Jan 282018
 
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Paul Cezanne Sugar Bowl, Pears and Blue Cup c.1866

 

Trump Moving On to Infrastructure Push (BBG)
Stock Market Setting Records In Levitation (Lyons)
Happy Landings (Jim Kunstler)
The Founding Fathers Worst Nightmare Come True (CH)
Illinois Ponders Pension-Fund Moonshot: a $107 Billion Bond Sale
The Dark Side of America’s Rise to Oil Superpower (BV)
Saudi Frees Billionaires Including Alwaleed as Ritz Jail Empties (BBG)
German Minister Urges Fast Passage Of EU Law On Chinese Takeovers (R.)
Spanish Court Suspends Puigdemont’s Return To Power In Catalonia (AFP)
British Lords Get Ready to Disrupt Brexit (BBG)
Corbyn Under Pressure To Change Direction On Brexit (G.)
Facebook Doesn’t Care (Atlantic)
In 2017, The Oceans Were By Far The Hottest Ever Recorded (G.)

 

 

State of the Union on Tuesday. Look for grand plans. $1.5 trillion?!

Trump Moving On to Infrastructure Push (BBG)

President Donald Trump plans to use Tuesday’s State of the Union address to build momentum for sweeping legislation on infrastructure and immigration that could buoy the White House and fellow Republicans ahead of crucial midterm elections. Emboldened by a booming economy and victory in his stare-down with Senate Democrats over government funding, Trump will make the case that the Republican tax cuts passed in December and his administration’s efforts to curb regulations are drawing investment to the U.S. and creating jobs, said a White House official who discussed the speech on condition of anonymity. There are few obvious areas for compromise, and little incentive to do so among increasingly polarized lawmakers whose chief concern remains an upcoming election season primed for a wave of votes protesting Trump.

Yet the president also aims to strike a bipartisan tone, the official said – a stark departure from his address to Congress a year ago. That speech delighted supporters, who saw his on-script performance as evidence that Trump, a mercurial political novice, could seize the power of the bully pulpit. This year, aides say, he’ll offer a future-focused vision. His agenda, the official said, includes a long-anticipated plan to rebuild and improve the nation’s infrastructure, continuing efforts to cut regulations, and an overhaul of the immigration system – campaign promises that got set aside last year as the administration focused on efforts to repeal Obamacare and pass the tax overhaul.

Read more …

Hell no, no bubble.

Stock Market Setting Records In Levitation (Lyons)

In our habitation within the investment-based social media realm, we have noticed a ongoing discussion between market observers related to the present stock rally. On the one hand, there is a loud chorus from folks (likely many of whom are frustrated non-participants in the rally) pointing out the unusual, and perhaps inorganic, nature of the incessant rally. On the other hand, you have the assured (condescending?) reminders from the other side (i.e., folks “killing it” at the moment) that an upward trajectory is the “normal” course of action for stocks, historically speaking. So which contingent is correct? They both are, to an extent. Yes, it has been far more typical for stocks to rise than fall over the past 100-plus years.

Thus, we should not be surprised by a rally, even in the face of elevated valuations, sentiment, etc. However, an unwillingness to acknowledge the noteworthy, even historic, nature of the current rally, would be an indication of either willful denial or potentially harmful ignorance. This week, we take a look at some of the ways in which our current rally is truly unique from a broad historical basis. Today, we note the torrid pace at which the stock market is racking up new 52-week highs. Specifically, the Dow Jones Industrial Average (DJIA) is in the midst of a historic run of new highs. Over the past 100 days, the index has scored no fewer than 46 new 52-week highs. That is the most new highs the DJIA has ever accumulated over a 100-day stretch.

This new record surpasses the former mark of 45 set in 1954. And looking back over the last 100-plus years, there have now been just 14 unique occasions with even 35 new highs over a 100-year span. So will the new highs continue from here – or is there nowhere to go but down at this point? Well, we’re not going to pretend that a new high is a bad thing. In fact, it’s about the most bullish thing a security or index can do – no resistance at all-time highs, you know. Furthermore, the momentum often generated by moves to new highs can be a powerful and (at least, temporarily) persisting phenomenon. That is, until the final high of the run. Obviously one high will eventually mark the top and the upward momentum will cease. Are we at that point now? Are stocks going to come crashing back to earth – or can the market continue its levitation act a little longer?

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“How long do you think the equity indexes will levitate once the bond market implodes?”

Happy Landings (Jim Kunstler)

A financial smash-up is really the only thing that will break the awful spell this country is in: the belief that everyday life can go on when nothing really adds up. It seems to me that the moment is close at hand. Treasury Secretary Mnuchin told the Davos crowd that the US has “a weak dollar” policy. Is that so? Just as his department is getting ready to borrow another $1.2 trillion to cover government operations in the year to come. I’m sure the world wants nothing more than to buy bucket-loads of sovereign bonds backed by a falling currency — at the same time that the Treasury’s partner-in-crime, the Federal Reserve, is getting ready to dump an additional $600 billion bonds on the market out of its over-stuffed balance sheet. I’d sooner try to sell snow-cones in a polar bomb-cyclone.

When folks don’t want to buy bonds, the interest rates naturally have to go higher. The problem with that is your country’s treasury has to pay the bond-holders more money, but the only thing that has allowed the Treasury to keep borrowing lo these recent decades is the long-term drop of interest rates to the near-zero range. And the Fed’s timid 25-basis-point hikes in the overnight Fed Fund rate have not moved the needle quite far enough so far. But with benchmark ten-year bond rate nosing upward like a mole under the garden toward the 3.00% mark, something is going to give.

How long do you think the equity indexes will levitate once the bond market implodes? What vaporizes with it is a lot of the collateral backing up the unprecedented margin (extra borrowed money) that this rickety tower of financial Babel is tottering on. A black hole is opening up in some sub-basement of a tower on Wall Street, and it will suck the remaining value from this asset-stripped nation into the vacuum of history like so much silage. Thus will begin the harsh era of America screwing its head back on and commencing the salvage operation. We’ll stop ricocheting from hashtag to hashtag and entertain a few coherent thoughts, such as, “…Gee, it turns out you really can’t get something for nothing….” That’s an important thought to have when you turn around and suddenly discover you’ve got nothing left.

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Founding fathers and inequality.

The Founding Fathers Worst Nightmare Come True (CH)

As the total debt grows (total debt now essentially equals GDP), the denominator is larger and the resultant debt spending must be that much larger to have the same impact. For example, to have the same impact as the ’09 debt binge, a $4+ trillion increase (annually) would be necessary to have the same impact as the $0.2 trillion spent in ’83 or the $2.1 trillion spent in ’09. However, in the next “crisis”, we should expect a $4 trillion jolt (annual) and perhaps as much as $20 trillion in the next episode of this ongoing “crisis” to achieve an ’83 or ’09 like stimuli. But this may not have nearly the impact as previous.

Typically, deficit spending and interest rate cuts have gone hand in hand but with rates having been at zero for nearly a decade before the recent, minor rise…a move to cut rates from anywhere near current levels back to zero will likely have little impact and not be capable of amplifying the deficit spending. Perhaps significantly greater debt creation will be necessary to have a like impact as that of ’83 or ’09. But, of course, the impact on the debt to GDP ratio will be an irrevocable moon shot into Japan style debt to GDP levels. Perhaps the sanity of an economy built on building new homes for a core population that is now shrinking is highly questionable (chart below)?

And to round it out, the annual growth of the 15-64yr/old US core population versus the Wilshire 5000 (representing the value of all publicly traded US stocks).

What should already be clear will be obvious for everyone…the federal “debt” being created isn’t actually “debt” at all. It is being created and spent with no intention of ever repaying it and the move back to zero % interest rates (or more likely NIRP) on that “debt” will make clear that it is simply centrally created and centrally directed monetization. And the resultant wealth is being centrally directed to a shrinking minority of asset holders at the expense of the vast majority. The founding fathers worst nightmare come true.

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Where greed meets despair.

Illinois Ponders Pension-Fund Moonshot: a $107 Billion Bond Sale

Lawmakers in Illinois are so desperate to shore up the state’s massively underfunded retirement system that they’re willing to entertain an eye-popping wager: Borrowing $107 billion and letting it ride in the financial markets. The legislature’s personnel and pensions committee plans to meet on Jan. 30 to hear more about a proposal advanced by the State Universities Annuitants Association, according to Representative Robert Martwick. The group wants Illinois to issue the bonds this year to get its retirement system nearly fully funded, assuming that the state can make more on its investments than it will pay in interest. It would be by far the biggest debt sale in the history of the municipal market, and in one fell swoop would be more than Puerto Rico amassed in the run up to its record-setting bankruptcy.

“We’re in a situation in Illinois where our pension debt is just crushing,” Martwick, a Democrat who chairs the committee, said in a telephone interview. “When you have the largest pension debt in the world, you probably ought to be thinking big.” Illinois owes $129 billion to its five retirement systems after years of failing to make adequate annual contributions. Because the state’s constitution bans any reduction in worker retirement benefits, the government’s pension costs will continue to rise as it faces pressure to pay down that debt, a squeeze that has pushed Illinois’s bond rating to the precipice of junk. Many American governments have sold bonds for their pensions, albeit on a much smaller scale. Illinois did so in 2003, when it issued a record $10 billion of them.

New Jersey also tried it, only to see its pension shortfall soar again after the state failed to make adequate payments into the system for years. Detroit’s pension-fund borrowing in 2005 and 2006 helped push it into bankruptcy. On the whole, the track record has been mixed, according to a study by the Center for Retirement Research at Boston College. Much hinges on timing the stock market: While most pension bonds have been profitable because of equity gains since the recession, those sold after the late 1990s rally or before the 2008 crash lost money, the study found. The S&P 500 Index climbed 19 percent last year and has continued to hit new highs.

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Oil is power.

The Dark Side of America’s Rise to Oil Superpower (BV)

The last time U.S. drillers pumped 10 million barrels of crude a day, Richard Nixon was in the White House. The first oil crisis hadn’t yet scared Americans into buying Toyotas, and fracking was an experimental technique a handful of engineers were trying, with meager success, to popularize. It was 1970, and oil sold for $1.80 a barrel. Almost five decades later, with oil hovering near $65 a barrel, daily U.S. crude output is about to hit the eight-digit mark again. It’s a significant milestone on the way to fulfilling a dream that a generation ago seemed far-fetched: By the end of the year, the U.S. may well be the world’s biggest oil producer. With that, America takes a big step toward energy independence. The U.S. crowing from the top of a hill long occupied by Saudi Arabia or Russia would scramble geopolitics. A new world energy order could emerge.

That shuffling will be good for America but not so much for the planet. For one, the influence of one of the most powerful forces of the past half-century, the modern petrostate, would be diminished. No longer would “America First” diplomats need to tiptoe around oil-supplying nations such as Saudi Arabia. OPEC would find it tougher to agree on production guidelines, and lower prices could result, reopening old wounds in the cartel. That would take some muscle out of Vladimir Putin’s foreign policy, while Russia’s oligarchs would find it more difficult to maintain the lifestyles to which they’ve become accustomed. President Donald Trump, sensing an opportunity, is looking past independence to what he calls energy dominance. His administration plans to open vast ocean acreage to offshore exploration and for the first time in 40 years allow drilling in the Arctic National Wildlife Refuge.

It may take years to tap, but the Alaska payoff alone is eye-popping—an estimated 11.8 billion barrels of technically recoverable crude. It sounds good, but be careful what you wish for. The last three years have been the hottest since recordkeeping began in the 19th century, and there’s little room in Trump’s plan for energy sources that treat the planet kindly. Governors of coastal states have already pointed out that an offshore spill could devastate tourism—another trillion-dollar industry—not to mention wreck fragile littoral environments. Florida has already applied for a waiver from such drilling. More supply could lower prices, in turn discouraging investments in renewables such as solar and wind. Those tend to spike when oil prices rise, so enthusiasm for nonpolluting, nonwarming energies of the future could wane. For now, though, the petroleum train is chugging. And you can thank the resilience of the U.S. shale industry for it.

Read more …

Oil is power. Twitter shares are not. They’re just money.

Saudi Frees Billionaires Including Alwaleed as Ritz Jail Empties (BBG)

Saudi Arabia freed Prince Alwaleed bin Talal and several of the kingdom’s most prominent businessmen from detention, clearing out the Ritz-Carlton hotel that served as a jail for the country’s elite during a controversial crackdown on corruption. Prince Alwaleed, the billionaire chairman of Riyadh’s Kingdom Holding Co. who owns stakes in Citigroup and Twitter, returned home on Saturday after reaching a settlement with authorities, a senior government official said on condition of anonymity. He will remain at the helm of his company, the official said, declining to provide the other terms of the deal. Waleed al-Ibrahim, head of a major media firm, and retail billionaire Fawaz Al Hokair were also freed after agreeing to deals, another government official said.

The prince’s release came just hours after Alwaleed told Reuters in an interview that he expected to go home soon and retain control of his company, calling his detention a “misunderstanding” and expressing support for the kingdom’s rulers. With the suspects’ names and evidence against them never officially announced, the detentions had raised concerns about transparency among foreign investors – vital to Crown Prince Mohammed bin Salman’s plan to diversify the economy away from oil. The departures from the hotel mark the end of the first phase of Prince Mohammed’s anti-corruption campaign, which shook the kingdom when it was launched in November. Hundreds of suspects were arrested, including some of the country’s richest men and its top economic policymaker.

Officials say the government expects to reap more than $100 billion from settlements with detainees in exchange for their freedom. Others have been transferred to prison to face trial, the Wall Street Journal reported. Also released after agreeing to settlements were Khalid al-Tuwaijri, head of the royal court under the late King Abdullah, and Prince Turki bin Nasser, who was involved in a massive arms sale that led to corruption probes in the U.K. and the U.S., one of the government officials said. Several of those released from detention earlier appear to be returning to their lives as usual. Among them is former finance minister and minister of state, Ibrahim al-Assaf, who recently led Saudi Arabia’s delegation to the World Economic Forum in Davos, Switzerland.

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While taking over and buying up southern Europe, Germans protect their own economy from the very same.

German Minister Urges Fast Passage Of EU Law On Chinese Takeovers (R.)

Germany wants to acquire the legal means to take a closer look at bids from Chinese companies to acquire German and European companies in order better to protect technologies, a German minister told newspaper Welt am Sonntag. Matthias Machnig, state secretary in Germany’s economics ministry, said it was urgent that proposed Europe-wide measures to police surging Chinese investment be adopted by the end of this year. “It is essential that we get a tougher law in the European Union this year to resist takeover fantasies or outflows of technology or know-how,” he said in an interview, excerpts of which were made available on Saturday.

The paper cited a study by the Cologne Institute for Economic Research that showed the volume of known Chinese investments in Germany had risen to €12.1 billion ($15.03 billion) in 2017 from around €11 billion the year before and just €100 million seven years ago. Concern has been growing across Europe at China’s buying spree on the continent, with investors snapping up often iconic businesses in a way many fear could threaten Europe’s position as a high-value economy. “With its innovative companies, the EU is attractive for many around the world,” Machnig said. “Takeovers are becoming more frequent, often under market-distorting conditions.”

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Rajoy lost two elections, one of which he himself called. This is very much how democracy is viewed in Europe.

Spanish Court Suspends Puigdemont’s Return To Power In Catalonia (AFP)

Spain’s constitutional court on Saturday announced it was blocking Catalonia’s ousted separatist leader Carles Puigdemont from returning to power in the region while he remains the subject of legal action. The court said in a statement that its 12 magistrates had decided unanimously “to preventively suspend the investiture of Puigdemont unless he appears in the (regional) parliament in person with prior judicial authorisation”. Puigdemont, who fled to Belgium after the Catalan parliament declared independence in October, was earlier this week chosen as candidate to lead Catalonia again, with the regional parliament set to vote on the issue in Barcelona on Tuesday . This despite the fact that he faces arrest for rebellion, sedition and misuse of public funds over his attempt to break Catalonia from Spain as soon as he returns to the country.

He has said he could be sworn in to office remotely, via videoconference from Brussels, a plan Spain’s central government opposes. The constitutional court warned all members of the Catalan parliament of “their responsibilities” and warned against disobeying the order to suspend any investiture. The magistrates said they needed six more days to consider a government bid to annul the nomination of Puigdemont as a candidate for the regional presidency. Puigdemont has said he would rather return to Spain, but without any risk of arrest. “The government must use every tool made available by the laws and the constitution to make sure that a fugitive, someone who is on the run from the law and the courts, cannot be illegitimately be sworn in,” Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said Friday after the government lodged the legal bid to keep Puigdemont from returning to power.

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It’s getting hard to predict where Brexit will be by the end of 2018. Not where it is now, that’s for sure.

British Lords Get Ready to Disrupt Brexit (BBG)

The bumpy journey toward Brexit reaches another fork in the road this week as the upper chamber of the British parliament plans to rewrite a key piece of Prime Minister Theresa May’s legislation. What happens to the European Union Withdrawal Bill in the predominantly pro-EU House of Lords could lead to a smoother divorce, a showdown with the government or even a constitutional crisis. It makes planned changes by the peers more than just a perfunctory stage in the sometimes complex democratic machinery of Westminster. The law aims to replicate thousands of existing EU regulations so there’s no legal black hole on the day Britain’s membership ceases, currently set for March 29 next year. That process could go awry if the lords halt or, more likely, demand changes that might include delaying the exit date or increasing the chance of second public vote on the issue.

“Drama is not a word usually associated with the House of Lords,” said Tom Strathclyde, a Conservative peer who used to guide legislation through the upper house. “On this occasion, there really could be high drama.” Already the passage of the law has been far from smooth as opponents of May’s vision for Brexit – taking Britain out of the EU single market and customs union – try to tear it up. She suffered a serious defeat in the House of Commons last month at the hands of mutineers from her own Conservative party who are opposed to Brexit in its current form. She slapped down Chancellor of the Exchequer Philip Hammond last week after he said Brexit would only herald modest changes to Britain’s relationship with the EU. Now more rebels are set to vent their frustration in the Lords.

The role of the unelected lords is supposed to be to revise rather than block legislation that the elected members of parliament have passed. In the case of Brexit, a majority of lawmakers in the House of Commons also opposed it, although most cite the need to uphold the result of the referendum in 2016 that kicked off the whole Brexit process dominating U.K. politics. The key Commons amendment last month was that parliament will now get a final vote on the Brexit deal after an agreement with the EU on the cost of the divorce and future trading relationship. The lords can start proposing more changes on Jan. 31. A list of them will be published two days later and the government will decide how to proceed. “There is a large majority of people in the Lords who feel that Brexit is a national disaster, and we will be trying to mobilize that majority as we go through,” said Dick Newby, who leads the Liberal Democrat peers.

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But Corbyn was never a fan of the EU.

Corbyn Under Pressure To Change Direction On Brexit (G.)

Jeremy Corbyn has called key members of his shadow cabinet to an “away day” to re-examine the party’s policy and strategy on Brexit amid growing frustration in Labour ranks that it is failing to exploit mounting Tory turmoil over Europe. Party sources confirmed to the Observer that the meeting, scheduled for early February, would look at adapting and developing Labour’s approach during “phase two” of the Brexit process. The gathering – which will be seen as a response to unrest and the threat of rebellions by dozens of Labour MPs – will be held at a location “away from Westminster”, and will involve senior shadow cabinet members in policy areas most affected by the UK’s departure from the EU.

The news suggests Labour may soon announce a major shift in policy that would see it back permanent membership of some form of customs union with the EU after Brexit – opening a potentially decisive dividing line with Theresa’s May’s increasingly fractured government. A senior figure aware of the meeting said: “There are several among those who will attend who want the party to move on the single market and customs union. But Jeremy is a lifelong eurosceptic and there is still opposition to doing so. “The greatest pressure for change is from those who insist we must back permanent membership of a customs union with the EU after Brexit, not just a fudge position of backing it during a transition and leaving open what happens after, which we have at present.”

Those who have been asked to attend are understood to include members of the shadow cabinet Brexit subcommittee. They include the shadow chancellor John McDonnell, shadow Brexit secretary Keir Starmer, the shadow home secretary Emily Thornberry, and shadow home secretary Diane Abbott. Shadow ministers responsible for Northern Ireland, Scotland and Wales will also attend. With Theresa May’s government increasingly split over Brexit, and the EU withdrawal bill heading into the House of Lords on Tuesday, where it is expected to be savaged by pro-Remain peers of all parties as well as crossbenchers, a growing number of Labour MPs and peers are pressing the leadership to open up clearer dividing lines with the Tories.

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“People say they’re interested in a broad range of news from different political preferences, but Facebook knows they really want angry, outraged articles that confirm political prejudices.”

Facebook Doesn’t Care (Atlantic)

Facebook’s crushing blow to independent media arrived last fall in Slovakia, Cambodia, Guatemala, and three other nations. The social giant removed stories by these publishers from users’ news feeds, hiding them in a new, hard-to-find stream. These independent publishers reported that they lost as much as 80% of their audience during this experiment. Facebook doesn’t care. At least, it usually seems that way. Despite angry pushback in the six countries affected by Facebook’s algorithmic tinkering, the company is now going ahead with similar changes to its news feed globally. These changes will likely de-prioritize stories from professional publishers, and instead favor dispatches published by a user’s friends and family. Many American news organizations will see the sharp traffic declines their brethren in other nations experienced last year—unless they pay Facebook to include their stories in readers’ feeds.

At the heart of this change is Facebook’s attempt to be seen not as a news publisher, but as a neutral platform for interactions between friends. Facing sharp criticism for its role in spreading misinformation, and possibly in tipping elections in the United States and in the United Kingdom, Facebook is anxious to limit its exposure by limiting its role. It has long been this way. This rebalancing means different things for the company’s many stakeholders—for publishers, it means they’re almost certainly going to be punished for their reliance on a platform that’s never been a wholly reliable partner. Facebook didn’t talk to publishers in Slovakia because publishers are less important than other stakeholders in this next incarnation of Facebook. But more broadly, Facebook doesn’t talk to you because Facebook already knows what you want.

Facebook collects information on a person’s every interaction with the site—and many other actions online—so Facebook knows a great deal about what we pay attention to. People say they’re interested in a broad range of news from different political preferences, but Facebook knows they really want angry, outraged articles that confirm political prejudices. Publishers in Slovakia and in the United States may warn of damage to democracy if Facebook readers receive less news, but Facebook knows people will be perfectly happy—perfectly engaged—with more posts from friends and families instead. For Facebook, our revealed preferences—discovered by analyzing our behavior—speak volumes. The words we say, on the other hand, are often best ignored.

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Lots of Joules.

In 2017, The Oceans Were By Far The Hottest Ever Recorded (G.)

Among scientists who work on climate change, perhaps the most anticipated information each year is how much the Earth has warmed. That information can only come from the oceans, because almost all heat is stored there. If you want to understand global warming, you need to first understand ocean warming. This isn’t to say other measurements are not also important. For instance, measurements of the air temperature just above the Earth are really important. We live in this air; it affects us directly. A great commentary on 2017 air temperatures is provided by my colleague Dana Nuccitelli. Another measurement that is important is sea level rise; so too is ocean acidification. We could go on and on identifying the markers of climate change.

But in terms of understanding how fast the Earth is warming, the key is the oceans. This important ocean information was just released today by a world-class team of researchers from China. The researchers (Lijing Cheng and Jiang Zhu) found that the upper 2000 meters (more than 6000 feet) of ocean waters were far warmer in 2017 than the previous hottest year. We measure heat energy in Joules. It turns out that 2017 was a record-breaking year, 151×1022 Joules hotter than any other year. For comparison, the annual electrical generation in China is 600 times smaller than the heat increase in the ocean. The authors provide a long history of ocean heat, going back to the late 1950s.

By then there were enough ocean temperature sensors to get an accurate assessment of the oceans’ warmth. Their results are shown in the figure below. This graph shows ocean heat as an “anomaly,” which means a change from their baseline of 1981–2010. Columns in blue are cooler than the 1981-2010 period, while columns in red are warmer than that period. The best way to interpret this graph is to notice the steady rise in ocean heat over this long time period.

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Dec 052017
 
 December 5, 2017  Posted by at 10:01 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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The Kennedies

 

China’s Property Binge Fuels Mortgage Fraud Frenzy (R.)
This Time IS Different, It Just Ends The Same (Roberts)
What Sowed The Seeds Of The Bitcoin Mania? (TM)
Bitcoin Is A ‘Dangerous Speculative Bubble’ – Stephen Roach (CNBC)
The Two-Tiered European Community (Bilbo)
This Could Mean The End Of May – And The Beginning Of Corbyn (Ind.)
Theresa May Humiliated As DUP Scuppers Border Deal (Ind.)
Confused May In Alignment Only With Herself Over Irish Issue (G.)
White House Weighing Plans For Private Spies To Counter “Deep State” (IC)
Apple Agrees To Pay Over $15 Billion To Ireland In Back Taxes (ArsT)
China, the Digital Giant (PS)
Pilots Across Germany Are Blocking The Deportation Of Asylum Seekers (IBT)
Push To Move Refugees From Greek Islands To Mainland (K.)
The World’s Oceans Are Under The Greatest Threat In History – Attenborough (G.)

 

 

It’s all fraud, and none of it is persecuted: “When everyone is doing it, you can’t put everyone in jail..”

“Operating out of small, cramped offices, often in residential blocks, loan agents “re-package” – or falsify documents for mortgage applications. “Around 60% of property buyers in Shanghai are involved in some kind of re-packaging..”

China’s Property Binge Fuels Mortgage Fraud Frenzy (R.)

[..] across China, unqualified borrowers use fake documents to secure mortgages, while loans deceptively obtained for other purposes are funnelled into property. These frauds are often committed with the consent and encouragement of other parties to the transactions, including lending brokers, property agents, valuation companies and the banks themselves. And these alleged crimes are rarely punished. Hu Weigang, a senior partner at Guangdong Shen Dadi Law Firm, would like to see the law enforced on the mainland as it is in Hong Kong, where creating a bogus document can lead to jail. But, he acknowledges, the scale of this cheating makes it virtually impossible. “When everyone is doing it, you can’t put everyone in jail,” says Hu, who specializes in real estate litigation.

While property prices in China continue to rise, mortgage fraud remains largely a hidden danger, much as subprime loans in the United States remained mostly out of sight ahead of the 2008 global financial crisis. The fear is that in a property correction, fraudulent mortgages would unravel, accelerating a collapse of housing prices in the world’s second biggest economy. This, in turn, would imperil China’s debt-laden financial system. The danger from gravity-defying home prices is clear to the ruling Communist Party. In his marathon speech at the 19th Party Congress in October, Chinese President Xi Jinping warned about the overheated property market. “Houses are built to be lived in, not for speculation,” he said. Top bank officials are also worried. Xu Zhong, head of the research bureau at the central bank, the People’s Bank of China, sees pitfalls ahead.

“We must be very aware that rapidly rising housing prices could not only hamper our economic development, but could easily result in systemic risks and negatively impact the macroeconomy..” The motive for widespread mortgage fraud is simple: fear of missing out. Millions of homeowners are enjoying the sensation of ever-expanding wealth. The average value of residential housing in China more than tripled between 2000 and 2015 as a huge property market emerged from the early decades of economic reforms. So far, China’s new home-owning class has yet to experience a sustained downturn in housing values. Official data showed prices grew 12.4% in 2016, the fastest rate since 2011. A report tracking home price trends by the Chinese Academy of Social Sciences, a state think tank, showed prices in 33 major cities soared 42% in 2016. Private estimates and anecdotal evidence suggest prices in most big Chinese cities actually doubled or tripled since late 2015.

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Look at them bubbles…

This Time IS Different, It Just Ends The Same (Roberts)

“Market bubbles have NOTHING to do with valuations or fundamentals.” [..] Stock market bubbles are driven by speculation, greed, and emotional biases – therefore valuations and fundamentals are simply a reflection of those emotions. In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.

The pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market which can create a feedback loop between the markets and fundamentals. This pattern of bubbles can be clearly seen at every bull market peak in history. The chart below utilizes Dr. Robert Shiller’s stock market data going back to 1900 on an inflation-adjusted basis with an overlay of the asymmetrical bubble shape.

There is currently a strong belief that the financial markets are not in a bubble. The arguments supporting those beliefs are all based on comparisons to past market bubbles. The inherent problem with much of the mainstream analysis is that it assumes everything remains status quo. However, the question becomes what can go wrong for the market? In a word, “much.” Economic growth remains very elusive, corporate profits appear to have peaked, and there is an overwhelming complacency with regards to risk. Those ingredients combined with an extraction of liquidity by the Federal Reserve leaves the markets more vulnerable to an exogenous event than currently believed.

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I can hear the protests from here…

What Sowed The Seeds Of The Bitcoin Mania? (TM)

2017 was an unusual year where financial conditions actually eased despite the Federal Reserve raising rates. The financial tightness in 2015 and 2016 was catalyzed by weakness in the energy market. With the help of central banks, as we have previously stated, the economy narrowly avoided a recession. It’s still remarkable to see how much financial conditions have eased since. According to the Taylor Rule, financial conditions are the easiest since 1970. The Chicago Fed’s net financial conditions index has financial conditions the easiest since 1993.


Chicago Fed- Financial Conditions Index

This explains why GDP growth was above 3% in Q2 and Q3 2017 for the first time since 2004-2005. It also explains why stock volatility has been very low; the S&P 500 has been up for 13 straight months which is the longest streak since at least 1928 (the index was created in 1923). With low interest rates and easy financial conditions, it’s not surprising that we’ve seen intense speculation in bitcoin. The cryptocurrency space has had other years with great performance, but the break out in 2017 is partially a result of the easy monetary environment. As you can see, the financial conditions in the 1990s and in the past year have both been very loose. The economic expansions were both elongated which further increases speculation as traders forget what a recession is. The chart below compares bitcoin’s rally since 2016 with other bubbles.

As you can see, Qualcomm’s performance in the 1990s is like bitcoin’s rally. This is a great analogy because Qualcomm saw its stock collapse in the dot com bust, but it has had a viable business model recently, making the Snapdragon chips in smartphones. The tech bubble was based on optimism which ended up being realized with the expansion of the mobile internet. However, the tech bubble witnessed exaggerated valuations, much like cryptocurrencies are experiencing today. Most of the blockchain startups today will fail like Pets.com did in the 1990s. However, blockchain technology in the future will likely become as synonymous with daily life as the internet is today.

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And more protests. Lots of older economists speak out against bitcoin.

Bitcoin Is A ‘Dangerous Speculative Bubble’ – Stephen Roach (CNBC)

With the price of bitcoin moving toward $12,000, a top economist on Tuesday sent a stark warning to investors: The cryptocurrency is in a “dangerous speculative bubble.” “This is a toxic concept for investors,” said Stephen Roach, Yale University senior fellow and the former Asia chairman and chief economist at investment bank Morgan Stanley. Roach, described by Yale as one of Wall Street’s most influential economists, spent the bulk of his 30-year career at Morgan Stanley heading up a highly regarded team of economists around the world. He had a critical take on the explosion of buying the world’s most popular cryptocurrency. “This is a dangerous speculative bubble by any shadow or stretch of the imagination,” he told CNBC’s “The Rundown.” “I’ve never seen a chart of a security where the price really has a vertical pattern to it. And bitcoin is the most vertical of any pattern I’ve ever seen in my career,” he added.

Bitcoin has surged more than 1,000% this year, accelerated by rising interest from retail and institutional investors who view the digital currency as a possible future means of exchange and store of value. Major exchanges like the CME and CBOE have also legitimized the currency’s investment credentials by saying they plan to introduce futures contracts to their respective exchanges, likely further supporting the price. Roach suggested that exchange legitimization makes bitcoin “somewhat dangerous” for investors, given what he described as a “lack of intrinsic underlying economic value to the concept.” Many investors admit to not understanding the technicalities of the instrument or the blockchain technology that underpins its existence, hoping instead to profit on the expectation that bitcoin as an investment will simply continue to rise. “Like all bubbles, they burst,” Roach said. “They go down, and the one who’s made the last investment gets hurt the most, there’s no question about it.”

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But the Troika demands 3.5% surpluses! “My estimate is that Greece should be running deficits close to 8 to 10% of GDP to move the economy in the right direction.”

The Two-Tiered European Community (Bilbo)

This is the final part of my four-part discussion of a so-called progressive proposal advanced by German academic Fritz Sharpf to reform the Eurozone into two tiers: a ‘Northern’ hard currency tier and a ‘Southern’ non-euro tier with the latter nations tying their currencies to the euro. We have seen that rather than providing a framework for convergence between the current Eurozone Member States, Sharpfs’ proposal would not liberate the weaker nations from the yoke of the euro, In fact, the proposal would just tie the exiting nations to the euro in a slightly different way – one that will not provide sufficient flexibility to make much difference.

In questioning the current orthodoxy, Sharpf also notes that if the ECB strictly behaved within the Maastricht rules then the need for even more aggressive internal devaluation would be required as the “sanctions would be inflicted by anonymous market forces”. That is, the Member States currently in trouble would soon go broke as they would have trouble raising funds from the bond markets at acceptable yields, given they do not issue their own currencies. In this context, Sharpf concludes that: “It is hard to see why Southern governments, after all the sacrifices that they have already been forced to make under the present regime, should opt for an alternative that would not loosen economic constraints but remove the present protections against state insolvency.” The same might be said of his Proposal 2.

Why would the Southern states, who would be forced to exit under his plan, not then fully exploit their new found currency capacities to improve domestic demand conditions immediately, which would then, after a while push their external balances into deficit, and once there was sufficient volumes of their own currency in the system, place downward pressure on their exchange rates? Greece only has a current account close to balance because the enduring Depression has killed import growth. Turn the growth back on and they will soon be back in deficit. As I noted in Part 1, the real exchange rate data shows that despite the painful internal devaluation that has been imposed on many Eurozone nations, only Ireland has improved its international competitiveness against Germany.

I also cannot see the ECB agreeing to unconditionally provide euro and other foreign currency reserves to the exiting nations who are running their fiscal policy outside the parameters of the Northern states. Can you imagine Germany, which proudly runs fiscal surpluses while its major transport network is falling apart (bridges etc) tolerating Greece running the fiscal deficits it needs to restore some sense of prosperity? While Germany sits on current account surpluses of around 7-8% and thus creating massive imbalances within the Eurozone, they lecture everyone else about fiscal rectitude. My estimate is that Greece should be running deficits close to 8 to 10% of GDP to move the economy in the right direction.

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More entertainment.

This Could Mean The End Of May – And The Beginning Of Corbyn (Ind.)

Is this it? The moment when the May premiership is over? Could Corbyn end up taking power in a matter of weeks? It’s at least possible, though I concede it sounds far-fetched at first. In history, some British Prime Ministers have had their premierships wrecked by the “Irish Question”. Others, in more recent times, have been destroyed by Europe. Theresa May is unique in managing to combine both famously intractable and insoluble issues into one lethal cocktail. And so, it seems she is about to swallow the poison. Her premiership may be even shorter than many anticipated, and a Jeremy Corbyn-led government could be a fact of British life by the time the snows melt next year. Here’s how.

From what we can discern, the Government is perfectly happy to concede “special status” for Northern Ireland / Ireland in the Brexit talks – anathema to the Ulster Unionists. This is because the Government desperately needs to get onto the second phase of the process – the trade talks for the whole UK – and MPs, without being too crude about it, are happy to sign whatever the EU sticks under their nose and worry about the consequences later. In the end, they will risk their support from the DUP to get moving on Brexit. Jobs (Tory MPs’ included) are at stake. After all, ministers such as David Davis always say that “nothing’s agreed until everything’s agreed”, so having now ratted on the Democratic Unionists, they can, in due course, re-rat on the Irish and the EU, after a trade deal is sorted out.

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This looks very amateurish. And everybody knows.

Theresa May Humiliated As DUP Scuppers Border Deal (Ind.)

Theresa May’s Brexit strategy is in disarray after the Irish Prime Minister dramatically accused her of reneging on an agreement that would have ended the deadlock in the talks. On a day of drama, the Prime Minister pulled the plug on a deal on the Irish border after it was rejected by the Democratic Unionist Party which props her up in power – triggering claims she is being “held to ransom”. The embarrassment left Ms May scrambling to arrange crisis talks with the DUP before she heads back to Brussels later this week, with the clock ticking on the negotiations. EU leaders have demanded she guarantee there will no hard land border in Ireland before a summit next week, if the talks are to move on to discussing future trade and a transitional deal.

The unravelling of the deal also left many Conservatives questioning Ms May’s handling of the talks, amid disbelief that the DUP had not been squared off in advance. The talks broke down after Arlene Foster, the DUP leader, ruled out any move “which separates Northern Ireland economically or politically from the rest of the United Kingdom”. “We have been very clear. Northern Ireland must leave the EU on the same terms as the rest of the United Kingdom,” she said, speaking at Stormont. The party – despite being the Tories’ partner in government – appeared to be blindsided by the UK’s apparent concession of “regulatory alignment” on both sides of the border, to avoid checks. Within 20 minutes, Ms May interrupted her talks with Jean-Claude Juncker, the EU Commission President, to telephone Ms Foster. When she went back to the lunch, the deal was off.

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“By the time Cornwall had got in on the act by insisting its dogs be allowed to surf wherever they wanted..”

Confused May In Alignment Only With Herself Over Irish Issue (G.)

“Are you sure we can’t fudge the Northern Ireland border issue just a little bit?” she had asked Juncker on arrival in Brussels. Juncker had sniggered. Absolutely not. What bit of “regulatory alignment” did she not get? Theresa had another go. How about we say that pigs, cheese and a few cows are allowed to wander across the border without a passport? So you’re basically giving in and accepting that Northern Ireland must stay inside the single market and the customs union, Juncker had observed. Mmm, yes and no, Theresa whispered, checking over her shoulder to make sure no one was listening. It was like this. Regulatory divergence and regulatory alignment could almost mean exactly the same thing. It just depended which side you were looking at it from. The secret was to persuade the divergers that you weren’t aligning and the aligners you weren’t diverging by drafting something that was equally open to misinterpretation by both.

“Whatever,” Juncker had yawned. Having persuaded herself she had got a deal she could sell – to herself if no one else – Theresa set about drafting an agreement with the Irish government. As the news seeped out that an agreement had been reached, all hell broke loose. If the Northern Irish could have a special nod and a wink for pigs, the Scots must have the same exemptions for scotch. And heather. Then London started making demands. Just because it could. It had never fancied leaving the EU anyway. By the time Cornwall had got in on the act by insisting its dogs be allowed to surf wherever they wanted, it dawned on the prime minister that maybe she ought to run the agreement past the DUP. Arlene Foster’s response had been unequivocal. Theresa could keep her £1bn. Any deal that didn’t make Northern Ireland exactly the same as the rest of the UK was unacceptable. No special status, no nothing. And if push came to shove, she’d bring down the UK government.

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Erik Prince and Oliver North. Yeah, those are the guys I would trust.

White House Weighing Plans For Private Spies To Counter “Deep State” (IC)

The Trump administration is considering a set of proposals developed by Blackwater founder Erik Prince and a retired CIA officer — with assistance from Oliver North, a key figure in the Iran-Contra scandal — to provide CIA Director Mike Pompeo and the White House with a global, private spy network that would circumvent official U.S. intelligence agencies, according to several current and former U.S. intelligence officials and others familiar with the proposals. The sources say the plans have been pitched to the White House as a means of countering “deep state” enemies in the intelligence community seeking to undermine Trump’s presidency. The creation of such a program raises the possibility that the effort would be used to create an intelligence apparatus to justify the Trump administration’s political agenda.

“Pompeo can’t trust the CIA bureaucracy, so we need to create this thing that reports just directly to him,” said a former senior U.S. intelligence official with firsthand knowledge of the proposals, in describing White House discussions. “It is a direct-action arm, totally off the books,” this person said, meaning the intelligence collected would not be shared with the rest of the CIA or the larger intelligence community. “The whole point is this is supposed to report to the president and Pompeo directly.” Oliver North, who appears frequently on Trump’s favorite TV network, Fox News, was enlisted to help sell the effort to the administration. He was the “ideological leader” brought in to lend credibility, said the former senior intelligence official.

Some of the individuals involved with the proposals secretly met with major Trump donors asking them to help finance operations before any official contracts were signed. The proposals would utilize an army of spies with no official cover in several countries deemed “denied areas” for current American intelligence personnel, including North Korea and Iran. The White House has also considered creating a new global rendition unit meant to capture terrorist suspects around the world, as well as a propaganda campaign in the Middle East and Europe to combat Islamic extremism and Iran. “I can find no evidence that this ever came to the attention of anyone at the NSC or [White House] at all,” wrote Michael N. Anton, a spokesperson for the National Security Council, in an email. “The White House does not and would not support such a proposal.”

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“The deal had allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003, down to as low as 0.005% in certain years..”

Apple Agrees To Pay Over $15 Billion To Ireland In Back Taxes (ArsT)

According to a top Irish official, Apple has agreed to to pay Ireland around $15.4 billion in back taxes. “We have now reached agreement with Apple in relation to the principles and operation of the escrow fund,” Finance Minister Paschal Donohoe told reporters before a meeting with European Competition Commissioner Margrethe Vestager. “We expect the money will begin to be transmitted into the account from Apple across the first quarter of next year.” Ireland was formally referred to the European Court of Justice after it failed to implement a 2016 order that required the island nation to collect the same amount in unpaid taxes. Over a year ago, as Ars reported, the EU’s competition chief Vestager said that a two-year investigation into so-called sweetheart tax deals in 1991 and 2007 had found Apple guilty of receiving illegal state aid from the Emerald Isle.

The deal had allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003, down to as low as 0.005% in certain years, according to Vestager. Apple has denied any wrongdoing and has also said that it received no “special deal.” “We have a dedicated team working diligently and expeditiously with Ireland on the process the European Commission has mandated,” Apple said in a Monday statement according to UPI. “We remain confident the General Court of the EU will overturn the Commission’s decision once it has reviewed all the evidence.” Both Apple and Ireland have challenged the EU’s court order.

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Why not check this for fraud too?

China, the Digital Giant (PS)

China has firmly established itself as a global leader in consumer-oriented digital technologies. It is the world’s largest e-commerce market, accounting for more than 40% of global transactions, and ranks among the top three countries for venture capital investment in autonomous vehicles, 3D printing, robotics, drones, and artificial intelligence (AI). One in three of the world’s unicorns (start-ups valued at more than $1 billion) is Chinese, and the country’s cloud providers hold the world record for computing efficiency. While China runs a trade deficit in services overall, it has lately been running a trade surplus in digital services of up to $15 billion per year. Powering China’s impressive progress in the digital economy are Internet giants like Alibaba, Baidu, and Tencent, which are commercializing their services on a massive scale, and bringing new business models to the world.

Together, these three companies have 500-900 million active monthly users in their respective sectors. Their rise has been facilitated by light – or, perhaps more accurate, late – regulation. For example, regulators put a cap on the value of online money transfers a full 11 years after Alipay introduced the service. Now, these Internet firms are using their positions to invest in China’s digital ecosystem – and in the emerging cadre of tenacious entrepreneurs that increasingly define it. Alibaba, Baidu, and Tencent together fund 30% of China’s top start-ups, such as Didi Chuxing ($50 billion), Meituan-Dianping ($30 billion), and JD.com ($56 billion). With the world’s largest domestic market and plentiful venture capital, China’s old “copy-cat” entrepreneurs have transformed themselves into innovation powerhouses.

They fought like gladiators in the world’s most competitive market, learned to develop sophisticated business models (such as Taobao’s freemium model), and built impregnable moats to protect their businesses (for example, Meituan-Dianping created an end-to-end food app, including delivery). As a result, the valuation of Chinese innovators is many times higher than that of their Western counterparts. Moreover, China leads the world in some sectors, from livestreaming (one example is Musical.ly, a lip-syncing and video-sharing app) to bicycle sharing (Mobike and Ofo exceed 50 million rides per day in China, and are now expanding abroad).

Most important, China is at the frontier of mobile payments, with more than 600 million Chinese mobile users able to conduct peer-to-peer transactions with nearly no fees. China’s mobile-payment infrastructure – which already handles far more transactions than the third-party mobile-payment market in the United States – will become a platform for many more innovations.

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Merkel is losing ground fast. First inviting refugees and then paying them to leave, what is that?

Pilots Across Germany Are Blocking The Deportation Of Asylum Seekers (IBT)

Pilots across Germany are refusing to carry out deportations of asylum seekers and have prevented at least 222 planned flights so far, the government said on Monday (4 December) Germany’s main airline Lufthansa and its subsidiary Eurowings halted at least 85 flights in the first eight months of this year, according to a freedom of information request obtained by the Left party. The majority of the cancellations took place at Frankfurt airport, Germany’s largest and most important transport hub. A large number of the flights were scheduled to repatriate refugees to Afghanistan, a move which has been widely condemned by human rights organisations. Earlier this year, Amnesty International called on European governments to “implement a moratorium on returns to Afghanistan until they can take place in safety and dignity”.

Anna Shea, Amnesty International’s Researcher on Refugee and Migrant Rights, said that government was being “wilfully blind” to the fact that violence was at a record high in Afghanistan. Despite an increase in deportations, Germany remains the top destination for refugees in the European Union. This year, Germany has taken in more asylum seekers than all other 27 EU countries combined. In the first six months of 2017 the country processed 388,201 asylum cases, Die Welt reported, quoting statistics agency Eurostat. To try and curb the numbers, the German government is offering rejected asylum seekers up to €1000 in benefits if they voluntarily return home. Families who agree to leave are entitled to receive up to €3000. Interior Minister Thomas de Maizière (CDU) told the Süddeutsche Zeitung on Sunday (3 December): “If you decide by the end of February for a voluntary return, you will get in addition to first aid, a housing aid for the first 12 months in your country of origin.”

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Tsipras has to ask Brussels (re: Merkel) for permission.

Push To Move Refugees From Greek Islands To Mainland (K.)

Municipal officials from the islands of Lesvos, Chios and Samos, which are bearing the brunt of an increased influx of migrants from neighboring Turkey, are due in Athens on Tuesday to press the government for action to ease the pressure on their local communities. The officials decided to coordinate their protests and seek a meeting with Migration Minister Yiannis Mouzalas to speed up the transfer of migrants from the islands to mainland Greece. There are currently more than 15,000 migrants living in state-run camps on Lesvos, Chios, Samos, Leros and Kos. More than 15,000 have been transferred to the mainland over the past year. Of those more than 3,500 were transferred in the last month alone. But islanders say more action is needed due to growing tensions in the reception centers and among the local communities as arrivals from Turkey have increased.

Hopes that a European Union refugee relocation program could ease some of the pressure have been largely frustrated as the process is a slow one. European Migration Commissioner Dimitris Avramopoulos has said the so-called Dublin Regulation, which dictates that refugees apply for asylum in the first EU country they enter, must be reformed for pressure on countries such as Greece and Italy to ease. In a related development on Monday, a court on Lesvos indicted 16 North African migrants who participated in the occupation of a central square in Mytilene, the main port of Lesvos. Authorities on the island detained a total of 25 protesters late on Sunday but the other nine were released as they are minors. The migrants had staged the protest in a bid to press authorities to accelerate their asylum applications and their transfer to mainland Greece.

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No question there.

The World’s Oceans Are Under The Greatest Threat In History – Attenborough (G.)

The world’s oceans are under the greatest threat in history, according to Sir David Attenborough. The seas are a vital part of the global ecosystem, leaving the future of all life on Earth dependent on humanity’s actions, he says. Attenborough will issue the warning in the final episode of the Blue Planet 2 series, which details the damage being wreaked in seas around the globe by climate change, plastic pollution, overfishing and even noise. Previous BBC nature series presented by Attenborough have sometimes been criticised for treading too lightly around humanity’s damage to the planet. But the final episode of the latest series is entirely dedicated to the issue. “For years we thought the oceans were so vast and the inhabitants so infinitely numerous that nothing we could do could have an effect upon them. But now we know that was wrong,” says Attenborough.

“It is now clear our actions are having a significant impact on the world’s oceans. [They] are under threat now as never before in human history. Many people believe the oceans have reached a crisis point.” Attenborough says: “Surely we have a responsibility to care for our blue planet. The future of humanity, and indeed all life on Earth, now depends on us.” BBC executives were reportedly concerned about the series appearing to become politicised and ordered a fact-check, which it passed. The series producer, Mark Brownlow, said it was impossible to overlook the harm being caused in the oceans: “We just couldn’t ignore it – it wouldn’t be a truthful portrayal of the world’s oceans. We are not out there to campaign. We are just showing it as it is and it is quite shocking.”


Strict management of the herring fishery in Norway has saved it from collapse. Herring now draw in humpback whales and orca. Photograph: Audun Rikardsen

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Sep 062016
 
 September 6, 2016  Posted by at 9:13 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle September 6 2016
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Harris&Ewing Agriculture Department, Cow jumps over moon 1920

These Are The Signs Of An Economic Collapse (Gray)
‘No Chance Of Russia And Saudi Arabia Oil Cooperation’ (CNBC)
Hanjin’s Creditors Ready To Provide $90 Million, But Debt Over $5 Billion (R.)
Trump Says US Interest Rates Must Change As Fed Weighs Rate Hike (R.)
Trump: Fed Has Created “Stock Bubble” And “False Economy” To Boost Obama (ZH)
There Has Never Been a Middle Class Without Strong Unions (I’Cept)
Auckland’s Surging House Prices Top Sydney, Parts of New York City (BBG)
New Zealand Needs Migrants As Some Kiwis Are Lazy And On Drugs, Says PM (G.)
Clouds Gathering In Brussels For Athens (Kath.)
If WalMart Held A Sale On Bullshit Filters… (Jim Kunstler)
Toxic Air Pollution Nanoparticles Found In Human Brains (G.)
We Are Making The Oceans Sick (AFP)
One Year After Launch, EU’s Dismal Failure On Refugee Relocation (EUO)
Prisoners Of Europe: The Everyday Humiliation Of Refugees Stuck In Greece (G.)
2,700 Migrants Rescued in Mediterranean on Monday, 15 Dead (R.)

 

 

“Don’t be fooled into thinking that the stock market is any indication of the health of an economy.”

These Are The Signs Of An Economic Collapse (Gray)

What does the beginning of an economic collapse look like? Do you see grocery stores closing? Do you see other retailers, like clothing stores and department stores, going out of business? Are there shuttered storefronts along your Main Street shopping district, where you bought a tool from the hardware store or dropped off your dry cleaning or bought fruits and vegetables? Are you making as much money annually as you did 10 years ago? Do you see homes in neighborhoods becoming run down as the residents either were foreclosed upon, or the owner lost his or her job so he or she can’t afford to cut the grass or paint the house? Did that same house where the Joneses once lived now become a rental property, where new people come to live every few months?

Do you know one or two people who are looking for work? Maybe professionals, who you thought were safe in their jobs? Friday’s anemic jobs numbers tell that tale. Did your high school buddy take a job at the local convenience store because he could not find work in sales? Is the pothole on your street getting larger instead of getting repaired? Is there more than one street light out in your town? Is the town pool closed this summer much more than usual? Have you seen a situation — any situation — and said, “Jeez, it wouldn’t take much money to fix that” — but it hasn’t been fixed? You may have witnessed many of these situations, but you tell yourself it can’t be an economic collapse because the stock market is at an all-time high. Does that mean all is well? No, this is what a 21st-century economic collapse looks like in the beginning.

[..] We are entering the problem months for the markets. September and October are historically times of greater market volatility to the downside. There was a time when this was very explainable. In the last two centuries, huge amounts of cash would move from the Eastern money markets over the mid- to late summer to the Midwest and Western states to buy crops, leaving the equity and bond markets in a liquidity squeeze come late summer/early fall. Now it’s down to the returning traders from the Hamptons or the Cape realizing that their trading book looks a little sick. Their bonus will depend on them making the right moves in the next three months, and they need to sell those dog stocks soon.

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Neither can afford it, and beides whatever they would not produce, someone else would.

‘No Chance Of Russia And Saudi Arabia Oil Cooperation’ (CNBC)

Energy experts poured scorn on the prospect of Russia and Saudi Arabia collaborating to stabilize the oil market, after the two countries made a joint statement to that effect on Monday. The two major oil producers announced at the G-20 summit in China that they would form a group to monitor the market and make recommendations on stabilizing prices, according to media reports. Russian Energy Minister Alexander Novak described the moment as “historic” and touted the possibility of the much-discussed-but-never-delivered crude production freeze. Commodity strategists told CNBC that the statement might push crude prices higher in the short-term, perhaps toward $50 per barrel, but insisted that little in the way of deeper cooperation was likely.

“The running gag of the ‘freeze’ means just nothing,” Eugen Weinberg, head of commodity research at Commerzbank, told CNBC on Monday. “As to the cooperation between Russia and Saudi Arabia – no chance! It’s clearly just lip service since real cooperation between these competitors is just impossible,” he later added. [..] “The press conference came and went without any significant initiatives being announced. Once again it highlights key producers’ ability to talk up the market without backing it by action,” Ole Hansen, head of commodities strategy at SaxoBank, told CNBC on Monday. “I expect the market to drift lower as this was an exercise in building up expectations without delivering anything,” he added.

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So it takes $90 million to let their ships unload their cargo. For a last time.

Hanjin’s Creditors Ready To Provide $90 Million, But Debt Over $5 Billion (R.)

Hanjin Shipping’s government-backed creditors are ready to provide the collapsed carrier with roughly 100 billion won ($90.60 million) of loans if Hanjin’s parent provides collateral, South Korean government officials said on Tuesday. The funding, however, is seen as falling far short of what the world’s seventh-largest container carrier needs after filing for court receivership last week when its creditors, led by Korea Development Bank (KDB), decided to halt support. “The 100 billion won funding, if it comes to pass, is not nearly enough to save Hanjin Shipping at all – it will most likely be used to pay fees to unload stranded cargo going forward,” said an official at a creditor bank, who was not authorized to speak with media and declined to be identified.

Hanjin Shipping shares jumped as much as 28% on Tuesday morning before trimming their gains to be up 20% by 0155 GMT. They had hit a record low on Monday. [..] Shares in Korean Air Lines, the biggest shareholder of Hanjin Shipping, fell as much as 5.7% on Tuesday. Hanjin Shipping had debt of 5.6 trillion won at the end of 2015. Last month, parent Hanjin Group submitted a plan to creditors pledging to raise up to 500 billion won for the troubled shipper, which KDB deemed inadequate.

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Sorry to say, but he’s right.

Trump Says US Interest Rates Must Change As Fed Weighs Rate Hike (R.)

Republican presidential nominee Donald Trump, who has previously accused the Federal Reserve of keeping interest rates low to help President Barack Obama, said on Monday that the U.S. central bank has created a “false economy” and that interest rates should change. “They’re keeping the rates down so that everything else doesn’t go down,” Trump said in response to a reporter’s request to address a potential rate hike by the Federal Reserve in September. “We have a very false economy,” he said. “At some point the rates are going to have to change,” Trump, who was campaigning in Ohio on Monday, added. “The only thing that is strong is the artificial stock market,” he said.

Fed Chair Janet Yellen said last month that the U.S. central bank was getting closer to raising interest rates, possibly as early as September, saying that the Fed sees the economy as close to meeting its goals of maximum employment and stable prices. The Fed raised interest rates last December for the first time in nearly a decade, and at that time projected four more hikes in 2016. The Fed later scaled back that projection to two rate hikes this year in the wake of a slowdown in global growth and continued financial market volatility. Trump, during the primary campaign, as he took on 16 Republican rivals, had called Yellen’s tenure “highly political” and said the Fed should raise interest rates but would not do so for “political reasons.”

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“We have a bad economy, everybody understands that but it’s a false economy.”

Trump: Fed Has Created “Stock Bubble” And “False Economy” To Boost Obama (ZH)

One month ago, Donald Trump urged his followers to sell stocks, warning of “very scary scenarios” for investors, and accused the Fed of setting the stage for the next market crash when he said that “interest rates are artificially low” during a phone interview with Fox Business. “The only reason the stock market is where it is is because you get free money.” Earlier today, speaking to a reporter traveling on his plane who asked Trump about a potential rate hike by the Fed in September, Trump took his vendetta to the next level, saying that the Fed is “keeping the rates artificially low so the economy doesn’t go down so that Obama can say that he did a good job. They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job.”

“It’s a very false economy. We have a bad economy, everybody understands that but it’s a false economy. The only reason the rates are low is so that he can leave office and he can say, ‘See I told you.'” He then lashed out at Yellen, whom he accused of having a political mandate when conducting monetary policy: “So far, I think she’s done a political job. You understand that.” On whether we can have a rate hike in September: “Well, the only thing that’s strong is the artificial stock market. That’s only strong because it’s free money because the rates are so low. It’s an artificial market. It’s a bubble. So the only thing that’s strong is the artificial market that they’re created until January. It’s so artificial because they have free money… It’s all free money. When rates are low like this it’s hard not to have a good stock market.”

His conclusion: “At some point the rates are going to have to change.” Indeed they will, and that’s precisely what almost every bank, from Goldman yesterday to Citi today, and many others inbetween, have been warning about in recent months. Until recently, Trump’s latest anti-Fed outburst would have been swept under the rug as just another example of the deranged ramblings of an anti-Fed conspiracy theorist (trust us, we’ve been there). However, considering the spike in anti-Fed commentary in recent weeks coming from prominent, and established institutional sellside analysts all the way to the WSJ, it may be that Trump was once again simply saying what everyone else thought but dared not mention.

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Nice connection.

There Has Never Been a Middle Class Without Strong Unions (I’Cept)

The entire Republican party and the ruling heights of the Democratic Party loathe unions. Yet they also claim they want to build a strong U.S. middle class. This makes no sense. Wanting to build a middle class while hating unions is like wanting to build a house while hating hammers. Sure, maybe hammers — like every tool humans have ever invented — aren’t 100% perfect. Maybe when you use a hammer you sometimes hit your thumb. But if you hate hammers and spend most of your time trying to destroy them, you’re never, ever going to build a house. Likewise, no country on earth has ever created a strong middle class without strong unions. If you genuinely want the U.S. to have a strong middle class again, that means you want lots of people in lots of unions.

The bad news, of course, is that the U.S. is going in exactly the opposite direction. Union membership has collapsed in the past 40 years, falling from 24% to 11%. And even those numbers conceal the uglier reality that union membership is now 35% in the public sector but just 6.7% in the private sector. That private sector%age is now lower than it’s been in over 100 years. Not coincidentally, wealth inequality – which fell tremendously during the decades after World War II when the U.S. was most heavily unionized – has soared back to the levels seen 100 years ago. The reason for this is straightforward. During the decades after World War II, wages went up hand in hand with productivity. Since the mid-1970s, as union membership has declined, that’s largely stopped happening. Instead, most of the increased wealth from productivity gains has been seized by the people at the top.

[..] the degree to which a country has created high-quality, universal health care is generally correlated with the strength of organized labor in that country. Canada’s single payer system was born in one province, Saskatchewan, and survived to spread to the rest of the country thanks to Saskatchewan’s unions. Now Canadians live longer than Americans even as their health care system is far cheaper than ours. U.S. unions were also key allies for other social movements, such as the civil rights movement in the 1950s and 1960s. Today, people generally say Martin Luther King, Jr. delivered the “I Have a Dream” speech at the March on Washington – but in fact it was the March on Washington for Jobs and Freedom, and it was largely organized by A. Philip Randolph of the Brotherhood of Sleeping Car Porters.

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Close to the brink.

Auckland’s Surging House Prices Top Sydney, Parts of New York City (BBG)

The average house price in Auckland, New Zealand’s largest city, has surged above NZ$1 million ($730,000) for the first time. The price for the Auckland area, home to a third of New Zealand’s 4.7 million people, jumped 16% in August from a year earlier and 6.1% in the last three months to NZ$1.01 million, according to data published Tuesday by government property research agency Quotable Value. The city’s average price has risen 86% since 2007. Record immigration, low interest rates and a supply shortage are driving Auckland’s housing market, and in turn fueling a nationwide boom. The central bank, which has been unable to raise borrowing costs because of weak general inflation, has introduced lending restrictions, focusing particularly on investors, in an effort to curb demand.

The Reserve Bank in October 2013 required banks to limit lending to borrowers with low deposits. It followed in November last year with measures targeting investors in Auckland. In July, the central bank announced a further round of restrictions, due to take effect Oct. 1, which require investors across the country to have a deposit of at least 40% to obtain a mortgage. Those measures may have caused an initial pick-up in buying but could now be starting to bite as banks begin to enforce the new rules early. [..] New Zealand isn’t alone in introducing new measures to try to cool surging house prices.

The Canadian province of British Columbia on Aug. 2 imposed a 15% tax on foreign buyers after average prices in Vancouver doubled over the past decade. The average price of a detached property in the city declined 17% in August from July, and 0.6% from a year earlier, to C$1.47 million ($1.1 million), according to the Real Estate Board of Greater Vancouver. Auckland’s average is still below London’s 705,600 pounds ($939,435) and some way behind New York’s $1.02 million, although that figure is boosted by Manhattan’s $2.2 million. Auckland prices are higher than those in the Bronx, Queens and Staten Island, according to the Real Estate Board of New York. CoreLogic data available for Sydney, which use the median rather than the average, show a price of A$780,000 ($593,000) in August.

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And you think your leaders are idiots?!

New Zealand Needs Migrants As Some Kiwis Are Lazy And On Drugs, Says PM (G.)

The New Zealand prime minister, John Key, has said the country is forced to rely on overseas workers to fill jobs because some Kiwis lack a strong work ethic and may have problems with drugs. The comments came on the back of record high immigration figures, showing in the year to July 69,000 people moved to New Zealand. In his weekly appearance on Radio New Zealand, Key was asked to explain high immigration figures, with 200,000 Kiwis currently unemployed. Key responded that schemes to get Kiwi beneficiaries into jobs had routinely failed because many lacked basic work skills. “Go and ask the employers, and they will say some of these people won’t pass a drug test, some of these people won’t turn up for work, some of these people will claim they have health issues later on,” Key told Radio New Zealand.

“So it’s not to say there aren’t great people who transition from Work and Income to work, they do, but it’s equally true that they’re also living in the wrong place, or they just can’t muster what is required to actually work.” Every year New Zealand brings in more than 9,000 seasonal workers from the Pacific islands to work on short-term contracts in the horticulture and wine industry. Both industries also say they are heavily reliant on overseas visitors with work permits – particularly backpackers. Leon Stallard, a director for Horticulture New Zealand and the owner of an apple orchard in Hawke’s Bay, said he had tried “for years” to get unemployed New Zealanders to pick his apples but had been let down time and again.

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Why the EU should be dismantled. Shameless. Or is that shameful?

Clouds Gathering In Brussels For Athens (Kath.)

Expectations are running low ahead of Friday’s Eurogroup meeting on Greece, as Athens is particularly late in implementing the 16 prior actions that were needed over the summer to secure the disbursement of a €2.8 billion subtranche. Friday’s meeting of eurozone finance ministers is not expected to go beyond an update on the progress of the Greek program, which is seriously lagging. Meanwhile, a report in German newspaper Handelsblatt said that Greece should not expect any disbursements for now, even though the first review was completed in May, as the government has only implemented two out of the 16 prior actions. Finance Ministry sources say that this Eurogroup was never going to approve a payment anyway as it is an informal gathering and that the delays in the prior actions will be the reason for the arrival of the creditors’ representatives in Athens on September 12.

Despite the concerns expressed by eurozone officials and the completion of just two prior actions so far, the Greek side insists everything is running “according to schedule.” In Brussels, however, the climate is souring as the failure to implement all the prior actions will push the completion of the first review beyond September. One eurozone official told Kathimerini that “I do not see the first review completed any time soon and as for the second, I do not see it being completed in the near future.” The creditors are also growing increasingly alarmed by Athens’s rhetoric and stance in asking for more independence from the bailout program, seen as backtracking on reforms. Officials monitoring the government’s moves have expressed their opposition to the Education Ministry’s law banning teacher layoffs from private schools, as this contravenes the spirit of the bailout program.

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“Both Trump and Hillary are perfect avatars for this date with a hard landing.”

If WalMart Held A Sale On Bullshit Filters… (Jim Kunstler)

The former middle class of America has lost its ability to absorb anymore smart phones or Kardashian brand Pure Glitz hairspray©. They’re pacing grooves in the faux hardwood floors of their McHomes through reams of unpayable bills trying to stave off the re-po squad while Grandma slips into a diabetic coma. These are the good folks who supposedly comprise 70% of the so-called economy, a.k.a. “consumers.” You can stick a fork in them — and maybe we’ll hear a few reports of that on Tuesday when the holiday barbeques smolder their last. More concerning, though, are the conditions of the banks. When their true insolvency is revealed — which may coincide with the height of the election season — look out below.

The bankruptcy of one measly shipping company will look like a zit on the ass of a diving blue whale as countless trade operations seize up for lack of confidence that they will ever be paid. Then what? Then we are forced to pay attention to the actual dynamics now at work in the world. Or be driven crazy by our refusal to get with the program. I tend to think we’ll opt for the latter. We’re too unused to reality. We’d rather crash and burn than change anything about our behavior, or even our perception. Both Trump and Hillary are perfect avatars for this date with a hard landing. The disorder both of them are capable of inducing will be a spectacle for the ages.

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Nasty. Move to the country.

Toxic Air Pollution Nanoparticles Found In Human Brains (G.)

Toxic nanoparticles from air pollution have been discovered in human brains in “abundant” quantities, a newly published study reveals. The detection of the particles, in brain tissue from 37 people, raises concerns because recent research has suggested links between these magnetite particles and Alzheimer’s disease, while air pollution has been shown to significantly increase the risk of the disease. However, the new work is still a long way from proving that the air pollution particles cause or exacerbate Alzheimer’s. “This is a discovery finding, and now what should start is a whole new examination of this as a potentially very important environmental risk factor for Alzheimer’s disease,” said Prof Barbara Maher, at Lancaster University, who led the new research.

“Now there is a reason to go on and do the epidemiology and the toxicity testing, because these particles are so prolific and people are exposed to them.” Air pollution is a global health crisis that kills more people than malaria and HIV/Aids combined and it has long been linked to lung and heart disease and strokes. But research is uncovering new impacts on health, including degenerative brain diseases such as Alzheimer’s, mental illness and reduced intelligence. The new work, published in the Proceedings of the National Academy of Sciences, examined brain tissue from 37 people in Manchester, in the UK, and Mexico, aged between three and 92. It found abundant particles of magnetite, an iron oxide. “You are talking about millions of magnetite particles per gram of freeze-dried brain tissue – it is extraordinary,” said Maher.

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“We are no longer the casual observers in the room [..] What we have done is unwittingly put ourselves in the test tube where the experiment is being undertaken.”

We Are Making The Oceans Sick (AFP)

Global warming is making the oceans sicker than ever before, spreading disease among animals and humans and threatening food security across the planet, a major scientific report said on Monday. The findings, based on peer-reviewed research, were compiled by 80 scientists from 12 countries, experts said at the International Union for Conservation of Nature (IUCN) World Conservation Congress in Hawaii. “We all know that the oceans sustain this planet. We all know that the oceans provide every second breath we take,” IUCN Director General Inger Andersen told reporters at the meeting, which has drawn 9,000 leaders and environmentalists to Honolulu. “And yet we are making the oceans sick.”

The report, “Explaining Ocean Warming,” is the “most comprehensive, most systematic study we have ever undertaken on the consequence of this warming on the ocean,” co-lead author Dan Laffoley said. The world’s waters have absorbed more than 93% of the enhanced heating from climate change since the 1970s, curbing the heat felt on land but drastically altering the rhythm of life in the ocean, he said. “The ocean has been shielding us and the consequences of this are absolutely massive,” said Laffoley, marine vice chair of the World Commission on Protected Areas at IUCN. The study included every major marine ecosystem, containing everything from microbes to whales, including the deep ocean. It documents evidence of jellyfish, seabirds and plankton shifting toward the cooler poles by up to 10 degrees latitude.

The movement in the marine environment is “1.5 to five times as fast as anything we are seeing on the ground,” Laffoley said. “We are changing the seasons in the ocean.” The higher temperatures will probably change the sex ratio of turtles in the future because females are more likely to be born in warmer temperatures. The heat also means microbes dominate larger areas of the ocean. “When you look overall, you see a comprehensive and worrying set of consequences,” Laffoley said. More than 25% of the report’s information is new, published in peer-reviewed journals since 2014, including studies showing that global warming is affecting weather patterns and making storms more common.

The study includes evidence that ocean warming “is causing increased disease in plant and animal populations,” it said. Pathogens such as cholera-bearing bacteria and toxic algal blooms that can cause neurological illnesses such as ciguatera poisoning spread more easily in warm water, with direct impact on human health. “We are no longer the casual observers in the room,” Laffoley said. “What we have done is unwittingly put ourselves in the test tube where the experiment is being undertaken.”

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Another reason to dismantle the disunion.

One Year After Launch, EU’s Dismal Failure On Refugee Relocation (EUO)

EU-led efforts to relocate people seeking international protection from Italy and Greece to other EU states remain dismal. The two-year plan, broadly hatched last September, aims to dispatch some 160,000 people arriving on Italian and Greek shores to other EU states. But one year in and less than 3% of that total have found a new home outside either country. Some ended up in non-EU states like Norway and Switzerland, which are also part of the scheme. As of earlier this month, just over 1,000 people left Italy and 3,493 people left Greece. The European Commission, which masterminded the scheme, on Monday urged national governments to step up efforts, but declined to answer questions on potential sanctions if they failed to meet the quotas.

“Relocations are still taking place, the last flights from Greece took place on the second of September,” an EU commission spokeswoman told reporters in Brussels. In July, the commissioner for migration, Dimitris Avramopoulos, sent a letter to the 28 EU interior ministers imploring them to relocate more people. But despite his appeal, in the period covering August and the first few days of September, member states took in just 65 more people. Finland took 40 asylum seekers from Greece. France took 18 and Cyprus took seven. Austria, Hungary, and Poland have yet to relocate anyone. Others, such as the Czech Republic, have relocated just handfuls of people. France took the most, with 1,431 from Greece alone.

Pledges from EU states to help Greece with border staff and asylum experts have also failed to fully materialise. Meanwhile, the issues and the numbers remain sensitive. Hungary has launched an anti-immigrant campaign in the lead up to a national referendum on 2 October on whether to boycott the EU relocation scheme. The German government is paying a political cost for taking in asylum seekers – on Sunday, the anti-immigrant AfD party beat chancellor Angela Merkel’s CDU party in regional elections. In Austria, the EU faces the prospect of having its first far-right head of state, as the FPO party’s candidate, Norbert Hofer, again leads opinion polls ahead of a presidential run-off on 2 October.

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Treat people as you would want to be treated.

Prisoners Of Europe: The Everyday Humiliation Of Refugees Stuck In Greece (G.)

Softex sits in an industrial wasteland on the northern fringes of Thessaloniki, Greece’s second city. Refugees have been here since the border shut in May, forcing the cash-strapped Greek authorities to hastily house people in whatever spaces they could find. Several hundred have now smuggled their way north, but about a thousand are still left. Most of them live in tents inside the gloomy warehouse. The rest sleep outside, a few hundred metres from a grim row of burnt-out trains and factory chimneys. “We’re suffering, emotionally – we’re not good,” says Mohammad Mohammad, a 30-year-old taxi driver whose wife and children are under siege in a Damascus suburb. Mohammad came to Greece in February, hoping he could make his way to Germany, claim asylum, and then apply for his family to join him.

Instead, the border shut before he could leave – meaning that he must pay a smuggler to take him north, or wait for the EU relocation programme to assign him a permanent place elsewhere in Europe. But as so many stuck in Greece point out, relocation is not working properly – with just 5,100 places made available in the space of nearly 12 months. “The system doesn’t work,” says Mohammad. “At this rate, they’ll need 10 years to get it finished. But if we’re here for another month, we’ll be in a mental asylum.” It is a familiar sentiment. Interviewees consistently said that the limbo they are trapped in – which has left them far from loved ones, without access to work and education, and without any clarity on their future – has led to a wave of depression and mental health problems.

Abouni, 17, is at Softex without his parents and sister, who are still under siege in Aleppo. As a minor, Abouni hoped to apply for family reunification after being granted asylum. Instead he is likely to turn 18 before that can happen, and he says the anxiety of the situation has led to him being taken to hospital four times with panic attacks. “Sometimes I feel so angry that I can’t breathe, and then I fall unconscious,” says Abouni, who asked to be referred to by a pseudonym to avoid being stigmatised at the camp. “I have family in Syria under the bombs, and when I talk to my little sister on the phone, she asks if she’ll ever see me again. I’m stuck here in this jail.”

At the Vasilika camp outside Thessaloniki, one of seven visited recently by the Guardian, the warehouse is brighter than at Softex but the despair is the same. Hisham worked as a medic for an international aid group for 10 years in Syria but now finds himself as its beneficiary rather than its employee. The work he did in Syria still haunts him, with the images of dead bodies flashing before him as he tries to sleep at night. “For years I saw people getting killed in Syria, and then you’re here for six months without knowing what’s going on, and I cannot sleep,” says Hisham. “What happened in Syria is playing every night like a film in front of my eyes. Psychologically, I need a doctor.”

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Rising death toll.

2,700 Migrants Rescued in Mediterranean on Monday, 15 Dead (R.)

Fifteen bodies were recovered and more than 2,700 boat migrants rescued off the coast of Libya on Monday, the Italian coastguard said, in another day of mass departures from north Africa. Italy’s navy and coastguard, ships patrolling on a European Union anti-smuggling mission, vessels run by humanitarian groups, and a commercial tug boat aided in the rescues. Earlier in the day, the Italian Navy said six bodies had been found after migrants fell out of a leaking rubber boat. The coastguard gave no further details. The migrants were saved from 19 dangerously overcrowded rubber boats and four small boats, the coastguard said. People smugglers operate freely in Libya, cashing in on migrants desperate to reach Europe.

Last week calmer seas and Libya’s lawlessness opened the way for smugglers to ship 13,000 migrants across the Mediterranean Sea in just four days. Europe’s worst migrant crisis since World War Two is now focused on Italy, at Europe’s southern frontier, where some 93,000 people had arrived by the end of August, according to Italy’s Interior Ministry. The death toll on the route from North Africa to Italy has jumped to one migrant for every 42 making the crossing, compared to one in every 52 last year, a U.N. refugee agency spokesman said last week.

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