agricole in Paris. “It’s negative in terms of the fiscal revenues and the backdrop for the negotiations. But it also provides Greece with some bargaining power when they negotiate the primary surplus for this year and next.” In a sign that leaders are stepping up the drive for an agreement, Greek Deputy Prime Minister Yannis Dragasakis will meet ECB President Mario Draghi in Frankfurt on Tuesday. In Paris, Finance Minister Yanis Varoufakis will have a meeting with his French counterpart Michel Sapin.

European Commission President Jean-Claude Juncker dismissed the notion of a Greek exit from the euro and said Tsipras had to take into account the other countries in the currency. “Grexit isn’t an option,” Juncker said in a televised speech in Leuven, Belgium. In February, the Commission forecast economic growth of 2.5% this year and a primary budget surplus at 4.8% of gross domestic product. Greece argues that such a surplus target is unachievable and says a goal of 1.5% is more realistic. Greece’s banks need some signs of progress in the Brussels talks, as the ECB keeps the liquidity they need for survival on a tight leash. A breakdown could prompt the ECB to raise the haircut it demands on Greek collateral as soon as May 6, a decision which would risk pushing the country further toward financial chaos.

What a douche: “..the government of Mr. Samaras was doing the right things, [and] those who were contesting these right things won the elections..” ‘Right things’=misery.

• Juncker: If Greece Leaves, Anglo-Saxons Will Try To Break Up Eurozone (EurActiv)

European Commission President Jean Claude Juncker said that if Greece left the single currency area, the “Anglo-Saxon world” would try everything to break it up. Speaking at the Catholic University of Leuven on May 4, Juncker made it clear that a ‘Grexit’ was not an option, because it would be an existential threat to the 19-member economic and monetary union. Juncker, who chose French to deliver his 40-minute speech at the Flemish university, said: “The world wants to know which way we are going. We should make sure that everyone understands that the economic and monetary union is irreversible, that the euro is a currency that is here to stay, which is not going to be abolished or suspended. “

Juncker added that he had discussed the issue the same day with former Greek Prime Minister Antonis Samaras, who was also present at the event. “Grexit is not an option. If Greece would accept it, if the others would accept it, that the country would exit the zone of security and prosperity constituted by the eurozone, we would be exposed to huge danger, because the Anglo-Saxon world would do everything to try to decompose, at a regular rhythm, by (the) sale, apartment by apartment, of the eurozone,” he said. Later, in the Q&A session, Juncker returned to the issue, speaking this time in English.

“We have to know that Greece was misbehaving in the past, that the government of Mr. Samaras was doing the right things, that those who were contesting these right things won the elections. Now they are confronted with their election promises, and we have to deal with that,” he said, referring of the leftist government of Alexis Tsipras. “My concern is not the Greek government. My concern is the Greek people. We don’t have the right to deal with the Greek people as if they were the neglected part of Europe. The Greek people have great dignity. This is a great nation, although being from time to time a weak state, and we have to show solidarity with the Greeks. And the [present] Greek government has to know that at the level of the eurozone, we have to deal with 19 democracies, not only with one, not only with Greek democracy,” he said.

One of the questions referred to the UK, and the push of the present government to renegotiate its status in the EU. “I want a fair deal with Britain, but Britain is not in a situation to impose its exclusive agenda to all the other member states of Europe”, Juncker said. “I’m a strong defender of the freedom of movement of workers”, he continued, alluding to the rhetoric against workers from the Eastern European countries in the UK . He added: “This is a basic principle of the EU laid down in the Treaty of Rome. So the British are kindly invited to present a list of their requests, we’ll take this under exam, with friendly attention, and then we will see. I don’t want Britain to leave the EU, but I don’t want the EU to follow an exclusive British commandership.”

Hunger and healthcare. That’s the real Greek crisis.

• Greece Plan Health Booklets For The Uninsured (Kathimerini)

Health Minister Panayiotis Kouroublis on Monday unveiled a plan aimed at helping some 2.5 million uninsured citizens gain access to free healthcare. Under Kouroublis’s plan, which is expected to be enforced by next month, millions of uninsured citizens will be able to apply for health booklets at Citizens’ Information Centers (KEPs). Greeks and immigrants who are legally resident in Greece will be eligible, as will children and pregnant women irrespective of their legal status. Apart from free access to medical assistance and drugs, uninsured patients will also be able to undergo health tests at state hospitals.

Alternate Administrative Reform Minister Giorgos Katrougalos, who also attended Monday’s press conference, said the new reform was a crucial one “that we have to do, whatever the cost.” Kouroublis said Greece’s crisis had created deep inequalities in society which a leftist government cannot accept. The government’s plan is to be put up for public consultation until May 11. Then, once the best of the proposed improvements have been applied, a biministerial decision will be signed, paving the way for the legislation to be implemented. Although existing Greek law allows uninsured citizens access to health services free of charge, many hospital units and public services interpret the legislation in varying ways and so the law is not always enforced.

The bankrupt casino that buys the west.

• China’s Crazy Stock Market, Charted (Bloomberg)

The Financial Times reports that every one of the 29 IPOs that took place in Shanghai and Shenzhen last month have risen by the daily limit each day since. Meanwhile, the Shanghai Composite Index is up a delirious 39% so far this year, while the CSI 300 Index has gained 35%. For many Chinese investors, that is some tantalizing price action. Openings of Chinese brokerage accounts have surged in recent months as has the take-up of margin accounts which offer investors the ability to borrow against their stock portfolios.

How high could the whole thing go, you ask? The Macquarie analysts estimate that, at an extreme, investors could borrow RMB 85.7 for every RMB 100 of collateral in their portfolios. That suggests the theoretical ability to increase margin finance loans from the current 1.7 trillion yuan to as much as 9.4 trillion yuan, or 461% higher than the current level. While it’s doubtful that would ever happen (banks, after all, do not have unlimited lending capacity and the government has already instituted some curbs on margin lending) even a moderate increase in margin borrowings could be meaningful. At 3.2% of total market cap, China’s margin debt has already eclipsed bubble-era Japan as well as pre-Asian Financial Crisis Korea.

“The central bank nominally has a “strict separation” between supervisory and monetary-policy operations.”

• ECB Said to Consider Delegating Powers to Ease Oversight Burden (Bloomberg)

The ECB is considering delegating more power to its supervisory arm to avoid monetary-policy makers becoming entangled in low-level details, said people familiar with the matter. Since assuming oversight of the euro area’s largest lenders in November, ECB officials have come to the conclusion that the legal requirement for each decision to be seen by the 25-member Governing Council isn’t sustainable, the people said, asking not to be named as the deliberations aren’t public. An ECB spokesman declined to comment. The discussions highlight the Frankfurt-based institution’s struggle to incorporate fresh responsibilities after 16 years of focusing on price stability. They may also provide ammunition to critics of the current set-up who want the Single Supervisory Mechanism to be split off entirely.

The SSM expects to take around 6,000 decisions a year across 19 countries on topics including capital plans and approval of bank management – all of which must pass through the Governing Council. One option being considered is ‘umbrella decisions’ that can cover multiple cases, two of the people said. Officials may make adjustments after a planned review of procedures due by the end of this year. The ECB was given responsibility for banking supervision by European Union leaders in 2012, as the first pillar of a Banking Union to mitigate future financial crises. Under the leadership of France’s Daniele Nouy, the SSM has aggressively pursued its mandate, scrutinizing bank balance sheets in an unprecedented review last year and pushing for higher capital levels.

Even so, the watchdog’s powers are effectively limited by the EU regulation written as the SSM was hastily constructed. That document must comply with Article 129 of the EU’s basic treaty, which states that the decision-making bodies of the ECB are the Governing Council and the Executive Board. It’s unlikely that the ECB will seek to change the treaty or even amend the SSM regulation, two of the people said. Instead, lawyers are examining how the rules can be adjusted to fit with existing laws, they said. SSM officials are anxious to avoid conflicts with the monetary-policy side of the ECB and have erred on the side of legal prudence with regard to the running of the institution, one of the people said. The central bank nominally has a “strict separation” between supervisory and monetary-policy operations.

Not chasing the bottom is so yesterday.

• Australia Cuts Benchmark Interest Rate to Record Low 2% (AP)

Australia’s central bank on Tuesday cut its benchmark interest rate to a record low of 2% in a bid to jolt the nation’s economy which is weighed by falling commodity prices and weakening demand from China. The Reserve Bank of Australia’s quarter percentage point rate cut was the first in three months. Before the last cut in February, the interest rate had been steady at 2.5% since August 2013. Economists largely anticipated the move, although some thought the bank would hold off until after the government released its budget next week for the fiscal year beginning July 1. Resource-rich Australia managed to avoid a recession during the global financial crisis thanks to a decade-long mining boom.

But with the economy weakening in China, which is Australia’s largest export market, prices for commodities such as iron ore and coal have dropped. RBA Governor Glenn Stevens said in a statement the global economy was expanding at a moderate pace, but commodity prices have declined over the past year, in some cases sharply. “Looking ahead, the key drag on private demand is likely to be weakness in business capital expenditure in both the mining and non-mining sectors over the coming year,” Stevens said. Public spending is also expected to be subdued. The economy was therefore likely to be operating with a degree of spare capacity for some time yet.

The central bank forecast inflation to remain within the target range of between 2 and 3% over the next one to two years, even with a lower exchange rate. “Low interest rates are acting to support borrowing and spending, and credit is recording moderate growth overall, with stronger lending to businesses of late,” Stevens said. The Australian dollar has declined sharply against a rising U.S. dollar over the past year, though less so against a basket of currencies. “Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices,” Stevens said.

Good!

• All The British Parties Are Eurosceptic Now (Münchau)

The aftermath of the British elections is one of the most pressing issues on the minds of EU policy makers. It ranks some distance behind a breakdown of the Minsk II ceasefire agreement in Ukraine, but some way ahead of a sudden Greek exit from the eurozone. Yet British voters do not return these attentions. Astonishingly, given the importance of this Thursday’s elections for Britain’s future in the EU, Europe has played hardly any role in the debate. What I can predict with some degree of confidence is that the outcome of these elections will have a profound effect on Britain’s future membership of the EU. The trouble is that the effect is hard to calculate – no matter who wins. A British exit from the EU is possible under virtually any election outcome.

David Cameron has promised an in-out referendum in 2017 if the Conservative party wins. If, instead, the Tories form a coalition with the more pro-European Liberal Democrats, the odds of a referendum are less clear. It would depend on the outcome of coalition negotiations that have yet to take place. The Labour party is viewed as, on the whole, more pro-EU than the Conservatives. That is true, but misleading. Labour has not chosen to raise the EU as a central election issue either. Of the 83 pages of the Labour party’s manifesto, the EU occupies little more than a single page – on page 76. That section consists of a very odd compilation of statements and proposals. I get the sense that I am spending more time summarising them than they spent writing them.

The short passage asks for less austerity and more budget discipline at the same time. It wants a “red card mechanism” to allow national parliaments to veto EU legislation. The overarching goal is “to change the EU in the best interests of Britain” and “to protect our national interest”. There is no mention of the EU’s interest, something that the social democratic parties of continental Europe nowadays commit to as well. Naturally, Labour rules out joining the euro. If you were reading this without knowing anything about the party and its history, you might conclude that there was a greater degree of overlap between Labour’s manifesto and that of the National Front in France, than with centre-left parties elsewhere in the EU.

To a continental European, this reads like a profoundly eurosceptic programme. If you ask people in Britain and the rest of the EU whether they support reform of the EU, the majority would say yes. But they mean opposite things by these assertions. What Labour has in common with the Conservatives, but not with social democrats and socialists in continental Europe, is support for returning certain EU powers to national parliaments.

Brand doesn’t remember Tony Blair.

• Russell Brand Has Endorsed Labour – And The Tories Should Be Worried (Guardian)

He has nearly 10 million Twitter followers; his YouTube interview with Ed Miliband received well over a million hits and counting; he is listened to by hundreds of thousands of disillusioned Britons, particularly young people who have been repeatedly kicked over the last few years. Russell Brand matters. And however much bluff and bluster the Tories now pull – maybe more playground abuse from David Cameron, who called Brand a “joke” – his endorsement of Labour in England and Wales will worry them. More people have registered to vote than ever before: between the middle of March and the deadline to register, nearly 2.3 million registered, over 700,000 of them 24 years old or younger. In countless marginal seats, disillusioned voters who were either going to plump for a protest party or not vote at all could well decide whether we are ruled by David Cameron, George Osborne and Iain Duncan Smith for another half a decade.

Naturally, Brand’s endorsement is being portrayed as a giant U-turn, and sure enough, he has abandoned his “no vote” stance. But Brand has been on a very public political journey, previously indicating his support for voting for Scottish independence and Syriza in Greece. He has been supportive of the Greens, and still calls on the people of Brighton Pavilion to return Caroline Lucas to parliament. And it isn’t quite as big a U-turn as you might think. Brand has thrown his support behind grassroots struggles, particularly over housing. He believes that change “comes from below, movements putting pressure on governments”, but if those in power are resolutely hostile, then there are limitations to what such pressure can achieve.

He’s not advocating a vote for Labour because he’s become a born-again Milibandite, but because he believes Labour are far more amenable to pressure than Tories who will happily shred the welfare state, the NHS, social housing and workers’ rights. When Ed Miliband met Brand, the comedian-cum-activist explained, he made it clear he “welcomes and wants pressure from below”. Brand is sometimes bizarrely portrayed as the cause of voter disengagement: obviously, it’s our political and media elites who are responsible for that. But actually he is a symptom. He achieved such traction because he summed up how millions of people already felt. He has won the ear of a section of the population that practically no other public figure has.

She should resign over this.

• Intelligence Scandal Puts Merkel in a Tight Place (Spiegel)

July 14, 2013 was an overcast day. The German chancellor was reclining in a red armchair across from two television hosts with the country’s primary public broadcaster. With Berlin’s Spree River flowing behind her, Angela Merkel gave her traditional summer television interview. The discussion focused in part on the unbridled drive of America’s NSA intelligence service to collect as much information as possible. Edward Snowden’s initial revelations had been published just one month earlier, but by the time of the interview, the chancellor had already dispatched her interior minister to Washington. Having taken action to confront the issue, Merkel was in high spirits. Merkel’s interviewers wanted to know exactly what data had been targeted in Germany.

Reports had been making the rounds, they reminded her, of “economic espionage.” Merkel sat quietly. “So, on that,” she said, “the German interior minister was clearly told that there is no industrial espionage against German companies.” Only a few hundred meters away from the red armchair, though, more was known. In Merkel’s Chancellery, staff had long been aware that the information provided by the United States wasn’t true. By 2010 at the latest, the Chancellery had received indications that the NSA had attempted to spy on European firms, including EADS, the European aerospace and defense company that is partly owned by German shareholders. They also knew that the Americans were seeking to join forces with Germany’s foreign intelligence agency, the Bundesnachrichtendienst (BND), in their spying efforts.

It would be astonishing if Merkel herself had not known about these occurrences long before she sat down for the interview. Indeed, she would look even worse had she not known. Officially, the chancellor is in charge of oversight of foreign intelligence and Merkel has an entire department in the Chancellery responsible for formulating the BND’s assignments, managing them and, most importantly, keeping an eye on the agency. But the Chancellery wasn’t just sloppy in exercising this oversight. It failed completely. As such, the scandal surrounding NSA spying, and the evident cooperation between the BND and the NSA, is an affair for Chancellor Merkel, as well. An online report by SPIEGEL triggered the latest intelligence service scandal a week ago Thursday.

SPIEGEL reported that the NSA had made massive efforts to target and spy on German and European targets using BND facilities. Despite having had indications for years, the Chancellery had essentially done nothing to stop it. The scope of the affair became increasingly apparent over the past week. It now appears that the NSA, via its cooperation with the BND, didn’t just spy on companies, but also on politicians and institutions in Europe. The conclusion can be drawn from search criteria the Americans supplied to their German partners. The German Federal Prosecutor’s Office is now reviewing whether there is “initial evidence for a criminal offense that would fall under our jurisdiction.” Within the federal public prosecutor’s jurisdiction is the prosecution of crimes relating to espionage and treason.

Thad can be wonderfully angry.

• Frankly My Dear, I Don’t Give a Damn (Thad Beversdorf)

I find it shocking how often I have people tell me the Constitution is out of date and is no longer relevant or necessary. Then there are the vast majority of people that think about the Constitution the same way they think about religion; it makes us feel good to believe in it and we’ll even worship it on a holiday or two. The reality is that those who seem to get very worked up to the point that they are willing to act in defense of the Constitution even against the highest levels of government make up a very small minority of Americans. This is a real problem. You see if people gave a damn the government couldn’t get away with negating the Constitution.

But the vast majority of people just don’t give a damn and so the government very easily provides ridiculous and false legal sounding arguments to explain away why they have become a higher law than the Constitution. Now I’ve tried to understand why it is that we Americans are so damn apathetic about everything the government and government officials do. Let me give a couple examples for which our apathy just boggles my mind. We know they took us into wars on false pretenses resulting in the wrongful deaths of thousands of American soldiers and hundreds of thousands of innocent civilians and yet we’ve prosecuted no one.

Hell they’ve admitted to hacking into millions of our home webcams and downloading videos and pictures of us in our most private moments and maintaining those downloads on government servers and then sharing these files with foreign governments. But because today’s American is simply a shell of a citizen none of the criminal atrocities creates even a stir from us. Sure we all read about these atrocities and we are angered in the moment but it passes rather quickly and we fall back into our self induced ignorant bliss. Only two things can get Americans to formidably rise up. The first is a very direct and immediate impediment to our comfort. For example try cutting back on the monthly social welfare checks. You’ll have riots. The second way is if the mainstream media relentlessly instructs us to be upset about a particular issue. Outside of that there is absolutely nothing the new American won’t move past like water off a duck’s back.

“The first thing I would do as Prime Minister is evacuate all the children that are in the contaminated areas.”

• Fukushima’s “Caldrons of Hell”: 300 Tons of Highly Radioactive Water Daily (GR)

Yauemon Sato, the ninth-generation chief of a sake brewery operating here since 1790 [and president of electric power company Aizu Denryoku] likens the crippled reactors at the Fukushima No. 1 nuclear power plant to “caldrons of hell.” In a recent interview with The Asahi Shimbun, Sato said the nuclear disaster “continues to recur every day”… Excerpts from the interview follow: Question: What drives you to be so active, including in the use of renewable energy?

Sato: You know the caldron of hell? You will be sent to hell and will be boiled in that caldron if you do evil. And there are four such caldrons in Fukushima… And the disaster has yet to end. It continues to recur every day. More than 300 tons of water, contaminated with intense levels of radioactive substances, are being generated every day… Hiroaki Koide, professor at Kyoto Univ. Research Reactor Institute (retired), Apr 24, 2015:

11:30 – The Prime Minister [said Fukushima] had been brought to a close. My reaction on hearing his words was, ‘Stop kidding.’ Reality is, though 4 years have passed, the accident has not yet been brought to a close at all.
15:15 – What is the situation within the core? How much has melted? Where is the fuel exactly? We do not know… This is an accident of a severity that cannot be imagined anywhere else… As you can see, we are facing a very, very difficult situation. The only choice that we have open to us is to somehow keep the situation from getting worse.
30:30 – We are in a very terrible situation, I would even call it a crisis.
55:30 – The Japanese government has issued a declaration that this is an emergency situation. As a result, normal laws do not have to be followed. What they are saying is that, in these very high radiation exposure level areas, they have basically abandoned people to live there. They’ve actually thrown them away to live there… The Cs-137 that’s fallen onto Japanese land in the Tohoku and Kanto regions, so much so that this area should all be put under the radiation control area designation [the Kanto region includes Tokyo and is home to over 40 million people].
1:01:00 – I really do want to impress upon you that the accident effects are continuing.
1:02:00 – Bahrain’s Ambassador to Japan: If you were the Prime Minister of Japan, what are you going to do with this very complicated situation?… Koide: When you have an emergency legally declared, regular laws are put on hold. What that means is people can be thrown away into areas where normally people should not be… The first thing I would do as Prime Minister is evacuate all the children that are in the contaminated areas.

It would be good if the Windsors adopt that baby, set up a college fund etc. Who am I kidding?

• The Other Royal Baby Was Born on the High Seas (Daily Beast)

She’s not a princess. We don’t even know her name. But the image of this child swaddled in a hazmat suit has brought tears of joy and pain to millions of Italians. Around the time Prince William and the Duchess of Cambridge, then in the early stages of labor, hopped into their armored Land Rover and headed to the Lindo Wing of St. Mary’s Hospital in London on Saturday morning, another pregnant woman started her own journey towards motherhood. We know well the minute details of the royal princess’s birth; but we believe the second baby girl born over the weekend has a story worth telling, too. She was delivered onboard the Italian Navy’s patrol boat Bettica after her mother was rescued from a rubber dinghy with hundreds of other migrants several hours after they left the Libyan coastline.

The Italian Navy says the young mother was already in labor when smugglers forced her onto the rubber boat on the Libyan coast. In the absence of an easel or trumpet like the ones brought out for the royal princess, after the migrant baby girl was born the Italian Navy doctors swaddled her in a disposable hazmat suit (used to try to protect the wearer from dangerous chemicals and infections) and tweeted her picture as a sign of hope. The Italian press have dubbed her “rose petal.” We don’t yet know the migrant mother’s name, her nationality or why she felt that crossing the perilous Mediterranean Sea to Europe was worth such a risk for her and her unborn child. She arrived in Pozzallo, Sicily, on the Bettica on Monday along with 654 people who were saved from four sinking vessels over the weekend.

The mother will be processed and questioned, and both she and her infant daughter will be given basic medical care and a checkup before being moved to a refugee camp somewhere in Italy. If they are lucky, they will get to spend a few nights in a hospital. Unlike the Duchess of Cambridge who left St. Mary’s ten hours after giving birth, a hospital stay probably sounds like a luxury for the migrant mother after all she has been through. We don’t know if the baby’s father was with her, or if he was one of the ten men who died over the weekend during which 6,771 migrants were saved from the sea.

The migrant baby doesn’t have a name yet, either. But the Italian press have dubbed her “rose petal.” She is one of now thousands of babies and children who survived the crossing this year so far. Italy’s branch of Save The Children says there has been a 60% increase in minors and pregnant women arriving by sea over last year. Of course that means that of the estimated 1,750 people who have died making the deadly crossing since the beginning of the year, many are likely to be children and hopeful mothers, too.

Debt Rattle May 2 2015

May 022015

May 2, 2015 Posted by Raúl Ilargi Meijer at 10:36 am Finance Tagged with: bubble, democracy, house of cards, Iceland, Merkel, murders, NATO, NSA, Odessa, TTP 11 Responses »

NPC National Service Co. front, 1610 14th Street N.W., Washington DC 1920

• Grantham Says Fed “Bound And Determined” To Engineer “Full-Fledged Bubble” (ZH)

• Our Banking System is a Giant House of Cards (Lynn Parramore)

• For China To Start All Over, The Dinosaurs Will Have To Change (Satyajit Das)

• Your No. 1 End-Of-The-World Investing Strategy (Paul B. Farrell)

• How Ben Bernanke Let Down America (MarketWatch)

• Quick Breakthrough At Brussels Group Looks Unlikely (Kathimerini)

• The Coming Defaults Of Greece (Vox.eu)

• FastTrack TPP: The Death of Sovereignty, Separation of Powers and Democracy (JF)

• Iceland Pirate Party Popularity Rivals Government Coalition (RT)

• Angela Merkel’s NSA Nightmare Just Got A Lot Worse (Don Quijones)

• Rioters In Milan Smash Shopfronts, Throw Smoke Bombs As Expo Opens (CNBC)

• Russia Preparing Offensive In Ukraine, NATO General Imagines (Zero Hedge)

• Kiev Is Making No ‘Tangible Steps’ To Investigate Year-Old Odessa Massacre (RT)

• Kim Dotcom Awarded Millions For Legal Bills And Living Expenses (TF)

I think people should stop calling this a ‘market’.

• Grantham Says Fed “Bound And Determined” To Engineer “Full-Fledged Bubble” (ZH)

Back in November, we highlighted the accuracy of Jeremy Grantham’s predictions about the trajectory of the central bank liquidity-fueled equity rally. In terms of how far the market can run before reality and gravity finally reassert themselves, bursting the centrally planned bubble and prompting a 2008-style “correction”, Grantham defined a “full-fledged” bubble as S&P 2250 and warned that a retracement of some 50% was possible depending on how assertive the Fed’s response to its real favorite economic indicator (stocks) turns out to be.

In GMO’s latest quarterly letter, Grantham is out reiterating his view that although US stocks may not have reached their peak in what he accurately calls a “strange, manipulated world” (we prefer “new paranormal”), he’s sticking with the idea that “bubble territory” is likely just around the corner as the Yellen Fed is “bound and determined” to facilitate an inexorable rise in asset prices. He also notes that the Yellen seems no more inclined than her predecessor to take Jeremy Stein’s advice on being careful not to adopt an “implicit policy of inaction” when it comes to bubbles. Here’s more:

The key point here is that in our strange, manipulated world, as long as the Fed is on the side of a strong market there is considerable hope for the bulls. In the Greenspan/Bernanke/Yellen Era, the Fed historically did not stop its asset price pushing until fully- fledged bubbles had occurred, as they did in U.S. growth stocks in 2000 and in U.S. housing in 2006. Both of these were in fact stunning three-sigma events, by far the biggest equity bubble and housing bubble in U.S. history.

Yellen, like both of her predecessors, has bragged about the Fed’s role in pushing up asset prices in order to get a wealth effect. Thus far, she seems to also share their view on feeling no responsibility to interfere with any asset bubble that may form. For me, recognizing the power of the Fed to move assets (although desperately limited power to boost the economy), it seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble. And we are not there yet.

“We are failing to take simple steps and at the same time undertaking extremely costly steps with doubtful benefits.”

• Our Banking System is a Giant House of Cards (Lynn Parramore)

Anat Admati teaches finance and economics at the Stanford Graduate School of Business and is co-author of The Bankers’ New Clothes, a classic account of the problem of Too Big to Fail banks. Admati warns that we are not doing nearly enough to confront a bloated, inefficient, and dangerous financial system. The system can’t fix itself. Here’s what you need to know.

Lynn Parramore: How would you describe the problem of Too Big to Fail banks. Whey does it matter to an ordinary person?

Anat Admati: Too Big to Fail is a license for recklessness. These institutions defy notions of fairness, accountability, and responsibility. They are the largest, most complex, and most indebted corporations in the entire economy. We all have to be really alarmed by the fact that not only do we still have such institutions, but many of them are ever-larger and more complex and at least as dangerous, if not more so, than they were before the financial crisis. They are too big to manage and control. They take enormous risks that endanger everybody. They benefit from the upside and expose the rest of us to the downside of their decisions. These banks are too powerful politically as well. As they seek profits, they can make wasteful and inefficient loans that harm ordinary people, and at the same time they might refuse to make certain business loans that can help the economy.

They can even break the laws and regulations without the people responsible being held accountable. Effectively we’re hostages because their failure would be so harmful. They’re likely to be bailed out if their risks don’t turn out well. Ordinary people continue to suffer from a recession that was greatly exacerbated or even caused by recklessness in the financial system and failed regulation. But the largest institutions, especially their leaders — even in the failed ones — have suffered the least. They’re thriving again and arguably benefitting the most from efforts to stimulate the economy. So there’s something wrong with this picture. And there’s also increasing recognition that bloated banks and a bloated financial system – these huge institutions—are a drag on the economy.

LP: Have we made any progress in dealing with the problem?

AA: The progress has been totally unfocused and insufficient. Dodd-Frank claims to have solved the problem and it gives plenty of tools to regulators to do what needs to be done (many of these tools they actually already had before). But this law is really complex and the implementation of it is very messy. The lobbying by the financial industry is a large part of the reason that the law has been implemented so poorly and inefficiently with so much difficulty. We are failing to take simple steps and at the same time undertaking extremely costly steps with doubtful benefits. So we’ve had far from enough progress. We are told things are better but they are nowhere near what we should expect and demand. Much more can be done right now.

LP: Banks, compared to other businesses, finance an enormous portion of their assets with borrowed money, or debt – as much as 95%. Yet bankers often claim that this is perfectly fine, and if we make them depend less on debt they will be forced to lend less. What is your view? Would asking banks to rely more on unborrowed money, or equity, somehow hurt the economy?

AA: Sometimes when I don’t have time to unpack everything I use a quote from a book called Payoff: Why Wall Street Always Wins by Jeff Connaughton. He relates something Paul Volcker once said to Senator Ted Kaufman: “You know, just about whatever anyone proposes, no matter what it is, the banks will come out and claim that it will restrict credit and harm the economy…It’s all bullshit.” Here’s one obvious reason such claims are, in Volcker’s vocabulary, bullshit: Lending suffered most when banks didn’t have enough equity to absorb their losses in the crisis — and then we had to bail them out. The loss they suffered on the subprime fiasco was relatively small by comparison to losses to investors when the Internet bubble burst, but there was so much debt throughout the system, and indeed in the housing markets, and so much interconnection that the entire financial system almost collapsed. That’s when lending suffered. So lending and growth suffers when the banks have too little equity, not too much.

Now, banks naturally have some debt, like deposits. But they don’t feel indebted even when they rely on 95% debt to finance their assets. No other healthy company lives like that, and nobody, even banks, needs to live like that — that’s the key. Normally, the market would not allow this to go on; those who are as heavily indebted feel the burden in many ways. The terms of the debt become too burdensome for corporations, and reflect the inefficient investment decisions made by heavily indebted companies. But banks have much nicer creditors, like depositors, and with many explicit and implicit guarantees, banks don’t face trouble or harsh terms. They only have to convince the regulators to let them get away with it. And they do. So the abnormality of this incredible indebtedness is that they get away with it. There’s nothing good about it for society. If they had more equity then they could do everything that they do better —more consistently, more reliably, in a less distorted fashion.

This will not happen, because the leaders themselves are the biggest dinosaurs. And they’re not about to give up their grip on power.

• For China To Start All Over, The Dinosaurs Will Have To Change (Satyajit Das)

Central to China’s agenda of driving growth through economic reform is a shift from debt-driven investment to consumption. Since the 1980s, investment has risen from 35% of GDP to 45 to 50%. China’s annual infrastructure spend is far greater than that of the US and Europe but also of other emerging markets. It is double that of India and around four times that of Latin America. The country’s investment levels are also running at 10 to 15% of GDP – higher than in comparable countries such as Japan and South Korea at the equivalent stages of their development. In recent years, Beijing has sought to rebalance the share of GDP contributed by consumption and investment, but the task is difficult.

First, as the analyst Michael Pettis has repeatedly stated, the level of consumption growth needed to rebalance China is formidable. That rate has not been static, running at around 8% a year over the past decade. But growth in consumer spending has been slower than that in the overall economy and the increase in gross fixed investment – an average annual growth of more than 13%, which resulted in the share of private consumption in GDP falling to 35% from 45 to 50%. If China grows at 8% a year, consumption needs to expand by around 11% (3% above growth) to increase the share of consumption from 35% to 36% of GDP in a year. Assuming a growth rate of 8% and consumption increases of 11%, it would take about five years to increase consumption to 40% of GDP. If growth slows, the difficulty of the task increases.

Second, legacy issues of rapid expansion and excessive investment will need to be managed. Many projects have dubious economics and will not generate sufficient revenues to repay the borrowings used to finance them, resulting in potential losses to lenders.

Third, boosting consumption will reduce savings, affecting the deposit base and cost of funding at Chinese banks, which will reduce their flexibility in managing rising losses on bad loans. It will also require a significant boost in household income, and this will affect the profitability of Chinese companies, which already operate on thin margins.

Fourth, the rebalancing will result in slower growth, at least during the period of transition. A move away from investment-driven growth also requires reform of China’s state-owned enterprises (SOEs). China has around 150,000 SOEs, which control around 50% of industrial assets and employ around 20% of the workforce.

Farrell misses out on the no. 1: people and communities.

• Your No. 1 End-Of-The-World Investing Strategy (Paul B. Farrell)

Quarterly reports are hot news today. Listen: “While the end-of-the-world scenario will be rife with unimaginable horrors,” predicts the CEO of a major Wall Street bank at a shareholders meeting, “we believe that the pre-end period will be filled with unprecedented opportunities for profit.” That message comes from one of Robert Mankoff’s popular New Yorker cartoons, and it accurately captures the winning strategy used by most successful Wall Street bankers. But the real successful strategists have both, balancing the two: short-term opportunities for profit plus a vision of the future, the long-term megatrends that impact returns today as well as tomorrow. Here’s an example of this strategy, hedging long risks while playing a winning short game.

Here’s one strategy based on the 12 megatrends in Jared Diamond’s book “Collapse: How Societies Chose to Fail Or Succeed.” So you’d be building a portfolio that balances short-term opportunities within Diamond’s megatrends structure, picking stocks that fit near-term the best investment parameters for success in a society that’s risking a collapse:

1. Water
Diamond warns: “Most of the world’s freshwater in rivers and lakes is already being used for irrigation, domestic and industrial water,” transportation, dams, fisheries and recreation. Water problems destroyed many earlier civilizations: “Today over a billion people lack access to reliable safe drinking water.” By 2015 two-thirds of the world will live in water-stressed countries. Water will trade like oil futures today. More and more wars will be fought over water and other basic resources concluded a 2003 Pentagon report predicting that “warfare will define human life by 2020.

2. Food
The United Nations says the global food crisis is a “silent tsunami.” Two billion people, mostly poor, depend on fish and other wild foods for protein. Their supplies have “collapsed or are in steep decline,” forcing use of costly animal proteins. The rise in food prices is making it worse for billions living below poverty levels. In “The End of Plenty,” National Geographic warns “synthetic fertilizers, pesticides, and irrigation, supercharged by genetically engineered seeds” is failing. A joint World Bank/UN study “concluded that the immense production increases brought about by science and technology the past 30 years have failed to improve food access for many of the world’s poor.” Time warns that our “addiction to meat” has led to farming that’s “destructive of the soil, the environment and us.”

3. Farmland
Crop soils are “being carried away by water and wind erosion at rates between 10 to 40 times the rates of soil formation.” With forests, the soil-erosion rate is “between 500 and 10,000 times” the replacement rate, a trend accelerated by today’s new age of the 100,000-acre megafires. Ceres and Chess are hedge funds that own many small farms.

4. Forests
We are destroying natural habitats and rain forests at an accelerating rate. Half the world’s original forests have been converted to urban developments. A quarter of what remains will be converted in the next 50 years.

How America lets down Americans.

• How Ben Bernanke Let Down America (MarketWatch)

Don’t say Ben Bernanke didn’t do anything for unemployment. After all, the former Federal Reserve chairman now has three jobs. On Wednesday, Pacific Investment Management Co., or Pimco, announced — via Twitter, of course — that Bernanke had signed on as a senior adviser to the fund company known for its bond investing. Pimco joins the hedge fund Citadel and the Brookings Institution as Bernanke’s post-Fed effort to put food on the table. While Bernanke has sought to underplay or, more accurately, not disclose how much he’s being paid by these firms, it’s highly unlikely he will have to ask for public assistance. Speaking of which, just how good is that unemployment office near the Fed and Treasury Department?

We’re just teasing, of course. Bernanke, like any other public servant, has a right to work after he leaves government. And since the Fed is a quasi-governmental institution and has been accused of serving Wall Street’s interests, is this as much of a radical transition as it may appear at first glance? On the other hand, isn’t this endless pattern, known as the “revolving door” where senior regulators leave to join the firms they regulated only a few months or weeks ago, getting a little tired? Timothy Geithner, a regulator cozy with Wall Street, goes to head the Treasury Department where he’s criticized for bailing out Wall Street and almost no one else, and then leaves public service for a private equity firm, Warburg Pincus, with deep ties to banks.

Get out, you Greeks!

• Quick Breakthrough At Brussels Group Looks Unlikely (Kathimerini)

Greece’s hopes of an emergency Eurogroup being called as early as Monday to confirm the progress in Brussels Group talks, and thereby possibly prompting the European Central Bank to allow Athens to issue more treasury bills to relieve its liquidity problem, appear to be misplaced. Several European Union officials have told Kathimerini that it is unlikely eurozone finance ministers will be in a position to discuss the state of negotiations at the beginning of the week. Greece’s lenders insist that there must be a staff-level agreement on the range of measures being demanded in return for €7.2 billion in bailout funding before the matter can be referred to the Eurogroup.

Athens, though, hopes that there can be an initial agreement on a bare minimum of reforms that would prompt the ECB to increase its €15 billion ceiling on the level of Greek T-bills that can be issued and allow local banks to increase their exposure to this form of debt. The first two days of the Brussels Group deliberations, which began on Thursday, confirmed that there is a substantial distance separating Greece and its lenders. For instance, they differ on macroeconomic projections. Athens still believes growth this year can reach 1.2 to 1.4% and that this would lead to a primary surplus of 1.2%. Creditors see these projections as extremely optimistic.

Also, Athens is willing to go ahead with some but not all of the privatizations planned for this year, bringing in projected revenues of €1.5 billion, which the institutions also see as being overestimated. The target for revenues from sell-offs this year had been €2.2 billion The government looks set to keep the single property tax (ENFIA) this year despite its election pledge to scrap the highly unpopular levy, but there is still a disagreement over the value-added tax increase being demanded by creditors. The institutions believe that between €2 and €3 billion of new fiscal measures will be needed this year for Greece to hit its targets.

“In the longer run, however, a much-depreciated drachma could lift the Greek economy and, of course, the country might appreciate monetary independence..”

• The Coming Defaults Of Greece (Vox.eu)

When thinking about Greece’s dilemma, two facts from Reinhart and Rogoff (2009) research are highly relevant:
• Defaults on public debts are pretty mundane events; and
• Greece is historically the world’s leading serious defaulter.

What makes the coming event interesting is that it will be the first time that a default occurs within a monetary union. The crucial observation is that there is no automatic link between a default and monetary-union membership. As we know from previous experiments of government default within the dollar monetary union – the defaults of Orange County in California and Detroit in Michigan – a sub-central government can default and keep the currency. The unique characteristics of such events are that: 1) an exchange-rate depreciation cannot help shift expenditure to the defaulting region’s production; and 2) there is no local central bank to provide liquidity to both the government and commercial banks during the hard phase of the default. The Greek government might be tempted to recover its own currency but the short-run costs are likely to far exceed the short-run benefits.

An idea of what would await Greece is provided by Levy Yeyati (2011) in his description of how Argentina gave up its currency board link to the US dollar, an easier case given that the national currency was already in place. The Argentinian example should warn the Greek authorities of the political turmoil that could follow a default. In the longer run, however, a much-depreciated drachma could lift the Greek economy and, of course, the country might appreciate monetary independence following its wrenching experience inside the Eurozone. Basically, the trade-off is a major shock and one more year of misery versus the removal of Eurozone membership shackles forever. The balance of benefits is difficult to evaluate since it depends very much on institutional issues that are not clear now.

The key questions are:
• Will Greece be able to finally establish on its own fiscal discipline and will its central bank deliver high-quality monetary policy?
• Will the Eurozone draw all the lessons from a Grexit and amend its policies and governance?

In the short run, after a first default, even a partial one, the Greek government will have to balance its books because no one will lend anything any more. ‘Balancing the books’ can mean different things, however.

• One option is to run an overall balanced budget, thus continuing to service the debt after the initial wave of defaults.

The latest European Commission forecasts for 2015 are for a surplus of 1.1% of GDP, after a deficit of 2.5% last year. This might be optimistic as tax receipts seem to have slowed down. Another option is to balance the primary budget, which means no servicing of the debt.

“..the death of National Sovereignty, State Sovereignty, Separation of Powers, and Democracy..”

• FastTrack TPP: The Death of Sovereignty, Separation of Powers and Democracy (JF)

Ellen Brown has called the TPP “the death of the Republic.” It certainly is that. But, I think I’ve shown that it is the death of National Sovereignty, State Sovereignty, Separation of Powers, and Democracy, as well. These impacts on governance and politics are even more important, I believe, than its economic ones, since it from these that our benefits, both economic and non-economic flow. The elevation of the principle of “expectation of profits” above all other principles including the principles of “public purpose,” “consent of the governed,” “the general welfare,” and “separation of powers,” is tantamount to the overthrow of democracy, preserving its form in national level elections, but emptying its elections of meaningful content in mandating change and in conferring legitimacy on national authorities.

I’ve said previously that the rule of the TPP, even if passed over the mushrooming opposition from all segments of American society except the uncritical globalists, will never be viewed as legitimate in the United States and will also always be viewed as tyranny for as long as we live under it. This problem will become increasingly severe the larger, more frequent, and more outrageous ISDS awards defending the “expectations of profits” of multinational become. That makes those who want to pass the TPP guilty of conspiracy to create tyrannical rule of the international few over the people of the United States and other TPP member nations. Eventually, I believe that a vote for the TPP will be viewed as vote to betray the Constitution and a violation of the oath of office of any who vote that way.

How can there be any other outcome when an action taken in office destroys National Sovereignty, State Sovereignty, Separation of Powers, and Democracy with a single vote.

A sudden surge.

• Iceland Pirate Party Popularity Rivals Government Coalition (RT)

The Pirate Party of Iceland, which has the smallest faction in the national parliament after the 2013 election, is now almost as popular as the two ruling coalition parties combined, the latest opinion poll showed. The party would score 30.1% of votes in Iceland if a general election was held now, the Icelandic National Broadcasting Service (RUV) reports citing a Gallup poll. Iceland’s two ruling parties – the Independent Party and the Progressive Party – have 22.9% and 10.1% support respectively, scoring less than 3% points ahead of the Pirates. The Pirate Party experienced an astounding surge of popularity in Iceland. In 2013, polls indicated it would barely score 5% of votes needed to win parliamentary seats. The party’s approval rating in January was roughly the same.

An early March Gallup poll showed its popularity had grown to over 15%, beating the Bright Future party. In less than two months the Pirate Party doubled its rating. “People are starting to realize that the whole system is corrupt, not just a few politicians,” Helgi Hrafn Gunnarsson, Pirate Party’s chair and one of its three MPs told Vísir news website in March. “They don‘t trust it at all. I think they appreciate it when someone points this out.” Responding to the latest poll, Gunnarsson said he was glad to see such a result but expected it to rebound somewhat in the weeks to come. He added there is still some time to go to the next election in Iceland, which is scheduled for 2017. The same opinion poll showed a 32% approval of the government by Icelanders, compared to 37% in March. Among the latest big decisions of the government is the March withdrawal of its bid to join the European Union.

“The phrase “shameless hypocrisy” comes to mind.”

• Angela Merkel’s NSA Nightmare Just Got A Lot Worse (Don Quijones)

Angela Merkel, Germany’s most successful and popular politician, could be in serious trouble, after revelations that Germany’s national intelligence agency, the BND, has been spying on key European assets on behalf of US intelligence. Those “assets” include top French officials, the EU’s headquarters, the European defense corporation EADS, the helicopter manufacturer Eurocopter and even German companies. To wit, from Der Spiegel:

In 2008, at the latest, it became apparent that NSA selectors were not only limited to terrorist and weapons smugglers… But it was only after the revelations made by whistleblower Edward Snowden that the BND decided to investigate the issue. In October 2013, an investigation came to the conclusion that at least 2,000 of these selectors were aimed at Western European or even German interests.

Today, the German foreign intelligence agency is accused of processing over 40,000 spy requests from the NSA, many of which represent a clear violation of the Memorandum of Agreement that the US and Germany signed in 2002. Washington and Berlin agreed at the time that neither Germans nor Americans — neither people nor companies or organizations — would be among the surveillance targets. The scandal could be particularly damaging for the Minister of Interior Thomas de Maiziere, whose ministry is accused of misleading parliament after claiming, as recently as April 14, to have no knowledge of alleged US economic spying in Europe, and of Germany’s alleged involvement.

For Merkel, it is a dizzying reversal of roles and fortunes. In 2013 she was arguably the most high-profile victim of NSA surveillance when it was revealed that the NSA had targeted her cellphone. When confronted with Edward Snowden’s allegations of US National Security Agency mass surveillance of European citizens, Merkel famously said that “spying on friends is just not on.” According to official accounts, she even placed a “strongly worded phone call” to US President Barack Obama. At the time the scandal was a political boon for Merkel, with 62% of Germans approving of her “harsh reaction”, according to a survey by polling institute YouGov. Now the tables have turned. If Merkel’s government is found to have had prior knowledge of the BND’s spying on the French government, citizens, and companies, its behavior in the wake of the phone-tapping revelations will be cast in a starkly different light. The phrase “shameless hypocrisy” comes to mind.

While the BNS is taking most of the flak, with some pundits even questioning whose interests it serves, questions are being raised about just how much Merkel’s government knew about the surveillance program. “At least since the Snowden revelations in 2013, all those involved at all levels, including the Chancellery, should have been suspicious of the cooperation with the NSA,” Konstantin von Notz, the senior Green Party member on the NSA investigative committee, told Der Spiegel.

Italy hates the Milan Expo. For good reason.

• Rioters In Milan Smash Shopfronts, Throw Smoke Bombs As Expo Opens (CNBC)

Milan has been waiting since 2008 for this day and now it has finally come—but takeoff for the World Expo 2015 looks to be overshadowed by violent protests. The turnstiles and doors officially opened on Friday in Italy’s commercial and fashion capital. But opening day excitement for the six-month-long commercial event wasn’t necessarily present among the crowds on Friday. The wet weather may have dampened the number of visitors to the event on its first day—with noticeably empty entrances and security checkpoints. Meanwhile, thousands of protesters marched through the streets of Milan behind a banner reading “No Expo, Eat the Rich,” according to Reuters. The No-Expo movement has been critical of the amount of money the government has poured into the event, when there are fears of austerity and cuts to public services.

A large anti-expo march through the center of Milan was overtaken by anarchists groups that smashed shopfronts and clashed with police. There were several banks with smashed-in doors and windows and the streets were strewed with detritus. Teargas was used by riot police to try and disperse parts of the crowd. Although most of the march was peaceful, around 200 demonstrators threw rocks, in addition to setting off flare and smoke bombs. A large six-story building was torched, as well as the ground floor of a two-story building. At least six cars were burnt and fire crews were deployed at multiple spots across the city. AP television footage appeared to show police using water cannons on protesters.

Friday is Labor Day, also known as May Day, and is a traditional occasion for anti-capitalist protests. The Expo is bringing together 145 countries from around the world with the theme “Feeding the Planet, Energy for Life.” The organizers are expecting up to 20 million visitors during the length of the Expo and as many as 250,000 on a particularly busy day. However, estimates for attendee numbers on Friday were only in the tens of thousands. Italy is hoping for a big economic boost because of the Expo, which is held every five years in different world location and is designed to showcase innovation. Some say the Milan Expo could generate up to $10 billion. But the event has come under criticism, particularly for skyrocketing costs and a number of corruption scandals.

“Note that Breedlove has managed to pull off what we thought was a linguistic impossibility: his statement is contradictory, vague, and definitive all at once.”

• Russia Preparing Offensive In Ukraine, NATO General Imagines (Zero Hedge)

Just a day after the US Navy said it was prepared to escort US-flagged cargo ships through the Strait of Hormuz as a precautionary measure after Iran supposedly fired on and subsequently seized a ship flying the Marshall Islands flag, we get still more sabre rattling in what has become a global staring match between the US on one side and Russia, Iran, and China on the other, with points of contention ranging from territorial sovereignty in Eastern Europe, to man-made islands in the South China Sea, to nuclear energy, to cyber warfare. This time it’s U.S. Air Force General and NATO supreme allied commander Philip Breedlove ratcheting up the rhetoric (and perhaps suggesting that the Kremlin is correct in its assessment of US foreign policy) by suggesting to the Senate that Russia is planning to shatter what remains of the fragile ceasefire in Ukraine by launching an imminent offensive. Via Reuters:

Russia’s military may be taking advantage of a recent lull in fighting in eastern Ukraine to lay the groundwork for a new military offensive, NATO’s top commander told the U.S. Congress on Thursday. U.S. Air Force General Philip Breedlove, the NATO supreme allied commander, said Russian forces had been seeking to “reset and reposition” while protecting battlefield gains, despite a fragile ceasefire agreed in February.

And while the general had trouble explaining exactly how he came to this conclusion based on the evidence he had observed, he did come prepared with plenty of vague soundbites which, although largely devoid of any real meaning, sounded scary enough to get the attention of the media and will probably play well with the 348 members of the House who not long ago voted to provide lethal aid to Kiev. Here are some excerpts from the DoD press release:

“Many [Russian] actions are consistent with preparations for another offensive,” he added. Russia is aggressive in all elements of national power – diplomatic, informational, economic, and its military, the general said. “It would not make sense to unnecessarily take any of our own tools off the table,” he said about the U.S. possibility of supplying defensive weapons to Ukraine. Russia’s aggression also is destabilizing neighboring states and the region, and its illegal actions are pushing instability closer to NATO’s boundaries, Breedlove told the senators. “We cannot be fully certain what Russia will do next, and we cannot fully grasp [Putin‘s] intent,” Breedlove he said. “What we can do is learn from his actions, and what we see suggests growing Russian capabilities, significant military modernization and an ambitious strategic intent.”

Got it. So summarizing, we cannot be certain about Putin’s intent, but based on his actions, we can be certain that his intent is both ambitious and strategic. Note that Breedlove has managed to pull off what we thought was a linguistic impossibility: his statement is contradictory, vague, and definitive all at once.

Kiev and the west are determined that no-one ever finds out what happened in Odessa, on Maidan Square, with MH-17 etc etc.

• Kiev Is Making No ‘Tangible Steps’ To Investigate Year-Old Odessa Massacre (RT)

Moscow has called on the international community to put pressure on Ukrainian authorities, which are not making any ‘tangible steps’ towards an independent and impartial investigation of last year’s Odessa massacre, Russia’s Foreign Ministry said. “With a deep concern we have to state that one year [since the tragedy], the Ukrainian justice system did not take any tangible steps toward an objective, independent and impartial investigation of this horrific crime in order to bring the perpetrators to justice,” the statement by the Russian Foreign Ministry said, as cited by Sputnik news agency. On May 2 last year, the Ukrainian radicals set fire to the Trade Union House in Odessa, killing 48 and injuring over 200 anti-Kiev activists inside.

“As a result of these barbaric acts of intimidation, several dozen people, whose only fault was that they openly expressed their civic stance against the anti-constitutional coup in February 2014 and outburst of radical ultranationalists, were killed,” the Foreign Ministry’s statement reads. Moscow urged the international community, including human rights NGOs, to “decisively and honestly” demand Kiev stage a fair investigation into the Odessa massacre and correct the “glaring flaws” in Ukrainian judicial system. The ministry stressed that Kiev’s “carelessness” and passiveness in investigating the May 2 events is backed by the stance of its Western backers and some major global media outlets.

The little attention given to the Odessa massacre in European and American news is “yet another manifestation of information warfare and manipulation of the media,” the statement said. Meanwhile, the US also addressed Kiev with an appeal not to delay the investigation of deadly fire. “We reiterate the need for a thorough and transparent investigation so those responsible can ultimately be held accountable. We continue to urge the Ukrainian government to investigate and bring charges against those culpable for the events in Odessa and to do so as quickly as possible,” Marie Harf, US State Department spokeswoman, said on Thursday.

Little bit crazy perhaps? My guess is if this comes out, he’s going to lose a lot of sympathy. Kiwi’s are sort of done with him anyway.

• Kim Dotcom Awarded Millions For Legal Bills And Living Expenses (TF)

Kim Dotcom has succeeded in getting more of his seized funds released by the courts in New Zealand. In addition to millions for legal expenses, the entrepreneur will receive $128K per month including $60K to pay mansion rent, $25,600 to cover staff and security, plus $11,300 for grocery and other expenses.

How much does it cost to enjoy a reasonable standard of living in the modern world? A couple of thousand dollars a month? Three thousand? Four? For Megaupload founder Kim Dotcom, none of these amounts scratch the surface, a problematic situation considering all of his assets were previously seized by the U.S. and New Zealand governments. In February a “broke” and “destitute” Dotcom appeared before Justice Patricia Courtney, asking for living expenses and a massive cash injection to pay historical and current legal fees. Dotcom was previously granted around US$15,000 per month to live on but high costs had left him “penniless”. Following the hearing Justice Courtney’s ruling is largely good news for Dotcom, with the Judge taking into consideration claims by authorities that the entrepreneur has funds in a trust that could help pay his expenses.

“The trust’s major asset is its shareholding in Mega Ltd, said to be worth more than $30m (US$22.6m). In evidence Mr Dotcom said that there were difficulties in selling Mega shares because they were blocked from being sold until the planned listing of Mega, which is now scheduled for late May 2015 (though it is possible that this date will be pushed back). There was no evidence to the contrary,” the Judge’s ruling reads. “I have concluded that Mr Dotcom does not have the ability to meet his legal and reasonable living expenses from trust assets because, on the evidence, those assets are not sufficiently liquid.” Noting that he still owes former lawyers around US$1.5m, the Judge said that Dotcom’s estimate for financing his legal battle against extradition is between US$1.5m and US$3m.

This amount will be released from currently restrained government bonds. Next up was the Dotcom family’s accommodation costs. Rent on the now-famous mansion amounts to US$754,000 per annum under a lease Dotcom signed in February 2013 and which expires in the same month 2016. The Judge decided that terminating that lease would result in additional costs. “If [Dotcom] were to terminate the lease in order to find a more modest home, he would immediately be exposed to a significant contractual liability for the existing rental in addition to the costs of any new accommodation,” the Judge writes.

“Little would be saved by requiring Mr Dotcom to move into more modest accommodation pending the expiry of the lease; it is more likely that the total amount required to house Mr Dotcom and his children and meet his lease commitment would actually prove greater than simply remaining where he is. “I therefore accept that, in the particular circumstances of this case, a figure of $80,000 (US$60,300) per month is reasonable for accommodation.”

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