Oct 242020
 


Henri Matisse Le Bonheur de Vivre 1906

 

Russian Data Reveals Diabetics Ten Times More Likely To Catch COVID19 (RT)
Kremlin Says US Elections Have Become “Competition In Russophobia” (ZH)
MSM Beat The Bidens To Declare Laptop Leak ‘Russian Disinformation’ (RT)
Millions Of Insurance Plans Were Cancelled Due To Obamacare (JTN)
FBI, GSA Undermined 2016 Transition By Sharing Private Trump Team Records (JTN)
Differences in How Democrats and Republicans Behave on Twitter (Pew)
If Trump Wins, My Profession Is Done: Pollster (RT)
Bleeding Out (Jim Kunstler)
AOC Blasts Republicans For Calling Her AOC (JTN)
YouTube Is Selling So Many Political Ads It Has Run Out Of Videos For Them (ZH)
European Data Considers Coronavirus Risk in Greece Mainly Low to Medium (GR)
Tesla, Ordered To Recall 30,000 Cars In China, Blames ‘Driver Abuse’ (LAT)

 

 

 

 

Tulsi Gabbard Daniel Ellsberg
“A whistleblower cannot get a fair trial”
https://twitter.com/i/status/1319750791641530369

 

 

What’s worse: ..coronavirus could be causing “an entirely new form of diabetes.”

Russian Data Reveals Diabetics Ten Times More Likely To Catch COVID19 (RT)

Diabetics are 10.3 times more likely to develop Covid-19, and their symptoms are more severe and life-threatening, with over a quarter of all infected patients already suffering from the illness as a pre-existing condition. That’s according to Russian Deputy Prime Minister Tatyana Golikova, who told officials that coronavirus is especially dangerous for those suffering with the common metabolic disorder. “In patients with diabetes, Covid-19 infection is 10.3 times more common,” Golikova explained. “Patients with diabetes experience the disease more severely, and more frequently develop acute respiratory distress syndrome, as well as respiratory failure, [requiring] artificial ventilation and, unfortunately, [experiencing] higher mortality.”


According to Golikova, 27 percent of all infected patients have diabetes among their comorbidities, and this is often complicated by increased glycemia. As of the start of 2020, 5.1 million people in Russia had a diabetes diagnosis. She noted that the risk is even higher in patients with high blood pressure. Curiously, earlier this week, American Covid-19 patient Mario Buelna experienced exactly the opposite situation – he developed diabetes for the first time, having contracted coronavirus. According to his doctors in Mesa, Arizona, Buelna’s diabetes was triggered by Covid-19. Speaking to London-based news agency Reuters, Dr. Robert Eckel, president of medicine and science at the American Diabetes Association, thinks that coronavirus could be causing “an entirely new form of diabetes.”

Read more …

“..competition in Russophobia has become a constant in all US electoral processes, regrettably.”

Kremlin Says US Elections Have Become “Competition In Russophobia” (ZH)

This week’s perhaps overly dramatic announcement Wednesday night by the heads of multiple federal agencies – foremost among them Director of National Intelligence John Ratcliffe – alleging new major efforts by Russia and Iran to interfere in the US presidential election formed a key question and talking point by debate moderator Kristen Welker Thursday night. Welker even referenced as somehow undisputed and settled “truth” the now debunked “Russian bounties” story. Over a month ago the Pentagon and other intelligence heads concluded after an exhaustive investigation that there’s simply no evidence to suggest Russian military intelligence paid Afghan fighters to target Americans.


Russia was certainly paying attention to the debate and was not amused. The Kremlin on Friday blasted what it said was “Russophobia” at the center of the debate. Kremlin Spokesman Dmitry Peskov told journalists Friday that “competition in Russophobia has become a constant in all US electoral processes, regrettably.” “We are fully aware of this and can only express regret,” he added as quoted in TASS. “After all, probably, it is the American electorate who is the target audience of these debates, that is, common Americans. It is up to them to decide who won the debate, not us,” the spokesman said. Indeed the American public is by and large likely growing tired of the endless Russia scapegoating too.

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“Joe Biden is supposed to deny and deflect attention from damaging information. He’s a politician, after all – it’s his job. The press is supposed to do the exact opposite.”

MSM Beat The Bidens To Declare Laptop Leak ‘Russian Disinformation’ (RT)

It’s not the media’s job to cover for Joe Biden. Yet the New York Times and its ilk have fallen over themselves to call the damaging leaks “Russian disinformation,” while also awkwardly publishing the FBI’s denial of the claim. As President Donald Trump and former Vice President Joe Biden geared up to debate on Thursday night, the cable TV commentariat wondered how Trump would bring up the “laptop from hell.” Recovered from a Delaware repair shop last year and handed to Trump’s attorney Rudy Giuliani, the laptop – which allegedly belonged to Joe’s son, Hunter – contained a tranche of emails that implicated the Biden family in numerous foreign graft schemes, all while Joe was in the White House.

Before the debate kicked off, the New York Times quoted the Director of National Intelligence (DNI) as saying: “No concrete evidence has emerged that the laptop contains Russian disinformation,” and the FBI as seconding this claim. For the Times, it was a dramatic turnaround. Just days earlier, before the FBI and DNI could weigh in, a headline in the nation’s paper of record read, “Is the Trump campaign colluding with Russia again?” Quoting only a Senate Democrat, the Times alleged that Giuliani had been cultivated as an “asset” by the Kremlin, and “any information proffered by Rudy Giuliani is likely compromised.” The Washington Post sang from the same hymn sheet, using the usual anonymous “former officials” to tie Giuliani to Russia.

Even before the media settled on Russia as the culprit, MSNBC’s Joe Scarborough called the scandal “made up” and a “hokey story,” while NBC’s Hallie Jackson described it as “dubious” and “questionably sourced.” As the Times and Post rang the Russia alarm last week, neither the FBI nor DNI had commented on the laptop. DNI John Ratcliffe would do so on Monday, and the FBI followed suit a day later. In fact, as these articles hit the presses, the only people who had fingered Russia for the stunt were a collection of Biden’s aides and advisors, who gave no evidence to support their claims. The Biden campaign itself didn’t embrace the Russia excuse until several days later. It’s one thing to cover a candidate sympathetically. It’s another to work as his preemptive press corps. Joe Biden is supposed to deny and deflect attention from damaging information. He’s a politician, after all – it’s his job. The press is supposed to do the exact opposite.

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But Biden can make the claim uncontested that number is zero.

Millions Of Insurance Plans Were Cancelled Due To Obamacare (JTN)

Democratic presidential nominee Joe Biden said during Thursday night’s debate that nobody lost their health insurance plans when Obamacare was fully implemented, but millions of individuals had their insurance policies cancelled at the time. A RAND Corporation study estimated that 5.9 million people lost their insurance plans due to Obamacare’s rules and regulations. Obamacare is the 2010 health care law crafted by former President Obama, for whom Biden served as vice president for both of his terms. Obama was heavily criticized at the time for telling Americans that if “you like your plan, you can keep your plan,” which turned out not to be the case. Politifact rated Obama’s promise the “lie of the year” in 2013.

Trump and Biden each were asked Thursday night how they would handle health care policy if the Supreme Court invalidates Obamacare’s individual mandate in the upcoming California v. Texas case. “What I’m going to do is pass Obamacare with a public option. It will become Bidencare. The public option says in fact if you do not have the wherewithal, if you qualify for Medicaid and you do not have the wherewithal in your state to get Medicaid, you’re automatically enrolled, providing competition for insurance companies,” Biden said. Biden rejected the idea that he wants to eliminate private insurance. “Not one single person with private insurance would lose their insurance under my plan, nor did they under Obamacare. They did not lose their insurance unless they chose they wanted to go to something else,” he said.

In response, Trump said Biden’s health care plan would amount to socialized medicine, given that the federal government would run the public option.

Bernie Biden

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This is the most severe of all. This is also why they complain in advance about Trump not doing a peaceful transition. Because they themselves did not.

FBI, GSA Undermined 2016 Transition By Sharing Private Trump Team Records (JTN)

A Senate report released today claims that the Federal Bureau of Investigation and the General Services Administration undermined the Trump transition team in 2016 by sharing private Trump team records in violation of an agreement between that team and the GSA. The majority staff report from both the Senate Committee on Finance and the Committee on Homeland Security and Governmental Affairs claims that officials from both the FBI and Mueller’s office “secretly sought and received access to the private records of Donald J. Trump’s presidential transition team, Trump for America, Inc.”

“They did so,” the report continues, “despite the terms of a memorandum of understanding between the Trump transition team and the General Services Administration…—the executive agency responsible for providing services to both candidates’ transition teams—that those records were the transition team’s private property that would not be retained at the conclusion of the transition.” The report states that officials at the GSA proactively called the FBI and offered to retain Trump transition team records following the controversy surrounding Michael Flynn’s resignation as national security adviser in early 2017. The agency informed neither the White House nor Trump for America of that decision. Those records would eventually make their way to Mueller’s office, the report says.

“At bottom,” the report continues, “the GSA and the FBI undermined the transition process by preserving Trump transition team records contrary to the terms of the memorandum of understanding, hiding that fact from the Trump transition team, and refusing to provide the team with copies of its own records.” “These actions have called into question the GSA’s role as a neutral service provider, and those doubts have consequences,” the report adds. “Future presidential transition teams must have confidence that their use of government resources and facilities for internal communications and deliberations—including key decisions such as nominations, staffing, and significant policy changes—will not expose them to exploitation by third parties, including political opponents.”

Amanda Milius The Plot Against the President

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And guess who gets censored?

Differences in How Democrats and Republicans Behave on Twitter (Pew)

Most U.S. adults on Twitter post only rarely. But a small share of highly active users, most of whom are Democrats, produce the vast majority of tweets. The Center’s analysis finds that just 10% of users produced 92% of all tweets from U.S. adults since last November, and that 69% of these highly prolific users identify as Democrats or Democratic-leaning independents. A number of factors contribute to this phenomenon. Previous Twitter analyses by the Center have found that the platform contains a larger share of Democrats than Republicans. And in addition to being more prevalent on the site in general, the 10% most active Democrats typically produce roughly twice as many tweets in a month (157) as the 10% most active Republicans (79).

Across both parties, those who use Twitter differ in several ways compared with non-users. For instance, Twitter-using Democrats and Republicans alike tend to be younger and have higher levels of educational attainment compared with members of each party who do not use the platform. Although nearly identical shares of Republican Twitter users (60%) and non-users (62%) describe themselves as very or somewhat conservative, Democrats who use Twitter tend to be more liberal than non-users. Some 60% of Democrats on Twitter describe their political leanings as liberal (with 24% saying they are “very” liberal), compared with 43% among those who are not Twitter users (only 12% of whom say they are very liberal).

Beyond posting volume, Democrats and Republicans also differ from each other in their actual behaviors on the platform. For instance, the two accounts followed by the largest share of U.S. adults are much more likely to be followed by users from one party than the other. Former President Barack Obama (@BarackObama) is followed by 42% of Democrats but just 12% of Republicans, while President Donald Trump (@realDonaldTrump) is followed by 35% of Republicans and just 13% of Democrats. Many other popular accounts are followed primarily by those who identify as either Democrat or Republican. However, a small number of the most-followed accounts on Twitter (mostly popular celebrities or entertainers) are followed by similar shares of U.S. adults belonging to each party.

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I don’t think so. If it didn’t happen in 2016, why would it now?

If Trump Wins, My Profession Is Done: Pollster (RT)

Polling guru Frank Luntz has admitted that if Donald Trump wins re-election, his “profession is done.” Though polls show Joe Biden in the lead, Luntz and his colleagues are hedging their bets and preparing to be shocked… again Democratic candidate Joe Biden is leading President Donald Trump by up to 10 points nationwide. Yet polls can be wrong, and for all the talk of a Biden “landslide” in the media, Trump’s supporters likely remember 2016, when their candidate pulled off a shock victory against Hillary Clinton, despite being given only a seven percent chance of winning by the New York Times two weeks before election day. Should Trump once again dispatch his Democratic challenger, the polling industry is finished, Republican pollster Frank Luntz told Fox News on Thursday.

“Well, I hate to acknowledge it, because that’s my industry,” he told Fox anchor Bret Baier. “But the public will have no faith. No confidence. If Donald Trump surprises people… my profession is done.” Luntz insists that his polling is accurate this time, and that Biden will win. However, undecided voters may be leaning toward Trump. As the two men faced off in the final presidential debate in Tennessee on Thursday night, Luntz organized a focus group of undecided voters. After the showdown, a majority of these voters were leaning toward backing Trump. They described him as “controlled,” “poised,” and “surprisingly presidential,” while Biden was thought of as “vague,” “elusive,” and “defensive.”

Luntz is a longtime critic of Trump, and a recently released email – found on Hunter Biden’s now-infamous laptop – apparently showed him massaging his predictions in favor of Biden back in 2012, when the then-VP was debating Mitt Romney’s running mate, Paul Ryan. Luntz appeared to confirm the email’s authenticity in a tweet, but denied it was any kind of bombshell, saying he’s known the Biden family since the 1990s. However, if a Biden-friendly pollster, backed by his latest focus group, is publicly opening the door to a potential Trump victory, the election gurus may not be as confident in their figures as they let on.

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“Is Hillary ironing her purple pantsuit up in Chappaqua, awaiting the emergency call from her DNC?”

Bleeding Out (Jim Kunstler)

“The difference between you and me,” Mr. Trump said to the ever more ghostly Joe Biden, fading mentally late in the action on the debate stage, “is that I’m not a politician and you are, and you’re a crooked politician.” Millions watching this spectacle might not have noticed, due to the media’s near-complete blackout of news detailing the Biden family’s adventures in systematic global moneygrubbing, but the Democratic candidate for president has political Ebola, a hemorrhagic fever of credibility, now gushing out of every pore and orifice.

Twitter and Facebook may try to squelch the story, but the evidence is all over the Internet now, like blood on a crime scene, in verifiable emails, texts, Snapchats, memoranda, and bank records that Ol’ White Joe Biden is at the center of a decades-long influence-peddling spree, selling his personal services to China, Russia, Ukraine, and any other country seeking favors in US government policy, and that this slime-trail of grift disqualifies him from holding high office as much as the irreversible rot of his cognitive abilities.

The “Laptop from Hell” affair has twelve more days to play out before the November 3 vote and the Democratic Party is in a terrible jam. Do they ask Mr. Biden to step aside, or do they keep running with him while the barrage of allegations and hard evidence pours down on them like so many mortar rounds on a besieged bunker? It’s obvious now that one way or another, voters are actually being asked to elect Kamala Harris president — but who asked for her? Only the disgraced and disabled head of the ticket, Joe Biden, desperate for a non-white running mate. Elsewise, she was so disliked by voters that she skulked out of the Iowa caucuses, ending her own run. Is Hillary ironing her purple pantsuit up in Chappaqua, awaiting the emergency call from her DNC?

The early 2020 impeachment gambit has finally blown up in the Democrats’ faces, too, as it’s now obvious the phony furor over Mr. Trump’s phone call to Ukraine President Zelensky was ginned up to smother any inquiry into Hunter Biden’s $83,000-a-month services to the Burisma gas company and its crooked chief, Mykola Zlochevsky, with help from then US Ambassador to Ukraine Marie Yovanovitch and several of her staff, as well as then Secretary of State John Kerry.

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On to more important matters.

AOC Blasts Republicans For Calling Her AOC (JTN)

Her name is a mouthful, so Alexandria Ocasio-Cortez became AOC. In fact, she calls herself AOC. “Team AOC is hiring!” she wrote on Twitter in August, for instance. But the first-term Democratic Socialist from New York bristles when Republicans call her AOC, as President Trump did during Thursday night’s debate with Joe Biden. “I wonder if Republicans understand how much they advertise their disrespect of women in debates when they consistently call women members of Congress by nicknames or first names while using titles & last names when referring to men of = stature. Women notice. It conveys a lot,” she wrote on Twitter.

“AOC is a name given to me by community & the people. Y’all can call me AOC. Government colleagues referring to each other in a public or professional context (aka who don’t know me like that) should refer to their peers as ‘Congresswoman,’ ‘Representative,’ etc. Basic respect 101,” she added. Twitterers pointed out that President Trump calls nearly all of his opponents, regardless of gender, by nicknames — some not so nice. Trump calls Sen. Elizabeth Warren (D-Mass.) “Pocahontas” for her false claims that’s she’s Native American. He calls Sen. Richard Blumenthal, the Connecticut Democrat who falsely claimed to have fought in the Vietnam War, “Da Nang Dick.” Jeb Bush was, of course, “Low Energy Jeb.” Then there’s “Crooked Hillary,” “Lyin’ Leakin’James Comey,” “Jeff Flakey,” “Head Clown Chuck Schumer,” and “Mad Maxine Waters.”

So AOC isn’t all that bad, is it? “You do this all the time, referring to ‘Trump’ or ‘Pence,'” Fee Online contributor Brad Polumbo wrote on Twitter. “Just *stop* with the endless self-victimization. It’s pathetic and tiring.” “Yes, names like Crying Chuck Schumer and Crazy Bernie are super sexist,” wrote another. In fact, AOC has another nickname for her and three colleagues — “The Squad,” which includes Reps. Ayanna Pressley (D-Mass.), Ilhan Omar, (D-Minn.) and Rashida Tlaib (D-Mich.). That’s who Trump referred to in Thursday’s debate. “They know nothing about the climate,” Trump said, referring to AOC’s “New Green Deal” environmental plan. “I mean, she’s got a good line of stuff, but she knows nothing about the climate. And they’re all hopping through hoops for AOC plus three. Look, their real plan costs $100 trillion.”

And one Twitterer pointed out that AOC isn’t even a nickname: “AOC is not a nickname, they’re your initials. JFK is also not a nickname. The FBI, again, is not a nickname. You can maybe say that Trump should’ve still used your official title, but Obama was also referenced sans title, and you don’t see him whining about it on Twitter …”

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“..commercial ads have been “anemic”..”

YouTube Is Selling So Many Political Ads It Has Run Out Of Videos For Them (ZH)

While social media makes its best attempt at trying to get Joe Biden elected by censoring stories about his son, YouTube is facing another dilemma: the platform is so inundated with political ads it has nowhere to put them. As advertising campaigns flood the platform, YouTube has “struggled” to place the ads in front of the desired audience for each, according to Bloomberg. Interestingly enough, YouTube is experiencing the shortage most in “critical swing states”, where ad prices have doubled as a result. This, obviously, makes political advertising far more lucrative for Google, who saw ad revenue fall this year and will announcing its earnings next week.

Cat Stern, media director for Lockwood Strategy Lab, a digital campaign agency focused on Democratic candidates and progressive advocacy organizations, told Bloomberg: “There’s a crunch. All political advertisers are buying in the same states, to similar audiences.” YouTube viewers have risen during the pandemic and while commercial ads have been “anemic”, political ads have spiked heading into November 3. In highest demand are the ads that users aren’t allowed to skip through. There are also ad “reservations” for YouTube’s most popular videos that are in high demand. Reid Vineis, vice president of digital at Majority Strategies, a Republican political ad firm, said: “The reserves tend to be gobbled up by well-funded campaigns.”

While this occurs, other less-well-funded campaigns have turned to platforms like Hulu and Roku to run their ads. Some states, like Iowa, are usually entirely sold out on YouTube. Tim Cameron, co-founder of FlexPoint Media, said: “A lot of late money that’s coming on board — it’s difficult to find anywhere to put it.” At some points, YouTube has been unable to place up to 75% of the amounts that people are willing to spend. YouTube didn’t comment for Bloomberg’s article, but the article notes that a “code yellow” was assigned to Google’s staff regarding the inability to place ads, meaning Google was increasing the resources it was deploying to try and solve the issue.

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We have a mask mandate now. And a curfew.

European Data Considers Coronavirus Risk in Greece Mainly Low to Medium (GR)

According to data released by the European Centre for Disease Prevention and Control (ECDC) on Friday, much of Greece is at a “low” or “medium” risk level for Covid-19. The ECDC records the epidemiological burden across Europe, and classifies either entire countries or regions, depending on their coronavirus risk level. Unlike much of Europe, excluding areas of Central and Northern Europe, which is considered high-risk, much of Greece is at low or medium risk. The regions of Attica, Central Greece, Macedonia, Epirus, are at medium risk, and areas of Central Macedonia belong to the high-risk category. Southern Greece, Eastern Macedonia, and Thrace are all considered very low risk areas.


All European countries, except for Greece, Cyprus, Finland, Estonia, Liechtenstein and Norway, which are considered “stable” by the ECDC, are in a situation of “great epidemiological concern” in terms of the virus. Although the stable countries may report an increase in cases, like Greece, they are still considered to have a relatively low risk level for young and healthy citizens. Older people and those who belong to vulnerable groups in these stable countries are still considered to be of high risk, however. Despite their stable designations, the situation regarding Covid-19 in the six countries should be carefully monitored, as the virus can spread quickly, increasing the countries’ risk level, according to the authorities.

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Best business model: always blame your customers.

Tesla, Ordered To Recall 30,000 Cars In China, Blames ‘Driver Abuse’ (LAT)

Tesla Model S and Model X owners have complained about potentially dangerous flaws with suspension systems at least since 2015. On Friday, the Chinese government took action — and the company responded by blaming the country’s drivers. China’s State Administration for Market Regulation ordered a recall for about 30,000 Model S and Model X vehicles manufactured at Tesla’s Fremont, Calif., plant and exported to China. The affected cars were built from 2013 to 2017. Model S and Model X vehicles sold in the U.S. and Europe were built at the same factory using the same suspension systems. More than 250,000 were sold worldwide. The traffic safety regulator for the United States, the National Highway Traffic Safety Administration, said Friday afternoon it is “aware of the Tesla recall due to suspension problems in China.


At this time, the agency has not received significant complaints related to these issues in the United States. The agency is in contact with Tesla and monitoring the situation closely, and will not hesitate to take action to protect the public against unreasonable risks to safety.” A spokesman declined to say what marks a complaint as significant. [..] in a letter sent by a Tesla attorney to NHTSA on Sept. 4, the company blamed Chinese drivers for the problem, said there was no safety issue, and said it didn’t plan to issue a recall outside China.Tesla owners at the Tesla Motors Club forum have been complaining about suspension issues since at least 2015, complaints that continue to this day. Many report that a ball joint connected to a control arm comes loose.

Read more …

 

 

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“Fall in love with some activity, and do it! Nobody ever figures out what life is all about, and it doesn’t matter.”

Richard Feynman

 

 

Emotions Trump

 

 

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Dec 152018
 
 December 15, 2018  Posted by at 11:09 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »


Vincent van Gogh Road menders at Saint-Remy 1889

 

US Banks See Biggest Unrealized Losses On Securities Since Q1 2009 (WS)
European Banks’ €300 Billion Race To The Bottom (BBG)
Global Debt Hits All-Time High Of $184,000,000,000,000 (RT)
Act V: Yellow Vests Prepare For Massive ‘Macron Resign’ Protest (RT)
Senior Tories Tell May To Work With Corbyn To Save Her Brexit Deal (Ind.)
Theresa May’s Brexit Strategy Left Brutally Exposed By Brussels Failure (G.)
Affordable Care Act Is Ruled Unconstitutional By A Federal Judge (CNBC)
Clinton Foundation Oversight Panel Hears Explosive Testimony (RT)
The War Against Globalism (Giraldi)
Yanis Varoufakis’s Internationalist Odyssey (Nation)

 

 

EU banks are disasters. US banks are too.

US Banks See Biggest Unrealized Losses On Securities Since Q1 2009 (WS)

The FDIC just released the aggregated third-quarter performance metrics of the 5,477 banks and thrifts it insures. The amount of their combined assets ticked up to $17.7 trillion. These assets – mostly loans but also investments of all kinds – include $3.6 trillion in securities (not including the securities in their trading accounts). And banks got hit by the biggest quarterly losses on those securities since the first quarter of 2009. Banks designate these securities either as “held-to-maturity” securities (valued at “amortized cost” or book value) and “available-for-sale” securities (valued at “fair value,” such as market value). For Q3, these were their unrealized losses – meaning, banks have not yet sold the securities:

• Available-for-sale securities: $51.5 billion in unrealized losses, or 2% of their amortized cost, as the FDIC said, “the highest loss level since first quarter 2009.” • Held-to-maturity securities: $32.8 billion in unrealized losses. • Both combined: $84.3 billion in unrealized losses. Note the damage done in 2018, after years of big gains: $83.4 billion in Q3; $66.4 billion in Q2; and about $55 billion in Q1; for a total so far this year about $200 billion in unrealized losses.

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And Draghi went for negative rates. One for the history books.

European Banks’ €300 Billion Race To The Bottom (BBG)

As we approach the end of a dismal year for European stocks, the question is: which sector had the worst year of them all? With a few trading sessions left before the end of 2018, banks and autos are in a tight race to the bottom. As of Thursday’s close, lenders are the biggest losers, with a quarter of their market value down the drain, a wipeout of roughly 300 billion euros in shareholders’ money. Banks haven’t seen such a bad year since the heat of the euro-zone sovereign debt crisis in 2011. As the final ECB meeting of the year confirmed, the central bank will keep rates unchanged at least until next summer and the grim outlook for the sector highlighted in one of our earlier Taking Stock columns remains valid.

Any attempt by the sector to break out from its downward trend in 2018 has so far failed. Perhaps it’s not a surprise as banks face a wall of worry from investors and nothing seems to be able to help them move forward. Repeated calls from some analysts that the sector is cheap hasn’t triggered any significant buying. A good example is Credit Suisse’s buyback and dividend announcement on Wednesday. That didn’t even raise investors’ interest with the stock hovering near its low. While any return of capital to shareholders is welcome, the dark clouds over its investment banking outlook seemed to weigh more.

Here’s the grim silver lining: …it doesn’t matter much to the rest of the market: Since the financial crisis a decade ago, the influence of banks over the broader European gauge has fallen dramatically, to a point where they now barely move the Stoxx 600. So what could help the shares regain their vigor? Although merger talk seems to find fruitful (speculative) ground, large cross-border deals remain a fantasy. But domestic love stories might be one theme to keep an eye on next year. Most prominent is the ongoing chatter about Deutsche Bank and Commerzbank, the worst and third-worst performing stocks in the Stoxx 600 Banks index. While any merger is far from certain, market reaction shows that investors, or at least algos and punters, are betting on any consolidation as the last resort to improve bottom-lines.

And if you are gloating at the “fortress balance sheet” US banks, as BMO’s Brad Wishak notes, price and time are playing a familair hand in US bank stocks… Finally, BofAML strategists summed it all up very succinctly this week: “What we learned in 2018: That central banks trump everything, when global liquidity peaked in Q1, markets peaked; that we remain in a deflationary world which cannot handle a 10-year Treasury yield above 3%; That investors have no satisfactory answers to the existential questions of ‘If not stocks, what?’, ‘If not tech, what?’ ‘If not the U.S. dollar, what?'”…

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Sometimes you wonder if even a grand jubilee could change this.

Global Debt Hits All-Time High Of $184,000,000,000,000 (RT)

The world’s debt currently exceeds $86,000 per person on average, according to the IMF. The US, China, and Japan are the top three global borrowers, accounting for more than half of the global debt. The IMF has calculated that their share of debt exceeds that of output. It stated that the emergence of China among the top ranking is, however, a relatively new development. Since the beginning of the millennium, China’s share in global debt surged from less than three percent to over 15 percent, underscoring the rapid credit surge in the aftermath of the global financial crisis. According to the IMF, global debt has reached a record high of $184 trillion in nominal terms.

That’s the equivalent of 225 percent of the world GDP in 2017. The debt figure is $2 trillion higher than the estimated number released by the fund in October, because it includes the debts of several countries who had not previously reported their updated data. “By including both the sovereign and private sides of borrowing for the entire world, the GDD (Global Debt Database) offers an unprecedented picture of global debt in the post-World War II era,” said the IMF. GDD is a comprehensive dataset covering public and private debt for 190 countries dating back to the 1950s.

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As I write this, things seem to be quiet still.

Act V: Yellow Vests Prepare For Massive ‘Macron Resign’ Protest (RT)

Paris is bracing for yet another round of Yellow Vest protests, with demonstrators planning to take to the streets on Saturday. More than 10,000 people have already RSVP’d on Facebook to the ‘Acte 5: Macron Démission’ march. The demonstration is scheduled to take place in the French capital on the Champs-Élysées. The organizers, consisting of some 15 groups, have outlined their list of demands on Facebook, saying they will continue their action against Macron until all their demands are met. “Our organizations support the demands of tax and social justice brought by the movement of yellow vests.

They call for demonstrations Saturday, December 15, for social justice and tax, for a real democracy, for equal rights, for a true ecological transition…” the planners said in a statement, as quoted by Le Parisien. Similar demonstrations are also expected to take place in other cities across the country. Security officials are gearing up for the protests, with Paris Police Chief Michel Delpuech stating that tens of thousands of cops will be deployed across France, and some 8,000 in Paris. “We need to be prepared for worst-case scenarios,” he said. Delpuech told RTL that authorities are aiming to be in “better control” of the situation than they were last weekend, when more than 125,000 people hit the streets of France, 10,000 of whom protested in Paris.

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But why should he?

Senior Tories Tell May To Work With Corbyn To Save Her Brexit Deal (Ind.)

Senior Tories have told Theresa May to open talks with Labour as her only hope of salvaging a Brexit deal, after the EU’s outright refusal to renegotiate left her strategy in tatters. A badly bruised prime minister was urged to stop trying to “go it alone”, accept her proposed agreement is dead and that she needs the help of other parties to push through softer exit terms. Nicky Morgan, the former education secretary, told The Independent that “cross-party support and proper discussions” were now essential, while Nick Boles, another former minister, said Ms May “must open cross-party discussions”.

The calls came after EU leaders dealt a devastating blow by scrapping written commitments, designed to help Ms May pass her deal through parliament, after disastrous talks failed to achieve a breakthrough. Brussels’ frustration at the prime minister’s inability to set out clearly what she wanted was laid bare when Jean-Claude Juncker, the European Commission president, branded the UK approach “nebulous”. At a press conference, Ms May put a brave face on, insisting her Brexit deal remained on track and that talks in the next few days would achieve “further clarification”.

[..] Jeremy Corbyn said the prime minister had “utterly failed in her attempts to deliver any meaningful changes to her botched deal”, calling for a Commons vote to kill it off without delay “Rather than ploughing ahead and dangerously running down the clock, the prime minister needs to put her deal to a vote next week so parliament can take back control,” he said. Nevertheless, Mr Boles said the route to success for Ms May was cross-party talks to “deliver their support for the deal”.

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She fled to Europe because she could, not to get anything done. The result is no Commons vote until after Christmas.

Theresa May’s Brexit Strategy Left Brutally Exposed By Brussels Failure (G.)

Theresa May has come home from Brussels empty-handed and without hope of further negotiations over the Irish backstop, with the failure to achieve any kind of breakthrough leaving her brutally exposed. Plans to work over Christmas on a legal guarantee over the temporary nature of the backstop had run into a brick wall, EU officials said, despite May’s claim that she would be holding further talks “in the coming days”. Brussels sources claimed May was just keeping up a pretence that the legal guarantee she had promised rebellious Tory MPs during this week’s leadership challenge was still on the cards.

Without clear evidence that she has made progress, May faces mounting jeopardy in Westminster, with Labour seriously considering tabling a vote of no confidence before Christmas, if it believes the prime minister’s DUP partners might support it. Jeremy Corbyn accused May on Friday of “dangerously running down the clock”. “The last 24 hours have confirmed that Theresa May’s Brexit deal is dead in the water. The prime minister has utterly failed in her attempts to deliver any meaningful changes to her botched deal,” he said. One shadow cabinet member said the moment at which Labour would table a no-confidence vote was getting “much, much closer”, but said it would depend on the stance of the DUP. “We are watching like hawks,” he added.

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Set up a bipartisan commission and get this solved. The US is a tragic laughing stock.

Affordable Care Act Is Ruled Unconstitutional By A Federal Judge (CNBC)

A federal judge in Texas ruled on Friday the Affordable Care Act unconstitutional, potentially threatening health-care coverage for millions of Americans and setting up a new legal showdown over former President Barack Obama’s signature policy initiative. U.S. District Court Judge Reed O’Connor of Texas issued the decision, declaring that key portions of the legislation were inconsistent with the Constitution. O’Connor’s ruling argued that the health-care law can not stand on its own since Congress last December repealed the individual mandate, which imposed a tax penalty on consumers who went uninsured. The mandate, which remains in effect for 2018, was a key part of ACA legislation, otherwise known as Obamacare. The mandate is the greater of $695 person per adult, or 2.5% of household income.

The lawsuit was backed by the Trump administration, and is likely to be appealed — which could mean the legislation will heard anew by the Supreme Court, which upheld Obamacare in a narrowly divided 2012 ruling. Medicare & Medicaid Services Administrator Seema Verma told reporters earlier this month that CMS has a plan to protect pre-existing conditions if the law is struck down. A CMS spokesperson late Friday told CNBC, “The recent federal court decision is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan.”

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Government investigators who refuse to share documents with the House. Not just insane, but by now years of insanity.

Clinton Foundation Oversight Panel Hears Explosive Testimony (RT)

Fraud investigators have exposed the Clinton Foundation’s alleged misdeeds in a Congressional hearing, describing it as a de facto “foreign agent” devoted not to charity but to “advancing the personal interests of its principals.” The Clinton Foundation acted as an agent of foreign governments “early in its life and throughout its existence,” according to testimony by former government forensic investigator John Moynihan, which, if true, would not only render it in violation of the Foreign Agents Registration Act but also would violate its nonprofit charter, putting it on the hook for a massive quantity of unpaid taxes. Moynihan and fellow ex-government investigator Lawrence Doyle shared 6,000 pages of evidence with the IRS over 18 months ago, only to be met with silence.

They shared them with the FBI multiple times – ditto. Yet when the pair testified before the House Oversight and Government Reform Committee, they refused to turn over the documents, stating they did not want to interfere with any ongoing investigations. The committee chairman Rep. Mark Meadows (R-NC) said witnesses’ reluctance to share all the documents was hardly a “good foundation for truth and transparency,” while Rep. Jody Hice (R-GA) said he felt the duo was “using” the panel for their own benefit. “These are not our facts. They are not your facts. They are the facts of the Clinton Foundation,” said Moynihan, maintaining his interest in the case is purely financial – not political.

Testifying on their findings, Doyle highlighted the Foundation’s alleged “misuse of donated public funds,” explaining that it “falsely attested that it received funds and used them for charitable purposes which was, in fact, not the case. Rather the foundation pursued in an array of activities both domestically and abroad,” which included activities “properly characterized as profit-oriented and taxable undertakings of private enterprise, again failing the operational tests of philanthropy referenced above,” referring to the equally non-charitable pursuit of funding the Clinton Presidential Library. John Huber, appointed by former Attorney General Jeff Sessions to investigate the Clinton Foundation after Sessions recused himself from doing so, was conspicuously absent from the hearing, even though his job is to probe Clinton’s approval of the sale of US uranium assets to Russia.

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Globalism has been extremely destructive. Hard to defend.

The War Against Globalism (Giraldi)

The idea that republican or democratic government will eventually deteriorate into some form of tyranny is not exactly new. Thomas Jefferson advocated a new revolution every generation to keep the spirit of government accountable to the people alive. Call it what you will – neoliberalism, neoconservatism or globalism – the new world order, as recently deceased President George H.W. Bush once labeled it, characteristically embraces a world community in which there is free trade, free movement of workers and democracy. They all sound like good things but they are authoritarian in nature, destructive of existing communities and social systems while at the same time enriching those who promote the changes.

They have also been the root cause of most of the wars fought since the Second World War, wars to “liberate” people who never asked to be invaded or bombed as part of the process. And there are, of course, major differences between neoliberals and neoconservatives in terms of how one brings about the universal nirvana, with the liberals embracing some kind of process whereby the transformation takes place because it represents what they see, perhaps cynically, as the moral high ground and is recognized as being the right thing to do. The neocons, however, seek to enforce what they define as international standards because the United States has the power to do so in a process that makes it and its allies impossible to challenge.

The latter view is promoted under the phony slogan that “Democracies do not fight other democracies.” The fact that globalists of every type consider nationalism a threat to their broader ambitions has meant that parochial or domestic interests are often disregarded or even rejected. With that in mind, and focusing on two issues – wholesale unwelcome immigration and corrupt government run by oligarchs – one might reasonably argue that large numbers of ordinary citizens now believe themselves to be both effectively disenfranchised and demonstrably poorer as rewarding work becomes harder to find and communities are destroyed through waves of both legal and illegal immigration.

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I can still hope he succeeds, but it’s getting hard to see how.

Yanis Varoufakis’s Internationalist Odyssey (Nation)

Flanked by a dozen members of DiEM25, the pan-European movement launched in 2016 to “democratize” the continent’s institutions, Varoufakis announced that he would run for a seat representing Germany in the European Parliament. He would make his bid as a Greek, a European, and, you might even say, a Berliner—all to drive home a larger point about the necessity of thinking beyond borders. “No European people can be prosperous and free when other European countries are condemned to the permanent depression that eternal austerity creates,” he said. Persistent unemployment, cuts to welfare, and other suffocating economic policies across the continent help explain why Varoufakis chose Germany—a country he’s best known for antagonizing, precisely over its leaders’ support for austerity, in the fraught negotiations over Greece’s debt in 2015.

These circumstances are also the motivating force behind the Progressive International, an initiative that Varoufakis launched five days later in Burlington, Vermont, with DiEM25 and the Sanders Institute. Building broad-based coalitions takes time, and for now, the Progressive International is just a website with some inspiring language and a video. Its membership is also very Eurocentric. But Varoufakis hopes it will blossom into a global movement that helps leftists create coherent platforms, policies, and parties to defeat the “nationalist international” masterminded by Donald Trump’s former chief strategist, Steve Bannon. The logic is simple. Financiers have long had global networks; now, right-wing authoritarians do too, with coordinated social-media strategies and deep pools of dark money funding campaigns and disrupting elections around the globe.

It’s time for the left to go on the offensive and reclaim its tradition of internationalism: in Varoufakis’s words, to “mobilize workers, women, and the disenfranchised around the world” to prevent outright fascism from taking hold. This means local action, but it also means dreaming big. It’s a fuzzy plan, of course, and one that Varoufakis’s critics deem implausible. Aren’t ideas like “democratizing” the European Union and making global finance more “progressive” oxymorons? How will a ragtag group of leftists dream up a new monetary system and an ecological New Deal for the whole world when Goldman Sachs and ExxonMobil call the shots?

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May 082018
 


Franco Fontana Praga 1967

 

Emerging Market Currencies Feel The Heat As US Economy Brightens (SCMP)
Two-Thirds Of Americans Believe It’s A Good Time To Buy A Home (MW)
Obamacare Premiums May Soar As Much As 91% Next Year (ZH)
Which Hunt? (Jim Kunstler)
The Donald’s Fabulous Fiscal Folly, Wall Street’s Wile E. Coyote (Stockman)
Trump To Unveil Iran Decision Tuesday; Europeans Move His Way (R.)
State Dept.: Giuliani Doesn’t Speak For US On Foreign Policy (AP)
Are You in a BS Job? In Academe, You’re Hardly Alone (David Graeber)
Theresa May Faces Renewed Turmoil Over Brexit Options (G.)
Shocks From Australian Banks’ Inquiry May Squeeze A Nation (R.)
“Creating Wealth” Through Debt (Michael Hudson)
Australia Pledges Millions To Help Save The Koala (AFP)
Glyphosate-Based Weedkillers Much More Toxic Than Their Active Ingredient (G.)

 

 

Feels like someone is trying not to let the US dollar rise too fast.

Emerging Market Currencies Feel The Heat As US Economy Brightens (SCMP)

A stream of broadly upbeat US economic data is opening up fissures in the foreign exchange markets. Market participants are recognising that the balance of risk is changing. Emerging markets, which have enjoyed substantive capital inflows, will not be immune to this process, and certain currencies are already feeling the heat. Emerging markets were major beneficiaries of inward capital flows last year, as evidenced in data from the Bank for International Settlements on 30 April. Overall “foreign currency credit continued to grow during 2017, with US dollar credit rising by 8% to US$11.4 trillion and euro credit by 10% to €3 trillion (US$3.57 trillion),” the bank wrote. US dollar credit to emerging market economies rose by 10% to US$3.67 trillion in the year to end-2017, it added.

This US-dollar dominance is critical, as the main currency moving into any markets, not just emerging markers, will also be the main mover out of them. [..] It seems an age ago now but, in June 2017, Argentina could issue a US dollar-denominated 100-year government bond receiving US$9.75 billion of orders for a US$2.75 billion issue with a coupon of 7.125%. Foreign investors had a taste for Argentina but now want out. Last Friday, with inflation in Argentina in April at 25.4%, the local central bank had to raise its benchmark interest rate to 40% in an attempt to arrest the pace of the peso’s decline. It had fallen 7.83% versus the US dollar on Thursday alone.

Friday also saw the Turkish lira hit a record low against the US dollar, beset by 11% year-on-year inflation and, among other factors, investor concerns that Turkey’s central bank could come under political pressure not to tighten monetary policy as far as they might. [..] Markets can behave like predators, pursuing what they perceive as the weakest prey first. Argentina and Turkey are currently filling that not-to-be-envied role in the wider emerging markets space. But they probably won’t be the last. Billions of US dollars of capital have flowed into emerging markets in recent years but the tide may be turning. It would be easy to just characterise Argentina and Turkey as special cases but that would be naive.

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Oh, sure. Never better.

Two-Thirds Of Americans Believe It’s A Good Time To Buy A Home (MW)

House prices are soaring and, despite warnings from some analysts, most Americans believe they will continue to soar. A majority of U.S. adults (64%) continue to believe home prices in their local area will increase over the next year, a survey released Monday by polling firm Gallup concluded. That’s up 9 percentage points over the past two years and is the highest percentage since before the housing market crash and Great Recession in the mid-2000s. The level of optimism is edging closer to the 70% of adults in 2005 who said prices would continue rising. That, of course, was less than one year before the peak of the housing market bubble in early 2006, which was largely fueled by a wave of subprime lending. (Roughly one-quarter of respondents in both 2005 and 2018 said they believed house prices would remain the same.)

In 2009, during the depths of the Great Recession, only 22% of Americans believed house prices would rise. But optimism about the housing market has made a slow recovery—along with the market itself—in the intervening years. Today, only 10% in the Gallup survey believe prices will fall. That compares to 5% who felt similarly pessimistic in 2005, just two years before the crash. Opinions vary between the West and East coasts, and renters and homeowners. Some 70% of homeowners see prices continuing to rise versus 59% of renters. Only 59% of Western residents see prices increasing, compared to a range of 65% to 68% in the other parts of the U.S. (The median sale price of a home in California is more than double that in the rest of the country.)

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About that house you were planning to buy…

Obamacare Premiums May Soar As Much As 91% Next Year (ZH)

Residents of Maryland and Virginia face double-digit percentage increases in premiums for individual Obamacare plans in 2019, according to rate requests made by insurers. The largest hikes are being sought by CareFirst, which is seeking a 64% increase in Virginia, and a whopping 91% increase in Maryland for its PPO. Other insurers are following suit in the two states, with Kaiser requesting hikes of 32% and 37% respectively, followed by CareFirst’s HMO offering. “In Maryland, CareFirst wants to raise rates by 91% on a plan covering 15,000 people, Insurance Commissioner Al Redmer Jr. said. If approved, premiums for a 40-year-old could reach $1,334 a month.” -Bloomberg

That’s over $16,000 per year for an individual plan in a state with an average personal income of $59,524. “We have folks in Maryland that are struggling, that are trying to do the right thing, and they’re paying more for their health insurance than they are for their mortgage,” Redmer said on a call with reporters. “Maryland is seeking permission from the federal government to create a reinsurance program that would use $975 million in state and federal funds over five years to lower rates. That would help only temporarily, Redmer said.” -Bloomberg “I believe we’ve been in a death spiral for a year or two,” he said, adding that a permanent solution requires Congress to fix the Affordable Care Act.

Virginia and Maryland are the first two states in which 2019 rate requests – which are subject to regulatory approval and may change – have been made public, however increases are anticipated across the country as insurers adjust to the post-ACA battle. Final premium increases will need to be approved ahead of the November 1 open-enrollment period. The hikes are being blamed in part by the expectation that the elimination of the Obamacare stipulation forcing all Americans to have health coverage would leave insurers with a smaller pool of sicker clients.

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“..the collusion of multiple intelligence agencies with social media companies and what used to be the respectable organs of the news..”

Which Hunt? (Jim Kunstler)

It was refreshing to read the response of Federal Judge T. S. Ellis III to a squad of prosecutors from Robert Mueller’s office who came into his Alexandria, Virginia, court to open the case against Paul Manafort, erstwhile Trump campaign manager, for money-laundering shenanigans dating as far back as 2005. Said response by the judge being: “You don’t really care about Mr. Manafort’s bank fraud. You really care about getting information that Mr. Manafort can give you that would reflect on Mr. Trump and lead to his prosecution or impeachment or whatever.”

Judge Ellis’s concise summation was like a spring zephyr clearing out a long winter’s fog of unreality in our national politics — the idea that Mueller’s mission has been anything but the Deep State’s ongoing crusade to nullify the 2016 election. In the meantime of the past year, Mueller has been additionally burdened by obvious misconduct in the FBI and its parent agency, the Department of Justice, which makes Mueller himself look like the instrument of a cover-up, or at least a massive organized distraction from the misdeeds of the Deep State itself.

I was never a Trump supporter or voter, but it seems to me he deserves to succeed or fail as President on his own merits (or lack of). It’s much more disturbing to me to see the runaway train that federal prosecution has turned into, along with orchestrated intrigues of FBI and DOJ officials at the highest level. These are of a piece with the creeping surveillance of all Americans, and the collusion of multiple intelligence agencies with social media companies and what used to be the respectable organs of the news, especially The New York Times, The Washington Post, and CNN — all of which are behaving like Grand Inquisitors in a medieval religious hysteria.

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Stockman does a Trump: “Simple Steve Mnuchin”.

The Donald’s Fabulous Fiscal Folly, Wall Street’s Wile E. Coyote (Stockman)

There has never been a more fiscally clueless team at the top than the Donald and his dimwitted Treasury secretary, Simple Steve Mnuchin. After reading the latter’s recent claim that financing Uncle Sam’s impending trillion dollar deficits will be a breeze, we now understand how he sat on the Board of Sears for 10-years and never noticed that the company was going bankrupt. In any event, fixing to borrow upwards of $1.2 trillion in FY 2019, Simple Steve apparently didn’t get the memo about the Fed’s unfolding QT campaign and the fact that it will be draining cash from the bond pits at a $600 billion annual rate by October. After all, no one who can do third-grade math would expect that the bond market can “easily handle” what will in effect be $1.8 trillion of homeless USTs:

“U.S. Treasury Secretary Steven Mnuchin said he’s unconcerned about the bond market’s ability to absorb rising government debt after his department said it borrowed a record amount for the first quarter. ‘It’s a very large, robust market — it’s the most liquid market in the world, and there is a lot of supply,” he said… ‘But I think the market can easily handle it.’ Then again, Simple Steve is apparently not alone in his fog of incomprehension. Even if you did get the memo—like most of the Wall Street day traders—you might still be under the delusion that the Fed is your friend and that when push comes to shove, it will put QT on ice in order to forestall any unpleasant hissy-fitting in the casino.

That is, it’s allegedly still safe to buy the dips or play the swing trade between the 50-DMA and 200-DMA because the Powell Put undergirds the latter. So never fear dear punters: At about 2615 on the S&P 500 (the current 200-DMA), the Eccles Building cavalry will ride to the rescue. That would appear to be the meaning of the chart below—except it isn’t. What it really says is that after nine years of buying the dips successfully, Wall Street has essentially deputized its own cavalry. [..] there is in our judgment 15-20% of downside before the Fed relents, but by that point it will be too late.

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China and Russia stand behind Iran.

Trump To Unveil Iran Decision Tuesday; Europeans Move His Way (R.)

President Donald Trump will announce on Tuesday whether he will withdraw from the Iran nuclear deal and a senior U.S. official said it was unclear if efforts by European allies to address Trump’s concerns would be enough to save the pact. Trump has repeatedly threatened to withdraw from the deal, which eased economic sanctions on Iran in exchange for Tehran limiting its nuclear program, unless France, Germany and Britain – which also signed the agreement – fix what he has called its flaws. The senior U.S. official said the European allies had moved significantly in Trump’s direction on what he sees as the defects – the failure to address Iran’s ballistic missile program, the terms under which international inspectors visit suspected Iranian sites, and “sunset” clauses under which some terms expire.

The official did not know, however, if the Europeans had done enough to convince Trump to remain in the deal. “The big question in my mind is does he think the Europeans have moved far enough so that we can all be unified and announce a deal? That’s one option,” said the official. “Or (does he conclude) the Europeans have not moved far enough and we say they’ve got to move more?” European diplomats said privately they expected Trump to effectively withdraw from the agreement, which was struck by six major powers – Britain, China, France, Germany, Russia and the United States – and Iran in July 2015.

[..] Under the deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), the United States committed to easing a series of U.S. sanctions on Iran and it has done so under a string of “waivers” that effectively suspend them. Under U.S. law, Trump has until Saturday to decide whether to reintroduce U.S. sanctions related to Iran’s central bank and Iranian oil exports. The reimposition of sanctions would dissuade foreign companies from doing business with Iran because they could be subject to U.S. penalties.

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The Rudy show. There won’t be a sequel.

State Dept.: Giuliani Doesn’t Speak For US On Foreign Policy (AP)

The Trump administration sought to distance itself Monday from Rudy Giuliani’s dramatic public statements about Iran and North Korea, saying that President Donald Trump’s new lawyer does not speak for the president on matters of foreign policy. Since joining Trump’s legal team last month and becoming its public face, Giuliani has raised eyebrows for a series of startling assertions not only about his legal strategy and the special counsel investigation, but also about global affairs and Trump’s policies. That spurred widespread confusion over whether the former New York mayor, now on Trump’s payroll, was disclosing information he’d been told by the president, stating U.S. government policy or merely describing his own impression of events.

“He speaks for himself and not on behalf of the administration on foreign policy,” State Department spokeswoman Heather Nauert said Monday. It was the clearest sign to date that Trump’s administration is seeking to draw a line between itself and Giuliani on matters of government policy, even as he continues to act as his spokesman on matters related to special counsel Robert Mueller’s Russia probe. It comes as Trump prepares for a series of high-stakes moments in the coming weeks on Iran, North Korea and the Mideast conflict — the type of delicate and potentially explosive regions where events can easily be upended by an errant remark by an emissary of the U.S. president. Giuliani’s perplexing and sometimes conflicting remarks have increasingly become a cause of consternation for Trump’s aides.

Asked last week whether Giuliani’s portfolio included foreign policy, White House spokeswoman Sarah Huckabee Sanders said simply, “Not that I’m aware of.” [..] Giuliani’s remarks have been watched with equal concern at the State Department, the Pentagon and other national security agencies, starting last week when he said on television that North Korea would release three Americans detained in the country. “We got Kim Jong Un impressed enough to be releasing three prisoners today,” Giuliani told Fox News. Although Trump has hinted that such a move could be coming, there has been no formal announcement by the U.S. government, which is in detailed talks with North Korea at the moment to plan a historic summit between Kim and Trump. The detainees have not yet been released as predicted by Giuliani.

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Bullshitization.

Are You in a BS Job? In Academe, You’re Hardly Alone (David Graeber)

For a number of years now, I have been conducting research on forms of employment seen as utterly pointless by those who perform them. The proportion of these jobs is startlingly high. Surveys in Britain and Holland reveal that 37 to 40% of all workers there are convinced that their jobs make no meaningful contribution to the world. And there seems every reason to believe that numbers in other wealthy countries are much the same. There would appear to be whole industries — telemarketing, corporate law, financial or management consulting, lobbying — in which almost everyone involved finds the enterprise a waste of time, and believes that if their jobs disappeared it would either make no difference or make the world a better place.

Generally speaking, we should trust people’s instincts in such matters. (Some of them might be wrong, but no one else is in a position to know better.) If one includes the work of those who unwittingly perform real labor in support of all this — for instance, the cleaners, guards, and mechanics who maintain the office buildings where people perform bullshit jobs — it’s clear that 50% of all work could be eliminated with no downside. (I am assuming here that provision is made such that those whose jobs were eliminated continue to be supported.) If nothing else, this would have immediate salutary effects on carbon emissions, not to mention overall social happiness and well-being.

Even this estimate probably understates the extent of the problem, because it doesn’t address the creeping bullshitization of real jobs. According to a 2016 survey, American office workers reported that they spent four out of eight hours doing their actual jobs; the rest of the time was spent in email, useless meetings, and pointless administrative tasks. The trend has much less effect on obviously useful occupations, like those of tailors, steamfitters, and chefs, or obviously beneficial ones, like designers and musicians, so one might argue that most of the jobs affected are largely pointless anyway; but the phenomenon has clearly damaged a number of indisputably useful fields of endeavor. Nurses nowadays often have to spend at least half of their time on paperwork, and primary- and secondary-school teachers complain of galloping bureaucratization.

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Nice going, Boris: “..the foreign secretary dismissed May’s customs partnership proposal as “crazy” “

Theresa May Faces Renewed Turmoil Over Brexit Options (G.)

Theresa May is facing renewed cross-party pressure to accept membership of the European Economic Area (EEA) or risk defeat in the Commons. Peers vote on Tuesday night on a series of amendments as officials work to try to find a deal on May’s preferred option of a customs relationship with Europe that is acceptable to Brexiters and remainers in her cabinet, as well as MPs and EU negotiators. The policy paper rejected by the inner cabinet on the Brexit subcommittee last week has been withdrawn for further work and will not be discussed at this week’s regular meeting.

A Downing Street source said: “It was agreed on Wednesday that more work needed to be done to flesh out the general principles agreed – no hard border and as frictionless trade as possible. “We realise the urgency. But as Greg Clark [the business secretary] said on Sunday, it is a crucial question to get right.” The prime minister also came under pressure from Boris Johnson, who is currently in Washington trying to persuade Donald Trump to stick with the Iran nuclear deal. In an interview with the Daily Mail, the foreign secretary dismissed May’s customs partnership proposal as “crazy” and said it would create massive bureaucracy. The scheme involves the UK levying border tariffs on imports on behalf of the EU and refunding them where the imported goods stay in Britain.

Johnson also condemned any system that prevented the UK from establishing its own trade policy and negotiating deals with non-EU countries, which is also the principle objection of Conservatives led by Jacob Rees-Mogg in the European Research Group. Meanwhile, the Irish government is concerned that many MPs and peers still believe that Dublin will back down at the last minute on the hard border. One parliamentarian who visited Westminster recently said he was surprised by how confident MPs were that there could be a frictionless border between north and south without a customs union. “Both May’s proposals for maximum facilitation and a customs partnership have been rejected by [the EU negotiator] Michel Barnier as magical thinking,” he said.

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Horse. Barn.

Shocks From Australian Banks’ Inquiry May Squeeze A Nation (R.)

Australia and New Zealand Banking Group last week said that in the wake of the Royal Commission, which has uncovered wide-spread examples of careless and at times fraudulent lending practices, it would likely be harder for customers to borrow money. And National Australia Bank said net interest margins on its all-important mortgage book were falling; while Westpac told Reuters it had recently increased scrutiny of borrowers’ living expenses, including asking them to disclose such items as gym memberships and pet insurance, when making loan assessments. The inquiry has come at a time when there was already a push for increased controls on lending and new capital requirements.

Those had helped spark a wave of divestments of cash-intensive wealth management, insurance and financial planning arms. Borrowers have begun to feel the squeeze, according to Sydney real estate agent Peter Wong, as banks dig through credit histories and ask borrowers for bigger deposits. “The residential sector has become very, very cautious and so, obviously, they’re making sure that they dot their i’s and cross their t’s, and before it wasn’t like that,” said Wong, who runs an agency in inner-city Chinatown. “I’ve got property on the market and I’ve had it on for over three months whereas previously, being a popular area, people would buy fairly quickly.”

Australia has an oligopoly banking system – Commonwealth Bank of Australia sits alongside Westpac, NAB and ANZ making up the so-called “Big Four” – which collectively dominate property, investment and business lending, giving Australians limited options when seeking credit.

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Hudson warns China not to become the west.

“Creating Wealth” Through Debt (Michael Hudson)

Western capitalism has not turned out the way that Marx expected. He was optimistic in forecasting that industrial capitalists would gain control of government to free economies from unnecessary costs of production in the form of rent and interest that increase the cost of living (and hence, the break-even wage level). Along with most other economists of his day, he expected rentier income and the ownership of land, natural resources and banking to be taken out of the hands of the hereditary aristocracies that had held them since Europe’s feudal epoch. Socialism was seen as the logical extension of classical political economy, whose main policy was to abolish rent paid to landlords and interest paid to banks and bondholders.

A century ago there was an almost universal belief in mixed economies. Governments were expected to tax away land rent and natural resource rent, regulate monopolies to bring prices in line with actual cost value, and create basic infrastructure with money created by their own treasury or central bank. Socializing land rent was the core of Physiocracy and the economics of Adam Smith, whose logic was refined by Alfred Marshall, Simon Patten and other bourgeois economists of the late 19th century. That was the path that European and American capitalism seemed to be following in the decades leading up to World War I. That logic sought to use the government to support industry instead of the landlord and financial classes.

China is progressing along this “mixed economy” road to socialism, but Western economies are suffering from a resurgence of the pre-capitalist rentier classes. Their slogan of “small government” means a shift in planning to finance, real estate and monopolies. This economic philosophy is reversing the logic of industrial capitalism, replacing public investment and subsidy with privatization and rent extraction. The Western economies’ tax shift favoring finance and real estate is a case in point. It reverses John Stuart Mill’s “Ricardian socialism” based on public collection of the land’s rental value and the “unearned increment” of rising land prices.

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A new threatened species every single day. So far this week: mountain gorillas, right whales and koalas.

Australia Pledges Millions To Help Save The Koala (AFP)

Australia unveiled on Monday a US$34 million plan to help bring its koala population back from the brink, following a rapid decline in the furry marsupial’s fortunes. The Australian Koala Foundation estimates there may be as few as 43,000 koalas left in the wild, down from a population believed to number more than 10 million prior to European settlement of the continent in 1788. “Koalas are a national treasure,” said Gladys Berejiklian, premier of New South Wales state, in announcing her government’s conservation plan. “It would be such a shame if this nationally iconic marsupial did not have its future secured.”

Habitat loss, dog attacks, car strikes, climate change and disease have taken their toll on one of Australia’s most recognisable animals. Studies show a 26% decline in the koala population in New South Wales over the last 15-20 years. The state lists the species as “vulnerable”, while in other parts of the country they are effectively extinct. Under the Aus$45 million plan, thousands of hectares will be set aside to preserve the marsupial’s natural habitat.

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The madness of it. After 44 years of active use, they’re finally being tested (!). But their formulas remain confidential business information, so they don’t even know what they’re testing.

Glyphosate-Based Weedkillers Much More Toxic Than Their Active Ingredient (G.)

US government researchers have uncovered evidence that some popular weedkilling products, like Monsanto’s widely-used Roundup, are potentially more toxic to human cells than their active ingredient is by itself. These “formulated” weedkillers are commonly used in agriculture, leaving residues in food and water, as well as public spaces such as golf courses, parks and children’s playgrounds. The tests are part of the US National Toxicology Program’s (NTP) first-ever examination of herbicide formulations made with the active ingredient glyphosate, but that also include other chemicals. While regulators have previously required extensive testing of glyphosate in isolation, government scientists have not fully examined the toxicity of the more complex products sold to consumers, farmers and others.

Monsanto introduced its glyphosate-based Roundup brand in 1974. But it is only now, after more than 40 years of widespread use, that the government is investigating the toxicity of “glyphosate-based herbicides” on human cells. The NTP tests were requested by the Environmental Protection Agency (EPA) after the International Agency for Research on Cancer (IARC) in 2015 classified glyphosate as a probable human carcinogen. The IARC also highlighted concerns about formulations which combine glyphosate with other ingredients to enhance weed killing effectiveness. Monsanto and rivals sell hundreds of these products around the world in a market valued at roughly $9bn.

Mike DeVito, acting chief of the National Toxicology Program Laboratory, told the Guardian the agency’s work is ongoing but its early findings are clear on one key point. “We see the formulations are much more toxic. The formulations were killing the cells. The glyphosate really didn’t do it,” DeVito said. [..] “This testing is important, because the EPA has only been looking at the active ingredient. But it’s the formulations that people are exposed to on their lawns and gardens, where they play and in their food,” said Jennifer Sass, a scientist with the Natural Resources Defense Council.

One problem government scientists have run into is corporate secrecy about the ingredients mixed with glyphosate in their products. Documents obtained through Freedom of Information Act requests show uncertainty within the EPA over Roundup formulations and how those formulations have changed over the last three decades. That confusion has continued with the NTP testing. “We don’t know what the formulation is. That is confidential business information,” DeVito said. NTP scientists sourced some samples from store shelves, picking up products the EPA told them were the top sellers, he said.

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Feb 272018
 
 February 27, 2018  Posted by at 11:02 am Finance Tagged with: , , , , , , , , ,  5 Responses »


Lewis Wickes Hine Mother and child, Ellis Island, New York 1907

Stock Market Rests Happily on Smoldering Powder Keg (WS)
China’s Bailouts Won’t End With Anbang (Balding)
US January New Home Sales Crash As Rates Spike (ZH)
US Gross National Debt Spikes $1 Trillion in Less Than 6 Months (WS)
Dark Money: The Secret Force Behind Today’s Rigged Markets (Nomi Prins)
Problem With Rising Rates: Corporate America Has Binged On Debt (CNN)
European Companies’ Alarming Leverage (BBG)
Central Banks Need To Stay Vigilant For Further Volatility – Lagarde (BBG)
US Will Overtake Russia As Top Oil Producer By 2019 (R.)
The Matrix? Alice In Wonderland? Praise For Corbyn From UK Business (Ind.)
Generational Battle Lines Harden Over Pensions (G.)
The Real Reason Behind The US Student Debt Problem (F.)
20 US States Sue Federal Government, Seeking End To Obamacare (R.)
US Supreme Court Rebuffs Trump, Won’t Hear Immigration Appeal (BBG)
And Now the Schiff Memo (Jim Kunstler)
East Ghouta: The Last Great Battle Of The Syrian War? (Duran)
Women ‘Sexually Exploited In Return For Aid’ in Syria (BBC)

 

 

The beauty of low rates.

Stock Market Rests Happily on Smoldering Powder Keg (WS)

There is nothing like a big shot of leverage to fire up the stock market. And that’s what the market got in 2017, when the S&P 500 surged 26%, and in January 2018, when the index soared another 7.5% through January 26 – until suddenly something happened. One measure of leverage in the stock market is margin debt – the amount individual and institutional investors borrow from their brokers against their portfolios – which surged $22.9 billion in January to a new record of $665.7 billion, according to FINRA (Financial Industry Regulatory Authority), which regulates member brokerage firms and exchange markets, and which has taken over margin-debt reporting from the NYSE.

For the 12-month period through January, margin debt soared $112.2 billion, among the largest 12-month gains in the history of the data series, behind only the 12-month periods ending in: • December 2013 ($123 billion) • July 2007 ($160 billion) • March 2000 ($133.7 billion) • November 1997 ($132 billion). But it’s not just the recent surge; it’s the length of the surge. With only a few noticeable down periods, margin debt has soared for nine years in a row and now exceeds the prior peak of July 2007 ($416 billion) by 60%. By comparison, over the same period, nominal GDP (not adjusted for inflation) has grown 32%, and the Consumer Price Index has grown 20%.

In other words, margin debt has ballooned twice as fast from peak to peak as GDP and three times as fast as the Consumer Price Index. The chart below shows margin debt based on the FINRA data, which includes margin debt from its own member firms and from NYSE Member firms, and is therefore more complete and larger than the NYSE data was. For example, NYSE margin debt in November 2017, the last month available, was $580.9 billion while FINRA’s data for November showed margin debt of $627.4 billion. And in January, FINRA warned about the levels of margin debt – marked in green on the chart. Note the spike that started in June 2016:

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Xi’s main problem: he can’t let these companies go belly-up. And there’s lots of them, some big, some smaller.

China’s Bailouts Won’t End With Anbang (Balding)

When the China Insurance Regulatory Commission announced last week that it was seizing Anbang, the only surprise was that it took so long. Last year, the company was told to sell its overseas assets, its founder was placed behind bars, and banks were ordered to stop offering its products. So what, if anything, does this latest incident tell us about China’s economy and its attempt to crack down on debt? Anbang is often referred to as an insurance company, but this is misleading. Although the company does offer some run-of-the-mill products, such as property and casualty insurance, what really drove its growth were unusually structured life-insurance products. At the end of 2016, shortly before regulators intervened, property and casualty premiums made up a mere 4% of the group’s revenue. Life insurance made up 96%.

The growth in this business stunned even China analysts accustomed to tales of fabulous growth. From 2010 to 2016, Anbang’s annual life-insurance premium revenue increased from 1 million yuan to 114.2 billion yuan, or total growth of 11 million %. Even during a period of rapid economic expansion, annualized growth of 593% is amazing. The problem was that the life-insurance products were actually high-yielding debt instruments; investors could opt out of the insurance portion in as little as two years. With some products yielding more than 5% in the first three years, this essentially made Anbang a highly leveraged investor taking on significant risks to cover its cost of capital. Customers were basically extending loans to Anbang that it used to overpay for assets. Regulators finally stepped in to prevent a collapse that could have led to significant instability – with some 35 million customers demanding their money back.

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Econ 101 redux: “..prices will be forced to adjust lower as affordability collapses..”

US January New Home Sales Crash As Rates Spike (ZH)

Following the significant disappointment of January’s existing home sales, hopes were high for a rebound in new home sales (+3.5% expected after December’s 9.3% plunge) but those hopes were crushed as January new home sales crashed 7.8% MoM. This is the lowest level since August, even as the supply of homes at current sales rate climbed to 6.1 months from 5.5 months.

This is the biggest two-month drop in new home sales SAAR since August 2013. The Median price dropped from $336,700 to $323,000 – the lowest since October…

16% of new homes sold in January cost more than $500,000, down from 22% last month. As sales in the Northeast collapsed: • Northeast -33.3%, from 36K to 24K • Midwest +15.4%, from 65K to 75K • South -14.2%, from 351K to 301K • West +1.0%, from 191K to 193K So we are sure NAR will blame ‘inclement’ weather – as opposed to soaring rates and plunging affordability. Just as we warned previously, the following chart shows, that surge in rates will have a direct impact on home sales (or prices will be forced to adjust lower) as affordability collapses… This won’t end well.

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When trapped by crazy, go crazier.

US Gross National Debt Spikes $1 Trillion in Less Than 6 Months (WS)

As of the latest reporting by the Treasury Department, the US gross national debt rose by $41.5 billion on Thursday, February 22, to a grand total of $20.8 trillion. Here’s the thing: On September 7, 2017, five-and-a-half months ago, just before Congress suspended the debt ceiling, the gross national debt stood at $19.8 trillion. At that time, I was holding my breath waiting for the gross national debt to take a huge leap in a single day – as it always does after the debt ceiling gets lifted or suspended – and jump to the next ignominious level. It sure did the next day, when it jumped $318 billion. And it continued. Over a period of 8 weeks, the gross national debt jumped by $640 billion.

Four weeks after that, it had ballooned by $723 billion, at which point Fed Chair Yellen – whose cheap-money policies had enabled Congress to do this for years – said that she was “very worried about the sustainability of the US debt trajectory.” Then Congress served up another debt ceiling – a regular charade lawmakers undertake to extort deals from each other, beat the White House into submission, and keep the rest of the world their on their toes. It goes like this: First they pass the spending bills, directing the Administration to spend specific amounts of money on a gazillion specific things spread around specific districts. Then they block the means to pay the credit card bill. That debt ceiling was suspended on February 8, at which point the gross national debt began to surge again, adding $960.4 billion, a 5% jump in the gross national debt in just 5.5 months:

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Dark money will end up killing everything.

Dark Money: The Secret Force Behind Today’s Rigged Markets (Nomi Prins)

Markets were up again big today and volatility was down. But we haven’t seen the last of rising volatility, nor of the central banks’ attempts to thwart it. This week, new Fed Chair Jerome Powell will be giving his first congressional testimony, and you can be sure that markets are waiting on his words with bated breath. Before his testimony, the Fed will be releasing its Monetary Policy Report, which will also give an indication to the direction of Fed policy. Because these will be his first official comments as Fed chair, Powell will want to both make a personal mark and make sure markets don’t panic over his remarks. I believe he will temper his comments to neutralize any negative market impact the report could have. Wall Street wants to hear that Powell’s not going to aggressively hike rates.

The risk is that, as an article from CNBC reports, “Powell may not clarify anything,” in which case, “traders could be stuck with the same dilemma that shook stocks and sent bond yields spiking [last] Wednesday after the release of the minutes from the Fed’s January meeting.” I think Powell will sound as dovish as he can to avoid that outcome. So even if he confirms rate hikes will be executed at the already forecast pace of three rates this year, he won’t indicate there could be more, which should keep markets calmer and bullish. In other words, I don’t believe that Powell will implement dramatically different monetary policy from his predecessors Janet Yellen or Ben Bernanke. The Fed will do whatever the markets need. Banks have grown accustomed to what I call “dark money” and don’t want Powell to rock the boat.

What is dark money? Dark money basically means money coming from central banks. In essence, central banks “print” money or electronically fabricate money by buying bonds or stocks. They use other tools like adjusting interest rate policy and currency agreements with other central banks to pump liquidity into the financial system. That dark money goes to the biggest private banks and financial institutions first. From there, it spreads out in seemingly infinite directions, affecting different financial assets in different ways. These dark money flows stretch around the world according to a pattern of power, influence and of course, wealth for select groups. Dark money is the No. 1 secret life force of today’s rigged financial markets. It drives whole markets up and down. It’s the reason for today’s financial bubbles.

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CNN wakes up.

Problem With Rising Rates: Corporate America Has Binged On Debt (CNN)

Corporate America, egged on by ridiculously-low borrowing costs, has built up more debt than any time since the end of the Great Recession. The credit binge has allowed companies to grow faster, invest in the future and reward shareholders with huge dividends and share buybacks. Yet elevated levels of debt will also make businesses vulnerable when the next recession strikes or if borrowing costs spike because of rising interest rates. Either outcome will make it harder for Corporate America to pay back the $4 trillion of debt coming due by 2022. This risk has been underlined by the recent surge in Treasury yields and rising concerns that inflation could force the Federal Reserve to consider aggressive rate hikes.

“Removing the easy money punch bowl could trigger the next default cycle,” S&P Global Ratings wrote in a recent report titled “Debt high, defaults low – something’s gotta give.” For nearly a decade, companies have taken advantage of extremely cheap money set by the Fed and foreign central banks trying to pump up sluggish growth. Excluding the highly leveraged financial sector, corporate debt relative to GDP matched an all-time high during the third quarter of 2017, according to an analysis of the most recent numbers by Informa Financial Intelligence. “It’s certainly a reason to be cautious, particularly when we are long into this growth cycle and the Fed is raising rates,” said David Ader, chief macro strategist at Informa Financial Intelligence. “Everything is fine and well – until it isn’t,” he said.

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US, China, Europe et al. Leverage is all that’s left.

European Companies’ Alarming Leverage (BBG)

Much has been written recently about whether companies are going to look overstretched as monetary policy is tightened and bond yields rise. Some excellent research on European non-financial corporates by our Bloomberg Intelligence colleagues Laurent Douillet and Tim Craighead shines more light on the subject. It’s a slightly worrying picture. First off, they looked at cumulative free cash flows over the five years between 2012 and 2016, and then compared them with shareholder payouts and M&A spending. In every sector, except telecoms, free cash flow was exceeded by combined dividends, buybacks and deal-making, as this chart shows:

Consumer companies, drugs makers and industrials have splurged the most on dividends and takeovers. When you take a first glance at leverage, this doesn’t appear to be the end of the world. When you look at the most recent period, net debt to Ebitda looks pretty undemanding, except for the utilities – which are something of a problem child in Europe generally. Even if you look at free cash flow as a proportion of total debt, utilities are probably the only real outlier. Yet if you take a stricter view of what makes up debt, and include pension deficits and operating lease obligations, things start to look less benign. Operating leases are something that Gadfly’s Chris Bryant has looked at before, as companies will have to include them as part of their assets and associated debts when the new IFRS 16 accounting rules come in next year. If you use an adjusted measure of debt by including pensions and leases, as our BI colleagues have done, you get this:

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Blah blah.

Central Banks Need To Stay Vigilant For Further Volatility – Lagarde (BBG)

Central banks need to stay vigilant as uncertainty remains over the impact of the normalization of monetary policies in advanced economies, IMF Managing Director Christine Lagarde said. “We have known for some time that this is coming, but it remains uncertain as to how exactly it will affect companies, jobs, and incomes,” Lagarde told a conference in Jakarta on Tuesday. “Clearly, policy makers need to stay vigilant about the likely effects on financial stability, including the prospect of volatile capital flows.” Stock markets from the U.S. to Asia were in turmoil in recent weeks on concerns that the U.S. could raise interests rates at a faster pace than previously thought. Investors are awaiting Jerome Powell’s first public comments in the role of Fed chairman on Tuesday.

The global economy is on a broad-based upswing, involving about two-thirds of the world, and it offers an opportunity to reform financial markets, upgrade labor laws, and lower barriers to entry in overly protected industries, Lagarde said. The IMF forecasts global economic growth of 3.9 percent this year and in 2019. “As I have been saying recently, the time to repair the roof is when the sun is shining,” Lagarde said. “Repairing the roof also means using fiscal reforms to generate higher public revenues, where needed, and improve spending. By boosting public finances, countries can increase infrastructure investment and development spending, especially on social safety nets for the most vulnerable.‘”

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Burn baby burn.

US Will Overtake Russia As Top Oil Producer By 2019 (R.)

The United States will overtake Russia as the world’s biggest oil producer by 2019 at the latest, the International Energy Agency (IEA) said on Tuesday, as the country’s shale oil boom continues to upend global markets. IEA Executive Director Fatih Birol said at an event in Tokyo the United States would overtake Russia as the biggest crude oil producer “definitely next year”, if not this year. “U.S. shale growth is very strong, the pace is very strong … The United States will become the No.1 oil producer sometime very soon,” he told Reuters separately. U.S. crude oil output rose above 10 million barrels per day (bpd) late last year for the first time since the 1970s, overtaking top oil exporter Saudi Arabia.

The U.S. Energy Information Administration said early this month that U.S. output would exceed 11 million bpd by late 2018. That would take it past top producer Russia, which pumps just below that mark. Birol said he did not see U.S. oil production peaking before 2020, and that he did not expect a decline in the next four to five years. The soaring U.S. production is upending global oil markets, coming at a time when other major producers — including Russia and members of the Middle East-dominated OPEC — have been withholding output to prop up prices. U.S. oil is also increasingly being exported, including to the world’s biggest and fastest growing markets in Asia, eating away at OPEC and Russian market share.

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Briatin’s much further down the rabbit hole than it wants to see.

The Matrix? Alice In Wonderland? Praise For Corbyn From UK Business (Ind.)

A Labour Party led by Jeremy Corbyn as the party of business? JC as the last, best hope for the business community? It’s the sort of thing that would make even one of those nutty internet conspiracy theorists who believe that contactless payments are a satanic plot scoff. Now? Now we’re in Terri May’s Brexit wonderland and the Cheshire Cat is pissing himself. Madness is part of everyday life and nothing seems strange anymore, not even the CBI’s director general Carlyn Fairbairn saying this: “The Labour leader’s commitment to a customs union will put jobs and living standards first by remaining in a close economic relationship with the EU. It will help grow trade without accepting freedom of movement or payments to the EU.”

Or Stephen Martin, the director general of the Institute of Directors, saying this: “Labour has widened the debate today on the UK’s relationship with the EU post-Brexit, and many businesses, particularly manufacturers, will be pleased to hear the Opposition’s proposal to keep a customs union on the table.” You remember the scene from the Wachowskis’ Matrix where Morpheus references Lewis Carroll’s most famous work? “You take the blue pill, you stay in your bed and believe whatever you want to believe. You take the red pill, you stay in wonderland and I show you how deep the rabbit hole goes.” With the Tory party having taken leave of its senses in favour of plunging us into a nightmare beyond anything either Carroll or the the brothers could have conceived, the red pill suddenly doesn’t seem quite as scary as it once did, not now the Tories’ mad ideologues are making merry. The Corbyn rabbit hole might actually be the better option.

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Prediction: no-one’s even going to try to control this, because it would mean having to admit that pensions are Ponzis.

Generational Battle Lines Harden Over Pensions (G.)

A report by the Intergenerational Foundation, a charity that funds research into issues that divide the generations, has found that far from losing out to younger people, baby boomers have proved themselves adept at ensuring they are the winners across many areas of public policy. Governments, say the authors, have been “tempted by short-term pressures to set rates that clearly disadvantage the young and favour the older generations” – compare university fees charged at an interest rate of 6.1% with the 2% the elderly are charged on loans to pay for residential care costs. Another example can be found in the rates of interest offered on state-sponsored savings bonds. The pensioner bond, which was launched by George Osborne and proved so popular it was credited with helping the Tories secure a majority in the 2015 general election, paid a 4% rate of interest.

National Savings bonds for everyone else pay a maximum 2.2%. Worst of all is the huge bill in store for younger people in 30 or 40 years’ time by virtue of the current calculations of future liabilities. Pension liabilities are top of the list, with public sector pensions in particular carrying a heavy cost. The foundation’s concern is that the government overestimates the state’s capacity to pay for future liabilities by exaggerating how fast the UK’s income will grow over time. If GDP growth is forecast at an absurdly high rate then the income will supposedly be in place to pay generous pension payments in 30 years. If that growth fails to materialise, those who are in their 20s and 30s today will need to find large sums of cash to fill the hole when they are in their 50s and 60s.

The debate centres on the discount rate, which is the calculation of a fund’s long-term growth, which is used to reflect how much money should be set aside today to pay for tomorrow. Downgrade the discount rate by 0.5% and the government will need to set aside additional pension contributions worth 3% of salaries, it says. “From this you can see very starkly why representatives of older workers have been lobbying strongly for higher discount rates. If they succeed in keeping discount rates 1% above what they should be, they have essentially transferred 6% of the total pension bill for each of these years from the old to the young, so the young will have to pay this bill,” the authors say.

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Failed education systems.

The Real Reason Behind The US Student Debt Problem (F.)

The New York Fed publishes the always-interesting Quarterly Report on Household Debt and Credit. The Q4 2017 version came out recently. In total, Americans carried $13.15 trillion in debt as of year-end 2017. Most of it is mortgage debt—about 71% of the total, if you include home equity loans. Much to our surprise, the next-largest category isn’t auto loans or credit cards. It’s student loans, which are now 10% of total debt. Their share has been growing steadily. This might be okay if the debt enhanced the student’s financial security, but for millions of Americans, that’s not what has happened. Borrowers don’t achieve the desired results but remain stuck with the debt anyway. While delinquency rates for other forms of debt fell after the recession, student loans didn’t. As of year-end 2017, about 11% of nearly $1.4 trillion in student debt was at least 90 days delinquent.

It’s actually worse than that. Roughly half of student debt is held by borrowers who aren’t required to make payments yet. That’s because they are still in school, unemployed, or otherwise excused. Much of that debt would likely be delinquent too. Also important: The delinquent loans tend to be small (less than $10,000) and held by borrowers who never earned degrees. These borrowers probably thought they were doing the right thing. They wanted decent jobs and saw that having a college degree was necessary to get one. So why is college the key to gainful employment? It hasn’t always been so. It’s because employers require a degree as a job qualification… and that’s partly the fault of IQ tests.

[..] College degrees are convenient, legal substitutes for the kind of testing employers haven’t been able to use since the 1970s. So apart from whatever you learn in college, merely having the credential became necessary to career success. As a result, everyone in the equation made certain choices. • Employers: demand a college degree even for jobs that don’t require college-level skills. • Workers: get a college degree even if you must take on debt. Colleges: Raise prices since so many students are begging for degrees.
This made college more expensive, forcing students to borrow more and more money.

Politicians jumped in to promote and guarantee those loans. And here we are.

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Thw two parties will have to come together to solve this. Just blaming the other won’t do it.

20 US States Sue Federal Government, Seeking End To Obamacare (R.)

A coalition of 20 U.S. states sued the federal government on Monday over Obamacare, claiming the law was no longer constitutional after the repeal last year of its requirement that people have health insurance or pay a fine. Led by Texas Attorney General Ken Paxton and Wisconsin Attorney General Brad Schimel, the lawsuit said that without the individual mandate, which was eliminated as part of the Republican tax law signed by President Donald Trump in December, Obamacare was unlawful. “The U.S. Supreme Court already admitted that an individual mandate without a tax penalty is unconstitutional,” Paxton said in a statement.

“With no remaining legitimate basis for the law, it is time that Americans are finally free from the stranglehold of Obamacare, once and for all,” he said. The U.S. Justice Department did not immediately respond to a request for comment on whether the Trump administration would defend the law in court. The individual mandate in Obamacare was meant to ensure a viable health insurance market by forcing younger and healthier Americans to buy coverage. Republicans have opposed the 2010 law formally known as the Affordable Care Act, the signature domestic policy achievement of Trump’s Democratic predecessor Barack Obama, since its inception.

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The Supreme Court is wise enough to keep its distance from executive and legislative branches.

US Supreme Court Rebuffs Trump, Won’t Hear Immigration Appeal (BBG)

The U.S. Supreme Court rejected a Trump administration appeal aimed at ending deportation protections for young undocumented immigrants, steering clear for now of the debate over the fate of hundreds of thousands of people. The justices, without published dissent, turned away the administration’s appeal of a ruling that has kept the Obama-era program in place. The rejection buys time for the so-called dreamers even as Congress has been unable to agree on legislation to give them permanent protection. The Senate earlier this month blocked three proposals that would have shielded the dreamers. The administration was asking the Supreme Court to take the unusual step of bypassing an appeals court and granting fast-track review of a federal trial judge’s decision.

The court’s rebuff leaves open the possibility that the justices could consider the case later, after a San Francisco-based federal appeals court hears it. “It is assumed that the Court of Appeals will proceed expeditiously to decide this case,” the Supreme Court said in its two-sentence order. The Deferred Action for Childhood Arrivals program “is clearly unlawful,” White House spokesman Raj Shah said in a statement. “We look forward to having this case expeditiously heard by the appeals court and, if necessary, the Supreme Court, where we fully expect to prevail,” he said. DACA, begun under President Barack Obama, protects undocumented immigrants who were brought to the U.S. as children. Applicants are shielded from deportation and allowed to apply for work permits.

The first group of DACA recipients had been set to lose their protected status in March before U.S. District Judge William H. Alsup’s Jan. 9 order. The Trump administration appeal argued that the judge’s order “requires the government to sanction indefinitely an ongoing violation of federal law being committed by nearly 700,000 aliens.” The administration resumed accepting DACA renewal applications after the order. Congress is at an impasse over legislation to protect the dreamers, as President Donald Trump and many Republicans insist that it must be combined with strict new limits on legal immigration. Even though the judge’s order means the prior March deadline isn’t in force, House Speaker Paul Ryan of Wisconsin said this month, “we want to operate on deadlines. We clearly need to address this issue in March.”

Alsup said the Department of Homeland Security based its decision to end the program on the “flawed legal premise” that Obama lacked the authority to set it up in the first place. In issuing his temporary order, which extends the protection while the lawsuit goes forward, Alsup said the “public interest” would be served by keeping the program in place. The judge pointed to Trump tweets that suggested he actually supported DACA. A September tweet read: “Does anybody really want to throw out good, educated and accomplished young people who have jobs, some serving in the military? Really! . . . .” Alsup wrote: “We seem to be in the unusual position wherein the ultimate authority over the agency, the chief executive, publicly favors the very program the agency has ended.”

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” Can I be alone in wondering how these agencies can mount massive prosecutions of nobodies like George Papadopoulos and Rick Gates while ignoring the much better documented intrigues?..”

And Now the Schiff Memo (Jim Kunstler)

The excruciating quandary President Trump presents to the nation is dragging the sad remnant of the thinking class ever-deeper into a netherworld of desperation, paranoia, and mendacity that may exceed even their own official fantasies about the enemy in the White House. Everything about the lumbering, blundering occupant of 1600 Pennsylvania Avenue drives his Dem/Prog opponents — or #Resistance, if you will — plumb batshit: his previous incarnations as a shady NYC real estate schmeikler, as a TV clown, as a business deadbeat, as a self-described pussy-grabber… his vulgar casinos, his mystifying hair-do, his baggy suits and dangling neckties, his arrant, childish, needless lying about trivialities, his intemperate tweets, his unappetizing associates, his loutish behavior in foreign lands, his fractured, tortured syntax, his obvious insincerity, his sneery facial contortions… and lots lots more — and of course that doesn’t even touch the actual policy positions he struggles to articulate.

In sum, Trump represents such a monumentally grotesque embarrassment to the permanent Washington establishment that they will pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the removal of this odious caitiff. And in the process abandon all reason and decency. To complicate matters, there really are policy differences that, despite Mr. Trump’s oafish profferings, must somehow be faced for the sake of the country’s future — two of the clearest, just for example, being whether we will have coherent, enforceable immigration laws and whether we will continue to allow the sale of tactical military rifles to the general public. These are matters, by the way, which people of sound mind and honorable intentions could actually resolve through open legislative debate.

[..] in creating this horror movie, the #Resistance is dangerously perverting institutions that may not recover from being written into the script. For instance, the Department of Justice, its subsidiary, the FBI, and sundry intel outfits whose highest officers have been enlisted as cast members. Can I be alone in wondering how these agencies can mount massive prosecutions of nobodies like George Papadopoulos and Rick Gates while ignoring the much better documented intrigues of officials such as Bruce Ohr, Andrew McCabe, Peter Strzok, Lisa Page, Sally Yates, James Comey, Loretta Lynch, John Brennan, Debbie Wasserman-Schultz, Hillary Clinton, and possibly even the sainted Barack Obama?

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All the west has left is fabricated narratives.

East Ghouta: The Last Great Battle Of The Syrian War? (Duran)

Just as was the case with the crisis in Aleppo in 2016, the crisis in east Ghouta today is the subject of much handwringing in the Western media. There are also – just as there were in 2016 – pleas to President Putin to “show mercy”. In 2016 these pleas came mainly from British Foreign Minister Boris Johnson. This time they are coming from German Chancellor Merkel and French President Macron. Meanwhile – as in 2016 – there is grandstanding against Russia at the UN Security Council by the US’s UN ambassador. In 2016 it was Samantha Power; this time it is Nikki Haley. Just as in 2016 we are now seeing overheated and hysterical demands for ‘military action’ to ‘bring the killing to a stop’, with all concerns about what that might lead to brushed aside.

To complete the truly extraordinary parallels, there has even been a US bombing raid on Syrian forces far away in eastern Syria in Deir Ezzor province, just as there was during the fighting in Aleppo in 2016. Moreover the Russian response to the US threats and to the US bombing raid appears to be the same as it was in 2016: the deployment of further powerful additional military forces to Syria and to Khmeimim air base. In 2016 it was S-300VM Antey 2500 anti aircraft missiles; today it is additional S-400 anti aircraft missiles and (reportedly) SU-57 fighters. As to what is really behind the furious campaign to stop the attack on east Ghouta, it is the same as was the case with the furious campaign to stop the attack on eastern Aleppo in 2016: to prevent a Jihadi enclave which threatens one of Syria’s two great cities – Aleppo in 2016, Damascus today – from being destroyed.

As to what would actually happen if – or rather when – that Jihadi enclave is finally destroyed, I can do no better than quote Marcus Papadopoulos “Once East Ghouta is liberated from Al-Qaeda, the world will see the same response from its inhabitants as the world saw once East Aleppo was liberated: jubilation. And, like with East Aleppo, East Ghouta will serve as another testimony about the facade that is the White Helmets.” Why all these frantic attempts to save an Al-Qaeda controlled Jihadi enclave from being destroyed near Damascus? The short answer is that just as the destruction in 2016 of the Jihadi enclave in eastern Aleppo showed to the Western ‘democracy promotion’ lobby that their regime change war in Syria could not be won, so the destruction of the Jihadi enclave in east Ghouta near Damascus today would show to the Western ‘democracy promotion’ lobby that their regime change war in Syria is irretrievably lost.

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The UN is just as guilty as Oxfam etc.

Women ‘Sexually Exploited In Return For Aid’ By Charities In Syria (BBC)

Women in Syria have been sexually exploited by men delivering aid on behalf of the UN and international charities, the BBC has learned. Aid workers said the men would trade food and lifts for sexual favours. Despite warnings about the abuse three years ago, a new report shows it is continuing in the south of the country. UN agencies and charities said they had zero tolerance of exploitation and were not aware of any cases of abuse by partner organisations in the region. Aid workers told the BBC that the exploitation is so widespread that some Syrian women are refusing to go to distribution centres because people would assume they had offered their bodies for the aid they brought home. One worker claimed that some humanitarian agencies were turning a blind eye to the exploitation because using third parties and local officials was the only way of getting aid into dangerous parts of Syria that international staff could not access.

The United Nations Population Fund (UNFPA) conducted an assessment of gender based violence in the region last year and concluded that humanitarian assistance was being exchanged for sex in various governorates in Syria. The report, entitled “Voices from Syria 2018”, said: “Examples were given of women or girls marrying officials for a short period of time for ‘sexual services’ in order to receive meals; distributors asking for telephone numbers of women and girls; giving them lifts to their houses ‘to take something in return’ or obtaining distributions ‘in exchange for a visit to her home’ or ‘in exchange for services, such as spending a night with them’.” It added: “Women and girls ‘without male protectors’, such as widows and divorcees as well as female IDPs (Internally Displaced Persons), were regarded as particularly vulnerable to sexual exploitation.” Yet this exploitation was first reported three years ago.

Danielle Spencer, a humanitarian adviser working for a charity, heard about the allegations from a group of Syrian women in a refugee camp in Jordan in March 2015. [..] “I remember one woman crying in the room and she was very upset about what she had experienced. Women and girls need to be protected when they are trying to receive food and soap and basic items to live. The last thing you need is a man who you’re supposed to trust and supposed to be receiving aid from, then asking you to have sex with him and withholding aid from you.” She continued: “It was so endemic that they couldn’t actually go without being stigmatised. It was assumed that if you go to these distributions, that you will have performed some kind of sexual act in return for aid.”

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Dec 122017
 
 December 12, 2017  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , , , , ,  3 Responses »


Wassily Kandinsky Clear connection 1925

 

How Fed Rate Hikes Impact US Debt Slaves (WS)
Why Obamacare Is Locked In An Inescapable Death Spiral (ZH)
Sitting Closer To The Exit (Roberts)
Oil Producers Turning to Crypto to Solve Sanctions Problems (Luongo)
Peak Bitcoin Media Mania Yet? (WS)
Bitcoin – Millennials’ “Fake Gold” (Katsenelson)
Next Bank of Japan Governor Faces a ‘Job From Hell’ (BBG)
Sweden: More Signs The World’s Biggest Housing Bubble Is Cracking (ZH)
Trump Tells NASA to Send Americans to the Moon (AFP)
Exxon To Provide Details On Climate Change Impact To Its Business (R.)
Apple Aims To Block Climate, Rights Using SEC Guidance (R.)
EU Could ‘Scrap Refugee Quota Scheme’ (G.)
Lesvos Authorities Block Ship With Container Homes For Refugees (AP)
Germany Rejects Additional Winter Aid For Refugees On Greek Islands (KTG)

 

 

“If the average interest rate on this debt is 20%, credit-cart interest payments alone add $233 a month to their household expenditures.”

How Fed Rate Hikes Impact US Debt Slaves (WS)

Revolving credit outstanding of $1 trillion, spread over 117.72 million households, would amount to $8,300 per household. But many households do not carry interest-bearing credit card debt; they pay their cards off in full every month. Finance charges are concentrated on households that use this form of debt to finance their spending and that cannot pay off their balances every month. Many of these households are already strung out and are among the least able to afford higher interest payments. Consumer credit bureau TransUnion shed some light on this in its Q3 2017 Industry Insights Report, according to which 195.9 million consumers had a revolving credit balance at the end of Q3, with total account balances of $1.35 trillion. This equals $6,892 per person with revolving credit balances.

If there are two people with balances in a household, this would amount to nearly $14,000 of this high-cost debt. If the average interest rate on this debt is 20%, credit-cart interest payments alone add $233 a month to their household expenditures. What is next for these folks? For now, the Fed has penciled in, and economists expect, three hikes next year. But recent developments – particularly the expected tax cuts and what the Fed calls “elevated asset prices” – suggest that the Fed might “surprise” the markets with its hawkishness in 2018. The Fed is currently pegging the “neutral” rate – the rate at which the federal funds rate is neither stimulating nor slowing the economy – at somewhere near 2.5% to 2.75%, so about five or six more rates hikes from today’s target range.

Interest rates on credit cards would follow in lockstep. These rate hikes to “neutral” would extract another $8 billion or so a year, on top of the additional $7.5 billion from the prior rate hikes. But that’s not all. Credit card balances continue to rise as our brave consumers are trying to prop up US consumer spending and thus the global economy by borrowing more and more. Thus, rising credit card balances combined with rising interest rates on those balances conspire to produce sharply higher interest costs. Since consumers with high-interest credit-card balances already don’t have enough money to pay off their costly debt, these additional interest payments will further curtail their efforts at making principal payments and thus inflate their credit card balances further.

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And if/when you manage to pay off your credit cards, there’s the next challenge…

Why Obamacare Is Locked In An Inescapable Death Spiral (ZH)

Ever since it was signed into law in 2010, defenders of Obamacare have dismissed staggering surges in annual premiums by highlighting only the rates paid by those fortunate enough to receive subsidies. In fact, last year we wrote about Marjorie Connolly’s, from Obama’s Department of Health and Human Services, response to the Tennessee insurance commissioner’s fear that the exchanges in his state were “very near collapse” after a staggering 59% premium surge: “Consumers in Tennessee will continue to have affordable coverage options in 2017. Last year, the average monthly premium for people with Marketplace coverage getting tax credits increased just $2, from $102 to $104 per month, despite headlines suggesting double digit increases,” said Marjorie Connolly, HHS spokeswoman, in a statement.

We’re unsure whether Connolly’s comment was just propaganda intended to defend a failing piece of legislation or an intentional, blatant admission that the Department of Health and Human Services just doesn’t care about the majority of Americans, the so-called 1%’ers, who are facing debilitating increases in healthcare costs simply because they manage to live above the poverty line. We’ll let you decide on that one. Be that as it may, as the Miami Herald points out this morning, roughly half of all Obamacare participants, nearly 9 million people in aggregate, don’t qualify for the subsidies that Connolly praised and have been forced to absorb debilitating premium increases for the past several years.

[..] As open enrollment for Affordable Care Act coverage nears the deadline of Dec. 15, and Florida once again leads all states using the federal exchange at healthcare.gov, Heidi and Richard Reiter sit at the kitchen table at their Davie home and struggle to piece together the family’s health insurance for 2018. The Reiters buy their own coverage, but they earn too much to qualify for financial aid to lower their monthly premiums. For 2017, they bought a plan off the exchange and paid $26,000 in premiums for family coverage, including their two sons, ages 21 and 17. Keeping the same coverage for 2018 would have cost the Reiters $40,000 in premiums, a 54% increase. So they selected a lower-priced plan that covers less but costs $29,000 in premiums. “That’s more than a lot of people’s mortgage payments,” Richard Reiter said. “For me, it’s a crisis situation.”

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The odds of a correction (reversion).

Sitting Closer To The Exit (Roberts)

While valuation risk is certainly concerning, it is the extreme deviations of other measures to which attention should be paid. When long-term indicators have previously been this overbought, further gains in the market have been hard to achieve. However, the problem comes, as identified by the vertical lines, is understanding when these indicators reverse course. The subsequent “reversions” have not been forgiving. The chart below brings this idea of reversion into a bit clearer focus. I have overlaid the real, inflation-adjusted, S&P 500 index over the cyclically-adjusted P/E ratio. Historically, we find that when both valuations and prices have extended well beyond their intrinsic long-term trendlines, subsequent reversions beyond those trend lines have ensued. Every. Single. Time.

Importantly, these reversions have wiped out a decade, or more, in investor gains. As noted, if the next correction began in 2018, and ONLY reverts back to the long-term trendline, which historically has never been the case, investors would reset portfolios back to levels not seen since 1997. Two decades of gains lost. With everyone crowded into the “ETF Theater,” the “exit” problem should be of serious concern. “Over the next several weeks, or even months, the markets can certainly extend the current deviations from long-term mean even further. But that is the nature of every bull market peak, and bubble, throughout history as the seeming impervious advance lures the last of the stock market ‘holdouts’ back into the markets.”

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“..the petrodollar is not the source of the U.S. dollar’s power around the world, but rather the U.S.’s main fulcrum by which to keep competition out of the markets..”

Oil Producers Turning to Crypto to Solve Sanctions Problems (Luongo)

Last week, Venezuela announced it would develop a national cryptocurrency backed by its oil reserves, the Petro. Now there is a report that Russia is considering the same thing. Iran will likely follow suit. As of right now this is just a rumor, but it makes some sense. So, let’s treat this rumor as fact for the sake of argument and see where it leads us. The U.S. continues to sanction and threaten all of these countries for daring to challenge the global status quo. There is no denying this. [..] at the heart of this is the petrodollar. Contrary to what many believe, the petrodollar is not the source of the U.S. dollar’s power around the world, but rather the U.S.’s main fulcrum by which to keep competition out of the markets. It is a secondary effect of the dollar’s dominance in global finance today. But it is not the main driver.

Financial market are simply too big relative to the size any one commodity market for it to be the fulcrum on which everything hinges. It was that way in the past. But it is not now. That said, however, getting out from underneath the petrodollar gives a country independence to begin building financial architecture that can be levered up over time to threaten the institutional control it helped create. U.S. foreign policy defends the petrodollar along with other systems in place – the IMF, the World Bank, SWIFT, LIBOR and the central banks themselves – to maintain its control. The main oil producers, however, can escape this control simply by selling their oil in currencies other than the U.S. dollar. That’s not enough to dethrone the dollar, but, like I just said, it is where the process has to start. Therefore, any and all means must be employed to defend the dollar empire by keeping everyone inside that system.

[..] The problem with backing any currency with physical reserves is the fluctuations in value of those reserves. It’s not like oil is a low-beta commodity or anything. But, like everything else in the commodity space, price movements are supposed to be smoothed out by the futures markets helping to coordinate price with time. But the bigger problem is the estimation of those reserves the coin’s value is based on. First, how do you accurately quantify them? Can holders of Petro or Neft-coin trust the Russian or Venezuelan governments to provide accurate assessments of their reserves? Second, there is the ability of the country to pull it out of the ground and sell it into the market at anything close to a fair price. This isn’t a concern for Russia, the world’s 2nd largest supplier of oil and very stable government but Venezuela is the opposite. And, its “Petro” would probably trade at quite a discount early on to the dollar price of oil.

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I doubt it. If only because as Taleb said, you can’t actually short BTC, and they should have introduced options along with futures. They didn’t. This story is far from over.

Peak Bitcoin Media Mania Yet? (WS)

Bitcoin mania is now everywhere. It’s hard to have a conversation with regular people without sooner or later getting into bitcoin. Some of this is just for fun. Manias breed amazement. Miracles are wonderful to behold. But some of it is pretty serious. “We’ve seen mortgages being taken out to buy bitcoin,” said Joseph Borg, president of the North American Securities Administrators Association and director of the Alabama Securities Commission, on CNBC’s Power Lunch today. “People do credit cards, equity lines,” he said. Bitcoin futures trading started Sunday night on the Cboe futures exchange. Next week, the CME will offer trading in bitcoin futures.

This way, speculators can bet with unlimited derivatives on an unregulated digital entity that is backed by nothing and whose cash trading takes place in unregulated opaque and easily hacked exchanges around the world. But Borg doesn’t think that futures contracts legitimize bitcoin. Innovation and technology always outrun regulation, he said. “You’re on this mania curve. At some point in time there’s got to be a leveling off,” he said. “Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don’t know.” And so the media mania over bitcoin has become deafening.

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But there’s definitely a media bubble, even if there’s no BTC one yet.

Bitcoin – Millennials’ “Fake Gold” (Katsenelson)

If you cannot value an asset you cannot be rational. With Bitcoin at $11,000 today, it is crystal clear to me, with the benefit of hindsight, that I should have bought Bitcoin at 28 cents. But you only get hindsight in hindsight. Let’s mentally (only mentally) buy Bitcoin today at $11,000. If it goes up 5% a day like a clock and gets to $110,000 – you don’t need rationality. Just buy and gloat. But what do you do if the price goes down to $8,000? You’ll probably say, “No big deal, I believe in cryptocurrencies.” What if it then goes to $5,500? Half of your hard-earned money is gone. Do you buy more? Trust me, at that point in time the celebratory articles you are reading today will have vanished. The awesome stories of a plumber becoming an overnight millionaire with the help of Bitcoin will not be gracing the social media.

The moral support – which is really peer pressure – that drives you to own Bitcoin will be gone, too. Then you’ll be reading stories about other suckers like you who bought it at what – in hindsight – turned out to be the all-time high and who got sucked into the potential for future riches. And then Bitcoin will tumble to $2,000 and then to $100. Since you have no idea what this crypto thing is worth, there is no center of gravity to guide you or anyone else to make rational decisions. With Coke or another real business that generates actual cash flows, we can at least have an intelligent conversation about what the company is worth. We can’t have one with Bitcoin. The X times Y = Z math will be reapplied by Wall Street as it moves on to something else.

People who are buying Bitcoin today are doing it for one simple reason: FOMO – fear of missing out. Yes, this behavior is so predominant in our society that we even have an acronym for it. Bitcoin is priced today at $11,000 because the fool who bought it for $11,000 is hoping that there is another, greater fool who will pay $12,000 for it tomorrow. This game of greater fools is not new. The Dutch played it with tulips in the 1600s– it did not end well. Americans took the game to a new level with dotcoms in the late 1990s – that round ended in tears, too. And now millennials and millennial-wannabes are playing it with Bitcoin and few hundred other competing cryptocurrencies.

The counterargument to everything I have said so far is that those dollar bills you have in your wallet or that digitally reside in your bank account are as fictional as Bitcoin. True. Currencies, like most things in our lives, are stories that we all have (mostly) unconsciously bought into. Of course, society and, even more importantly, governments have agreed that these fiat currencies are going to be the means of exchange. Also, taxation by the government turns the dollar bill “story” into a very physical reality: If you don’t pay taxes in dollars, you go to jail. (The US government will not accept Bitcoins, gold, chunks of granite, or even British pounds).

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Compared to Japan, all other central banks are wimps and pussies.

Next Bank of Japan Governor Faces a ‘Job From Hell’ (BBG)

The next governor of the Bank of Japan faces a “job from hell.” That’s according to Takeshi Fujimaki, a banker-turned-lawmaker who sees any attempt by Japan’s central bank to exit its program of unprecedented easing as triggering a Greek-like debt crisis. “This is the calm before the battle,” Fujimaki, an opposition Japan Innovation Party politician who once served briefly as an adviser to George Soros, said in an interview at his Tokyo office on Monday. BOJ Governor Haruhiko Kuroda’s five-year term runs out in April, with recent praise from Prime Minister Shinzo Abe strengthening expectations that the 73-year-old will stay on for a second stint. His massive easing program has weakened the yen, bolstered exports and helped stock prices to more than double. But inflation is still short of the government’s 2% target, and critics say the BOJ’s swollen balance sheet is unsustainable.

Fujimaki, 67, said he agreed with the view expressed by Kuroda’s predecessor Masaaki Shirakawa in his 2013 resignation press conference, when he said no judgment could be made on non-traditional monetary easing in Japan and in other developed economies until exits had been completed. Last week, Kuroda said the BOJ can take the appropriate steps to exit when the time comes, but talking specifics of an exit now would end up confusing markets. Even so, Fujimaki said Kuroda should stay on to oversee an exit from the policies he introduced. “Because Mr. Kuroda has taken it this far, he should carry on until the end,” Fujimaki said. “Just taking the good part and running away would be unfair.”

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“(SEB) says 63% of households in Stockholm now expect prices to decline in the coming year while only 21% expect an increase; that’s “a dramatic shift compared with only two months’ ago..”

Sweden: More Signs The World’s Biggest Housing Bubble Is Cracking (ZH)

We like to highlight that although Sweden’s property bubble is not the longest running (that accolade goes to Australia at 55 years), it is probably the world’s biggest, even though it gets relatively little coverage in the mainstream financial media. A month ago, we noted that SEB’s housing price indicator suffered its second biggest ever drop, falling by 39 points, only lagging a steeper fall from ten years earlier. This month the indicator, which shows the balance between households forecasting rising or falling prices, fell into negative territory, dropping to -5 from +11 in November. Households expecting prices to rise has almost halved from 66% In October, to 43% in November and 36% this month. The percentage of households expecting prices to fall has risen from 16% in October, to 32% in November and 41% this month.

After the housing price indicator was published, the Swedish krona fell as much as 0.7% versus the Euro to 10.0118, its lowest level since 5 December 2017. Not surprisingly, the focal point of Sweden’s property boom has been Stockholm, where the decline in the housing price indicator in December 2017 was precipitous. According to Bloomberg. “SEB says sharp drop in home-price expectations in Stockholm was main culprit behind the decline in its Swedish home-price indicator, with the indicator falling to -42 in the Swedish capital in Dec. from -6 in Nov. That means the Stockholm indicator is now close to the record low of -47 that was reached in Dec. 2008, at the height of the global financial crisis. (SEB) says 63% of households in Stockholm now expect prices to decline in the coming year while only 21% expect an increase; that’s “a dramatic shift compared with only two months’ ago..”

Given the disproportionate rate of decline in December in Stockholm, SEB was minded to ask whether special factors are at work “rather than general drivers such as fears over rising interest rates or a weak business cycle”. Indeed, aside from south-eastern Sweden, the outlook in all other regions remains positive. With regard to Stockholm, the bank notes that a large increase in new supply of expensive residential property and what it terms “very negative media reporting” have had an impact. Whether that’s a fair assessment, or whether it’s realist reporting of a monumental asset bubble is a moot point. What is indisputable is that the number of Swedish homes for sale has surged in November 2017 compared with the same month last year.

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After talking to Musk and Bezos. Who target billions in profits from the bridges to nowhere on steroids.

Trump Tells NASA to Send Americans to the Moon (AFP)

US President Donald Trump directed NASA on Monday to send Americans to the Moon for the first time since 1972, in order to prepare for future trips to Mars. “This time we will not only plant our flag and leave our footprint,” Trump said at a White House ceremony as he signed the new space policy directive. “We will establish a foundation for an eventual mission to Mars and perhaps someday to many worlds beyond.” The directive calls on NASA to ramp up its efforts to send people to deep space, a policy that unites politicians on both sides of the aisle in the United States. However, it steered clear of the most divisive and thorny issues in space exploration: budgets and timelines.

Space policy experts agree that any attempt to send people to Mars, which lies an average of 140 million miles (225 million kilometers) from Earth, would require immense technical prowess and a massive wallet. The last time US astronauts visited the Moon was during the Apollo missions of the 1960s and 1970s. Trump, who signed the directive in the presence of Harrison Schmitt, one of the last Americans to walk on the Moon 45 years ago, said “today, we pledge that he will not be the last.” The better known Buzz Aldrin, the second man on the Moon after Armstrong and a fervent advocate of future space missions, was also present at the ceremony but not mentioned by Trump during his speech.

[..] Trump vowed his new directive “will refocus the space program on human exploration and discovery,” and “marks an important step in returning American astronauts to the Moon for the first time since 1972.” The goal of the new Moon missions would include “long-term exploration and use” of its surface. “We’re dreaming big,” Trump said. His administration has previously held several meetings with SpaceX boss Elon Musk and Amazon owner Jeff Bezos, who also owns Blue Origin.

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The article has two authors, and at least one editor (Reuters), and still it says this: “world temperatures are likely to rise by more than 2 degrees Celsius (35.6°F) this century..

Exxon To Provide Details On Climate Change Impact To Its Business (R.)

Exxon Mobil on Monday said it would publish new details about how climate change could affect its business in a move aimed at appeasing critics and forestalling another proxy fight next year. The largest U.S. oil and gas producer said in a filing to U.S. securities regulators that its board agreed to provide shareholders with information on “energy demand sensitivities, implications of two degree Celsius scenarios, and positioning for a lower-carbon future.” Scientists have warned that world temperatures are likely to rise by more than 2 degrees Celsius (35.6°F) this century, surpassing a “tipping point” that a global climate deal aims to avert. Exxon’s statement, which came three days before the deadline for its 2018 annual meeting resolution submissions, said additional information would be released in the near future, but did not provide details.

The company’s board originally opposed providing shareholders with a report outlining the potential impact of global warming on Exxon’s long-term outlook. Thomas P. DiNapoli, New York state’s comptroller, heads one the two lead sponsors of a shareholder resolution calling for Exxon to issue a climate-impact report. He called Monday’s decision “a win for shareholders and for the company’s ability to manage risk.” However, another sponsor noted the lack of specificity in the company’s statement. “This is giving no detail,” said Tim Smith, who leads shareholder engagement efforts at Walden Asset Management, a co-filer of last spring’s resolution. He said Exxon’s statement “needs to be expanded to assure shareowners that they’re responsive to last year’s request.”

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Apple, Exxon, everybody seeks to escape their own shareholders.

Apple Aims To Block Climate, Rights Using SEC Guidance (R.)

Apple is pushing back on shareholder proposals on climate issue and human rights concerns, an effort activists worry could sharply restrict investor rights. In letters to the U.S. Securities and Exchange Commission last month, an attorney for the California computer maker argued at least four shareholder proposals relate to “ordinary business” and therefore can be left off the proxy Apple is expected to publish early next year, ahead of its annual meeting. The attorney, Gene Levoff, cited guidance issued by the SEC on Nov. 1 saying that company boards are generally best positioned to decide if a resolution raises significant policy issues worth putting to a vote.

While companies routinely seek permission to skip shareholder proposals, Apple’s application of the new SEC guidance shows how it could be used to ignore many investor proposals by claiming boards routinely review those areas, said Sanford Lewis, a Massachusetts attorney representing Apple shareholders who had filed two of the resolutions. Were the SEC to side with Apple, “this would be an incredibly dangerous precedent that would essentially say a great many proposals could be omitted,” Lewis said. [..] Often seen as distractions in the past, shareholder measures have taken on new significance as big asset managers increasingly back those on areas like climate change or board diversity.

Apple cited the SEC’s new guidance among other things in seeking to omit the shareholder measures from its proxy, according to letters Apple sent to the SEC. These include calls for Apple to take steps such as establishing a “human rights committee” to address concerns on topics like censorship, and for Apple to report on its ability to cut greenhouse gas emissions.

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Tusk against the rest. Couldn’t be because he’s Polish, could it? And looking at big jobs back home?!

EU Could ‘Scrap Refugee Quota Scheme’ (G.)

The EU could scrap a divisive scheme that compels member states to accept quotas of refugees, one of the bloc’s most senior leaders will say this week. The president of the European council, Donald Tusk, will tell EU leaders at a summit on Thursday that mandatory quotas have been divisive and ineffective, in a clear sign that he is ready to abandon the policy that has created bitter splits across the continent. Tusk will set a six-month deadline for EU leaders to reach unanimous agreement on reforms to the European asylum system, but will propose alternatives if there is no consensus. “If there is no solution … including on the issue of mandatory quotas, the president of the European council will present a way forward,” states a draft letter from Tusk to national capitals, seen by the Guardian.

In effect this means scrapping mandatory quotas, because Hungary, Poland and Czech Republic are fiercely opposed to the idea of dispersing refugees around the bloc based on a formula drawn up in Brussels. Tusk is likely to face opposition, however, from other EU bodies, including the European commission. EU leaders introduced compulsory quotas in 2015 at the height of the migration crisis, as thousands of people arrived daily on Europe’s shores, many of whom were refugees from Syria, Iraq and Eritrea. Hungary, Slovakia, Romania and the Czech Republic voted against the move, but the policy was forced through by a majority vote. Hungary and Poland have defied the rest of the EU by not taking a single refugee under the scheme, which aimed to relocate about 120,000 refugees, mainly Syrians. The Czech republic has taken in only 12. All three countries were referred to the European court of justice last week for failing to implement the policy, the usual procedure for flouting EU rules.

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All refugees living on Lesbos should be evacuated.

Lesvos Authorities Block Ship With Container Homes For Refugees (AP)

Authorities on the Greek island of Lesvos say they have blocked a ship carrying container homes for refugees and other migrants in protest at the refusal of the government and the European Union to move more people to Greece’s mainland. A government-chartered ship carrying the containers remained anchored at Mytilene, the island’s main town, on Monday after municipal vehicles were used to block port facilities. The island’s municipal board was due to meet later on Monday to decide on whether to lift the blockade following talks with the government, state-run TV ERT said. The mayors of five Greek islands facing the coast of Turkey are demanding that the government and EU end a policy of containment for migrants – introduced last year as a deterrent against illegal migration – because living facilities are severely overcrowded.

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Merkel, the story of a great and bitter failure.

Germany Rejects Additional Winter Aid For Refugees On Greek Islands (KTG)

The German Foreign Ministry has made it clear that it will not provide additional winter assistance to refugees on the Aegean islands. In a related question from German newspapers, the foreign ministry replied that “responsibility for accommodating and feeding refugees falls under the jurisdiction of each country.” According to dpa, the Foreign Ministry recalled that Berlin recently funded the installation of 135 heated containers for a total of 800 people in two camps in the Thessaloniki region and that the EU has allocated up to now 1.4 billion euros to tackle the refugee crisis in Greece.

Meanwhile, there is media report that Greece has persuaded Turkey to accept migrant returns from the mainland in order to reduce critical overcrowding in its refugee camps. The Kathimerini daily said the agreement came during a strained two-day state visit by Turkish President Recep Tayyip Erdogan this week, during which he angered his hosts with talk of revising borders and complaints about Greece’s treatment of its Muslim minority. The deal is in addition to Turkey’s existing agreement to take back migrants from Aegean island camps, under the terms of an EU-Turkey pact.

Read more …

Oct 182017
 
 October 18, 2017  Posted by at 9:14 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Marcel Bovis Lovers, Paris 1934

 

No, China Isn’t Fixing Its Economic Flaws (BBG)
US Senators Reach Bipartisan Deal On Obamacare, Trump Indicates Support (R.)
Fixing Macroeconomics Will Be Really Hard (BBG)
Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks (ZH)
Money Will Divide Europe After Brexit (R.)
Dalio’s Fund Opens $300 Million Bet Against Italian Energy Firm (BBG)
Boeing’s Attack on Bombardier Backfires (BBG)
The Gig Economy Chews Up And Spits Out Millennials (G.)
Greek Growth Data Cast Doubt On Recovery
Debt-Ridden Greece to Spend $2.4bn Upgrading its F-16 Fighter Jet Fleet (GR)
Canada Methane Emissions Far Worse Than Feared (G.)
The Lie That Poverty Is A Moral Failing Is Back (Fintan O’Toole)

 

 

Antidote for the Party Congress.

No, China Isn’t Fixing Its Economic Flaws (BBG)

In our China Beige Book, we quiz over 3,300 firms across China about the performance of their companies as well as the broader economy. Their responses reveal that much of the exuberance about China today is based on dangerous misconceptions. The first and most obvious myth is that China is actually deleveraging, as officials claim. Responses from Chinese bankers support the notion that regulators, at least for the moment, have successfully targeted certain forms of shadow financing such as wealth management products. Companies, however, don’t seem to be feeling much pressure to curb their excesses. In the second quarter, while firms reported facing moderately higher interest rates and borrowing modestly less, that only slowed the pace of leveraging instead of reversing it. And even that progress has since stalled.

Third-quarter loan applications rose, rejections fell and companies borrowed more. Interest rates at both banks and shadow financials slid. What officials are calling deleveraging – rolling back excess credit – still represents more, uneven leveraging. If the restrictions on financials do extend to companies in 2018 and deleveraging actually begins, the process could be much more traumatic for the Chinese economy than most people currently recognize. The second myth is that the Chinese economy has finally begun to rebalance away from manufacturing and investment to services and consumption. In reality, China’s stronger 2017 performance has depended almost entirely on a revival of the old economy; the improvement in both growth and jobs drew heavily upon commodities, property and, most consistently, manufacturing. Call it “de-balancing.”

[..] China hasn’t slashed overcapacity in commodities sectors. Xi has incessantly touted what he calls “supply-side reforms,” which would seem to give Chinese companies very strong incentive to report results showing such cuts. Yet for more than a year, firms have indicated the opposite. While some gross capacity has been taken offline to much fanfare, net capacity has continued to rise. From July through September, hundreds of coal, steel, aluminum and copper companies reported a sixth straight quarter of overall capacity rising, not falling.

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Getting Bernie to support the same as Trump is an achievement.

US Senators Reach Bipartisan Deal On Obamacare, Trump Indicates Support (R.)

Two U.S. senators on Tuesday reached a bipartisan agreement to shore up Obamacare for two years by reviving federal subsidies for health insurers that President Donald Trump planned to scrap, and the president indicated his support for the plan. The deal worked out by Republican Senator Lamar Alexander and Democratic Senator Patty Murray would meet some Democratic objectives, including reviving the subsidies for Obamacare and restoring $106 million in funding for a federal program that helps people enroll in insurance plans. In exchange, Republicans would get more flexibility for states to offer a wider variety of health insurance plans while maintaining the requirement that sick and healthy people be charged the same rates for coverage.

The Trump administration said last week it would stop paying billions of dollars to insurers to help lower-income Americans pay medical expenses, part of the Republican president’s effort to dismantle Obamacare, former Democratic President Barack Obama’s signature healthcare law. The subsidies to private insurers cost the government an estimated $7 billion this year and were forecast at $10 billion for 2018. Trump’s move to scuttle them had raised concerns about chaos in insurance markets. Trump hoped to make good on his campaign promise to dismantle the law when he took office in January, with Republicans, who pledged for seven years to scrap it, controlling Congress. But he has been frustrated with their failure to pass legislation to repeal and replace it.

Obamacare, formally known as the Affordable Care Act, extended health insurance coverage to 20 million Americans. Republicans say it is ineffective and a massive government intrusion in a key sector of the economy. The Alexander-Murray plan could keep Obamacare in place at least until the 2020 presidential campaign starts heating up. “This takes care of the next two years. After that, we can have a full-fledged debate on where we go long-term on healthcare,” Alexander said of the deal.

[..] Senator Bernie Sanders threw his weight behind the effort. In an interview with Reuters, Sanders said Alexander was a “well-respected figure” known for bipartisanship and that the Tennessee senator’s reputation would help propel the legislation through the Senate. Trump, during comments at the White House, suggested he could get behind the Alexander-Murray plan as a short-term solution. In remarks later at the Heritage Foundation, a conservative think tank, Trump commended the work by Alexander and Murray, but said: “I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies.”

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Nuff said: “Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time.”

Fixing Macroeconomics Will Be Really Hard (BBG)

A presentation by Blanchard and Summers provides a useful summary of how elite thinking has changed. They basically draw three lessons from the crisis: 1) the financial industry matters, 2) government should use a wider array of policies to fight recessions, and 3) recessions can last longer than expected. [..] The real sea change is the third one – the reconsideration of what recessions really are. Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time. And they assume that recessions are short-lived affairs that go away of their own accord. If these assumptions are wrong, then most of the theories written down in macroeconomics journals over the past several decades – and most of those being written as we speak – are of questionable usefulness.

Blanchard and Summers are hardly the first to raise this possibility – economists have known for decades that recessions might not be random, short-lived events, but the idea always remained on the fringes. One big reason was simple mathematical convenience – models where recessions are like rainstorms, arriving and departing on their own, are mathematically a lot easier to work with. A second was data availability – unlike in geology, where we can draw on Earth’s whole history, reliable macroeconomic data goes back less than a century. If economic fluctuations really do have long-lasting effects, it will be very hard to identify those patterns from just a few decades’ worth of history.

If macroeconomists heed Blanchard and Summers’ advice, they will have to do harder math, and they will find better data to test their models. But their challenges won’t end there. If the economy can linger in a good or bad state for a long time, it’s almost certainly a chaotic system. Researchers have known for decades that unstable economies are very hard to work with or predict. In the past, economists have simply ignored this unsettling possibility and chosen to focus on models with only one possible long-term outcome. But if Blanchard and Summers are any indication, the Great Recession might mean that’s no longer an option.

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Derivatives.

Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks (ZH)

This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony. Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a “hard” or “no-deal” Brexit. We wonder whether Juncker and Barnier appreciate the threat that a “no-deal” Brexit poses for the EU’s already fragile financial system? When asked does the European Council “get it” in terms of potential shocks to financial stability, Carney diplomatically commented that “a learning process is underway.” Having sounded alarm bells about clearing in his last Mansion House speech, he noted “These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.”

Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was “pretty clear they will no longer be valid”, that this “could only be solved by both sides” and has been “underappreciated” by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation “We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.” Maybe it’s Europe, not the UK, that needs the transition period most.

In Carneys view “It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…If one thinks about the implementation of Basel III, we are alone in the current members of the EU in having extensive experience of managing the transition for individual firms of various derivative and risk activities from one jurisdiction back into the UK. That tends to take 2-4 years. Depending on the agreement, we are talking about a substantial amount of activity.”

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Europe borrows from the future.

Money Will Divide Europe After Brexit (R.)

The British government once hoped that the Oct. 19-20 meeting would be the moment when the Brexit negotiations could move on to discuss trade. That aspiration now seems hopeless. European leaders look set to insist on further delay until there is more progress in the first stage of talks, above all in reaching agreement on how much Britain will have to pay to settle its obligations when it leaves.

[..] If economic size and time favor the EU, the British government’s strongest card is money – one that it has played in various guises for centuries with its continental neighbors – and it is naturally reluctant to show its full hand too early. Even so May has already made an important concession. As part of the transition period of around two years that she called for in her emollient Florence speech last month, Britain would continue to pay in to the EU budget to ensure that none of the member states was out of pocket owing to the decision to leave. These net payments of around €10 billion ($11.8 billion) a year would fix the immediate problem facing the EU, the hole that would otherwise open up in its finances during the final two years of its current budgetary framework, which runs from 2014 to 2020.

But that extra money from aligning Britain’s effective date of departure with the end of the EU’s budgeting plan will not be enough, for two reasons. One is the way the EU in effect borrows from the future, by making spending commitments that it pays for later. In principle, the EU cannot borrow to pay for expenditure. But, through its accounting procedures, the EU can and does commit it to spending that will be paid for by future receipts from the member states. What this means is that even after 2020 there will still be payments due on commitments made under the current seven-year spending plan. That pile of unpaid bills, eloquently called the “reste à liquider” (the amount yet to be settled), is forecast to be €254 billion at the end of 2020.

Estimates of what Britain might owe towards this vary, but taking into account what might have been spent on British projects it could be around €20 billion. On top of that – and the second main reason why the EU is holding out for more – the EU has liabilities, notably arising from the unfunded retirement benefits of European staff estimated at €67 billion at the end of 2016, which it is expecting Britain to share. Even taking into account some potential offsets from its share of assets, Britain may face a bill of between €30 billion and €40 billion on top of the €20 billion paid during the transition period.

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Biggest threat of all to Europe may be Italy’s weaknesses.

Dalio’s Fund Opens $300 Million Bet Against Italian Energy Firm (BBG)

Bridgewater Associates is adding to its billion-dollar short against the Italian economy. The world’s largest hedge fund disclosed a $300 million bet against Eni SpA, Italy’s oil and gas giant, data compiled by Bloomberg show. Bloomberg previously reported that Ray Dalio’s firm had wagered more than $1.1 billion against shares of six Italian financial institutions and two other companies. This latest bet is the hedge fund’s second-largest against an Italian company, trailing only the $310 million against Enel SpA, the country’s largest utility. Eni’s majority holder is the Italian government via state lender Cassa Depositi e Prestiti SpA and the Ministry of Economy. The public involvement also is reflected in the government’s role in appointing the chief executive officer. Current CEO Claudio Descalzi has been at the helm since 2014 and was reconfirmed this year.

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Airbus buys C Series for $1?!

Boeing’s Attack on Bombardier Backfires (BBG)

Boeing’s diminutive Canadian rival just found itself one heck of a wingman. The world’s largest aerospace company tried to block Bombardier’s all-new C Series jet from the U.S. by complaining to the government about unfair competition. Now that move is backfiring as Boeing’s primary foe, Airbus, takes control of the Canadian aircraft – with plans to manufacture in Alabama. The deal leaves Boeing’s 737, the company’s largest source of profit, to face a strengthened opponent in the market for single-aisle jetliners, where Airbus’s A320 family already enjoys a sales lead. The European planemaker is riding to the rescue of a plane at the center of a trade dispute that soured U.S. relations with Canada and the U.K., where the aircraft’s wings are made.

“For Boeing, its decision to wage commercial war on Bombardier has arguably had some unintended negative outcomes,” Robert Stallard, an analyst at Vertical Research Partners, said in a report. “As well as damaging relations with the Canadian and U.K. governments and some major airline customers, it has now driven Bombardier into the arms of its arch competitor.” Boeing on Tuesday held firm to its stance against the C Series, saying the deal with Airbus would have “no impact or effect on the pending proceedings at all” in the trade dispute. Boeing won a preliminary victory against Bombardier last month when President Donald Trump’s administration imposed import duties of 300% on the C Series.

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Self-employment as a means to hide unemployment.

The Gig Economy Chews Up And Spits Out Millennials (G.)

Huws says the golden age for the gig economy was some time around 2013, when companies took a smaller cut and there were fewer drivers/riders/factotums to compete with. “As Deliveroo pass on all risk to the rider, there’s nothing to stop them over-recruiting in an area and flooding the city with riders, which is exactly what we saw last winter,” says Guy McClenahan, another Brighton rider (Deliveroo maintain that the hundreds of riders in the area earn on average well above the national living wage). Over time, Uber has increased the commission it takes from drivers while reducing fares. Drivers are finding themselves working much longer hours in order to make the same pay – or far less. (There are currently no time limits on how many hours Uber drivers can work a week in the UK, but the company is testing changes and says it plans to introduce limits over a 24-hour period.)

TaskRabbit, the online platform for handymen and odd jobs, which was recently bought by Ikea, took away a rate in which contractors would earn more money for repeat commissions – and buried that news in an email about introducing the option for clients to tip. [..] Huws points out that the gig economy has always existed: cash-in-hand or on-call work or people turning up at building sites or dockyards in the hope of a day’s work. But since the 2008 crash, jobs that provide a secure income have become harder to come by. It is true that the unemployment rate among 16- to 24-year-olds in the UK is 12%, while in parts of Europe it is 40%. But that doesn’t mean much if many of those people are in precarious “self-employment” – the McKinsey Global Institute estimates this may be up to 30% of working-age adults across Europe. Huws says the notion of a career is being eroded, with young people often working a patchwork of different occupations.

[..] Huws worries about something else, too: the wellbeing of gig-economy millennial workers. This kind of employment can be “really damaging for self-esteem”, she says. As Hughes and Diggle both say, crowd work can be lonely. “Especially if you’re working a double shift,” says Diggle. “Or sometimes you don’t feel human. You’re just handing a bag over and some people take the bag, don’t look at you and close the door. And then don’t tip. One day I’ll be on stage singing, and the next I’m delivering food on my bicycle and it does feel … deflating.”

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A Greek recovery is mathematically impossible.

“..taxation on products increased 7.8%..”

Greek Growth Data Cast Doubt On Recovery

Greece was in recession last year, as revised data from the Hellenic Statistical Authority (ELSTAT) showed on Tuesday that the economy shrank 0.2% compared to 2015 against a previous estimate for zero growth. Furthermore, the Foundation for Economic and Industrial Research (IOBE) forecast that 2017 will close with growth of just 1.3%, against a government estimate of 1.8%. That the way out of the crisis is proving more arduous and uncertain than many had predicted was underscored by the two sets of data released on Tuesday, with IOBE Director General Nikos Vettas warning that the recovery may turn out to be “short-term and fragile” unless the pending crucial structural reforms are implemented.

ELSTAT’s downward revision for 2016 is mainly based on consumer spending, which declined 0.3% compared to 2015, against a previous estimate in March 2017 for an increase of 0.6%. Even in March, when ELSTAT announced zero growth for 2016, the figures created a headache for Prime Minister Alexis Tsipras, who had previously said the economy had grown in 2016. Yesterday’s revision turned stagnation into recession for another year. It is also impressive that while the economy shrank 0.2%, taxation on products increased 7.8%, against a hike of 1.7% in 2015 and 0.8% in 2014. The revision also revealed that 2014 saw growth of 0.7%, against an estimate of 0.3% in March. That upward course was clearly interrupted by the January 2015 election.

IOBE undercut the government’s growth estimates for this year and next, with its president, Takis Athanasopoulos, saying, “Indeed, our economy is showing signs of improvement, but its rate remains below what is necessary for the country to leave the crisis behind it for good.” Next year IOBE anticipates growth of 2%, against an official forecast of 2.4%, putting the achievement of fiscal targets into question. The weak 1.3% recovery rate seen for this year, compared to the original 2.7% estimate of the budget and the bailout program, is according to IOBE due to the weak momentum of investments.

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Wonder who pays the bill. Which is not as bas as it seems.

Debt-Ridden Greece to Spend $2.4bn Upgrading its F-16 Fighter Jet Fleet (GR)

The United States has approved the possible sale of more than 120 upgrade kits from Lockheed Martin to the Greeks for their F-16 fighter jet fleet. The deal, worth $2.4bn, was announced as U.S. President Donald Trump met with Greek Prime Minister Alexis Tsipras in Washington, D.C. Trump, who has repeatedly criticized NATO countries for not meeting the alliance’s defense budget targets, applauded Greece for meeting the goal of each member spending two percent of their gross domestic product on their military and highlighted the F-16 upgrade plans. “They’re upgrading their fleets of airplanes – the F-16 plane, which is a terrific plane,” Trump said ahead of a bilateral meeting. “They’re doing big upgrades.”

“This agreement to strengthen the Hellenic Air Force is worth up to 2.4 billion U.S. dollars and would generate thousands of American jobs,” Trump said during his joint press conference with Tsipras. Greek Defense Minister Panos Kammenos sought later to downplay the cost of the deal for Greece. In a message on twitter he said that the cost to Greece will be 1.1 billion euros. “The ceiling in the budget for the upgrading of the F-16 is 1.1 billion euros”, he said. “The rest will come from aid programs and offsets”, he added. According to the U.S. Defense Security Cooperation Agency (DSCA) there are currently no known offsets. However, Greece typically requests offsets. Any offset agreement will be defined in negotiations between Greece and the contractor, Lockheed Martin. .

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“..the type of heavy oil recovery used released 3.6 times more methane than previously believed..”

Canada Methane Emissions Far Worse Than Feared (G.)

Alberta’s oil and gas industry – Canada’s largest producer of fossil fuel resources – could be emitting 25 to 50% more methane than previously believed, new research has suggested. The pioneering peer reviewed study, published in Environmental Science & Technology on Tuesday, used airplane surveys to measure methane emissions from oil and gas infrastructure in two regions in Alberta. The results were then compared with industry-reported emissions and estimates of unreported sources of the powerful greenhouse gas, which warm the planet more than 20 times as much as similar volumes of carbon dioxide.

“Our first reaction was ‘Oh my goodness, this is a really big deal,” said Matthew Johnson, a professor at Carleton University in Ottawa and one of the study’s authors. “If we thought it was bad, it’s worse.” Carried out last autumn, the survey measured the airborne emissions of thousands of oil and gas wells in the regions. Researchers also tracked the amount of ethane to ensure that methane emissions from cattle would not end up in their results. In one region dominated by heavy oil wells, researchers found that the type of heavy oil recovery used released 3.6 times more methane than previously believed. The technique is used in several other sites across the province, suggesting emissions from these areas are also underestimated.

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UBI.

The Lie That Poverty Is A Moral Failing Is Back (Fintan O’Toole)

By the time he died, in 1950, Bernard Shaw, as the most widely read socialist writer in the English-speaking world, had done as much as anyone to banish the fallacy that poverty is essentially a moral failing – and conversely that great riches are proof of moral worth. His most passionate concern was with poverty and its causes. He was haunted by the notorious Dublin slums of his childhood. As his spokesman Undershaft puts it in Major Barbara: “Poverty strikes dead the very souls of all who come within sight, sound or smell of it.” The question – why are the poor poor? – has a number of possible answers in the 21st century, just as it had in the late 19th. A Eurobarometer report in 2010 examined attitudes to poverty in the European Union. The most popular explanation among Europeans (47%) for why people live in poverty was injustice in society.

[..] In the preface to Major Barbara, Shaw attacks “the stupid levity with which we tolerate poverty as if it were … a wholesome tonic for lazy people”. His great political impulse was to de-moralise poverty, and his most radical argument about poverty was that it simply doesn’t matter whether those who are poor “deserve” their condition or not – the dire social consequences are the same either way. He assails the absurdity of the notion implicit in so much rightwing thought, that poverty is somehow more tolerable if it is a punishment for moral failings: “If a man is indolent, let him be poor. If he is drunken, let him be poor. If he is not a gentleman, let him be poor. If he is addicted to the fine arts or to pure science instead of to trade and finance, let him be poor … Let nothing be done for ‘the undeserving’: let him be poor. Serve him right! Also – somewhat inconsistently – blessed are the poor!”

In an era when many on the left purported to despise money and romanticised poverty, Shaw argued that poverty is a crime and that money is a wonderful thing. He recognised that there is no relationship between poverty and a supposed lack of a work ethic: Eliza Doolittle is out selling her flowers late at night in the pouring rain but she is still dirt poor. (Conversely, when she is “idle” and being kept by Higgins, she leads a life of relative luxury.) And therefore the cure for poverty can never be found in moral judgments. The cure for poverty is an adequate income. “The crying need of the nation,” he wrote, “is not for better morals, cheaper bread, temperance, liberty, culture, redemption of fallen sisters and erring brothers, nor the grace, love and fellowship of the Trinity, but simply for enough money.

And the evil to be attacked is not sin, suffering, greed, priestcraft, kingcraft, demagogy, monopoly, ignorance, drink, war, pestilence, nor any other of the scapegoats which reformers sacrifice, but simply poverty.” The solution he proposed was what he called a “universal pension for life”, or what we now call a universal basic income.

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Jul 282017
 
 July 28, 2017  Posted by at 8:21 am Finance Tagged with: , , , , , , , , , , ,  6 Responses »


Gordon Burt Bond Street, Wellington, New Zealand c1957

 

Senate Blocks ‘Skinny’ Obamacare Repeal Bill In Dramatic Late-Night Vote (CNBC)
Russia Promises Retaliation As Senate Passes Sanctions Bill (G.)
US Housing Bubble 2.0 (Mark Hanson)
Is This The Bubble? (Lance Roberts)
Japan Defense Minister Quits Amid Plunging Support For PM Abe (R.)
Libor, The Scandal-Ridden Financial Benchmark, Doesn’t Have Long To Live (Qz)
Shell’s Profits Treble As Cost Cuts Take Effect (PA)
Oil Companies Trim Drilling Budgets in Sign of Rising Caution (BBG)
US Indicts Russian Suspected of $4 Billion Bitcoin Laundering Scheme (R.)
The Syrian Army Were Standing Up To Isis Long Before The Americans (Fisk)
France Plans Asylum ‘Hotspots’ In Libya (BBC)
Italy Loses Patience With France’s Macron Over Migrants, Libya (VoA)
EU Announces New Emergency Support For Greek Refugee Crisis (AP)

 

 

Three things:

1) Boy, was I right to say US politics should be observed through the eyes of Shakespeare.

2) Playing with people’s health care, let alone for petty political reasons, is not forgiveable.

3) What a bunch of has-beens these people are. Limit their terms, close the revolving doors, and let the future be decided by people young enough to actually have a future. Oh, and get money out of politics.

Senate Blocks ‘Skinny’ Obamacare Repeal Bill In Dramatic Late-Night Vote (CNBC)

The Senate blocked the latest Republican attempt to repeal Obamacare in a dramatic floor vote early Friday morning, yet again stalling — for now — the key campaign goal that eludes the GOP six months into the Trump administration. Three GOP defections — Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and John McCain of Arizona — sank the measure in a 49-51 vote. McCain, who recently returned to the Senate after getting diagnosed with brain cancer, cast his “no” vote to audible gasps on the chamber’s floor, according to reporters there. Senate Republicans released the plan late Thursday just hours before voting on an amendment to take up the bill. The GOP could only afford to lose two votes on the proposal, which many senators suggested they would not even want to see become law.

The measure came after separate pushes to immediately replace the Affordable Care Act or repeal it with a two-year transition period failed amid GOP divisions. Several Republican senators slammed the plan and appeared to not even want it to become law. It marks another blow to the sprawling agenda that Republicans hoped to accomplish when President Donald Trump won the White House and the GOP held both chambers of Congress in November. After the vote, a visibly frustrated Senate Majority Leader Mitch McConnell called it “clearly a disappointing moment.” “So yes, this is a disappointment, a disappointment indeed … I regret that our efforts were simply not enough this time,” McConnell said.

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But this they do agree on. More reasons to get rid of the old order in Washington.

Russia Promises Retaliation As Senate Passes Sanctions Bill (G.)

Vladimir Putin has accused US lawmakers of “insolence”, and promised Russia will retaliate if the latest round of US sanctions against Russia are signed into law. The House of Representatives voted by 419 votes to three on Tuesday to pass the new sanctions bill, which targets Russia as well as North Korea and Iran. The US legislation was passed overwhelmingly by the Senate on Thursday, and will now go to Donald Trump for his signature. Trump, who enjoyed two warm conversations with Putin at the G20 summit earlier this month, is likely to face a major backlash if he attempts to veto the legislation, with his administration already embroiled in a Russia scandal. “We are behaving in a very restrained and patient way, but at some moment we will need to respond,” said Putin at a press conference with his Finnish counterpart, Sauli Niinistö.

“It’s impossible to endlessly tolerate this kind of insolence towards our country,” Putin said, referring to the sanctions. “This practice is unacceptable – it destroys international relations and international law.” Putin was vague on exactly how Russia might respond. The newspaper Kommersant quoted two unnamed sources saying a range of potential responses was under consideration in Moscow, including expelling US diplomats, seizing diplomatic properties, increasing restrictions on US companies working in Russia and halting enriched uranium shipments to US power plants. [..] Putin and other Russian officials have repeatedly denied any meddling in the US election, while US intelligence agencies say they have overwhelming evidence of a coordinated Russian campaign. Putin on Thursday described the allegations as “hysteria”, and said: “It’s a great pity that Russian-US relations are being sacrificed to resolve questions of domestic politics.”

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And you thought the US housing bubble was over?

US Housing Bubble 2.0 (Mark Hanson)

The striking Case-Shiller regional charts shown below, courtesy of MHanson.com, make Mark Hanson angry: “so, 2006/2007 was the largest house price bubble ever, but there is nothing to see here in 2017?” and sarcastically points out that “if this isn’t a house price bubble, I would hate to see one.” His bottom line: “If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages? Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.”

[..] Income required to buy the avg priced builder house is at historical highs and has completely diverged from the multi-decade trend line. Historically low growth & rebound relative to resales suggest “lack of supply” meme in the Existing Sales market is over-stated.

“Peak builder is here.”
1) New Home Sales “up to” 1995 levels after $15 TRILLION in debt and Fed liquidity aimed largely at the sector.
2) Builder pricing power largely flat for 2-years.
3) Income required to buy the average priced builder house has completely diverged from the multi-decade trend line. This obviously explains why sales are only at 600k SAAR now vs 1.2 million in Bubble 1.0. Reversion to this mean will occur…either thru a sharp rise in income; new exotic loan programs, which make payment less; or house prices dropping.

4) Last time builders were this euphoric was the peak of the biggest credit bubble in history.

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Rinse, forget and repeat.

Is This The Bubble? (Lance Roberts)

Every major market peak, and subsequent devastating mean reverting correction, has ever been the result of the exact ingredients seen previously. Only the ignorance of its existence has been a common theme. The reason that investors ALWAYS fail to recognize the major turning points in the markets is because they allow emotional “greed” to keep them looking backward rather than forward. Of course, the media foster’s much of this “willful” blindness by dismissing, and chastising, opposing views generally until it is too late for their acknowledgement to be of any real use. The next chart shows every major bubble and bust in the U.S. financial markets since 1871 (Source: Robert Shiller)

At the peak of each one of these markets, there was no one claiming that a crash was imminent. It was always the contrary with market pundits waging war against those nagging naysayers of the bullish mantra that “stocks have reached a permanently high plateau” or “this is a new secular bull market.” Yet, in the end, it was something that was unexpected, unknown or simply dismissed that yanked the proverbial rug from beneath investors. What will spark the next mean reverting event? No one knows for sure, but the catalysts are present from: • Excess leverage (Margin debt at new record levels) •IPO’s of negligible companies (Blue Apron, Snap Chat) • Companies using cheap debt to complete stock buybacks and pay dividends, and; • High levels of investor complacency.

Either individually, or in combination, these issues are all inert. Much like pouring gasoline on a pile of wood, the fire will not start without a proper catalyst. What we do know is that an event WILL occur, it is only a function of “when.” The discussion of why “this time is not like the last time” is largely irrelevant. Whatever gains that investors garner in the between now and the next correction by chasing the “bullish thesis” will be wiped away in a swift and brutal downdraft.

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Abe should just go. But before he does, he’ll throw Kuroda under the bus first, if he has the time.

Japan Defense Minister Quits Amid Plunging Support For PM Abe (R.)

Embattled Japanese Defence Minister Tomomi Inada on Friday said she was resigning, after a series of gaffes, missteps and a cover-up at her ministry that have contributed to a sharp plunge in public support for Prime Minister Shinzo Abe. Inada, 58, an Abe protege who shares his conservative views and had been suggested as a possible future premier, had already expected to be replaced in a likely cabinet reshuffle next week that Abe hopes will help rebuild his ratings. Support for the prime minister has sunk below 30% in some polls, due to scandals over suspected cronyism and a view among many voters that he and his aides took them for granted.

Abe apologized “to the people from my heart”, in comments to reporters carried live on national television after Inada announced her resignation. He said Foreign Minister Fumio Kishida would add the defense portfolio to his duties, to eliminate any gap at a time when Japan faces tough security challenges, such as from a volatile North Korea. “I want to make every effort to maintain a high degree of vigilance and protect the security of the people,” Abe said. Abe had drawn fire from both ruling and opposition party lawmakers for retaining Inada despite her perceived incompetence. “He should have thrown Inada under the bus long ago … doing so on the eve of a cabinet reshuffle only looks like desperation,” said Jeffrey Kingston, director of Asian Studies at Temple University Japan.

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Taking it out before the real big scandals come up?

Libor, The Scandal-Ridden Financial Benchmark, Doesn’t Have Long To Live (Qz)

A global borrowing benchmark that became synonymous with rigged financial markets, and cost banks some $9 billion in fines, is going away. Andrew Bailey, the head of Britain’s Financial Conduct Authority, said in a speech today that the regulator will phase out the indicator, Libor, by the end of 2021. Bailey said the reason the London interbank offered rate is being scrapped is because the market underpinning the benchmark—unsecured bank lending—has dried up. For one particular Libor benchmark—there are many rates for various durations and currencies—there were only 15 transactions last year, he said. Such benchmarks have long been problematic and susceptible to manipulation. Libor, for example, is based on an estimate of what supposed experts at banks think a borrowing rate would be.

Bloomberg describes the process like this: “The benchmark is the average rate a group of 20 banks estimate they’d be able to borrow funds from each other in five different currencies across seven time periods, submitted by a panel of lenders every morning. Its administration was overhauled in the wake of the scandal, with Intercontinental Exchange Inc. taking over from the then-named British Bankers’ Association.” Before the financial crisis, banks submitted daily estimates of borrowing rates to the BBA, which then averaged them to calculate that day’s Libor rate. Via allegedly colluding, the banks submitting rates could nudge the average up or down, depending on what was needed to increase a profit or reduce a loss in their portfolios.

Libor is of global importance because it’s used to help determine borrowing costs for more than $300 trillion in securities, for things like student loans and mortgages. But as a trader once said in a transcript uncovered by regulators, it’s “just amazing how libor fixing can make you that much money.” The Libor scandal was also part of an era in which recorded electronic communications—chat messages—became evidence and got a lot of people in a lot of trouble. Similar market manipulation was discovered in things like foreign-currency exchange rates and commodity prices. And now Libor is being scrapped. Banks didn’t really want to participate in the rate-setting process anymore anyway, Bailey said, given the market had shrank by so much. (Their recent history of being fined billions for their role in daily rate submissions probably didn’t help.) Some new indicator will have to be agreed on.

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When I saw the headline, I thought they must either have been real inefficient before, or they’re selling teh kitchen sink and not investing a penny. And whaddaya know?

Shell’s Profits Treble As Cost Cuts Take Effect (PA)

Royal Dutch Shell has reported a large rise in second quarter profits after the energy giant was boosted by higher oil and gas prices. The firm said adjusted earnings rose from £800m to £2.7bn, an increase of 245 per cent, as chief executive Ben van Beurden said he is making progress on “reshaping the company”. He said: “Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel. “The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments.

“I am confident that we are on track to deliver a world-class investment to our shareholders.” The figures were flattered by a disastrous second quarter in 2016, when it was stung by dilapidated crude prices and costs linked to its takeover of BG Group. This time last year Brent Crude was trading at round 45 US dollars a barrel compared to circa 50 US dollars today. Shell is also embarking on an ambitious cost-cutting drive and a £24.6bn divestment initiative. To this end, the oil major has sold off more than £16bn of assets since the BG takeover. Shell this year announced it will sell off a package of North Sea assets for up to £3bn to smaller rival Chrysaor, and recently agreed to sell its stake in Irish gas project Corrib in a deal worth up to £956 million.

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Everybody does it.

Oil Companies Trim Drilling Budgets in Sign of Rising Caution (BBG)

Caution lights are flashing for the oil industry. Facing lower-than-expected commodity prices, drillers from ConocoPhillips to Hess to Statoil have slashed their capital spending plans in recent days, as companies lay out their plans to cope with oil prices stuck below $50 a barrel. The budget cuts won’t necessarily mean less oil or natural gas on the market, with some of the companies saying they can now do more with less and expect to produce just as much oil and gas in 2017. But they speak to an investor community that’s grown anxious as a global rally in crude prices has stalled out this year.

“The expectation was that oil would be at least above $50 by this time,” said Brian Youngberg, an energy analyst with Edward Jones & Co. in St. Louis. “Right now, the market wants you to spend within your cash flow, no exceptions allowed. It’s just a response to that.” The “modest tweaks” in this week’s second-quarter earnings reports will probably continue in the coming days, Youngberg said, as drillers focused on U.S. shale plays take center stage. “Companies are going to be cautious,” he said. “No one wants to be the outlier.”

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The Mt. Gox link is interesting. Will BTC-e also close?

US Indicts Russian Suspected of $4 Billion Bitcoin Laundering Scheme (R.)

A US jury indicted a Russian man on Wednesday as the operator of a digital currency exchange he allegedly used to launder more than $4 billion for people involved in crimes ranging from computer hacking to drug trafficking. Alexander Vinnik was arrested in a small beachside village in northern Greece on Tuesday, according to local authorities, following an investigation led by the US Justice Department along with several other federal agencies and task forces. US officials described Vinnik in a Justice Department statement as the operator of BTC-e, an exchange used to trade the digital currency bitcoin since 2011.

They alleged Vinnik and his firm “received” more than $4 billion in bitcoin and did substantial business in the United States without following appropriate protocols to protect against money laundering and other crimes. US authorities also linked him to the failure of Mt. Gox, a Japan-based bitcoin exchange that collapsed in 2014 after being hacked. Vinnik “obtained” funds from the hack of Mt. Gox and laundered them through BTC-e and Tradehill, another San Francisco-based exchange he owned, they said in the statement.

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Robert Fisk is part of our conscience.

The Syrian Army Were Standing Up To Isis Long Before The Americans (Fisk)

I don’t like armies. They are dangerous institutions. Soldiers are not heroes just because they fight. And I’ve grown tired of saying that those who live by the sword sometimes die by the sword. But in an age when the Americans and the Iraqis and Isis can account for 40,000 civilian deaths in Mosul in the past twelve months, compared to 50,000 civilians slaughtered by the Mongols in 13th-century Aleppo – a human rights improvement of US aircrews, Iraqi brutality and Isis sadism over the Mongol hordes by a mere 10,000 souls – death sometimes seems to have lost its meaning. Unless you know the victims or their families. I have a friend whose mother was murdered in the Damascus suburb of Harasta near the start of the Syrian war, another whose brother-in-law was kidnapped east of the city and never seen again.

I met a little girl whose mother and small brother were shot down by al-Nusrah killers in the town of Jisr al-Shughour, and a Lebanese who believes his nephew was hanged in a Syrian jail. And then, this month, in the eastern Syrian desert, near the dust-swept shack village of al-Arak, a Syrian soldier I’d come to know was killed by Isis. He was, of course, a soldier in the army of the Syrian regime. He was a general in an army constantly accused of war crimes by the same nation – the United States – whose air strikes contributed so generously to the obscene massacre in Mosul. But General Fouad Khadour was a professional soldier and he was defending the oil fields of eastern Syria – the crown jewels of Syria’s economy, which was why Isis tried to occupy them all and why they killed Khadour – and the war in the desert is not a dirty war like so many of the conflicts perpetrated in Syria.

When I met him west of Palmyra, Isis had just conquered the ancient Roman city and publicly chopped or blown off the heads of the civilians and soldiers and civil servants who did not manage to flee. Just a year before, the general’s son, also a soldier, had been shot dead in battle in Homs. Fouad Khadour merely nodded when I mentioned this. He wanted to talk about the war in the hot, brown mountains south of Palmyra, where he was teaching his soldiers to fight back against the Isis suicide attackers, to defend their isolated positions around the oil pumping and electricity transmission station where he was based, and to save the T4 pipelines on the road to Homs. The Americans, who proclaimed Isis to be an “apocalyptic” force, sneered that the Syrian army did not fight Isis. But Khadour and his men were standing up to Isis before the Americans ever fired a missile, and learning the only lesson that soldiers can understand when confronted by a horrific enemy: not to be afraid.

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The idea is not exactly new. But Macron wants to go it alone.

France Plans Asylum ‘Hotspots’ In Libya (BBC)

France says it plans to set up “hotspots” in Libya to process asylum seekers, in a bid to stem the flow of migrants to Europe. President Emmanuel Macron said the move would stop people not eligible for asylum from “taking crazy risks”. The centres would be ready “this summer”. He said that between 800,000 and a million people were currently in camps in Libya hoping to get into Europe. But many of them did not have a right to asylum, Mr Macron said. The French leader said that migrants were destabilising Libya and Europe by fuelling people-smuggling, which in turn funded terrorism. “The idea is to create hotspots to avoid people taking crazy risks when they are not all eligible for asylum. We’ll go to them,” he said on Thursday at a naturalisation ceremony in the central city of Orléans.

On Tuesday, Mr Macron mediated talks in Paris between Libya’s opposing governments. UN-backed Prime Minister Fayez al-Sarraj and Khalifa Haftar, the rival military commander who controls the east, committed to a conditional ceasefire after the meeting. They are aiming to end the conflict which has engulfed the country since Col Muammar Gaddafi was ousted in 2011. Mr Macron and other EU leaders had been hoping for some sort of agreement, as Libya has become a key route for migrants making their way to Europe. The French leader said he hoped the deal would be a blow to the human traffickers who work in the region.

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This is not over. Macron wants to show he’s a tough guy, but pushing aside Italy is bad theater.

Italy Loses Patience With France’s Macron Over Migrants, Libya (VoA)

Macron’s Libya diplomacy is just one irritant in increasingly tension-filled Franco-Italian relations. In May, after meeting Gentiloni in Paris, Macron announced: “We have not listened enough to Italy’s cry for help on the migration crisis.” But Macron’s position since hasn’t changed much from Francois Hollande, his predecessor in the Elysee Palace, to the Italian government’s rising anger. “Italian pleas for more burden-sharing by other EU countries have, so far, fallen on deaf ears. Italy’s refugee centers and shelters have reached their capacity of 200,000. So far this year nearly 100,000 asylum seekers have crossed the Mediterranean from Libya — a 17% increase over the same period last year — and with months more of good weather, another 100,000 asylum seekers are likely to land at Italian ports.

This month, Italy’s deputy foreign minister, Mario Giro, complained, “it doesn’t seem like France wants to help us concretely.” French police are blocking hundreds of migrants on the Italian side of the border at Ventimiglia from entering France; the French government is refusing to allow asylum seekers rescued in the Mediterranean from landing at French ports and, like nearly every other EU country, France hasn’t come anywhere near meeting its quota of migrants as agreed to under a 2015 EU refugee relocation scheme. Macron this month talked of distinguishing between war refugees and economic migrants, indicating that France won’t admit any asylum-seekers who are just escaping poverty and hunger. But that doesn’t help Italy as it tries to cope with a mounting influx of mainly economic migrants, who, under EU rule, it has little alternative but to admit, at least for processing and to save lives.

Paris has also scorned an Italian proposal for an EU military mission to monitor and interdict migrants along Libya’s southern border. Italians question why a large French military mission in Niger isn’t being used to disrupt migrant trafficking when it is right by the main route being used by smugglers and would-be asylum seekers traveling north. Last month, the European Parliament’s most senior left-wing politician, Italian Gianni Pittella, launched a scathing attack on Macron after French police frogmarched back into Italy more than 100 migrants who’d crossed into France. “The situation is shameful. Italy and the Italians are being abandoned, they’re being expected to deal with all these migrants on their own with no support,” he said.

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I’ve said it before: help for refugees in fine, even though its distribution through NGOs is a colossal mess. But renting homes for refugees, and supplying them with money to live, is a huge blow in the face of the Greeks devastated by EU-induced austerity, who get nothing.

EU Announces New Emergency Support For Greek Refugee Crisis (AP)

The European Commission announced a new emergency support package for Greece Thursday to help it deal with the refugee crisis that has seen tens of thousands of migrants and refugees stuck in the country. The €209 million ($243 million) package includes a €151 million program to help refugee families rent accommodation in Greek cities and provide them with money in an effort to help them move out of refugee camps, EU officials said during a visit to Athens. The Commission said the new funding more than doubles the emergency support extended to Greece for the refugee crisis, bringing it to a total of €401 million.

The rental project is in cooperation with the UN High Commissioner for Refugees and will provide 22,000 rental places with the aim of increasing the number of refugees living in rented apartments to 30,000 by the end of the year, including 2,000 places on Greek islands. A parallel scheme worth €57.6 million will provide refugees and asylum seekers with monthly cash stipends distributed through cash-cards for expenses such as transport, food and medication. “The projects launched today are one part of our wider support to the country but also to those in need of our protection,” said Migration Commissioner Dimitris Avramopoulos. “Around €1.3 billion of EU funds are at the disposal of Greece for the management of the migration crisis.”

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Jul 182017
 


Piet Mondriaan The Flowering Apple Tree 1912

 

US Senate Will Vote To Repeal Obamacare Without Replacement (G.)
There Has Been Just One Buyer Of Stocks Since The Financial Crisis (ZH)
People Buy Payments – Not Houses (Roberts)
Student Debt Is a Major Reason Millennials Aren’t Buying Homes (BBG)
US Student Loans Worth Billions Are Getting Erased On A Technicality (ZH)
UK Students Should Not Try To Pay Off Loans Early (G.)
Fears Mount Over a New US Subprime Boom – Cars (BBG)
When A “Black Swan” Will No Longer Do: China Warns Beware The “Gray Rhino” (ZH)
Half of China’s Rich Plan To Move Overseas (CNBC)
Household Debt: A Tale of Three Countries (Hail)
Boomerangski (Jim Kunstler)
Staving Off the Coming Global Overshoot Collapse (Rees)

 

 

If they would stick their heads together, they could hammer out a single payer plan for less than what this competition in incompetence costs. But they won’t.

US Senate Will Vote To Repeal Obamacare Without Replacement (G.)

Senate majority leader Mitch McConnell has announced that the Senate will vote on a clean repeal of Obamacare without any replacement, after two Republican senators broke ranks to torpedo the current Senate healthcare bill. Senators Mike Lee of Utah and Jerry Moran of Kansas came out on Monday night in opposition to McConnell’s Better Care Reconciliation Act (BCRA), the Senate version of the controversial healthcare reform bill that passed the House in May. Senate Republicans hold a bare 52-48 majority in the Senate and two members of the GOP caucus, the moderate Susan Collins of Maine and the libertarian Rand Paul of Kentucky, already opposed the bill, along with all 48 Democrats. The announcement from Moran and Lee made it impossible for Republicans to muster the 50 votes needed to bring the BCRA bill to the floor.

Instead, McConnell announced late on Monday night that the Senate would vote on a bill to simply repeal Obamacare without any replacement in the coming days. The Kentucky Republican said in a statement: “Regretfully, it is now apparent that the effort to repeal and immediately replace the failure of Obamacare will not be successful.” He added that “in the coming days” the Senate would vote on repealing the Affordable Care Act with a two-year-delay. The Senate passed a similar bill in 2015, which was promptly vetoed by Barack Obama. McConnell’s plan echoes a statement made by Donald Trump in a tweet on Monday night, in which the president urged a repeal of Obamacare with any replacement to come in the future. “Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!” Trump wrote.

In January, an analysis by the nonpartisan Congressional Budget Office (CBO) estimated that repealing Obamacare without a replacement would result in 32 million people losing insurance by 2026, including 19 million who would lose Medicaid coverage. It would also cause premiums to rise by as much as 50% in the year following the elimination of key planks of the healthcare law, including the repeal of Medicaid expansion and cost-sharing subsidies. Premiums would nearly double over a decade.

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This is your entire economy. Companies refusing to invest in themselves. Why do anything useful if you can simply borrow your share price higher?

There Has Been Just One Buyer Of Stocks Since The Financial Crisis (ZH)

When discussing Blackrock’s latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: “While significant cash remains on the sidelines, investors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform.”

While the intention behind the statement was obvious: to pitch Blackrock’s juggernaut ETF product platform which continues to steamroll over the active management community, leading to billions in fund flow from active to passive management every week, if not day, he made an interesting point: cash remains on the sidelines even with the S&P at record highs. In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS’ strategist Andrew Garthwaite writes, “one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap.” What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

Why this rush by companies to buyback their own stock, and in the process artificially boost their Eearning per Share? There is one very simple reason: as Reuters explained some time ago, “Stock buybacks enrich the bosses even when business sags.” And since bond investor are rushing over themselves to fund these buyback plans with “yielding” paper at a time when central banks have eliminated risk, who is to fault them. More concerning than the unprecedented coordinated buybacks, however, is not only the relentless selling by institutions, but the persistent unwillingness by “households” to put any new money into the market which suggests that the financial crisis has left an entire generation of investors scarred with “crash” PTSD, and no matter what the market does, they will simply not put any further capital at risk.

As to Fink’s conclusion that “investors have begun to put more of their assets to work”, we will wait until such time as central banks, who have pumped nearly $2 trillion into capital markets in 2017 alone, finally stop doing so before passing judgment.

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Real estate across the globe is on the edge of a cliff. Entire economies will follow it down.

People Buy Payments – Not Houses (Roberts)

When the average American family sits down to discuss buying a home they do not discuss buying a $125,000 house. What they do discuss is what type of house they “need” such as a three bedroom house with two baths, a two car garage, and a yard. That is the dream part. The reality of it smacks them in the face, however, when they start reconciling their monthly budget. Here is a statement I have not heard discussed by the media. People do not buy houses – they buy a payment. The payment is ultimately what drives how much house they buy. Why is this important? Because it is all about interest rates. Over the last 30-years, a big driver of home prices has been the unabated decline of interest rates. When declining interest rates were combined with lax lending standards – home prices soared off the chart. No money down, ultra low interest rates and easy qualification gave individuals the ability to buy much more home for their money.

[..] With this in mind let’s review how home buyers are affected. If we assume a stagnant purchase price of $125,000, as interest rates rise from 4% to 8% by 2027 (no particular reason for the date – in 2034 the effect is the same), the cost of the monthly payment for that same priced house rises from $600 a month to more than $900 a month – more than a 50% increase. However, this is not just a solitary effect. ALL home prices are affected at the margin by those willing and able to buy and those that have “For Sale” signs in their front yard. Therefore, if the average American family living on $55,000 a year sees their monthly mortgage payment rise by 50% it is a VERY big issue.

Assume an average American family of four (Ward, June, Wally and The Beaver) are looking for the traditional home with the white picket fence. Since they are the average American family their median family income is approximately $55,000. After taxes, expenses, etc. they realize they can afford roughly a $600 monthly mortgage payment. They contact their realtor and begin shopping for their slice of the “American Dream.” At a 4% interest rate, they can afford to purchase a $125,000 home. However, as rates rise that purchasing power quickly diminishes. At 5% they are looking for $111,000 home. As rates rise to 6% it is a $100,000 property and at 7%, just back to 2006 levels mind you, their $600 monthly payment will only purchase a $90,000 shack. See what I mean about interest rates?

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Home prices will have to come down enormously to cover this issue. And therefore they will. The losses will be crippling.

Student Debt Is a Major Reason Millennials Aren’t Buying Homes (BBG)

College tuition hikes and the resulting increase in student debt burdens in recent years have caused a significant drop in homeownership among young Americans, according to new research by the Federal Reserve Bank of New York. The study is the first to quantify the impact of the recent and significant rise in college-related borrowing—student debt has doubled since 2009 to more than $1.4 trillion—on the decline in homeownership among Americans ages 28 to 30. The news has negative implications for local economies where debt loads have swelled and workers’ paychecks aren’t big enough to counter the impact. Homebuying typically leads to additional spending—on furniture, and gardening equipment, and repairs—so the drop is likely affecting the economy in other ways.

As much as 35% of the decline in young American homeownership from 2007 to 2015 is due to higher student debt loads, the researchers estimate. The study looked at all 28- to 30-year-olds, regardless of whether they pursued higher education, suggesting that the fall in homeownership among college-goers is likely even greater (close to half of young Americans never attend college). Had tuition stayed at 2001 levels, the New York Fed paper suggests, about 360,000 additional young Americans would’ve owned a home in 2015, bringing the total to roughly 2.9 million 28- to 30-year-old homeowners. The estimate doesn’t include younger or older millennials, who presumably have also been affected by rising tuition and greater student debt levels.

There’s a good chance the number of millennials kept from buying homes because of their student loans has only grown since the period the economists studied. As tuition has risen, total student debt has increased 13%, and every new class graduates with more student debt than the preceding one. The consequences could reverberate for decades as more young Americans are locked out of purchasing property, the primary way that U.S. households build wealth. With less wealth, millennials could cut their spending as they attempt to build up their net worth. The U.S. economy has historically depended on household spending for roughly 70% of its growth.

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Who gets stuck with the empty bag here? The piper must be paid.

US Student Loans Worth Billions Are Getting Erased On A Technicality (ZH)

National Collegiate Funding (NCF) is an umbrella name for 15 trusts that collectively hold 800,000 private student loans, totaling some $12 billion in outstanding obligations. The only problem is that roughly $5 billion worth of those loans, or over 40%, are currently in default (and you thought auto delinquencies were bad). Now, ordinarily when a student defaults on their loan, NCF simply files a lawsuit in local or state court as a means for negotiating a settlement or payment plan with the borrower. Often times, NCF wins these cases automatically as the borrowers don’t even bother to show up for their court date. In cases like that, NCF can use their court victory to garnish wages and/or federal benefits from entitlement programs like Social Security which can haunt borrowers for decades.

That said, NCF is increasingly finding that, much like the subprime mortgage debacle from 10 years ago, student lending institutions apparently had a really hard time keeping tracking of paperwork over the years and/or processed deeply flawed contracts with incomplete ownership records and mass-produced documentation (who can forget that whole robo-signing catastrophe). As the New York Times points out today, student loans, much like mortgages, are often originated at large commercial banks before being sold to numerous other financial institutions and ultimately ending up in a securitization owned by some unsuspecting European pension funds. And while pooling these student loans in such a complicated way into securitizations apparently magically eradicates all default risk associated with the underlying loans (just ask any 22 year old on the JPM securitization desk and he/she will confirm the same), it also makes it extremely difficult to prove ownership.

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Shouldn’t try to pay them off at all. But a millstone around your neck for 30 years is no fun.

UK Students Should Not Try To Pay Off Loans Early (G.)

Students should not try to pay off their loans early despite the controversial interest rate rise to 6.1% in September, according to research by money expert Martin Lewis. Lewis says his moneysavingexpert.com website has been “swamped” by graduates terrified by new statements that show their debt spiralling in size after interest is added. He believes most graduates will never repay their debt. Lewis said: “Many graduates are starting to panic. First they look in shock at their student loan statements after noticing interest totalling thousands has been added. Then they read the headline interest rate for the 2017-18 academic year will increase from 4.6% to 6.1%. It’s no surprise I’ve been swamped with people asking if they should be trying to overpay the loans to reduce the interest.”

But after crunching the numbers, Lewis estimates that “overpaying is just throwing money away” unless the graduate is likely to be in very high-paid employment all their lives. Only if the student lands a job earning £40,000 a year on graduation, and then enjoys big pay rises after, should they consider repaying their loan early, said Lewis. A graduate earning £36,000 a year will repay £40,500 of a £55,000 total student loan over 30 years, said Lewis, at the current repayment rates. The remaining debt will be wiped clean after 30 years. If the same graduate cuts the total £55,000 balance to £45,000 with an overpayment of £10,000, they will still have to repay the same amount of student loan over 30 years, making the overpayment entirely pointless.

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A Spanish bank doing US subprime liar car loans. What a world.

Fears Mount Over a New US Subprime Boom – Cars (BBG)

It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud. Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017. A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide. Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo. Few things capture this phenomenon like the partnership between Fiat Chrysler and Banco Santander.

Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines. Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s. The largest portion were for Chrysler vehicles.

Some of their dealers, meantime, gamed the loan application process so low-income borrowers could drive off in new cars, state prosecutors said in court documents. Through it all, Wall Street’s appetite for high-yield investments has kept the loans – and the bonds – coming. Santander says it has cut ties with hundreds of dealerships that were pushing unsound loans, some of which defaulted as soon as the first payment. At the same time, Santander plans to increase control over its U.S. subprime auto unit, Santander Consumer USA Holdings, people familiar with the matter said.

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Xi is toying with his credibility.

When A “Black Swan” Will No Longer Do: China Warns Beware The “Gray Rhino” (ZH)

Perhaps the biggest outcome from the weekend Conference was the creation of a financial “super-regultor” meant to tackle the growing threat of a financial crisis, and among its broad conclusions were i) To make finance better serve the real economy; ii) To contain financial risks; and iii) To deepen financial reforms. The proposed reforms are the result of the unprecedented increase in overall Chinese debt, which while promoting growth – in this case China’s latest 6.9% GDP print – is also leading to a relentless buildup of risks. And while until now Chinese regulators had homed in on financial-sector excesses, the latest probe – Bloomberg notes – is now widening to debt in the broader economy, “a shift that prompted a sell-off in domestic stocks.”

There was another reason for the market’s swoon. Earlier on Monday China People’s Daily newspaper warned of potential “gray rhinos” which it defined as “highly probable, high-impact threats that people should see coming, but often don’t.” So in a surprising case of forward-looking prudence, the Chinese government is doing what numerous Fed members have also done in recent weeks, by setting a surprisingly wary tone about risk, demonstrated best by the front page commentary in the People’s Daily, which said China should not only be alert to “black swan” risks that catch people off guard but also more obvious threats, citing cited a term popularized by author Michele Wucker’s book “The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore.”

Noting that with the economy still on a slowing-growth trend, the People’s Daily commentary said that China should “strictly prevent risks from liquidity, credit, shadow banking and abnormal capital market fluctuations, as well as insurance market and property bubbles.” And, as Bloomberg adds, the new focus on “deleveraging in the economy” suggests that local-government and state-owned enterprise debt is now very much in the spotlight. In other words, this time Beijing’s crackdown on excess debt may actually be real. Of course, by now it is widely understood that China’s strong (credit-driven) momentum has fueled global economic expansion and boosted sentiment in international markets, and served as the springboard for the global economic rebound in the depths of the financial crisis (when China’s debt load was roughly half the current one).

[..] In a separate commentary by China Daily, the official English-language newspaper added that fending off risks is one of the country’s top priorities, with corporate debt running high, the property market being overheated and excess capacity in some sectors lingering, adding that “only through guarding against financial risks can a sound and stable financial sector better fulfill its duty and purpose of serving the real economy.” While it is admirable that China continues to push for deleveraging, it faces an uphill battle, not least of all because as the IIF recently calculated, China’s debt is not only the biggest contributor to global debt growth, currently at a record $217 trillion, but as of 2017 is at just over 300% debt/GDP. Meanwhile, the marginal benefit of all this debt continues to shrink, with the Chinese economy growing at levels just shy of all time lows.

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Cash in your monopoly money before they find out what it’s worth.

Half of China’s Rich Plan To Move Overseas (CNBC)

Half of Chinese millionaires are considering moving overseas, and the U.S. remains their favorite destination, according to a new survey. Among Chinese millionaires with a net worth of more than $1.5 million, half either plan to or are considering moving abroad, according to a survey from Hurun Report in association with Visas Consulting Group. The survey suggests that the flow of wealthy Chinese and Chinese fortunes into U.S. homes and buildings is likely to continue, helping demand and prices in certain real estate markets — especially in the U.S. The U.S. remains the most popular destination for wealthy Chinese moving their families and fortunes abroad, according to the report. Canada ranks second, overtaking the U.K., which had ranked second but now ranks third. Australia comes in at fourth.

The favorite city for wealthy Chinese moving to the U.S. is Los Angeles, while Seattle ranks second followed by San Francisco. New York ranked fourth. When asked for their main reasons for moving abroad, education was the top reason, followed by the “living environment.” “Education and pollution are driving China’s rich to emigrate,” said Rupert Hoogewerf, chairman and chief researcher of Hurun Report. “If China can solve these issues, then the primary incentive to emigrate will have been taken away.” Yet the fear of a falling Chinese currency is also driving many rich Chinese — and their money — abroad. Fully 84% of Chinese millionaires are concerned about the devaluation of the yuan, up from 50% last year. Half are worried about the exchange rate of the dollar, foreign exchange controls and property bubbles in China.

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Australia almost makes America look good. But let’s not make it look like Japan has no problems.

Household Debt: A Tale of Three Countries (Hail)

In the year 2000, Japan, the USA and Australia all had about the same ratio of household debt to GDP – in each country, this figure was about 70%. In Japan, the ratio fell gradually from 70% to the low 60%, and has remained at about 62% for a while. In the US, household debt surged as financial fragility grew, with the ratio peaking at 98% in the first quarter of 2008. Households deleveraged post GFC, and the ratio fell back to about 80%. Till way too high for another surge in private debt to be allowed to persist, but at least well below its level at the peak of the bubble. What about Australia? Like Japan and the US, our household debt to GDP stood at about 70% at the millennium – well above the levels of previous years. It then grew and grew, mainly due to increasing mortgage debt, standing at 108% in mid-2008.

Well above the level in the US when the crash happened there. As we know, Australia missed the worst of the GFC, and propped up its housing market, and household debt just kept growing. By the end of last year it was above 123%, placing Australia very near the top of the global league table. Bound to lead to a crash? Many would say so – Steve Keen and Philip Soos amongst them, and who am I to disagree? Unwise? On that we should all agree. And done at the urging of successive governments which have failed to run appropriate fiscal policies; with the approval, for most of this period, of the RBA; and with the acquiescence of what until quite recently was a very relaxed APRA. Who has the debt problem? Not Japan. Since around 2013, The Bank of Japan began buying up government debt, to become a monopoly supplier of bank reserves, denominated in Yen.

In September 2016 it took the decision to buy unlimited amounts of Japanese government bonds at a fixed-yield, meaning it could control yields across bond maturities from a two-to-40-year output and sets them at whatever level they choose. It also implemented $80 trillion worth of quantitative and qualitative easing while introducing a negative interest rate of minus 0.1% to current accounts held by financial institutions at the bank, driving the bond yield rate down. Bond market dealers queued up to get their hands on as much Japanese government debt as they could, with the promise it would mature within 40 years. To quote Economist Bill Mitchell: “The bond markets do not have the power to set yields unless the government allows them that flexibility. The government rules, not the markets.” Moreover, Japan’s government doesn’t need to issue debt in primary markets in order to spend. Because monetary sovereign government debt is not the problem. Household debt is the problem.

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“..any contact between Russians and Americans is ipso facto nefarious vectors into the very beating heart of the “Resistance” itself..”

Boomerangski (Jim Kunstler)

[..] this blog might be described as anti-Trump, too, in the sense that I did not vote for him and regularly inveigh against his antics as President — but neither is Clusterfuck Nation a friend of the Hillary-haunted Dem-Prog “Resistance,” in case there’s any confusion about where we stand. If anything, we oppose the entirety of the current political regime in our nation’s capital, the matrix of rackets that is driving the aforementioned Limousine-of-State off the cliff of economic collapse. Just sayin’. “Resistance” law professors, such as Lawrence Tribe at Harvard, were quick to holler “treason” over Junior’s meet-up with Russian lawyer Natalia Veselnitskaya and Russian-American lobbyist Rinat Akhmetshin. Well, first of all, and not to put too fine a point on it, don’t you have to be at war with another nation to regard any kind of consort as “treason?”

Last time I checked, we were not at war with Russia — though it sure seems like persons and parties inside the Beltway would dearly like to make that happen. You can’t call it espionage either, of course, because that would purport the giving of secret information, not the receiving of political gossip. Remember, the “Resistance” is not going for impeachment, but rather Section 4 of the 25th Amendment. That legal nicety makes for a very neat-and-clean surgical removal of a whack-job president, without all the cumbrous evidentiary baggage and pain-in-ass due process required by impeachment. All it requires is a consensus among a very small number of high officials, who then send a note to the leaders in both houses of congress stating that said whack-job president is a menace to the polity — and out he goes, snippety-snip like a colorectal polyp, into the hazardous waste bag of history.

And you’re left with a nice clean asshole, namely Vice President Mike Pence. Insofar as Pence appears to be a kind of booby-prize for the “Resistance,” that fateful reach for the 25th Amendment hasn’t happened quite yet. It is hoped, I’m sure, that the incessant piling on of new allegations about “collusion” with the Russians will get the 25thers over the finish line and into the longed-for end zone dance. More interestingly, though, the meme that has led people to believe that any contact between Russians and Americans is ipso facto nefarious vectors into the very beating heart of the “Resistance” itself: the Clintons.

How come the Clintons have not been asked to explain why — as reported on The Hill blog — Bill Clinton was paid half a million dollars to give speech in Russia (surely he offered them something of value in exchange, pending the sure thing Hillary inaugural), or what about the $2.35 million “contribution” that the Clinton Foundation received after Secretary of State Hillary allowed the Russians to buy a controlling stake in the Uranium One company, which owns 20% of US uranium supplies, with mines and refineries in Wyoming, Utah, and other states, as well as assets in Kazakhstan, the world’s largest uranium producer? Incidentally, the Clinton Foundation did not “shut down,” as erroneously reported early this year. It was only its Global Initiative program that got shuttered. The $2.35 million is probably still rattling around in the Clinton Foundation’s bank account. Don’t you kind of wonder what they did with it? I hope Special Prosecutor Robert Mueller wants to know.

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“..techno-industrial society consumed more energy and resources during the most recent doubling (the past 35 years or so) than in all previous history..”

Staving Off the Coming Global Overshoot Collapse (Rees)

Humans have a virtually unlimited capacity for self-delusion, even when self-preservation is at stake. The scariest example is the simplistic, growth-oriented, market-based economic thinking that is all but running the world today. Prevailing neoliberal economic models make no useful reference to the dynamics of the ecosystems or social systems with which the economy interacts in the real world. What truly intelligent species would attempt to fly spaceship Earth, with all its mind-boggling complexity, using the conceptual equivalent of a 1955 Volkswagen Beetle driver’s manual? Consider economists’ (and therefore society’s) near-universal obsession with continuous economic growth on a finite planet.

A recent ringing example is Kaushik Basu’s glowing prediction that “in 50 years, the world economy is likely (though not guaranteed) to be thriving, with global GDP growing by as much as 20% per year, and income and consumption doubling every four years or so.” Basu is the former chief economist of the World Bank, senior fellow at the Brookings Institution and professor of economics at Cornell University, so he is no flake in the economics department. But this does not prevent a display of alarming ignorance of both the power of exponential growth and the state of the ecosphere. Income and consumption doubling every four years? After just 20 years and five doublings, the economy would be larger by a factor of 32; in 50 years it will have multiplied more than 5000-fold! Basu must inhabit some infinite parallel universe.

In fairness, he does recognize that if the number of cars, airplane journeys and the like double every four years with overall consumption, “we will quickly exceed the planet’s limits.” But here’s the thing — it’s 50 years before Basu’s prediction even takes hold and we’ve already shot past several important planetary boundaries. Little wonder. Propelled by neoliberal economic thinking and fossil fuels, techno-industrial society consumed more energy and resources during the most recent doubling (the past 35 years or so) than in all previous history. Humanity is now in dangerous ecological overshoot, using even renewable and replenishable resources faster than ecosystems can regenerate and filling waste sinks beyond capacity. (Even climate change is a waste management problem — carbon dioxide is the single greatest waste by weight in all industrial economies.)

Meanwhile, wild nature is in desperate retreat. One example: from less than one% at the dawn of agriculture, humans and their domestic animals had ballooned to comprise 97% of the total weight of terrestrial mammals by the year 2000. That number is closer to 98.5% today, with wild mammals barely clinging to the margins. The “competitive displacement” of other species is an inevitable byproduct of continuous growth on a finite planet. The expansion of humans and their artefacts necessarily means the contraction of everything else. [..] Ignoring overshoot is dangerously stupid — we are financing growth, in part, by irreversibly liquidating natural resources essential to our own long-term survival.

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May 062017
 
 May 6, 2017  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


Edouard Boubat Paris 1950

 

Think Like a Surfer in the Largest Stock Market Bubble Since 1983 (Dent)
US Student, Auto Loans Hit New All Time High Of $2.6 Trillion (ZH)
China’s War on Debt: Stocks Drop, Bond Yields Shoot Up and Defaults Rise (WSJ)
This Is Not a Bill (Jim Kunstler)
Review of Steve Keen’s Can We Avoid Another Financial Crisis? (R.)
France and Greece Heavily Disadvantaged by Euro as Germany Benefits (WE)
How the Eurozone Damaged French Politics – And The Election (Nation)
Macron Team Blasts ‘Massive Hacking Attack’ (R.)
Macron Personifies The Very Europe Whose Failure Feeds Le Pen (Zizek)
The English Language Is Losing Importance In Europe – Juncker (G.)
Germany Says No Debt Relief Being Prepared For Greece (R.)
The Forgotten History of Cinco de Mayo (IC)
Rescuers Pick Up 560 Migrants Off Libyan Coast On Thursday (R.)

 

 

Disasters as opportunities.

Think Like a Surfer in the Largest Stock Market Bubble Since 1983 (Dent)

I took up surfing in my early 30s. It didn’t last long. But I learned a tremendous amount from the experience (least of which is that I suck at surfing). Well, it’s time to think like a surfer. Your sole focus is to catch the wave. The best surfers can see the waves building, just like we can in the markets, but they only care about where the biggest, best waves will crash. That’s where you get the ride. And if you catch the biggest wave in the right place, you get the ride of a lifetime. Look at this fourth and largest wave building in the stock market. It’s the wave of a lifetime for investors, and it’s rolling onto our shores right about now… Remember, all the action comes when the wave crashes, not as it’s building. As the swell grows around you, you can go with the flow and harness the energy of the wave with little effort.

That’s when you become one with the universe, sitting there on your board, surrounded by dark water, rolling up and down as the power builds beneath you. That’s why surfers get addicted. Then, at the perfect moment, all the wave’s pent up energy releases in a roaring spray of water and power. That’s where we want YOU to be when the greatest market wave of your lifetime comes crashing to shore! That’s when the greatest profits come. That’s when the greatest innovations spring up. The smartest people (I include surfers in this group) and the greatest innovators understand this. They don’t look at a good economy as the best opportunity for success. Seeds of radical innovation only grow in the most challenging conditions.

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Private debt is far more dangerous than public debt.

US Student, Auto Loans Hit New All Time High Of $2.6 Trillion (ZH)

One month after we, and every other financial media, reported that US credit card debt had risen back over $1 trillion for the first time since January 2017, the Fed demonstrated just how meaningless such reports are when in its latest consumer credit report it revised the total stock of revolving debt back under $1 trillion for the month of March, while boosting December’s amount to $1,000.1 billion, meaning that all those “$1 trillion in credit card” debt headlines were about 4 months late. Fed screwing around with the financial reporters aside, the latest monthly report showed that total consumer credit rose by $16.4 billion, more than the $14 billion expected, an increase which was offset by a downward revision to the February consumer credit number from $15.2 billion to $13.8 billion. Revolving credit accounted for $2 billion of the increase with the rest, or $14.4 billion, in the form of auto and student loans.

And speaking of student and auto loans, the Fed also released its latest quarterly estimate for the two series as of March 31, and as one would expect, the numbers rose to new all time highs, and as of the end of the first quarter, US consumers owed $1.44 trillion in student loans, an increase of $32 billion for the quarter and $80 billion for the year, as well as $1.12 trillion in auto loans, an increase of $8 billion Q/Q and $73 billion Q/Q. This means that as of March 31, Americans owed two and a half times as much on their auto and student loans, as on their credit cards, a new all time high.

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“..since these products aren’t logged as loans or other assets on their balance sheets, banks have to set aside little or nothing for potential losses associated with them..”

China’s War on Debt: Stocks Drop, Bond Yields Shoot Up and Defaults Rise (WSJ)

A wave of regulations aimed at cutting risk in China’s financial system is rippling through the country’s markets and sending banks and companies scrambling for funds. During the past month, Chinese shares have fallen nearly 5%, draining almost half a trillion dollars out of the country’s markets. Bond yields have shot up to their highest levels in two years, and bond defaults hover at record levels. The uncertainty has also weighed on metals and commodity prices, already hurt by doubts around China’s growth momentum. The price of iron ore plunged 8% on Thursday, the daily trading limit. Investors blame the volatility on a host of measures Chinese authorities have rolled out to curb runaway debt levels, from raising the cost of short-term funds to measures that are prompting banks to unwind hidden loans and securities.

A particular target is high-risk, high-yielding investment products that banks have used to boost returns, but that regulators say may conceal dangerous amounts of risky lending. Regulators are responding to prodding from Chinese President Xi Jinping, who issued a call for financial stability ahead of a major power reshuffle later this year, and just last week warned finance officials not to miss “a single risk” or “hidden danger.” The market turbulence will test Beijing’s resolve in tackling China’s snowballing debt, especially if it looks like regulators’ crackdown is jeopardizing short-term growth. If they can withstand the short-term squeeze and continue to push it through, the effort will help put China’s economy on a sounder footing longer-term. Banks—especially small and midsize lenders—sell the risky investment products to Chinese savers, then lend the funds to outside asset managers who invest them in bonds, stocks and loans.

The lenders make money from the difference between what they pay their investment clients and what they get from the outside managers. But since these products aren’t logged as loans or other assets on their balance sheets, banks have to set aside little or nothing for potential losses associated with them. That leaves banks more exposed to risk and shows their financial position as stronger than it really is. The maneuvering also encourages leveraged purchases of securities by asset managers and enables banks to continue funding troubled customers, such as property developers with excess inventory and bloated steelmakers. Such grey-area investments reached nearly 20 trillion yuan ($2.8 trillion) at the end of last year, says Fitch Ratings, or about 26% of China’s GDP in 2016, up from less than 10% three years earlier. They now represent an average of 19% of small and midsize banks’ total assets, compared with about 1% for big state banks, according to Fitch.

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America’s unsolvable problem has been solved in dozens of countries.

This Is Not a Bill (Jim Kunstler)

The way it works now, the so-called “providers” (doctors, hospitals) refuse to post the cost of any service, and then charge whatever they feel they can extract, subject to an abstruse and dishonest ceremonial “negotiation” with the insurance company. The result: hospital and insurance executives get paid multi-million dollar salaries, doctors get to drive fine German cars, and the patient gets financially ass-raped, kicked to the curb, and eventually stuffed into the bankruptcy courts. ObamaCare did nothing to fix this. It just added more victims to the rolls and upped the price of admission for a personal financial ass-raping, so that an insured individual could go to the hospital for an emergency appendectomy and end up getting dunned for thousands of dollars — or even more if one of the hosptial’s favorite cute scams is applied, such as calling in an out-of-network anesthesiologist to knock you unconscious (in which state you are unlikely to inquire whether he/she/zhe is in-network or out).

Under the current system, a hospital can bill you $5,999 to stitch up a cut finger, mitigate a bee-sting, or wind an Ace bandage around a sprained ankle, and you’re sure not to learn the cost-of-treatment until the postman drops off the incomprehensible “explanation of benefits” from the insurance company that states in bold print on top “This Is Not a Bill,” but actually is a report of your own incipient financial ass-raping. But judging from the news reports this day, none of these issues is actually on the table in the congressional debate. I don’t believe the editors of The New York Times are necessarily “in bed” with the overpaid hospital CEOs and the insurance company fraudsters. They are simply putting up a defense of their previous psychological investment in Democratic Party ideology — in the shibboleth that ObamaCare was unquestionably a great thing because it was created under the magically empowered 44th president.

I can believe that both Democratic and Republican law-makers are not only in bed with the medical fraudsters of all categories, but are performing a particularly odious form of sadomasochistic bondage-and-discipline sex in exchange for payoffs. Note, too, that none of the aforementioned major media have reported what the medical and insurance lobbyists have paid to their rent-boys and doxies in the US capitol. Wouldn’t you like to know?

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“Money is seen as a “veil” placed over the activities of the real economy, a mere contrivance to get around the inconveniences of barter.”

Review of Steve Keen’s Can We Avoid Another Financial Crisis? (R.)

The preference for high theory and abstruse mathematical modeling meant that mainstream economics had come to rest on a number of gloriously improbable assumptions. In their models, millions of households were reduced to a single “representative agent,” a God-like being, omniscient and immortal. This unreal creature inhabited a world where peace – or equilibrium – ruled. Crises were impossible in such an Eden, unless a mischievous serpent entered from abroad. But such an outcome was naturally impossible to predict. Both Romer and Keen agree that the most serious error of modern macroeconomics is that it ignores finance. Money is seen as a “veil” placed over the activities of the real economy, a mere contrivance to get around the inconveniences of barter.

Minsky, by contrast, saw capitalism as a financial system in which millions of balance sheets and cash flows were intertwined in a highly complex fashion. Money and credit are the essence of capitalism: economic transactions can only take place after financing. The trouble is that credit is inherently unstable, prone to expand excessively and to inflate asset price bubbles, which in time collapse, causing a cascade of defaults throughout the economy. In Minsky’s world, the tail of finance wags the real economy dog. Anyone who paid serious attention to credit, as Keen did prior to 2008, could hardly have failed to notice that something was amiss. After all, credit was growing very rapidly in the United States, in Australia and across much of Europe. Keen’s own contribution at the time was to point out that it wouldn’t take a collapse of credit to cause a serious economic downturn – a mere slowdown in the rate of lending would do the job.

This prediction was vindicated in 2008, when credit growth slowed sharply but remained positive, sending the U.S. economy into a tailspin. Keen is now calling for the dominant macroeconomic models to be jettisoned and replaced by ones that take account of credit. In his book, he develops a simple credit-based macro model. The economists at the Bank for International Settlements have constructed a “financial cycle” model along similar lines. In the end, the money-free macro models appear doomed. Yet progress has been painfully slow to date. As Max Planck said, science advances one funeral at a time – failing death, retirement would do the trick.

So what of the next crisis? With his eye on credit growth, Keen sees China as a terminal case. The People’s Republic has expanded credit at an annualized rate of around 25 per cent for years on end. Private-sector debt exceeds 200 per cent of GDP, making China resemble the over-indebted economies of Ireland and Spain prior to 2008, but obviously far more significant to the global economy. “This bubble has to burst,” writes Keen unequivocally.

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Untenable, but zero movement towards addressing the issue.

France and Greece Heavily Disadvantaged by Euro as Germany Benefits (WE)

It is now incontestable that Germany benefits greatly from the Euro. The weaker members of the Euro drag down the external value of the Euro compared with the US Dollar making German exports far more competitive than they would otherwise be. Despite the relative value of the Euro being lower than would be the case if the Euro was the currency of Germany alone, the Euro’s value relative to the Dollar is still significantly higher than would be the case were the Euro the currency of an independent Greece or France.

In Purchasing Power Parity (PPP) terms the Euro in Germany is some 32% undervalued compared with the Greek Euro, greatly benefiting German exporters, but imposing a burden on Greek exporters that they must find impossible to cope with. Conversely the overvaluation facing French companies is now a clear 20% compared with German companies.

 

Brazil and Argentina suffer from overvalued currencies against the US Dollar, suggesting one reason for the serious recession suffered by South America’s biggest economies over the past year. In contrast Canada, Russia, China, Mexico, Turkey and India all have currencies between 15% and 44% undervalued against the US Dollar, suggesting that at least some of Mr Trump’s rhetoric is justified. Over time these fundamental disparities have not shrunk, they have in fact widened. The charts to the upper right show the trend of German undervaluation against the French and Greek Euro’s in Purchasing power terms.

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“Although the major Western media portrays the EU authorities’ policies as the only sensible course, in economic terms, it is anything but.”

How the Eurozone Damaged French Politics – And The Election (Nation)

[..] there is a structural problem in the eurozone, and in the EU. The ECB, the European Commission, and the IMF (which is not an independent entity but generally answers to its European directors for decisions affecting Europe), are the European authorities that have increasingly constrained the economic decision-making of European governments. We can also include the eurogroup of finance ministers, which has tormented poor Greece and helped prolong that country’s interminable economic crisis. These people have shown that they are committed to creating a different kind of Europe. This can be seen in a paper trail of thousands of pages of documents, called Article IV consultations, where the IMF and EU government finance ministries hammer out their views on economic policies. These documents represent an elite consensus which can differ greatly from public opinion within the countries.

A review of 67 of these agreements for the four years 2008 through 2011, for 27 EU countries, showed a clear pattern of policy choices: cutting government spending, including on health care and pensions; increasing labor supply; reducing public sector employment; and changes in labor law that would reduce the scope of collective bargaining. This is the economic program that any politician or political party who does not want to be labeled as “anti-Europe” must adhere to, and it can be seen in the most recent (July 2016) IMF Article IV consultation for France, as well as the Stability Program that France has agreed to with the EU. These documents see France as freezing real spending, and committing to reducing its budget deficit to zero by 2021. These commitments imply that the French government can do nothing to reduce mass unemployment, which has averaged about 10% over the past year.

Although the major Western media portrays the EU authorities’ policies as the only sensible course, in economic terms, it is anything but. With France’s real borrowing costs near zero and inflation well below target, it makes sense for France to implement an economic stimulus, for example by increasing public investment. Fears of increasing the French public debt are unfounded; annual interest payments on that debt are currently at about 1.7% of GDP, a modest burden by any historical or international comparison.

[..] Since the 2008–09 world financial crisis and recession, the project of the eurozone, and to some extent of the EU, has created a destructive feedback loop that leads directly to the kind of dysfunctional politics now unfolding in France. It is one thing to give up some national sovereignty for a common project that can raise common living standards; it is quite another to surrender a country’s most important macroeconomic decision-making (monetary, exchange rate, and increasingly fiscal policy) to unaccountable authorities who have demonstrated their commitment to a regressive agenda. The Center Left’s collaboration with this program, e.g., President Hollande’s in France, has given the Far Right opportunities not seen since the 1930s.

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Good thing everybody already knows it’s Putin again. No reasoning needed.

Macron Team Blasts ‘Massive Hacking Attack’ (R.)

French presidential candidate Emmanuel Macron’s campaign team says it has been the victim of a massive and coordinated hacking operation. A large trove of emails from the campaign of French presidential candidate Emmanuel Macron was posted online late on Friday, 1-1/2 days before voters go to the polls to choose the country’s next president in a run-off against far-right rival Marine Le Pen. Some nine gigabytes of data were posted by a user called EMLEAKS to Pastebin, a document-sharing site that allows anonymous posting. It was not immediately clear who was responsible for posting the data or whether the emails were genuine. In a statement, Macron’s political movement En Marche! (Onwards!) confirmed that it had been hacked.

“The En Marche! Movement has been the victim of a massive and co-ordinated hack this evening which has given rise to the diffusion on social media of various internal information,” the statement said. An interior ministry official declined to comment, citing French rules which forbid any commentary liable to influence an election, and which took effect at midnight French time on Friday (2200 GMT). Comments about the email dump began to appear on Friday evening just hours before the official ban on campaigning began. The ban is due to stay in place until the last polling stations close on Sunday at 8 p.m. (1800 GMT).

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Perhaps the failure of the EU is not clear enough yet everywhere.

Macron Personifies The Very Europe Whose Failure Feeds Le Pen (Zizek)

The title of a comment piece which appeared in The Guardian, the UK voice of the anti-Assange-pro-Hillary liberal left, says it all: “Le Pen is a far-right Holocaust revisionist. Macron isn’t. Hard choice?” Predictably, the text proper begins with: “Is being an investment banker analogous with being a Holocaust revisionist? Is neoliberalism on a par with neofascism?” and mockingly dismisses even the conditional leftist support for the second-round Macron vote, the stance of: “I’d now vote Macron – VERY reluctantly.” This is liberal blackmail at its worst: one should support Macron unconditionally; it doesn’t matter that he is a neoliberal centrist, just that he is against Le Pen. It’s the old story of Hillary versus Trump: in the face of the fascist threat, we should all gather around her banner (and conveniently forget how her side brutally outmanoeuvred Sanders and thus contributed to losing the election).

Are we not allowed at least to raise the question: yes, Macron is pro-European – but what kind of Europe does he personify? The very Europe whose failure feeds Le Pen populism, the anonymous Europe in the service of neoliberalism. This is the crux of the affair: yes, Le Pen is a threat, but if we throw all our support behind Macron, do we not get caught into a kind of circle and fight the effect by way of supporting its cause? This brings to mind a chocolate laxative available in the US. It is publicised with the paradoxical injunction: “Do you have constipation? Eat more of this chocolate!” – in other words, eat the very thing that causes constipation in order to be cured of it. In this sense, Macron is the chocolate-laxative candidate, offering us as a cure for the very thing that caused the illness.

[..] In the hopeless situation we are in, facing a false choice, we should gather the courage and simply abstain from voting. Abstain, and begin to think. The commonplace “enough talking, let’s act” is deeply deceiving – now, we should say precisely the opposite: enough of the pressure to do something, let’s begin to talk seriously, ie, to think! And by this I mean we should also leave behind the radical leftist self-complacency of endlessly repeating how the choices we are offered in the political space are false, and how only a renewed radical left can save us – yes, in a way, but why, then, does this left not emerge? What vision has the left to offer that would be strong enough to mobilise people? We should never forget that the ultimate cause of the act that we are caught into – the vicious cycle of Le Pen and Macron – is the disappearance of the viable leftist alternative.

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Sharp thinking. Make literally everyone incapable of understanding anything that’s said.

The English Language Is Losing Importance In Europe – Juncker (G.)

The English language is losing importance in Europe, the president of the European commission has said amid simmering tensions over the Brexit negotiations. Speaking to an audience of European diplomats and experts in Florence, Jean-Claude Juncker also described the UK’s decision to leave the EU as a tragedy. “Slowly but surely English is losing importance in Europe,” Juncker said, to applause from his audience. “The French will have elections on Sunday and I would like them to understand what I am saying.” After these opening remarks in English, he switched to French for the rest of the speech. Making a stout defence of the EU, Juncker said the UK had voted to leave the project despite historic successes and a recent uptick in economic growth. “Our British friends decided to leave the EU, which is a tragedy,” he said.

[..] It is not the first time the English language has been caught in the crossfire of the Brexit negotiations. At a recent EU summit May slapped down reports that Brexit negotiations would be conducted in French, and after the June referendum EU officials made it known they planned to downgrade the use of English in the corridors of Brussels. In reality, the Brexit talks are most likely to be conducted in French and English with simultaneous interpretation. Barnier, a former French EU commissioner who clashed with the City of London, speaks English but wants the right to negotiate in his native tongue. English is also highly unlikely to disappear as a dominant language in the EU any time soon. Not only is it an official language for the Irish and Maltese governments, but many diplomats prefer to use English as a common second language rather than French.”

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2018 at the earliest. Then again, debt relief would make Greece less of a slave, so maybe much longer or not at all.

Germany Says No Debt Relief Being Prepared For Greece (R.)

No debt relief measures are being readied for Greece, Germany’s Finance Ministry said on Thursday after the Handelsblatt business daily reported measures were under consideration. The implementation of reforms that Greece agreed to in return for aid would help ensure the sustainability of the country’s debt, the ministry said in a statement e-mailed to Reuters. “No debt relief is being prepared,” it added. Regarding possible debt measures, a clear agreement was reached in a statement by the Eurogroup of eurozone finance ministers last May. “According to that, after the full implementation of the adjustment program, there will be an assessment of whether debt measures are necessary. That still applies,” it said. Earlier, Handelsblatt reported that Greece’s international lenders were preparing possible debt relief for Athens for discussion by the finance ministers.

The European Commission, the ESM eurozone rescue fund, the ECB and the IMF had prepared various debt measures in a document to be sent to the Eurogroup for further discussion, it said, citing people familiar with the document. One option was for the ESM to take over loans paid out by the IMF. The advantage would be lower interest rates charged by the ESM. Others included extending debt maturities and having the ECB and national central banks send profits made on Greek bonds to Athens through national governments, Handelsblatt reported. An EU source told Reuters the document was originally a paper by the ESM, not all four institutions, and had been modified on the way to the version Handelsblatt saw.

“It lays down several options for the restructuring of Greek debt and specifies possibilities which were given by the Eurogroup last May. One of the options still is that ESM would take debt from IMF,” the source said. “It is not clear yet if the IMF would agree on that.” Separately, German Finance Minister Wolfgang Schaeuble said in Durban, South Africa that the EU needed to “exert pressure on national governments to implement … much-needed reforms.” “Those countries which received help under European assistance programmes, and therefore had to actually implement unpleasant reforms, and those countries which have kept to the agreed rules are among the most successful countries in the EU today,” he said. “The problem is therefore not with the rules, but with the lack of implementation of them.

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Warfare, financial or otherwise.

The Forgotten History of Cinco de Mayo (IC)

Cinco de Mayo celebrates the victory of Mexican troops over the invading French army at the Battle of Puebla southeast of Mexico City on May 5, 1862. Because the Mexican soldiers were badly outnumbered and outgunned, the unexpected triumph was a watershed in forging the country’s national identity. (Militarily it wasn’t that significant — the next year France captured the Mexican capital and installed a member of the Austrian nobility as Maximillian I, “Emperor of Mexico.”) But here’s important part for everyone else to remember today: France was invading Mexico essentially because Mexico owed France money. Mexico had borrowed enormous amounts from Europe during the Mexican-American War from 1846-8 and in a civil war from 1858-61.

By 1862 it was impossible for the government to make timely payments on the loans without starving the country, and Mexican president Benito Juárez declared that all payments on foreign debt would be suspended for two years. Getting into unsustainable debt is not something unique to Mexico; countries have done so over and over throughout history, particularly during wars. The U.S. borrowed more than we could ever repay from France and the Netherlands during the Revolutionary War, and the U.K. borrowed far beyond its means from the U.S. during World War I. When this happens, it’s far better for both the debtors and creditors to organize some kind of default rather than forcing the debtors to pay all the money back on the original terms. The advantage for debtors is obvious.

More intelligent creditors understand it’s also good for them, because they generally don’t have a choice between getting all or just some of their money back. Instead, it’s a choice between getting some of it back or much less. To understand why, imagine loaning too much money to a software engineer. If you demand that the engineer sell all their computers to make interest payments, you’re unlikely to get much more money after that. And indeed both the U.S. and U.K. defaulted to varying degrees after their wars. Likewise, in 1862 the U.K. and Spain agreed to accept less than they were formally owed by Mexico. France, however, invaded Mexico in an attempt to get all its money back, which is why French troops were there for the Battle of Puebla on May 5.

In a sense, the invasion was admirably honest. International relations are often like organized crime on a gigantic scale, but people pretend otherwise. Here there was no pretense: The loanshark’s enforcers beat the crap out of an entire country. By contrast, creditors today have institutions like the IMF, which has often functioned as a creditors’ cartel — squeezing countries until they pay back their debts. This often involves lots of people dying … but in quiet ways, without armies involved.

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The EU isn’t only giving us Le Pen, it’s presenting us with this too.

Rescuers Pick Up 560 Migrants Off Libyan Coast On Thursday (R.)

Rescuers picked up 560 migrants from unsafe boats off the coast of Libya on Thursday, Italy’s Coast Guard said, including the body of a young man who the migrants said had been shot by smugglers on the beach for his baseball cap. Italian Navy and Coast Guard boats participated in the rescues together with two humanitarian vessels, a spokesman said. The migrants were traveling on board two large rubber boats and five small wooden ones, he added. The Phoenix, a rescue ship operated by the Migrant Offshore Aid Station (MOAS), took 422 on board, plus the body of the allegedly murdered young Gambian. “According to eyewitnesses, the deceased teenager was killed by human traffickers because they wanted his baseball hat. What cruelty,” MOAS co-founder Chris Catrambone said.

“The medical team onboard the Phoenix have confirmed that the deceased teenager died from gunshot wound,” he added. MOAS doctors are also caring for another teenage boy who has a gunshot wound to the stomach, but is stable. German NGO Jugend Rettet also helped with the rescues. Separately, Doctors Without Borders said its rescue ship Prudence would arrive in the Sicilian port of Catania early on Friday with the corpses of six migrants, including five women, who it had picked up in the Mediterranean in recent days. There had been a pause of boat departures from Libya, where smugglers operate with impunity, since Easter, because of bad weather and sea conditions. But boat migrant arrivals in Italy are still up 30 percent so far this year from 2016, when a record 181,000 arrived.

Humanitarian rescue ships have come in for criticism in Italy in recent months, with Catania chief prosecutor Carmelo Zuccaro opening a fact-finding investigation into possible ties between NGOs and people-smugglers. The NGOs have strongly denied the accusations, including representatives from MOAS who testified in Italy’s parliament earlier on Thursday. They say their only mission is to save lives. Zuccaro has yet to present any evidence of illicit activities and has not opened a criminal investigation.

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May 052017
 


Fred Stein Under the El New York 1949

 

Senate GOP to Snub House Obamacare Repeal Bill and Write Its Own (BBG)
Cost Of Interest On US Government Debt Tops Half A Trillion Dollars (ZH)
Oil Extends Slump Below $45 (BBG)
Emerging-Market Companies Binge On Dollar-Denominated Debt (BBG)
Chemchina Clinches Landmark $43 Billion Takeover of Syngenta (R.)
Brexit Talks Could Become ‘Impossible’: EU Council President Tusk (Ind.)
Italy’s Bankrupt National Airline Is Being Put Up For Sale (Ind.)
Italy’s Rescue Of Its Airline Comes At Great Cost To The Economy (BBG)
Baumol’s Cost Disease Explains A Lot About Our Economies (Vox)
Russia Set to Police Syria Safe Zones Backed by Iran, Turkey (BBG)
Syria Safe Zones To Be Shut For US, Coalition Planes (R.)
EU Wants China’s Help To Stop Boats Being Used By Migrants (R.)
EU Seeks to Ward Off New Refugee Crisis (Spiegel)
Tensions Boiling Over On Greece’s Chios Amid Absence Of Migrant Facility (K.)
Greece Paying Asylum Seekers To Reject Appeals (EUO)
Greece Says Has Done Its Bit, Now Wants Debt Relief (R.)
Greek Pensioners’ Network Lists 23 Cuts Inflicted On Benefits (K.)

 

 

This could take a while. And that’s a good thing.

Senate GOP to Snub House Obamacare Repeal Bill and Write Its Own (BBG)

Several key Senate Republicans said they will set aside the narrowly passed House health-care bill and write their own version instead, a sign of how difficult it will be to deliver on seven years of promises to repeal Obamacare. Lamar Alexander of Tennessee, who chairs the Senate health committee, and Roy Blunt of Missouri, a member of GOP leadership, both described the plan, even as the House was celebrating passing its repeal after weeks of back and forth. The decision will likely delay even further the prospect of any repeal bill reaching President Donald Trump’s desk. Hospital stocks dipped on the House vote, but quickly bounced back on the news the Senate would start over with its own version, with the BI North America Hospitals Index up 0.9% at 2:39 p.m. Hospitals fear the winding-down of Obamacare’s Medicaid expansion will leave them with more customers who can’t afford to pay.

Trump celebrated the House vote with a news conference at the White House, standing alongside dozens of Republican lawmakers. “This has really brought the Republican Party together,” he said. But in the wake of the House’s razor-thin 217-213 vote, the Senate made clear it was going in a different direction. Alaska’s Lisa Murkowski, who has been very critical of the House bill, said Thursday she hopes they start with “a clean slate” in the Senate. To get some kind of bill through his chamber, Majority Leader Mitch McConnell will need to unite moderate and conservative wings of the party that want to pull the measure in entirely different directions. The GOP controls the chamber 52-48, meaning he can lose no more than two Republicans and still pass it, given the united Democratic opposition.

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At ZIRP.

Cost Of Interest On US Government Debt Tops Half A Trillion Dollars (ZH)

With debt ceilings, spending plans, and tax reforms focusing all eyes on Washington, we thought it notable that for the first time in US history, the cost of interest on US government debt has risen above half a trillion dollars… One wonders, given the grandiose spending plans, if we will ever get back below half a trillion dollars?

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We’ve been saying all along OPEC cuts were fantasy. US shale is a minor factor. Lack of demand is a major one.

Oil Extends Slump Below $45 (BBG)

Oil slid below $45 a barrel for the first time since OPEC agreed to cut output in November as U.S. shale confounds the producer group’s attempts to prop up prices. Futures have collapsed 11% this week, slumping to the lowest since Nov. 15 – two weeks before OPEC agreed to production curbs to boost prices and ease a global glut. The decline is being driven by expanding U.S. output that’s countering the group’s curbs. Energy companies in Asia slumped on Friday, after their American counterparts were hammered in the previous session. While news of OPEC’s cuts drove prices in early January to the highest since July 2015, that increase encouraged U.S. drillers to pump more.

The result has been 11 straight weeks of expansion in American production in the longest run of gains since 2012. Prices are still more than 50% below their peak in 2014, when surging shale output triggered crude’s biggest collapse in a generation and left rival producers such as Saudi Arabia scrambling to protect market share. “There’s disappointment that the production cuts we’ve seen from OPEC and others has not had any impact at this stage on global inventory levels,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market seems to be much further away from a balanced situation than some had previously forecast. There is a possibility that oil could be headed to the low $40s range from here.”

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Expecting the dollar to fall. Doesn’t look all that wise.

Emerging-Market Companies Binge On Dollar-Denominated Debt (BBG)

Emerging-market companies are showing up to the U.S. debt market at the fastest pace ever, and finding plenty of appetite for their bonds. Sales of dollar-denominated notes have climbed to about $160 billion this year, more than double offerings at this point in 2016 and the fastest annual start on record, according to data compiled by Bloomberg going back to 1999. Emerging-market assets tanked after Donald Trump’s surprise election in November, but they’ve quickly recovered, with bonds returning 4% this year and outperforming U.S. investment-grade and high-yield debt. The deluge of issuance began when companies anticipating a surge in borrowing costs amid economic stimulus from Trump rushed to sell notes before his inauguration Jan. 20.

But the expected jump never materialized, extending the window for companies like Petroleo Brasileiro SA and Petroleos Mexicanos to pursue multi-billion-dollar deals. They found plenty of demand from investors keen to buy shorter-dated debt that’s better insulated against rising U.S. interest rates. Jean-Dominique Butikofer, the head of emerging markets for fixed income at Voya Investment Management in Atlanta, said he’s seen new interest in emerging markets from investors who already own U.S. high-yield bonds or emerging market sovereign debt that’s more vulnerable to rising interest rates. “You want to be less sensitive to U.S. rates, but you still want to diversify and you still want to play the EM catch-up growth story,” said Butikofer, whose firm manages $217 billion. “You’re going to gradually add emerging-market corporates.”

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There should never be something like a pesticides and seeds group. Break them up.

Chemchina Clinches Landmark $43 Billion Takeover of Syngenta (R.)

ChemChina has won more than enough support from Syngenta shareholders to clinch its $43 billion takeover of the Swiss pesticides and seeds group, the two companies said on Friday. The deal, announced in February 2016, was prompted by China’s desire to use Syngenta’s portfolio of top-tier chemicals and patent-protected seeds to improve domestic agricultural output. It is China’s biggest foreign takeover to date. It is one of several deals that are remaking the international market for agricultural chemicals, seeds and fertilisers. The other deals in the sector are a $130 billion proposed merger of Dow Chemical and DuPont, and Bayer’s plan to merge with Monsanto. The trend toward market consolidation has triggered fears among farmers that the pipeline for new herbicides and pesticides might slow.

Regulators have required some divestments as a condition for approving the Syngenta deal. Based on preliminary numbers, around 80.7% of Syngenta shares have been tendered, above the minimum threshold of 67% support, the partners said in a joint statement. [..] The transaction is set to close on May 18 after the start of an additional acceptance period for shareholders and payment of a special 5-franc dividend to holders of Swiss-listed shares on May 16. Holders of U.S.-listed depositor receipts will get the special dividend in July. Syngenta shares will be delisted from the Swiss bourse and its depository receipts from the New York Stock Exchange. Chief Executive Erik Fyrwald played down the transition from publicly listed group to becoming part of a Chinese state enterprise, stressing that Syngenta would remain a Swiss-based global company while under Chinese ownership.

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May has nothing, election or not. “..the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

Brexit Talks Could Become ‘Impossible’: EU Council President Tusk (Ind.)

The President of the EU’s ruling Council has intervened to calm Brexit tensions 24 hours after Theresa May launched a vicious attack on “Brussels bureaucrats” on the steps of No 10. Donald Tusk warned that talks would become “impossible” if emotions got out of hand between the UK and EU and called for “mutual respect” between the negotiating parties. The call for calm comes after Theresa May accused the EU’s bureaucracy of trying to influence the result of Britian’s general election by maliciously leaking the content of discussions to the media. In an aggressive speech on Wenesday she tore into officials, warning that her government would not let “the bureaucrats of Brussels run over us”.

The European Commission this morning reacted indignantly to Ms May’s conspiracy theory, with a spokesperson telling reporters that the organisation was “rather busy” and preoccupied with more important matters than trying to fix the poll. But Mr Tusk, a Polish national who represents the EU states’ heads of government in Brussels, said on Thursday afternoon: “Brexit talks [are] difficult enough. If emotions get out of hand, they’ll become impossible. Discretion, moderation and mutual respect needed. “At stake are the daily lives and interests of millions of people on both sides of the Channel.”

The call for calm contrasts with that of a Commission spokesperson earlier today, who said: “We are not naive, we know that there is an election taking place in the United Kingdom. People get excited whenever we have elections. “This election in the United Kingdom is mainly about Brexit. But we here in Brussels, we are very busy, rather busy, with our policy work. “We have too much to do on our plate. So, in a nutshell, we are very busy. And we will not Brexitise our work. “To put it in the words of an EU diplomat, the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

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10 years too late? 20?

Italy’s Bankrupt National Airline Is Being Put Up For Sale (Ind.)

Alitalia will be put up for sale in two weeks having earlier this week fallen into administration. In a radio interview cited by the Financial Times, Carlo Calenda, the country’s economic development minister, said that the priority is for the whole company to get bought. “Within 15 days the commissioners will be open to expressions of interest,” he said. On Tuesday, Alitalia started bankruptcy proceedings for the second time in a decade after employees rejected job cuts and concessions linked to a €2bn recapitalisation plan. Shareholders voted unanimously to file for special administration. According to the Financial Times, the government of Prime Minister Paolo Gentiloni has extended a bridge loan of €600m to keep Alitalia afloat for the next six months, but has ruled out nationalisation.

This loan should give the commissioners appointed by the government time to come up with a strategy that will ensure the airline’s fleet is not grounded. Speaking to the broadcaster, Mr Calenda said the €600m loan would be the “maximum” of state aid on offer. Speaking about possible buyers, Mr Calenda said “any idea is welcome”. He stressed, however, that “Alitalia needs an alliance with a big European group”. Alitalia, whose major shareholders are Abu-Dhabi based Etihad Airways and Italian banks, has about 12,500 employees. It has been struggling ever since a previous bankruptcy in 2008.

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Somone will buy it for pennies on the buck. China?

Italy’s Rescue Of Its Airline Comes At Great Cost To The Economy (BBG)

Given its rich history, Italy is rightly attached to its relics. Unfortunately, this affection for the past does not stop at the Colosseum: It applies to failing companies too. Take Alitalia, Italy’s loss-making flag carrier, which has survived for years thanks to a string of public and private rescues. On Tuesday, the airline went into administration, prompting the government to provide a fresh loan worth €600 million ($655 million) to guarantee another six months of operation. Surely the time has come for Italy to stop losses. Unless Alitalia can find a buyer, the government should allow it to go bust. Politically, that is a tall order, of course. Politicians want to protect workers, who stand to lose their jobs if a company shuts down. But every euro used in a bailout is one that can’t be spent elsewhere; what economists call “opportunity cost.” How many more jobs could have been created had the government invested €600 million into upgrading Italy’s digital infrastructure?

Keeping Alitalia alive is also a burden on productivity, since it takes resources that might be deployed by more efficient competitors. Last year, a study for the European Commission found that the misallocation of workers and capital in Italy has steadily worsened since 1995, accounting for a large fraction of Italy’s productivity slowdown. If the government is serious about Italy returning to sustainable growth, it should stop helping losers get in the way of productive companies. There are also questions of financial stability. Between 1974 and 2014, Italian taxpayers have spent €7.4 billion propping up Alitalia, according to Mediobanca. Italy’s addiction to helping companies in trouble has contributed to its huge government debt, which now stands at nearly 133% of GDP, exposing Rome to the risk of a financial crisis.

The same problem also applies to banks. From UniCredit to Intesa Sanpaolo, many of Italy’s big lenders have granted hundreds of millions in credit lines to Alitalia, only to see their loans go up in smoke. The list also includes Monte Dei Paschi di Siena, the troubled bank which in December had to apply for a multi-billion euro government bailout. The reason? It was struggling under the weight of non-performing loans, like those it provided to Alitalia. While European rules on state aid will make it difficult for Rome to help Alitalia beyond the initial six months, one should never underestimate the ability of the Italian government to find a way to stitch together another flawed rescue. But if Italy is to finally start focusing on future growth, it will have to stop dwelling on the ruins of the past.

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A great economist died.

Baumol’s Cost Disease Explains A Lot About Our Economies (Vox)

William Baumol — an economist who just died at the age of 95 — had a famous idea, commonly known as Baumol’s cost disease, that explains a lot about our modern world. It explains why barbers make more in San Francisco than in Cleveland and why services such as health care and education keep getting more expensive. And it provides a possible explanation for why rich countries like America are devoting more and more of their workforces to low-productivity services, dragging down the economy-wide rate of productivity growth. In the 1960s, Baumol was trying to understand the economics of the arts, and he noticed something surprising: Musicians weren’t getting any more productive — playing a piece written for a string quartet took four musicians the same amount of time in 1965 as it did in 1865 — yet musicians in 1965 made a lot more money than musicians in 1865.

The explanation wasn’t too hard to figure out. Rising worker productivity in other sectors of the economy, like manufacturing, was pushing up wages. An arts institution that insisted on paying musicians 1860s wages in a 1960s economy would find their musicians were constantly quitting to take other jobs. So arts institutions — at least those that could afford it — had to raise their wages in order to attract and retain the best musicians. The consequence is that rising productivity in the manufacturing sector of the economy inevitably pushes up the cost of labor-intensive services like live musical performances. Rising productivity allows factories to cut prices and raise wages at the same time. But when wages rise, music venues have no alternative but to raise ticket prices to cover the higher costs.

This became known as Baumol’s cost disease, and Baumol realized that it had implications far beyond the arts. It implies that in a world of rapid technological progress, we should expect the cost of manufactured goods — cars, smartphones, T-shirts, bananas, and so forth — to fall, while the cost of labor-intensive services — schooling, health care, child care, haircuts, fitness coaching, legal services, and so forth — to rise. And this is exactly what the data shows. Decade after decade, health care and education have gotten more expensive while the price of clothing, cars, furniture, toys, and other manufactured goods has gone down relative to the overall inflation rate — exactly the pattern Baumol predicted a half-century ago.

Baumol’s cost disease is a powerful tool for understanding the modern economic world. It suggests, for example, that the continually rising costs of education and health care isn’t necessarily a sign that anything has gone wrong with those sectors of the economy. At least until we invent robotic professors, teachers, doctors, and nurses, we should expect these low-productivity sectors of the economy to get more expensive. While some argue that prices keep rising because the government subsidizes health care through programs like Medicare and college educations through student loans and grants, you see the same basic pattern with services like summer camps, veterinary services, and Broadway shows that aren’t hamstrung by government regulations and subsidies.

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Putin keeps his enemies close.

Russia Set to Police Syria Safe Zones Backed by Iran, Turkey (BBG)

Russia said it’s ready to send peacekeepers to Syria as it won backing from Turkey and Iran for a plan to establish safe zones inside the war-torn country in an effort to shore up a shaky cease-fire brokered by the three powers. The three countries signed a memorandum on the creation of so-called de-escalation areas on Thursday after two days of talks in Kazakhstan that also included representatives of the Syrian government and rebel groups. Opposition leaders distanced themselves from the plan, saying they can’t accept Iran as a guarantor of the truce and that they want “clear and tangible” guarantees the deal will be enforced. The U.S. also expressed doubts. “Russia is ready to send its observers” to help enforce the safe zones, President Vladimir Putin’s envoy to Syria, Alexander Lavrentiev, told reporters in the Kazakh capital, Astana. “We believe the Syrian crisis can only be resolved through political methods.”

Putin said on Wednesday that he’d secured the backing of U.S. President Donald Trump for the proposal, which could include a ban on bombing raids. But State Department spokeswoman Heather Nauert said Thursday that the U.S. has “concerns” about the accord, “including the involvement of Iran as a so-called “guarantor,”’ and said Russia should do more to stop violence. [..] The latest initiative would establish four zones patrolled by foreign forces – possibly including Russian ones – in the northwestern Idlib province, Homs province in the west, the East Ghouta suburb of the capital Damascus and southern Syria. It will take a month to finalize the maps of the proposed safe zones, Iranian Deputy Foreign Minister Hossein Jaberi Ansari said. The United Nations’ Special Envoy for Syria, Staffan de Mistura, who also attended the Astana talks, described the agreement as a “step in the right direction.”

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That’ll go down well with Wolfowitz et al.

Syria Safe Zones To Be Shut For US, Coalition Planes (R.)

The safe zones which are being created in Syria will be closed for warplanes of the United States and those of the U.S.-led coalition, Russian news agencies quoted Russian envoy at Syria peace talks Alexander Lavrentyev as saying on Friday. Turkey and Iran agreed on Thursday to Russia’s proposal for “de-escalation zones” in Syria, a move welcomed by the United Nations but met with scepticism from the United States.

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Stop selling rubber boats, problem solved!

EU Wants China’s Help To Stop Boats Being Used By Migrants (R.)

The European Union wants China to help prevent migrants and refugees using Chinese-made inflatable boats to get into the bloc by stopping the boats reaching them, the European Commissioner for Migration said on Thursday. Dimitris Avramopoulos, speaking to reporters in Beijing after meeting Chinese Minister for Public Security Guo Shengkun, said the rubber boats used by people smugglers were made in China. “The rubber boats used by the smuggler networks in the Mediterranean are fabricated somewhere in China, they are exported to the countries in Asia and they are used by them,” Avramopoulos said.

“So I requested the support and cooperation from the Chinese authorities in order to track down this business and dismantle it, because what they produce is not serving the common good of the country. It is a very dangerous tool in the hands of ruthless smugglers.” He gave no further details, but said he and Guo had not discussed the possibility of China taking any of the refugees or migrants. More than a million people sought asylum in Europe’s rich north in 2015, mostly in Germany but also in large numbers in Sweden, straining the capacity of countries to cope. A contentious deal with Turkey to stop Syrian refugees from reaching Greece and the overland route to Germany, in return for EU funds, has reduced flows to a trickle, though thousands of migrants still try to reach Europe from Libya via sea routes.

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Who cares about the law? “..a more restrictive interpretation of asylum rights..”

EU Seeks to Ward Off New Refugee Crisis (Spiegel)

Merkel has promised that the refugee crisis seen two years ago will not be repeated: Never again will Europe see an uncontrolled inflow of millions of people. The refugee deal with Turkey is working, we are repeatedly told, and the crisis is over. That, though, could turn out to be wrong. With German voters set to go to the polls on Sept. 24, Merkel’s re-election campaign hinges on there not being a repeat of the refugee crisis, even if it’s not as substantial as the 2015 influx. But west of the closed Balkan route, a new migrant stream has been growing since the beginning of the year. From Jan. 1 to April 23, 36,851 migrants have followed the central Mediterranean route from North Africa to Italy. That represents a 45% increase over the same period last year, when a record 181,000 people crossed the Mediterranean on the route.

Even more concerning is the fact that summer hasn’t even begun. Experience has shown that most migrants only climb into the boats once the Mediterranean grows calmer. Italian authorities estimate that a quarter million people will arrive on its shores this year. “There are challenges ahead,” says a senior German security official. Berlin is particularly concerned because it’s not just Africans who are taking the Mediterranean route to Italy. An increasing number of South Asians are as well, which could mean that the route across the sea to Italy is now seen as a viable alternative to the defunct Balkan route. People from Bangladesh now represent the second largest group of migrants that have crossed over from Libya this year. From January to March 2016, by contrast, exactly one Bangladeshi was picked up on the route. Pakistanis have also chosen the Mediterranean route more often in recent months.

[..] The EU is currently working on an emergency plan in case a “serious crisis situation” develops. The discussions are focusing on a scenario under which more than 200,000 refugees would have to be redistributed each year. An unpublished report by Malta, which currently holds the rotating European Council presidency, calls for a more restrictive interpretation of asylum rights in such a case. In other words, should too many migrants begin arriving, the EU will increase efforts at deterrence. Controversial proposals for reception camps to be established in North Africa also remain under discussion. Most of those currently fleeing from countries like Nigeria, Guinea and the Ivory Coast are doing so to escape grinding poverty and in the hopes of finding better opportunities in Europe. Very few of them have much chance of being granted asylum. That reality has made redistribution within the EU even more difficult. According to current law, those with no chance at asylum are supposed to be sent back home as quickly as possible and not sent to other European countries.

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Now add a huge rise in arrival numbers.

Tensions Boiling Over On Greece’s Chios Amid Absence Of Migrant Facility (K.)

Tensions are rising on the eastern Aegean island of Chios, which is currently favored by human smugglers ferrying migrants over from neighboring Turkey, with an increasing number of brawls at overcrowded state reception centers and local residents’ tolerance wearing thin. Clashes between migrants of different ethnicities are an almost daily occurrence, residents said following a violent confrontation on Tuesday night between Afghan and Algerian nationals at the Vial reception facility. That incident started as a fight between two small groups throwing stones at each other and escalated into a full-blown brawl involving around 60 people. Riot police stationed nearby were eventually obliged to enter the facility and break up the fight.

According to sources at the Citizens’ Protection Ministry, migrants have been arriving in greater numbers on Chios as it still lacks a so-called pre-departure camp due to protests by local residents against the creation of new facilities on the island. As a result, migrants landing on Chios and deemed ineligible for asylum are not being deported to Turkey as foreseen in an agreement signed between Turkey and the EU in March last year. Around 200 migrants have arrived on Chios this week, according to government figures, compared to virtually none on other islands in the eastern Aegean. And, according to a top-ranking police official, the problem is unlikely to be resolved until a center is set up. “The message being sent to those deciding to make the journey is that if you get to Chios they won’t send you back,” he said.

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NGOs to be thrown off the islands this summer, Greek army and the Greek Red Cross to take over.

Greece Paying Asylum Seekers To Reject Appeals (EUO)

The Greek government is giving cash incentives for rejected asylum seekers on the islands to forgo their legal rights to appeal their cases. Some €1,000 and free plane tickets home are now part of a largely EU-financed package to send them packing as quickly as possible. “This is quite complicated and quite immoral,” a Greek lawyer working for Save the Children, an international NGO, told EUobserver on Tuesday (2 May). The move is part of a larger effort to return people to Turkey and free up administrative bottlenecks, but the plan has generated criticism from human rights defenders who say asylum seekers are being pushed into taking the money. People have five days to decide whether to take the cash, with reports emerging that even that short delay was not being respected by authorities. Previously, people were entitled to the assistance even if they appealed.

The scheme only applies to those in so-called eu hotspots on the Chios, Kos, Leros, Lesvos, and Samos islands, where arrivals are screened, given that Turkey does not accept people back from mainland Greece. Greek minister of migration Ioannis Mouzalas has said the financial bait was needed to prevent bogus claimants from abusing the asylum system. The new rules on excluding people who appeal their cases, imposed last month, also come after the European Commission pressured Athens into shortening its appeal process and removing administrative barriers to send more people home. The EU-Turkey deal last year was supposed to ensure that new asylum arrivals whose applications have been declared unfounded would be returned to the country. But only around 1,500 have been sent back since its launch, with the Greek appeals system consistently ruling in favour of initially rejected asylum seekers over broader concerns that Turkey was not safe.

[..] The whole appears to be part of bigger plan to squeeze asylum-seeker rights on the islands and get them out of Greece as fast as possible. It also comes on the heels of a new plan that aims to boot NGOs from the islands. “Many NGOs will longer be on the islands after July, it means there is going to be a lot less scrutiny and a lot less visibility on what is going on as well,” said Claire Whelan from the Norwegian Refugee Council, an independent humanitarian organisation. NGOs working in the medical field in the Vial hotspot in Chios island have already been replaced by the Greek army and the Greek Red Cross. All were informed earlier this year that DG ECHO, the EU Commission’s humanitarian branch, would no longer fund them. Instead, the money will be coming from the Commission’s interior and security department, DG Home. “One of the biggest gaps we see, that remains, is access to legal assistance and legal counseling. And I don’t know if that will be funded under DG Home and the government,” the Norwegian Refugee Council’s Whelan said.

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Europe doesn’t care what Greece wants.

Greece Says Has Done Its Bit, Now Wants Debt Relief (R.)

Prime Minister Alexis Tsipras called on Greece’s international lenders on Thursday to reach an agreement on easing its debt burden by May 22, when eurozone finance ministers meet in Brussels to discuss the country’s bailout progress. Athens and its creditors reached a long-awaited deal at staff-level this week on a series of bailout reforms Greece needs to unlock loans from its €86 billion rescue package, the country’s third since 2010. The EU and the IMF, which has yet to announce if it will participate in the bailout, have now started negotiations over Greece’s post-bailout fiscal targets, a key element for granting it further debt relief. Greece is being firm that it has done what was asked of it and now wants to see movement from the other side. “Medium-term debt relief measures must be clearly defined by the May 22 Eurogroup meeting,” Tsipras told his cabinet on Thursday.

“Greece has done its part and all parties must now fulfill their commitments.” The creditors have been not been quite as upbeat and there is no guarantee that the May 22 meeting will actually sign off on the new tranche of loans, let alone draft up debt relief. But Luxembourg Finance Minister Pierre Gramenga did cite progress when speaking to reporters on the sidelines of a conference in Luxembourg. “We’re one step closer. They [Greece] over-performed last year, they are on track this year, we have now an agreement looming that we will hopefully agree on in Eurogroup,” he said. “Those who have been pessimistic all the time have been proved wrong. I’m very pleased about that. The worst case is not always the scenario that plays out.” Greece’s economy and budget have improved markedly recently, although major problems of poverty and unemployment persist.

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Additional 18% cuts to come.

Greek Pensioners’ Network Lists 23 Cuts Inflicted On Benefits (K.)

At least 23 cuts have been inflicted on pensioners since 2010, with losses adding up to more than €50 billion. For some, their benefits have fallen by as much as 50%. The United Pensioners network has just added a 23rd cut to its list – the reduction of up to 18% of main and supplementary pensions agreed by the government this week. Network chief Nikos Hatzopoulos says the cuts have impoverished pensioners. The other 22 cuts on the list are as follows:

– In 2010, Christmas, Easter and holiday bonuses ended.

– In 2011, all pensioners under the age of 60 took a 6-10% cut.

– In the same year, pensioners were also slapped with a solidarity levy ranging from 3 to 13% for monthly pensions over €1,400. Also cuts to supplementary pensions started, from 3 to 10%.

– Main pensions to under-60s were slashed in 2011 and supplementary pensions of more than 150 euros a month fell by 15-30%.

– From January 2012, there were fresh cuts to any “high” pensions not affected until then.

– In 2012, monthly pensions over 1,000 euros were hit with a new cut.

– Summer 2014 saw a 5.2% cut to all supplementary pensions.

– In 2015, minimum pensions fell.

– In the same year, all early retirements incurred a 10% cut.

– From last May, all new pensioners were informed they would get up to 30% less.

– Some 250,000 supplementary pensions fell by up to 40%.

– The EKAS benefit to 160,000 low-income pensioners was ended.

– Civil servants’ share fund dividends were slashed 45%.

– High pensions took a retroactive cut from late 2016 to end-2018.

– Widows’ benefits fell and stricter criteria were introduced.

– The pensions of people with employment were slashed 60%.

– Early retirees took big cuts.

– Retirement lump sums shrank 15-20%.

– New disability pensions were slashed last May.

– The healthcare levy on main pensions rose.

– A similar 6% levy was imposed on supplementary pensions.

– Since January, 650,000 farmers have had to pay a 14% income levy.

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