Nov 072017
 
 November 7, 2017  Posted by at 10:07 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


Edward S. Curtis Zuni Girl with Jar c. 1903

 

Saudi Arabia’s Government Purge — And How Washington Corruption Enabled It (IC)
Saudi Arabia Accuses Lebanon Of ‘Declaring War,’ Egypt Calls For Calm (CNBC)
Oil Prices Surge On Saudi Purge (CNBC)
The Black Swan In Plain Sight – Debt Out The Wazoo (Stockman)
What Could Go Wrong? (Jim Kunstler)
Growing Homeless Camps Contrast With West Coast Tech Wealth (AP)
Profiting from Puerto Rico’s Pain (New Yorker)
Sacked Catalan President Condemns ‘Brutal Judicial Offensive’ (G.)
Bernie Sanders Warns Of ‘International Oligarchy’ – Paradise Papers (G.)
End These Offshore Games Or Our Democracy Will Die (G.)
Four False Viral Claims Spread by Journalists on Twitter in One Week (GG)
Growing Number of Greeks Unable To Pay Taxes (K.)
Greek Notaries Refuse To Carry Out Foreclosures (K.)
Hawking: AI Could Be ‘Worst Event In The History Of Our Civilization’ (CNBC)
The Charter of the Forest (Standing)

 

 

Reading a lot on Saudi. This is good by Ryan Grim. ” And make no mistake, MBS is a project of the UAE — an odd turn of events given the relative sizes of the two countries.”

Saudi Arabia’s Government Purge — And How Washington Corruption Enabled It (IC)

Whatever the official explanation, it is being read around the world as a power grab by the kingdom’s rising crown prince. “The sweeping campaign of arrests appears to be the latest move to consolidate the power of Crown Prince Mohammed bin Salman, the favorite son and top adviser of King Salman,” as the New York Times put it. “The king had decreed the creation of a powerful new anti-corruption committee, headed by the crown prince, only hours before the committee ordered the arrests. The men are being held in the Ritz-Carlton Riyadh. “There is no jail for royals,” a Saudi source noted. The move marks a moment of reckoning for Washington’s foreign policy establishment, which struck a bargain of sorts with Mohammed bin Salman, known as MBS, and Yousef Al Otaiba, the United Arab Emirates ambassador to the U.S. who has been MBS’s leading advocate in Washington.

The unspoken arrangement was clear: The UAE and Saudi Arabia would pump millions into Washington’s political ecosystem while mouthing a belief in “reform,” and Washington would pretend to believe that they meant it. MBS has won praise for some policies, like an openness to reconsidering Saudi Arabia’s ban on women drivers. Meanwhile, however, the 32-year-old MBS has been pursuing a dangerously impulsive and aggressive regional policy, which has included a heightening of tensions with Iran, a catastrophic war on Yemen, and a blockade of ostensible ally Qatar. Those regional policies have been disasters for the millions who have suffered the consequences, including the starving people of Yemen, as well as for Saudi Arabia, but MBS has dug in harder and harder. And his supporters in Washington have not blinked.

The platitudes about reform were also challenged by recent mass arrests of religious figures and repression of anything that has remotely approached less than full support of MBS. The latest purge comes just days after White House adviser Jared Kushner, a close ally of Otaiba, visited Riyadh, and just hours after a bizarre-even-for-Trump tweet. Whatever legitimate debate there was about MBS ended Saturday — his drive to consolidate power is now too obvious to ignore. And that puts denizens of Washington’s think tank world in a difficult spot, as they have come to rely heavily on the Saudi and UAE end of the bargain. As The Intercept reported earlier, one think tank alone, the Middle East Institute, got a massive $20 million commitment from the UAE. And make no mistake, MBS is a project of the UAE — an odd turn of events given the relative sizes of the two countries.

“Our relationship with them is based on strategic depth, shared interests, and most importantly the hope that we could influence them. Not the other way around,” Otaiba has said privately. For the past two years, Otaiba has introduced MBS around Washington and offered assurances of his commitment to modernizing and reforming Saudi Arabia, according to people who’ve spoken with him, confirmed by emails leaked by the group, Global Leaks. When confronted with damning headlines, Otaiba tends to acknowledge the reform project is a work in progress, but insists that it is progress nonetheless, and in MBS resides the best chance of the region.

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“The region cannot support more turmoil..”

Saudi Arabia Accuses Lebanon Of ‘Declaring War,’ Egypt Calls For Calm (CNBC)

Egyptian President Abdel Fattah al-Sisi called on Middle Eastern nations to maintain stability just as tensions were suddenly spiking between Lebanon and Saudi Arabia. “The stability of the region is very important and we all have to protect it … I am talking to all the parties in the region to preserve it,” Al-Sisi said in an interview with CNBC over the weekend that aired Tuesday morning. On Saturday, Lebanese Prime Minister Saad al-Hariri shocked the political establishment in Beirut by announcing his resignation. The leader said he was stepping down amid concerns of a potential assassination plot against him. Speaking from Riyadh, Hariri criticized Iran, and its Lebanese ally Hezbollah, for igniting conflict in the region.

Following the CNBC interview, Reuters reported that Saudi Arabia sharply escalated rhetoric in the region by declaring that Lebanon had — figuratively at least — declared “war” against it because of aggression from Hezbollah. Saudi Gulf Affairs Minister Thamer al-Sabhan said the government of Lebanon “would be dealt with as a government declaring war on Saudi Arabia,” Reuters reported. When asked whether the time had come for Egypt to consider its own measures against Hezbollah, Al-Sisi replied, “The subject is not about taking on or not taking on, the subject is about the status of the fragile stability in the region in light of the unrest facing the region.” “The region cannot support more turmoil,” he said.

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What OPEC couldn’t do.

Oil Prices Surge On Saudi Purge (CNBC)

Oil prices surged to their highest levels since the summer of 2015 on Monday as a major political shakeup in Saudi Arabia underpinned a rally fueled by geopolitical risk, analysts said. Crude futures hit the new highs overnight after the powerful Saudi Crown Prince Mohammad bin Salman coordinated the arrest of several princes and ministers, ostensibly as part of crackdown on corruption. Prices pulled back in morning trade as the market digested a wealth of analysis on the Saudi purge, but futures suddenly shot higher at midday. International benchmark Brent crude oil topped $64 a barrel for the first time since June 2015. Meanwhile U.S. West Texas Intermediate crude broke above $57, a level the market has not seen since July 2015.

WTI finished Monday’s session $1.71 or 3.1 percent, higher at $57.35. Brent was trading up $2.04, or 3.3 percent, at $64.11 by 2:27 p.m. ET. Analysts cautioned against pinning the surge on any one headline, or even the Saudi arrests alone. Instead, they said a growing cloud of geopolitical uncertainty was unleashing animal spirits in an already bullish market. “You can grab all sorts of different headlines when you have a runaway market, and this is a runaway market right now,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. In this kind of environment, “people throw caution to the wind, and this is like the grand finale of fireworks,” he said.

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More debt, fast.

The Black Swan In Plain Sight – Debt Out The Wazoo (Stockman)

The black swan in plain sight does emit the Donald’s orangish glow, but at the end of the day its true color is actually red. That is, monumental towers of rapidly rising debt loom everywhere on the planet. For the moment, the artificial cash flow from this unsustainable borrowing spree is keeping a simulacrum of growth and prosperity alive. Yet this whole outbreak of debt madness – represented by $225 trillion outstanding on a global basis – is careening toward a financial and economic dead end that will soon crush today’s fiscally profligate politicians and heedless financial punters, alike, in a devastating reset of bond yields. For our first case in point, the always excellent Wolf Richter published a great chart over the weekend on the exploding US public debt.

To say the least, it constitutes a clanging wake-up call amidst the absolute fantasy world that prevails on both ends of the Acela Corridor. That’s because during the mere 8 weeks since the public debt ceiling was suspended by the Donald’s end-run with Nancy and Chuckles in September, the national debt has spiked by $640 billion. That’s about $16 billion per Federal business day, and they are not done yet. The US Treasury will continue to borrow heavily until the current debt ceiling “suspension” expires on December 8 – at which time it will repair to the old game of divesting trusting funds and employing other gimmicks which circumvent the ceiling, while waiting for Congress to blink and raise the ceiling or authorize a new “temporary” suspension.

As Wolf pointed out, this pattern played out during the debt showdowns of 2013 and 2015, as well, when the resulting “temporary” suspension resulted in borrowing spikes of $464 billion and $650 billion, respectively. Accordingly, Washington has suspended it way into a $5.7 trillion increase in the public debt in just six years since October 2011. That is, during a period which supposedly constitutes the third longest business expansion in US history.

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“The “narrative” is firmest before its falseness is proved by the turn of events, and there are an awful lot of events out there waiting to present, like debutantes dressing for a winter ball.”

What Could Go Wrong? (Jim Kunstler)

The economy isn’t growing and can’t grow. The economy is a revenant of something that used to exist, an industrial economy that has rolled over and died and come back as a moldy ghoul feeding on the ghostly memories of itself. Stocks go up because the unprecedented low interest rates established by the Fed allow company CEOs to “lever-up” issuing bonds (i.e. borrow “money” from, cough cough, “investors”) and then use the borrowed “money” to buy back their own stock to raise the share value, so they can justify their companies’ boards-of-directors jacking up their salaries and bonuses — based on the ghost of the idea that higher stock prices represent the creation of more actual things of value (front-end-loaders, pepperoni sticks, oil drilling rigs).

The economy is actually contracting because we can’t afford the energy it takes to run the things we do — mostly just driving around — and unemployment is not historically low, it’s simply mis-represented by not including the tens of millions of people who have dropped out of the work force. And an epic wickedness combined with cowardice drives the old legacy news business to look the other way and concoct its good times “narrative.” If any of the reporters at The New York Times and The Wall Street Journal really understand the legerdemain at work in these “mysteries” of finance, they’re afraid to say. The companies they work for are dying, like so many other enterprises in the non-financial realm of the used-to-be economy, and they don’t want to be out of paycheck until the lights finally go out.

The “narrative” is firmest before its falseness is proved by the turn of events, and there are an awful lot of events out there waiting to present, like debutantes dressing for a winter ball. The debt ceiling… North Korea… Mueller… Hillarygate….the state pension funds….That so many agree the USA has entered a permanent plateau of exquisite prosperity is a sure sign of its imminent implosion. What could go wrong?

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All bubbles disrupt.

Growing Homeless Camps Contrast With West Coast Tech Wealth (AP)

SEATTLE — Housing prices are soaring here thanks to the tech industry, but the boom comes with a consequence: A surge in homelessness marked by 400 unauthorized tent camps in parks, under bridges, on freeway medians and along busy sidewalks. The liberal city is trying to figure out what to do. “I’ve got economically zero unemployment in my city, and I’ve got thousands of homeless people that actually are working and just can’t afford housing,” said Seattle City Councilman Mike O’Brien. “There’s nowhere for these folks to move to.” That struggle is not Seattle’s alone. A homeless crisis is rocking the entire West Coast, pushing abject poverty into the open like never before. Public health is at risk, several cities have declared states of emergency, and cities and counties are spending millions – in some cases billions – in a search for solutions.

San Diego now scrubs its sidewalks with bleach to counter a deadly hepatitis A outbreak. In Anaheim, 400 people sleep along a bike path in the shadow of Angel Stadium. Organizers in Portland lit incense at an outdoor food festival to cover up the stench of urine in a parking lot where vendors set up shop. Homelessness is not new on the West Coast. But interviews with local officials and those who serve the homeless in California, Oregon and Washington — coupled with an Associated Press review of preliminary homeless data — confirm it’s getting worse. People who were once able to get by, even if they suffered a setback, are now pushed to the streets because housing has become so expensive. All it takes is a prolonged illness, a lost job, a broken limb, a family crisis. What was once a blip in fortunes now seems a life sentence.

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“There is no European Union standing ready to bail out Puerto Rico.”

Profiting from Puerto Rico’s Pain (New Yorker)

In 2012, Cate Long was working at the news service Reuters, where she wrote a daily column on the municipal-bond market. Municipal bonds are typically a sleepy corner of investing. They are forms of debt issued by states, counties, or cities, usually to fund infrastructure projects, such as airports and highways, and they are generally considered a safe investment, paying relatively low levels of interest. Finding a compelling story about the municipal-bond market is not an easy task, so when Long came across a document related to an $800 million bond sale that Puerto Rico would be undertaking that spring, she decided to look at the numbers more closely. What she found was startling. “I sat down and read it for a couple of hours, and I said, ‘These people are going to default,’ ” she told me recently. “It was pretty obvious.”

In the column she wrote about her analysis, titled “Puerto Rico Is America’s Greece,” Long expressed concern about the island’s economic health, calling it “America’s own Third World country.” At the time, Puerto Rico’s per-capita income was just $15,203 (less than half that of Mississippi, the poorest of the fifty states), and 45% of its residents were living below the poverty line. Puerto Rico also had a “massive” amount of debt, and was issuing even more bonds, which mutual funds and individuals were eagerly buying up, in spite of the warning signs. In her article, Long seemed to charge almost everyone involved, borrowers and creditors alike, with disingenuousness, incompetence, or both. “As happened with Greece, bond investors continue to buy the debt assuming at some point the government will be bailed out by somebody, somewhere,” she wrote.

“Caution, bond investors: There is no European Union standing ready to bail out Puerto Rico.” The article sent shock waves through the investment community. Moody’s Investors Service, which provides credit ratings, asked Long to come to its offices and defend her findings. (Her defense was, essentially, “I’m looking at the numbers.”) Nevertheless, the island continued its unsustainable borrowing for years—and Wall Street investors kept lending it money. By 2017, five years after Long’s warning, Puerto Rico’s bond debt had soared to $74 billion, almost a third of which was held by hedge funds. Meanwhile, the government was struggling to provide basic services to residents.

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Guess: he won’t be back in Catalonia in time for the Dec 21 elections.

Sacked Catalan President Condemns ‘Brutal Judicial Offensive’ (G.)

The deposed Catalan president, Carles Puigdemont, has accused the Spanish authorities of conducting a “brutal judicial offensive” against members of his ousted government and said he was afraid they would not receive an unbiased hearing in Spanish courts. Writing in the Guardian, Puigdemont said it was a “colossal outrage” that he and 13 colleagues were being investigated over possible charges including sedition and rebellion in relation to their roles in last month’s declaration of independence. “Today, the leaders of this democratic project stand accused of rebellion and face the severest punishment possible under the Spanish penal code; the same as for cases of terrorism and murder: 30 years in prison,” he said.

Puigdemont said he doubted that he and his colleagues would get a “fair and independent hearing” and called for “scrutiny from abroad” to help bring the Catalan crisis to a political, rather than judicial, conclusion. He added: “The Spanish state must honour what was said so many times in the years of terrorism: end violence and we can talk about everything. We, the supporters of Catalan independence, have never opted for violence, on the contrary. But now we find it was all a lie that everything is up for discussion.” The former Catalan leader fled to Brussels with a handful of cabinet colleagues last week, hours before Spain’s attorney general announced he would be seeking to bring charges of rebellion, sedition and misuse of public funds against them.

On Thursday, a national court judge ordered the jailing of the eight Catalan politicians and, a day later, issued a European arrest warrant for Puigdemont and four of his allies. Late on Sunday, a Belgian judge granted the five conditional release. They will make their first appearance in court on 17 November when a judge will decide on whether to execute the arrest warrant. The conditions of release include a ban on them leaving Belgium until their appearance in the court of first instance in Brussels later this month. With the extradition process likely to take months rather than weeks, there is growing scope for Puigdemont’s presence in Belgium to cause the country’s coalition government serious difficulties.

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No kidding.

Bernie Sanders Warns Of ‘International Oligarchy’ – Paradise Papers (G.)

Bernie Sanders has warned that the world is rapidly becoming an “international oligarchy” controlled by a tiny number of billionaires, highlighted by the revelations in the Paradise Papers. In a statement to the Guardian in the wake of the massive leak of documents exposing the secrets of offshore investors, Sanders said that the enrichment of wealthy individuals and companies in tax havens was “the major issue of our time”. He said the Paradise Papers opened the door on a “major problem not just for the US but for governments throughout the world”. “The major issue of our time is the rapid movement toward international oligarchy in which a handful of billionaires own and control a significant part of the global economy. The Paradise Papers shows how these billionaires and multinational corporations get richer by hiding their wealth and profits and avoid paying their fair share of taxes,” the US senator from Vermont said.

Sanders, who came in a close second to Hillary Clinton in the race for the Democratic presidential nomination last year, pointed the finger of blame for the flourishing of offshore holdings on both Congress and the Trump administration. He told the Guardian that Republicans in Congress were responsible for providing “even more tax breaks to profitable corporations like Apple and Nike”. The same tax breaks, he said, were being seized upon by super-wealthy members of Trump’s cabinet “who avoid billions in US taxes by shifting American jobs and profits to offshore tax havens. We need to close these loopholes and demand a fair and progressive tax system.”

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“We must accept that Big Finance and runaway inequality are incompatible with either a functioning democracy or a sustainable economy.”

End These Offshore Games Or Our Democracy Will Die (G.)

Tax avoidance is now so systemic that the Queen’s own wealth managers apparently see nothing wrong with her receiving £82m a year from taxpayers while shunting £10m into the Caymans and elsewhere. Shuttling between tax havens is so commonplace that economist Gabriel Zucman describes it as an “elite sport” – a sport in which the loser each time is the rest of society, which sees its taxbase shrink. These papers are aptly named: they outline a model that is paradise for the super-rich and purgatory for the rest of us. The second myth of British politics is that austerity was the only correct response to the high-living of the New Labour boom. That was always opposed by some of us – now it is exploded with each new tax investigation.

Drawing in part on data from last year’s Panama Papers and the HSBC files leaked in 2015, Zucman recently co-published a study that found wealthy Britons have stashed about £300bn – equivalent to 15% of our GDP – in offshore tax havens. Three hundred billion quid would more than cover our entire education budget for the rest of this decade and into the 2020s. Or, if you prefer, it is the equivalent of £350m being paid into the NHS every week for the next 16 years. Instead, it is funnelled offshore and used to buy yachts and mansions and other baubles – tax efficiently, of course. The economics of David Cameron and George Osborne can be summed up simply: punish the poor, but reward the rich for fear they will flee offshore. To that end, they scrapped the 50p tax rate for millionaires, they drove down corporation tax to a record low, and cut sweetheart deals with companies such as Google who couldn’t be bothered to pay even that much.

The result is that London has more super-rich residents than any other city – yet however soft the kid gloves with which they are treated, our wealthiest 0.01% stick 30-40% of their wealth offshore. In high-tax Sweden, by contrast, the rich do not use havens half as much. The logic that has underpinned our tax system over this entire decade is rubbish. [..] Add the City of London to Britain’s crown dependencies such as Jersey and the Isle of Man, and overseas territories such as the Caymans, and Britain’s tax havens account for nearly a quarter of the entire offshore financial industry. According to Deutsche Bank, London itself receives about £1bn a month in what it calls “hidden capital flows”, much of it Russian. It ends up in Stucco-fronted houses and fine art.

Much of this could be changed, and quickly. Britain has previously ordered the Caymans and other overseas territories to decriminalise homosexuality and abolish the death penalty. It could do the same with tax transparency, in an Order of Council that, a Mayfair tax lawyer recently told me, need be no longer than two sides of A4. We could change the rules on Lords and Commons’ members’ interests so that all offshore holdings would have to be registered. These are the fixes, but a real solution is ultimately political. We must accept that Big Finance and runaway inequality are incompatible with either a functioning democracy or a sustainable economy. Britain either shrinks the City of London, or the City of London will swallow Britain.

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Lots of talk about this, with widely differing views.

Four False Viral Claims Spread by Journalists on Twitter in One Week (GG)

There is ample talk, particularly of late, about the threats posed by social media to democracy and political discourse. Yet one of the primary ways that democracy is degraded by platforms such as Facebook and Twitter is, for obvious reasons, typically ignored in such discussions: the way they are used by American journalists to endorse factually false claims that quickly spread and become viral, entrenched into narratives, and thus can never be adequately corrected. The design of Twitter, where many political journalists spend their time, is in large part responsible for this damage. Its space constraints mean that tweeted headlines or tiny summaries of reporting are often assumed to be true with no critical analysis of their accuracy, and are easily spread.

Claims from journalists that people want to believe are shared like wildfire, while less popular, subsequent corrections or nuanced debunking are easily ignored. Whatever one’s views are on the actual impact of Twitter Russian bots, surely the propensity of journalistic falsehoods to spread far and wide is at least as significant. Just in the last week alone, there have been four major factually false claims that have gone viral because journalists on Twitter endorsed and spread them: three about the controversy involving Donna Brazile and the DNC, and one about documents and emails published by WikiLeaks during the 2016 campaign. It’s well worth examining them, both to document what the actual truth is as well as to understand how often and easily this online journalistic misleading occurs:

Viral Falsehood #1: The Clinton/DNC agreement cited by Brazile only applied to the General Election, not the primary.

Viral Falsehood #2: Sanders signed the same agreement with the DNC that Clinton did.

Viral Falsehood #3: Brazile stupidly thought she could unilaterally remove Clinton as the nominee.

Viral Falsehood #4: Evidence has emerged proving that the content of WikiLeaks documents and emails was doctored.

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Deep deep deeper and down.

Growing Number of Greeks Unable To Pay Taxes (K.)

Almost half a million taxpayers were added to the long list of debtors to the state in the month of September, according to the latest data from the Independent Authority for Public Revenue. The authority’s figures are a reflection of citizens’ increasing inability to pay their taxes, with 410,000 not paying their second income tax installment and the ENFIA property tax in September. More specifically, 4,267,408 taxpayers owed money to the Greek state in September, up from 3,857,086 in August. Moreover, by the end of September, the amount of unpaid taxes since the beginning of the year came to 9.25 billion euros. What concerns the government is whether the 410,000 that couldn’t pay their taxes in September will join the Finance Ministry’s 12-month installment program, as the hole in tax revenues will only grow if they don’t.

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What good will kicking people out do?

Greek Notaries Refuse To Carry Out Foreclosures (K.)

The outlook for property foreclosures in Greece is unclear after notaries announced a boycott on auctions until the end of the year, citing abuse by protesters, though foreign creditors expect the first online auctions to take place this month. According to sources, Greece’s lenders have suggested that the responsibility for foreclosures be shifted from notaries to Greek courts or possibly to Justice Ministry officials. The latter model, which has been tried and tested in Germany and Spain, was first mooted last month during a visit to Athens by bailout monitors. The auditors made it clear that the resumption of foreclosures on the homes of overindebted Greeks, which have dragged during the crisis years due to strikes by lawyers and notaries and more recently due to anti-austerity protesters, is a prerequisite for the successful conclusion of Greece’s current bailout review.

In comments at Monday’s summit of eurozone finance ministers in Brussels, ECB President Mario Draghi indicated that the resumption of property auctions would help banks by reducing the large proportion of bad loans that they hold. Commenting, Greek Finance Ministry sources said Athens was committed to “not taking our foot off the gas in the implementation of reforms for the review.” One of the many conditions of the latest review is that Greece launch electronic foreclosures. The first is supposed to take place on November 29. However, it is unclear how that procedure will be carried out in view of the protracted walkout by Greek notaries.

In a joint statement on Monday, the associations representing notaries in Athens, Piraeus and the islands of the Aegean and the Dodecanese said they will not be conducting any property auctions through December 31. The decision was reached during a meeting on Saturday with a vote of 134 in favor and 132 against. The associations said the decision was aimed at initiating talks with the Justice Ministry in order to provide protection to notaries who have come under attack – often violent – by anti-establishment groups and protesters opposed to foreclosures. Notaries also want the Justice Ministry to be made responsible for electronic auctions, as well as to address any disputes that may arise from them.

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I don’t share his optimism.

Hawking: AI Could Be ‘Worst Event In The History Of Our Civilization’ (CNBC)

The emergence of artificial intelligence (AI) could be the “worst event in the history of our civilization” unless society finds a way to control its development, high-profile physicist Stephen Hawking said Monday. He made the comments during a talk at the Web Summit technology conference in Lisbon, Portugal, in which he said, “computers can, in theory, emulate human intelligence, and exceed it.” Hawking talked up the potential of AI to help undo damage done to the natural world, or eradicate poverty and disease, with every aspect of society being “transformed.” But he admitted the future was uncertain. “Success in creating effective AI, could be the biggest event in the history of our civilization. Or the worst. We just don’t know. So we cannot know if we will be infinitely helped by AI, or ignored by it and side-lined, or conceivably destroyed by it,” Hawking said during the speech.

“Unless we learn how to prepare for, and avoid, the potential risks, AI could be the worst event in the history of our civilization. It brings dangers, like powerful autonomous weapons, or new ways for the few to oppress the many. It could bring great disruption to our economy.” Hawking explained that to avoid this potential reality, creators of AI need to “employ best practice and effective management.” The scientist highlighted some of the legislative work being carried out in Europe, particularly proposals put forward by lawmakers earlier this year to establish new rules around AI and robotics. Members of the European Parliament said European Union-wide rules were needed on the matter. Such developments are giving Hawking hope.

“I am an optimist and I believe that we can create AI for the good of the world. That it can work in harmony with us. We simply need to be aware of the dangers, identify them, employ the best possible practice and management, and prepare for its consequences well in advance,” Hawking said.

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We want one!

The Charter of the Forest (Standing)

Eight hundred years ago this month, after the death of a detested king and the defeat of a French invasion in the Battle of Lincoln, one of the foundation stones of the British constitution was laid down. It was the Charter of the Forest, sealed in St Paul’s on November 6, 1217, alongside a shortened Charter of Liberties from 2 years earlier (which became the Magna Carta). The Charter of the Forest was the first environmental charter forced on any government. It was the first to assert the rights of the property-less, of the commoners, and of the commons. It also made a modest advance for feminism, as it coincided with recognition of the rights of widows to have access to means of subsistence and to refuse to be remarried. The Charter has the distinction of having been on the statute books for longer than any other piece of legislation.

It was repealed 754 years later, in 1971, by a Tory government. In 2015, while spending lavishly on celebrating the Magna Carta anniversary, the government was asked in a written question in the House of Lords whether it would be celebrating the Charter this year. A Minister of Justice, Lord Faulks, airily dismissed the idea, stating that it was unimportant, without international significance. Yet earlier this year the American Bar Association suggested the Charter of the Forest had been a foundation of the American Constitution and that it was more important now than ever before. They were right. It is scarcely surprising that the political Right want to ignore the Charter. It is about the economic rights of the property-less, limiting private property rights and rolling back the enclosure of land, returning vast expanses to the commons.

It was remarkably subversive Sadly, whereas every school child is taught about the Magna Carta, few hear of the Charter. Yet for hundreds of years the Charter led the Magna Carta. It had to be read out in every church in England four times a year. It inspired struggles against enclosure and the plunder of the commons by the monarchy, aristocracy and emerging capitalist class, famously influencing the Diggers and Levellers in the 17th century, and protests against enclosure in the 18th and 19th. At the heart of the Charter, which is hard to understand unless words that have faded from use are interpreted, is the concept of the commons and the need to protect them and to compensate commoners for their loss. It is scarcely surprising that a government that is privatising and commercialising the remaining commons should wish to ignore it.

In 1066, William the Conqueror not only distributed parts of the commons to his bandits but also turned large tracts of them into ‘royal forests’ – ie, his own hunting grounds. By the time of the Domesday Book in 1086, there were 25 such forests. William’s successors expanded and turned them into revenue-raising zones to help pay for their wars. By 1217, there were 143 royal forests. The Charter achieved a reversal, and forced the monarchy to recognise the right of free men and women to pursue their livelihoods in forests. The notion of forest was much broader than it is today, and included villages and areas with few trees, such as Dartmoor and Exmoor. The forest was where commoners lived and worked collaboratively.

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Nov 022016
 
 November 2, 2016  Posted by at 10:11 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »


Unknown Petersburg, Virginia. Group of Company B, U.S. Engineer Battalion 1864

Asian Markets Show Jitters as Polls Narrow Gap Between Trump and Clinton (G.)
Goldman Says Weakening Yuan Is Behind Iron Ore Rally (BBG)
Maersk’s Profit Drops 43% On Overcapacity In Shipping Industry (BBG)
In Greece, Property Is Debt (NY Times)
Hillary Clinton Is Irreparably Damaged, Even If She Wins (MW)
370 Economists, Including 8 Nobel Laureates: ‘Do Not Vote for Trump’ (WSJ)
Clintons Are Under Multiple FBI Investigations as Agents Are Stymied (Martens)
Five Separate FBI Cases Are Probing Clinton’s Inner Circle (DM)
Top DOJ Official In Clinton Probe ‘Kept Podesta Out Of Jail’ in 1998 (F.)
Hillary Clinton: Wall Street’s Favorite Enemy (R.)
Can The American People Defeat The Oligarchy That Rules Them? (PCR)
Why Is MI5 Making Such A Fuss About Russia? (G.)
Central Banks and the Revenge of Politics (Issing)
Brexit Complexity Set to Overwhelm Politicians (G.)
Oil Drilling Thought To Have Caused 1933 Killer Earthquake In California (R.)
Turkey Rejects Europe’s ‘Red Line’ On Press Freedom After Detentions (R.)
It’s Now -Temporarily- Legal to Hack Your Own Car (IEEE)

 

 

Time to get nervous.

Asian Markets Show Jitters as Polls Narrow Gap Between Trump and Clinton (G.)

Asian shares stumbled and the US dollar was on the defensive on Wednesday amid signs investors were becoming spooked by polls narrowing the gap between US presidential nominees Donald Trump and Hillary Clinton. Market anxiety has deepened over a possible Trump victory given uncertainty on the Republican candidate’s stance on issues including foreign policy, trade relations and immigration, while Clinton is viewed as a candidate of the status quo. Stocks across Asia Pacific saw a broad selloff on Wednesday with the Nikkei in Japan down by 1.8% at 4am GMT. There were also steep falls in Australia where the ASX/S&P 200 benchmark index was down almost 1.5%, with falls of 1.3% in South Korea and Hong Kong as markets took a lead from a sharp drop on Wall Street overnight.

The main European markets were also expected to begin the day in the red when they open later, according to futures trading. The tumultuous presidential race appeared to tighten after news that the FBI was reviewing more emails as part of a probe into Clinton’s use of a private email server. While Clinton held a five-percentage-point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, other polls showed Trump ahead by 1-2 %age points. That pushed the US S&P500 Index down to a four-month closing low on Tuesday. The CBOE volatility index, often seen as an investors’ fear gauge, briefly rose to a two-month high, above 20%.

In the currency market, traders sold the dollar partly as they suspect Trump would prefer a weaker dollar given his protectionist stance on international trade. The euro rose to a three-week high of $1.1069, up about 2% from its seven-and-a-half-month low of $1.0851 hit just over a week ago. Against the yen, the dollar slipped to 104.03 yen from three-month high of 105.54 yen set on Friday. Koichi Yoshikawa at Standard Chartered Bank said: “If you had a long dollar position on the view that the dollar would gain because Clinton would win, you would surely close that position because her victory is less certain.”

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There’s that picture again of massive inventory in ports.

Goldman Says Weakening Yuan Is Behind Iron Ore Rally (BBG)

Iron ore’s eye-catching rally to the highest since April is probably due to the weakening of the yuan, according to Goldman Sachs, which said that China’s currency may decline further against the dollar and help to sustain prices of the raw material. Prices surged last month as losses in the yuan prompted some local investors to move into dollar-linked assets, including iron ore, analysts Hui Shan, Amber Cai and Christian Lelong said in a report received Wednesday. Should the Federal Reserve raise interest rates by the end of the year, there’s scope for further yuan weakness, they wrote in the Nov. 1 note. Iron ore has rallied even as signs of robust supply multiply, including a buildup in stockpiles at ports in China.

While some analysts have sought to explain the jump by pointing to higher coal prices as a driver, Goldman said that didn’t stack up as a reason, targeting the yuan’s drop instead. The Chinese currency has sagged as local policy makers signaled they are willing to allow greater currency flexibility amid a slump in exports and rise in the dollar. “By our estimates, about 60% of the iron ore price rally in October can be explained by the yuan depreciation,” the analysts said. Iron ore may be the first in line to benefit from onshore investment flows into commodities as the “futures curve is almost always backwardated, making long iron ore a positive-carry trade,” they said, referring to bets on gains.

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Global trade bites again.

Maersk’s Profit Drops 43% On Overcapacity In Shipping Industry (BBG)

A.P. Moller-Maersk, owner of the world’s largest container line, reported a 43% decline in third-quarter profit as the shipping industry suffers from overcapacity. Net income fell to $429 million in the third quarter compared with $755 million in the same period a year earlier, the Copenhagen-based company said in a statement Wednesday. That missed the average estimate of $501 million in a Bloomberg survey of 15 analysts. “The result is unsatisfactory, but driven by low prices,” Chief Executive Officer Soren Skou said in the statement. “We generally perform strongly on cost and volume across businesses.” Maersk said its underlying profit for 2016 will be “below” $1 billion. Previously, the company had said the full-year result would be “significantly” below 2015’s $3.1 billion.

An excess of vessels and weak trade growth have driven container lines to try to under-bid each other on the rates they offer clients. The climate has proven lethal for some industry members, with South Korea’s biggest line Hanjin Shipping Co. filing for bankruptcy protection in August. Earlier this week, Japan’s three biggest container lines said they plan to merge their operations in an efforts to return to profit. Maersk’s response has been to cut costs. On Wednesday it said costs at Maersk Line declined 14% in the quarter, but that was outpaced by a 16% decline in freight rates. The shipping line reported a net operating loss after tax of $116 million compared with a profit by the same measure of $264 million a year earlier as freight rates fell 16%.

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The destruction continues unabated and unopposed. “Construction of homes has collapsed, dropping by 95% from 2007 to 2016.”

In Greece, Property Is Debt (NY Times)

At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate. Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden. The figures are clear. In 2013, two years after a property tax was introduced (previously, real estate tax revenue came mainly from transfers or conveyance taxes), 29,200 people declined to accept their inheritance, according to the Justice Ministry. In 2015, the number had climbed to 45,627, an increase of 56% in two years.

Reports from across the country suggest that this year, too, large numbers of people are refusing to inherit. “This can be very painful,” said Giorgos Voukelatos, a lawyer. “People may lose their family home. Because if the father or mother had debts, the child might be unemployed and unable to carry this weight as well.” The growing aversion to property is evident in the drop in business at notaries public. The national statistics service, Elstat, reported in July that in 2014 there were 23,221 deeds in which living parents transferred property to their children, down from 90,718 in 2008. The number of wills drawn up or notarized has been steady through the crisis, at around 30,000 annually, suggesting that many inheritances being rejected were not part of formal wills. (More than 120,000 people die each year.)

The desire to inherit used to be so great that some took it upon themselves to give fortune a hand. Greeks were stunned in 1987 when the police uncovered a gang that had killed at least eight rich elderly people after forging their wills. The plot’s leader was a lawyer and former mayor of an Athens suburb; accomplices included a notary public and a gravedigger. Murder Inc., as the news media called it, was seared into popular consciousness as an instance in which criminals acted out a common desire. Today, people are more likely to run away from real estate than be tempted to kill for it.

The collapse of the real estate market shows why. The total number of transactions dropped by 74% from 2004 to 2014. People once hoped that if they came into property they could sell it and live easier; now they fear that they will be unable to sell it and the taxes will drag them down. If they did find a buyer, they would be unlikely to gain much, as prices of apartments have fallen by 41% since 2008, according to the Bank of Greece. Construction of homes has collapsed, dropping by 95% from 2007 to 2016. With no end to the crisis in sight, people will continue to dread coming into property.

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An entire campaign blinded by hubris.

Hillary Clinton Is Irreparably Damaged, Even If She Wins (MW)

We don’t know whether the reopening of the FBI probe of Hillary Clinton’s emails will cost her the election. It may be that she will still emerge the winner after next Tuesday’s vote, or that Donald Trump’s momentum from the Wikileaks emails, Obamacare’s failures, and Clinton’s flawed candidacy were going to carry him to victory in any case. What we do know is that whoever wins, we are in for a fiasco in politics that will make even this fiasco of a campaign pale by comparison. There is hardly any scenario that is too far-fetched. Even if the polls are right and Clinton’s lead translates into an electoral victory, she will be so damaged going into office that her chances of getting anything done will be virtually nil. In this sense alone, Trump’s claim that this scandal is “worse than Watergate” could prove to be true.

As an incumbent, Richard Nixon at least had an administration in place when he won re-election in 1972, though it took nearly another two years before he was forced to resign under threat of impeachment. Clinton is likely to be stymied from the start, especially if the ongoing investigations into her email practices and the Clinton Foundation lead to further damaging disclosures. For one thing, we now have the precedence of Watergate, and Republicans, who are sure to retain the House and now probably the Senate, will not let go. There is hardly a chance that it will all end well for Clinton and that she will be exonerated because what is already known has many Republicans convinced that she is guilty at the very least of mishandling classified documents and perhaps obstruction of justice.

While the immediate attention in the wake of last week’s disclosure about reopening the email investigation has focused on FBI Director James Comey, the real conundrum in all this concerns his boss, Attorney General Loretta Lynch. Lynch fatally compromised her position by meeting with former President Bill Clinton just days before the original investigation was closed without a grand jury ever considering the evidence. And now her failure to block Comey’s disclosure — while leaking that she wanted to — is another ethical lapse. Other reports indicate that she attempted to quash the investigation into the Clinton Foundation. It is hard to see how she can remain in office even if Clinton wins and wants to keep her. Her resignation — or even impeachment — seems inevitable with Republicans out for blood.

The damage done to the whole Clinton entourage through the machinations exposed in the Wikileaks emails means that many of them – Huma Abedin, Cheryl Mills, John Podesta, Neera Tanden – will be virtually untenable in any position of responsibility in a new Clinton administration. And this is the best-case scenario for Clinton. We all know what the worst-case scenario is.

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Hilarious. 370 economists making Trump’s case for him: “The economists object to Mr. Trump for questioning the legitimacy of economic data produced by institutions such as the Bureau of Labor Statistics.” Everybody questions the BLS. Except for 370 economists?!

370 Economists, Including 8 Nobel Laureates: ‘Do Not Vote for Trump’ (WSJ)

A group of 370 economists, including eight Nobel laureates in economics, have signed a letter warning against the election of Republican nominee Donald Trump, calling him a “dangerous, destructive choice” for the country. Signatories include economists Angus Deaton of Princeton University, who won the economics Nobel last year, and Oliver Hart of Harvard University, who was one of the two Nobel winners this year. The letter is notable because it is less partisan or ideological than such quadrennial exercises, and instead takes issue with Mr. Trump’s history of promoting debunked falsehoods.

“He misinforms the electorate, degrades trust in public institutions with conspiracy theories and promotes willful delusion over engagement with reality,” said the signatories, which also include Paul Romer, the new chief economist at the World Bank, and Kenneth Arrow, the 1972 Nobel winner. The economists object to Mr. Trump for questioning the legitimacy of economic data produced by institutions such as the Bureau of Labor Statistics. They say he hasn’t proposed credible solutions to reduce budget deficits and that he has promoted misleading claims about trade and tax policy. They also chide Mr. Trump for failing to “listen to credible experts” and for promoting “magical thinking and conspiracy theories over sober assessments of feasible economic policy options.”

[..] Peter Navarro, a Trump adviser and professor at the University of California, Irvine, said the economics profession has been so wrong about the impact of trade deals, including both the North American Free Trade Agreement in 1994 and the accession of China to the World Trade Organization in 2001, that it has little standing to criticize Mr. Trump’s position on those pacts. Tuesday’s letter “is a headline, whatever, and then they wind up being just so horribly wrong,” Mr. Navarro said. “You shouldn’t believe economists or Nobel Prize winners on trade.”

“You don’t need a Ph.D. in economics to know Trump’s plan to cut taxes, reduce regulation, increase oil, gas, and clean coal production, and eliminate our trade deficit by increasing exports and reducing imports will significantly increase growth, boost wages and generate trillions in new tax revenues,” he said. “This new letter is an embarrassment to an economics profession which continues to insist bad trade deals are good for America—a classic case of reality running roughshod over textbook trade theory.”

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“Not only was Bill Clinton’s wife under an FBI investigation at the time [..] but his own charitable foundation was also under investigation, a fact that was unknown at the time to the public and the media.

Clintons Are Under Multiple FBI Investigations as Agents Are Stymied (Martens)

Current and former FBI officials have launched a media counter-offensive to engage head to head with the Clinton media machine and to throw off the shackles the Loretta Lynch Justice Department has used to stymie their multiple investigations into the Clinton pay-to-play network. Over the past weekend, former FBI Assistant Director and current CNN Senior Law Enforcement Analyst Tom Fuentes told viewers that “the FBI has an intensive investigation ongoing into the Clinton Foundation.” He said he had received this information from “senior officials” at the FBI, “several of them, in and out of the Bureau.” That information was further supported by an in-depth article in the Wall Street Journal by Devlin Barrett. According to Barrett, the “probe of the foundation began more than a year ago to determine whether financial crimes or influence peddling occurred related to the charity.”

Barrett’s article suggests that the Justice Department, which oversees the FBI, has attempted to circumvent the investigation. The new revelations lead to the appearance of wrongdoing on the part of U.S. Attorney General Loretta Lynch for secretly meeting with Bill Clinton on her plane on the tarmac of Phoenix Sky Harbor International Airport on the evening of June 28 of this year. Not only was Bill Clinton’s wife under an FBI investigation at the time over her use of a private email server in the basement of her New York home over which Top Secret material was transmitted while she was Secretary of State but his own charitable foundation was also under investigation, a fact that was unknown at the time to the public and the media.

The reports leaking out of the FBI over the weekend came on the heels of FBI Director James Comey sending a letter to members of Congress on Friday acknowledging that the investigation into the Hillary Clinton email server was not closed as he had previously testified to Congress, but had been reopened as a result of “pertinent” emails turning up.

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The Daily Mail reoprts on ‘persons of interest’: Huma Abedin, Terry McAuliffe, Cheryl Mills, Phillipe Reines, John Podesta, Tony Podesta, Doug Band, Justin Cooper, Anthony Weiner

Five Separate FBI Cases Are Probing Clinton’s Inner Circle (DM)

The extent to which Hillary Clinton’s key advisers are now the focus of major FBI investigations is becoming clear. The Clintons’ long-term inner-circle – some of whom stretch back in service to the very first days of Bill’s White House – are being examined in at least five separate investigations. The scale of the FBI’s interest in some of America’s most powerful political fixers – one of them a sitting governor – underlines just how difficult it will be for Clinton to shake off the taint of scandal if she enters the White House. There are, in fact, not one but five separate FBI investigations which involve members of Clinton’s inner circle or their closest relatives – the people at the center of what has come to be known as Clintonworld.

The five known investigations are into: Anthony Weiner, Huma Abedin’s estranged husband sexting a 15-year-old; the handling of classified material by Clinton and her staff on her private email server; questions over whether the Clinton Foundation was used as a front for influence-peddling; whether the Virginia governor broke laws about foreign donations; and whether Hillary’s campaign chairman’s brother did the same. The progress of the Clinton Foundation investigation and that into McAuliffe was first reported by the Wall Street Journal. The FBI does not generally comment on investigations, so it is entirely possible there are more under way. Here are the advisers and consiglieri – and how the FBI is looking at them:

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Rep. Gowdy has said he thinks Kadzik will do his job properly.

Top DOJ Official In Clinton Probe ‘Kept Podesta Out Of Jail’ in 1998 (F.)

The Justice Department official in charge of informing Congress about the newly reactivated Hillary Clinton email probe is a political appointee and former private-practice lawyer who kept Clinton Campaign Chairman John Podesta “out of jail,” lobbied for a tax cheat later pardoned by President Bill Clinton and led the effort to confirm Attorney General Loretta Lynch. Peter Kadzik, who was confirmed as assistant attorney general for legislative affairs in June 2014, represented Podesta in 1998 when independent counsel Kenneth Starr was investigating Podesta for his possible role in helping ex-Bill Clinton intern and mistress Monica Lewinsky land a job at the United Nations.

“Fantastic lawyer. Kept me out of jail,” Podesta wrote on Sept. 8, 2008 to Obama aide Cassandra Butts, according to emails hacked from Podesta’s Gmail account and posted by WikiLeaks. Kadzik’s name has surfaced multiple times in regard to the FBI’s investigation of Democratic presidential nominee Hillary Clinton for using a private, homebrewed server. After FBI Director James Comey informed Congress on Thursday the FBI was reviving its inquiry when new evidence linked to a separate investigation was discovered, congressional leaders wrote to the Department of Justice seeking more information. Kadzik replied. “We assure you that the Department will continue to work closely with the FBI and together, dedicate all necessary resources and take appropriate steps as expeditiously as possible,” Kadzik wrote on Oct. 31.

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Can’t keep your enemies any closer than this.

Hillary Clinton: Wall Street’s Favorite Enemy (R.)

Hillary Clinton began her presidential campaign by promising to do what it takes to rein in Wall Street. Boosted by Wall Street’s toughest critics, U.S. senators Bernie Sanders and Elizabeth Warren, the Democratic candidate has declared “the deck is still stacked in favor of those at the top” and said she would raise bank fees and tighten banking regulations. She has encouraged regulators to break up too-risky banks. And yet, Wall Street appears unperturbed by the prospect of a Clinton presidency. In fact, the banking industry has supported Clinton with buckets of cash and stocks have sold off on days when the Clinton campaign stumbles. Privately, bankers say that they trust her to remain a pragmatist who will keep the current regulatory regime laid down by the Dodd-Frank Wall Street reform legislation passed in 2010.

“I don’t think Clinton wakes up thinking about Wall Street,” one senior banking industry lobbyist said. There are hints in apparently leaked email discussions among Clinton’s campaign staff that bankers are not far off the mark when they count on her to tread lightly. Pressed during the campaign by progressive Democrats to call for a revival of the Glass-Steagall Act that would require separation of commercial and investment banking, Clinton ultimately refused. She also weighed another progressive favorite – a tax on financial transactions- but instead recommended a far narrower plan to tax only canceled orders by high speed traders. Ultimately, what bankers most like about Clinton is that she is not Donald Trump.

Many financiers fear her unorthodox Republican rival could disrupt global trade, damage geopolitical relationships and rattle markets, industry analysts and participants say. “Those are the kind of things that corner offices think about,” said Karen Shaw Petrou of Federal Financial Analytics, whose firm advises financial firms about U.S. regulatory policy. “The overriding concern about Trump has dominated people’s thinking.” [..] People who work for hedge funds and private equity firms have contributed more than $56 million to Clinton’s presidential campaign and the supporting groups that face no legal cap on donations. Trump’s campaign and related groups received just $243,000 from donors in the same sector, according to data from the Center for Responsive Politics.

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“During an election it is OK to announce that a candidate for president is cleared but it is not OK to say that a candidate is under investigation.”

Can The American People Defeat The Oligarchy That Rules Them? (PCR)

Aren’t you surprised that Hillary and the presstitutes haven’t blamed Putin for FBI director Comey’s reopening of the Hillary email case? But the presstitutes have done the next best thing for Hillary. They have made Comey the issue, not Hillary. According to US Senator Harry Reid and the presstitutes, we don’t need to worry about Hillary’s crimes. After all, she is only a political woman feathering her nest, just as political men have done for ages. Why all this misogynist talk about Hillary? The presstitutes’ cry is that Comey’s alleged crime is far more important. This woman-hating Republican violated the Hatch Act by telling Congress that the investigation he said was closed is now reopened. A very strange interpretation of the Hatch Act. During an election it is OK to announce that a candidate for president is cleared but it is not OK to say that a candidate is under investigation.

In July 2016 Comey violated the Hatch Act when he, on orders from the corrupt Obama Attorney General, announced Hillary clean. In so doing, Comey used the prestige of federal clearance of Hillary’s violation of national security protocols to boost her standing in the election polls. Actually, Hillary’s standing in the polls is based on the pollsters over-weighting Hillary supporters in the polls. It is easy to produce a favorite if you overweight their supporters in the poll questions. If you look at the crowds attending the two candidate’s public appearances, it is clear that the American people prefer Donald Trump, who is opposed to war with Russia and China. War with nuclear powers is the big issue of the election.

Hillary’s problem has the ruling American Oligarcy, for which Hillary is the total servant, concerned. What are they going to do about Trump if he wins? Will his fate be the same as John F. Kennedy, Robert Kennedy, Martin Luther King, George Wallace? Time will tell. Or will a hotel maid appear at the last minute in the way that the Oligarchy got rid of Dominique Strauss-Kahn? All of the American and Western feminists, progressives, and left-wing remnant fell for the obvious frame-up of Strauss-Kahn. After Strauss-Kahn was blocked from the presidency of France and resigned as Director of the IMF, the New York authorities had to drop all charges against Strauss-Kahn. But Washington succeeded in removing Strauss-Kahn as a challenge to its French vassal, Sarkozy.

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Because it seems cheap and easy.

Why Is MI5 Making Such A Fuss About Russia? (G.)

If I had cornflakes for breakfast (which I don’t), I would have choked on them, reading Andrew Parker’s view of the threat posed by Russia, not just to the world at large – that is a commonplace of the “new cold war” discourse – but to the stability of the UK. With the majority vote for Brexit against the strong preference of Scotland and Northern Ireland for remain, we have shown ourselves quite capable of inflicting potentially fatal harm to our national stability all by ourselves. Why would we need Russia to do it for us? That was a knee-jerk reaction to the main thrust of the MI5 chief’s first national newspaper interview in the agency’s history. But a second, more substantial, response chased behind it in the form of a rather basic, and recurrent, question.

Why is the UK establishment in general, and UK intelligence in particular, so fixated on a supposed threat from Russia? The cold war is a quarter-century behind us. The Warsaw Pact was dissolved; the Soviet Union collapsed. Today’s Russia has three quarters of the territory but only half the population of the old Soviet Union. Its GDP, whether overall or per capita, is far below that of the US, or ours. Its 2015 military budget took 5% of that – $70bn in actual money – less than an eighth of the nearly $600bn spent by the US. “Tsar” Vladimir Putin may have played a weak hand magnificently, as judged by admirers and detractors alike, but a weak hand is still a weak hand.

If Russia really harbours ambitions to reconstitute an empire, its only success to date is the expensive (in every respect) reacquisition of Crimea, a contested no-man’s land of ragtag rebels in the rust belt of eastern Ukraine, and two miniature enclaves inside independent Georgia. That recent “show of force”, when the might of the Russian navy made its stately progress through the English Channel, demonstrated only the obsolescence of the erstwhile superpower’s fleet. In the same interview, Parker disclosed that there were around 3,000 “violent Islamic extremists in the UK, mostly British”, and that cyber, not just in Russia’s hands, was the threat of the future. So let me repeat the question: why does Russia remain bogeyman-in-chief?

Here are a few ideas. The first is that blaming Russia carries little cost. Russia is not China. Investment is not a big consideration. For all sorts of reasons, political relations have long been dire. Applying the same virulent rhetoric to terrorism conducted in the name of Islam, on the other hand, risks fomenting social and cultural strife here at home. A second reason, now as in the past, is that blaming Russia aligns us comfortably with the US, where stalwarts in Congress and at the Pentagon have never emerged from their old thinking about the threat. The Russia card has been played to exhaustion during this presidential campaign, to the point where it could swing the election – and I don’t mean in Donald Trump’s favour. A third factor is the consensus about a strong and malevolent Russia that still rules the “expert” community, and will probably do so for a few years yet – helped along by the hatchet-faced Putin.

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When their unwarranted powers are finally taken away from them it will be too late.

Central Banks and the Revenge of Politics (Issing)

The reputation of central banks has always had its ups and downs. For years, central banks’ prestige has been almost unprecedentedly high. But a correction now seems inevitable, with central-bank independence becoming a key casualty. Central banks’ reputation reached a peak before and at the turn of the century, thanks to the so-called Great Moderation. Low and stable inflation, sustained growth, and high employment led many to view central banks as a kind of master of the universe, able – and expected – to manage the economy for the benefit of all. The depiction of US Federal Reserve Chair Alan Greenspan as “Maestro” exemplified this perception. The 2008 global financial crisis initially bolstered central banks’ reputation further.

With resolute action, monetary authorities made a major contribution to preventing a repeat of the Great Depression. They were, yet again, lauded as saviors of the world economy. But central banks’ successes fueled excessively high expectations, which encouraged most policymakers to leave their monetary counterparts largely responsible for macroeconomic management. Such “expectational” and, in turn, “operational” overburdening has exposed monetary policy’s true limitations. In other words, central banks’ good reputation now seems to be backfiring. And “personality overburdening” – when trust in the success of monetary policy is concentrated on the person at the helm of the institution – means that individual leaders’ reputations are likely to suffer as well.

Yet central banks cannot simply abandon their new operational burdens, particularly with regard to financial stability, which, as the 2008 crisis starkly demonstrated, cannot be maintained by price stability alone. On the contrary, a period of low and stable interest rates may even foster financial fragility, leading to a “Minsky moment,” when asset values suddenly collapse, bringing down the whole system. The limits of inflation targeting are now clear, and the strategy should be discarded. Central banks now have to reconcile the need to maintain price stability with the responsibility – regardless of whether it is legally mandated – to reduce financial vulnerability. This will not be easy, not least because of another new operational burden that has been placed on many central banks: macro-prudential and micro-prudential supervision.

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They’re already completely lost by the looks of it.

Brexit Complexity Set to Overwhelm Politicians (G.)

Managing Britain’s exit from the EU is such a formidable and complex challenge that it could overwhelm politicians and civil servants for years, senior academics have warned. Theresa May has announced she will trigger article 50 – the two-year process of negotiating a separation from the EU – by the end of March next year. The government will also publish a great repeal bill, which will transfer all EU-originated laws into British law, so that MPs can decide how much they want to discard. A report from The UK in a Changing Europe, an independent group of academics led by Prof Anand Menon of King’s College London, warns that this will only be the start of the process of extricating Britain from the EU and establishing new relationships with other member states.

“Brexit has the potential to test the UK’s constitutional settlement, legal framework, political process and bureaucratic capacities to their limits – and possibly beyond,” Menon said. The group of experts, commissioned by the Political Studies Association, found that identifying and transposing the legislation to be included in the great repeal bill – and then deciding what to keep and what to ditch – will be a daunting task for civil servants. They also warn that while article 50, as set out in the Lisbon treaty, concerns the terms of a divorce with the rest of the EU – including what share of EU liabilities the UK should take on, for example – it is unclear whether the process can allow for parallel negotiations on Britain’s future status. And they suggest the repatriation of decision-making in key policy areas including agriculture, the environment and higher education to Britain from Brussels could affect the balance of power between Westminster and the devolved parliaments – another major constitutional headache for politicians.

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Wonder how far this kind of research will lead.

Oil Drilling Thought To Have Caused 1933 Killer Earthquake In California (R.)

Several damaging Los Angeles-area earthquakes of the 1920s and 1930s, including the deadliest ever in southern California, may have been brought on by oil production during the region’s drilling boom of that era, US government scientists have reported. The findings of a possible link between oil extraction and seismic events in the LA basin do not apply to modern industry practices but suggest the natural rate of quake occurrences in the region may be lower than previously calculated, the scientists said. The study’s authors, Susan Hough and Morgan Page of the US Geological Survey, stressed a distinction between their results and separate research attributing a growing frequency of quakes in Oklahoma and elsewhere to underground wastewater injection associated with fossil fuel production.

The new study, published in the Bulletin of the Seismological Society of America, also noted that early 20th-century industry techniques differed greatly from today, so the findings “do not necessarily imply a high likelihood of induced earthquakes at the present time”. The report suggested four major Los Angeles-area quakes in 1920, 1929, 1930 and 1933 were triggered by early drilling methods in which oil was extracted without water being pumped into the ground to replace it, causing the ground to subside. This could have artificially placed more pressure on seismic faults near oilfields. The most devastating event was the so-called Long Beach earthquake of 10 March 1933, a 6.4-magnitude quake that ruptured the Newport-Inglewood fault along the coast, toppling scores of buildings and killing 115 to 120 people – the highest death toll on record from a southern California earthquake.

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“..seeking to precipitate the coup through “subliminal messages” in their columns before it happened..”

Turkey Rejects Europe’s ‘Red Line’ On Press Freedom After Detentions (R.)

Turkey’s prime minister said he had no regard for Europe’s “red line” on press freedom on Tuesday and warned Ankara would not be brought to heel with threats, rejecting criticism of the detention of senior journalists at an opposition newspaper. Police detained the editor and top staff of Cumhuriyet, a pillar of the country’s secularist establishment, on Monday, on accusations that the newspaper’s coverage had helped precipitate a failed military coup in July. The United States and European Union both voiced concern about the move in Turkey, a NATO ally which aspires to EU membership. European Parliament President Martin Schulz wrote on Twitter that the detentions marked the crossing of ‘yet another red-line’ against freedom of expression in the country.

“Brother, we don’t care about your red line. It’s the people who draw the red line. What importance does your line have,” Prime Minister Binali Yildirim told members of his ruling AK Party in a speech in parliament. “Turkey is not a country to be brought in line with salvoes and threats. Turkey gets its power from the people and would be held accountable by the people.” Prosecutors accuse staff at Cumhuriyet, one of few media outlets still critical of President Tayyip Erdogan, of committing crimes on behalf of Kurdish militants and the network of Fethullah Gulen, a U.S.-based cleric blamed for orchestrating the July coup attempt. Journalists at the paper were suspected of seeking to precipitate the coup through “subliminal messages” in their columns before it happened, the state-run Anadolu agency said.

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Good to know, right? You don’t really own your car. Or anything else that has software in it.

It’s Now -Temporarily- Legal to Hack Your Own Car (IEEE)

You may own your car, but you don’t own the software that makes it work— that still belongs to your car’s manufacturer. You’re allowed to use the software, but in the past, trying to alter it in any way (including fixing it by yourself when it breaks or patching security holes) was a form of copyright infringement. iFixit, Repair.org, the Electronic Frontier Foundation (EFF), and many others think this is ridiculous, and they’ve been lobbying the government to try to change things. A year ago, the U.S. Copyright Office agreed that people should be able to modify the software that runs cars that they own, and as of last Friday, that ruling came into effect. It’s good for only two years, though, so get hacking. The legal and technical distinction between physical ownership and digital ownership is perhaps most familiar in the context of DVD movies.

You can go to the store and buy a DVD, and when you do, you own that DVD. You don’t, however, own the movie that comes on it: Instead, it’s more like you own limited rights to watch the movie, which is a very different thing. If the DVD is protected by Digital Rights Management (DRM) software, the Digital Millennium Copyright Act (DMCA) says that you are not allowed to circumvent that software, even if you’re just trying to watch the movie on a different device, change the region restriction so that you can watch it in a different country, or do any number of other things that it really seems like you should be able to do with a piece of media that you paid 20 bucks for.

Cars work in a similar way. You own the car as a physical object, but you only have limited rights to the software that controls it, because the car’s manufacturer holds the copyright on that software. This prevents you from making changes to the software, even if those changes are to fix problems or counter obsolescence, as well as preventing you from investigating the security of the software, which can have very serious and direct consequences for you as the owner and driver. It’s also worth pointing out that (especially in older vehicles like the 1995 Volvo 940 Turbo belonging to a certain anonymous journalist) relatively simple computerized parts can cost a ridiculous amount of money to replace because there is no legal alternative besides buying a new one from the manufacturer, who hasn’t made them in 20 years and would much rather you just bought an entirely new car anyway.

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Aug 162016
 
 August 16, 2016  Posted by at 9:14 am Finance Tagged with: , , , , , , , , ,  1 Response »


Harris&Ewing Army surplus 1919

Mining Giant BHP Slumps To Record Loss (BBC)
Chinese Traders Are Falling Out Of Love With Commodities (BBG)
China’s Fading Animal Spirits (BBG)
Germany Amassing Huge Surpluses – And Huge Risks (MW)
Bundesbank Floats Higher Retirement Age -69- in German Pension Debate (BBG)
Top UK Firms Paid Five Times More In Dividends Than Into Pensions (G.)
Pension Funds Are Driving The Biggest Bond Bubble In History (ZH)
Hedge Funds Bet Dollar Will Lose More Ground Versus Yen (BBG)
Krugman’s Arrow Theory Misses Target by Light Years (Mish)
A Government of Scoundrels, Spies, Thieves, And Killers (JW)
Jimmy Carter: The US Is an ‘Oligarchy With Unlimited Political Bribery’ (IC)
Burning Down the House (Jim Kunstler)
Sleeping Bear Of Debt Set To Wake (Herald Sun)
One-Third Of New Zealand Children Live Below The Poverty Line (G.)

 

 

No matter what anybody does, the overbuilding, overcapacity and overconsumption in China can no longer be extended. Infrastructure investment in other countries won’t be enough to pick up the slack.

Mining Giant BHP Slumps To Record Loss (BBC)

Mining giant BHP Billiton has reported a record loss for the past year following a mining disaster in Brazil and a slump in commodity prices. The Anglo-Australian commodities firm reported an annual net loss of $6.4bn (£5bn) for the year to 30 June. The global mining sector has seen years of weak demand attributed largely to slowing growth in China. BHP results were also hit by costs after the Samarco mining disaster in Brazil, which killed 19 people. The record losses come after the company had reported a $1.9bn net profit. “While commodity prices are expected to remain low and volatile in the short to medium term, we are confident in the long-term outlook for our commodities, particularly oil and copper,” chief executive Andrew Mackenzie said in a statement.

Underlying earnings for the past year, which strip out one-off costs, came in at $1.22bn. The financial fallout from the Samarco mining tragedy is still not clear though warns James Butterfill, head of research & investment strategy at ETF Securities. “There’s a huge uncertainty overhang,” he told the BBC. “The report hasn’t been published with regard to the Samarco dam collapse and there’s currently a $48bn lawsuit. It’s unrealistic to be that amount, but this is really BHP’s Macondo well incident theoretically that BP endured.”

Read more …

As consumption and investment falls, so will prices. Commodity producers worldwide are sitting on huge overcapacity. They must shrink their operations, but the first reaction is always to produce more to make up for falling revenue.

Chinese Traders Are Falling Out Of Love With Commodities (BBG)

Chinese traders are falling out of love with commodities. Aggregate volumes across the nation’s three biggest exchanges have shrunk to the lowest level in six months, a shadow of the fevered trading in March and April when retail investors charged into markets for everything from iron ore to cotton, driving up prices and stoking fears of a bubble. Chinese authorities brought an end to the frenzy by introducing curbs on excessive speculation and trading has failed to recover since. Flush with record credit and hunting for returns, investors piled into commodities in the first half of the year, spurred by bets that China’s economic stimulus and industrial reforms would lead to shortages of raw materials. Now, there’s just not much for traders to get excited about, according to Wei Lai, an analyst with Cofco Futures.

Industrial production and fixed-asset investment slowed in July and a measure of new credit expanded the least in two years, spurring concern over growth in the world’s second-largest economy. “Investors are reluctant as there isn’t much information to play around with in the market,”’ Shanghai-based Wei said in an e-mail. High prices for some commodities may also be deterring traders, Wei said. Combined aggregate volume across the Shanghai Futures Exchange, Dalian Commodity Exchange and Zhengzhou Commodity Exchange slid to 23 million contracts as of Aug. 12, the lowest since February and compared with a peak of more than 80 million on April 22 when a total of $261 billion changed hands. Chinese exchanges double count trading volume and turnover.

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China will become known for the biggest misallocation of investment in history.

China’s Fading Animal Spirits (BBG)

The July wobble in China’s economy – like its multi-year slowdown – has much to do with the waning “animal spirits” of Chinese businesses caused by an historic shift in housing. That’s according to Chi Lo, greater China senior economist at BNP Paribas Investment Partners in Hong Kong. A property-led pick up in the first half lost momentum in July, suggesting the market is struggling to digest an overhang in supply of apartments. “In the past, the economic players expanded supply first and created jobs so as to create demand, but that is gone now,” Lo said in a telephone interview after Friday’s disappointing data. “It has to clean out the excess capacity, which means the supply-expansion model has to change.”

Another way of putting it: China’s build-it-and-they-will-come strategy needs to shift to one where demand, not supply, is in the drivers’ seat. It’s a change companies are struggling to come to terms with, leaving private investment in the doldrums. “Little attention has been paid to the underlying structural factor that is hurting private investment incentive,” Lo wrote in a research note ahead of the data last week. “This is the weakening of the final demand for output produced by the investment or capital-intensive sector in China. The key to understand this puzzle is China’s housing market.” That’s because it accounts for about half of all investment in China once spillovers into industries like metals and machinery are thrown in.

With such pervasive impact on everything from cement to cars, China’s property market was dubbed the most important sector in the universe back in 2011 by a UBS economist. BNP’s Lo says it’s unlikely to ever recapture the glory days of old. “China’s housing demand has likely passed its high-growth phase, with housing construction growth expected to go into a secular decline soon,” according to Lo. “This means that the capital-intensive sector, which has focused on producing all this housing units through the decades, is facing a structural decline in demand for its output.”

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One might be forgiven for thinking Berlin is blowing up the eurozone on purpose. What is needed are transfer payments to southern Europe, but there is too much resistance to those.

Germany Amassing Huge Surpluses – And Huge Risks (MW)

As one of the world’s largest exporters, Germany saw an important part of the political and economic rationale of entering European economic and monetary union in 1999 as lowering risks on its international commercial interactions. Nearly two decades later, Germany, more than ever, is an export champion. It is likely to register the world’s largest trade surplus this year, according to the OECD, at $324 billion (against China’s $314 billion), and will amass a record current-account surplus of 9.2% of gross domestic product. Yet, as a result of the large imbalances within EMU that these surpluses symbolize, Germany is a long way from insulating itself against foreign-currency risks.

The Bundesbank provides the strongest indicator of this change. The quintessentially hard-money central bank provided a role model for the ECB at the heart of the euro bloc. Yet the Bundesbank now confronts on its balance sheet a range of potential hazards that the euro’s founding fathers in the 1980s and 1990s would have regarded as inimical to economic stability and, for that reason, impossible to countenance. The Bundesbank’s balance sheet rose to €1.2 trillion in July from €222 billion when monetary union started in January 1999. Underlining the Bundesbank’s pivotal role in eurozone monetary operations, the German central bank’s balance sheet has expanded faster than that of the Eurosystem (the ECB and the constituent national central banks) as a whole.

The Bundesbank’s balance sheet now encompasses around 37% of Eurosystem assets of €3.3 trillion (computed on a net basis that strips out individual central banks’ claims and liabilities against each other under the Target-2 payments system), against 32% at the inception of EMU. The acceleration stands in marked contrast to the central bank’s stated desire, when monetary union started, to slim down its balance sheet and especially to economize on foreign-exchange reserves, held mostly in dollars. These have traditionally (together with gold) made up the lion’s share of the Bundesbank’s foreign assets, but have been cut from €45 billion to €50 billion when the euro was launched to only €30 billion to €35 billion in recent years.

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You’re not going to solve the problems by tweaking the age; that merely shifts the issue into the future. Can, road.

Bundesbank Floats Higher Retirement Age -69- in German Pension Debate (BBG)

Germany’s Bundesbank said raising the legal retirement age to 69 by 2060 could ease some of the pressure on the country’s state pension system as the population ages. Recent reforms won’t protect citizens from a drop in the level of pension payments from 2050, the central bank said in its monthly report published on Monday. Citizens who don’t opt for state-supported private insurance may face shortfalls a lot sooner. Low average interest rates could further reduce available provisions. While higher premiums could theoretically keep payouts stable, they would “raise the strain on those paying the contributions, and an increasing, high burden of payments overall has negative consequences on economic development,” the Bundesbank wrote. To avoid that, “the legal retirement age ultimately needs to be adjusted.”

The Bundesbank said the government’s current plans that include raising the retirement age to 67 by 2030 and increasing contributions don’t account for the fact that the ratio of retirees to contributors is set to widen further. Increasing life expectancy means retirees will draw from pension funds for a longer period of time, and a generation of baby boomers that retires post-2030 means there will be more pensioners to take care of per working adult, while birth rates remain low, according to the report. “Amid demographic change, the parameters of a contribution-based pension system can’t all be kept stable,” the Bundesbank said. “Confidence in pension insurance could be strengthened and uncertainty about financial stability at old age could be decreased if it were made clear how the parameters of retirement age, provision levels, and contribution rates can be adjusted in the long term.”

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Short termism perfected.

Top UK Firms Paid Five Times More In Dividends Than Into Pensions (G.)

Britain’s biggest companies paid five times more in dividends than they did pension contributions last year, according to a new report that highlights the pressure on retirement schemes. FTSE 100 companies paid £13.3bn towards their defined benefit pension schemes, compared with £71.8bn in payments to shareholders, according to the consultancy firm LCP’s annual study of pensions. The report has been published after Sir Philip Green was heavily criticised by a parliamentary investigation into the collapse of BHS for leaving the retailer with a £571m pension deficit, despite his family and other investors banking more than £400m in dividends. BHS’s 164 stores are all scheduled to close by 28 August, a week later than administrators planned last month as the retailer continues to sell its remaining stock.

Green remains locked in talks with the Pensions Regulator about a rescue deal for the BHS pension scheme. He has pledged to sort out the problems facing it, but the regulator has launched an investigation into whether the billionaire tycoon should be forced to make a financial contribution to fill the black hole. Other companies with large pension deficits could face action from the regulator if they are paying dividends, LCP says in its report. The 56 FTSE 100 companies that disclosed a pension deficit at the end of their 2015 financial year had a combined deficit of £42.3bn, but the same companies paid out dividends worth £53bn, 25% more than their pension contributions.

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“..a $1BN pension that is fully funded at prevailing interest rates would be nearly $700mm underfunded if interest rates declined 300bps and all of their assets were invested in 30-year treasury bonds.”

Pension Funds Are Driving The Biggest Bond Bubble In History (ZH)

We’ve frequently discussed the many problems faced by pension funds. Public and private pension funds around the globe are massively underfunded yet they continue to pay out current claims in full despite insufficient funding to cover future liabilities…also referred to as a ponzi scheme. In fact, we recently noted that the Central States Pension Fund pays out $3.46 in pension funds for every $1 it receives from employers. The pension problem is often attributed to low returns on assets. As Bill Gross frequently points out, low interest rates are the enemy of savers and pension funds have some of the biggest savings accounts around. That said, the impact of declining interest rates on the asset side of a pension’s net funded status is dwarfed by the much more devastating impact of declining discount rates used to value future benefit obligations.

The problem is one of duration. By definition, pension liabilities represent the present value of future benefit payments owed to retirees which is a virtually perpetual cash flow stream. Obviously, the longer the duration of a cash flow stream the larger the impact of interest rate swings on the present value of that stream. We created the chart below as a simplistic illustration of the pension “duration dilemma.” The chart graphs how a pension liability grows in a declining interest rate environment versus the value of 5-year and 30-year treasury bonds. As you can see, a $1BN pension that is fully funded at prevailing interest rates would be nearly $700mm underfunded if interest rates declined 300bps and all of their assets were invested in 30-year treasury bonds. The result is obviously even worse if the fund’s assets are invested in shorter duration 5-year treasuries.

Pension Duration

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How Abenomics gets strangled.

Hedge Funds Bet Dollar Will Lose More Ground Versus Yen (BBG)

Hedge funds and other large speculators increased net bets the dollar will weaken against the yen to the highest level in a month, according to Commodity Futures Trading Commission data as of Aug. 9. Traders will focus on the meetings of the Federal Reserve and the Bank of Japan next month for direction, after disappointing stimulus announced last month by the BOJ failed to halt yen strength.

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“Krugman would do himself a favor if he threw away what he thinks he knows about economics and went back for a nice 5th grade education.”

But the saddest part of course is that belugas are kept in an aquarium and learn tricks to amuse Japanese. Who are we?

Krugman’s Arrow Theory Misses Target by Light Years (Mish)

With full employment, roads paved and repaved to nowhere, and bubble blowing beluga whales, just what the hell is Japan supposed to waste money on? Curiously, Krugman says it doesn’t matter. He once proposed a fake aliens from outer space scare as the solution to stimulate the economy. But roads and bridges and bubble blowing blowing beluga whales are surely better than fabricating space aliens or paying people to dig ditches and others to fill them up again. The problem is, it’s hard arguing with economic illiterates like Krugman. He can (and will) say “spending wasn’t enough”.

One can never prove him wrong. The implosion of Japan would not do it. His built-in excuse would be Japan did too little, too late. Just once I would like Krugman to address in his model what happens when the stimulus stops. He cannot and he won’t because he has no answer. The average 5th grader understands it’s absurd to pay money for something guaranteed to be useless, but the average Keynesian economist doesn’t. Krugman would do himself a favor if he threw away what he thinks he knows about economics and went back for a nice 5th grade education.

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John Whitehead does not mince words.

A Government of Scoundrels, Spies, Thieves, And Killers (JW)

“There is nothing more dangerous than a government of the many controlled by the few.”—Lawrence Lessig, Harvard law professor

The U.S. government remains the greatest threat to our freedoms. The systemic violence being perpetrated by agents of the government has done more collective harm to the American people and our liberties than any single act of terror. More than terrorism, more than domestic extremism, more than gun violence and organized crime, the U.S. government has become a greater menace to the life, liberty and property of its citizens than any of the so-called dangers from which the government claims to protect us. This is how tyranny rises and freedom falls.

As I explain in my book Battlefield America: The War on the American People, when the government views itself as superior to the citizenry, when it no longer operates for the benefit of the people, when the people are no longer able to peacefully reform their government, when government officials cease to act like public servants, when elected officials no longer represent the will of the people, when the government routinely violates the rights of the people and perpetrates more violence against the citizenry than the criminal class, when government spending is unaccountable and unaccounted for, when the judiciary act as courts of order rather than justice, and when the government is no longer bound by the laws of the Constitution, then you no longer have a government “of the people, by the people and for the people.”

What we have is a government of wolves. Worse than that, we are now being ruled by a government of scoundrels, spies, thugs, thieves, gangsters, ruffians, rapists, extortionists, bounty hunters, battle-ready warriors and cold-blooded killers who communicate using a language of force and oppression. Does the government pose a danger to you and your loved ones? The facts speak for themselves. We’re being held at gunpoint by a government of soldiers—a standing army. While Americans are being made to jump through an increasing number of hoops in order to exercise their Second Amendment right to own a gun, the government is arming its own civilian employees to the hilt with guns, ammunition and military-style equipment, authorizing them to make arrests, and training them in military tactics.

Among the agencies being supplied with night-vision equipment, body armor, hollow-point bullets, shotguns, drones, assault rifles and LP gas cannons are the Smithsonian, U.S. Mint, Health and Human Services, IRS, FDA, Small Business Administration, Social Security Administration, National Oceanic and Atmospheric Administration, Education Department, Energy Department, Bureau of Engraving and Printing and an assortment of public universities. There are now reportedly more bureaucratic (non-military) government civilians armed with high-tech, deadly weapons than U.S. Marines. That doesn’t even begin to touch on the government’s arsenal, the transformation of local police into extensions of the military, and the speed with which the nation could be locked down under martial law depending on the circumstances. Clearly, the government is preparing for war—and a civil war, at that—but who is the enemy?

Read more …

2 weeks old, but highly relevant.

Jimmy Carter: The US Is an ‘Oligarchy With Unlimited Political Bribery’ (IC)

Former president Jimmy Carter said on the nationally syndicated radio show the Thom Hartmann Program that the United States is now an “oligarchy” in which “unlimited political bribery” has created “a complete subversion of our political system as a payoff to major contributors.” Both Democrats and Republicans, Carter said, “look upon this unlimited money as a great benefit to themselves.” Carter was responding to a question from Hartmann about recent Supreme Court decisions on campaign financing like Citizens United. Transcript: HARTMANN: Our Supreme Court has now said, “unlimited money in politics.” It seems like a violation of principles of democracy. … Your thoughts on that?

CARTER: It violates the essence of what made America a great country in its political system. Now it’s just an oligarchy, with unlimited political bribery being the essence of getting the nominations for president or to elect the president. And the same thing applies to governors and U.S. senators and congress members. So now we’ve just seen a complete subversion of our political system as a payoff to major contributors, who want and expect and sometimes get favors for themselves after the election’s over. … The incumbents, Democrats and Republicans, look upon this unlimited money as a great benefit to themselves. Somebody’s who’s already in Congress has a lot more to sell to an avid contributor than somebody who’s just a challenger.

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“..generate Money-Out-Of-Thin-Air (QE) for the purpose of allowing “liquidity” flows to end up in US equity and bond markets in order to paint a false picture of “recovery” so as to insure the election of Hillary Clinton.”

Burning Down the House (Jim Kunstler)

There’s a new feature to the Anything-Goes-and-Nothing-Matters economy: Nothing-Adds-Up. The magicians who pretend to measure the growth of GDP (Gross Domestic Product — the monetary value of all the finished goods and services) came up with a second quarter “adjusted” figure of 1.2 percent. That would have to be construed by anyone acquainted with basic econ stats as perfectly dismal. And yet the Bureau of Labor Statistics put out a sparkly Nonfarm Payroll Report of 255,000 for July, way above the forecast 180,000. There were so many ways to game the jobs number — between people forced to work more than one shit job and the notorious “birth/death model” used to just make up any old number for political purposes — that no one can take this information seriously.

Anyway, the GDP number was instantly forgotten and the jobs number launched the stock markets to previously uncharted record altitude. It’s that time of the year for the hedge fund boys, with their testosterone flowing, to start burning down their house rentals in the Hamptons. And it’s also the time of year for an ever more stressed financial system to go down in flames. And, of course, it’s a presidential election season. Even for one allergic to conspiracy theories, it’s not farfetched to imagine a coordinated effort by central banks — under government direction — to generate Money-Out-Of-Thin-Air (QE) for the purpose of allowing “liquidity” flows to end up in US equity and bond markets in order to paint a false picture of “recovery” so as to insure the election of Hillary Clinton.

I think that is exactly behind the recent money-printing activities by the Japanese and European Central Banks, and the Bank of England. Why would it end up in US markets? For bonds, because the Euro and Japanese bond sovereign yields are in sub-zero territory and the BOE just cut its prime rate lower than the US Federal Reserve’s prime rate; and for stocks, because the value of the other three currencies is sliding down and the dollar has been rising — so, dump your falling currency for the rising dollar and jam it into rising US stocks. It’ll work until it doesn’t.

Why do this for Hillary? Because she represents the continuity of all the current rackets being used to prop up belief in the foundering business model of western civilization. If she doesn’t get into the White House there may be no backstopping of the insolvent banks and bankrupt governments and a TILT message will appear in the sky.

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Australia is a private debt disaster. Public debt is much less important.

Sleeping Bear Of Debt Set To Wake (Herald Sun)

The great sleeping bear of Australia’s economic future – of your economic future – is the current account deficit and our foreign debt. They have completely disappeared from the front page – indeed, even from the business pages. Nobody seems to mention them. But they most certainly haven’t disappeared in reality. And in reality, they’ve never been bigger. The deficit, the CAD, in the latest March quarter was more than $20 billion. It will top $80 billion for the full 2015-16 year. The net foreign debt sits at a tad more than $1 trillion. To give you a sense of the scale, that’s more than half the size of the Australian economy; more than double the total of all federal tax revenues in a year.

The CAD is the difference between what we earn from exports and from our international investments each year and what we pay for imports and to foreign investors in Australia. That last bit includes the interest we pay on our existing foreign debt. And the deficit each year is mostly covered by borrowing more from foreigners. In recent years, the biggest borrowers have been our banks. So we have this merry-go-round. The bigger the foreign debt, the bigger the deficit tends to be because of the interest paid on the debt. Then, the bigger the deficit, the bigger the foreign debt gets. Sound familiar? Because it’s exactly the same as the merry-go-round with the Budget deficit and the national debt. The deficit increases the national debt; and the interest on the debt increases the next year’s deficit; and that deficit further increases the debt.

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“..as a society, are we really prepared to let our children grow up this way?”

One-Third Of New Zealand Children Live Below The Poverty Line (G.)

One-third of New Zealand children, or 300,000, now live below the poverty line – 45,000 more than a year ago. Unicef’s definition of child poverty in New Zealand is children living in households who earn less than 60% of the median national income – NZ$28,000 a year, or NZ$550 a week. The fact that twice as many children now live below the poverty line than did in 1984 has become New Zealand’s most shameful statistic. “We have normalised child poverty as a society – that a certain level of need in a certain part of the population is somehow OK,” said Vivien Maidaborn, executive director of Unicef New Zealand. “The empathy Kiwis are famous for has hardened. Over the last 20 years we have increasingly blamed the people needing help for the problem.

“If you can’t afford your children to have breakfast, you’re a bad budgeter. If you aren’t working you’re lazy. But our subconscious beliefs about some people ‘deserving’ poverty because of poor life choices no longer apply in today’s environment. We have to ask ourselves as a society, are we really prepared to let our children grow up this way?” For a third of New Zealand children the Kiwi dream of home ownership, stable employment and education is just that – a dream. For poor children in the developed South Pacific nation of 4.5 million illnesses associated with chronic poverty are common, including third world rates of rheumatic fever (virtually unknown by doctors in comparable countries like Canada and the UK), and respiratory illnesses.

Read more …

Apr 072015
 
 April 7, 2015  Posted by at 8:44 am Finance Tagged with: , , , , , , , ,  5 Responses »


NPC Shad fishing on the Potomac 1920

Oil Slump Pushes S&P Toward First Profit Decline Since 2009 (Bloomberg)
How America Became an Oligarchy (Ellen Brown)
Fidelity’s Wolf Says Zero Rate Inescapable in Oil-Shocked Canada (Bloomberg)
Greece Offers 5 Key Points For Consensus With Creditors (RT)
Greece Puts Figure Of €278.7 Billion On Claim For German Reparations (Guardian)
Varoufakis Extends DC Charm Offensive After Talks With Lagarde (Guardian)
Frustrated EU Officials Want Greek Premier To Ditch Syriza Far Left (FT)
Alexis Tsipras’s Soft Fruit Ploy With Moscow Set To Antagonise EU (FT)
Why Hugh Hendry Went From China’s Biggest Bear To Its Biggest Bull (Zero Hedge)
How Rich and Poor Spend -and Earn- Their Money (WSJ)
Jobs Shocker May Show That US Economy Is In Real Trouble (CNBC)
The Global South Has Free Trade To Thank For Obesity And Diabetes (Guardian)
The School of Globalism (Jim Kunstler)
Russia Says Ukraine Should Seek Direct Debt-Restructuring Talks (Bloomberg)
Canadian Orchestra Drops Ukraine-Born Pianist Over Anti-Kiev Twitter Posts (RT)
Four-Bedroom House In Spain ‘Sold’ In €10 Raffle (Guardian)
New Zealand Dairy Giant Fonterra’s China Sales Fall 61% (NZ Herald)
Italians Rescue 1,500 Migrants In 24 Hours In Mediterranean (BBC)
Mapping America’s Exceptional Drought Conditions (Reuters)

There’s a limit to what QE can buy.

Oil Slump Pushes S&P Toward First Profit Decline Since 2009 (Bloomberg)

Tumbling oil prices and a stronger dollar are pushing down U.S. corporate profits for the first time in more than five years, hurting companies from Exxon Mobil to Wal-Mart. First-quarter earnings per share for companies in the S&P 500 may have fallen about 5.8%, according to estimates compiled by Bloomberg, in the first year-over-year decline since 2009’s third quarter. As earnings season gets its unofficial start this week with Alcoa, the biggest drag will come from a 63% profit decline at energy companies. Oil prices have fallen by about half from a year ago as companies pumped their way into a global glut, and the dollar’s climb of about 25% against a basket of currencies since last summer has chipped away at revenue for companies such as United Technologies.

“There are all these cross currents going on right now heading into earnings season,” said Todd Lowenstein at HighMark Capital. “You’re going to have at least on paper a technical earnings recession, meaning two consecutive quarters of negative growth, in the first and second quarters.” The effects ripple across industries. US Steel last month announced plans to shut an Illinois mill partly on falling demand from the energy companies. The dollar’s surge helped make steel imports cheaper, hurting producers such as Nucor. At Dow Chemical profit is poised to drop as plastics prices decline with oil and farmers buy fewer chemicals because their crops are selling for less. United Technologies has said it expects foreign exchange to cut $100 million from first-quarter profit on sales of its jet engines, elevators and air conditioners. “That still remains the biggest watch item for me,” CFO Akhil Johri told investors on March 12.

The slowdown is showing in some U.S. economic reports. The Labor Department reported Friday that employers added 126,000 jobs in March, the fewest since December 2013. The S&P 500 fell 0.3% at 9:38 a.m. Monday in New York, the first trading day after the report. Once energy companies are pulled out of the picture, S&P earnings look a bit better, with a projected rise of 1.9%. Alcoa is poised to report a higher profit in part because of rising aluminum demand from automakers and airlines – – two industries that are both benefiting from lower oil prices. Profits at auto manufacturers and their suppliers may jump 42%, the estimates show. “People know that energy prices are down, they know the dollar’s up,” said Jim Paulsen at Wells Capital. “What is less known here is what does the earnings performance look like outside the energy industry.”

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“Can we justify sending troops into other countries to spread a political system we cannot maintain at home?”

How America Became an Oligarchy (Ellen Brown)

According to a new study from Princeton University, American democracy no longer exists. Using data from over 1,800 policy initiatives from 1981 to 2002, researchers Martin Gilens and Benjamin Page concluded that rich, well-connected individuals on the political scene now steer the direction of the country, regardless of – or even against – the will of the majority of voters. America’s political system has transformed from a democracy into an oligarchy, where power is wielded by wealthy elites. “Making the world safe for democracy” was President Woodrow Wilson’s rationale for World War I, and it has been used to justify American military intervention ever since. Can we justify sending troops into other countries to spread a political system we cannot maintain at home?

The Magna Carta, considered the first Bill of Rights in the Western world, established the rights of nobles as against the king. But the doctrine that “all men are created equal” – that all people have “certain inalienable rights,” including “life, liberty and the pursuit of happiness” – is an American original. And those rights, supposedly insured by the Bill of Rights, have the right to vote at their core. We have the right to vote but the voters’ collective will no longer prevails. In Greece, the left-wing populist Syriza Party came out of nowhere to take the presidential election by storm; and in Spain, the populist Podemos Party appears poised to do the same. But for over a century, no third-party candidate has had any chance of winning a US presidential election. We have a two-party winner-take-all system, in which our choice is between two candidates, both of whom necessarily cater to big money. It takes big money just to put on the mass media campaigns required to win an election involving 240 million people of voting age.

In state and local elections, third party candidates have sometimes won. In a modest-sized city, candidates can actually influence the vote by going door to door, passing out flyers and bumper stickers, giving local presentations, and getting on local radio and TV. But in a national election, those efforts are easily trumped by the mass media. And local governments too are beholden to big money. When governments of any size need to borrow money, the megabanks in a position to supply it can generally dictate the terms. Even in Greece, where the populist Syriza Party managed to prevail in January, the anti-austerity platform of the new government is being throttled by the moneylenders who have the government in a chokehold. How did we lose our democracy? Were the Founding Fathers remiss in leaving something out of the Constitution? Or have we simply gotten too big to be governed by majority vote?

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Join the club.

Fidelity’s Wolf Says Zero Rate Inescapable in Oil-Shocked Canada (Bloomberg)

Canada’s central bank will eventually join global peers by cutting interest rates to zero to revive flagging output, said Fidelity Investments’ David Wolf. The world’s 11th-largest economy is hobbled by weak oil prices, indebted consumers and a currency that remains too strong to draw new business investment, Wolf, a former Bank of Canada adviser under Mark Carney, said Monday from Toronto. Stephen Poloz, Carney’s successor, already cut rates once in January to 0.75% as “insurance” against plummeting crude prices. Swaps trading shows investors are betting on just one more rate cut this year. That probably won’t be enough for Canada to avoid becoming mired in weak global demand like other major economies have, Wolf said.

“There’s a reason why rates are zero just about everywhere else in the developed world,” Wolf, who co-manages the C$7.4 billion Canadian Asset Allocation Fund, said. In Canada, zero rates are “what eventually will happen” as well, he said. The Bank of Canada makes its next interest-rate decision on April 15. Carney cut the benchmark overnight lending rate to 0.25% in April 2009, saying it was effectively zero, and laid out principles for potential quantitative easing. Canada never joined the U.S., Europe and Japan in using that unconventional policy of asset purchases.

Given the unprecedented experience global central banks have had with QE since the financial crisis, and with pushing policy rates to zero or even lower, Canada would need to revisit its 2009 guidelines if policy makers decided to pursue extraordinary stimulus, Wolf said. “No doubt the bank would take a fresh look at what options would be appropriate,” he said. Canada’s dollar is at “roughly fair value” today, Wolf said, and needs to weaken further before companies are encouraged to make new investments to expand locally. The currency traded at C$1.2463 against its U.S. counterpart at 2:02 p.m. in Toronto, and is down about 6.8% this year. “Just going from overvalued to fair valued historically hasn’t been enough to prompt those changes and I don’t think will be in this case either,” he said.

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First time I see a Greece bad bank being discussed.

Greece Offers 5 Key Points For Consensus With Creditors (RT)

Greek Finance Minister Yanis Varoufakis has unveiled his plan on reviving the Greek economy by both meeting the IMF requirements and circuiting the austerity measures. A preliminary agreement over proposal is expected on April 24. “Negotiations [with international lenders – Ed.] will be completed when we come to a decent agreement that will give a real prospect of stabilization and further substantial growth to the Greek economy,”Varoufakis said in an interview to Naftemporiki newspaper published Monday. The minister also noted that his Cabinet won’t agree to carry out measures leading to a recession. Greece requires a new agreement with Europe to make its €324-billion debt sustainable, as now it accounts for 178% of GDP, said Varoufakis pointing out five terms on which the plan is expected to work out.

First, it is a reasonable level of primary budget surplus about 1.5% of GDP instead of 4.5% agreed by the previous government which has led to a severe recession. Secondly, it is a reasonable debt restructuring that will link payments with the growth rate of nominal GDP. In addition, Greece needs an investment package from the European Investment Bank and the European Investment Fund, which should be placed mainly in the private sector in accordance with the new, non-bureaucratic procedures. Fourth, Greece should pass on effective restructuring of troubled loans by allocating them to a ‘Bad Bank’ unlike other resources of the Fund for financial stability. The fifth thing is significant reforms that will give support to creative people and businesses that produce tradable goods, with export prospects, he added.

Greece expects to reach a preliminary agreement with creditor countries on financing the economy and the external debt at a meeting of eurozone finance ministers on April 24, Varoufakis said. “Preliminary results will be achieved at the meeting of the Eurogroup on April 24,” he said adding that Greece expects to negotiate the unblocking of the last tranche of €7.2 billion from the EU loan program, and to negotiate restructuring of external debt by June.

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And 25 cents.

Greece Puts Figure Of €278.7 Billion On Claim For German Reparations (Gaurdian)

Greece’s deputy finance minister has said that Germany owes it nearly €279bn (£205bn) in reparations for the Nazi occupation of the country. Greek governments and private citizens have pushed for war damages from Germany for decades but the Greek government has never officially quantified its reparation claims. A parliamentary panel set up by Alexis Tsipras’s government started work last week, seeking to claim German debts, including war reparations, the repayment of a so-called occupation loan that Nazi Germany forced the Bank of Greece to make and the return of stolen archaeological treasures.

Speaking at a parliamentary committee on Monday, the deputy finance minister, Dimitris Mardas, said Berlin owed Athens €278.7bn, according to calculations by the country’s general accounting office. The occupation loan amounts to €10.3bn. The campaign for compensation has gained momentum in the past few years as the Greeks have suffered hardship under austerity measures imposed by the EU and IMF in exchange for bailouts totalling €240bn to save Greece from bankruptcy. Tsipras has frequently blamed Germany for the hardship stemming from the imposition of austerity. The Greek prime minister has angered Berlin by threatening to push for reparations in the middle of talks to unlock aid for Greece. Germany has repeatedly rejected the country’s claims and says it has honoured its obligations, including a 115m deutschmark payment to Greece in 1960.

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Consider me amused. Looks more like Shakespeare than Greek drama, though.

Varoufakis Extends DC Charm Offensive After Talks With Lagarde (Guardian)

Varoufakis’ surprise trip to Washington was reportedly instigated by Lagarde after ministers began suggesting the government would prefer to pay pensions and salaries than the IMF loan – in keeping with its philosophy to support those hardest hit by the crisis. Failure to meet bondholder obligations could spark a dangerous chain reaction for a country saddled with €320bn in debt – the highest debt-to-GDP ratio in Europe. As such, Lagarde was quick to say she welcomed the news that Athens would honour the loan repayment. Reports indicated the IMF chief had also pressed Varoufakis to agree to pension cuts and raise VAT. Both are anathema to a government that has refused outright to adopt any more “recessionary” measures.

Varoufakis, who has repeatedly said a euro exit would be catastrophic for Greece, promised to break the deadlock by improving the efficacy of negotiations with creditors. “There will be topics established in order to reach deals faster and to reach better quality deals,” he told reporters. “Our government is a reformist government, we are intent upon reforming Greece deeply. This is our promise to the Greek people so having an opportunity to discuss the reform programme here at the IMF with the managing director is an excellent step towards that direction.” Yet such reforms – including the sale of state assets – will not be easy. Internal dissent within Syriza, the governing party, has peaked in recent days with far-left militants, led by the energy minister Panagiotis Lafazanis, robustly rejecting any suggestion of rolling back on pre-election pledges.

Lafazanis, a Marxist who openly supports improving ties with Moscow, controls around a third of Syriza’s MPs and could easily bring down the government by voting against reforms when they are brought before the 300-member house. With the young premier clearly at odds over how to deal with the hardliners, there is growing speculation, not least among eurozone officials, that a new bailout accord to keep the country afloat can only be achieved if Tsipras agrees to dismember his own party and join up with centrist forces to form a new coalition. That would require him also cutting links with his rapidly anti-austerity rightwing junior partner Anel.

“Either Tsipras makes the policy U-turns being demanded of him, or Greece crashes,” said Dimitris Keridis, political science professor at Panteion University. “In that sense this government cannot survive in its current form.” Piling on the pressure, the Greek parliament late on Monday began debating the need to form a committee to investigate how Greece ended up being “stripped of its sovereignty” under its bailout agreement and placed under the surveillance of the EU and IMF. Analysts believe the move will almost certainly inflame relations with Athens’ creditors further.

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Brussels is always willing to help out a democracy.

Frustrated EU Officials Want Greek Premier To Ditch Syriza Far Left (FT)

Eurozone authorities frustration with Greece has grown so intense that a change in the current Athens government s make-up, however far-fetched, has become a frequent topic of conversation on the sidelines of bailout talks. Many officials up to and including some eurozone finance ministers have suggested privately that only a decision by Alexis Tsipras, Greek prime minister, to jettison the far left of his governing Syriza party can make a bailout agreement possible. More The idea would be for Mr Tsipras to forge a new coalition with Greece s traditional centre-left party, the beleaguered Pasok, and To Potami (The River), a new centre-left party that fought its first general election in January. Tsipras has to decide whether he wants to be prime minister or the leader of Syriza, said one European official.

A senior official in a eurozone finance ministry added: ‘This government cannot survive’. Members of Syriza’s moderate wing admit there is a problem with the Left Platform, the official internal opposition that represents about a third of the party and controls enough MPs to bring down the government if it were to rebel in a parliamentary vote. We used to be more debating society than political party … so it is hard to get a system of party discipline up and running, said one Syriza official. But you have to remember we’ve been in power less than 100 days. Under the leadership of Panayotis Lafazanis, almost as popular a figure in the party as the prime minister, Left Platform members say they will veto structural reforms that are being pushed hard by Greece’s creditors in the current round of bailout talks.

Yet even though Mr Tsipras had adopted a more moderate stance in his dealings with Brussels and Berlin, it is too soon to expect him to risk an open clash with his left wing, according to observers in Athens. To win the support of Pasok and To Potami, Mr Tsipras would also have to dump his right-of-centre coalition partner, the nationalist Independent Greeks. It would be desirable to move to a more coherent pro-European centre-left coalition compared with this unseemly union of the radical left with the populist right, said George Pagoulatos, a professor of political economy at Athens business university. But it is premature for the moment. Eurozone officials insist they are not trying to force a change in the government sensitive to accusations the EU was complicit in ending the tenure of George Papandreou, Greece’s prime minister at the start of the eurozone crisis, and Silvio Berlusconi, the Italian premier until late 2011.

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Some pretty vicious anti-Putin stuff af FT today. Münchau wrote one I won’t even bother to post here. I’m surprised Tsipras didn’t go see Putin way before.

Alexis Tsipras’s Soft Fruit Ploy With Moscow Set To Antagonise EU (FT)

When Alexis Tsipras visits Vladimir Putin’s Kremlin on Wednesday there is a chance the Greek premier’s eastern manoeuvre will immediately bear fruit: kiwis, peaches and strawberries to be precise. Athens is hopeful that Moscow will lift a retaliatory ban on Greek soft fruits to demonstrate the abiding strength of Russo-Greek relations, just as both leaders feel a diplomatic chill with Europe over the Ukraine crisis and Athens’ bailout saga respectively. But what worries European diplomats is that the Putin-Tsipras gladhanding amounts to something more significant than fruit trade. The big fear, in the words of one suspicious senior official, is a “Trojan horse” plot, where Russia extends billions in rescue loans in exchange for a Greek veto on sanctions — a move that would kill western unity over Ukraine.

No such shock is expected this week. But as Athens nears the brink of insolvency there is growing alarm that Mr Tsipras’s radical left government might turn to Moscow in desperation. It would set off the biggest panic over Greece’s strategic alignment since the 1947 US Marshall Plan, initiated to save the country from communist fighters that Mr Tsipras’ Syriza party lionise to this day. Others argue that Mr Tsipras’ Russia card is but a ploy in bailout talks with Germany and the eurozone. In spite of historic cultural ties and Syriza’s Soviet romanticism, analysts think Greece is too tied to the west – through EU and Nato membership – and too deep in debt for sanctions-damaged Russia to buy it off as a reliable ally.

“The Greeks are using Russia as a way to piss off Berlin, to frighten them. Tsipras wants to show he has other options,” said Theocharis Grigoriadis, a Greece-Russia relations expert at the Free University of Berlin. “But he has no intention of making Greece a Russian satellite. The Russians know that. The Germans know that. It is pure theatre, a Greek game, and I’m afraid it looks like a poodle trying to scare a lion.” From his first day in office Mr Tsipras’ administration has stoked Russian paranoia in western capitals. During his debut at an EU foreign ministers meeting, Greece’s Nikos Kotzias angrily waved a rolled-up Russian sanctions proposal in his hand as he condemned the measures. “We argue and squabble but it is like a family, we’re supposed to share the same world view,” said one official present. “That meeting was something else — it felt like the UN Security Council.”

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Central Bank Omnipotence, Hugh?

Why Hugh Hendry Went From China’s Biggest Bear To Its Biggest Bull (Zero Hedge)

Back in the day, Chinese stocks had no greater nemesis than Hugh Hendry, whose “China Short” fund soared by 52% in 2011. The (anti) investment thesis was simple: the Chinese economy is bogged down by unprecedented overcapacity. Well, it still is, but Hugh Hendry sensed which way the wind was blowing for the last central bank left to unleash QE, and some time ago, ahead of a gargantuan, liquidity and margin-debt driven Shanghai Composite rally, the Scotsman warned, so far presciently that “To Bet Against China Is To Bet Against Central Bank Omnipotence.”

Considering that Chinese equities are the best performing market in USD terms (second only, oddly enough, to Russia) in 2015, one can see why after a disappointing 2012 and 2013, and modest 2014, Hendry has hit 2015 out of the park with a bang, generating a 10.6% return in the first two months of the year. So is Hendry still bullish on China’s stock market prospects? Why yes, and then some. But is he is contrarian just for the sake of being contrarian? Does he see something in China that nobody else does? Or is he simply right… or wrong, as the case may be? We will let readers decide. Here is his full “managers’ commentary” from his most recent letter to investors dedicated entirely to China.

So much is written about China, and of late very little has been bullish. The notion of impending renminbi devaluation has taken root as traders worry that the dollar rally has pulled its reluctant Chinese counterpart higher, especially against the euro and the yen. Indeed, it seems that shorting the renminbi has become the new equivalent to the JGB short in macro circles. But having shared these doomsday prophecies back in 2010, when the consensus was less negative, I have recently become less concerned about China. Here’s why. First China has recalibrated its growth model. Between 2001 and 2011, China had a very comparable decade to the US economy during the 1920s. Both boomed on surging productivity, high returns on capital, massive gross fixed capital formation and a fervent desire by the rest of the world to participate.

We know that both economies should have boomed; indeed they did. However I would contend that they should have boomed even more. That they didn’t was because of hawkish macro policy. In the 1920s, the Fed refused to allow the high powered money entering its economy via the gold standard to boost credit further. The Chinese discriminated against their household sector: the currency was never allowed to appreciate as much as the boom justified; wages never fully captured the dramatic gains in productivity; and real interest rates were consistently negative. Together, these measures robbed the household of anything between 5% and 7% of GDP per annum, statistically depressing income’s share of GDP and hence boosting involuntary saving. No one really complained, everyone felt better off, but they could have done even better.

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What money?

How Rich and Poor Spend -and Earn- Their Money (WSJ)

For many Americans, the rise in food and housing prices is a tough squeeze. That’s because—even in an era with low overall inflation—low-income Americans spend a disproportionate share of their money on food and housing. New data from the Labor Department show the extent of the discrepancy. The bottom 10% of Americans, by income, devote 42% of their spending to housing and an additional 17% to food–nearly 60% of their total spending, according to the Consumer Expenditures Survey. By contrast, the wealthiest 10% of Americans dedicate only 31% of their spending to housing and 11% to food–closer to 40% of total spending. This underscores one reason that inflation feels different household to household: People spend their money in such different ways. A parent with children in college or daycare might scoff at the notion that inflation has been low for the last five years.

Conversely, someone with no car payment and no mortgage but who does a lot of driving may be feeling flush from the plunge in gas prices. This year, the expenditure survey added new data breaking down Americans into tenths. Approximately 12.5 million consumer units are in each tenth. In the bottom three brackets are individuals earning around $20,000 a year or less, and spending more than they bring in. The survey breaks out their sources of income. The poorest 10% receive more public assistance than any other group. The second 10% receive more than half their income from Social Security and retirement programs. The third and fourth 10% also receive large shares of their income from retirement programs, suggesting that retirees make up a large share of the lower-middle part of the income distribution.

The top half of Americans receive at least three-quarters of their income from wages and salaries. (The complete definition of the income sources is available here. The chart above combines “regular contributions for support” with “public assistance, supplemental security income and food stamps.”) The sixth through ninth decile in this survey earn between $51,000 and $112,000 a year. The top 10% earn an average of $220,000. Even among this group, the vast majority of annual income comes from wages, although they also receive 10% of their income from other sources, primarily self-employment. As consumers become wealthier, their spending patterns change, sometimes dramatically.

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“Investors are going to freak out if earnings turn negative..”

Jobs Shocker May Show That US Economy Is In Real Trouble (CNBC)

In the wake of March’s tepid jobs creation, it may be time to take a harder look at this soft patch. Even ahead of Friday’s employment report, concerns were mounting about a growing pile of weak data. JPMorgan’s economic research team cut their first quarter GDP growth forecast to a mere 0.6% on Thursday, citing poor consumer spending data. Recent manufacturing data have also looked especially bad, with the ISM manufacturing index’s March reading showing the slowest growth since May 2013. Separately, housing market indicators have been mixed, perhaps due to the harsh winter weather. Amid all of the concerns, many economists have held out hope because of the string of strong employment reports, which have indicated that growth remains strong where it matters most.

Now, that story changed after the Bureau of Labor Statistics reported that a mere 126,000 jobs were created in March, compared to broad expectations of another 200,00-plus report. “While the jobs report was disappointing, in some ways it confirms what we already know,” commented Marc Chandler, global head of currency strategy with Brown Brothers Harriman. “The U.S. economy slowed markedly in Q1 2015.” In the 45 minutes of futures trading that followed the report (which was released on a day when the stock market was closed for the Good Friday holiday) S&P 500 futures fell by 1%, while bond futures marched higher. In the currency market, the U.S. dollar fell sharply across the board.

While the jobs number may have somewhat shifted expectations about when the Federal Reserve will raise short-term interest rates, these moves are all consonant with shifting perceptions of the American economy—and not with shifting expectations about the Fed. After all, with all else being equal, a more dovish Fed would be good rather than bad for stocks. For Brian Stutland of Equity Armor Investments, the jobs disappointment couldn’t come at a worse time. Earnings season is around the corner, and analysts are already predicting an earnings decline. “You have to worry about whether valuations are correct if earnings are flat to down,” Stutland said. “Investors are going to freak out if earnings turn negative, and you could see a snowball effect.”

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And Warren Buffett.

The Global South Has Free Trade To Thank For Obesity And Diabetes (Guardian)

The North America Free Trade Agreement, signed in 1993, triggered an immediate surge of direct investment from the US into Mexico’s food processing industry. Between 1999 and 2004, three-quarters of the country’s foreign investment went into the production of processed foods. At the same time, sales of processed foods went up by 5-10% per year. Mexico is now one of the ten biggest producers of processed food in the world, with total sales reaching $124bn in 2012. The corporations running this business – such as PepsiCo, Nestlé, Unilever and Danone – made $28bn in profits from these sales, $9bn more than they made in Brazil, Latin America’s largest economy. Mexico is now one of the ten biggest producers of processed food in the world, with total sales reaching $124bn in 2012.

The corporations running this business – such as PepsiCo, Nestlé, Unilever and Danone – made $28bn in profits from these sales, $9bn more than they made in Brazil, Latin America’s largest economy. Mexico offers the global food industry not only low operation costs, but a network of trade agreements that provide access to big markets such as the European Union and the US. At the same time, these corporations are investing heavily in taking over local distribution. The number of supermarkets, discount chains and convenience stores exploded: in 1997, their numbers went from 700 to 3,850; there were 5,730 such stores in 2004. Today, Oxxo, a convenience store chain owned by a unit of Coca-Cola Mexico, is opening an average of three stores a day, and aims to inaugurate its 14,000th store in Mexico this year.

One of the main effects of all this has been a radical change in people’s diets and a disproportionate increase in malnutrition, obesity and diabetes. Mexico’s National Institute for Public Health reports that, between 1988 and 2012, the proportion of overweight women between the ages of 20 and 49 increased from 25% to 35.5%; the number of obese women in that age group increased from 9.5% to 37.5%. A staggering 29% of Mexican children between the ages of five and 11 were found to be overweight, as were 35% of the youngsters between 11 and 19, while one in 10 school age children suffers from anaemia.

The level of diabetes is equally troubling. The Mexican Diabetes Federation says there are up to 10 million people who suffer from diabetes in Mexico; around two million of them are unaware that they have the disease. This means that more than 7% of the Mexican population has diabetes. The incidence rises to 21% for people between the ages of 65 and 74. In 2012, Mexico ranked sixth in the world for diabetes deaths and specialists predict that there will be 11.9 million Mexicans with diabetes by 2025. Obesity and diabetes function together, interacting so strongly that a new term has emerged: “diabesity”. Who can we thank for this? The transnational food industry supported by governments that share their interests.

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Larry Summers redux.

The School of Globalism (Jim Kunstler)

One might say the main effect of the 50-year-long Friedman globalism orgy was the schooling of other nations in American-style financial fraud. Surely China has now surpassed the USA, considering the structural perversities of their banking and government relations. They really don’t have to account to anybody, including themselves, and the numbers they publish must be even more fantastical than the junk statistics produced by the US BLS. Europe has been a star pupil and only a few months ago announced a Quantitative Easing (fake capital creation) program as ambitious as America’s have been. Japan, of course, is just marking time until it quietly slips away and goes medieval.

Global disintegration has advanced furthest, not surprisingly, in the fragile band of regions most strung out on the primary commodity: oil. The Middle East/North Africa/Central Asia war zone is steadily combusting, and there is no sign of resolution across the whole of it, only the promise that conflict will get worse. Saudi Arabia was the cornerstone of that district, and the senile Saudi leadership finds itself in peril as its military pretends to support splintering Yemen. The other Arabian princes of other non-Saud clans must be watching the spectacle with wonder and nausea. When Arabia blows up, that will truly be the beginning of the end. The foregoing leads to that other original question: what is that “capital” we’re counting on? I’d propose that it doesn’t exist. It is a figment engraved on the hard drives of the world, a ghost that haunts the people still in charge of that disintegrating global economy. There is still wealth in the world, but a lot less than people such as Larry Summers say there is.

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Ukraine needs regime change. Who has experience with that?

Russia Says Ukraine Should Seek Direct Debt-Restructuring Talks (Bloomberg)

Russia said only direct talks with Ukrainian authorities may change its refusal to join debt restructuring negotiations. No official contacts have taken place with Ukraine’s Finance Ministry about renegotiating $3 billion of Eurobond debt, Russian Deputy Finance Minister Sergey Storchak said in an April 3 interview in Moscow. Russia expects to be paid on time and in full when the debt matures in December, he said. “We are not going to join any offer that they are getting ready,” Storchak said. “Only one thing can influence our position — some direct contact with the debtor.” Ukraine wants to restructure all external sovereign debt incurred before March 2014 in negotiations to save $15.3 billion in public sector financing under its bailout agreement with the IMF, the Finance Ministry in Kiev said on Saturday.

Russia, the second-largest bondholder after Franklin Templeton, refuses to join restructuring talks, saying the debt it holds was official aid to Ukraine’s struggling economy under former President Viktor Yanukovych. Russia purchased $3 billion of bonds in December 2013 after Yanukovych rejected an association agreement with the European Union in favor of closer ties with the government in Moscow. He was ousted in February last year and fled Ukraine after violent clashes between police and protesters who supported the trade pact with the EU. Ukraine’s Finance Ministry “publicly invited all bondholders” through the clearing system to take part in debt negotiations, including those holding bonds issued in December 2013, the ministry said in e-mailed comments on April 6. “To date, the Ministry has not received any response through the designated website to its invitation from the holders of such bonds.”

Finance Minister Natalie Jaresko said in March that all loans and bonds should be treated the same. The debt Russia holds should be considered “official” state aid, Russian Finance Minister Anton Siluanov said on March 27. The only concession it was willing to make was not to enforce a clause providing for early repayment once Ukraine’s public debt surpassed 60% of gross domestic product, he said. Holders of Ukraine’s bonds have suffered losses of more than 40% since the beginning of 2014, the worst performance among countries in the Bloomberg USD Emerging Market Sovereign Bond Index. The bonds handed investors a 25.7% loss this year, while the index gave a return of 2.64%.

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Strange story.

Canadian Orchestra Drops Ukraine-Born Pianist Over Anti-Kiev Twitter Posts (RT)

A Ukrainian-born pianist was barred from playing at Canada’s Toronto Symphony Orchestra (TSO) for expressing views on the situation in Ukraine via Twitter, according to the soloist herself. The move led to a social media storm tagged #LetValentinaPlay. The orchestra has officially announced its decision to drop pianist Valentina Lisitsa from its Rachmaninoff Concerto #2 program earlier this week. TSO President and CEO Jeff Melanson cited “ongoing accusations of deeply offensive language by Ukrainian media outlets,” adding that Lisitsa’s “provocative comments” had allegedly “overshadowed past performances.” In the statement, Melanson seems to be referring to Lisitsa’s Twitter posts, in which she expresses her views on the situation in Ukraine.

Lisitsa turned to Facebook on Monday with a plea, asking her fans for support to “tell Toronto Symphony that music can’t be silenced.” “Someone in the orchestra top management, likely after the pressure from a small but aggressive lobby claiming to represent Ukrainian community, has made a decision that I should not be allowed to play,” she wrote, referring to her TSO performances on Wednesday and Thursday. “I don’t even know who my accusers are, I am kept in the dark about it.” After expressing her views, Lisitsa claimed to have received numerous death threats. The last straw was the decision to drop her performance: “My haters didn’t stop there. Trying, in their own words, to teach me a lesson, they have now attempted to silence me as a musician.”

Lisitsa revealed that TSO offered to cover her entire fee for the canceled program, if she chose to stay silent about the reason behind the decision. “They even threatened me against saying anything about the cause of the cancellation … If they do it once, they will do it again and again, until the musicians, artists are intimidated into voluntary censorship,” she wrote. The reaction on Twitter was massive, with the hashtag #LetValentinaPlay surging in popularity and thousands of supporters speaking out. International concert violinist and recording artist Hannah Woolmer tweeted: “To me, this IS a VITAL campaign pls can all my followers retweet if they agree that @TorontoSymphony should #letvalentinaplay.”

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Who’s next to try this??

Four-Bedroom House In Spain ‘Sold’ In €10 Raffle (Guardian)

A stone’s throw from a former palace and vestiges of a medieval wall, this four-bedroom house in rural Valencia boasts a prime location, 20 miles from the beach and 50 miles from the nearest ski hill. And it is a steal – given that its newest owner paid just €10 (£7.35) for it in a raffle. When the previous owners, the Bolumar family, first wanted to sell the house they had inherited two years ago in Segorbe, a town of 9,300, they tried to do it the traditional way, listing it for €90,000. But the struggling Spanish housing market yielded few potential buyers. “It was really complicated,” said Pepe Bolumar, 35. The family began considering other ways to sell.

Most ideas were dismissed quickly, save one. “Raffling it off seemed interesting – people would have the chance to acquire a home for a low cost and we would still end up covering the cost,” Bolumar said. From there began a year-long project, with the family wrestling their way through seemingly endless amounts of red tape to obtain authorisation from the country’s tax authorities to be the first in Spain to raffle off a house. The €10 tickets, sold from a kiosk in Valencia as well as online, offered the chance to win the 141 sq metre home, no strings attached. As news of the raffle spread through Facebook and Twitter, 32,000 tickets were sold, the majority of them in Spain but also as far away as Australia and Canada. Those in Florida, he said, seemed to be particularly taken with the idea.

“Lots of people from Florida called us, also from England,” said Bolumar. Some of the calls that came in were heartbreaking, he said, from families who had been evicted from their homes or who had fallen on tough times and were desperately hoping to win the house. As the family prepared to gather together with a notary to watch the numbered balls drop from a borrowed lottery machine, Bolumar was confident that the family had recouped the original sale price of the house, estimating it would walk away with further €10,000. “It’s less than what it appears. We didn’t receive €320,000, because we have to cover our costs of the past year,” he said, pointing to publicity as well as the cost of servers and maintenance for the website.

The family will also cover any taxes incurred by the winner from the transfer of the house. “The winner doesn’t have to pay a thing more.” Throughout the process, Bolumar said the family regularly received phone calls from others interesting in raffling off their own houses. It now plans on keeping its website open to offer guidance to others looking to do the same. “It was a huge amount of effort. It took up a whole year and became a second job for me,” said Bolumar, who manages a small business in Valencia. But it proved to be an effective way to beat the tumbling Spanish property market, he said. “If you’re trying to sell your home and its not working, this might be the solution for you.”

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“So when might Chinese demand return to normal?” You’re looking at it.

New Zealand Dairy Giant Fonterra’s China Sales Fall 61% (NZ Herald)

Fonterra’s half-year result – which revealed a 16% profit drop and a cut to the forecast dividend – was a disappointment for farmers and investors in the co-operative’s listed shareholders’ fund. But an aspect of the interim financials that didn’t get much attention last week was the precipitous decline in Chinese revenue the company experienced in the six months to January 31. Sales in Fonterra’s largest market slumped to $1.2 billion from $3.1 billion in the same period a year earlier. That’s a whopping 61% decline, well ahead of the next biggest geographical revenue fall of 29% in Europe. It underlines the extreme volatility Fonterra has been dealing with in China and the ongoing challenges it faces there.

Aggressive Chinese buying during the latter part of 2013, into early 2014, helped to inflate global dairy prices and resulted in a massive build-up of inventory in China. To put it in perspective, the $3.1 billion Chinese revenue Fonterra posted for the six months to the end of January 2014 was a 138% increase on the $1.3 billion it reported for the half-year up to January 2013. But the spike in demand wasn’t to last. High inventory levels had put the brakes on Chinese buying by the middle of last year. That drop in demand has been a factor in the dairy price downturn New Zealand farmers are now facing.

Speaking to the Business Herald last week, Fonterra chief financial officer Lukas Paravicini attributed the half-year slump in Chinese revenue to a combination of lower dairy prices, which were a negative for the co-op’s ingredients business, and weak demand. It appears the latter factor was the biggest contributor to the decline. Fonterra’s half-year revenue across the rest of Asia fell only 5%, to $2.6 billion, despite falling dairy prices. So when might Chinese demand return to normal? Paravicini expressed some optimism, saying Fonterra’s core ingredients business in China had experienced “a bit” of a recovery. “We’re still in a supply-rich and demand-weak environment and that includes China,” he said.

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Europe’s shame continues. Anybody seen a task force announced? Neither have I.

Italians Rescue 1,500 Migrants In 24 Hours In Mediterranean (BBC)

Some 1,500 migrants have been rescued from boats trying to cross to Italy in the space of 24 hours, the Italian coastguard has said. The navy and coastguard despatched vessels to rescue the migrants from five different boats. The UNHCR says almost 3,500 people died and more than 200,000 were rescued trying to cross the Mediterranean Sea to reach Europe last year. The chaotic political situation in Libya has added to the crisis. The coastguard despatched four vessels and the navy another after receiving satellite telephone distress calls from three migrant boats. Two more boats were found to be in trouble when the rescuers arrived. The migrants were transferred to Lampedusa island and the ports of Augusta and Porto Empedocle in Sicily. Last year, Italy dealt with 170,000 migrants who entered the EU by sea. Officials say the numbers for the first two months of this year are up 43% on January and February in 2014.

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“..more than half of the U.S. is affected by water shortages..”

Mapping America’s Exceptional Drought Conditions (Reuters)

As government websites go, the U.S. Drought Portal sounds full of promise. Fun even. But alas, recent news from the site’s weekly reports on things like U.S. drought conditions and wildfire risks, has been anything but fun.

As this Reuters graphic shows, more than half of the U.S. is affected by water shortages, and the problem is growing worse. The number of people affected by extreme or exceptional drought conditions is approaching 40 million, many of those in California, where Gov. Jerry Brown last week ordered a 25% cut in domestic water use for the first time in state history.

According to the U.S. Geological Survey, California’s 2014 Water Year was the third driest in 119 years and the warmest on record, so perpetual wildfire season looks like the new normal. And there’s little relief on the horizon: The National Weather Service’s seasonal drought outlook predicts developing, persisting or intensifying drought conditions for most of the American West through at least the end of June.

DroughtConditions040615-620

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