Apr 062015
 
 April 6, 2015  Posted by at 9:16 am Finance Tagged with: , , , , , , , , ,  


G.G. Bain ‘Casino Theater playing musical ‘The Little Whopper’, NY 1920

7 Unfounded Fears About An Exit From The Euro (Beppe Grillo)
Teachers Warn Of ‘Victorian’ Poverty Among Pupils (BBC)
Once Over $12 Trillion, the World’s Reserves Are Now Shrinking (Bloomberg)
How Criminals Built Capitalism (Bloomberg)
Greek Political Unrest And Deepening Crisis Fuel Talk Of Snap Election (Guar.)
Greek Economy Staring At Recession Again (Kathimerini)
What Happens If Greece Defaults On Its IMF Loans? (Telegraph)
Greece and IMF Hold Talks on Crucial Debt Payment (NY Times)
Varoufakis Meets Lagarde: ‘Greece Will Pay All Creditors Including IMF’ (GR)
How Much Of Brazil’s Economy Got Lost In Petrobras Scandal? (Forbes)
Petrobras Woes Reach Europe, US (Bloomberg)
Japan’s Wary Manufacturers Resist Abe’s Urge To Splurge (Reuters)
The Inbred Bernanke-Summers Debate On Secular Stagnation (Steve Keen)
Leader Of Ukraine Neo Nazi Right Sector Appointed As Army Advisor (Zero Hedge)
Eastern Ukraine Leaders Appeal To Merkel, Hollane To End Embargo (DW)
Saudi Arabia Rejects Russian UN All-Inclusive Arms Embargo on Yemen (RT)
Record Gasoline Output to Curb Biggest US Oil Glut in 85 Years (Bloomberg)
UK Law Changed To Force Nuclear Waste Dumps On Local Communities (Guardian)

Beppe is not just an entertainer.

7 Unfounded Fears About An Exit From The Euro (Beppe Grillo)

1) Mortgages – Mortgages will be converted into the new currency the day we exit the Euro. For anyone with a variable interest rate, this will still remain linked to the Euribor and thus it will remain stable. In relation to mortgages, Italians will benefit.

2) Inflation – Just think that the goods (home, car, telephone) that we want to buy will come down in price. If we don’t spend, the economy stagnates. This is what is happening today with deflation. A low level of inflation is thus necessary to keep the economy going. On the other hand, it mustn’t be too high to avoid devaluing our ability to spend. This won’t happen because Italian products will become more competitive than foreign products and the products that we are obliged to import from abroad (for example: crude oil) have a limited impact on the final price (for example: in the last year the value of the Euro has fallen by about 25% in relation to the dollar, but the high level of customs duties on petrol, has meant that the effect has not been apparent).

3) Current account – Your current account in Euro will be converted into the new currency. But, just even today, you can have a different currency in your bank account. You will still be able to do that after the exit from the Euro. So you could have dollars, Euro, pounds sterling, francs or a new currency.

4) Government bonds – 95% of Italian State bonds will be converted into the new currency (given that 95% are issued in accordance with Italian legislation and so they would inherit the national currency). The State will pay out on them and will issue them in the new currency. Given the low yields and the high risk that we already see right now, Italian State bonds are not a good buy for an Italian citizen.

5) Transition from the Euro to the lira – There’ll probably be a 1 to 1 conversion with the new currency and it will then probably devalue a bit. The effect on prices will probably be that they stay the same as today but they will be given in the new currency.

6) Increase in the price of petrol – The price of petrol is a false problem as most of the price (64%) is paid in taxes. International prices of crude oil and the exchange rate only relate to 26% of the price. If we also consider that the price of crude oil is at a record low right now, an exit from the Euro will surely be no problem from this point of view.

7) Imports: increase in the prices of imported products – This problem, that is particularly important for technology products, can only be resolved by investing in innovation after the destruction of companies like Olivetti and the downsizing of Telecom Italia. Innovation is the only way to develop the country. Staying in the Euro is not going to help. Throughout history, we have exported and traded with the countries nearest to us, but not because they have the Euro, simply because they are the closest and the geographic location has made it easier to trade with them ever since the time of the Roman Empire.

However, the value of exports going into the countries using the Euro, has being going down ever since we joined the Euro. Just in 2007, those accounted for 60%, and today that’s now down to less than 50%. The only areas where the value of our exports is growing is outside the Euro zone as can be seen from research into Italian exports: “emerging markets currently represent the biggest proportion of our exports, while the importance of the Euro area has seen a significant fall“.

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While Cameron is boasting this huge recovery.

Teachers Warn Of ‘Victorian’ Poverty Among Pupils (BBC)

Teachers say they are seeing “Victorian conditions” with pupils arriving at school hungry and not wearing the right clothes needed for the weather. The NASUWT teachers’ union says schools and teachers are increasingly having to deal with the consequences of poor housing and poverty. Teachers reported bringing in their own food to school to give to children. The Conservatives said the number of children in poverty had fallen by 300,000 under the coalition government. The Liberal Democrats said they had helped families by introducing free school meals for all infant children. Tristram Hunt, Labour’s shadow education secretary, warned of the “quiet indignity of poverty that can wreak havoc with a child’s confidence”. He said poverty was one of the “biggest barriers” to pupils achieving in school.

Claims about poverty in the school-age population will be heard at the NASUWT teachers’ union annual conference in Cardiff. The union asked members for their experiences and received almost 2,500 responses. It was not a representative sample of teachers, but among those replying more than two in three reported seeing pupils come to school hungry. “Children in 2015 should not be hungry and coming to school with no socks on and no coats – some children are living in Victorian conditions – in the inner cities,” said one unnamed teacher. Almost one in four of the teachers who responded said they had brought in food for pupils who were hungry, and an even higher proportion had seen the school feeding pupils.

More than three in four had seen pupils arriving at school with “inappropriate clothing” such as no socks or coats in bad weather. Similar numbers claimed that a bad diet meant that pupils were unable to concentrate on their work. More children were being sent home with letters about unpaid school meals and pupils who were sick were still being sent to school because parents could not afford to take time off work, claimed teachers. The comments from the survey suggest teachers felt that they were having to cope with the wider problems linked to family hardship, such as children living in temporary accommodation or relying on food banks.

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All about emerging markets. They’re going to be steamrollered.

Once Over $12 Trillion, the World’s Reserves Are Now Shrinking (Bloomberg)

The decade-long surge in foreign-currency reserves held by the world’s central banks is coming to an end. Global reserves declined to $11.6 trillion in March from a record $12.03 trillion in August 2014, halting a five-fold increase that began in 2004, according to data compiled by Bloomberg. While the drop may be overstated because the strengthening dollar reduced the value of other reserve currencies such as the euro, it still underlines a shift after central banks – with most of them located in developing nations like China and Russia – added an average $824 billion to reserves each year over past the decade. Beyond being emblematic of the dollar’s return to its role as the world’s undisputed dominant currency, the drop in reserves has several potential implications for global markets.

It could make it harder for emerging-market countries to boost their money supply and shore up faltering economic growth; it could add to declines in the euro; and it could damp demand for U.S. Treasury bonds. “It’s a big challenge for emerging markets,” Stephen Jen, a former IMF economist, said. They “now need more stimulus. The seed has been sowed for future volatility,” he said. Stripping out the effect from foreign-exchange fluctuations, Credit Suisse estimates that developing countries, which hold about two-thirds of global reserves, spent a net $54 billion of this stash in the fourth quarter, the most since the global financial crisis in 2008. China, the world’s largest reserve holder, together with commodity producers contributed to most of the declines, as central banks sold dollars to offset capital outflows and shore up their currencies.

A Bloomberg gauge of emerging-market currencies has lost 15% against the dollar over the past year. China cut its stockpile to $3.8 trillion in December from a peak of $4 trillion in June, central bank data show. Russia’s supply tumbled 25% over the past year to $361 billion in March, while Saudi Arabia, the third-largest holder after China and Japan, has burned through $10 billion in reserves since August to $721 billion. The trend is likely to continue as oil prices stay low and growth in emerging markets remains weak, reducing the dollar inflows that central banks used to build reserves, according to Deutsche Bank.

Such a development is detrimental to the euro, which had benefited from purchases in recent years by central banks seeking to diversify their reserves, according to George Saravelos at Deutsche Bank. The euro’s share of global reserves dropped to 22% in 2014, the lowest since 2002, while the dollar’s rose to a five-year high of 63%, the International Monetary Fund reported March 31. “The Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years,” Saravelos wrote in a note. The central banks there “need to sell euros,” he said.

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By a gut named Clive Crook, no less.

How Criminals Built Capitalism (Bloomberg)

Whenever buyers and sellers get together, opportunities to fleece the other guy arise. The history of markets is, in part, the history of lying, cheating and stealing — and of the effort down the years to fight commercial crime. In fact, the evolution of the modern economy owes more than you might think to these outlaws. That’s the theme of “Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance” by Ian Klaus. It’s a history of financial crimes in the 19th and early 20th centuries that traces a recurring sequence: new markets, new ways to cheat, new ways to transact and secure trust. As Klaus says, criminals helped build modern capitalism. And what a cast of characters.

Thomas Cochrane is my own favorite. (He was the model for Jack Aubrey in Patrick O’Brian’s “Master and Commander” novels.) Cochrane was an aristocrat and naval hero. At the height of his fame in 1814 he was put on trial for fraud. An associate had spread false rumors of Napoleon’s death, driving up the price of British government debt, and allowing Cochrane to avoid heavy losses on his investments. Cochrane complained (with good reason, in fact) that the trial was rigged, but he was found guilty and sent to prison. The story is fascinating in its own right, and the book points to its larger meaning. Cochrane, in a way, was convicted of conduct unbecoming a man of his position. Playing the markets, let alone cheating, was something a man of his status wasn’t supposed to do.

Trust resided in social standing. As the turbulent century went on, capitalism moved its frontier outward in every sense: It found new opportunities overseas; financial innovation accelerated; and buyers and sellers were ever more likely to be strangers, operating at a distance through intermediaries. These new kinds of transaction required new ways of securing trust. Social status diminished as a guarantee of good faith. In its place came, first, reputation (based on an established record of honest dealing) then verification (based on public and private records that vouched for the parties’ honesty). Successive scams and scandals pushed this evolution of trust along.

Gregor MacGregor and the mythical South American colony of Poyais (“the quintessential fraud of Britain’s first modern investment bubble,” Klaus calls it); Beaumont Smith and an exchequer bill forging operation of remarkable scope and duration; Walter Watts, insurance clerk, theatrical entrepreneur and fraudster; Harry Marks, journalist, newspaper proprietor and puffer of worthless stocks. On and on, these notorious figures altered the way the public thought about commercial trust, and spurred the changes that enabled the public to keep on trusting nonetheless.

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They’ll only do snap if the polls allow for it. Doesn’t look anywhere near.

Greek Political Unrest And Deepening Crisis Fuel Talk Of Snap Election (Guar.)

The worsening Greek debt crisis has reanimated talk within the ruling Syriza party of a snap general election if discussions with creditors fail, as the country faces a Thursday deadline to repay a €450m loan to the IMF. The Greek finance minister, Yanis Varoufakis, was scheduled to hold informal talks with the IMF’s managing director, Christine Lagarde, in Washington DC on Sunday, while warnings of early elections underscored the political unrest in Athens. The slow pace of negotiations with creditors and worsening state of the Greek economy brought a warning from the far-left Syriza of snap polls being held before the summer – just months after winning power. “If we are not satisfied [with the outcome] we will go to the people,” Kostas Chrysogonos, a prominent Syriza MEP told local media at the weekend.

“We have a popular mandate to bring about a better result,” he said of the talks aimed at concluding a reform-for-cash programme to keep the crisis-hit country afloat. “If, ultimately, creditors insist on following an inflexible line … then the electoral body will have to assume its responsibilities.” Varoufakis’ unexpected meeting with the IMF chief has been arranged as senior government officials repeated assurances that Greece was not about to to default on its debt repayments. The deputy finance minister, Dimitris Mardas, said the IMF payment would be made and civil service wages would be paid. “There is money for the payment of salaries, pensions and whatever else is needed in the next week.”

The prospect of renewed political strife in Greece coincided with mounting dissent within Syriza over the extent to which it should roll back on pre-electoral reforms. The anti-austerity government led by Alexis Tsipras has found itself increasingly cornered with creditors – the so-called troika – refusing to endorse proposed reforms under an extension of its €240bn bailout. Militants led by energy minister Panagiotis Lafazanis have ratcheted up the pressure by rejecting any notion of making necessary concessions starting with privatisations.

On Sunday, Lafazanis denounced Greece’s international creditors for treating the country with “unbelievable prejudice and as a colony”. Raising the prospect of a deal with Russia, he said, “A Greek-Russian agreement would help our country greatly in negotiations with lenders.” Despite assertions over the weekend that Sunday’s talks were part of the negotiation process, Athens is believed to harbour hopes that the IMF – which has proved to be a more conciliatory partner than either the EU or ECB in negotiations – will agree to cut the government some slack when Varoufakis discusses the reform programme with Lagarde. On Friday, Syriza’s parliamentary spokesman, Nikos Filis, also piled on the pressure saying Tsipras’ leftist-led coalition would prefer to pay salaries and pensions than bondholders if forced to make a choice.

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“The combination of a better-than-expected tax collection in March, the postponement of some budget expenditures and internal borrowing from some state entities and other sources made it possible for the government to pay both creditors and pensioners and civil servants last month.”

Greek Economy Staring At Recession Again (Kathimerini)

The Greek state may be able to service its debt and pay pensions and salaries to civil servants in April. However, the limited progress in negotiations between the government and the official creditors on the conclusion of the economic policy program increases uncertainty, reduces credit availability and adversely affects domestic demand despite less austerity. The economic damage has increased the risk of recession. The combination of a better-than-expected tax collection in March, the postponement of some budget expenditures and internal borrowing from some state entities and other sources made it possible for the government to pay both creditors and pensioners and civil servants last month. Greece paid an estimated €2.5 billion to the IMF and other creditors in March without including T-bills.

Assuming tax revenues remain on track and more general government entities lend part of their cash reserves to the state, we would expect Greece to be able to meet its obligations to creditors in April but it will face a tougher hurdle in May. It is reminded the state owes about 458 million euros to the IMF on April 9 and has to find an additional €700 million or so for T-bills maturing on April 14 which are held by international investors and most likely will not be rolled over. It will also have to pay €194 million to private bondholders on April 17 and €80 million to the ECB on April 20, according to Bank of America Merrill Lynch (BofA). Deputy Finance Minister Dimitris Mardas, who is in charge of the General Accounting Office, assured recently that the state will make the payment to the IMF on time and pay wages to some civil servants in the middle of the month.

This contrasts with leaks in the press, citing other government officials’ warnings that Greece would run out of money on April 9. Although no one disputes that the central government is in a tough financial position, some abroad suspect these warnings are also part of a Greek strategy to get some funding from the EU via the EFSF or indirectly from the ECB. Even if Greece is able to overcome this hurdle in April, it will have to pass another test in early May, assuming it has not reached an agreement with its creditors by then. It will have to pay €200 million to the IMF on May 1 and an additional €763 million on May 12, according to a recent report by BofA.

Of course, the country has shown that it intends to honor its obligations so far and could be able to continue doing so in the rest of April and even May to the extent that it is able to mobilize the cash reserves of state entities, collect more revenues than targeted in the adjustment program and postpone expenditures to suppliers and others for the future, building arrears.

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This will take until at least June. “According to IMF protocol, Greece would be afforded a 30-day grace period..” They’ll pay on April 9. The next payments are May 1 and 12. Add 30 days to that. That’s when payments to other creditors are due.

What Happens If Greece Defaults On Its IMF Loans? (Telegraph)

The Greek government faces another crucial deadline in its interminable bail-out drama this week, as fears mount that the country could become the first developed nation to ever default on its international obligations. After a harrowing March, cash-strapped Athens now faces a €448m payment to the IMF on Thursday. But with public sector wages and pensions to pay out, a cacophony of voices on Syriza’s Left have vowed to prioritise domestic obligations unless creditors finally unlock the remainder of its €240bn bail-out programme. “We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,” a senior Greek official told The Telegraph last week.

The rhetoric is a far cry from February, when Greece’s finance minister pledged his government would “squeeze blood out of a stone” to meet its obligations to the Fund. Yanis Varoufakis will now spend Easter Sunday with IMF director Christine Lagarde in a bid to gain some leeway on the country’s reforms-for-cash programme. Greece owes €9.7bn to the IMF this year. Missing its latest installment in order to pay out its social security bill on April 14, would see the country fall into an arrears process, unprecedented for a developed world debtor. Although no nation has ever officially defaulted on its obligations in the post-Bretton Woods era, Greece would join an ignominious list of war-torn nations and international pariahs who have failed to pay back the Fund on time.

What happens after April 9? Missing Thursday’s payment would not immediately trigger a default however. According to IMF protocol, Greece would be afforded a 30-day grace period, during which it would be urged to pay back the money as soon as possible, and before Ms Lagarde notifies her executive board of the late payment. Following this hiatus, a technical default could be declared a month later, when “a complaint regarding the member’s overdue obligations is issued by the Managing Director to the Executive Board”. In the interim, Greece may well stump up the cash having spooked creditors and the markets of the possibility of a fatal breach of the sanctity of monetary union. Should no money be forthcoming however, the arrears process may well extend indefinitely. Greece’s IMF burden would also start piling up, with the government due to pay another €963m by May 12.

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Very predictable.

Greece and IMF Hold Talks on Crucial Debt Payment (NY Times)

Mr. Varoufakis, from the moment he became finance minister this year, has gone out of his way to cultivate ties with Ms. Lagarde and has said that paying the fund was a priority for Greece. Over the last month, however, the economic situation in Greece has worsened greatly. Deposits worth about €25 billion have been withdrawn from Greek banks, some of which are now on life support with the European Central Bank. The government’s tax collections are also suffering as companies and consumers fret over the prospect that Greece might be forced to abandon the euro. Now, with Europe refusing to permit Greece access to temporary lines of liquidity — such as letting its banks issue more short-term treasury notes — Greece is running out of cash.

Which means that if it were to pay the fund €458 million this Thursday, there might not be enough left in the coffers to pay pensions and public sector wages the next week, some Greek officials say. Mr. Varoufakis, who came to power on a platform of ending the policy of putting the needs of Greece’s creditors above its suffering citizens, was to make the case to Ms. Lagarde that his government could not meet all of its commitments. “This government has made strong statements that they will meet their commitments,” said a person who was involved in the negotiations but was not authorized to speak publicly. The problem is, this person said, Greek officials have made commitments to their own people as well. “They are being pushed to the wall.”

There is some wiggle room. Even if Greece does not pay up on Thursday, it will not be in technical default as there is a 30-day grace period that could allow the government to pay its pension and wage obligations and strike a broader deal so that its creditors could disburse the needed funds. Mr. Varoufakis is also planning to meet with officials in the United States Treasury on Monday in the hope that the United States, as the dominant voice at the I.M.F., might pressure fund officials, and Europe as well, to cut Greece some slack. The United States has been quietly critical of Europe’s harsh stance toward Greece, warning of the consequences that a Greek default and exit from the euro would have on financial markets.

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Hollow phrases exercise.

Varoufakis Meets Lagarde: ‘Greece Will Pay All Creditors Including IMF’ (GR)

Greek Finance Minister Yanis Varoufakis said Greece will pay all its creditors, including the upcoming International Monetary Fund installment, as he was exiting a meeting with IMF managing director Cristine Lagarde in Washington, DC on Sunday April 5. Greece faces a deadline to repay a €450m loan to the International Monetary Fund on April 9th, and many sources had speculated that the crisis-hit country won’t be able to pay the installment. “Greece was a founding member of Bretton Woods institutions,” the Greek Finance Chief noted to reporters outside the IMF. Christine Lagarde made the following statement after the meeting: “Minister Varoufakis and I exchanged views on current developments and we both agreed that effective cooperation is in everyone’s interest. We noted that continuing uncertainty is not in Greece’s interest and I welcomed confirmation by the Minister that payment owing to the Fund would be forthcoming on April 9th.”

“I expressed my appreciation for the Minister’s commitment to improve the technical teams’ ability to work with the authorities to conduct the necessary due diligence in Athens, and to enhance the policy discussions with the teams in Brussels, both of which will resume promptly on Monday. I reiterated that the Fund remains committed to work together with the authorities to help Greece return to a sustainable path of growth and employment.” The Greek finance minister traveled to Washington, DC to hold an informal discussion on the Greek government’s reform program with the IMF’s managing director, Christine Lagarde. The Varoufakis-Lagarde meeting started at 6.15 pm on Sunday and lasted for two hours. The Greek Finance minister is also scheduled to meet with President Obama’s top economic and national security adviser Caroline Atkinson on Monday.

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Lowballing.

How Much Of Brazil’s Economy Got Lost In Petrobras Scandal? (Forbes)

A study out this week in Brazil estimates just how much the country lost to this ugly Petrobras oil scandal. The price tag: R$87 billion ($27.1 billion) that is expected to have been lost in GDP this year because of Petrobras’ corrupt, little ways. All told, that comes out to a little more than 1% of Brazil’s GDP burned up in scandal. Brazil’s GDP is about $2.2 trillion. The study was done by the Getulio Vargas Foundation. It based its estimates on Petrobras planned reduction in investments this year, which will hit oil and gas service firms, construction, engineering and consumer spending. Layoffs in construction will likely take at least R$13.6 billion from federal coffers this year. Two construction companies that colluded with Petrobras in the scandal, OAS and Galvao, have both filed for bankruptcy.

Construction companies are expected to reduce GDP by another R$10 billion, with the Foundation estimating a massive blood-letting in the job market, well into the thousands. Petrobras has yet to release earnings due to its third party auditors fearing repercussions if it signs off on phony accounts. So far, the market has April 30 as the date to discover just what Petrobras earned last year. But that can be delayed because shareholder lawsuits in New York have forced the Securities and Exchange Commission to review the earnings data before it is released to the market. The SEC will have their final say. At least three law firms have filed class action suits against the Brazilian oil giant. New York law firm Pomerantz is lead counsel on the case. Earnings will not include losses accrued from the scandal, the local Estado de Sao Paulo newspaper reported this week.

The newspaper also said that changes to the way auditors and regulators are reviewing Petrobras’ books might work in the oil firm’s favor. Last year, Deloitte said that Petrobras inflated its assets to the tune of R$88.6 billion. That number is expected to decline by at least half. Petrobras’ ex-CEO Maria Gracas Foster and her auditing firm PricewaterhouseCoopers are part of the shareholder lawsuit along with Brazilian bank Itau Unibanco. Estimates are for Brazil’s economy to contract by around 0.5% this year. “Brazil’s problems are all domestic and you can trace it to Petrobras,” says economist Alex Wolf at Standard Life Investments. “Consumer sentiment is down, unemployment is up slightly and investment is still down. We think Brazil is one of the most vulnerable emerging markets around.”

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“It’s a stark reversal from five years ago when a wave of European and US oil-services companies eagerly flocked to Brazil to build plants and set up offices.”

Petrobras Woes Reach Europe, US (Bloomberg)

When Italian oil services company Saipem spent $300 million at the start of the decade in Brazil, it joined a long list of foreign companies jockeying for business with Petrobras. Now it’s struggling to get paid. Saipem is one of at least five European companies that spoke about late payments, delivery delays or other difficulties in Brazil during fourth-quarter earnings calls. While day-to-day operations are functioning, Petrobras partners are also facing decision-making obstacles that are inhibiting planning, said officials at partners Galp Energia, BG Group and Repsol who asked not to be named. It’s a stark reversal from five years ago when a wave of European and US oil-services companies eagerly flocked to Brazil to build plants and set up offices.

Back then, Petrobras was ramping up investments to more than $100 million a day after making the Western Hemisphere’s biggest crude finds in decades. Today, Petrobras is slashing spending as oil prices plunge and it’s all but locked out of credit markets because of a sweeping corruption scandal. “Brazil’s a big market,” Terje Soerensen, CEO of Norwegian Siem Offshore, said in a telephone interview. “When that stops, it affects the entire industry.” Siem doesn’t know if the four to six vessels it had marked for Brazilian contracts will be needed now, Soerensen said. Saipem executives said in a February 16 earnings call that some payments from Petrobras were late. Norway’s Aker CEO Luis Araujo said in a March 17 interview that the company was asked to delay equipment deliveries.

Vallourec, a French oil-pipeline maker, and Alfa Laval, a Swedish oil industry engineering firm, also cited a difficult business environment in February conference calls. US oilfield-service providers Halliburton and Schlumberger echoed similar concerns. Halliburton sees activity continuing to decline in Brazil, President Jeff Miller said in a conference call earlier this year. The spending cuts Petrobras has announced will create “challenges” this year, Schlumberger CEO Paal Kibsgaard said.

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“But Japan’s bankers are laughing all the way to the…”

Japan’s Wary Manufacturers Resist Abe’s Urge To Splurge (Reuters)

Hirotoshi Ogura, a self-described “factory geek”, is Daikin Industries’ master of doing more with less – and part of the reason Japan’s recovery remains stuck in the slow lane. As Japan heads into the season of peak demand for room air-conditioners, Ogura and other Daikin managers have been tasked with figuring out how to boost output by some 20% at a plant in western Japan that six years ago the company had almost given up on as unprofitable. The wrinkle: they have no budget for new capital investment at the 45-year-old Kusatsu plant.

The still-evolving workaround shown to a recent visitor involves home-made robots for ferrying parts, experimental systems using gravity rather than electricity to power parts of the line, more temporary workers on seasonal contracts and dozens of steps to chip away at the 1.63 hours it takes to make a typical new air conditioner. “We can do a lot without spending anything,” says Ogura, a 33-year Daikin veteran who joined the company just after high school. “Anything we need, we first try to build ourselves.” Like Daikin, a number of Japanese manufacturers are shifting production back to Japan from China and elsewhere to take advantage of a weaker yen.

Rival Panasonic has pulled back some production of room air-conditioners, Sharp has brought back production of some refrigerators, and Canon has repatriated some output of high-end copiers, according to a list compiled by Nomura. But even as output recovers, Japanese companies remain cautious about new capital investment in factories and equipment. The trend is especially pronounced for smaller firms down the supply chain. After increasing capital spending by 6% in the just-completed fiscal year, small manufacturers plan a 14% decrease in the current year, according to the Bank of Japan’s quarterly survey released this week. Big manufacturers like Daikin plan a 5% increase, but overall investment remains 10% below pre-crisis 2007 levels.

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Economics and inbreeding.

The Inbred Bernanke-Summers Debate On Secular Stagnation (Steve Keen)

Ben Bernanke has recently started blogging (and tweeting), and his opening topics were why interest rates are so low around the world, and a critique of Larry Summers’ “secular stagnation” explanation for this phenomenon, and for persistent low growth since the financial crisis. Summers then replied to Bernanke’s argument, and a debate was on. So who is right: Bernanke who argues that the cause is a “global savings glut”, or Summers who argues that the cause is a slowdown in population growth, combined with a dearth of profitable investment opportunities, not only now but for the foreseeable future? I’d argue both of them, and neither simultaneously—both, because they can both point to empirical data that support their case; neither, because they are only putting forward explanations that are consistent with their largely shared view of how the economy works.

And the extent to which they are the product of a single way of thinking about the world simply cannot be exaggerated. It goes well beyond merely belonging to the same school of thought within economics (the “Neoclassical School” as opposed to the “Austrian”, “Post Keynesian”, “Marxist” etc.), or even the same sect within this school (“New Keynesian” as opposed to “New Classical”). Far beyond. They did their graduate training in the same economics department at the Massachusetts Institute of Technology (MIT). They attended the same macroeconomics class: Stanley Fisher’s course in monetary economics at MIT for graduate students (was it the same year—does anybody know?) Some of their fellow Fisher alumni included Ken Rogoff and Olivier Blanchard.

And that’s not all—far from it. Paul Samuelson (MIT) was overwhelming the intellectual architect of what most people these days think is Keynesian economics. Paul Samuelson is Larry Summers’ uncle. Samuelson’s “Foundations of Economic Analysis” was the core of the MIT approach to economics, and it became the model for economics textbooks around the world. Gregory Mankiw’s (PhD, MIT) market-dominating text today is a pale echo of Samuelson’s original. This group has been notably dismissive of other approaches to doing economics. Krugman (PhD MIT) leads the pack here, deriding views that are outside this mindset.

If I were describing a group of thoroughbred horses, alarm bells would already be ringing about a dangerous level of in-breeding. Sensible advice would be proffered about the need to inject new blood into this dangerously limited breeding pool. But the issue would only be of importance to the horseracing community. Instead I am talking about a set of individuals whose ideas have had enormous influence upon both the development of economic thought and the formation of economic policy around the globe for the last four decades. The fact that so much of the dominant approach to thinking about the economy emanates, not merely from such a limited perspective, but from such a limited and interconnected pool of people, should be serious cause for alarm – especially given how the world has fared under the influence of this thoroughbred group.

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Time to stop our support right here and now.

Leader Of Ukraine Neo Nazi Right Sector Appointed As Army Advisor (Zero Hedge)

With Greece on the verge of either getting kicked out of Europe or suffer through yet another government overhaul, one which many suggest may usher the “last” option for Greece, the ultra nationalist, neo-Nazi Golden Dawn party into governance, some wonder if it is not Europe’s ulterior intention to force a populist shift toward right wing, nationalist parties (perhaps best observed in France where Marine le Pen’s dramatic rise to power has left many dazed and confused) one which will lead to social instability and shortly thereafter, war (because in a world in which every Keynesian voodoo trick to revive the economy has failed, war is the last remaining outcome).

So while we await to see if Europe’s turn to ultra right wing movements accelerates in the coming months, we just learned of a very disturbing development in just as insolvent Ukraine, where moments ago the website of the local Ministry of Defense reported that Dmytro Yarosh, leader of Ukraine’s “Right Sector” political party, whose political ideology has been described as nationalist, ultranationalist, neofascist, right-wing, or far right, was just appointed as Advisor to Chief of General Staff. From the Ukraine ministry of defense:

Dmytro Yarosh appointed as Advisor to Chief of General Staff – Dmytro Yarosh, leader of ‘Pravyi Sector’ (Right Sector) political party, appointed as Advisor to Chief of General Staff. Yesterday, Colonel General Viktor Muzhenko, Chief of General Staff, and Dmytro Yarosh agreed the format of cooperation between ‘Pravyi Sector’ and the Ukrainian Armed Forces. Colonel General Viktor Muzhenko stressed the Ukrainian army had become one of the strongest armies of Europe; the Ukrainian soldiers proved they knew how to fight and appreciated the contribution of volunteer battalions to defense of Ukraine and said: “We understand the needs of changes and increase of efficiency at all the army levels. We also consider various models of formation of the army reserve.

We are developing the reforms and will implement them. We gathered all the patriots and defenders of Ukraine under single leadership. The enemy understands our unity and that its attempts end in failure. We have one goal and the united Ukraine. The Army becomes stronger each week”. Dmytro Yarosh underlined the unity was the key precondition for further successful fighting and demonstrated the readiness to establish the cooperation and integration of volunteer battalions to the Ukrainian Armed Forces. ‘Pravyi Sector’ is ready to be subordinated to military leaders in issues related to defense of state from the external enemy.

In other words, the leader of Ukraine’s Neo-Nazis will, as a local “patriot and defender of Ukraine” be advising, i.e., fighting for, what little remains of Ukraine’s army. Sadly the parallels with Europe of the 1920s and 1930s, not to mention the decade just following, grow more visible with every passing day.

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“..the UN warned in December that Kyiv’s embargo might be a violation of its obligations to citizens in the rebel-held territory.”

Eastern Ukraine Leaders Appeal To Merkel, Hollande To End Embargo (DW)

Alexander Zakharchenko and Igor Plotnitsky, the elected leaders of Donetsk and Luhansk, called for an end to Kyiv’s embargo on government services in eastern Ukraine on Saturday. In an open letter to Chancellor Angela Merkel and President Francois Hollande, they asked the leaders who helped negotiate the ceasefire in Ukraine to use their “influence to encourage Ukrainian offices to begin paying out welfare services to Donbass residents once again.” The government in Kyiv placed an embargo on social services to the country’s eastern residents in November following what it deemed illegal elections that gave power to Zakharchenko and Plotnitsky.

Although the EU, the US and the UN also condemned the polls, the UN warned in December that Kyiv’s embargo might be a violation of its obligations to citizens in the rebel-held territory. “The fate for many [in those areas] may well be life-threatening,” the Office of the UN High Commissioner for Human Rights said.” Kyiv had not only ceased paying out pensions, but had also relocated hospitals, schools and prisons, leaving a what the UNHCHR described as a “severe protection gap.”

The open letter to Merkel and Hollande also pointed to numerous violations of a ceasefire, which was implemented in February. Both Kyiv and Donbass have blamed each other for not upholding the truce. Over the weekend, three soldiers were killed by a landmine near Donetsk. Those were the first deaths reported since Monday, when one soldier was killed. Fighting in the region has claimed roughly 6,000 lives since last spring.

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The whole world should speak up against this warfare. Where’s the US?

Saudi Arabia Rejects Russian UN All-Inclusive Arms Embargo on Yemen (RT)

Saudi Arabia has rejected Russia’s amendments to a Security Council draft resolution which would see an all-inclusive arms embargo on all parties in the Yemeni conflict, as it continues to spiral out of control with civilian death toll climbing up. “There is little point in putting an embargo on the whole country. It doesn’t make sense to punish everybody else for the behavior of one party that has been the aggressor in this situation,”Saudi Arabia’s representative to the UN Abdallah Al-Mouallimi said after a closed emergency UN Security Council meeting on Saturday. Al-Mouallimi added that he “hopes” Russia won’t resort to its veto power in case the all-inclusive embargo clause is not added into the draft submitted by the Gulf Cooperation Council that urges an arms embargo only on the Houthis.

At the same time, Riyadh agreed with Moscow’s calls for need of “humanitarian pauses” in the Saudi-led coalition’s air campaign in Yemen – though saying that Saudi Arabia already cooperates fully in this regard. “We always provided the necessary facilities for humanitarian assistance to be delivered,” Al-Mouallimi told reporter heading out of the meeting. “We have cooperated fully with all requests for evacuation.” Moscow convened an emergency meeting on a draft resolution demanding “regular and obligatory” breaks in air assaults against Houthi rebels, in which many civilians keep dying in increasing numbers. The Russian-proposed draft circulated on Saturday demanded “rapid, safe and unhindered humanitarian access to ensure that humanitarian assistance reaches people in need.”

The current council president and Jordan’s Ambassador Dina Kawar said that the council members “need time” to consider the Russian draft resolution, adding that the talks would continue. “We hope that by Monday we can come up with something,” Kawar said. The 15-member council is considering the possibly of merging the Russian and Gulf Cooperation Council proposed drafts into one. The Security Council meeting coincided with the call from the International Committee of the Red Cross for a “humanitarian pause.” The NGO urged to break hostilities for at least 24 hours. “We urgently need an immediate halt to the fighting, to allow families in the worst affected areas, such as Aden, to venture out to get food and water, or to seek medical care,” said Robert Mardini, head of the ICRC’s operations in the Near and Middle East.

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As per these geniuses, Americans are going to drive like crazy. Storage problem? Just make gasoline! It’s the Forrest Gump approach.

Record Gasoline Output to Curb Biggest US Oil Glut in 85 Years (Bloomberg)

Refiners are poised to make gasoline at a record pace this year, keeping the biggest U.S. crude glut in more than 80 years from overflowing storage. They’re enjoying the best margins in two years as they finish seasonal maintenance of their plants before the summer driving season. They’ll increase output to meet consumer demand and they’ve added more than 100,000 barrels a day of capacity since last summer, when they processed the most oil on record. Booming crude production expanded inventories this year by 86 million barrels to 471 million, the highest level since 1930. Analysts from BofA to Goldman Sachs have said storage space may run out. What looks like an oversupply to banks is turning into an all-you-can-eat buffet for those making gasoline and diesel fuel.

“A lot of the excess crude we’ve been sitting on is going to get chewed up quickly,” Sam Davis at Wood Mackenzie, said in Houston April 2. “We’re going to move from a stock build to a stock draw.” Goldman Sachs and Bank of America have said storage builds are increasing the risk of breaching storage capacity, sending prices tumbling. West Texas Intermediate, the U.S. benchmark, already has lost more than half its value since June as growing U.S. shale production led to a global oversupply. Inventories surged as U.S. output rose 71% over the past five years as drillers used techniques like horizontal drilling and hydraulic fracturing to tap previously inaccessible oil in shale rock layers.

In Cushing, Oklahoma, the delivery point for WTI futures, supplies have more than tripled since early October to a record 58.9 million barrels. Last July, refiners processed 16.5 million barrels of crude a day, the highest level in monthly Energy Department data going back to 1961. Refining margins in March have averaged $28.09 a barrel, the most since March 2013. Refiners typically schedule maintenance shutdowns in the spring and fall, reducing oil demand during that time. U.S. refiners increased crude runs by an average 1.1 million barrels a day in April through July over the past five years. During that period, U.S. crude inventories have fallen an average of 24.7 million barrels from the end of May through September.

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Just lovely.

UK Law Changed To Force Nuclear Waste Dumps On Local Communities (Guardian)

Nuclear waste dumps can be imposed on local communities without their support under a new law rushed through in the final hours of parliament. Under the latest rules, the long search for a place to store Britain’s stockpile of 50 years’ worth of the most radioactive waste from power stations, weapons and medical use can be ended by bypassing local planning. Since last week, the sites are now officially considered “nationally significant infrastructure projects” and so will be chosen by the secretary of state for energy. He or she would get advice from the planning inspectorate, but would not be bound by the recommendation. Local councils and communities can object to details of the development but cannot stop it altogether.

The move went barely noticed as it was passed late on the day before parliament was prorogued for the general election, but has alarmed local objectors and anti-nuclear campaigners. Friends of the Earth’s planning advisor, Naomi Luhde-Thompson, said: “Communities will be rightly concerned about any attempts to foist a radioactive waste dump on them. We urgently need a long-term management plan for the radioactive waste we’ve already created, but decisions mustn’t be taken away from local people who have to live with the impacts.” Objectors worry that ministers are desperate to find a solution to the current radioactive waste problem to win public support to build a new generation of nuclear power stations.

Zac Goldsmith, one of the few government MPs who broke ranks to vote against the move, criticised the lack of public debate about such a “big” change. “Effectively it strips local authorities of the ability to stop waste being dumped in their communities,” he said. “If there had been a debate, there could have been a different outcome: most of the MPs who voted probably didn’t know what they were voting for.”

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 March 21, 2015  Posted by at 6:53 am Finance Tagged with: , , , , , , , , ,  


Jack Delano Freight operations on the Indiana Harbor Belt railroad 1943

Wages Haven’t Been This Crucial to US Economy in 50 Years (Bloomberg)
American Underwater Homeowners “Here To Stay” Zillow Says (Zero Hedge)
Here’s the Next Biggest Threat to Global Crude Oil Prices (Bloomberg)
Global Oil Glut Set To Grow As China Slows Crude Imports (Reuters)
Debt Is Oil Patch’s Four-Letter Word (Bloomberg)
Shocking Austerity: Greece’s Poor Lost 86% Of Income, Rich Only 17-20% (KTG)
Of Greeks and Germans: Re-Imagining Our Shared Future (Yanis Varoufakis)
Legal Experts: Greece Has Grounds for WWII Reparations (Greek Reporter)
It Really Looks Like Greeks Are Hiding Cash Under the Mattress (Bloomberg)
EU Offers Funds In Return For Urgent Greek Reforms (Guardian)
EC Head Juncker Offers $2 Billion In Unused Funds To Greece (RT)
EU Bank’s Lack Of Transparency ‘Like A John Le Carré Novel’ (Guardian)
Japan Pensions Sell Record $46 Billion Bonds to Buy Stocks (Bloomberg)
The Central Banks Will Not Be Able to Control the Dollar Carry Trade (Phoenix)
US Sets First Fracking Standards in More Than 30 Years (Bloomberg)
Ukraine Sends Request For Proposals For US Taxpayer-Guaranteed Bond (Reuters)
US ‘Aggressively’ Threatened Germany Over Snowden Aylum (Glenn Greenwald)
Inhofe’s Snowball Fight With NASA, US Navy, CEOs And The Pope (Paul B. Farrell)
Monsanto Weedkiller Roundup Is Probably Carcinogenic, WHO Says (Bloomberg)
The Lion Hugger (BBC)

Why? Because people refuse to go deeper into debt: “In an environment where credit is not being used in a material way, the fate of wages matters..” But that still sounds far too much like it’s a voluntary thing. It’s not.

Wages Haven’t Been This Crucial to US Economy in 50 Years (Bloomberg)

When it comes to U.S. economic growth, wages may never have been this important. The link between earnings and consumer spending has been tighter in this expansion than in any other since records began in the 1960s, according to calculations by Tom Porcelli at RBC Capital Markets. Wages have become even more critical as households, still shaken after being caught with too much debt when the recession hit, remain unwilling or unable to tap home equity or let credit-card balances balloon to buy that new television or dishwasher. By not overextending themselves again, Americans are only spending as much as their incomes will allow, meaning that 70% of the economy is riding on how fast pay rises.

“In an environment where credit is not being used in a material way, the fate of wages matters,” Porcelli said. “They’re doing all of the driving from a consumption perspective.” The correlation between growth in wages and consumer spending adjusted for inflation stands at 0.93 since June 2009, when the recovery began, according to Porcelli. A reading of 1 means they move in the same direction all the time, zero means there is little relationship and minus 1 means they continually diverge. Porcelli tracked wages through the index of aggregate weekly payrolls for private production workers, which takes into account hourly earnings, the length of the workweek and changes in employment for about 80% of the labor force. Records go back to 1964, longer than the measure for all employees that includes supervisors, which dates back only to 2006.

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“The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us..”

American Underwater Homeowners “Here To Stay” Zillow Says (Zero Hedge)

A few weeks back we commented on the rather disturbing news that repeat foreclosures jumped in January: “According to Black Knight Financial, both new and repeat foreclosures hit a 12-month high during the first month of the year with repeats (i.e. the borrower was rescued but has since entered the foreclosure process again) jumping 11% M/M. More troubling is the trend in repeat foreclosures which accounted for only 15% of total foreclosures during the crisis but now make up a startling 51%.” Here’s what the trend looks like:

Now, a new report from Zillow seems to offer further evidence that the US housing market may not be the picture of health after all (as if we needed more proof after housing starts cratered 17% in February). The%age of homeowners underwater in the US was flat from Q3 to Q4 which doesn’t sound all that terrible until you consider that this figure had fallen for 10 consecutive quarters. Things look particularly bad in Florida and the midwest where Zillow notes more than 25% of borrowers are sitting in a negative equity position. Here’s more:

In the fourth quarter of 2014, the U.S. negative equity rate – the%age of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9%, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year… More than a quarter of mortgaged homes are underwater in some markets in Florida and the Midwest…

Zillow goes on to note that we have entered a new era in the US housing market: the era of the underwater homeowner. Even better, the report goes on to note that in a number of cases, borrowers will likely be “in negative equity forever”:

…this represents a major turning point in the housing market. The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived. Negative equity, while it may still fall in fits and spurts, is decidedly here to stay, and will impact the market for years to come.

In fact, some homeowners trapped very deeply underwater may essentially be in negative equity forever. And those homeowners are much more likely to own America’s least expensive homes. Making matters worse, many homeowners in the bottom home value tiers are not only underwater, but very far underwater. Consider, for example, homeowners of the least expensive homes in the Detroit metro area. These homeowners are 29 times more likely to owe twice as much than their house is worth compared to a homeowner at the high end of the market.

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Darn! Trumped by teapots again!

Here’s the Next Biggest Threat to Global Crude Oil Prices (Bloomberg)

The next big threat to oil prices isn’t from OPEC or Bakken shale. It’s Russian samovars, or teapots. Simple refineries that process crude into fuel oil are scaling back, because when oil prices slump, the government reduces the discount that these refiners – known as teapots to those in the industry – get for exporting fuel. They use less crude, freeing it up for sale abroad, which in turn adds to the global glut. Russia may increase oil exports by as much as 250,000 barrels a day this year, according to James Henderson, a senior research fellow at the Oxford Institute for Energy Studies who’s followed the country’s energy industry for more than 20 years. That would equate to 5% growth in shipments, the most in at least a decade.

“The pain Russia is feeling from low oil prices has made more crude available for export,” Henderson said by phone March 18. “Quite a few of Russia’s simple refineries could reduce their runs.” Rising shipments from Russia, which ranks with Saudi Arabia and the U.S. as the world’s biggest oil producers, would put more pressure on crude, already down more than 50% from last year. Falling energy prices and U.S. and European Union sanctions imposed last year in response to the Ukraine crisis have pushed Russia to the brink of recession, damping demand for refined fuel products in the country. Crude loadings from Russian ports are 9.5% higher in the first quarter year over year, according to shipment schedules obtained by Bloomberg.

Teapot refineries processed as much as 800,000 barrels of crude a day last year, Igor Dyomin, a spokesman for Russia’s state-run pipeline operator, Transneft, said by phone March 19. A teapot refinery is one that produces mostly fuel oil rather than more premium fuels, according to Dyomin. Seven simple plants with a combined capacity of 1.2 million barrels a day are most at risk in the current price environment, according to Henderson.

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As seen from a mile away.

Global Oil Glut Set To Grow As China Slows Crude Imports (Reuters)

A global oversupply of oil is set to rise as China pauses in the build-up of its strategic reserves and Asian refineries slow crude imports ahead of the spring maintenance season, putting more downward pressure on prices. China’s purchases to fill its strategic petroleum reserves (SPR) had been one of the main drivers of Asian demand since August of last year, with the No.2 oil consumer taking up cheap crude to fill its tanks despite slowing economic growth. Yet China could pause its reserve purchases soon as tank sites reach their limits and new space only becomes available later this year. Little is known about China’s SPR levels.

The government seldom issues data, but its plan is to reach around 600 million barrels, about 90 days’ worth of imports. Most estimates put the SPR stocks currently to be 30-40 days’ worth. “I don’t think there is much (SPR) space left to fill,” a Chinese storage executive said under the condition of anonymity. In the Zhoushan area of Zhejiang province – site of two SPR bases and major commercial storage facilities – tanks are brimming, the executive said. “They are so full that one VLCC tanker owned by a state refiner has had to wait for almost 15 days to discharge,” he said. Adding to downward pressure is the expectation that Chinese refiners could process less crude oil in the second quarter as demand is dented by tax hikes and an economy growing at its slowest in 25 years.

Thomson Reuters data also shows that Asian imports overall have fallen 5% since peaking in December, when China’s purchases hit an all-time high at 7.2 million barrels per day. In India and Japan, crude imports for the most recent month are down 20% and 11% from a year ago, respectively, mainly due to the approach of the spring refinery maintenance season.

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“Just as fracking helped production soar in America’s oil fields, the debt boom is now magnifying the slump in prices..”

Debt Is Oil Patch’s Four-Letter Word (Bloomberg)

The 60 percent plunge in crude oil prices since mid-2014 isn’t just about increased production and slower global growth. Debt may be the four-letter word when it comes to explaining the extent of the energy sector’s collapse, a paper in the Bank for International Settlement’s Quarterly Review shows. While production has certainly increased and consumption cooled, current estimates of both are little changed from previous forecasts. This stands in contrast to the last two periods of similar oil-price declines in 1996 and 2008, which were attributed to big reductions in demand and/or a surge in production, according to the paper.nThis time, low borrowing costs, a product of easy Federal Reserve monetary policy, are a new wrinkle.

Cheap financing has made it easier for exploration and production (E&P) companies to finance operations and expand rapidly as the era of hydraulic fracturing kicked into high gear. Debt in the global oil and gas industry reached $2.5 trillion in 2014, 2 1/2 times what it was eight years earlier, according to the BIS paper. Just as fracking helped production soar in America’s oil fields, the debt boom is now magnifying the slump in prices as E&Ps boost current and future sales of crude to make sure they can fulfill their debt obligations. The direct effect on the economy is a sharp cutback in capital spending plans, already evidenced by plummeting rig counts.

At the same time, production continues to march higher. Deteriorating balance sheets encourage companies to keep pumping from existing wells even as the value of the assets (the oil) backing those securities declines. That explains the blowout in spreads between high-yield energy bonds and risk-free counterparts. “A sell-off of oil company debt could spill over to corporate bond markets more broadly if investors try to reduce the riskiness of their portfolios,” the BIS authors write. “The fact that debt of oil and gas firms represents a substantial portion of future redemptions underlines the potential system-wide relevance of developments in the sector.”

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Just to show you what Samaras and the Troika did to the country. And what the EU etc. want to continue doing.

Shocking Austerity: Greece’s Poor Lost 86% Of Income, Rich Only 17-20% (KTG)

Greece’s unbalanced austerity and drastic increase of poverty. The poorest households in the debt-ridden country lost nearly 86% of their income, while the richest lost only 17-20%. The tax burden on the poor increased by 337% while the burden on upper-income classes increased by only 9% !!! This is the result of a study that has analyzed 260.000 tax and income data from the years 2008 – 2012.

According to the study commissioned by the German Institute for Macroeconomic Research (IMK) affiliated with the Hans Böckler Foundation:
– The nominal gross income of Greek households decreased by almost a quarter in only four years.
– The wages cuts caused nearly half of the decline.
– The net income fell further by almost 9%, because the tax burden was significantly increased
– While all social classes suffered income losses due to cuts, tax increases and the economic crisis, particularly strongly affected were households of low- and middle-income. This was due to sharp increase in unemployment and tax increases, that were partially regressive.
– The total number of employees in the private sector suffered significantly greater loss of income, and they were more likely to be unemployed than those employed in the public sector.
-From 2009 to 2013 wages and salaries in the private sector declined in several stages at around 19%. Among other things, because the minimum wage was lowered and collective bargaining structures were weakened. Employees in the public sector lost around a quarter of their income.

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“In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors.”

Of Greeks and Germans: Re-Imagining Our Shared Future (Yanis Varoufakis)

Any sensible person can see how a certain video[1] has become part of something beyond a gesture. It has sparked off a kerfuffle reflecting the manner in which the 2008 banking crisis began to undermine Europe’s badly designed monetary union, turning proud nations against each other. When, in early 2010, the Greek state lost its capacity to service its debts to French, German and Greek banks, I campaigned against the Greek government’s quest for an enormous new loan from Europe’s taxpayers. Why?

I opposed the 2010 and 2012 ‘bailout’ loans from German and other European taxpayers because:
• the new loans represented not a bailout for Greece but a cynical transfer of losses from the books of the private banks to the weak shoulders of the weakest of Greek citizens. (How many of Europe’s taxpayers, who footed these loans, know that more than 90% of the €240 billion borrowed by Greece went to financial institutions, not to the Greek state or its citizens?)
• it was obvious that, at a time Greece could not repay its existing loans, the austerity conditions for giving Greece the new loans would crush Greek nominal incomes, making our debt even less sustainable
• the ‘bailout’ burden would, sooner or later, weigh down German and other European taxpayers once the weaker Greeks buckled under their mountainous debts (as moneyed Greeks had already shifted their deposits to Frankfurt, London etc.)
• misleading peoples and Parliaments by presenting a bank bailout as an act of ‘solidarity to Greece’ would turn Germans against Greeks, Greeks against Germans and, eventually, Europe against itself.
In 2010 Greece owed not one euro to German taxpayers. We had no right to borrow from them, or from other European taxpayers, while our public debt was unsustainable. Period!

That was my ‘controversial’ point in 2010: In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors. Well before the May 2010 ‘bailout’, I urged European citizens to tell their governments not to even think of transferring private losses to them. To no avail, of course. That transfer was effected soon after[2] with the largest taxpayer-backed loan in economic history given to the Greek state on austerity conditions that have caused Greeks to lose a quarter of their income, making it impossible to repay private and public debts, and causing a hideous humanitarian crisis. That was then, in 2010. What should we do now, in 2015, that Greece remains in crisis and our people, the Greeks and the Germans, have, regrettably but also predictably, descended into a mutual ‘blame game’?

First, we should work towards ending the toxic ‘blame game’ and the moralising finger-pointing which benefit only the enemies of Europe. Secondly, we need to focus on our joint interest: On how to grow and to reform Greece rapidly, so that the Greek state can best repay debts it should never have taken on while looking after its citizens as a modern European state ought to do. In practical terms, the 20th February Eurogroup agreement offers an excellent opportunity to move forward. Let us implement it immediately, as our leaders have urged in yesterday’s informal Brussels meeting. Looking ahead, and beyond current tensions, our joint task is to re-design Europe so that Germans and Greeks, along with all Europeans, can re-imagine our monetary union as a realm of shared prosperity.

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“Greece was not asked, so the claims have not gone away.” “The German government’s argument is thin and contestable. It is not permissible to agree to a treaty at the expense of a third party, in this case Greece..”

Legal Experts: Greece Has Grounds for WWII Reparations (Greek Reporter)

A growing number of legal experts are supporting Greece’s demands over the German war reparations from the country’s brutal Nazi occupation during World War II. Despite the official German refusal to address the issue, legal experts say now Athens has ground for the case. The hot issue is expected to be brought up by Greece’s newly elected Prime Minister Alexis Tsipras during his official visit to Berlin on Monday, where he is scheduled to hold a meeting with the German Chancellor Angela Merkel. The tension between the two countries have recently rose to unexpected levels and a series of events with the Finance Ministers of Greece and Germany, Yanis Varoufakis and Wolfgang Schaeuble respectively, and the war reparations issue — mainly by the Greek side — has significantly affected the already negative climate.

The Greek leftist-led coalition government has repeatedly raised the issue causing Germany’s firm reaction as expressed by German Finance Minister Wolfgang Schaeuble, who recently warned Athens to forget the war reparations, underlining that the issue has been settled decades ago. Central to Germany’s argument is that 115 million deutschemarks have been paid to Greece in the 1960s, while similar deals were made with other European countries that suffered a Nazi occupation. At the same time, though, lawyers from Germany and other countries have said the issue is not wrapped up, as Germany never agreed a universal deal to clear up reparations after its unconditional surrender.

The German answer on that is that in 1990, before its reunification, the “Two plus Four Treaty” agreement was signed with the United Kingdom, the United States, the former Soviet Union and France, which renounced all future claims. According to Berlin, this agreement settles the issue for other states too. “The German government’s argument is thin and contestable. It is not permissible to agree to a treaty at the expense of a third party, in this case Greece,” international law specialist Andreas Fischer-Lescano said, as cited by the Reuters. Mr. Lescano’s opinion finds several other experts in agreement. One of them, the Greek lawyer Anestis Nessou, who works in Germany highlighted that “there is a lot of room for interpretation. Greece was not asked, so the claims have not gone away.”

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Obviously. But still, that money did not leave the country.

It Really Looks Like Greeks Are Hiding Cash Under the Mattress (Bloomberg)

It is no secret that banks in Greece have been losing deposits in recent months. The question that is somewhat open, though, is where Greeks have been moving their deposits to. Have they been transferring the cash to other banks, or have they been squirreling it away under the mattress—and under bathroom tiles? At first glance, data from the Bank of Greece seem to point to the deposit transfer option rather than the cash-under-mattress option as the “banknotes in circulation” line item on its balance sheet hasn’t shown any big spike in recent months. This, however, does not tell the full story. The banknotes in circulation item on the Bank of Greece balance sheet only shows the amount of cash Greece has been allocated under its share of overall euro-area banknote circulation.

Any extra cash needs of the Greek economy are accounted for elsewhere on the Bank of Greece balance sheet under the rather drab headline of “net liabilities related to the allocation of euro banknotes within the Eurosystem.” This extra cash was zero before the start of the Greek crisis in 2009, climbed above €22 billion in the months leading to the 2012 Greek political crisis, and had been falling steadily since. Until December of last year, that is, when the Greek political crisis reemerged following the collapse of the Samaras administration. We can now clearly see there has been a €10 billion increase in cash in Greece in the three months to the end of February 2015. That is a lot of mattresses.

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Impossible conditions: “only on condition that Tsipras’s left-wing government had persuasively shown it was committed to enforcing austerity..” That directly contradicts its mandate.

EU Offers Funds In Return For Urgent Greek Reforms (Guardian)

Greece’s eurozone creditors are considering bringing forward a financial lifeline for Athens by a few weeks after Alexis Tsipras, the Greek prime minister, told EU leaders the country would be insolvent by the end of April without assistance. In a key three-hour meeting in Brussels that ended in the early hours of Friday, Tsipras informed his creditors if they wait until the end of April before releasing funds, it will be too late for Greece. According to an account of that meeting policymakers are now discussing whether they can supply emergency funding earlier than previously agreed. Tsipras was also advised to treat the Eurocrats working in Athens with more respect and ensure their safety. Under the terms of an agreement on Greece’s bailout last month, some €7.2bn in rescue funds were not to be disbursed until the end of April and only on condition that Tsipras’s left-wing government had persuasively shown it was committed to enforcing austerity in the country.

Chancellor Angela Merkel of Germany concluded a two-day EU summit in Brussels on Friday by stressing Tsipras had to present a “comprehensive” reform package urgently and this would need to be endorsed by the Eurogroup of finance ministers before Greece could access any of the funds. Merkel’s remarks came after the crucial meeting, that ran until 2am on Friday, when Tsipras came face-to-face for the first time with the leaders of his key creditors – Merkel and Mario Draghi, the president of the European Central Bank. The other five present at the crisis talks were the French president, François Hollande; the presidents of the European Commission and Council, Jean-Claude Juncker and Donald Tusk; Jeroen Dijsselbloem, head of the committee of eurozone finance ministers; and Uwe Corsepius, a senior eurocrat who has just been appointed Merkel’s EU adviser.

Tsipras had requested the meeting and had been confrontational in the days preceding it. According to an authoritative account of what took place, he started the negotiations by making it clear he expected urgently needed bailout funds released without giving very much in return. According to the account, he was disabused of that notion within 10 minutes and the meeting then ran smoothly, except for an episode where the new Greek leader was upbraided by Draghi, who is furious at the way senior EU officials monitoring the terms of the Greek bailout are being treated in Athens. According to senior officials in Brussels, the Tsipras government has been orchestrating a campaign of intimidation against the eurocrats in Athens, frustrating their work and refusing all access.

Visiting Athens this week, they were confined to a luxury hotel and denied access to government ministries. Their whereabouts were leaked to the media and “aggressive” demonstrations were staged outside the hotel. One of the top officials needed two bodyguards. Draghi was said to have read Tsipras the riot act, while the others demanded cooperation with the creditors. Merkel was said to have soothed things by telling Tsipras that, when International Monetary Fund officials go to Berlin, they are granted access to everything they need, even when it is a little humiliating.

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Narrative: it’s for the poor.

EC Head Juncker Offers $2 Billion In Unused Funds To Greece (RT)

The European Commission has made $2 billion of unused funds available to Greece to help the country avert a cash crunch, EC head Jean-Claude Juncker says. The offer was made a day after crisis talks between Greece’s new Prime Minister Alexis Tsipras and European leaders on Greece’s EU-IMF bailout. Greek authorities said on Friday they were gradually moving towards meeting the requirements of international creditors on a more detailed reform plan, after Prime Minister Tsipras said his coalition would intensify work to avert the country’s bankruptcy. Austerity policies have been the focus of a standoff between Greece and its troika of creditors.

Promises to end the era of drastic cuts helped Tsipras win power two months ago, but since then his stance has weakened. Greece’s western creditors have been insisting the country needs to reform its economy and start cutting its own expenses, if it wants to get new money for its ailing economy. Austerity policies have been the focus of a standoff between Greece and its Troika of creditors. Promises to end the era of drastic cuts helped Tsipras win power two months ago, but since then his stance has weakened. Greece’s western creditors have been insisting the country needs to reform its economy and start cutting its own expenses, if it wants to get new money for its ailing economy.

The Troika of creditors said in February they were ready to extend the current bailout program until June 2015, but a general agreement hasn’t been reached yet. Tsipras has sharply criticized the Troika methods calling them arm-twisting. He blames them for his country’s unprecedented recession. Greece received two bailouts from the EU in 2010 and 2014 totaling €240 billion. Having taken on austerity measures, Greece saw its economy losing a quarter of its value, with a third of Greeks living below the poverty line and unemployment exceeding 30%. Experts say the money Greece has now will only last till the end of March.

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Bizarre story.

EU Bank’s Lack Of Transparency ‘Like A John Le Carré Novel’ (Guardian)

The EU watchdog has accused the union’s bank of flouting its own transparency rules and hiding what it knows about allegations of tax avoidance by a Zambian mining firm largely owned by the Swiss commodity trader Glencore. On Tuesday, Emily O’Reilly, the European ombudsman, said she was not satisfied with the European Investment Bank’s claims that, despite an internal investigation, it had been unable to establish whether Mopani Copper Mines had avoided paying local tax running into tens of millions. Ten years ago, the EIB – which is owned by EU member states – loaned Mopani $50m (£30m) for the renovation of a smelter to reduce sulphur dioxide emissions.

Six years later, after a leaked audit report suggested that Mopani had avoided paying tens of millions of dollars in local tax, the bank announced an investigation into the company. It also halted loans to Glencore because of “serious concerns” about its corporate governance. Glencore has always denied the allegations, which it maintains are based on “fundamental factual errors”. Mopani repaid the EIB loan in full in 2012.

After the EIB refused to release the findings of its investigation, the charity Christian Aid referred the bank to the European ombudsman, who was granted access to the internal report. In her ruling, O’Reilly disputed the bank’s assertion that “it was not possible to comprehensively prove or disprove the allegations” made in the leaked audit report. She said: “The ombudsman considers that this statement does not adequately reflect the information contained in the [EIB] investigation report on this issue.”

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Someone should stop Abe and Kuroda. This will be a huge disaster.

Japan Pensions Sell Record $46 Billion Bonds to Buy Stocks (Bloomberg)

Japan’s public pension funds, which include the world’s biggest, accelerated their push to dump local bonds and invest the money abroad to a record pace. The $1.1 trillion Government Pension Investment Fund and its smaller peers almost doubled net sales of Japanese government bonds to 5.56 trillion yen ($46 billion) in the fourth quarter, the most in Bank of Japan figures dating back to 1998. They bought an unprecedented 2.39 trillion yen of foreign stocks and bonds. Selling of JGBs and buying of overseas securities has continued for six straight quarters.

GPIF posted its largest investment gain in almost two years last quarter after shifting more money into stocks from Japanese bonds, as it came under government pressure to boost returns to cover payouts for the world’s fastest-aging population. The Federation of National Public Service Personnel Mutual Aid Associations, last month said it will boost its investments in foreign stocks and bonds and cut exposure to domestic debt, matching the plan by GPIF. “It seems like three other civil service funds have yet to move,” Takafumi Yamawaki, the chief rates strategist in Tokyo at JPMorgan, said referring to data from the BOJ and and GPIF. “That means there is still some room left for the shift to take place.”

Japan’s public pension funds raised domestic stock holdings for a fifth quarter, adding a net 1.73 trillion yen, the most since 2009. They held 5.6% of a record 1.023 quadrillion yen of outstanding JGBs at the end of December. The biggest holder, the BOJ, owned 25% of the total as of then, it said Wednesday in Tokyo. GPIF hired four external managers of domestic and overseas stocks as it moves to boost equities to half its assets. It made a 5.2% return in the fourth quarter, the most since the period ended March 2013, according to a statement last month. Domestic shares returned 6.2% in the quarter, while local debt returned 1.9%. Foreign bonds returned 9.4%, and overseas stocks gained 10%.

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” The US Dollar carry trade is north of $9 trillion… literally bigger than the economies of Germany and Japan COMBINED..”

The Central Banks Will Not Be Able to Control the Dollar Carry Trade (Phoenix)

The biggest issue facing the finacial system today is the US Dollar rally. The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013. And it’s imploding as we write this. Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally bigger than the economies of Germany and Japan COMBINED. When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.

And the US Dollar has been rallying… HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown. Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up. You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed’s FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up. Rate hikes, QE, all of this stuff is minor in comparison to the carnage the US Dollar is having on the financial system. Take a look at the impact it’s having on emerging market currencies.

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It’s all about timing.

US Sets First Fracking Standards in More Than 30 Years (Bloomberg)

The Obama administration issued the first federal regulations for fracking since the drilling technique fueled a domestic energy boom, requiring extensive disclosures of the chemicals used on public land. After years of debate and delay, the Bureau of Land Management on Friday said drillers on federal lands must reveal the chemicals they use, meet well construction standards and safely dispose of contaminated water used in fracking. The rule had been highly anticipated by drillers, who oppose added regulation, and by environmentalists who have raised alarms about water contamination. Both sides had complaints with the outcome: groups representing the oil and gas industry sued to block its implementation and an environmental group said the regulation favored industry over public health.

“This rule will move our nation forward as we ensure responsible development while protecting public land resources,” Interior Secretary Sally Jewell said on a call with reporters. “As we continue to offer millions of acres of America’s public lands – your lands – for oil and gas development, it is critical that the public has confidence that robust safety and environmental protections are in place.” Domestic production from more than 100,000 wells on public lands accounts for about 11% of U.S. natural-gas production and 5% of oil production. Fracking, or hydraulic fracturing, is a technique in which water, chemicals and sand are shot underground to free oil or gas from rock. It is used for about 90% of the wells on federal lands.

The rule, which is set to take effect in three months, triggered criticism from environmental groups, which said the regulations put industry interests ahead of public health, and from congressional Republicans the oil and gas industry. The Independent Petroleum Association of America and the Western Energy Alliance filed a lawsuit against the Interior Department, saying the regulations are the product of “unsubstantiated concerns,” and lack evidence necessary to sustain them. The group asked in a lawsuit filed Friday in a U.S. court in Wyoming to have the new rules declared invalid.

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Can it get any crazier?

Ukraine Sends Request For Proposals For US Taxpayer-Guaranteed Bond (Reuters)

The Republic of Ukraine has sent out a request for proposals (RFP) to banks for a new US government-guaranteed bond, according to three sources. This is the second time the US government has thrown its financial backing behind a Ukrainian international bond issue. In May 2014, the US guaranteed a US$1bn Ukrainian bond maturing in 2019 through the US Agency for International Development. That bond was given a credit rating in line with the US sovereign at Aaa by Moody’s, AA+ by Standard & Poor’s and AAA by Fitch. This is a far cry from Ukraine’s credit rating, which stands at Caa3, CCC and CC with the same three agencies.

The RFP comes just over a week after Ukraine agreed a new four-year US$17.5bn bailout facility with the IMF. As part of the IMF agreement several institutions – including the EU, World Bank and US – have agreed to provide around US$7.5bn between them, according to analyst estimates, to the war torn country. It is not clear whether the US-backed bond forms part of the US contribution. Meanwhile, Ukraine is obligated under the IMF agreement to restructure at least US$15.3bn of outstanding debt. Ukraine’s finance minister Natalia Yaresko confirmed during an investor call last week that bondholders will see haircuts to principal, as well as maturity extensions and changes to interest payment.

Russia, which holds US$3bn of Ukrainian debt that comes due in December this year, will not be exempt from the cuts, Yaresko said. A clause in the debt owed to Russia allows it to accelerate bond payments if Ukraine’s debt-to-GDP ratio breaches 60% – a number that has been passed largely because Ukraine’s industrial power centre Donbass has ground to a halt under sustained conflict. Russia has repeatedly said that it would not accelerate the debt.

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Not surprised.

US ‘Aggressively’ Threatened Germany Over Snowden Aylum (Glenn Greenwald)

German Vice Chancellor Sigmar Gabriel (above) said this week in Homburg that the U.S. government threatened to cease sharing intelligence with Germany if Berlin offered asylum to NSA whistleblower Edward Snowden or otherwise arranged for him to travel to that country. “They told us they would stop notifying us of plots and other intelligence matters,” Gabriel said. The vice chancellor delivered a speech in which he praised the journalists who worked on the Snowden archive, and then lamented the fact that Snowden was forced to seek refuge in “Vladimir Putin’s autocratic Russia” because no other nation was willing and able to protect him from threats of imprisonment by the U.S. government (I was present at the event to receive an award).

That prompted an audience member to interrupt his speech and yell out: “Why don’t you bring him to Germany, then?” There has been a sustained debate in Germany over whether to grant asylum to Snowden, and a major controversy arose last year when a Parliamentary Committee investigating NSA spying divided as to whether to bring Snowden to testify in person, and then narrowly refused at the behest of the Merkel government. In response to the audience interruption, Gabriel claimed that Germany would be legally obligated to extradite Snowden to the U.S. if he were on German soil.

Afterward, however, when I pressed the vice chancellor (who is also head of the Social Democratic Party, as well as the country’s economy and energy minister) as to why the German government could not and would not offer Snowden asylum — which, under international law, negates the asylee’s status as a fugitive — he told me that the U.S. government had aggressively threatened the Germans that if they did so, they would be “cut off” from all intelligence sharing. That would mean, if the threat were carried out, that the Americans would literally allow the German population to remain vulnerable to a brewing attack discovered by the Americans by withholding that information from their government.

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“..if it’s really God’s plan, does He also pay the bill?”

Inhofe’s Snowball Fight With NASA, US Navy, CEOs And The Pope (Paul B. Farrell)

The Tulsa World newspaper recently reran a heated Washington Post editorial headlined: “Sen. Jim Inhofe embarrasses GOP and U.S.” The Senate’s top climate-science denier’s snowball throwing stunt in the Senate chambers was more offensive to his Senate colleagues and the liberal media than his official denier’s bible he wrote calling it “The Greatest Hoax: How the Global Warming Conspiracy Threatens Your Future.” But what if Oklahoma Sen. Inhofe is right? What if “God really is in charge” of the global warming mess? And what if “humans cannot change climate,” as he warns America? Get it? Humans cannot reverse the climate damage. The biggest “hoax is that there are some people who are so arrogant to think that they are so powerful.”

But humans can’t change climate. Humans are powerless to change it, not RiskyBusiness.org nor 350.org, not Big Oil nor the GOP. And if God is in solely responsible, humans are just bit players in a grand drama, but can’t affect the outcome one way or another, either accelerating it or halting it. And no matter what capitalists or environmentalists do, or plan, or legislate, or oppose, or spend, God’s plan is “The Plan,” and we may just make matters worse, and waste a lot of money … $60 trillion. Economic shocker. A ScientificAmerican team did a research study on the cost of fixing the global warming and climate-change problem. Bottom line: $60 trillion. That’s one helluva price tag. A whopping $60 trillion on our planet – where the total global GDP is only $75 trillion.

And if it’s really God’s plan, does He also pay the bill? Now add this to the economic equation: Is Inhofe speaking for God? He’s hardly neutral, a huge chunk of Oklahoma’s state revenue is generated by Big Oil. And he’s received well over a million bucks in campaign donations from fossil-fuel interests. Worse, no states, nations nor businesses, nobody has a master plan for dealing with climate change … yes, lots of conflicting, piecemeal technologies … but no tested, reliable grand solution … no guarantees anything will work.

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Monsanto has more clout than the WHO.

Monsanto Weedkiller Roundup Is Probably Carcinogenic, WHO Says (Bloomberg)

Monsanto’s best-selling weedkiller Roundup probably causes cancer, the World Health Organization said in a report that’s at odds with prior findings. Roundup is the market name for the chemical glyphosate. A report published by the WHO in the journal Lancet Oncology said Friday there is limited evidence that the weedkiller can cause non-Hodgkin’s lymphoma and lung cancer and convincing evidence it can cause cancer in lab animals. The report was posted on the website of the International Agency for Research on Cancer, or IARC, the Lyon, France-based arm of the WHO. Monsanto, which invented glyphosate in 1974, made its herbicide the world s most popular with the mid-1990s introduction of crops such as corn and soybeans that are genetically engineered to survive it.

The WHO didn t examine any new data and its findings are inconsistent with assessments from the U.S., EU and elsewhere, Monsanto said. We don t know how IARC could reach a conclusion that is such a dramatic departure from the conclusion reached by all regulatory agencies around the globe, Philip Miller, Monsanto vice president for global regulatory affairs, said in a statement. The evidence in humans is from studies of exposures, mostly agricultural, in the USA, Canada, and Sweden published since 2001, the WHO said in the report. In addition, there is convincing evidence that glyphosate also can cause cancer in laboratory animals. The WHO said exposure by the general population is generally low.

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Feel good story.

The Lion Hugger (BBC)

In 2012 Valentin Gruener rescued a young lion cub and raised it himself at a wildlife park in Botswana. It was the start of an extraordinary relationship. Now an astonishing scene is repeated each time they meet – the young lion leaps on Gruener and holds him in an affectionate embrace. “Since the lion arrived, which is three years now, I haven’t really left the camp,” says Gruener. “Sometimes for one night I go into the town here to organise something for the business, but other than that I’ve been here with the lion.” The lion he has devoted himself to is Sirga – a female cub he rescued from a holding pen established by a farmer who was fed up of shooting animals that preyed on his cattle. “The lions had killed the other two or three cubs inside the cage, and the mother abandoned the remaining cub. She was very tiny, maybe 10 days old,” Gruener says.

The farmer, Willy de Graaf, asked Gruener to try to save her and so he took her to a wildlife park financed by de Graaf and became her adoptive mother, “feeding her and taking care of her”. “You have this tiny cute animal sitting there and it’s already quite feisty,” he says. “It will become about 10 times that size and you will have to deal with it.” She’s much bigger now, but when Gruener opens her cage she still rushes to greet him – ecstatically throwing her paws around his neck. “That happens every time I open the door. It is an amazing thing every time it happens, and it’s such a passionate thing to do for this animal to jump and give me a hug,” says Gruener. “But I guess it makes sense. At the moment she has no other lions with her in the cage and I guess for her I’m like her species. So I’m the only friend she’s got. Lions are social cats so she’s always happy to see me.”

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