Jun 012017
 
 June 1, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , , ,  1 Response »
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Ted Russell James Baldwin and Bob Dylan 1963

 

America Is Racing Toward Peak Polarization (NYMag)
US Middle Class Is Now The Company Store Class (Michael Hudson)
Theresa May’s Lead Slashed To Record Low Of Three Points In New Poll (Ind.)
Does Theresa May Pass The Turing Test? (PH)
Terror In Britain: What Did The Prime Minister Know? (John Pilger)
UK Policymakers Face A Dilemma Over Public’s Slowing Demand For Credit (G.)
UK Comes Bottom Of G7 Growth League, Canada Takes Lead (G.)
Europe May Finally Rethink NATO Costs (McGovern)
NATO Allies Can Spend More Money, More Wisely (BBG)
Oil Prices Crushed As Traders Bet Against OPEC, Russia (CNBC)
Fitch Warns Baidu Faces “Default Risk” Due To Growing Shadow Banking Business (ZH)

 

 

Very true of course, but what’s this worth coming from a polarized view?

America Is Racing Toward Peak Polarization (NYMag)

There is a venerable, centrist point of view that partisan polarization is a function of Washington’s warring politicians, who inflate artificial differences into causes for political war. Out there in the country, it is thought, Americans simply want politicians to come together and work out sensible, centrist policies. Whatever this gospel’s general applicability, it is increasingly clear that in the era of Donald Trump it’s The People who are even more polarized than their representatives in Washington. A new poll from Morning Consult for Politico has this jarring news: after the president’s first overseas trip, his job approval ratings rose. But so, too, did the percentage of Americans who want impeachment proceedings against him to begin post-haste.

Indeed, we are rapidly approaching the point where Americans are basically divided between those who think the president’s doing a good job (45% at present), and those who think he should be removed from office before his first term ends (43% at present). Unsurprisingly, these sentiments closely match partisan preferences. According to this same poll, 82% of self-identified Republicans approve of Trump’s job performance, 46% of them strongly. 79% of self-identified Democrats disapprove of Trump’s job performance, 65% of them strongly. These grassroots Americans are really, really at odds. That becomes even more obvious when the possibility of impeachment is introduced. Seventy-one% of Democrats want Congress to initiate impeachment proceedings.

Over half of these impeachment supporters say he’s unfit to serve, whether or not he has committed an impeachable offense. 76% of Republicans oppose the idea. For all the talk about anti-Trump Republicans and moderate Democrats, the truth is there is not a lot of support out there for anything other than the highly partisan approach Trump and the congressional GOP have taken this year, and for what some Democrats have called “the resistance.”

Read more …

Empty bags can get heavy.

US Middle Class Is Now The Company Store Class (Michael Hudson)

Students usually don’t think of themselves as a class. They seem “pre-class,” because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class. But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student’s means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job. The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt.

So the middle class today is a debtor class. Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the “permanent Obama economy” in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing. Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.)

Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery. And if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans.

This is simply a replay of what banks have negotiated for real estate mortgage lending. Students who do succeed in getting a job hope to start a family, or at least joining the middle class. The most typical criterion of middle-class life in today’s world (apart from having a college education) is to own a home. But almost nobody can buy a home without getting a mortgage. And the price of such a mortgage is to pay up to 43% of one’s income for thirty years, that is, one’s prospective working life (in today’s as-if world that assumes full employment, not just a gig economy).

Read more …

Boy, is she doing a bad job. Calling an election and not showing up. And yeah, we get it: if she would show up, numbers would be even worse. On Twitter: “A Ladbrokes customer in Chelsea has just had £2,000 at 100/1 for Boris Johnson to be PM on July 1st. #GE2017

Theresa May’s Lead Slashed To Record Low Of Three Points In New Poll (Ind.)

Labour is closing the gap with Tories and now stands just three points from Theresa May’s party, a new YouGov poll shows. The poll, commissioned by The Times, found the Conservative lead has slipped dramatically in recent weeks and is now within the margin of error. The figures show the Conservatives on 42 points but Labour are close behind on 39. Meanwhile, the Liberal Democrats are struggling to maintain the momentum of their “fightback” as they slip to just 7% vote share. The poll points to a remarkable change in fortunes for the Tories, which had a 24-point lead over Labour when the snap general election was called in April. Ms May has struggled in recent weeks after she was forced into an embarrassing U-turn over plans to reform social care in the party’s manifesto.

The party said elderly people who needed care will be able to put off playing for it until after their deaths so they could potentially stay in their own home for as long as possible. But critics said this would unfairly penalise people who suffer a slow decline from illnesses like dementia, over people who die suddenly and can then leave their estate to their children. Ms May has faced criticism for refusing to to engage with voters, especially after she declined to take part in televised debates. During the debate, Green party leader Caroline Lucas said: “You don’t call a general election and say it is the most important election in her lifetime and then not even be bothered to debate the issues at hand.” She added: “I think the first rule of leadership is to show up.”

Read more …

Fitting comment on Twitter to the original title “Three minutes of nothing”: “Does this pass the Turing test?”

Does Theresa May Pass The Turing Test? (PH)

Before 8.30am today, I had never interviewed a Prime Minister. Heading back to the office to transcribe my encounter with Theresa May at Plymouth’s fish market, I couldn’t be certain that had changed. To start with, it was quite an exciting experience. We got the call late on Tuesday night, and the visit was kept totally secret until her arrival. We waited in the drizzle as she chatted with fishermen and nodded earnestly at nets and buckets, leopard print heels click-clacking on the harbour floor. ired-looking campaign managers hurried back and forth, mulling over our request for a filmed interview which had been denied on her previous visit. Then suddenly we were on. I had a list of four questions, all on local issues, carefully prepared with the help of my newsroom colleagues.

Two visits in six weeks to one of the country’s most marginal constituencies – is she getting worried?

May: “I’m very clear that this is a crucial election for this country.”

Plymouth is feeling the effects of military cuts. Will she guarantee to protect the city from further pain?

May: “I’m very clear that Plymouth has a proud record of connection with the armed forces.”

How will your Brexit plan make Plymouth better off?

May: “I think there is a better future ahead for Plymouth and for the whole of the UK.”

Will you promise to sort out our transport links?

May: “I’m very clear that connectivity is hugely important for Plymouth and the South West generally.”

I was pleased to have secured the interview and happy to have squeezed all my points in. But no sooner had the ministerial car pulled away from Sutton Harbour than I began to feel a bit deflated. If the ultimate job of a journalist is to get answers, I had failed. Should I have stopped her and demanded she be more specific? Could I have gone full angry Paxman, or brought the interview to an abrupt close in protest? Back at the office, we scratched our heads and wondered what the top line was. She had and given me absolutely nothing. It was like a postmodern version of Radio 4’s Just A Minute. I pictured Nicholas Parsons in the chair: “The next topic is how Plymouth will be affected by Brexit, military cuts and transport meltdown. Theresa, you have three minutes to talk without clarity, candour or transparency. Your time starts now.”

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No, Theresa May in reality is not so funny or innocent.

Terror In Britain: What Did The Prime Minister Know? (John Pilger)

The unsayable in Britain’s general election campaign is this. The causes of the Manchester atrocity, in which 22 mostly young people were murdered by a jihadist, are being suppressed to protect the secrets of British foreign policy. Critical questions – such as why the security service MI5 maintained terrorist “assets” in Manchester and why the government did not warn the public of the threat in their midst – remain unanswered, deflected by the promise of an internal “review”. The alleged suicide bomber, Salman Abedi, was part of an extremist group, the Libyan Islamic Fighting Group, that thrived in Manchester and was cultivated and used by MI5 for more than 20 years. The LIFG is proscribed by Britain as a terrorist organisation which seeks a “hardline Islamic state” in Libya and “is part of the wider global Islamist extremist movement, as inspired by al-Qaida”.

The “smoking gun” is that when Theresa May was Home Secretary, LIFG jihadists were allowed to travel unhindered across Europe and encouraged to engage in “battle”: first to remove Mu’ammar Gadaffi in Libya, then to join al-Qaida affiliated groups in Syria. Last year, the FBI reportedly placed Abedi on a “terrorist watch list” and warned MI5 that his group was looking for a “political target” in Britain. Why wasn’t he apprehended and the network around him prevented from planning and executing the atrocity on 22 May? These questions arise because of an FBI leak that demolished the “lone wolf” spin in the wake of the 22 May attack – thus, the panicky, uncharacteristic outrage directed at Washington from London and Donald Trump’s apology.

The Manchester atrocity lifts the rock of British foreign policy to reveal its Faustian alliance with extreme Islam, especially the sect known as Wahhabism or Salafism, whose principal custodian and banker is the oil kingdom of Saudi Arabia, Britain’s biggest weapons customer. This imperial marriage reaches back to the Second World War and the early days of the Muslim Brotherhood in Egypt. The aim of British policy was to stop pan-Arabism: Arab states developing a modern secularism, asserting their independence from the imperial west and controlling their resources. The creation of a rapacious Israel was meant to expedite this. Pan-Arabism has since been crushed; the goal now is division and conquest.

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“The BoE has busted a gut to keep the mortgage market afloat with one scheme after another to subsidise everything from deposits to the lenders themselves. It must have been upsetting to see a fall in approvals for house purchases in April for the third month in a row.”

UK Policymakers Face A Dilemma Over Public’s Slowing Demand For Credit (G.)

As the election on 8 June nears, the debate has intensified over how much Britain’s frothy cappuccino-drinking economy can cope without endless dollops of interest-free credit. Financial regulators are worried about it. So are the debt charity workers who pick up the pieces when the debt merry-go-round grinds to a halt. And they should be worried. Many of the biggest, shiniest new cars zipping round UK streets would still be sitting on the garage forecourt without ultra cheap credit deals that rival mortgages for their rock-bottom rates. On the high street, shops have in recent years relied more heavily on consumers using their credit cards for big purchases. Back in 2014 these shoppers could avoid paying the 18.9% interest commonly applied to credit card balances and use the two, even three-year interest-free period many card operators allow.

As we know from recent experience, when debt bubbles burst, they hit everyone and drag the economy down into recession. The Bank of England’s most recent data for April shows that the mania for borrowing last year and the year before has paused somewhat since January. That should be seen as good news. Net mortgage lending is down at levels seen a year ago while unsecured borrowing on credit cards and loans has stabilised at a growth rate of of just over 10% a year. But not everybody at the Bank of England will be content to see consumers putting their credit cards in a drawer. The economists attached to the BoE’s interest rate-setting committee know the economy runs on debt. To adapt a well-known first world war poster, they know Britain needs borrowers. If a reminder of this basic economic rule was needed, it was made clear earlier this month when the latest UK GDP figures appeared.

The relative lack of borrowing in the first three months of the year coincided with a dive in GDP growth from 0.7% in the final quarter of 2016 to 0.2% in the first quarter of this year. The BoE has busted a gut to keep the mortgage market afloat with one scheme after another to subsidise everything from deposits to the lenders themselves. It must have been upsetting to see a fall in approvals for house purchases in April for the third month in a row. Now there are signs that the credit habit is returning as almost zero interest rates work their magic again, Easter’s spending is out of the way and wage rises are being outpaced by inflation. Analysts say GDP growth in Q2 will be higher for this very reason. Is that a return of consumer confidence with shoppers shrugging off the election, they ask? Or is it, as the debt charities suspect, cash-strapped consumers rolling over their debts and taking out a bit more credit just to get by?

Read more …

Yes, if you can’t get people to go deeper into debt, your growth shrinks. That’s economics these days.

UK Comes Bottom Of G7 Growth League, Canada Takes Lead (G.)

The UK has slumped to the bottom of the league table of advanced economies after Canada registered stellar growth in the first three months of the year. Canada was the final member of the G7 to report its growth figures, which confirmed the UK as officially the joint worst performing member so far this year. The announcement marked a significant decline for the UK economy, which a year ago was outshining Germany, the US and Japan. In February it was announced that Germany had pipped the UK as the fastest-growing G7 nation during 2016 by 10 basis points. However, the latest figures for Canada, which showed that growth accelerated to 0.9% in the first quarter, putting it top of the G7 performers, has left Britain languishing alongside Italy at the bottom of the table.

Germany is in second spot at 0.6%, followed by Japan with 0.5%, France 0.4% and the US at 0.3%. The UK and Italy are then level on growth of just 0.2%. The sluggish expansion in the first quarter provides the latest evidence that the early resilience to the EU referendum result last June is now wearing off as higher inflation puts consumers under pressure. Prices have been increasing since the Brexit vote because the referendum result sent the pound sharply lower and has raised the cost of imports to the UK. That higher inflation has hit household budgets and dented the main driver of UK growth, consumer spending. The Bank of England said earlier this month that it expected GDP growth would edge up marginally to 1.9% for 2017 from 1.8% in 2016. But it warned that living standards would fall this year because inflation would be higher than pay growth.

Read more …

NATO needs enemies or it will disappear.

Europe May Finally Rethink NATO Costs (McGovern)

President Donald Trump’s politically incorrect behavior at the gathering of NATO leaders in Brussels on Thursday could, in its own circuitous way, spotlight an existential threat to the alliance. Yes, that threat is Russia, but not in the customary sense in which Westerners have been taught to fear the Russian bear. It is a Russia too clever to rise to the bait – a Russia patient enough to wait for the Brussels bureaucrats and generals to fall of their own weight, pushed by financial exigencies in many NATO countries. At that point it will become possible to see through the West’s alarmist propaganda. It will also become more difficult to stoke artificial fears that Russia, for reasons known only to NATO war planners and neoconservative pundits, will attack NATO. As long as Russian hardliners do not push President Vladimir Putin aside, Moscow will continue to reject its assigned role as bête noire.

First a request: Let me ask those of you who believe Russia is planning to invade Europe to put down the New York Times for a minute or two. Take a deep cleansing breath, and try to be open to the possibility that heightened tensions in Europe are, rather, largely a result of the ineluctable expansion of NATO eastward over the quarter-century since the Berlin Wall fell in 1989. Actually, NATO has doubled in size, despite a U.S. quid-pro-quo promise in early 1990 to Russian leader Mikhail Gorbachev in early 1990 not to expand NATO “one inch” to the east of Germany. The quid required of Russia was acquiescence to a reunited Germany within NATO and withdrawal of the 300,000-plus Russian troops stationed in East Germany.

The US reneged on its quo side of the bargain as the NATO alliance added country after country east of Germany with eyes on even more – while Russia was not strong enough to stop NATO expansion until February 2014 when, as it turned out, NATO’s eyes finally proved too big for its stomach. A U.S.-led coup d’etat overthrew elected President Viktor Yanukovych and installed new, handpicked leaders in Kiev who favored NATO membership. That crossed Russia’s red line; it was determined – and at that point able – to react strongly, and it did.

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No, Bloomberg, spending more is not an answer to any serious question.

NATO Allies Can Spend More Money, More Wisely (BBG)

If Donald Trump and Barack Obama agree on something, does that mean it’s true? In the case of Europe’s woeful support of its collective defense, yes: Member states need to contribute their “fair share” toward the North Atlantic Treaty Organization, a phrase both men used in speeches in European capitals. The question is what “fair share” means. Instead of measuring how much member nations spend on their defense, NATO should pay more attention to how they spend it. The current definition – members are expected to spend at least 2% of GDP on defense – is both misleading and unfair. Currently, only four European members meet the alliance’s target and things are going the wrong direction. Across Europe, including non-NATO members, military spending as a percentage of GDP has dropped by almost 9% in the last five years.

But some kinds of military spending are better than others. Money for major training exercises, or transport planes and helicopters for airlift operations, is far more valuable than lots of spending on ill-equipped troops in glorified jobs programs. Spending on national defense is always going to reflect national priorities. That said, better coordination among member nations can bolster both their security and the alliance’s. A wealthy nation may want some shiny new fighter jets, but the collective defense may be better served by more prosaic equipment such as refueling tankers. To their credit, not only have the alliance’s newer members such as the Baltic States been paying up, they’ve been helpful in buying what NATO most needs. Arriving at a consensus as to what constitutes useful spending among 28 separate militaries would be contentious and difficult, to put it mildly. It would still be a useful exercise.

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Flip flop. Up down.

Oil Prices Crushed As Traders Bet Against OPEC, Russia (CNBC)

The oil market has serious doubts that the production deal between OPEC and Russia is sufficient enough to bring the world oil market back into balance, against a potential wave of new supply. As a result, traders appeared to be adding to short positions, as crude fell sharply Wednesday morning, analysts said. The decline in oil prices was triggered by news that Libya had increased its production to a three-year high of 827,000 barrels a day. “The game of chicken between them and the market is back on again,” said John Kilduff, partner at Again Capital. West Texas Intermediate crude for July settled off 2.7%, at $48.32 per barrel after briefly breaking $48. Brent, the international benchmark, dipped temporarily below the psychological $50 for the first time in two weeks, and was down 3% at $50.66 in afternoon trading.

Last week, Saudi Arabia and other members of OPEC agreed with Russia and other producers to extend their agreement to cut back output by 1.8 million barrels a day for another nine months. But market expectations had been hinging on the idea that producers would take even more barrels off the market because of the overhang of supply. Oil plunged 5% last Thursday, after the announcement. “The meeting was much more of a failure than people realize because of what wasn’t achieved. There are no caps on production for Libya, or Nigeria, or Iran,” said Kilduff. Libya has shipped an average of 500,000 barrels per day of oil so far this year, up from 300,000 per day last year. Production reached 800,000 barrels per day earlier this month.

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“Shadow bank run” is a good way to put it. I’ve been warning about Chinese shadown banking for years, and I haven’t been wrong. Baidu is a search engine, for pete’s sake… which “does not need to set aside large capital against potential defaults on its WMPs”… Beijing facilitates the shadows, and they in turn lend into the economy what Beijing’s state banks can’t do without raising bright red alarms.

Fitch Warns Baidu Faces “Default Risk” Due To Growing Shadow Banking Business (ZH)

Less than a week after Moody’s downgraded China’s sovereign credit rating, prompting an unprecedented currency response by the PBOC which as noted earlier resumed its crusade against Yuan shorts by sending CNH overnight deposit rates as high as 65%, on Wednesday another rating agency, Fitch, took aim at what many consider the weakest link in China’s financial system: the nearly $9 trillion in shadow banking “assets”, of which roughly $4 billion are Wealth Management Products. Just as surprising was the target of Fitch’s wrath: none other than China’s tech giant Baidu, which Fitch put on “negative watch” warning that the company’s financial services division faced increased risk of default as a result of its growing reliance on shadow banking in general and Wealth Management Products (WMPs) in particlar.

As reported previously, China’s popular WMPs offer a higher yielding alternative to conventional financial instruments by bundling together investments into money market bonds, corporate loans and many other products, all of which are usually a mystery to the buyer. As of 2016, China had nearly 30 trillion yuan outstanding in WMPs. Baidu, China’s dominant search engine, has not been immune to the scramble for funding optionality provided by shadow banking alternatives, and has been getting into the WMP game by rapidly expanding its Financial Services Group, which Fitch says is increasing Baidu’s overall business risk. While Baidu is not under obligation to pay the returned target on these products, a failure could be potentially damaging to Baidu’s reputation, Fitch warned.

As with Chinese banks, Baidu does not need to set aside large capital against potential defaults on its WMPs … WMPs have become an alternative form of financing for projects or investments that would not qualify for bank loans,” Fitch said. This could lead to an increased risk of default or “shadow bank run”, since many of the bundled assets are of poor quality and would not qualify for bank loans. The WMP warning from Fitch came less than two weeks after Moody’s also put Baidu’s corporate debt on watch for a potential downgrade. WMPs have been behind the staggering surge in total assets of Baidu’s Financial Services Group, which have more than doubled to CNY25 billion in the period ended April 2017.

Read more …

May 312017
 
 May 31, 2017  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Johannes Vermeer Woman in Blue Reading a Letter 1662-3

 

China Is The Greatest Financial Bubble in History (Rickards)
In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)
EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)
Sterling Dips After Poll Suggests Hung UK Parliament (BBC)
Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)
US Starts Shipping Weapons To Syrian Kurds (ZH)
The Plot To Overthrow Trump Is Very Real (Martin Armstrong)
‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)
Merkel Comes Out Swinging At Trump And Misses (Luongo)
After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)
Two-Thirds Of Greek Construction Jobs Have Vanished (K.)
Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)
US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

 

 

“The toxic combination of government debt, corporate debt, WMPs, and unrealistic growth expectations have set up China for the greatest market crash in history. But, not yet. As analysis will continue to prove, political forces will put off a day of reckoning until early 2018.”

China Is The Greatest Financial Bubble in History (Rickards)

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year. China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn. The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account. Paying off that debt requires growth, but the growth itself is fueled by more debt. China is now at the point where enormous new debt is required to achieve only modest new growth. This is clearly non-sustainable.

The next bubble is in investment instruments called Wealth Management Products, or WMPs. Picture this. You’re a middle-class Chinese saver and you walk into a bank. They offer you two investment options. The first is a bank deposit that pays about 2%. The other is a WMP that pays about 7%. Which do you choose? In the past ten years, bank customers have chosen almost $12 trillion of WMPs. That might be fine if WMPs were like high-quality corporate or municipal bonds. They’re not. They’re more like the biggest Ponzi scheme in history. Here’s how they work. Proceeds from sales of WMPs are loaned to speculative real estate developers and unprofitable state owned enterprises (SOEs) at attractive yields in the form of notes. So, WMPs resemble collateralized debt obligations, CDOs, the same product that sank Lehman Brothers in the panic of 2008.

The problem is that the borrowers behind the WMPs can’t pay their debts. They’re relying on further bubbles in real estate or easy credit from the government to meet their interest obligations. What happens when a WMP matures? Usually the bank customer is encouraged to rollover the investment into a new WMP. What happens if the customer wants her money back? The bank sells a new WMP to another customer, then uses those sales proceeds to redeem the first customer. The new customer now steps into the shoes of the first customer with the same pile of bad debt. That’s where the Ponzi dynamic comes in. Simply put, most of the debts backing up the WMPs cannot be repaid, which means it’s just a matter of time before the WMP market goes into a full meltdown and triggers a banking panic.

Finally, there is an infrastructure bubble. As explained in more detail below, China has kept its growth engine humming mostly with investment instead of aggregate demand from consumers. Investment is fine if it is directed at long-term growth projects that produce a positive expected return and help the broader economy grow as well. But, that’s not what China has done. About half of China’s investment in the past ten years has been wasted on “ghost cities,” white elephant transportation facilities, and prestige projects that look good superficially, but that don’t produce enough revenue or efficiencies to pay for themselves. Much of this investment was financed with debt. If the project itself is not revenue producing then the associated debt cannot be repaid, and will go into default.

Read more …

Watershed Ponzi.

In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)

Less than a decade after various complex, synthetic, squared, cubed and so on securitized debt structures nearly brought down the financial system, here come “Sovereign Bond-Backed Securities.” Moments ago, the FT reported that in a watershed event for the European – and global – bond markets, Brussels is pressing for sovereign debt from across the eurozone to be “bundled into a new financial instrument and sold to investors as part of a proposal to strengthen the single currency area.” Call it securitized sovereign debt. In the latest attempt by Europe to create a common bond market, a European Commission paper on the future of the euro seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.

The logic is simple: combine all the debt from strong and weak countries into one big pool, eliminating the outliers on both sides, then tranche it out, and sell it based on required yield returns. “Officials hope that the plans would boost demand for debt issued by governments with relatively weaker economies, and encourage banks to manage their risks better by diversifying their portfolios, while avoiding old political battles over whether the currency bloc should issue common bonds”. Why now? Because as has been Germany’s intention all along, Berlin has been hoping to create a fiscally intergrated Europe (with a shadow government in Berlin of course), call it a (quasi) “fiscal union”, and which is much more stable and resilient than the current iteration which is only as strong as its weakest link. Securitizing the sovereign debt resolves virtually all outstanding problems.

“The commission paper is the latest in a series of efforts to kick-start integration inside the eurozone. Such integration efforts have stalled since financial markets became convinced in 2013 that the European Central Bank would not allow the eurozone to break up. The last successful integration project was the creation of an EU banking union three years ago.” There is another reason why now: over the next year, the ECB’s QE, which has been instrumental to implement Draghi’s “Whatever it takes” bluff, will start hiking rates and eventually unwinding its balance sheet, the world’s biggest. That’s when the European bond market may have its next freak out moment. As a result, Brussels and Frankfurt are hoping to preempt this potential unwind by coming up with today’s “ingenious” solution.

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Brussels wants the opposite of what the people want.

EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)

The EU executive will suggest on Wednesday the euro zone might need to issue collective debt and run a joint budget, among proposals for bolstering the single currency that echo ideas from new French President Emmanuel Macron. People familiar with the European Commission reflection paper told Reuters the scenario of a finance minister managing common revenue, spending and borrowing had been worked on for many months in Brussels, but now appears a much more likely option since centrist former banker Macron won power on May 7. German conservatives dislike an idea they say means paying for poorer neighbors. But Chancellor Angela Merkel, seeking re-election in September, has welcomed Macron’s victory and EU officials said they hoped governments might start working on a plan to forge a more cohesive euro zone from next year.

The Commission paper examines possible reforms to the bloc after the 2010-2012 sovereign debt crisis that nearly destroyed it and which triggered a wave of quick fixes for its weak spots. While some problems have been addressed, there is a lot more EU governments need to do to have an optimally functioning Economic and Monetary Union (EMU), the Commission will say. The document, part of a wider series on the future of the EU, comes as the EU is to start talks with Britain on the terms of its withdrawal – a great setback to European integration but one that will see the euro zone make up nearly four-fifths of the EU’s economy, up from two thirds today. The Commission will avoid making any clear suggestions as to the evolution of the single currency area, leaving it up to EU governments to decide which of the ideas they like. But it does say that in the later stages of deepening euro zone integration, not least because it would require politically difficult and time-consuming changes to EU treaties, the bloc could establish a euro zone treasury.

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May’s fall is swift.

Sterling Dips After Poll Suggests Hung UK Parliament (BBC)

The value of the pound dropped after a projection suggested the Conservatives could fail to win an outright majority in the election on 8 June. Previous opinion polls suggested Prime Minister Theresa May’s party would increase its majority, which is currently 17 seats. But the projection, published in the Times and based on YouGov research, suggests a possible hung parliament. Sterling fell by more than half of one per cent, but recovered some losses. By early Wednesday morning, it was trading 0.44% lower against the dollar at $1.28020 and 0.29% lower against the euro at €1.146. The Times said the YouGov data suggested that the Tories could lose up to 20 of the 330 seats they held in the last parliament, with Labour gaining nearly 30 seats.

The Conservatives would still be the biggest party, but would not have an overall majority. The model is based on 50,000 interviews over a week, with voters from a panel brought together by YouGov. It uses a new “constituency-by-constituency” model for polling, which the paper says allows for big variations. According to the Times, “the estimates were met with scepticism by Tory and Labour figures.” YouGov’s chief executive, Stephan Shakespeare said the model had been tested during the EU referendum campaign, when it consistently put the winning Leave side ahead. But he added: “It would take only a slight fall in Labour’s share and a slight increase in the Conservatives’ to result in Mrs May returning to No 10 with a healthy majority.”

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Fear rules the waves. Telegraph headline today: “Tax on homes ‘to treble under Labour plans for Land Value Tax’ “

Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)

Flapping Theresa May fired off a volley of insults at Jeremy Corbyn today after Labour surged in general election polls. The desperate Prime Minister even conjured up an image of the Labour leader naked in Brussels as she urged voters to consider the impact of propelling Mr Corbyn to No 10. She used a Labour legend’s quote as she mocked Mr Corbyn over what she claimed would be his weakness in tough EU divorce talks. “With his position on Brexit , he will find himself alone and naked in the negotiating chamber,” she said. “I know that’s an image that doesn’t bear thinking about but actually this is very serious.” The barb was particularly wounding for Labour by borrowing the charge from one of the party’s heroes, NHS founder Aneurin Bevan.

Urging Labour conference delegates in October 1957 not to support unilateral nuclear disarmament, he warned: “You will send a British Foreign Secretary, whoever he may be, naked into the conference chamber.” Challenged by the Mirror, Mrs May denied demeaning the office of Prime Minister with her outspoken attacks. And she was later forced to deny they showed she was getting “desperate”, saying: “It represents the difference between myself, having prepared for the negotiations, having a clear plan for the negotiations, and Jeremy Corbyn and the Labour Party who have said they would tear up the plan we have produced.” Speaking at the former railway station in Wolverhampton, Mrs May claimed her rival’s performance in the Sky News/Channel 4 TV showdown proved he could not be PM. “Despite being a Member of Parliament for 34 years, despite being the leader of the Labour Party for the last two years, he’s simply not ready to govern, and not prepared to lead,” she said.

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Some are trying to turn this into a war with Iraq.

US Starts Shipping Weapons To Syrian Kurds (ZH)

Just three weeks after reports first emerged that the Trump administration was considering arming the Syrian Kurd militia caught in the crossfire between Turkish and Syrian army forces, NBC reported that the American military has started shipping weapons and equipment to the Kurdish fighters of the Syrian Democratic Forces, also known as YPG, a key US ally on the ground in Syria. Citing an unnamed official, NBC adds that the U.S. began providing the equipment in the last 24 hours. Details were scarce, with no specifics about what weapons and supplies the US is sending the Syrian Democratic Forces or how those items are being delivered however when the report first emerged, the U.S. military announced it would provide the YDF with ammunition, rifles, armor, radios, bulldozers, vehicles, and engineering equipment.

Pentagon spokesman Eric Pahon told RT taid that this move represents the “early steps to prepare for the eventual liberation of Raqqa,” which the Islamic State has declared the capital of its self-proclaimed caliphate. “Overall, the equipment the US-led coalition will provide to the SDF includes small arms, ammunition, heavy machine guns and weapons capable of defeating specific threats our partner forces are expected to encounter as they take the fight to a desperate enemy, such as heavily-armored vehicle-borne IEDs,” Pahon said. Earlier this month US officials said that Trump had signed off on a plan “to equip Kurdish elements of the Syrian Democratic Forces” in the fight to retake the Syrian city of Raqqa from ISIS. “The SDF, partnered with enabling support from U.S. and coalition forces, are the only force on the ground that can successfully seize Raqqa in the near future,” Pentagon spokeswoman Dana White said in a statement.

The announcement is guaranteed to send Turkey’s president Erdogan into another fit of rage. Earlier this month Erdogan condemned Trump’s decision to arm Syrian Kurds whom Turkey considers to be terrorists and an extension of outlawed Kurdish insurgents within its borders. Three weeks ago Erdogan said: “I hope very much that this mistake will be reversed immediately,” adding that “we want to believe that our allies would prefer [to] be side by side with ourselves rather than with the terror groups.” President Trump and Erdogan met earlier this month and discussed the administration’s plans to arm Kurdish militias in Syria. It was unclear what agreement the two leaders reached on this controverial move.

At the same time, Reuters reported that Syrian rebels say the United States and its allies “are sending them more arms to try to fend off a new push into the southeast by Iran-backed militias aiming to open an overland supply route between Iraq and Syria.” Rebels said military aid has been boosted through two separate channels: a program backed by the CIA, known as the MOC, and regional states including Jordan and Saudi Arabia, and one run by the Pentagon. “There has been an increase in the support,” said Tlass Salameh, head of the Jaish Usoud al-Sharqiya, one of the FSA groups backed via the CIA-backed program. “There’s no way we can let them open the Baghdad-Damascus highway,” he said.

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No doubt there.

The Plot To Overthrow Trump Is Very Real (Martin Armstrong)

There is a very REAL plot to overthrow Trump led by the political establishment and aided by the mainstream press.. This is not simply speculation – this is the real deal. Of course the Washington Post and New York Times are in full swing to get rid of Trump. No matter what it might be, the twist is always against Trump right down to the story how Sean Spicer wanted to see the Pope because he is a devote Catholic and was denied. CNN, of course, is also part of this conspiracy. You will NEVER find any positive article about Trump in mainstream media. Here is CNN and we can see that 50% of the top stories are always against Trump. We have Boehner coming out saying Trump is a disaster. This is the guy who threw people off committees if they did not vote for his agenda. The Kushner story is desperately trying to make something out of nothing.

Here we have after Flynn’s removal, Kushner suggesting setting up a direct channel for diplomatic purposes regarding Syria with the Russians. That is entirely within reason and has been done during confrontations in the past. This was only a suggestion. It was not done, yet the press twist this into somehow supporting Russia who single-handedly defeated Hillary and put Trump in office. They think if they can just keep selling that nonsense it will become a fact.. The press seems to want war with Russia and absolutely nothing else. No such link was established and the last thing you want to do is not talk to your adversary. So why is this a major story? Of yes. It’s again RUSSIA. The press created the Spanish American War. They supported the Vietnam War and kill more than 58,000 American boys, most of my high school friends died thanks to them.

Behind the Curtain, Republican Elites are conspiring to overthrow Trump (including Boehner) to protect the establishment. McCain and Graham are the worst of the lot in office. They obviously picked up the phone and called Boehner for help. The Republicans have lost it. They think this “populism” is over with Macron’s victory in France so it’s time to get rid of Trump and it will all be OK again. I have never seen such an all out effort on a massive coordinated effort to reject the people’s demand for reform. This is HIGHLY dangerous for we can very well move toward civil war. These people think getting rid of Trump and it will all be roses and raining money for them once again. They are DEAD wrong! Our model also warns that that United States can break up as a result of this by 2032-2040.

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No, Merkel has started her campaign.

‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)

Attending a campaign rally ahead of the country’s elections, Angela Merkel claimed that now was the time for Europe to pay more attention to its own interests, and “take our fate into our own hands”. In an uncharacteristically bold speech, she went so far as to suggest that even the US was no longer a reliable partner to the EU – a strong statement, according to officials, who were left stunned. The words appeared to herald a change in transatlantic relations – effectively saying with Donald Trump in charge, the US-European alliance would never be the same. Mrs Merkel’s out of character appearance also signalled a strong pro-European stance to voters in Germany, as well as the wider EU, that Berlin will be playing a more activist role in the bloc. Norbert Spinrath, Europe spokesman in the Bundestag for the Social Democrats, said: “[Mrs] Merkel seems to have finally understood that she really needs to get stuck in and solve Europe’s problems.

“She has to realise that Europe is more than just fiscal consolidation — we need closer integration, we need to strengthen the currency and fight social imbalances.” The speech comes just weeks after newly elected French president Emmanuel Macron announced his plans to spearhead reforms in the Eurozone. It would be a sharp departure from her previous role as the EU’s crisis manager, with Mr Macron’s election pushing the German leader to present a more promising vision of Europe’s future. According to Jan Techau, a foreign policy analyst at the American Academy in Berlin, the speech was more for domestic audiences than those abroad, with the country’s federal elections just four months away. He adds: “It shows she is finally moving into campaign mode. “She’s switched from the international Merkel to the domestic Merkel.”

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What is Trump going to do if Corbyn wins? Or Merkel?

Merkel Comes Out Swinging At Trump And Misses (Luongo)

German Chancellor Angela Merkel will preside over the end of the European Union. Her reaction to the G-7 meeting and U.S. President Donald Trump’s refusal to endorse the Paris Agreement on Climate Change will accelerate the market’s rejection of EU policy. I’ve been warning about this for months in my articles here on Seeking Alpha. Angela Merkel is caught between two stanch nationalists whom Germany depends on: Russian President Vladimir Putin to the east and U.S. President Donald Trump to the right. Last week, I told you that Trump would clash with Merkel over Brexit at the G-7 meeting. “But, the likelihood of that is remote. If anything, there are signs that Trump is getting control of the narrative and his presence at the G-7 meeting this weekend will put the EU, specifically German Chancellor Angela Merkel in her place with respect to Brexit by backing U.K. Prime Minister Theresa May.”

And by all accounts he did that and more, forcing the G-7 to issue a four-page forward statement that outlined the lack of consensus among the participants. This is unprecedented. Trump went overseas and stood athwart the financial and political order to fulfill campaign promises. Now, Angela Merkel is forced to make campaign promises of her own. And she’s not happy about it. Merkel gave a “watershed speech” during a Christian Democratic Union (CDU) rally in Munich. From an AFP report on the speech: “Europe “must take its fate into its own hands” faced with a western alliance divided by Brexit and Donald Trump’s presidency, German Chancellor Angela Merkel said Sunday. “The times in which we could completely depend on others are on the way out. I’ve experienced that in the last few days,” Merkel told a crowd at an election rally in Munich, southern Germany. “We Europeans truly have to take our fate into our own hands,” she added.

And while these are fighting words, they also ring hollow. Merkel is in no position to drive a hard bargain with either the U.S. or the U.K. over trade. Trump went to the G-7 to put the kibosh on the EU’s intransigence over Brexit. He succeeded. Trump is winning control of the political narrative at home. He’s up in the polls, he was deferential to Israel and even handed with the Arabs in Saudi Arabia. This trip and his standing up to G-7 technocrats on behalf of his voters give him the political capital to whip his Republican majority into line on spending, taxes and budgeting. The punditry is right. This is a watershed moment. But, it was not instigated by Merkel. It was instigated by Trump. And it will be the beginning of the next wave of capital flight out of the EU.

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So much for democracy in Holland. Make that Europe. Big mistake, guys.

After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)

The Dutch senate on Tuesday approved a European Union “association agreement” with Ukraine, a final hurdle to the treaty, which strengthens the former Soviet republic’s ties with Western Europe and moves it further from Moscow’s orbit. It did so following amendments made at the EU level to take into consideration the Dutch referendum vote last year against the agreement. “Today’s vote in the Dutch Senate sends an important signal from the Netherlands and the entire European Union to our Ukrainian friends: Ukraine’s place is in Europe. Ukraine’s future lies with Europe,” said EU Commission President Jean-Claude Juncker. The agreement, a treaty, had already been negotiated and approved by all EU governments and by Ukraine in 2014, and had even partially gone into effect pending ratification when it was abruptly rejected by Dutch voters in a snap referendum held in April 2016.

The Dutch vote was as much a rebuke to Prime Minister Mark Rutte and the European Union as a rejection of the treaty, which focuses mostly on trade ties. But Rutte and the European Union diplomats were forced to renegotiate parts of the treaty in order to render it palatable to Dutch parliament or risk seeing it derailed, since it cannot be ratified without support from all European Union legislatures. Ultimately the treaty was amended to underline it does not make Ukraine a candidate for EU membership, does not entitle Kiev to financial aid or military assistance from the bloc, and does not give Ukrainians the right to live and work in EU member states. The amended version passed Dutch parliament in March, and the Senate approved it Monday, both by comfortable margins.

Read more at

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Everything is left to fall apart. As billion-dollar buildings open in Brussels. Union.

Two-Thirds Of Greek Construction Jobs Have Vanished (K.)

The number of companies active in the construction sector has declined by 35.4% since 2004 as a result of the financial crisis and the considerable drop in investment in infrastructure. Worse, compared to the 401,000 employees in the sector during the third quarter of 2008 – just before the recession cycle started – construction employed just 141,800 workers at end-2016, which means that at least 64.6% of the construction workers eight-and-a-half years ago have now been forced out of the sector.

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Ironic quote of the year, from the oil industry: “There is life in deep-water yet..”

Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)

Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates. The tumbling costs present another challenge for OPEC which is currently curbing output to shrink a glut. In 2014, when the U.S. shale boom sparked oil’s crash from above $100 a barrel, the group embarked on a different strategy of pumping at will to defend market share and throttle high-cost projects.

Ali Al-Naimi, the former energy minister of OPEC member Saudi Arabia, said in February 2016 that such producers need to either “lower costs, borrow cash or liquidate.” “There is life in deep-water yet,” said Angus Rodger, director of upstream Asia-Pacific research at Wood Mackenzie in Singapore. “When oil prices fell, many projects were deferred, but the ones that were deferred first were deep-water because the overall break-evens were highest. Now in 2017, we’re seeing signs that the best ones are coming back.” The falling costs make it more likely that investors will approve pumping crude from such large deep-water projects, the process for which is more complex and risky than drilling traditional fields on land. That may compete with OPEC’s oil to meet future supply gaps that the group sees forming as demand increases and output from existing wells naturally declines.

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We should start training young people for this. Send them to Africa to live with the vets and observe. Best teachers ever.

US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

The sun has set over the scrubby savannah. The moon is full. It is time for Ryan Tate and his men to go to work. In camouflage fatigues, they check their weapons and head to the vehicles. Somewhere beyond the ring of light cast by the campfire, out in the vast dark expanse of thornbushes, baobab trees, rocks and grass, are the rhinos. Somewhere, too, may be the poachers who will kill them to get their precious horns. The job of Tate, a 32-year-old former US Marine, and the group of US military veterans he has assembled in a remote private reserve in the far north of South Africa is simple: keep the rhinos and the rest of the game in the bush around their remote base alive. The men are not mercenaries, or park rangers –they work for Tate’s Veterans Empowered To Protect African Wildlife (Vetpaw), a US-based nonprofit organisation funded by private donations.

All have seen combat, often with elite military units, in Iraq, Afghanistan and elsewhere. Though equipped with vehicles, trail bikes, assault rifles, sniper suits and radios, the most important weapons in the war against poaching, Tate believes, are the skills and experiences his team gained on successive deployments in conflict zones over the last decade and a half. “We are here for free. We are not going anywhere. Whether it is cold or hot, day or night … we want to work with anyone who needs help,” Tate says. The initiative is not without controversy. Some experts fear “green militarisation” and an arms race between poachers and gamekeepers. Others believe deploying American former soldiers to fight criminals in South Africa undermines the troubled country’s already fragile state. But the scale of the challenge of protecting South Africa’s rhinos is clear to everyone, with a rise in poaching in recent years threatening to reverse conservation gains made over decades.

[..] Tate founded Vetpaw after seeing a documentary about poaching and the deaths of park rangers in Africa. His team now work on a dozen private game reserves covering a total of around 200,000 hectares in Limpopo, the country’s northernmost province. One advantage for local landowners is the protection heavily armed combat veterans provide against the violent break-ins feared by so many South Africans, particularly on isolated rural farmsteads. The team has also run training courses for local guides and security staff. But if one aim of Vetpaw is to counter poaching, another is to help combat veterans in the US, where former servicemen suffer high levels of unemployment and mental illness. “Everyone gets PTSD when they come back from war … you are never going to get the brotherhood, the intensity again.. [There are] all these veterans with billions of dollars of training and the government doesn’t use them. I saw a need in two places and just put them together,” says Tate.

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Jan 182017
 
 January 18, 2017  Posted by at 10:08 am Finance Tagged with: , , , , , , , , , ,  5 Responses »
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Albert Freeman Effect of gasoline shortage in Washington, DC 1942

Why Theresa May Is Right To Take A Huge Gamble On Hard Brexit (MW)
Trump Is Waving Adios To The Longstanding ‘Strong Dollar Policy’ (MW)
The Issue Is Not Trump, It’s Us (John Pilger)
Focus Turns To Julian Assange After US Decision To Free Chelsea Manning (G.)
Russia Extends Snowden’s Residency Permit ‘By A Couple Of Years’ (R.)
Putin Mocks Claims That Trump Was Spied On (AFP)
PBOC Cash Injections Surge To Record $60 Billion Before Holidays (BBG)
China New Home Prices Rise 12.4% Y/Y In December (R.)
Rustbelt China Province Admits It Faked Fiscal Data For Years (BBG)
Saudis Claim Victory Over US Shale Industry (AEP)
Rising U.S. Shale-Oil Output Threatens OPEC’s Production Pact (MW)
Italian Conservative Tajani Wins Race To Head European Parliament (R.)
The Bankers Who Fixed The World’s Most Important Number (G.)
Percentage of World Population Age 65+ in 2015 and 2050 (BR)

 

 

While I tend to largely agree with this, I also think what makes these discussions obsolete is that I haven’t seen a single person talk about the possibility that EU will not survive as is, or the single market, and what that would in turn mean for Brexit. Not a single one. Meanwhile, Britain has declared mudslinging its new national sport, and that will continue to make predicting anything at all very hard.

Why Theresa May Is Right To Take A Huge Gamble On Hard Brexit (MW)

First, there is very little evidence that membership of the Single Market is worth the costs. Every country in the world has access to the single market, under WTO Rules, although occasionally subject to some very minor tariffs. What you lose by leaving is any voice in how the rules of that market are set, and the hassle and paperwork involved in exporting. How much that is really worth, it is hard to judge. What we do know is that ever since the single market was launched in 1992, the EU has been one of the slowest-growing regions in the world, and that trade between its member states has started to decline. If it is so important to an economy, that is, to put it mildly, a bit odd. The only honest position is to say we have absolutely no idea what difference it will make. No country has left the single market before. But given the obligations that come with it — especially open borders and budget contributions — it may well not be worth much.

Second, it strengthens the U.K.’s negotiating position. If Britain goes into the haggling over the terms of departure saying it has decided to leave the single market, and that there is nothing it really wants from Brussels, then suddenly the conversation changes. After all, there are two things the EU wants from the U.K.: the net budget contribution, which accounts for 7% of its total spending, and access to our market, given that the U.K. runs a massive trade deficit with Europe. The EU doesn’t have to have either — it will get by OK without them. But they are helpful. If the U.K. can offer both, while asking for virtually nothing in return, it is more likely to get what it genuinely wants — which is mainly free access to Europe for its financial sector.

Finally, the politics look right. The Conservative Party has remarkably and quickly reassembled itself as the Brexit Party. That might be the right or the wrong decision, but it is where the majority of the country is right now. After all, Leave won the referendum despite fierce warnings of catastrophe from the rest of the world. Of its opponents, the Liberal Democrats want to go back in, and Labour is hopelessly undecided. If Brexit is a reasonable success — and that simply means it regains control of its borders, and the economy keeps expanding even if it is at a lower rate than before — then the Tories will be rewarded with power for a generation. That makes it a prize worth fighting for.

True, the risks are great. The potential disruption to the economy may be a lot worse than anyone yet realizes. The pound could collapse, inflation could soar, and joblessness start to rise. If any of that happens, May will go down as a catastrophic prime minister. But it is more likely she has called this right — and a hard Brexit will turn out to be best the best option available.

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Question is, how much can teh US do as long as the USD is the reserve currency and so much global debt is denominated in it?

Trump Is Waving Adios To The Longstanding ‘Strong Dollar Policy’ (MW)

The strong dollar policy—a mantra of Democratic and Republican administrations for more than two decades—may be headed for the scrap heap once Donald Trump is sworn in as president on Friday. Indeed, Trump sent the dollar skittering lower Tuesday after he told The Wall Street Journal that the U.S. currency was “too strong,” in part due to Chinese efforts to hold down the yuan. But while much is made of Trump’s questioning of the need for NATO or the lasting power of the EU, an administration-level push for a weaker currency would hardly be without precedent. It would, however, be an adjustment a generation of investors and traders who came of age in an era when the executive branch at least paid lip service to the notion that a strong dollar was a desirable aim.

The tide last shifted during the Clinton administration after Robert Rubin, the former Goldman Sachs chief, took over as Treasury secretary from Lloyd Bentsen in early 1995. Before that, Bentsen and U.S. Trade Representative Mickey Kantor had often used language that inadvertently—or not—tended to weaken the dollar. Bentsen got the ball rolling early in Clinton’s first term, calling for a stronger yen in a February 1993 appearance and shocking currency traders who duly bid up the Japanese currency. As recounted in a 2001 paper by economists Brad DeLong and Barry Eichengreen, Bentsen saw the stronger yen as potentially helpful in alleviating the U.S. trade deficit, while Kantor saw a weaker dollar providing leverage in trade talks. That may sound a bit familiar. Trump made the U.S. trade deficit a centerpiece of his campaign, using it to argue that it was proof the nation is getting its lunch eaten by competitors in a zero-sum world.

[..] Douglas Borthwick, managing director of Chapdelaine Foreign Exchange, argued in a note earlier this month that an incoming Trump administration, by throwing out the strong dollar policy, could use the currency as a linchpin in implementing its economic agenda: “With a removal of the Strong USD Policy, the US Dollar will weaken against its global counterparts. This will give the FED the ability to normalize US interest rates, as they can use the weaker USD and the resulting inflation as an excuse for raising rates. The FED will then be used by the Administration as a brake on US Dollar weakness. The weaker USD will also force other countries struggling to get their economies moving to rewrite trade agreements in a way that is more advantageous to the US. In other words, we will see a normalization of US Interest rates, and better negotiated trade deals. Both a win for the new Administration.”

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Pilger’s not a fan of Obama. Good read.

The Issue Is Not Trump, It’s Us (John Pilger)

One of the persistent strands in U.S. political life is a cultish extremism that approaches fascism. This was given expression and reinforced during the two terms of Barack Obama. “I believe in American exceptionalism with every fiber of my being,” said Obama, who expanded the United States’ favorite military pastime: bombing and death squads (“special operations”) as no other president has done since the Cold War. According to a Council on Foreign Relations survey, in 2016 alone Obama dropped 26,171 bombs. That is 72 bombs every day. He bombed the poorest people on earth, in Afghanistan, Libya, Yemen, Somalia, Syria, Iraq, Pakistan. Every Tuesday — reported the New York Times — he personally selected those who would be murdered by mostly hellfire missiles fired from drones.

Weddings, funerals, shepherds were attacked, along with those attempting to collect the body parts festooning the “terrorist target.” A leading Republican senator, Lindsey Graham, estimated, approvingly, that Obama’s drones killed 4,700 people. “Sometimes you hit innocent people and I hate that,” he said, “but we’ve taken out some very senior members of Al Qaeda.” Like the fascism of the 1930s, big lies are delivered with the precision of a metronome, thanks to an omnipresent media whose description now fits that of the Nuremberg prosecutor: “Before each major aggression, with some few exceptions based on expediency, they initiated a press campaign calculated to weaken their victims and to prepare the German people psychologically … In the propaganda system … it was the daily press and the radio that were the most important weapons.”

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Assange doesn’t lie. But he may demand the US clarify its positions.

Focus Turns To Julian Assange After US Decision To Free Chelsea Manning (G.)

The decision by the US president, Barack Obama, to commute the sentence of Chelsea Manning has brought fresh attention to the fate of Julian Assange. On Twitter last week, Assange’s anti-secrecy site WikiLeaks posted: “If Obama grants Manning clemency Assange will agree to US extradition despite clear unconstitutionality of DoJ [Department of Justice] case.” Obama’s move will test the promise. The president commuted Manning’s 35-year sentence, freeing her in May, nearly three decades early. In a statement on Tuesday, Assange said Manning should never have been convicted and described her as “a hero, whose bravery should have been applauded not condemned”. Assange went on to demand that the US government “immediately end its war on whistleblowers and publishers, such as WikiLeaks and myself”, but made no mention of the Twitter pledge.

His lawyer said he has been pressing the Justice Department for updates on an investigation concerning WikiLeaks. The transgender former intelligence analyst, born Bradley Manning, was convicted in August 2013 of espionage and other offences after admitting to leaking 700,000 sensitive military and diplomatic classified documents to WikiLeaks in 2010. Assange has been holed up for more than four years at the Ecuadorian embassy in London. He has refused to meet prosecutors in Sweden, where he remains wanted on an allegation of rape, fearing he would be extradited to the US to face espionage charges if he leaves the embassy. In a statement on Tuesday, a lawyer for Assange did not address whether Assange intended to come to the US.

“For many months, I have asked the DoJ to clarify Mr Assange’s status. I hope it will soon,” Assange’s lawyer, Barry Pollack, said in the statement. “The Department of Justice should not pursue any charges against Mr Assange based on his publication of truthful information and should close its criminal investigation of him immediately.” Another Assange lawyer, Melinda Taylor, said: “Julian’s US lawyers have repeatedly asked the Department of Justice to clarify Julian Assange’s status and would like them to do so now by announcing it is closing the investigation and pursuing no charges.”

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Only right thing to do.

Russia Extends Snowden’s Residency Permit ‘By A Couple Of Years’ (R.)

Former U.S. intelligence contractor Edward Snowden has been given leave to remain in Russia for another couple of years, a spokeswoman for the Russian foreign ministry said. “Snowden’s residency in Russia has just been extended by another couple of years,” the spokeswoman, Maria Zakharova, said in a post on Facebook.

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He must be having so much fun with this. And he’s right: “This shows a significant level of degradation of the political elite in the West.”

Putin Mocks Claims That Trump Was Spied On (AFP)

President Vladimir Putin cracked raunchy jokes on Tuesday as he poked fun at claims that Russian secret services filmed US President-elect Donald Trump with prostitutes. Showing he is familiar with the claims in the explosive dossier, Putin launched into a series of ribald jokes about prostitutes, riffing on Trump’s former role as owner of the Miss Universe beauty contest. The unsubstantiated dossier published by American media last week alleged that Russia had gathered compromising information on Trump, namely videos involving prostitutes at a luxury Moscow hotel, supposedly as a potential means for blackmail. In his first public comments on the claims, Putin rubbished the idea that Russian secret services would have spied on Trump during his 2013 visit to Moscow for the Miss Universe final, as alleged in the dossier.

“Trump when he came to Moscow… wasn’t any kind of political figure, we didn’t even know of his political ambitions,” Putin said, responding to a journalist’s question at a news conference. “Does anyone think that our special services chase every American billionaire? Of course not, it’s just completely ridiculous.” Putin also questioned why Trump would feel the need to hire prostitutes, given his opportunities to meet beautiful women at the Miss Universe contest. “He’s a grown-up for a start and secondly a man who spent his whole life organising beauty contests and meeting the most beautiful women in the world,” Putin said. “I can hardly imagine that he ran off to a hotel to meet our girls of ‘lowered social responsibility’,” said Putin, adding jokingly “although they are of course the best in the world. “I doubt Trump fell for that.”

Putin went on to compare those behind the dossier unfavourably with prostitutes. “The people who order falsifications of the kind that are now circulating against the US president-elect – they are worse than prostitutes, they don’t have any moral limits at all. “The fact that such methods are being used against the US president-elect is a unique case: nothing like this has happened before. “This shows a significant level of degradation of the political elite in the West.”

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Xi ordered no market selloffs while he’s in Davos. Joke.

PBOC Cash Injections Surge To Record $60 Billion Before Holidays (BBG)

China’s benchmark money-market rate surged the most in 19 months, with record central bank cash injections being overwhelmed by demand before the Lunar New Year holidays. The People’s Bank of China put in a net 410 billion yuan ($60 billion) through open-market operations on Wednesday, the biggest daily addition since Bloomberg began compiling the data in 2004. That brings the total injections so far this week to 845 billion yuan. The interbank seven-day repurchase rate jumped 17 basis points, the most since June 2015, to 2.58% as of 1:18 p.m. in Shanghai, according to weighted average prices. Demand for cash tends to increase before the Lunar New Year holidays, when households withdraw money to pay for gifts and get-togethers.

Month-end corporate tax payments are adding to the pressure this time, with the break running from Jan. 27 through Feb. 2. The PBOC offered 200 billion yuan of seven-day reverse repos and 260 billion yuan of 28-day contracts, compared with 50 billion yuan of loans maturing on Wednesday. “The PBOC aims to ensure that the liquidity situation remains adequate, while the 28-day reverse repo is apparently targeted at covering the holidays,” said Frances Cheung at Societe Generale. “There could also be preparation for any indirect tightening impact from potential outflows.” China’s central bank has been offering more 28-day reverse repos than one-week loans in the past two weeks, while curbing the injection of cheaper, short-term funds amid efforts to lower leverage in the financial system. It drained a net 595 billion yuan in the first week of January, before switching to a net injection of 100 billion yuan last week as the seasonal funding demand started to emerge.

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The result of cash injections.

China New Home Prices Rise 12.4% Y/Y In December (R.)

Average new home prices in China’s 70 major cities rose 12.4% in December from a year earlier, slowing slightly from a 12.6% increase in November, an official survey showed on Wednesday. Compared with a month earlier, home prices rose 0.3% nationwide, slowing from November’s 0.6%, according to Reuters calculations from data issued by the National Bureau of Statistics (NBS). Shenzhen, Shanghai and Beijing prices rose 23.5%, 26.5% and 25.9%, respectively, from a year earlier. Monthly growth in Shanghai and Shenzhen slowed but was unchanged in Beijing as local governments’ tightening measures took effect.

China relied heavily on a surging real estate market and government stimulus to help drive economic growth in 2016, but policymakers have grown concerned that the property frenzy will fuel price bubbles and risk a market crash, with serious consequences for the broader economy. Soaring home prices have prompted more than 20 Chinese cities to tighten lending requirements on house purchases, while regulators have told banks to strengthen their risk management on property loans.

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Scapegoating. You pick one to make the rest look good in comparison. But this is endemic, in a variety of forms.

Rustbelt China Province Admits It Faked Fiscal Data For Years (BBG)

The rust-belt province of Liaoning fabricated fiscal numbers from 2011 to 2014, local officials have said, raising fresh doubts about the accuracy of China’s economic data just days ahead of the release of the nation’s full-year growth report. City and county governments in the northwestern region committed fiscal data fraud in the period, Governor Chen Qiufa said at a meeting with provincial lawmakers Tuesday, according to state-run People’s Daily. Fiscal revenues were inflated by at least 20 percent, and some other economic data were also false, the paper said, without specifying categories. Chen said the data were made up because officials wanted to advance their careers. The fraud misled the central government’s judgment of Liaoning’s economic status, he said, citing a report from the National Audit Office in 2016.

With growth now moderating, officials have sought to improve the credibility of economic data as diffusing financial risks becomes a key policy consideration, along with keeping growth ticking along at a rapid clip. Ning Jizhe, head of the National Bureau of Statistics, has said China should prevent fake economic data and increase the quality of its statistics. Liaoning has seen an unprecedented purge of more than 500 deputies from its legislature. The deputies were implicated in vote buying and bribery in the first provincial-level case of its kind in the Communist Party’s almost seven-decade rule, according to the official Xinhua News Agency. Former provincial party chief Wang Min, who led Liaoning from 2009 until 2015, was earlier expelled following corruption allegations by China’s top anti-graft watchdog.

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Wonderful pair of articles. Take your pick. Ambrose has one view, while…

Saudis Claim Victory Over US Shale Industry (AEP)

Saudi Arabia’s oil sheikhs insisted defiantly in Davos that they have defeated the challenge of the American shale industry and restored the balance to the global oil markets after two years of trauma and glut. The country’s energy minister Khalid Al-Falih said US oil frackers had survived only by tapping the most prolific wells and would face surging costs once again as recovery builds, while cannibalisation of their plant will prevent a rapid rebound in US output. “Their supply infrastructure has been decimated,” he said, speaking at the World Economic Forum. Mr Al-Falih admitted for the first time that Saudi Arabia’s decision to flood the world crude markets in 2014 and force a collapse in prices was essentially aimed at US shale frackers, a claim always denied in the past.

“If we had cut production and kept prices at three-digit levels, they would have kept adding one million barrels a day each year, for year after year. Saudi production would have been three million barrels day less in 2017 under that scenario. It was not sustainable,” he said. US drillers bridle at the suggestion that the Saudis won, insisting that they held Opec and Russia to a standstill, forcing them to capitulate last November with an agreement by 22 states to trim output by 1.2m barrels a day, and even that may not prove enough. “Opec engaged in a price war against US producers and they lost,” said Kenneth Hersh from Energy Capital. “This has brought the cost structure down for the whole world. There is no longer a cartel any more.”

Amin Nasser, head of Saudi Aramco, insisted that the job of knocking back shale is largely accomplished and that the market would rebalance by the first half of this year. The cycle is now switching to the opposite extreme. He warned that the world needs $1 trillion of fresh investment in oil projects each year just to keep up with growing demand, and the risk of “price spikes” later this decade is rising fast. The warning was echoed by Fatih Birol, head of the International Energy Agency, who fears a looming oil shortage after an unprecedented collapse in spending on exploration and development over the last two years. “Alarm bells will be ringing if there is no major new investment this year,” he said.

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….MarketWatch has the exact opposite.

Rising U.S. Shale-Oil Output Threatens OPEC’s Production Pact (MW)

The oil market got a stark reminder Tuesday that rising oil production in the U.S. could upend efforts by major producers to bring global supply and demand for crude back in to balance. Just ahead of the settlement for oil futures prices on the New York Mercantile Exchange on Tuesday, the Energy Information Administration released a report on drilling productivity—forecasting a monthly rise of 41,000 barrels a day in February oil production to 4.748 million barrels a day. “That is bearish for oil and a concern for OPEC,” said James Williams, energy economist at WTRG Economics, pointing out that the volume of new oil per rig has climbed because of gains in efficiency.

“If maintained, the expected February production gain means production from the shale plays will be up at least a half million barrels per day by the end of the year,” said Williams. Prices for February West Texas Intermediate crude lost the bulk of the day’s gain on Tuesday to settle with a modest 11-cent climb at $52.48 a barrel. “Since rigs are higher now than in December and should continue to increase, that means a half million [barrel-per-day] gain in production by year-end is a conservative estimate,” Williams said. “Most OPEC members expected this, but U.S. shale production will be the closest monitored data after OPEC’s own compliance with quotas,” he said.

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Backroom dealmaking. Why the EU is on its way out.

Italian Conservative Tajani Wins Race To Head European Parliament (R.)

Centre-right politician Antonio Tajani was elected the new president of the European Parliament on Tuesday after defeating his socialist rival, a fellow Italian, in a daylong series of votes. The new speaker, 63, a former EU commissioner and an ally of former premier Silvio Berlusconi, succeeds German Social Democrat Martin Schulz at a time of crisis for the European Union. Britain wants a divorce deal that needs the legislature’s blessing while old adversary Russia and old ally the United States both pose new threats to EU survivors holding together. Schulz’s tenure saw close cooperation with the centre-right head of the EU executive, Jean-Claude Juncker, but ended with recriminations over the end of a left-right grand coalition. That could spell trouble for the smooth passage of EU laws on a range of issues.

And the win for Tajani, who beat centre-left leader and fellow Italian Gianni Pittella by 351 votes to 282 in a fourth-round runoff, gives the right a lock on three pivotal EU political institutions. That has stirred some calls for change from either Juncker at the European Commission or Donald Tusk, who chairs the European Council of national leaders. However, there is no clear consensus for such changes. Tajani, mindful of the scars left by an unusually bruising battle over a post which can be a powerful influence on which EU rules are made, promised to be “a president for all of you”. His eventual victory came with backing from pro-EU liberals as well as from the ruling conservative parties of Britain and Poland, both of them sharply critical of the EU’s failings. They bristle at the EU impinging on national sovereignty and see it as bureaucratic and wasteful.

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Not THE world, but THEIR world.

The Bankers Who Fixed The World’s Most Important Number (G.)

By the time the market opened in London, Lehman’s demise was official. Hayes instant-messaged one of his trusted brokers in the City to tell him what direction he wanted Libor to move. Typically, he skipped any pleasantries. “Cash mate, really need it lower,” Hayes typed. “What’s the score?” The broker sent his assurances and, over the next few hours, followed a well-worn routine. Whenever one of the Libor-setting banks called and asked his opinion on what the benchmark would do, the broker said – incredibly, given the calamitous news – that the rate was likely to fall. Libor may have featured in hundreds of trillions of dollars of loans and derivatives, but this was how it was set: conversations among men who were, depending on the day, indifferent, optimistic or frightened.

When Hayes checked the official figures later that night, he saw to his relief that yen Libor had fallen. Hayes was not out of danger yet. Over the next three days, he barely left the office, surviving on three hours of sleep a night. As the market convulsed, his profit and loss jumped around from minus $20 million to plus $8 million in just hours, but Hayes had another ace up his sleeve. ICAP, the world’s biggest inter-dealer broker, sent out a “Libor prediction” email each day at around 7am to the individuals at the banks responsible for submitting Libor. Hayes messaged an insider at ICAP and instructed him to skew the predictions lower. Amid the chaos, Libor was the one thing Hayes believed he had some control over. He cranked his network to the max, offering his brokers extra payments for their cooperation and calling in favours at banks around the world.

By Thursday, 18 September, Hayes was exhausted. This was the moment he had been working towards all week. If Libor jumped today, all his puppeteering would have been for nothing. Libor moves in increments called basis points, equal to one one-hundredth of a percentage point, and every tick was worth roughly $750,000 to his bottom line. For the umpteenth time since Lehman faltered, Hayes reached out to his brokers in London. “I need you to keep it as low as possible, all right?” he told one of them in a message. “I’ll pay you, you know, $50,000, $100,000, whatever. Whatever you want, all right?” “All right,” the broker repeated. “I’m a man of my word,” Hayes said. “I know you are. No, that’s done, right, leave it to me,” the broker said.

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Yes, you should be scared. For your children.

Percentage of World Population Age 65+ in 2015 and 2050 (BR)

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Dec 132016
 
 December 13, 2016  Posted by at 9:36 am Finance Tagged with: , , , , , , , ,  1 Response »
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Lewis Wickes Hine Newsies Gus Hodges, 11, and brother Julius, 5, Norfolk VA 1911

Trump-Powered Dollar To Be The Bogeyman Of 2017 For Emerging Markets (MW)
Oil Prices Moderate as Doubts Over OPEC’s Output-Cut Plan Set In (WSJ)
Saudi Arabia Is Playing Defense To Hold On To Its Most Prized Customers (BBG)
UniCredit To Raise €13 Billion In Fresh Capital, Lay Off 14,000 (AFP)
One Bad Deal That Destroyed Four Bad Banks (WSJ)
Indian Banks’ Poisoned Chalice (BBG)
London House Prices Are Having Their Worst December in Years (BBG)
Mrs. O’Leary’s Cow (Thomas)
Trumpxuberance… Until It’s Not (Jim Kunstler)
Greece Faces Permanent Crisis – IMF: Bail-Out Plan ‘Simply Not Credible’ (Tel.)
Greece Heads Toward New Crisis in Debt Saga, Support for Tsipras Slumps (WSJ)
World’s Largest Reindeer Herd Plummets (BBG)

 

 

Prime candidate for biggest 2017 finance story.

Trump-Powered Dollar To Be The Bogeyman Of 2017 For Emerging Markets (MW)

Foretelling the future is a daunting task. But the one thing that strategists are agreed on for 2017 is that Donald Trump’s presidency will usher in a new era of dominance for the U.S. dollar that will have wide-ranging implications. Among the biggest casualties of the buck’s rise will be developing economies, which tend to be more sensitive to external shock. Ethan Harris at BofAML cautioned that emerging markets are vulnerable on two fronts: capital outflows in response to higher rates in the U.S. and trade restrictions that will hurt economies that heavily depend on U.S. markets. The ICE U.S. Dollar index measure of the greenback’s performance against a basket of six rivals, has recently broken out of its narrow range to trade at the highest level since late 2002, FactSet data show.

That spells trouble for Brazil, China and Russia, which statistically have the highest negative correlation to the dollar, according to Mislav Matejka, an equity strategist at J.P. Morgan Cazenove. Even before Trump’s election, Matejka had downgraded emerging markets to neutral from overweight, citing the bullish dollar on the back of a Federal Reserve rate hike in December. Hans Redeker, a strategist at Morgan Stanley, expects the dollar index to gain 6% before topping out in the second quarter of 2018. Apart from the rallying dollar, Redeker warned that the possibility of a global shift toward protectionism will put trade-centric economies at a disadvantage, weigh on economic growth and add to deflationary pressure.

Meanwhile, higher bond yields on expectations of stronger growth and accelerated inflation will widen the yield spread in favor of the dollar against the Chinese yuan, where authorities are projected to maintain easy monetary policy. The yuan has retreated over 6% in 2016 to 6.92, with more room to fall in the coming months. “We expect the Chinese yuan depreciation to continue. The balance of payments position remains in deficit, indicated by declining foreign exchange reserves,” said Redeker in a report. Even though capital outflows from China have not been as large as they had been earlier this year, muted economic growth and limited investment opportunities domestically could lead to more funds fleeing the country, pressuring the yuan, he said.

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Headfake.

Oil Prices Moderate as Doubts Over OPEC’s Output-Cut Plan Set In (WSJ)

Crude-oil prices lost steam in early Asian trade Tuesday as investors turned bearish over oil producers’ commitment to observe a deal aimed at easing supply to the market. On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $52.75 a barrel at 0347 GMT, down $0.08 in the Globex electronic session. February Brent crude on London’s ICE Futures exchange rose $0.01 to $55.70 a barrel. The price fall is largely a reflection of investors’ bearishness over a deal that is supposed to lift prices to at least the $60-$70 range per barrel. This shows the market isn’t really buying the OPEC rhetoric and that they recognize the potential risks. Over the weekend, 11 non-OPEC countries, including Russia, agreed to slash their output by 558,000 barrels a day, in concert with OPEC’s own pledge to cut 1.2 million barrels a day.

The total sum represents almost 2% of global supply. The deal will take effect on Jan. 1 but the reduction will be carried out in phases. Participating countries will meet in six months to evaluate progress. Analysts say if producers fully adhere to agreed quotas, the oil market could shift into a deficit. OPEC’s own calculations forecasts world crude demand will hit 95.5 million barrels a day in 2017, an increase of 1.2 million barrels a day. Removing excess barrels will lift prices, possibly into the target range of $60-$70 per barrel, but it would mostly hinge on the compliance of the producers who have been known to cheat, BMI Research said. “We note that the higher the barrel price, the greater the temptation to break allocated quotas,” the firm said. In 17 production cuts since 1982, OPEC members have reduced output by an average of just 60% of their commitments, according to Goldman Sachs.

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OPEC cuts, prices rise, shale expands.

Saudi Arabia Is Playing Defense To Hold On To Its Most Prized Customers (BBG)

As Saudi Arabia goes on a shock and awe attack to curb a global oil glut, it’s also playing defense to hold on to its most prized customers. The kingdom is largely sparing Asia from reductions in crude sales, at least for now. That’s amid the threat of more U.S. and European supply coming to the world’s biggest market, as Saudi-led production cuts have boosted the Middle East oil benchmark relative to other regions. Also, crude’s surge risks reviving shale output while American shipments are already making their way to countries including Thailand, Japan and South Korea. While OPEC’s biggest member could yet curb some volumes to Asia in coming months, it’s unlikely to completely abandon the battle for market share even as it changes tack from its pump-at-will policy of the past two years.

It’s counting on regional refiners’ inability to completely switch over to rival supply, as their plants are geared to process ‘sour’ sulfurous crudes like those produced by Saudi Arabia rather than ‘sweet’ shale or North Sea oil. It can afford to cut sales more significantly in other places that aren’t as valuable as Asia. “Now that Saudi Arabia has committed to such large production cuts, it’s important for them to retain market share in the region where they see the most growth potential,” said Peter Lee at BMI Research. “In Asia, we still have India and China where Saudi Arabia is vying for market share. It makes sense for them to concentrate on the region and try to keep buyers happy.”

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UniCredit’s entire market cap is €14 billion for pete’s sake.

UniCredit To Raise €13 Billion In Fresh Capital, Lay Off 14,000 (AFP)

Italy’s biggest bank, UniCredit, on Tuesday confirmed plans for a capital increase worth €13 billion as it scrambles to raise funds amid market uncertainty. UniCredit also announced plans to shed around 14,000 jobs by the end of 2019, which it said would save it €1.1 billion in staff costs. The bank’s plans to raise fresh funds come at a time when investor confidence in Italy has been shaken by the collapse of former PM Renzi’s government. And the Italian banking sector is in a perilous state, with the world’s oldest bank, Monte dei Paschi di Siena, scrambling to put together a private-sector rescue after losing 80% of its market capitalisation in the past year. UniCredit’s announcement was part of a major strategic review launched under new chairman Jean-Pierre Mustier, that involves selling off assets to strengthen the bank’s capital base. Mustier said it was a “pragmatic plan based on conservative assumptions, with tangible and achievable targets.” The bank is targeting a net profit of €4.7 billion in 2019.

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When Europe’s bankers and politicians alike proved they’re inept.

One Bad Deal That Destroyed Four Bad Banks (WSJ)

The crisis engulfing the world’s oldest bank, Italy’s Banca Monte dei Paschi di Siena, has many causes, but its roots go back nine years to a lunch at a fancy Geneva hotel. It was there, at the Four Seasons Hotel des Bergues, that three of Europe’s top bankers gathered to plot a hostile bid to buy and break up Dutch bank ABN Amro in what became the biggest bank takeover, worth €71 billion (then $101 billion). The deal will go down as one of humankind’s worst business transactions. It led to government rescues of what was then the biggest bank in the world, Royal Bank of Scotland, and the biggest bank in Belgium, Fortis, as well as taking out Dutch bank SNS Reaal. Now its legacy threatens the oldest bank in the world.

With M&A booming again, have investors learned the lessons of ABN? The brief answer is probably that yes, enough of the lessons have sunk in that an equally catastrophic bank takeover is unlikely soon. The longer answer is a resounding no, and investors retain a pigheaded inability to avoid taking excessive risks when the good times beckon—as they do now. The Michelin-starred restaurant in Geneva gave the chief executives of RBS, Fortis and Santander a pleasant start to what became a vicious 2007 bidding battle for ABN. The weak Dutch bank had been an obvious target for years, with a complex string of small businesses spread across retail and investment banking in the Netherlands, U.S., U.K., Italy and Brazil. Each banker saw opportunities, but they had to wrest ABN away from an agreed deal with Barclays.

After succeeding, the canny Santander abandoned its stated aim of expanding in Italy and flipped ABN’s Banca Antonveneta to Monte dei Paschi for €9 billion—before it had even completed the deal. Santander was badly hurt by the crisis, but thanks to its highly profitable Italian switcheroo was the only bank involved not to be critically injured by ABN. Monte dei Paschi, after overpaying wildly, has been short of capital ever since, making it even harder to cope with years of Italian recessions. The biggest lesson is that the good times don’t last forever. RBS, Fortis and Monte dei Paschi took on too much debt to buy parts of ABN, leaving them even weaker than the rest of the overstretched banking system when the bust came.

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Throw in utter corruption and you have a recipe for unrest.

Indian Banks’ Poisoned Chalice (BBG)

What should have been a cornucopia of new deposits from old cash has become a poisoned chalice. Lenders don’t have enough banknotes to meet even the restrictive withdrawal limits the central bank has set for depositors. People have died waiting in ATM queues, and bank staff fear the wrath of crowds. Safety concerns are rising amid pressure from authorities to expand card and online-payment systems that are still rudimentary. Even the ATM networks, running on outdated software, aren’t very secure.To top it all, the taxman is waiting in the wings, ready to confiscate any unusual surge in deposits that people don’t surrender voluntarily. Instead of sympathy for lenders, there’s schadenfreude. Some feel bank employees have colluded with the holders of ill-gotten cash to give their unaccounted wealth safe passage. The poor, and their bank accounts, are suspected to have been used as mules.

The initial premise of demonetization was that a big chunk of cash would be too tainted to dare return to the banking system, and canceling those liabilities would generate a bumper profit for the government. With most old currency deposited into accounts or exchanged into new money, however, that hypothesis has been shredded. Banks – and bankers – are in the crosshairs for robbing the nation of its demonetization rewards. Reporting requirements have gone through the roof: The government wants to know how much of lenders’ fresh deposits are old legal tender, and how much is new. Axis Bank suspended 19 employees for allegedly exchanging old banknotes illegally and asked KPMG to do a forensic audit. That, one suspects, is the genesis of the whisper campaign.

As banking regulator, the Reserve Bank of India ought to be keeping a lid on operational risks, lest they overwhelm the system and scar its reputation. But the monetary authority is too busy shoring up its own sullied credibility to be of any real assistance. The barrage of befuddling rule changes it has unleashed since Nov. 8 – including a temporary but ham-handed confiscation of banks’ excess liquidity with no compensation – have made things worse, and investors have been forced to change their minds about the impact of the cash ban. Amid the chaos, discussions about improving the governance of India’s dominant state-run banks, and selling or shuttering the weakest of them, have come to a standstill.

The more urgent task of cleaning up their compromised balance sheets has also lost the steam it had gathered under previous RBI Governor Raghuram Rajan. If a month ago there was fond but foolish hope that banks would get a big one-time recapitalization boost, now there’s despair about how long they can go on fighting fires without any chance of a revival in credit demand. It’s hard to believe PM Modi didn’t think through these unintended consequences. What’s even scarier is the possibility that he did, and topped up the banking industry’s chalice regardless.

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No, their best.

London House Prices Are Having Their Worst December in Years (BBG)

London home prices are having their worst December in six years, led by weakness in prime areas in the capital that is likely persist into 2017. Rightmove said on Monday that asking prices fell 4.3% from November to 616,160 pounds ($775,500), with inner London dropping 6%. The property website operator said the bubble in prime London “continues to deflate,” and it sees prices there declining 5% next year. “Alongside the seasonal slowdown, the readjustment of prices to match buyers’ greater reticence continues, especially in more expensive inner London,” said Rightmove Director Miles Shipside. “Buyers are being put off the really big-ticket purchases.” In a sign of the disparity within the city, average prices in inner London are down 2.6% over the past year, whereas outer areas are up 2.7%.

That left average prices across the capital little changed. The split partly reflects the luxury end of the market, where an April tax increase on property investors and worries about Brexit are sapping demand. Rightmove’s report also showed demand in London — as measured by sales agreements – was down 7.2% in November from a year earlier. Nationally, asking prices fell 2.1% in December from the previous month, in line with the seasonal average, and were up 3.4% from a year earlier. In contrast to London, Rightmove expects national prices to increase for a seventh consecutive year in 2017, forecasting a 2% advance.

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One spark will do.

Mrs. O’Leary’s Cow (Thomas)

In 1871, a large portion of the city of Chicago burned to the ground. The Chicago Tribune attributed the fire to a cow owned by a Mrs. O’Leary. The Tribune stated that the cow kicked over a lantern as she was being milked, burning the barn and much of Chicago. Whether the story is accurate is of little concern. (Somebody always has to be found to take the blame for catastrophe.) Whatever started the barn fire in Mrs. O’Leary’s neighbourhood, a seemingly minor event resulted in a major conflagration. And so it is with economic events. Bankers are expected to maintain a fractional reserve of 3–10%, depending on the level and type of liabilities, but, not surprisingly, they often drop below the official level, especially in times of economic difficulties. Bank managers assume that they can always increase the reserve when good times return.

The trouble is they’re at their most exposed at a time when a substantial reserve is most critical. But why would bankers take such a risk? Aren’t they fearful that they’ll get caught out if a crisis occurs? Not really. Their assumption is very often that their indiscretion exists in isolation. They assume that if they alone cheat the system a bit, they can always catch up later. For whatever reason, it rarely occurs to them that, in a struggling economy, each of their associates in the industry is also cheating the system. Since each one keeps his activities under wraps, it doesn’t become apparent that the whole system is a house of cards until a black swan jolts the system, which, due to its overall instability, self-destructs. Similarly, in shaky economic times, there’s quite a bit of fiddling that’s done in the stock market.

As the public begins to lose their confidence in the system, they offers their shares for sale. In order to cover up the loss of confidence, these shares may be bought up by central banks, governments, and/or the corporations themselves – buying back their own shares. Of course, this is risky, as crashes are caused by loss of confidence. Papering over that loss of confidence by papering over the cause of the problem only means that when the crash comes, it will be worse than if it had been allowed to collapse earlier. Pensions tend to be heavily invested in the markets, which tends to put them at risk as well. The foremost mutual fund in the US is invested in 507 companies – commodities, energy, financials, industrials, IT, etc. To be sure, these will not suffer equally in a crash, but all will be affected – some severely.

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Trump may have buildings, but he has no room.

Trumpxuberance… Until It’s Not (Jim Kunstler)

When Reagan stepped in the national debt was only (only!) about half a trillion dollars. It will be over $20 trillion when Trump hangs his golden logo on the White House portico. Oh, by the way, consider that a trillion dollars is a thousand billion dollars and a billion dollars is a thousand million dollars. Just so you know. Reagan had room for plenty of government finance monkey business. Trump has no room. Bush One, Clinton, Bush Two and Obama dug the deadfall debt trap for poor Donald and the election shoved him right into it. He thinks he’s on an upper floor of his enchanted tower; he’s actually down in a pit. Trump thinks he’s going to rebuild highways and bridges for another century of Happy Motoring — to make America like it was in 1962 forever. Fuggeddabowdit.

The bond market is poised for collapse as I write, and Trump’s money people (that is, the Goldman Sachs gang he has assembled) are talking about issuing fifty and 100 year “Build America” bonds. Their nostrils must be rimed with the frost of Medellin. They’re certainly not going to accomplish this trick by raising taxes. On who? Corporations? Ha! The 1%? Double-Ha! Everyone else? Pitchforks and torches! American oil companies can no longer make a buck doing their thing. Exxon-Mobil’s U.S. production business lost $477 million in the third quarter, the seventh straight quarter in the red. Why? Because it costs a lot more to get the stuff out of the ground than it did ten years ago, and that high cost is bankrupting oil companies and industrial economies. That is the stealth action of Peak Oil that so many people pretend is not happening. It will ultimately destroy the banking system.

The disappointment issuing from this dire set of circumstances is apt to be epic as Trump flounders and the furious tweets of futility waft out of the hole he’s trapped in. Christmas will be over, and with it the hopes of a retail reprieve. Gasoline may remain cheap, but the little people won’t be able to buy the cars to run it in. Or buy much of anything else. Not even tattoos. We’ll soon discover the temperamental difference between Donald J. Trump and Franklin Delano Roosevelt.

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This will not stop.

Greece Faces Permanent Crisis – IMF: Bail-Out Plan ‘Simply Not Credible’ (Tel.)

The IMF has hit back at claims that it is demanding more austerity in Greece, as the Fund warned that the country’s ambitious budget targets were “simply not credible”. Firing a broadside at Brussels and Athens, Maurice Obstfeld, the IMF’s chief economist, and Poul Thomsen, director of the IMF’s European department, said cuts to investment and discretionary spending had “gone too far” and would prevent the Greek economy from recovering. Just 48 hours after Euclid Tsakalotos, Greece’s finance minister, accused the IMF of “betraying” the country by pushing for more belt tightening, the senior IMF officials insisted that they were “not demanding more austerity”. “We have not changed our view that Greece does not need more austerity at this time. Claiming that it is the IMF who is calling for this turns the truth upside down,” they wrote in a blog post.

They warned that demands by Greece’s creditors for a sustained 3.5pc primary surplus – which excludes debt servicing costs – were unrealistic and unnecessary. The IMF has previously insisted that a primary surplus target of 1.5pc of GDP is more realistic. It has also called for significant debt relief that goes beyond the action taken this month to reduce Greece’s debt share by 20 percentage points. Mr Obstfeld and Mr Thomsen said the IMF was not demanding more cuts either now or in the future to lower the need for debt relief, as they signalled that Greece itself had signed up for tougher budget targets. “To be more direct, if Greece agrees with its European partners on ambitious fiscal targets, don’t criticise the IMF for being the ones insisting on austerity when we ask to see the measures required to make such targets credible,” they said.

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Tsipras is going to call 2017 snap elections with the intent of losing them.

Greece Heads Toward New Crisis in Debt Saga, Support for Tsipras Slumps (WSJ)

Greece’s crisis is approaching a potential breaking point after a year of relative calm, as a government with declining political stamina confronts creditors’ unyielding demands. The ruling left-wing Syriza party, grappling with slumping popularity, is considering the option of calling snap elections in 2017, as it loses hope of winning concessions on debt relief or austerity from the eurozone and IMF. No decision for elections has been made, said Greek officials, who added that they would review the state of negotiations in January, after pressing creditors again to show more flexibility. Elections would allow Syriza—if not Greece—to escape from the pressures of an unpopular bailout program whose strained math has eventually brought down every Greek government since the crisis began in 2009.

Syriza’s leader and Prime Minister Alexis Tsipras, like his predecessors, is struggling to meet strict fiscal targets in a recession-scarred country weary of austerity. A renewed flare-up of the Greek debt crisis in 2017 would create a further test for the cohesion of the EU, whose political establishment is facing challenges from EU-skeptic populists in a string of major elections next year. European governments’ appetite for another bout of Greek drama is low—but so too is willingness to grant Athens concessions to avoid one. The embattled Mr. Tsipras, who is due to hold talks with the leaders of Germany and France in the coming days, surprised Greeks and creditors last week with fiscal gifts that were widely seen as preparing the option of elections.

He promised 1.6 million pensioners a Christmas bonus of between €300 and €800. He also suspended a planned increase in sales tax for Aegean islands that have received large numbers of Middle-East refugees. EU officials said they would study whether Mr. Tsipras’s promises are compatible with Greece’s bailout commitments.

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It all dies baby, that’s a fact. We’re not even trying to stop it from happening. All we got is words.

World’s Largest Reindeer Herd Plummets (BBG)

The world’s largest wild reindeer herd has fallen by 40% since 2000, scientists have warned. They say that the animals, which live in the Taimyr Peninsula in the northernmost tip of Russia, are being affected by rising temperatures and human activity. This is causing the animals to change their annual migration patterns. The research has been presented at the Fall Meeting of the American Geophysical Union (AGU). “There is a substantial decline – and we are also seeing this with other wild reindeer declining rapidly in other parts of the world,” said Andrey Petrov, who runs the Arctic Centre at the University of Northern Iowa, US. The Taimyr herd is one of the most monitored groups of reindeer in the world. The animals have been tracked for nearly 50 years by aerial surveys and more recently by satellite imagery.

The population reached a peak of one million in 2000, but this latest research suggests that there are now only 600,000 reindeer. “Climate change is at least one of the variables,” explained Prof Petrov. “We know in the last two decades that we have had an increase in temperatures of about 1.5C overall. And that definitely impacts migration patterns.” Industrial development is increasing in the region, which is also changing the animals’ distribution. The researchers found that in the summer, the reindeer were moving east to avoid human activity. But they were also shifting north and to higher elevations. The team thinks this is to try to get to cooler ground and also to avoid the mosquitoes that are booming as the region gets warmer and wetter.

“They just move and move and move to escape them,” said Prof Petrov. This is extending the distance that the animals have to migrate between winter and summer. “They now have to travel much longer distances to reach those areas with their newborn calves, and that means there is an increase in calf mortality.”

Read more …

Dec 122016
 
 December 12, 2016  Posted by at 8:53 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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‘Daly’ Store, Manning, South Carolina July 1941

CIA’s Blatant Lies Demolished By A Little Simple Logic (Craig Murray)
Chinese Media Hit Out At Trump Over ‘One China’ Comments (CNBC)
Dollar Debt Issuance Soars As Central Banks Take A Back Seat – BIS (CNBC)
Market ‘Paradigm Shift’ May Be Under Way, More Volatility Likely – BIS (R.)
China’s Highly Leveraged Real Estate Developers Face Tough 2017 (BBG)
Top Tech Executives To Attend Trump Summit On Wednesday (R.)
Italy’s Monte dei Paschi To Seek Private Sector-Led Rescue (AFP)
Saudi’s Willing To Cut Oil Output Even More Than Agreed (BBG)
India Workers Abandon Building Sites After Cash Crackdown (R.)
Foxconn Puts 25% Of Its India Workers On Bench After Demonetization (ET)
Venezuela Pulls Most Common Banknote From Circulation To ‘Beat Mafia’ (R.)
Syria’s Palmyra Falls To ISIS Once More (DW)
Vienna Will Veto EU Membership Talks With Turkey – Austrian FM (RT)
Economic Migrants Put Extra Strain On Greek Asylum System (Kath.)
Greece Is Rock Bottom In EU’s Social Justice Rankings (Kath.)
Happiness Depends On Health And Friends, Not Money (G.)

 

 

A merciless put-down by Craig Murray, former British ambassador to Uzbekistan, and former Rector of the University of Dundee. Close associate of Assange.

CIA’s Blatant Lies Demolished By A Little Simple Logic (Craig Murray)

I have watched incredulous as the CIA’s blatant lie has grown and grown as a media story – blatant because the CIA has made no attempt whatsoever to substantiate it. There is no Russian involvement in the leaks of emails showing Clinton’s corruption. Yes this rubbish has been the lead today in the Washington Post in the US and the Guardian here, and was the lead item on the BBC main news. I suspect it is leading the American broadcasts also. A little simple logic demolishes the CIA’s claims. The CIA claim they “know the individuals” involved. Yet under Obama the USA has been absolutely ruthless in its persecution of whistleblowers, and its pursuit of foreign hackers through extradition.

We are supposed to believe that in the most vital instance imaginable, an attempt by a foreign power to destabilise a US election, even though the CIA knows who the individuals are, nobody is going to be arrested or extradited, or (if in Russia) made subject to yet more banking and other restrictions against Russian individuals? Plainly it stinks. The anonymous source claims of “We know who it was, it was the Russians” are beneath contempt. As Julian Assange has made crystal clear, the leaks did not come from the Russians. As I have explained countless times, they are not hacks, they are insider leaks – there is a major difference between the two.

And it should be said again and again, that if Hillary Clinton had not connived with the DNC to fix the primary schedule to disadvantage Bernie, if she had not received advance notice of live debate questions to use against Bernie, if she had not accepted massive donations to the Clinton foundation and family members in return for foreign policy influence, if she had not failed to distance herself from some very weird and troubling people, then none of this would have happened. The continued ability of the mainstream media to claim the leaks lost Clinton the election because of “Russia”, while still never acknowledging the truths the leaks reveal, is Kafkaesque.

[..] both Julian Assange and I have stated definitively the leak does not come from Russia. Do we credibly have access? Yes, very obviously. Very, very few people can be said to definitely have access to the source of the leak. The people saying it is not Russia are those who do have access. After access, you consider truthfulness. Do Julian Assange and I have a reputation for truthfulness? Well in 10 years not one of the tens of thousands of documents WikiLeaks has released has had its authenticity successfully challenged. As for me, I have a reputation for inconvenient truth telling.

Contrast this to the “credible sources” Freedland relies on. What access do they have to the whistleblower? Zero. They have not the faintest idea who the whistleblower is. Otherwise they would have arrested them. What reputation do they have for truthfulness? It’s the Clinton gang and the US government, for goodness sake. In fact, the sources any serious journalist would view as “credible” give the opposite answer to the one Freedland wants. But in what passes for Freedland’s mind, “credible” is 100% synonymous with “establishment”. When he says “credible sources” he means “establishment sources”. That is the truth of the “fake news” meme. You are not to read anything unless it is officially approved by the elite and their disgusting, crawling whores of stenographers like Freedland.

The worst thing about all this is that it is aimed at promoting further conflict with Russia. This puts everyone in danger for the sake of more profits for the arms and security industries – including of course bigger budgets for the CIA. As thankfully the four year agony of Aleppo comes swiftly to a close today, the Saudi and US armed and trained ISIS forces counter by moving to retake Palmyra. This game kills people, on a massive scale, and goes on and on.

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He’s not trying to trade the policy.

Chinese Media Hit Out At Trump Over ‘One China’ Comments (CNBC)

Donald Trump attracted stinging criticism from China’s state media after the President-elect stated that the U.S. did not necessarily have to stick to the “One China” policy. Communist Party-owned paper, Global Times, published in an opinion piece with the headline: “Trump, please listen clearly, the One China policy cannot be traded” as it warned Trump that China cannot “cannot be easily bullied”. “If Trump abandons the one-China principle, why should China need to be U.S.’ partner in most international affairs?” said the paper, which is known for its extreme nationalistic views. Most would think Trump is “ignorant like a child” in handling diplomacy, the paper added.

Its English language editor was less strident, with the paper citing a foreign affairs analyst chalking up Trump comments to “inexperience” in a piece entitled “Prevent ‘immature’ Trump being manipulated by conservative forces: analyst”. “As a businessman, he thinks it’s quite normal to do business, but he hasn’t realized that the Taiwan question is not a business to China. The Taiwan question is not negotiable,” China Foreign Affairs University professor Li Haidong was quoted as saying. Li also said Trump didn’t have a plan to challenge the “One China” policy. China and Taiwan parted ways in 1949, when the Nationalist Party (KMT) was forced to retreat to Taiwan by the Chinese Communist Party and China views the territory as a renegade province that can be re-taken by force if necessary. Washington embraced the “One China” policy in 1979 under which Beijing views Taiwan, Hong Kong and Macau as part of China.

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And at the end of the day central banks are going to buy up all the devalued paper again?

Dollar Debt Issuance Soars As Central Banks Take A Back Seat – BIS (CNBC)

The amount of dollar-denominated debt issued by financial institutions stepped up to reach a record high during the third quarter as the influence of central banks receded, according to the latest quarterly review from the Bank of International Settlements (BIS), released on Sunday. “Developments during this quarter stand out for one reason: For once, central banks took a back seat,” Claudio Borio, head of the BIS’ monetary and economic department was quoted as saying in the review. “It is as if market participants, for once, had taken the lead in anticipating and charting the future, breaking free from their dependence on central banks’ every word and deed,” he continued. Total issuance of international debt securities during the third quarter slipped 10% to hit $1.4 trillion.

Within advanced economies, a below-average pace of repayments meant quarterly net issuance jumped 40% with the year-to-date net figure at its highest level since 2009. Turning to emerging markets, quarterly net issuance dropped 35% from its abnormally large amount the previous quarter but the year-to-date figure still showed a 73% jump over 2015’s equivalent number. The lower EM net issuance figure this quarter particularly reflected a sharp slowdown in sovereign borrowing by oil-producing governments. However, looking ahead, fourth-quarter figures should be bolstered once again by Saudi Arabia’s $17.5 billion bond issue placed in October and it is worth remembering the heady pace of issuance during the second quarter, driven by oil exporters such as Oman, Qatar and the United Arab Emirates.

Read more …

Who needs central banks?

Market ‘Paradigm Shift’ May Be Under Way, More Volatility Likely – BIS (R.)

Financial markets have been remarkably resilient to rising bond yields and sudden shift in outlook following last month’s shock U.S. election result, but the sheer scale of uncertainties ahead means the adjustment will be “bumpy”, the BIS said on Sunday. While the resilience to recent market swings following the U.S. election and Brexit vote have been welcome, investors should be braced for further bouts of extreme volatilty and “flash crash” episodes like the one that hit sterling in October, the Bank for International Settlements said. “We do not quite fully understand the cause of such unusual price moves … but as long as such moves remain self-contained and do not threaten market functioning or the soundness of financial institutions, they are not a source of much concern: we may need to get used to them,” said Claudio Borio, Head of the Monetary and Economic Department at the BIS.

“It is as if market participants, for once, had taken the lead in anticipating and charting the future, breaking free from their dependence on central banks’ every word and deed,” Borio said. This suggests investors may finally be learning to stand on their own two feet after years of relying on central bank stimulus, signaling a potential “paradigm shift” for markets, he said. “But the jury is still out, and caution is in order. And make no mistake: bond yields are still unusually low from a long-term perspective,” Borio said. [..] Bond yields have risen sharply since the middle of the year. The benchmark 10-year U.S. Treasury yield has jumped 100 basis points since July’s multi-decade low, with a growing number of investors saying the 35-year bull run in bonds is now over.

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I say it almost every day: shadow banks.

China’s Highly Leveraged Real Estate Developers Face Tough 2017 (BBG)

For China’s highly leveraged real estate developers, 2017 could be the year that the borrowing binge finally catches up with them. Regulators have choked off a key source of funding, with the Shanghai Stock Exchange raising the threshold for property firms to sell bonds on their platform in October. Since then, builders haven’t sold any notes in a market that played host to about 40% of their onshore debentures over the past two years, data compiled by Bloomberg show. The curbs couldn’t have come at a worse time, with a record $17.3 billion of developer bonds due next year, and another $27.9 billion in 2018. China’s government is treading a fine line with the curbs on debt issuance as it tries to gently deflate the real-estate bubble while avoiding wider fallout in an industry that accounts for as much as 20% of Asia’s largest economy.

The sector is also threatened by a broader increase in funding costs, with the yield premium on AAA-rated domestic corporate notes reaching the widest since July 2015, amid a global pullback in bonds and targeted central bank steps to stem leverage. Smaller developers will be the hardest hit, with bigger players still able to sell exchange-regulated bonds, according to NN Investment Partners. “Overall, funding conditions will become more challenging in 2017,” said Clement Chong, senior credit analyst in Singapore at NN Investment. “Only stronger developers can issue onshore bonds, subject to a number of conditions. But smaller builders will be forced to come to the offshore market to issue bonds, which will be subject to regulatory approval.”

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Most of them were strong Hillary supporters.

Top Tech Executives To Attend Trump Summit On Wednesday (R.)

Top executives from Alphabet Inc, Apple Inc and Facebook Inc are among a small group of tech leaders invited to a summit to be held on Wednesday by U.S. President-elect Donald Trump, Recode reported, citing sources. Executives from Microsoft Corp, Intel Corp and Oracle Corp will also be among “a very heady group of less than a dozen, comprising most of the key players in the sector” to attend the summit, Recode said. Billionaire entrepreneur and Tesla Motors Inc CEO Elon Musk will also be in attendance, the Wall Street Journal reported, citing people familiar with the matter.

“I plan to tell the president-elect that we are with him and are here to help in any way we can,” Oracle CEO Safra Catz told Reuters in an emailed statement. “If he can reform the tax code, reduce regulation, and negotiate better trade deals, the U.S. technology community will be stronger and more competitive than ever.” Amazon.com Inc CEO and founder Jeff Bezos was also invited and is likely to attend, Recode said citing sources with knowledge of the situation.

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What’s in it for Qatar?

Italy’s Monte dei Paschi To Seek Private Sector-Led Rescue (AFP)

Italy’s troubled Monte dei Paschi di Siena (BMPS) bank on Sunday announced it would go ahead with plans to seek a private sector-led rescue, narrowly avoiding the need to seek a government bailout. The world’s oldest bank’s woes have raised concerns over the eurozone’s third-largest economy, particularly in the aftermath of prime minister Matteo Renzi’s resignation after a crushing referendum defeat. The bank’s prospects appeared somewhat less alarming Sunday however, after Italian President Sergio Mattarella asked Renzi’s ally Paolo Gentiloni to form a new government. BMPS’s stock tumbled Friday over reports that the ECB had denied it more time to raise the cash it needed to avoid being wound down, triggering speculation it would be forced to seek a government bailout.

The bank – seen as the weak link in Italy’s economy – had asked to be given until January 20 to avoid collapse. The request was reportedly refused, with the ECB’s board believed to have ruled that two weeks of extra time would be of little use in turning around the historic bank. In a statement published late Sunday after a board meeting in Milan, BMPS said it had “decided to go ahead” with plans to seek a market-led rescue by December 31. The bank had initially announced its plan to seek a private sector-led rescue in July. The bank, whose stock has fallen more than 80% this year, plans the sale of €27.6 billion in non-performing loans. It also aims for a capital injection of up to €5 billion. Italian media reports say the Qatar Investment Authority – the Gulf nation’s state-owned holding company – may be willing to contribute €1 billion.

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Everyone’s willing to cut outputs, but not if it costs money or market share. Not going to work.

Saudi’s Willing To Cut Oil Output Even More Than Agreed (BBG)

Saudi Arabia signaled it’s ready to cut oil production more than expected, a surprise announcement made minutes after Russia and several non-other OPEC countries pledged to curb output next year. Taken together, OPEC’s first deal with its rivals since 2001 and the Saudi comments represent a forceful effort by producers to wrest back control of the global oil market, depressed by persistent oversupply and record inventories. “This is shock and awe by Saudi Arabia,” said Amrita Sen at Energy Aspects in London. “It shows the commitment of Riyadh to rebalance the market and should end concerns about OPEC delivering the deal.” Oil prices have surged more than 15% since OPEC announced Nov. 30 it will cut production for the first time in eight years, rising this week briefly above $55. The price rise has propelled the shares of energy groups from Exxon Mobil to shale firms such as Continental Resources.

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Everyone needs a bank account, but the banks have no yime for that since they’re exchanging old for new money. Sounds like a plan.

India Workers Abandon Building Sites After Cash Crackdown (R.)

Hundreds of thousands of construction workers have returned home since Prime Minister Narendra Modi abolished high-denomination banknotes, leaving some building sites across the country facing costly delays. A month after Modi’s shock move to take away 86% of cash in circulation to crush the shadow economy, the growing labour shortage threatens to slow a recovery in India’s construction industry, which accounts for 8% of gross GDP and employs 40 million people. Work at SARE Homes’ residential projects, spanning six cities, has slowed dramatically as migrant workers, who are out of cash and have no bank accounts to draw from, have little choice but to return to their villages. “Construction work at all projects has slowed down in a big way,” managing director Vineet Relia told Reuters.

Property enquiries, meanwhile, have slumped by 80% around the Indian capital since the cash crackdown, according to property portal 99acres. Getamber Anand, president of Indian builders’ association CREDAI, said projects nationwide had been hit, and estimated that roughly half of the migrant workforce, numbering in the low millions, had left for home. Road developers have also reported a slowdown as they struggle to find sufficient labour. The exodus shows little sign of reversing, risking damage to construction activity and the wider economy into 2017, despite Modi’s assurances that hardships from his radical “demonetisation” should be over by the end of the year. [..] for now, millions of workers who depend on daily wages for food and shelter are struggling. Many have never held a bank account, and even if they wanted one, some do not have the necessary documents to do so.

CREDAI’s Anand predicts activity on construction sites will not return to normal until April, and only once labourers are able to open accounts at banks still struggling to serve long queues of people desperate for cash. “Right now the banks say they don’t have time to open accounts. It’s the biggest challenge,” Anand said.

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Modi said it would all be fine by the end of the year. Not going to happen.

Foxconn Puts 25% Of Its India Workers On Bench After Demonetization (ET)

Foxconn, the world’s largest contract manufacturer and poster boy of the government’s Make in India project, has asked nearly a fourth of its 8,000 factory workers to go on paid leave for two weeks after last month’s demonetisation of high value notes sparked a severe cash crunch that saw sales slump almost 50%, forcing the company to slash production by half. The government’s move to ban Rs 500 and Rs 1,000 notes from November 9 has had a domino effect on the mobile phone industry, where a large majority of mobile phones are bought for less than Rs 5,000 and most of the transactions happen through cash.

Consumer purchase power has been reduced dramatically – mobile phone monthly sales halved to Rs 175-200 crore post demonetisation – and sales revival is not looking up, as was perceived earlier, industry insiders said. Leading local players including Intex, Lava and Karbonn are planning to lay off or bench 10-40% of their workforce, as they cut production to control inventory pile-ups in retail channels with consumers delaying cash purchases after Nov 8 demonetisation sucked out cash from the market. Lava is shutting down its plant – which employs around 5000 people -for a week starting December 12, while others could soon follow, industry insiders said.

Read more …

Failure of Maduro or intervention from abroad? Venezuela still has a lot of oil.

Venezuela Pulls Most Common Banknote From Circulation To ‘Beat Mafia’ (R.)

Venezuela, mired in an economic crisis and facing the world’s highest inflation, will pull its largest bill, worth two US cents on the black market, from circulation this week ahead of introducing new higher-value notes, President Nicolás Maduro said on Sunday. The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank. Critics slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted.

Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48% of all bills and coins. Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than $5 on the streets. No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500%. The oil-producing nation’s bolivar currency has fallen 55% against the US dollar on the black market in the last month.

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Putin won’t like this.

Syria’s Palmyra Falls To ISIS Once More (DW)

On Sunday, the “Islamic State” (IS) retook the desert city of Palmyra in Syria after being driven out of the city hours earlier by heavy Russian aerial attacks, a group monitoring the country’s conflict reported. “Despite the ongoing air raids, IS retook all of Palmyra after the Syrian army withdrew south of the city,” said Rami Abdel Rahman, who heads the Britain-based Syrian Observatory of Human Rights. The Amaq news agency, which has links to the IS militants, also reported that the group had retaken “full control” of the city after first taking Palmyra’s citadel (above photo), which overlooks the historic site.

After launching an offensive in the region a few days before, IS pushed into the city on Saturday, only to be forced to withdraw by a fierce Russian bombing campaign that killed scores of its fighters. The Observatory reported that the militants regrouped on the outskirts of the city and made a successful attempt to retake control. IS has had possession of the city once before, in May last year, destroying many of its ancient treasures, and Palmyra’s recapture could put the remaining artifacts and monuments in extreme danger. The group considers certain artifacts and monuments to be “idolatrous,” and has severely damaged important historic sites and objects across areas of Syria and Iraq that it controls.

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Nothing else makes sense.

Vienna Will Veto EU Membership Talks With Turkey – Austrian FM (RT)

Any further negotiations with Ankara over its future European Union membership will be blocked by Vienna, the Austrian Foreign Minister said, slamming Ankara’s alleged human rights violations in the post-coup crackdown on any opposition. The European Parliament passed a non-binding resolution on November 24 to freeze Turkey’s EU accession process, citing Ankara’s crackdown after July’s failed coup. The final verdict on Turkey’s immediate EU future will be decided following the European Council meeting that is scheduled to take place on December 15-16. Granting visa liberalization to Turkish citizens will also be on the table during the discussions. Before the crucial meeting, the EU’s General Affairs Council of foreign ministers, which meets once a month, will convene to discuss the potential role of Ankara in the EU.

At the meeting, Austria intends to block the continuation of EU accession talks with Turkey, the country’s Foreign Minister, Sebastian Kurz, told Spiegel online. “The European Parliament has adopted a courageous and correct resolution demanding that the accession negotiations with Turkey be frozen. In the conclusions of the Foreign Ministers, there must also be a reaction to developments in Turkey. We must also propose that the accession talks be frozen,” Kurz said. The minister added that the Netherlands and Bulgaria seem to share Vienna’s position on Turkey. The 30-year-old politician said that his country believes that Turkey does not share EU values. He called for a clear response from the European Union to the events which followed the July 15 failed coup.

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Over 300 arrivals a day. Numbers are rising again.

Economic Migrants Put Extra Strain On Greek Asylum System (Kath.)

The numbers of migrants crossing from Turkey to the eastern Aegean islands are on the rise, but the%age of those who merit international protection is on the wane, say authorities, who are looking for ways to speed up asylum procedures. Speaking to Kathimerini on condition of anonymity, local officials told the newspaper that refugee families currently stranded on the islands are reluctant to share a roof with economic migrants, mostly young men from the Maghreb region (Morocco, Tunisia, Algeria) who allegedly often display delinquent behavior and are on the front lines of riots at reception centers. Migration Policy Minister Yiannis Mouzalas recently admitted that between 70 and 80% of arrivals were now migrants while before it was refugees escaping conflict and war.

Whereas the latter appear aware that the Balkan route to Western Europe is officially closed, the groups of young male economic migrants appear more willing to take the risks of reaching Europe. A total 324 undocumented migrants crossed from Turkey on Friday, most of them from Africa and Pakistan. Another 330 reached Greece on Saturday. Rising numbers are putting a big strain on Greece’s asylum system as virtually all newcomers make a claim for asylum despite knowing that they do not fulfill the necessary criteria for international protection. “Even so, we are still obliged to follow the formal procedure and fulfill the European directives,” Maria Stavropoulou, director of the Greek Asylum Service, told Kathimerini.

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Firdt you put them down, then you write a report on it.

Greece Is Rock Bottom In EU’s Social Justice Rankings (Kath.)

Greece came out worst among the bloc’s 28 member-states in the EU’s annual report on social justice for 2015, reflecting the impact of the financial crisis on society, social cohesion and the competitiveness of the Greek economy. The “Social Justice in the EU” report shows that not only is Greece the bloc’s laggard, but the situation in the country is deteriorating, with the gap between Greece and Romania – the second to last in the rankings – growing. Furthermore, the report indicates that the gap between the European North and South is also widening. The social and economic inequality that has emerged in Greece during the crisis is now taking on a permanent structural character, while the local economy appears to be losing its most important comparative advantage – human capital.

The report examines six social justice sectors: poverty prevention, equal rights in education, labor market access, social cohesion, and the absence of discrimination in healthcare and justice. It argues that those sectors have seen a downturn across the EU in the last seven years, reaching their lowest point in the period from 2012 to 2014. On the poverty and social exclusion front, the situation in Greece is particularly worrying, as 35.7% of the population faces the risk of poverty, with the figure for children even higher, at 37.8%, from 36.7% in 2014. The %age of children living in conditions of serious material deprivation has grown to 25.7% from 23.8% in 2014 and 10.4% in 2008. The situation is also disturbing in the labor market: In 2015 just 50.8% of Greeks of working age actually worked – the lowest rate in the EU.

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What happened to the warm gun?

Happiness Depends On Health And Friends, Not Money (G.)

Most human misery can be blamed on failed relationships and physical and mental illness rather than money problems and poverty, according to a landmark study by a team of researchers at the London School of Economics (LSE). Eliminating depression and anxiety would reduce misery by 20% compared to just 5% if policymakers focused on eliminating poverty, the report found. Lord Richard Layard, who led the report, said on average people have become no happier in the last 50 years, despite average incomes more than doubling. The economist and former adviser to Tony Blair and Gordon Brown said the study, called Origins of Happiness, showed that measuring people’s satisfaction with their lives should be a priority for every government. T

he researchers analysed data from four countries including the US and Germany. Extra spending on reducing mental illness would be self-financing, the researchers added, because it would be recovered by the government through higher employment and increased tax receipts together with a reduction in NHS costs from fewer GP visits and hospital A&E admissions. “Tackling depression and anxiety would be four times as effective as tackling poverty. It would also pay for itself,” he said. The report supports the arguments put forward by Layard over several decades that social and psychological factors are more important to the wellbeing of individuals than income levels. “Having a partner is as good for you as being made unemployed is bad for you,” he said.

The report claims that state-run organisations, including schools, must become more focused on tackling anxiety and mental health issues. “This evidence demands a new role for the state – not ‘wealth creation’ but ‘wellbeing creation’,” Layard said. “In the past, the state has successively taken on poverty, unemployment, education and physical health. But equally important now are domestic violence, alcoholism, depression and anxiety conditions, alienated youth, exam mania and much else. These should become centre stage.”

Read more …

Dec 112016
 
 December 11, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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‘Daly’ Somewhere in the South, possibly Miami 1941

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)
Stocks Have Only Been This Expensive During Times Of Crisis (BI)
UK Government Faces New Brexit Court Case (R.)
Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)
Does Krugman Really Support The Working Class? (Dean Baker)
Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)
Quebec Paves Way For More Oil And Gas Exploration (BBG)
Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)
Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)
The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)
WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)
Russian Bombardment ‘Forces ISIS Out Of Palmyra’ Hours After Re-Entry (AFP)

 

 

“A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk..”

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)

Next year could turn out to be a make-or-break year for Europe. But unlike in 2008, neither the governments nor the central banks have sufficient means to deal with another crisis. And it’s not entirely clear whether their intervention last time actually made things better or worse. Take Mr. Draghi, for instance. By lowering interest rates in the euro zone and buying up debt en masse, he has been trying to give the European economy a much needed shot in the arm. Yet despite all of his efforts, the specter of deflation still looms over the bloc, the future of the common currency is uncertain and lenders in southern Europe are still fighting for their existence. At the same time, the negative effects of Mr. Draghi’s policies are becoming more apparent. The STOXX Europe 600 index may have closed at its highest level in more than two months earlier this week, but it’s still 65% lower than where it was before the financial crisis.

The IMF has even said it feared a third of European banks wouldn’t be able to become profitable again even if the economy were to recover. The weird thing about the way the European economy has fared after the financial crisis is that even though businesses have been struggling, not a lot of them are going under. Insolvencies have been below the historical average. In Germany, for instance, the%age of companies declaring bankruptcy was the same right before the Lehman Brothers crash as it was in the 1990s – between 1.5 and 2%. Since the crisis began, that metric has fallen steadily. In 2015, the last full year for which data is available, it stood at 0.6%. Insolvency rates have even dropped in the euro zone’s weakest members along its southern periphery. Common sense would have one believe that the number of bankruptcies increases in times of crisis – especially during crises as protracted as financial ones.

“With its zero interest rate policy and the massive purchasing of bonds, the ECB is undermining the process of creative destruction, which is so important to a market economy,” said Markus Krall at Goetz Partners in Frankfurt. The ECB, for its part, was willing to do anything to prevent the economy from tanking. The central bank flooded the banks with money, and that deluge reduced companies’ capital costs to practically nothing. Even the most inefficient businesses can survive in that environment. Mr. Krall did the math on what it would mean for the balance sheets of European banks if insolvency rates had been at the historical average all along. He discovered that the €1 trillion in bad loans the ECB identified in its latest report would be closer to the tune of €2.5 trillion in that hypothetical scenario. “A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk,” Mr. Krall said. “The ECB is creating a world of zombie banks and zombie companies,” he added.

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1929, 1999, 2007.

Stocks Have Only Been This Expensive During Times Of Crisis (BI)

Stocks are getting a bit pricey. All three major indexes break though their all-time highs on a seemingly daily basis, and this has pushed earnings multiples higher and higher. The current 12-month trailing price-to-earnings ratio of the S&P 500 sits at 25.95x, while the forward 12-month price-to-earnings is roughly 17.1x, according to FactSet data. Each of these is higher than its long-term average. In fact, based on one measure of valuation, the market hasn’t been this expensive anytime other than before a massive crash. The cyclical adjusted price-to-earnings ratio, better known as Shiller P/E, which adjusts the price-to-earnings ratio for cyclical factors such as inflation, stands at 27.86 as of Friday.

There have only been a few instances in history when stocks have been this expensive: just before the crash of 1929, the years leading up to the tech bubble and its bursting, and around the financial crisis of 2007-09. This does not necessarily mean that a crash is imminent — during the tech bubble, the Shiller P/E made it well into the 30s before coming back down. Additionally, there are some criticisms that Shiller P/E is generally more backward-looking since it adjusts for the cycle, so it may not be as accurate. Another caveat is that, during the three previous instances, investors have been incredibly bullish on stocks (there’s a reason Robert Shiller’s book is titled “Irrational Exuberance”) and most indicators of sentiment — from the American Association of Individual Investors to Bank of America Merrill Lynch’s sell-side sentiment indicator — are still depressed. Still, an elevated level for the Shiller P/E certainly isn’t going to make it any easier to sleep at night.

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As the EU descends into chaos, some of these people are going to remember something about a gift horse’s mouth.

UK Government Faces New Brexit Court Case (R.)

Opponents to Britain leaving the EU will launch a fresh legal action this week, which could further hamper Prime Minister Theresa May’s Brexit plans, The Sunday Times reported. The newspaper said campaigners will write to the UK government on Monday saying they are taking it to the High Court in an effort to keep Britain in the single market. It said the claimants will seek a judicial review in an attempt to give lawmakers a new power of veto over the terms on which Britain leaves the EU. They argue the government “has no mandate” to withdraw from the single market because it was not on the referendum ballot paper on June 23 and was not part of the ruling Conservative Party’s manifesto for the 2015 general election.

May has said she wants to invoke Article 50 of the EU’s Lisbon Treaty by the end of March, kicking off up to two years of exit negotiations. However the High Court ruled last month that Article 50 cannot be triggered without parliament’s assent. That ruling is being challenged by the government in Britain’s Supreme Court. The Sunday Times said the new court case hinges on whether the government would also have to trigger another legal measure — Article 127 of the European Economic Area agreement — in order to quit the single market. It said ministers argue Britain automatically exits the single market when it quits the EU. But, it said if the claimants win the new case, the government would have to gain the approval of lawmakers.

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Sanity evaporates in the US. And it’s not Trump.

Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)

While we wait to see if and when the Senate will pass (and president will sign) Bill “H.R. 6393, Intelligence Authorization Act for Fiscal Year 2017”, which was passed by the House at the end of November with an overwhelming majority and which seeks to crack down on websites suspected of conducting Russian propaganda and calling for the US government to “counter active measures by Russia to exert covert influence … carried out in coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly,” another, perhaps even more dangerous and limiting to civil rights and freedom of speech bill passed on December 8.

Recall that as we reported in early June, “a bill to implement the U.S.’ very own de facto Ministry of Truth has been quietly introduced in Congress. As with any legislation attempting to dodge the public spotlight the Countering Foreign Propaganda and Disinformation Act of 2016 marks a further curtailment of press freedom and another avenue to stultify avenues of accurate information. Introduced by Congressmen Adam Kinzinger and Ted Lieu, H.R. 5181 seeks a “whole-government approach without the bureaucratic restrictions” to counter “foreign disinformation and manipulation,” which they believe threaten the world’s “security and stability.” Also called the Countering Information Warfare Act of 2016 (S. 2692), when introduced in March by Sen. Rob Portman, the legislation represents a dramatic return to Cold War-era government propaganda battles.

“These countries spend vast sums of money on advanced broadcast and digital media capabilities, targeted campaigns, funding of foreign political movements, and other efforts to influence key audiences and populations,” Portman explained, adding that while the U.S. spends a relatively small amount on its Voice of America, the Kremlin provides enormous funding for its news organization, RT.“Surprisingly,” Portman continued, “there is currently no single U.S. governmental agency or department charged with the national level development, integration and synchronization of whole-of-government strategies to counter foreign propaganda and disinformation.”

Long before the “fake news” meme became a daily topic of extensive conversation on wuch mainstream fake news portals as CNN and WaPo, H.R. 5181 would rask the Secretary of State with coordinating the Secretary of Defense, the Director of National Intelligence, and the Broadcasting Board of Governors to “establish a Center for Information Analysis and Response,” which will pinpoint sources of disinformation, analyze data, and — in true dystopic manner — ‘develop and disseminate’ “fact-based narratives” to counter effrontery propaganda.

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I don’t really want to mention Krugman ever again, but maybe just this once…

Does Krugman Really Support The Working Class? (Dean Baker)

Paul Krugman told readers that intellectual types like him tend to vote for progressive taxes and other measures that benefit white working class people. This is only partly true. People with college and advanced degrees tend to be strong supporters of recent trade deals [I’m including China’s entry to the WTO] that have been a major factor in the loss of manufacturing jobs in the last quarter century, putting downward pressure on the pay of workers without college degrees. They also tend to support stronger and longer patent and copyright protections (partly in trade deals), which also redistribute income upward. (We will pay $430 billion for prescription drugs this year, which would cost 10-20% of this amount in a free market. The difference is equal to roughly five times annual spending on food stamps.)

Educated people also tended to support the deregulation of the financial sector, which has led to some of the largest fortunes in the country. They also overwhelmingly supported the 2008 bailout which threw a lifeline to the Wall Street banks at a time when the market was going to condemn them to the dustbin of history. (Sorry, the second Great Depression story as the alternative is nonsense — that would have required a decade of stupid policy, nothing about the financial collapse itself would have entailed a second Great Depression.)

His crew has also been at best lukewarm on defending unions. However they don’t seem to like free trade in professional services that would, for example, allow more foreign doctors to practice in the United States, bringing their pay in line with doctors in Europe and Canada. The lower pay for doctors alone could save us close to $100 billion a year in health care expenses.

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OPEC members cheat. What do you think non-members will do? Still, prices can remain ‘high-ish’ until we find out.

Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)

11 countries agreed on Saturday to cut their oil output, teaming up with the OPEC cartel in an exceptional bid to end the world’s glut of crude and reverse a dramatic fall in income. Russia and 10 other non-OPEC states will reduce their production by more than half a million barrels per day (bpd), OPEC announced. The deal will take effect from the start of 2017 and last for six months, though it may be extended depending on market conditions. “I am happy to announce that a historic agreement has been reached,” said Qatar’s Energy Minister Mohammed Bin Saleh Al-Sada, whose country holds the rotating presidency of the OPEC. The cut will contribute to OPEC’s own initiative to ease a saturated market and end a price slump that has brutally affected the economies of many oil producers.

On November 30 its members announced a slash in output by 1.2 million barrels per day (bpd) beginning in January, to 32.5 million bpd. Under that deal, OPEC called on non-member producer states to lower their output by 600,000 bpd. Saturday’s deal approves cuts totalling 558,000 bpd. Russia had already signalled it would provide half of that production cut in the first half of 2017. Among the other countries that will contribute cuts Kazakhstan agreed to reduce production by 20,000 bpd, Mexico 100,000 bpd, Oman 40,000 bpd and Azerbaijan 35,000 bpd, according to Bloomberg. The deal also includes Malaysia, Bahrain, Equatorial Guinea, Sudan, South Sudan and Brunei.

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Québec is powered by hydro. All this is just for export to the US. Turn ‘La Belle Province’ into a moonscape. It’s up to the First Nations again to stop the mess. You still like Justin?

Quebec Paves Way For More Oil And Gas Exploration (BBG)

Quebec’s legislature passed a bill that will pave the way for more oil and gas exploration, providing a boost to drillers such as Junex Inc. while drawing criticism from environmental, aboriginal and citizen groups. Bill 106 passed Quebec’s National Assembly in a 62-38 vote early Saturday after an overnight debate ahead of the holiday break. The legislation is meant to implement Quebec’s clean energy plan but also contains provisions allowing for energy exploration, potentially including fracking. “Quebec’s government just voted down an amendment to ban fracking in a triumph of science over ‘leave it in the ground’ lunacy,” Calgary-based Questerre Energy tweeted early Saturday morning. Shares of companies that hold exploration rights, including Questerre and Junex, based in Quebec City, surged last week as passage of the legislation looked likely.

Questerre holds about 1 million acres and has drilled test wells in the Utica shale formation along the St. Lawrence River, according to its website. Questerre’s shares rose the most in more than eight years on Thursday and inched up again on Friday. Junex’s stock increased 30%, the most in almost two years. Bill 106 creates a new agency to promote Quebec’s transition to cleaner energy yet also lays out a framework for oil and gas development in the Canadian province. Environmental, aboriginal and citizen groups argued that the bill’s mandate is contradictory, that debate was rushed and that it should have included a moratorium on fracking as well as greater protection for landowners. [..] Bill 106 strips power from landowners who will be powerless to stop exploration by companies with drilling claims, Carole Dupuis at Regroupement vigilance hydrocarbures Quebec, said by phone.

That, in turn, will hurt property values, especially if exploration leads to fracking. “If there was not the fracking issue, the landowner issue would not be a problem. It’s an access issue,” she said. “What’s the value of your land if someone has been drilling one kilometer from you and you don’t know if your drinking water is safe?” [..] Bill 106 goes against aboriginal rights to self-determination and to establish the best use of their lands, Mi’gmaq Chief Darcy Gray said in an e-mail Saturday. “The bill also opens up our lands to exploration that we feel could have long-lasting, detrimental and irreparable damage,” he wrote “especially with regards to hydraulic fracturing and or other types of well stimulation.” “Why this would even be considered, or how it could be construed as a favorable initiative, is beyond me,” he said.

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When will Modi’s support crash?

Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)

It’s 11 o’clock, and Laxman Chauhan still hasn’t sold any fish. His stall in the central market in the west Indian city of Panjim has been open for three hours, but none of his usual clients have come today. He checks his watch, and then takes a walk to see if other vendors have had any customers. “Sold anything yet?” he asks Ramila Pujjar, who has set her stall up with a glistening display of the morning’s catch. She hasn’t either. “I’m losing 2,000-3,000 rupees (£23-£35) a day,” says Chauhan. “I’m throwing fish away every day.” The low footfall at Panjim’s fish market is unusual; fish is a staple in Goan cuisine but, for the past month, since the prime minister, Narendra Modi, abolished the 500 and 1,000 rupee notes, business has suffered. “I’m losing money because of the government,” says Pujjar.

“The government only takes care of the rich, the poor will always be poor.” Modi’s surprise announcement wiped out 86% of the nation’s currency overnight, leaving the vendors at Panjim’s fish market to suffer heavy losses. “Nobody has cash, so they’re not buying fish.” Panjim is no different to the rest of India. Long queues wind around banks and ATMs in every city as people scramble to exchange their high-value banknotes. The cash crisis has hit millions of traders, as people tighten purse strings and save up precious banknotes. But now, this sleepy tourist town is going to become the laboratory for a radical new experiment. From January, Goa’s government has announced that the city will go “cashless”, meaning every street vendor, rickshaw driver and shopkeeper must offer their customers the option to pay using a debit card or mobile phone. The cash-free drive will attempt to close down India’s thriving parallel economy of untaxed cash transactions.

A government circular at the beginning of the month instructed traders: “Goa is likely to become the state in India to go for cashless transactions from 31 December. Even though cash transactions are not being banned, it is in the interest of the government to encourage cashless transactions.” The policy, announced by India’s defence minister, Manohar Parrikar, is in line with Modi’s vision for a cash-free India. Last week, the finance minister, Arun Jaitley, announced a series of discounts on digital transactions for petrol, railway tickets and insurance policies. Modi has urged young people to support his “less cash” economy in a radio broadcast: “I need the help of young people in India … There are many people in your families or neighbourhoods who may not know how to use technologies such as e-wallets and payments through mobiles. I urge you to spend some time … to teach this technology to at least 10 families who may not know it,” he said.

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Sure. Just get your most creative accountants out. A “landmark year”?

Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)

Greece’s Parliament has passed a budget of continued austerity as mandated by the country’s creditors, but which forecasts robust growth for 2017. Prime Minister Alexis Tsipras says it will mark Greece’s “final exit” from its nearly decade-long financial crisis. The budget adds more than €1 billion in new taxes, mostly indirect taxes on items from phone calls to alcohol. It also cuts spending by over €1 billion. The budget was backed by the left-dominated ruling coalition and opposed by all other parties. It passed by a vote of 152-146 on Saturday. Despite the continued austerity, Tsipras predicted that 2017 will be a “landmark year” with 2.7% economic growth. He said his government has achieved a higher-than-forecast 2016 primary surplus.

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Interesting long interview.

The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)

You are “the minister” who refused to cooperate with the FBI because you suspected their agents on mission in Iceland were of trying to frame Julian Assange. Do you confirm this? Yes. What happened was that in June 2011, US authorities made some approaches to us indicating they had knowledge of hackers wanting to destroy software systems in Iceland. I was a minister at the time. They offered help. I was suspicious, well aware that a helping hand might easily become a manipulating hand! Later in the summer, in August, they sent a planeload of FBI agents to Iceland seeking our cooperation in what I understood as an operation set up to frame Julian Assange and WikiLeaks.

Since they had not been authorised by the Icelandic authorities to carry out police work in Iceland and since a crack-down on WikiLeaks was not on my agenda, to say the least, I ordered that all cooperation with them be promptly terminated and I also made it clear that they should cease all activities in Iceland immediately. It was also made clear to them that they were to leave the country. They were unable to get permission to operate in Iceland as police agents, but I believe they went to other countries, at least to Denmark. I also made it clear at the time that if I had to take sides with either WikiLeaks or the FBI or CIA, I would have no difficulty in choosing: I would be on the side of WikiLeaks.

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Erdogan’s son-in-law, “groomed to be Mr Erdogan’s successor”. Parliament certain to vote to hand Erdogan much increased powers. Seen any false flags lately?

WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)

WikiLeaks has released a cache of thousands of personal emails allegedly from the account of senior Turkish government minister Berat Albayrak, son-in-law of the country’s president, Recep Tayyip Erdogan, which it says shows the extent of links between Mr Albayrak and a company implicated in deals with Isis-controlled oil fields. The 60,000 strong searchable cache, released on Monday, spans the time period between April 2000 – September 23 2016, and shows Mr Albayrak had intimate knowledge of staffing and salary issues at Powertrans, a company which was controversially given a monopoly on the road and rail transportation of oil into the country from Iraqi Kurdistan.

Turkish media reported in 2014 and 2015 that Powertrans has been accused of mixing in oil produced by Isis in neighbouring Syria and adding it to local shipments which eventually reached Turkey, although the charges have not been substantiated by any solid evidence. The emails were apparently obtained by Redhack, a Turkish hactivist collective. WikiLeaks founder Julian Assange said that they were published in response to the Turkish government’s widening crackdown on dissent. Mr Albayrak, one of the most powerful individuals in Turkey, is widely seen as being groomed to be Mr Erdogan’s successor. The hardline president has been consolidating his grip on power by implementing emergency powers and arresting thousands of journalists, activists and academics in the wake of a failed military coup in July.

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Reported without any added anti-Putin innuendo?!

Russian Bombardment Forces ISIS Out Of Palmyra Hours After Re-Entry (AFP)

A Russian aerial onslaught forced Islamic State fighters to withdraw from Palmyra at dawn on Sunday, only hours after the jihadis had re-entered the ancient Syrian city, a monitor said.“Intense Russian raids since last night forced IS out of Palmyra, hours after the jihadists retook control of the city,” said Rami Abdel Rahman of the Syrian Observatory for Human Rights.The raids killed a large number of militants in the desert city in central Syria, Abdel Rahman told AFP. “The army brought reinforcements into Palmyra last night, and the raids are continuing on jihadist positions around the city.”Isis began an offensive last week near Palmyra, which is on Unesco’s world heritage list. In May last year, the Sunni Muslim extremist group seized several towns in Homs province including Palmyra, where they caused extensive damage to many of its ancient sites. They were ousted from Palmyra in March by Syrian regime forces backed by Russia.

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Dec 092016
 
 December 9, 2016  Posted by at 9:42 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Arthur Rothstein Migratory fruit pickers’ camp in Yakima, Washington Jul 1936

Trumponomics Will Collapse Under a Mountain of Debt (Stockman)
Shiller CAPE Ratio Signals ‘Overvaluation On A Very Grand Scale’ (CNBC)
The American Dream Is Fading And May Be Very Hard To Revive (WSJ)
Europe’s Comfort Blanket Is Being Pulled Away (AEP)
Albert Edwards’ ‘Most Frightening Chart’ (MW)
Australia Property Market Mirrors Tulip Bubble, Says Former Bank CEO (ND)
Top Official In Italy’s M5S Increases Call For Referendum On Euro (G.)
It Is Almost Certain There Will Be Another Euro Crisis In 2017 (McWilliams)
OPEC Deal Won’t Be Enough to Drain Oil Stockpiles (BBG)
UK Sells Majority Stock In Gas Infrastructure To China, Qatar (Ind.)
UK Village Unleashes Anger With Syrian Refugees: £600 Worth Of Jumpers (Ind.)
Relations With Ankara Sour As Turkey Disputes Greek Sovereignty (Kath.)
Electric Cars Are Only As Clean As Their Power Supply (G.)

 

 

Right back to the poisoned chalice I wrote about on the morning of election day.

Trumponomics Will Collapse Under a Mountain of Debt (Stockman)

Financial markets are heading straight into a perfect storm of central bank failure, bond market carnage, a worldwide recession and a spectacular fiscal bloodbath in Washington. Investors should be heading for the hills with all deliberate speed. What is going to stop Trumponomics cold is debt — roughly $64 trillion of it. That’s what is crushing the American economy, and until the mechanics of its relentless growth are stopped and reversed, the odds of achieving and sustaining the 3–4% real economic growth that Trump’s economics team is yapping about is somewhere between slim and none. Here’s the newsflash. The nation’s monumental debt problem wasn’t newly created by the Obama Administration or the fact that Nancy Pelosi never met a spending program she couldn’t embrace.

The last eight years have surely made the problem far worse and the Democrats are culpable without question. But quite frankly the debt problem is a thoroughly bipartisan creation that is completely immune to the fact that the White House and both sides of Capitol Hill are now under GOP control. In fact, the nation’s debt affliction actually goes back to August 1971 when Nixon closed the gold window and launched the world on the current destructive experiment with massive central bank driven credit expansion. However, it was after 1980 that the wraps really started coming off the debt monster that was spawned by the world’s unshackled central banks. In that context, Paul Volcker was the last honest central banker, and with Ronald Reagan’s acquiescence he did break the back of the virulent commodity and consumer goods inflation that had been unleashed by his immediate predecessors during the 1970s.

Yet Volcker’s great handiwork was for naught because of two other developments – the breakdown of fiscal rectitude and the final destruction of sound money by Alan Greenspan – that also occurred on the Gipper’s watch. In fact, the gigantic Reagan deficits — which nearly tripled the national debt from $930 billion to $2.7 trillion during his eight years in office — is exactly what led Greenspan to crank up the printing press at the Fed after the stock market crash in October 1987.

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What Stockman said, but now in a graph.

Shiller CAPE Ratio Signals ‘Overvaluation On A Very Grand Scale’ (CNBC)

While the S&P 500 is reaching all-time highs on optimism over Donald Trump’s economic agenda, some Wall Street strategists are increasingly worried about a widely followed valuation measure that’s reached levels that preceded most of the major market crashes of the last 100 years. “The cyclically adjusted P/E (CAPE), a valuation measure created by economist Robert Shiller now stands over 27 and has been exceeded only in the 1929 mania, the 2000 tech mania and the 2007 housing and stock bubble,” Alan Newman wrote in his Stock Market Crosscurrents letter at the end of November. Newman said even if the market’s earnings increase by 10% under Trump’s policies “we’re still dealing with the same picture,.”

The Shiller “cyclically adjusted price-to-earnings ratio” (CAPE) is calculated using price divided by the index’s average historical 10-year earnings, adjusted for inflation. Yale economics professor Robert Shiller’s research found future 10-year stock market returns were negatively correlated to high CAPE ratio readings on a relative basis. He won the Nobel Prize in economics in 2013 for his work on stock market inefficiency and valuations.

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Barely half of US 30-year-olds earn more than their parents did at that age..

The American Dream Is Fading And May Be Very Hard To Revive (WSJ)

Barely half of 30-year-olds earn more than their parents did at a similar age, a research team found, an enormous decline from the early 1970s when the incomes of nearly all offspring outpaced their parents. Even rapid economic growth won’t do much to reverse the trend. Economists and sociologists from Stanford, Harvard and the University of California set out to measure the strength of what they define as the American Dream, and found the dream was fading. They identified the income of 30-year-olds starting in 1970, using tax and census data, and compared it with the earnings of their parents when they were about the same age. In 1970, 92% of American 30-year-olds earned more than their parents did at a similar age, they found. In 2014, that number fell to 51%.

“My parents thought that one thing about America is that their kids could do better than they were able to do,” said Raj Chetty, a prominent Stanford University economist who emigrated from India at age 9 and is part of the research team. “That was important in my parents’ decision to come here.” Although there are many definitions of the American Dream—the freedom to speak your mind, for instance, or the ability to rise from poverty to wealth—the economists chose a measure that they said was possible to define precisely. The percentage of young adults earning more than their parents dropped precipitously from 1970 to about 1992, to 58%, found Mr. Chetty et al.

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Draghi says two or more completely contradictory things all in one breath. It’s what they pay him the big bucks for.

Europe’s Comfort Blanket Is Being Pulled Away (AEP)

The long-feared moment of bond tapering in the eurozone has arrived. The comfort blanket is being pulled away – gently – for the first time since the region first crashed into a debt crisis. The ECB has tried to cushion the blow with dovish rhetoric and a glacially slow exit but there is no denying that monetary policy has reached a critical turning point. “The ECB has delivered an unwelcome surprise,” said Luigi Speranza from BNP Paribas. Europe’s incipient tightening has begun just as the US Federal Reserve prepares to raise interest rate next week, probably the first of several rises over the next twelve months as the incoming Trump administration launches a fiscal boom. It comes as China takes action to choke off a property bubble and rein in shadow banking. The world’s three big monetary blocs will all be draining liquidity at the same time.

The ECB will wind down quantitative easing from €80bn to €60bn a month when the current programme expires in March. Societe Generale says that this is just the start, predicting more tapering of €10bn in June, and then further cuts of €10bn at each meeting – a truly drastic outlook. Doves at the ECB warned that it would be dangerous to start any tapering at this delicate juncture, given that there has been no flicker of life in core inflation – still stuck at 0.8pc – and given that imported monetary tightening from the US has already led to a doubling of Italian 10-year yields over the last three months. The doves were over-ruled. It is clear that a German-led bloc on the ECB’s governing council blocked efforts to roll over the existing QE structure for another six months.

Bond purchases will carry on for longer instead. The new €60bn regime will run for nine months until the end of 2017. The ultimate stock of ECB bonds will be higher. You could call it a compromise. But despite appearances – and logical inference – these are not an equivalent forms of stimulus. The stormy saga of bond tapering by the Fed shows that investors react more to the monthly “flow” of QE than they do to the “stock” of bonds held – the balance sheet syndrome that looms large in the theoretical models of central banks. [..] Mario Draghi, the ECB’s president, was at pains to insist that there is no tightening whatsoever coming next year. “The presence of the ECB on the markets will be there for a long time. The key message is that there is no tapering in sight,” he said. Nothing is on auto-pilot and the volume of QE could rise again if need be. “It can go back to €80bn,” he said.

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“..a ghoulish quest to harvest bad news with a forceful sweep of my scythe..”

Albert Edwards’ ‘Most Frightening Chart’ (MW)

Albert Edwards, a global strategist at Société Générale, has been steadily beating the doomsday drum for decades. But despite the perma-bear’s repeated warnings about an impending economic disaster, investors are still likely to take notice when he gleefully shares the “most frightening chart” he’s seen in a while — especially when the stupendous postelection rally in U.S. stocks has stoked fears that a correction might be just around the corner. “I sometimes feel like ‘The Grim Reaper,’ scouring the research savannah in a ghoulish quest to harvest bad news with a forceful sweep of my scythe. Imagine then my perverse delight when our credit team produced what is one of the scariest charts I have seen for a very long time,” writes Edwards in his report. The chart by Guy Stear, head of emerging markets and credit research at Société Générale, shows credit spreads holding steady even as political uncertainty spikes to an unprecedented level.

According to Edwards, that cognitive dissonance is all wrong. “Markets shrugged off the Brexit vote in a couple of days. They shrugged off Donald Trump’s election in a single day. They shrugged off the Italian referendum result in a couple of hours. Heck, in this mood they would shrug off an alien invasion of planet Earth,” he said. “But global political risk is now at such elevated levels that investors must surely be on another planet.” The graph is based on the economic policy uncertainty index developed by three U.S. professors — Scott Baker, Nick Bloom and Steven Davis. This is the original chart that shows the EPU index at 282, significantly above 201 in 2008 and 218 in 2011, two previous periods of panic:

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Really?: “If the economy tracks along okay, it might turn out that this thing sorts itself out.”

Australia Property Market Mirrors Tulip Bubble, Says Former Bank CEO (ND)

Australia’s property market now mirrors one of the worst speculative manias in human history, according to a former Commonwealth Bank CEO. In a televised interview that drew little media attention, David Murray warned that the entire economy is “vulnerable” because of overvalued house prices in Sydney and Melbourne. “All the signs of a bubble are there. Many of the signs are the same as the Dutch tulips,” Mr Murray told Sky News on December 1. Starting in 1634, the Dutch bid up the price of tulip bulbs to extraordinarily high levels. Then, in 1637, the price collapsed, turning the craze into a byword for speculative insanity. Since 2009, Sydney dwelling prices have risen by 95% and Melbourne by 85%, according to CoreLogic, a prominent property analysis firm.

Mr Murray, who chaired a recent inquiry into the health of Australia’s financial sector, said we may yet avoid a Dutch-style price plunge. It is a risk, not a certainty. “If the economy tracks along okay, it might turn out that this thing sorts itself out. But when those risks are there, something needs to be done about it in a regulatory sense, and the Reserve Bank and APRA need to stay on it.” In recent years, APRA has imposed tougher lending policies on the big banks, including forcing them to hold more capital as a buffer against mortgage defaults. This was a recommendation made by Mr Murray during his financial sector review. The former bank boss has been warning of a property bubble since at least last year.

The fact that prices in Melbourne and Sydney have not corrected already is a further cause for concern, he said in his latest interview. “When we get a momentum in a market like this, when you get these self-amplifying price spirals, the fact they keep going on and on longer than expected is another sign that it’s not very healthy.” The crash, if it eventuates, would be triggered by a large number of landlords being forced to sell their investment properties all at once, thereby driving down prices, Mr Murray said. “We have more investors in the market than we’ve had historically and those investors typically, even people on lower incomes, own multiple properties and those properties are often collateralised in the system. So they’re the people who become forced sellers, and that’s the risk to the system.”

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Now President Mattarella is rumored to have asked Renzi to form a new government?!

Top Official In Italy’s M5S Increases Call For Referendum On Euro (G.)

A top official in the Italian anti-establishment Five Star Movement (M5S) is ratcheting up his party’s call for a referendum on the euro, signalling that Italy’s possible exit from the single currency could become a central issue in the next election. Alessandro Di Battista, 38, who is a prime contender to represent M5S in the next poll, said in an interview with German newspaper Die Welt that he did not support an exit from the EU but did support a referendum on the euro. “The euro and Europe are not the same thing. We only want for Italians to decide on the currency,” he said. Asked whether the party had considered the repercussions of leaving the euro, which most economists believe would carry big risks for Italy and the global markets, Di Battista said he “understood well the consequences of the introduction of the euro”.

The single currency, he said, had shrunk Italians’ buying power and earnings and caused higher unemployment and “social deprivation”. “If Europe does not want to implode you must accept that you can not go on like this,” he said. M5S’s opposition to the euro is not new, but the remarks are important in the wake of the departure of the centre-left prime minister Matteo Renzi, who submitted his resignation to Sergio Mattarella, the Italian president, on Wednesday evening. Mattarella is meeting the leaders of all the major political parties over the next few days in the hope they can agree on an interim prime minister. Renzi resigned after he was trounced in a referendum on Sunday, with nearly 60% of Italians opposing constitutional reforms he backed. Even if the parties agree on the next prime minister an early election is expected to be called in 2017.

[..] The chances of M5S winning the next election are fairly strong, according to most analysts. But its ability to hold a referendum would depend on whether the party could win strong majorities in both chambers of parliament. That rests on the fate of a controversial electoral law that is under legal review and will dictate how parliamentary seats will be allocated in the next election. Italy’s constitutional court is due to rule on the electoral law on 24 January. Even if M5S wins the next election, Italy’s exit from the euro would be complicated. Italy’s constitution sets a high threshold for the country to abandon an international treaty via a popular vote. M5S would have to pass an amendment before calling a referendum, which would then require winning two-thirds majorities in both chambers of parliament. Even if a referendum passed, the issue could come up for review by the constitutional court.

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Oh, no, not almost.

It Is Almost Certain There Will Be Another Euro Crisis In 2017 (McWilliams)

It is almost certain that there will be another euro crisis in 2017. The last time we had a euro crisis, the focus of attention was Greece; today the vortex is Italy. Italy is not Greece. Italy is the third-largest economy in the Eurozone. Italy is the second-largest manufacturing nation in the EU after Germany. Italy is the largest debtor in Europe. The third-largest Italian bank is irredeemably bankrupt. Italy has no government and the people who are likely to win the next election want to take Italy out of the euro and replace the euro with their own currency, the lira. These are the facts. Our Finance Minister has said there is no problem in the Eurozone. I really don’t know what planet he is living on. Unfortunately for the EU, if Greece was a tricky issue to deal with, Italy is — in economic terms — a massive Greece.

Unlike Greece when it was going bust, Italy can’t be patronised, isolated and vilified by the likes of Slovakia, Finland and – shamefully – our own Government. Italy is a country of close to 60 million people and unlike the British, who were always semi-detached Europeans, the Italians are founding members of the EU and original signatories of the Treaty of Rome, which is 60 years old in March. By March, it is likely that Marine Le Pen will be the frontrunner in the French presidential election. Could she win? Of course she could. And if she wins, the euro is toast. There is already a massive capital flight from Italy. This flight of money will extend to France in the months ahead. The euro is the problem and if the EU wants to save itself, it may have to abandon the euro.

Quite what that looks like is anyone’s guess, but here are the political facts: the two main Italian opposition parties, the people who won on Sunday, want Italy to hold a referendum on leaving the euro. Furthermore, Le Pen has explicitly stated that the day she wins, if she does, she will pull France out of the euro and reinstate the French franc. Le Pen currently has 40pc of the electorate. All she needs is the same type of momentum that propelled Brexit, Donald Trump, and the vote in Italy, where the government lost — not by a few%, but by a whopping 60pc to 40pc.

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Not even close.

OPEC Deal Won’t Be Enough to Drain Oil Stockpiles (BBG)

OPEC is likely to bring the oil market into balance by the middle of next year, but its production cut looks set to fall short of its stated goal of draining the stockpiles that are depressing prices. The oil market will rebalance “toward the middle of next year,” according to Nigeria’s Minister of State for Petroleum Emmanuel Kachikwu, bringing an end to more than three years when supply exceeded demand. However, Bloomberg News calculations based on OPEC data show that across the whole of 2017 there will be little overall reduction in record oil inventories – even if the group convinces non-members to join supply curbs at a meeting on Saturday. “Even with 100% compliance from both OPEC and non-OPEC producers global stocks are unlikely to fall in the first half of 2017,” said Tamas Varga at PVM Oil Associates in London. “That should keep oil prices in check.”

Crude prices could rise to $60 to $70 a barrel if the OPEC succeeds in bring inventories back to a normal level, Venezuelan Oil Minister Eulogio del Pino said last week, echoing a widely held view within the group, from Saudi Arabia to Iran. The portents for achieving this are mixed. OPEC’s track record shows the group only delivers 80% of promised cuts. While Russia has pledged to come to the party and lower output by 300,000 barrels a day in the first half of 2017, other non-OPEC producers, such as Mexico, Azerbaijan and Colombia, are likely to dress up involuntary production declines, already factored in by traders, as cuts. That scenario would leave largely unchanged the 300 million-barrel global stockpile surplus Del Pino and his colleagues are targeting.

OPEC has said its agreement will accelerate the decline of global stockpiles and an optimistic Bloomberg scenario shows the call on the group’s supply exceeding its output by 1.2 million barrels a day in third quarter. That depends on full compliance by OPEC members and for Russia to make good on its pledge, even as other non-OPEC producers make little contribution. The analysis of the market re-balancing by Bloomberg News is based on OPEC’s own estimates and projections of crude supply and demand adjusted for potential scenarios of cooperation from Russia and other non-OPEC countries. Other consultancies and agencies have different views. The International Energy Agency expects the re-balancing will happen early next year, while consultants at Rystad Energy expect a 1.26 million barrels-a-day deficit in the first quarter of next year if Russia is the only non-OPEC country to join the effort.

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You should take your government to court for this, guys. Let them prove this is beneficial to the country.

UK Sells Majority Stock In Gas Infrastructure To China, Qatar (Ind.)

National Grid has agreed to sell a majority stake in the UK’s gas pipe network to a team of investors, including the Chinese and Qatari states. The UK’s power network operator confirmed it is offloading the 61% shareholding to a consortium led by Australian investment bank Macquarie in a deal that values the unit at around £13.8bn. The division controls an important part of the country’s infrastructure, which delivers gas to 11 million homes through 82,000 miles of pipeline, and its sale will reignite concerns about the ownership of critical national assets by foreign investors. In August Theresa May said such deals would face tighter regulation as she gave the green light to the French and Chinese-funded Hinkley Point nuclear reactor.

National Grid said it would distribute a £150m voluntary payment to benefit British energy customers, while some £4bn of the proceeds will be returned to the company’s shareholders. It will keep 31% of the business but said it could potentially sell another 14% stake to the consortium under the terms of the deal. The sale, which is set to complete before the end of March next year, comes as part of a move to rebalance National Grid’s business towards higher growth areas and create extra value for shareholders. Dave Prentis, Unison union general secretary, said: “The experience of Thames Water customers when Macquarie was running the show should have been a red flag to ministers and regulators as how unsuitable this company is to be in charge of the UK’s gas supply. ”Macquarie has poor form already – in building up huge company debt, repatriating massive dividends to the southern hemisphere and charging customers more for a much poorer service.

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Lovely. And funny.

UK Village Unleashes Anger With Syrian Refugees: £600 Worth Of Jumpers (Ind.)

Last week I was in Torrington, North Devon, the village that’s been in the news because local people organised a massive collection of clothes and toys, for Syrian refugees placed in the area. Hundreds took part in the collection, and the local theatre was filled with provisions. It’s a story that would make any reasonable person look at those children’s faces and say, “What a bunch of do-gooding whining liberals, this is typical of the metropolitan elites in their cosy London boroughs such as North Devon.” North Devon obviously isn’t in Devon, because a law of modern life is that in the real neglected England that no one ever talks about, real proper people think all immigrants are thieving dogs, and they understand these matters because they’ve never seen a mango.

So it’s lucky the Daily Mail was able to report, “Fury as refugees are settled in Devon”, and another paper told us the refugees “faced anger” from the community. Because when the mayor, local theatre and hundreds of residents organised the collections, and arranged meetings to welcome the refugees, you could at first sight see this as motivated slightly by kindness. But these newspapers weren’t fooled, and understand it’s tradition in North Devon to express your anger by buying a room full of clothes and arranging them in a hall. Whatever you do when you’re in South Molton, don’t shout at a tractor driver to move out of your way, or they’ll lose their temper and collect six hundred pounds worth of jumpers and line them up in their kitchen, insisting you take the lot. Because a lifetime of working on the land makes them vicious.

Five national newspapers told the story of this rage against the refugees, all quoting one man who said: “We’re receiving 50 to 70 refugees, and 50 to 70 is a huge number in an area with restricted public transport.” There’s no doubt 50 to 70 would create a problem for local public transport, if all 50 to 70 of them were housed on one bus. The 7.15am from St Mary’s Church to Barnstaple would be a dreadful crush, so it’s no wonder this man was annoyed, and you can see why the newspapers regard him as the spokesman for the entire region, rather than the hundreds of people who provided all the clothes, who represent no one but themselves.

But it gets worse, because every newspaper covering the story told how refugee children “annoyed locals” by “relaxing playing basketball on a basketball court”. That’s just taking the piss, isn’t it? How dare children play sports in an area specially designated for that specific sport? They should reward our hospitality by playing sports in the wrong areas, such as basketball on a chess board, or skiing on a snooker table.

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Here’s an issue the EU does need to speak up about. But doesn’t.

Relations With Ankara Sour As Turkey Disputes Greek Sovereignty (Kath.)

Greek Foreign Minister Nikos Kotzias and his Turkish counterpart Mevlut Cavusoglu met Thursday on the sidelines of the annual OECD Summit in Hamburg amid escalating tensions brought on by the nationalistic rhetoric coming out of Ankara and Defense Minister Panos Kammenos’s reference to President Recep Tayyip Erdogan as a “ruthless dictator” who “at this moment is threatening our country.” “If they [Turkey] threaten our country, they will meet with our response and they will know that we shall not make concessions in the name of diplomacy on issues of national sovereignty,” Kammenos said in a radio interview Thursday, referring to recent remarks by Erdogan questioning the 1923 Treaty of Lausanne that set the borders between Greece and Turkey, as well as by other Turkish politicians who have disputed Greek sovereignty over a string of islets in the eastern Aegean.

The remarks by Kammenos, the leader of junior coalition partner Independent Greeks, followed strong statements by Turkey’s Deputy Parliament Speaker Tugrul Turkes, who described his country as the guarantor power of the whole of Cyprus, rather than just the breakaway state in the north, while a lawmaker of the opposition CHP, Tanju Ozcan, upped the ante even further, saying he would raise the Turkish flag on 18 Greek islands. “I will go to the islands and if need be I myself will raise the Turkish flag. Then I will fold the Greek one and send it to the Greek government with a courier,” he told the Turkish Parliament. The latest acrimonious rhetoric comes as tensions also simmer over the outcome of Turkey’s extradition request for eight officers who landed in Greece in July in the aftermath of a botched coup attempt in the neighboring country.

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But ‘green’ sells, and delivers votes. Still: “Charging an electric car for 100 miles of travel could use about 30kwh – roughly the same amount of energy an average US home uses in three or four days.”

Electric Cars Are Only As Clean As Their Power Supply (G.)

Electric cars have never been closer to the mainstream, the market pushed ahead by California subsidies for electric car buyers, and a wide array of new models from established car firms such as Toyota and Chevy. Tesla’s focus on luxury, high-performance vehicles has also broadened their appeal; electric cars are no longer purely an environmental statement, but a tech status symbol too. Yet the “zero emissions” claim grates on some experts, who have continued to argue over whether electric cars are really more environmentally friendly than gas guzzlers, once the manufacturing process for the vehicles and their batteries are taken into account.

Electric cars rely on regular charging from the local electricity network. The power plants providing that energy aren’t emission-free; even in California, 60% of electricity came from burning fossil fuels in 2015, while solar and wind together made up less than 14%. “I couldn’t bear to hear them say the words ‘zero emissions vehicle’ one more time,” says Joshua Graff Zivin, who advised one of California’s three main utilities, San Diego Gas & Electric, on electric cars. Graff Zivin is a professor of economics and public policy at the University of California, San Diego. [..] “All of the action is in the hourly,” says Graff Zivin. It’s not only the region that an electric vehicle plugs into that matters. The hour of the day is equally critical. “The cheapest power is not the greenest power.”

In California, the cheapest power is produced at night, mostly from natural gas, hydroelectric dams and nuclear. Night is when many people will charge their electric cars. However, the greenest power gets generated during the day, when solar power can feed the grid; solar doesn’t work in the dark, windmills stop spinning if there’s no wind and, in today’s grid, there is almost the capacity to store solar and wind-generated electricity to use later. Grid storage is slowly expanding, but most electricity has to be used as it is produced. Units of electricity also can’t be tagged according to where and how they were generated, so nobody can verify whether the electricity they use is from a sustainable source – unless they plug directly into their own solar panel or windmill.

[..] Graff Zivin, along with economics researchers Matthew Kotchen and Erin Mansur, waded into this contentious territory in a 2014 paper. Zivin concluded that a plug-in electric vehicle, such as the Nissan Leaf, always produces less carbon dioxide emissions than a hybrid electric- and gas-powered car – but only in selected regions that rely on less coal, like the western United States and Texas. Charging from the coal-dependent grid in the upper midwest of the US at night could generate more emissions than an average gasoline car. And, in some US regions, plugging in at different times of day could even double an electric car’s emissions impact. Charging an electric car for 100 miles of travel could use about 30kwh – roughly the same amount of energy an average US home uses in three or four days.

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Dec 042016
 
 December 4, 2016  Posted by at 9:44 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Wyland Stanley “J.A. Herzog Pontiac, 17th & Valencia Sts., San Francisco.” 1936

Trump’s Unhappy Fate: A Financial Crisis Far Worse Than The Last (Rickards)
Trump’s Appointments (Paul Craig Roberts)
Petition To Reverse US Election Result Becomes Most Popular In History (Ind.)
Jill Stein Supporters Drop Pennsylvania Recount Suit (WSJ)
Jill Stein To Pursue Pennsylvania Recount Petition In Federal Court (R.)
Brent Caps Biggest Weekly Advance Since 2009 on OPEC Agreement (BBG)
Steve Keen, Michael Hudson Unpick Historical Path to Global Recovery (MH)
The Italian Trouble for Greek Debt (BBG)
Will 2017 See End Of US Neocons’ Promotion Of Chaos Theory? (RT)
Late Is Enough: On Thomas Friedman’s New Book (Matt Taibbi)

 

 

As I said on election day in America is The Poisoned Chalice.

Trump’s Unhappy Fate: A Financial Crisis Far Worse Than The Last (Rickards)

As earthquake doesn’t care if you’re progressive or populist. It destroys your house all the same. Likewise a financial crisis is indifferent to a politician’s policy mix. Systemic crises proceed according to their own dynamic based on the array of agents in a system, and systemic scale. The tempo of recent crises in 1994, 1998, and 2008 says a crisis is likely soon. A new global financial panic will be one legacy of the Trump administration. It won’t be Trump’s fault, merely his misfortune. The equilibrium and value-at-risk models used by banks will not foresee the new panic. Those models are junk science relying as they do on notions of efficient markets, normally distributed risk, continuous liquidity, and a future that resembles the past. None of those hypotheses match reality.

Advances in behavioural psychology have demolished the idea of efficient markets. Data shows the degree distribution of risk is a power curve not a normal bell curve. Liquidity evaporates when most needed. Prices gap down; they do not move continuously. Each of the 1994, 1998, and 2008 crises was worse than the one before, and required more drastic intervention. The future does not resemble the past; it keeps getting worse. The standard models are in ruins. Recent model improvements that take into account so-called tail risk still fail to come to grips with systemic scale. The most catastrophic event possible in a complex system is an exponential function of scale. In plain language, if you double system size, you do not double risk; you increase it by a factor of five or more.

Since 2008, the largest banks in the world are larger in terms of gross assets, share of total deposits, and notional value of derivatives. Everything that was too-big-to-fail in 2008 is bigger and exponentially more dangerous today. The living wills and resolution authority of Dodd-Frank are entrances to gated communities. They seem imposing, but are a façade. They will do nothing to stop an angry mob. Increases in regulatory capital will not suffice. When a leveraged financial institution faces a liquidity panic, no amount of capital is enough. As boxing legend Mike Tyson mused, no plan survives the first punch in the face.

[..] What snowflake could precipitate the next financial panic? Deutsche Bank is an obvious candidate. Less obvious is a failure to deliver physical gold by a London bullion bank. That would expose the hyper-leveraged “paper gold” market for what it is. A natural disaster on the scale of Fukushima would do as well. Looming over these catalysts is a global dollar shortage, which has been limned by economists Claudio Borio and Hyun Song Shin at the Bank for International Settlements. The strong dollar could precipitate a wave of defaults on $9 trillion of dollar-denominated emerging markets corporate debt. Those defaults would make the 1994 Tequila Crisis look tame.

The 2008 crisis was truncated with tens of trillions of dollars of currency swaps, money printing, and rate cuts coordinated by central banks around the world. The next crisis will be beyond the scope of central banks to contain because they have failed to normalise either interest rates or their balance sheets since 2008. Central banks will be unable to pull another rabbit out of the hat; they are out of rabbits.

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Trump vs special interests. Why jump to conclusions?

Trump’s Appointments (Paul Craig Roberts)

We do not know what the appointments mean except, as Trump discovered once he confronted the task of forming a government, that there is no one but insiders to appoint. For the most part that is correct. Outsiders are a poor match for insiders who tend to eat them alive. Ronald Reagan’s California crew were a poor match for George H.W. Bush’s insiders. The Reagan part of the government had a hell of a time delivering results that Reagan wanted. Another limit on a president’s ability to form a government is Senate confirmation of presidential appointees. Whereas Congress is in Republican hands, Congress remains in the hands of special interests who will protect their agendas from hostile potential appointees. Therefore, although Trump does not face partisan opposition from Congress, he faces the power of special interests that fund congressional political campaigns.

[..] With Trump under heavy attack prior to his inauguration, he cannot afford drawn out confirmation fights and defeats. Does Trump’s choice of Steve Mnuchin as Treasury Secretary mean that Goldman Sachs will again be in charge of US economic policy? Possibly, but we do not know. We will have to wait and see. Mnuchin left Goldman Sachs 14 years ago. He has been making movies in Hollywood and started his own investment firm. Many people have worked for Goldman Sachs and the New York Banks who have become devastating critics of the banks. Read Nomi Prins’ books and visit Pam Martens website, Wall Street on Parade. My sometimes coauthor Dave Kranzler is a former Wall Streeter. Commentators are jumping to conclusions based on appointees past associations. Mnuchin was an early Trump supporter and chairman of Trump’s finance campaign.

He has Wall Street and investment experience. He should be an easy confirmation. For a president-elect under attack this is important. Will Mnuchin suppport Trump’s goal of bringing middle class jobs back to America? Is Trump himself sincere? We do not know. What we do know is that Trump attacked the fake “free trade” agreements that have stripped America of middle class jobs just as did Pat Buchanan and Ross Perot. We know that the Clintons made their fortune as agents of the 1%, the only ones who have profited from the offshoring of American jobs. Trump’s fortune is not based on jobs offshoring. Not every billionaire is an oligarch. Trump’s relation to the financial sector is one as a debtor. No doubt Trump and the banks have had unsatisfactory relationships. And Trump says he is a person who enjoys revenge.

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Not the Jill Stein petition. More the Soros one.

Petition To Reverse US Election Result Becomes Most Popular In History (Ind.)

A petition asking for the result of the US election to be reversed is now the most popular in the history of Change.org. The signatories – who total 4.6 million people – call on the Electoral College to stop Donald Trump from being President, which is a theoretically possible but never-before-attempted way of altering the result of the US election. Hillary Clinton won millions more votes than Donald Trump, but Mr Trump became President-elect because of the voting system. The petition is titled “Make Hillary Clinton President” and argues that because Ms Clinton won the popular vote she should be made President. It also argues that the President-elect is “unfit to serve”. With 4.6 million signatures, the petition has over two million more votes than the second largest campaign on the website. That was a campaign asking for the Yulin Dog Meat Festival to be shut down, which was begun three years ago.

The petition against Mr Trump was begun just after the election on 10 November. It was started by social worker Daniel Brezenoff. Signatures to the petition are based on the idea that it is still possible for the result of the election to be reversed. The Electoral College system requires that representatives of each state cast ballots to decide who will actually become the new President – those members of the college are supposed to vote for whoever won their state, but could theoretically change their mind. “On December 19, the Electors of the Electoral College will cast their ballots,” the petition writes. “If they all vote the way their states voted, Donald Trump will win. However, in 14 of the states in Trump’s column, they can vote for Hillary Clinton without any legal penalty if they choose.”

Since the petition has started, some legal proceedings have been launched to test the legal penalty in those other states. There has never really been any need to enforce them, since faithless electors make up only a tiny number of people, but activists are looking to encourage more people not to vote this year. The petition itself argues that the Electoral College should change its mind because of the results of the popular vote. “Hillary won the popular vote,” the description reads. “The only reason Trump “won” is because of the Electoral College.

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But wait, there’s more…

Jill Stein Supporters Drop Pennsylvania Recount Suit (WSJ)

Supporters of Green Party presidential candidate Jill Stein on Saturday withdrew a last-ditch lawsuit in Pennsylvania state court aimed at forcing a statewide ballot recount, another major setback in the effort to verify the votes in three states that provided President-elect Donald Trump his margin of victory. Ms. Stein’s campaign announced in a statement Saturday that the Pennsylvania lawsuit had been dropped after the court demanded that a $1 million bond be posted by the 100 Pennsylvania residents who brought the suit, which was backed by the campaign. Recounts will still proceed in a handful of Pennsylvania precincts, but it is far from the statewide recount that Ms. Stein initially was hoping for.

She is also pushing recounts in Wisconsin and Michigan after a prominent computer scientist laid out a case that the election results may have been hacked. Legal challenges have also been filed in state and federal court to halt those recount efforts as well. The decision also dashes the aspirations of some Democrats, who had hoped that enough irregularities or missing votes would be found across all three states to overturn the election results that saw Mr. Trump, the Republican candidate, prevail over Democrat Hillary Clinton. Mrs. Clinton would need to declared the winner in all three states to reverse the election results.

“The judge’s outrageous demand that voters pay such an exorbitant figure is a shameful, unacceptable barrier to democratic participation,” said Ms. Stein in the statement. “This is yet another sign that Pennsylvania’s antiquated election law is stacked against voters. By demanding a $1 million bond from voters yesterday, the court made clear it has no interest in giving a fair hearing to these voters’ legitimate concerns over the accuracy, security and fairness of an election tainted by suspicion.”

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…. straight to federal court.

Jill Stein To Pursue Pennsylvania Recount Petition In Federal Court (R.)

Green Party candidate Jill Stein late Saturday vowed to bring her fight for a recount of votes cast in Pennsylvania in the U.S. presidential election to federal court, after a state judge ordered her campaign to post a $1 million bond. “The Stein campaign will continue to fight for a statewide recount in Pennsylvania,” Jonathan Abady, lead counsel to Stein’s recount efforts, said in a statement. Saying it has become clear that “the state court system is so ill-equipped to address this problem,” the statement said “we must seek federal court intervention.” The Stein campaign said it will file for emergency relief in the Pennsylvania effort in federal court on Monday, “demanding a statewide recount on constitutional grounds.”

The bond was set by the Commonwealth Court of Pennsylvania a day after representatives of President-elect Donald Trump requested a $10 million bond, according to court papers. The court gave the petitioners until 5 p.m. local time on Monday to post the bond, but said it could modify the amount if shown good cause. Instead, Stein’s campaign withdrew. “Petitioners are regular citizens of ordinary means. They cannot afford to post the $1,000,000 bond required by the court,” wrote attorney Lawrence Otter, informing the court of the decision to withdraw.

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“The last time OPEC set a quota, members exceeded it for 20 of the 24 months before the cap was scrapped..”

Brent Caps Biggest Weekly Advance Since 2009 on OPEC Agreement (BBG)

Brent oil capped its biggest weekly gain since 2009 after OPEC approved its first supply cut in eight years, with attention now shifting to compliance with the deal and how other producers will react to a price rally. Futures closed at the highest in more than a year in London and New York. OPEC’s three largest producers – Saudi Arabia, Iraq and Iran – overcame discord to reach Wednesday’s pact to reduce the group’s output by 1.2 million barrels a day, while Russia pledged a cut of as much as 300,000. The accord ended the group’s pump-at-will policy started in 2014 aimed at protecting market share and driving out high-cost competitors such as shale. “Everyone wins, but U.S. shale producers are the big winners from the OPEC deal,” Francisco Blanch at Bank of America said.

“The agreement made sense purely on economic logic. OPEC wanted to end the price war.” OPEC set a collective output target at the lower end of the range outlined two months ago in Algiers, boosting prices and prompting predictions of a possible advance to $60 a barrel from Goldman Sachs and Morgan Stanley. Some analysts warned that the rally may encourage higher output from producers outside the group, including in the U.S. The last time OPEC set a quota, members exceeded it for 20 of the 24 months before the cap was scrapped at the end of 2015.

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Two of the finest in a long conversation. Here’s a tiny snippet of Hudson talking.

Steve Keen, Michael Hudson Unpick Historical Path to Global Recovery (MH)

Killing the Host will be published in German at the end of the month of November, and, basically, it’s a more popular version of The Bubble and Beyond. And it shows that when the financial sector takes over, it’s very much like a parasite in nature. And people think of parasites simply as taking the life blood of the host and draining the energy. But in order to do that, the parasite has to have an enzyme to take over the host’s brain. And the key thing in nature is they take over the brain, and they convince the host that the free luncher is actually part of the host’s own body, and even its baby to be protected. And that’s what the financial sector has done.

Classical economics was all about separating the rent-extracting sectors – landlords, monopolies, and finance – from the rest of the economy. And that was unearned income. It wasn’t necessary. And the whole idea of classical economics from Quesnay’s Tableau Economique to all the way through Adam Smith and John Stuart Mill was to look at the finance sector and the landlord sector and monopolies as unnecessary. You’re going to get rid of them. You’re going to tax away all the land’s rent or else nationalize the land. And you are going to have public enterprises as basic infrastructure so that they couldn’t be monopolized. Well, you had a revolution against classical economics in the 1890s and 1900s, and the national income now – accounts make it appear as if the financial sector and the real estate sector and the monopolies – oil and gas – are all contributing to GDP.

So a few months ago, you had the head of Goldman Sachs – Lloyd Blankfein – say, the Goldman Sachs managers are the most productive workers in the United States, because we make $22 million a year in salary, and we get bonuses. And that’s all considered as contributing to GDP. That’s the financial services that we’re providing $22 million per manager of financial services. Now what they don’t realize is that this $22 million per manager in that Goldman Sachs extracts money from the rest of the economy. It’s a zero-sum game. And instead of adding to the GDP, you should have – A subtraction. Yes, you should have – all of this is overhead – unnecessary. And since 2008, the 99% of the population in America, and I think in most of Europe, too, have seen their incomes go down. But the 1% have had their financial and real estate incomes go up so much more that there is an illusion of growth. And what’s been growing is the tumor, not the actual economic body.

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Italian debt is a threat to the entire eurozone, not just Greece.

The Italian Trouble for Greek Debt (BBG)

If the fallout for Sunday’s Italian referendum is bad for Italian bonds, it could well be worse for one of Europe’s star performers this year: Greece.Greek debt has tightened massively to German bonds in the past three months, while all other main European government securities have been widening. Growing confidence in Greek Prime Minister Alexis Tsipras’s willingness to conform to the Troika requirements on the latest bailout package, is behind this.

The pot of gold at the end of the rainbow would be inclusion into the ECB’s bond purchase program – Greece has long been excluded since it’s not rated investment grade. A shift in the rules would be a reward for budget discipline.This has looked until recently like a long shot, but a tectonic shift in attitude is underway. A recent piece of evidence for this is a remark from ECB policy maker Benoit Couere on Tuesday. He said that Greece can maintain a 3.5% primary budget surplus to GDP for years after the current bailout ends in 2018 – that is a major vote of confidence. Such recent Greek outperformance could easily unwind on a “no” vote on Italian constitutional reform. As Gadfly has argued, that could create serious problems not just for Italy, the world’s third-largest debtor, but also for other borrowers in the region.

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It’s all the US have done for decades.

Will 2017 See End Of US Neocons’ Promotion Of Chaos Theory? (RT)

Trump will hopefully be an assertive defender of US interests rather than an assertive meddler, says Oxford Crisis Research Institute Director Mark Almond.

RT: What obstacles remain preventing the UN from sending aid to Aleppo? Mark Almond: Obviously, there is still an area controlled by the rebels where there is fighting, and the rebels have not always been terribly concerned about discriminating between their enemies and aid workers. But it is quite bizarre that now, as you actually have people, tens of thousands of people, who are finally accessible, that the UN agencies are not actually rushing to help. Because, after all, these are people who are in need, and the weather is very bad in addition to all the suffering caused by the violence.

But I think we have to, I’m afraid, accept the fact that the UN is not composed of people from outside the normal world of politics – after all, the head of its aid agency is a former British conservative MP, [UN Special Envoy for Syria’s Senior Adviser] Jan Egeland is a Norwegian political activist who has been for a long time very critical of Russia. So, we are talking of people who do have a political past, even if they are now presented as being somehow the representatives of global charity or global concern. But I am afraid they are politicians.

RT: Do you think the standoff in Aleppo will continue for much longer? Despite major gains by the Syrian Army, the rebels are reportedly refusing to surrender. Mark Almond: I think the remaining rebel forces are in a very difficult position, so unless something changes through some external intervention which would widen the wall and would be a very dangerous development. And I don’t see the US, either doing it itself or, for that matter, encouraging any of its friends to do it, like Turkey or Saudi Arabia, neither of which, I think, really has the stomach for such a fight. So, the likelihood is that the horrible conflict in Aleppo itself is grinding towards a conclusion. And that may also mean that in 2017 we can look towards trying to repair the international situation around Syria.

The new president of the US has said that he is much more prepared to offer realpolitik rather than an ideologically driven agenda to produce regime change [that], if necessary, [says]… “if we can’t have regime change, at least we can have chaos and, perhaps, out of that chaos, something good will come.” I think we’ve seen, really, over the last 25 years, from the chaos we helped produce in Afghanistan through to Syria today, that the chaos theory that the neocons in Washington have promoted has actually bitten back. We’ve seen terrorist attacks in Western Europe, we’ve seen [them] in the US. I think Trump recognizes that even though he is going to be a very assertive defender of American interests, he is not going to be an assertive meddler. And that does offer some hope.

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Friedman’s easy fodder.

Late Is Enough: On Thomas Friedman’s New Book (Matt Taibbi)

“The folksiness will irk some critics … But criticizing Friedman for humanizing and boiling down big topics is like complaining that Mick Jagger used sex to sell songs: It is what he does well.” –John Micklethwait, review of Thank You for Being Late, in The New York Times With apologies to Mr. Micklethwait, the hands that typed these lines implying Thomas Friedman is a Mick Jagger of letters should be chopped off and mailed to the singer’s doorstep in penance. Mick Jagger could excite the world in one note, while Thomas Friedman needs 461 pages to say, “Shit happens.” Joan of Arc and Charles Manson had more in common. Thomas Friedman was once a man of great influence. His columns were must-reads for every senator and congressperson.

He helped spread the globalization gospel and push us into war in Iraq. But he’s destined now to be more famous as a literary figure. No modern writer has been lampooned more. Hundreds if not thousands of man-hours have been spent teaching robots to produce automated Friedman-prose, in what collectively is a half-vicious, half-loving tribute to a man who raised bad writing to the level of an art form. We will remember Friedman for interviewing 76% of the world’s taxi drivers, for predicting “the next six months will be critical” on 14 occasions over two and a half years (birthing the neologism, “the Friedman unit”), and for his unmatched, God-given ability to write nonsensical metaphors, like his classic “rule of holes”: “When you’re in one, stop digging. When you’re in three, bring a lot of shovels.”

Friedman’s great anti-gift is his ability to use many words when only a few are necessary. He became famous as a newspaper columnist for taking simple one-sentence observations like, “Wow, everyone has a cell phone these days,” and blowing them out into furious 850-word trash-fires of mismatched imagery and circular argument. The double-axel version of this feat was to then rewrite that same column over and over again, in the same newspaper, only piling on more incongruous imagery and skewing rhetoric to further stoke that one thought into an even higher and angrier fire.

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Dec 022016
 
 December 2, 2016  Posted by at 10:34 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Harris&Ewing Washington, DC, Storm damage..” Between 1913 and 1918

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (BBG)
What’s Causing The Fire Sale In The Bond Market (CNBC)
Donald Trump Promises to Usher In New ‘Industrial Revolution’ (WSJ)
Trump Will End Growth-Zapping Fiscal Austerity – McCulley (CNBC)
China’s Central Bank Is Facing a Major New Headache (BBG)
Rural China Banks With $4 Trillion Assets Face Debt Test (BBG)
Obama Set To Block Chinese Takeover Of German Semiconductor Supplier (BBG)
QE Infinity Eyed In Europe If Renzi Loses Crucial Italian Referendum (CNBC)
December 4 Could Trigger the “Most Violent Economic Shock in History” (IM)
How Putin, Khamenei And Saudi Prince Got OPEC Deal Done (R.)
Russian Oil Output Near Post-Soviet Record as It Prepares to Cut (BBG)
US Veterans Arrive At Pipeline Protest Camp In North Dakota (R.)
Joy As China Shelves Plans To Dam ‘Angry River’ (G.)
World’s Growing Inequality Is ‘Ticking Time Bomb’: Nobel Laureate Yunus (R.)
This Is The Most Dangerous Time For Our Planet (Stephen Hawking)

 

 

Things get crowded, it’s inevitable. And much more so in manipulated markets.

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (BBG)

The 30-year-old bull market in bonds looks to be ending with a bang. The Bloomberg Barclays Global Aggregate Total Return Index lost 4% in November, the deepest slump since the gauge’s inception in 1990. Treasuries extended declines Thursday along with European bonds on speculation that the ECB will consider sending a signal that stimulus will eventually end. The reflation trade has been driving markets since Donald Trump’s election victory due to his promises of tax cuts and $1 trillion in infrastructure spending. Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to raise interest rates again – and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may buy less sovereign debt going forward.

Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to records. “The market has moved with remarkable swiftness to price in the anticipated reflationary impact of a Trump administration,” said Matthew Cairns, a strategist at Rabobank International in London. “This has, in turn, prompted a notable rotation out of fixed income and into equities.” Still, Cairns cautioned the moves are “remarkable given the distinct lack of clarity as regards what policies the president-elect will actually pursue.” November’s rout wiped a record $1.7 trillion from the global index’s value in a month that saw world equity markets’ capitalization climb $635 billion.

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Eevrybody’s been on the same side of the boat for too long.

What’s Causing The Fire Sale In The Bond Market (CNBC)

There’s a fire sale in the bond market, and the November jobs report could make it burn even hotter. The wild move came amid speculation that Friday’s employment report could be better-than-expected and drive interest rates even higher. Interest rates surged Thursday, with the 10-year yield spiking as much as 12 basis points at its peak, to 2.49%, the highest yield since June 2015. Yields move inversely to prices and rates snapped higher across the whole yield curve. The 2-year pressed up against 1.17% and the 30-year rose to as high as 3.15%. In afternoon trading, some of the selling subsided, and the 10-year yield slipped back to just under 2.44%, but 2.50 is being watched as the next psychological line in the sand.

“In order to stay above 2.50, it’s got to be a really good number. The way we’re going, it’s like an unhinged market. It’s also going to be counterproductive for things down the road. This is not a healthy adjustment in rates. There’s going to be some losses on this,” said George Goncalves at Nomura. The 10-year yield affects consumer loans especially home mortgage rates, which have already risen near 4%, slowing borrowing activity. The 2-year is the rate most closely watched as a signal about the market’s expectation for Fed rate activity. The Fed is expected to hike rates Dec. 14 but traders have been speculating a stronger economy could force it into a faster hiking cycle next year.

Strategists say Thursday’s rate spike was driven by a combination of factors and at the same time inexplicable in its scope. The overriding themes are that the world is moving to a higher interest rate environment and for the first time in years, there could be inflation. OPEC’s deal to cut production Wednesday, drove oil prices 15% higher in just two days, ramping up inflation expectations that already had been on the rise.

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“There is no global anthem, no global currency..”

Donald Trump Promises to Usher In New ‘Industrial Revolution’ (WSJ)

President-elect Donald Trump on Thursday said his administration would usher in a new “Industrial Revolution,” one of numerous promises he made in Cincinnati as he began a nationwide “Thank You” tour following his Nov. 8 election. Mr. Trump used the 53-minute speech, the first of its kind since he became president-elect, to reflect on his victory but also to outline a number of goals, many of them lofty, for his term as president. The speech was more than just thematic, however. He said for the first time that on Monday he would announce that he was nominating Ret. Gen. James Mattis as his first secretary of defense. Mr. Trump promised sweeping changes to trade policy, national security, infrastructure, military spending and immigration. He said he wanted to work with Democrats but said he could get the work done without them, even without his supporters.

“Now that you put me in this position, even if you don’t help me one bit, I’m going to get it done,” he said. “Don’t worry.” The Cincinnati rally resembled, in some ways, the campaign rallies he held for months as his candidacy gained steam during the year. There were chants of “U.S.A.,” and vendors sold Trump campaign memorabilia. But there was one notable difference: with the election over, the crowd was far smaller[..] During his speech, he stuck to many of his campaign promises. He said a wall would be built along the U.S.-Mexico border. He said his administration would “repeal and replace” the Affordable Care Act. He said the Trump administration would seek plans and deals that benefited Americans first and not get duped into deals with other countries. “There is no global anthem, no global currency,” he said. “We pledge allegiance to one flag, and that flag is the American flag.”

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It’ll fail. You can’t ‘make’ growth.

Trump Will End Growth-Zapping Fiscal Austerity – McCulley (CNBC)

Economist Paul McCulley told CNBC on Thursday he’s had a “big ax to grind” with Washington for years over the need for more deficit spending, and it appears Republican Donald Trump may actually be the one to deliver. The stock market rally since Trump won the presidential election has been reflecting that notion, argued McCulley, who said he voted for Democrat Hillary Clinton. “The market is essentially celebrating the end of fiscal austerity. And it just happens to be a vehicle of Mr. Trump. But the end of fiscal austerity is the key economic issue.” “My big ax to grind in recent years — not months but years — is that we needed to have more fiscal policy expansion, because we’re in a liquidity trap,” said McCulley, former chief economist at Pimco. He said too much responsibility has fallen on the Federal Reserve for growing the economy.

“We needed some help with larger budget deficits.” “I’ve never had an issue with increasing the size of the budget deficit. I think it’s been too small. I have zero problem with increased public investment and funding it with deficits,” he said. “To the extent that Mr. Trump wants to do that, I think that is the right Keynesian policy.” McCulley was referring to the British economist John Maynard Keynes, who is often credited with the concept of deficit spending as a means of fiscal policy. “My biggest complaints for the person I voted for, Mrs. Clinton, is that she said, ‘I will not add a penny to the national debt.’ That was basically putting you in a straightjacket of fiscal austerity forever,” said McCulley, senior fellow in financial macroeconomics at Cornell Law School.

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Mundell: “..nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time..”

China’s Central Bank Is Facing a Major New Headache (BBG)

People’s Bank of China Governor Zhou Xiaochuan already has one policy headache with the currency falling to near an eight-year low. He could have an even bigger one next month. That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital outflow pressures that are already on the rise. If just 1% of China’s almost 1.4 billion people max out those limits, that’s an outflow of about $700 billion – more than the estimated $620 billion that Bloomberg Intelligence estimates indicate has already flowed out in the first 10 months of this year. Middle class and wealthy Chinese have been converting money into other currencies to protect themselves from devaluation, exacerbating downward pressure on the yuan.

Outflows could intensify if Federal Reserve interest-rate hikes fuel further dollar appreciation. That leaves Zhou in a bind identified by Nobel-prize winning economist Robert Mundell as the “impossible trinity” – a principle that dictates nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time. “At a moment like this, you have to compare two evils and pick the less-worse one,” said George Wu, who worked as a PBOC monetary policy official for 12 years. “Capital free flow may have to be abandoned in order to maintain a relatively stable currency rate.” China is moving further away from balance among trinity variables, at least temporarily, and “it may take a while before the situation stabilizes” for the yuan and capital outflows, said Wu, who’s now chief economist at Huarong Securities in Beijing.

[..] rather than raise borrowing costs to try to make domestic returns more attractive – China has added new restrictions on the flow of money across its borders. They include a pause on some foreign acquisitions and bigger administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News. China should cut intervention in foreign exchange markets while stepping up capital control, Yu Yongding, a former academic member of the PBOC’s monetary policy committee, said Friday at a conference in Beijing. Yuan internationalization shouldn’t be promoted too aggressively, said Yu, a senior research fellow at the Chinese Academy of Social Sciences.

About $1.5 trillion has exited the country since the beginning of 2015. While China still has the world’s largest foreign exchange stockpile, the hoard shrank in October to a five-year low of $3.12 trillion, PBOC data show. That means there’s less in the armory to battle depreciation if China’s famously frugal savers park more cash abroad. The outflow pressure rose in January as individuals socked away a record amount in domestic bank accounts denominated in other currencies. Household foreign deposits surged 8.1% to $97.4 billion, according to the central bank, for the biggest jump since it began tracking the data in 2011. Those holdings stood at $113.1 billion in October.

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The correct way to write this is: “Assets”.

Rural China Banks With $4 Trillion Assets Face Debt Test (BBG)

Bond investors are weighing rising risks that smaller Chinese banks will fail against growing signs the government will do anything to avoid a financial meltdown. A lender called Guiyang Rural Commercial Bank in the southwestern province of Guizhou sparked concern that risks among smaller lenders are spreading after its rating outlook was cut last month following a jump in overdue loans to 30% of the total. That compares with just 3% at the nation’s biggest lender. Short-term borrowing costs surged for the riskiest lenders including rural commercial banks, which hold 29 trillion yuan ($4.2 trillion) of assets, 13.4% of the total amount in China’s banking system.

Yet confidence in the government’s readiness to step in and offer support to struggling borrowers is rising as authorities allow a credit-fueled recovery of manufacturing activity, helping an official factory gauge match a post-2012 high last month. While 17 onshore public bonds defaulted in the first half of the year, there have since been only seven. The combination of government support and desperation for yield helps explain why Guiyang Rural was able to sell a junior bond at 4.7% last month, 1.7 %age points less than a similar offering last year. “Investors have yet to suffer losses from any bank capital securities, which adds to their confidence,” said He Xuanlai at Commerzbank.

“Smaller banks have a less diversified business profile and will likely get less support from the central government compared with bigger banks. Still, the base case is the government is still not ready to let any bank fail in a disorderly way.” That assumption has helped cut the extra yield investors demand to hold AA- rated five-year bank subordinated notes over AAA rated peers to a record low of 81 basis points, from 113 at the start of the year. There are some positive fundamentals. Rural banks are tied with the big five state-owned banks for the best Tier 1 capital ratio at 12%, according to an analysis by Natixis.

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And Germany says what?

Obama Set To Block Chinese Takeover Of German Semiconductor Supplier (BBG)

U.S. President Barack Obama is poised to block a Chinese company from buying Germany’s Aixtron, people familiar with the matter said, which would mark only the third time in more than a quarter century that the White House has rejected an investment by an overseas buyer as a national security risk. The president is expected Friday to uphold a recommendation by the Committee on Foreign Investment in the U.S. that the sale of the semiconductor-equipment supplier to China’s Grand Chip Investment should be stopped, according to the people, who asked not to be identified as the details aren’t public. Blocking the €670 million ($714 million) acquisition would mark the second time Obama has rejected a deal on national security grounds. The first was in 2012 when he stopped Chinese-owned Ralls Corp. from developing a wind farm near a Navy base in Oregon.

Before that, in 1990 then-president George H.W. Bush stopped a Chinese acquisition of MAMCO, an aircraft-parts maker. CFIUS reviews purchases of U.S. companies by foreign buyers and pays particular attention to purchases of technology, especially when it has defense applications. It has a say in the Aixtron deal because the company has a subsidiary in California and employs about 100 people in the U.S., where it generates about 20% of its sales. Aixtron technology can be used to produce light-emitting diodes, lasers, transistors, solar cells, among other products, and can have military applications in satellite communications and radar. Northrop Grumman, a major U.S. defense contractor, is among its customers, according to a Bloomberg supply chain analysis. “It will be extremely difficult for China’s state owned enterprises to do deals in the semiconductor industry looking forward,” said He Weiwen at the Center for China and Globalization.

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A No vote is also a vote against the ECB.

QE Infinity Eyed In Europe If Renzi Loses Crucial Italian Referendum (CNBC)

Dovish words from the ECB this week have fueled speculation of more accommodative monetary policy if Italians reject constitutional reforms this weekend, but one economist has told CNBC that it might not be that simple. “The market believes that we are basically in for QE infinity in Europe and that might be a stretch of the imagination,” said Elga Bartsch, Morgan Stanley’s global co-head of economics. While the Morgan Stanley economist acknowledged the rhetoric emanating from ECB President Mario Draghi this week arguably did imply there could be a so-called “Draghi put” in the case of a “no” vote in the referendum, she also posited that this view was somewhat simplistic.

“There was strong communication from him (Draghi) and a number of executive board members at the ECB, but at the same time, the views of the broader council and among the national central bank governors seem to be a little bit more mixed,” she explained. “For instance, the debate as to whether instead of extending by six months at €80 billion, just to do nine months of €60 billion doesn’t really want to go away,” Bartsch noted.

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“December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses.”

December 4 Could Trigger the “Most Violent Economic Shock in History” (IM)

The Five Star Movement (M5S) is Italy’s new populist political party. It’s anti-globalist, anti-euro, and vehemently anti-establishment. It doesn’t neatly fall into the left–right political paradigm. M5S has become the most popular political party in Italy. It blames the country’s chronic lack of growth on the euro currency. A large plurality of Italians agrees. M5S has promised to hold a vote to leave the euro and reinstate Italy’s old currency, the lira, as soon as it’s in power. That could be very soon. Given the chance, Italians probably would vote to return to the lira. If that happens, it would awaken a monetary volcano. The Financial Times recently put it this way: “An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.”

If the FT is even partially right, it means a stock market crash of historic proportions could be imminent. It could devastate anyone with a brokerage account. Here’s how it could all happen… On December 4, Italian Prime Minister Matteo Renzi’s current pro-EU government is holding a referendum on changing Italy’s constitution. In effect, a “Yes” vote is a vote of approval for Renzi’s government. A “No” vote is a chance for the average Italian to give the finger to EU bureaucrats in Brussels. Given the intense anger Italians feel right now, it’s very likely they’ll do just that. According to the latest polls, the “No” camp has 54% support and all of the momentum. Even prominent members of Renzi’s own party are defecting to the “No” side.

If the December 4 referendum fails, Renzi has promised to resign. Even if he doesn’t, the loss would politically castrate him. In all likelihood his government would collapse. (Italian governments have a short shelf life. There have been 63 since 1945. That’s almost a rate of a new government each year.) One way or another, M5S will come to power. It’s just a matter of when. If Renzi’s December 4 referendum fails—and it looks like it will—M5S will likely take over within months. Once it’s in power, M5S will hold a referendum on leaving the euro and returning to the lira. Italians will likely vote to leave. [..] December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses.

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Don’t be fooled: it’s all Putin, the one non-OPEC voice. And he’s playing the rest like so many fiddles.

How Putin, Khamenei And Saudi Prince Got OPEC Deal Done (R.)

[..] Heading into the meeting, the signs were not good. Oil markets went into reverse. Saudi Prince Mohammed had repeatedly demanded Iran participate in supply cuts. Saudi and Iranian OPEC negotiators had argued in circles in the run-up to the meeting. And, then, just a few days beforehand, Riyadh appeared back away from a deal, threatening to boost production if Iran failed to contribute cuts. But Putin established that the Saudis would shoulder the lion’s share of cuts, as long as Riyadh wasn’t seen to be making too large a concession to Iran. A deal was possible if Iran didn’t celebrate victory over the Saudis. A phone call between Putin and Iranian President Rouhani smoothed the way.

After the call, Rouhani and oil minister Bijan Zanganeh went to their supreme leader for approval, a source close to the Ayatollah said. “During the meeting, the leader Khamenei underlined the importance of sticking to Iran’s red line, which was not yielding to political pressures and not to accept any cut in Vienna,” the source said. “Zanganeh thoroughly explained his strategy … and got the leader’s approval. Also it was agreed that political lobbying was important, especially with Mr. Putin, and again the Leader approved it,” said the source. On Wednesday, the Saudis agreed to cut production heavily, taking “a big hit” in the words of energy minister Khalid al-Falih – while Iran was allowed to slightly boost output. Iran’s Zanganeh kept a low profile during the meeting, OPEC delegates said.

Zanganeh had already agreed the deal the night before, with Algeria helping mediate, and he was careful not to make a fuss about it. After the meeting, the usually combative Zanganeh avoided any comment that might be read as claiming victory over Riyadh. “We were firm,” he told state television. “The call between Rouhani and Putin played a major role … After the call, Russia backed the cut.”

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As you can see here, Putin even prepared for the cuts: all Russia needs to cut is that 2016 production surge. Which may have been untenable to begin with. And it catches out those who haven’t created a surge, but will have to cut anyway.

Russian Oil Output Near Post-Soviet Record as It Prepares to Cut (BBG)

Russia, the world’s largest energy exporter, held November output near a post-Soviet record , which is likely to remain a high-water mark in the near term after a pledge to cut production. Russian crude and condensate production averaged 11.21 million barrels a day in November, compared with a record 11.23 million barrels a day in October, according to the Energy Ministry’s CDU-TEK statistics unit. Russia promised to support a push by OPEC to reduce a global oil oversupply after the group agreed to cut production by 1.2 million barrels a day on Wednesday.

Energy Minister Alexander Novak pledged Russia would cut its own output by as much as 300,000 barrels a day, a stronger move than the previously preferred position of a freeze. Russia will make a gradual reduction over the first half of the year starting in January, Novak said Thursday. The reduction, supported by Russian oil producers, would be spread proportionally among companies, he said without providing further detail. Gazprom Neft and Novatek led Russian output growth in November compared with a year earlier, although both companies posted lower oil production than October, according to the data.

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“I bought a one-way ticket [..] Hopefully we can shut this down before Christmas.”

US Veterans Arrive At Pipeline Protest Camp In North Dakota (R.)

U.S. military veterans were arriving on Thursday at a camp to join thousands of activists braving snow and freezing temperatures to protest a pipeline project near a Native American reservation in North Dakota. However, other veterans in the state took exception to the efforts of the group organizing veterans to act as human shields for the protesters, saying the nature of the protests reflected poorly on the participants. Protesters have spent months rallying against plans to route the $3.8 billion Dakota Access Pipeline beneath a lake near the Standing Rock Sioux reservation, saying it poses a threat to water resources and sacred Native American sites.

State officials on Monday ordered activists to vacate the Oceti Sakowin camp, located on U.S. Army Corps of Engineers land near Cannon Ball, North Dakota, citing harsh weather conditions. Officials said on Wednesday however that they will not actively enforce the order. Matthew Crane, a 32-year-old Navy veteran who arrived three days ago, said the veterans joining the protest were “standing on the shoulders of Martin Luther King Jr and Gandhi” with the their plans to shield protesters. “I bought a one-way ticket,” he told Reuters as he worked to build a wooden shelter at the main camp. “Hopefully we can shut this down before Christmas.”

[..]Veterans Stand for Standing Rock, a contingent of more than 2,000 U.S. military veterans, intends to reach North Dakota by this weekend and form a human wall in front of police, protest organizers said on a Facebook page. The commissioner of the state’s Department of Veterans Affairs, who appeared at the West Fargo event, said he was worried about the involvement of individuals who have been in war situations. “We’re going to have veterans that we don’t know anything about coming to the state, war time veterans possibly with PTSD and other issues,” Lonnie Wangen told Reuters. “They’re going to be standing on the other side of concertina fence looking at our law enforcement and our (National) Guard, many of whom have served in war zones also,” he added. “We don’t want to see veterans facing down veterans.”

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“Thirty years ago there were 50,000 rivers in China; today there are less than 23,000.”

Joy As China Shelves Plans To Dam ‘Angry River’ (G.)

Environmentalists in China are celebrating after controversial plans to build a series of giant hydroelectric dams on the country’s last free-flowing river were shelved. Activists have spent more than a decade campaigning to protect the Nujiang, or “angry river”, from a cascade of dams, fearing they would displace tens of thousands of people and irreparably damage one of China’s most spectacular and bio-diverse regions. Since the start of this year, hopes had been building that Beijing would finally abandon plans to dam the 1,750-mile waterway, which snakes down from the Tibetan plateau through some of China’s most breathtaking scenery before entering Myanmar, Thailand and eventually flowing into the Andaman Sea.

On Friday, campaigners said that appears to have happened after China’s State Energy Administration published a policy roadmap for the next five years that contained no mention of building any hydroelectric dams on the Nu. “I am absolutely thrilled,” said Wang Yongchen, a Chinese conservationist and one of the most vocal opponents of the plans, which first surfaced in 2003. Wang, who has made 17 trips to the Nu region as part of her crusade to protect the river, said geologists, ecologists, sociologists and members of the public who had been part of the campaign could all take credit for halting the dams. “I think this is a triumph for Chinese civil society,” the Beijing-based activist said. Stephanie Jensen-Cormier, the China programme director for International Rivers, said environmentalists were “very happy and very excited” at what was a rare piece of good news for China’s notoriously stressed waterways.

“The state of rivers in China is so dismal. Thirty years ago there were 50,000 rivers in China; today there are less than 23,000. Rivers have completely disappeared. They have become polluted, they have become overused for agriculture and manufacturing,” she said. “So it is so exciting when a major river – which is a major river for Asia – is protected, at least where it flows in China.” Jensen-Cormier said the shelving of plans to dam the Nu – which is known as the Salween in Thailand and the Thanlwin in parts of Myanmar – represented “a great turning point for the efforts to preserve China’s rivers”. “It is a really good indication that China is starting to look at other ways of developing energy, and renewable energies especially, that mean they don’t have to sacrifice their remaining healthy river.”

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I don’t know, I think perhaps many people are born followers: “People are not born to be job seekers – they are entrepreneurs by nature..”

World’s Growing Inequality Is ‘Ticking Time Bomb’: Nobel Laureate Yunus (R.)

The widening gap between rich and poor around the world is a “ticking time bomb” threatening to explode into social and economic unrest if left unchecked, Nobel Peace laureate Muhammad Yunus said on Thursday. The banking and financial system has created a world of “the more money you have, the more I give you” while depriving the majority of the world’s population of wealth and an adequate standard of living, Yunus told the Thomson Reuters Foundation. “Wealth has become concentrated in just a few places in the world … It’s a ticking time bomb and a great danger to the world,” said the founder of the microfinance movement that provides small loans to people unable to access mainstream finance.

Yunus cited Donald Trump’s victory in the U.S. presidential election on Nov. 8 and Britain’s vote to leave the EU on June 23 as expressions of popular anger with ruling elites who have failed to stem the widening global wealth gap. A 2016 report by charity Oxfam showed that the wealth of the world’s richest 62 people has risen by 44% since 2010, with almost half of the super-rich living in the United States, while the wealth of the poorest 3.5 billion fell 41%. “This creates tension among people at the bottom (of the income ladder). They blame refugees and minorities – and unscrupulous politicians exploit this,” said Yunus [..]

To break free from an unequal financial system that disadvantages the poor, people should use their creative energy to become entrepreneurs themselves and spread wealth among a broader base of citizens, said Yunus. “People are not born to be job seekers – they are entrepreneurs by nature,” he said, adding that businesses that are focused more on doing social good than generating maximum profit can help to rectify economic and gender inequality. “If wealth comes to billions of people, this wealth will not come to the top one percent (of rich people), and it will not be easy to concentrate all the wealth in a few hands,” he said.

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It’s a little painful to see Hawking lose himself in a field of logic that is not his. He claims we should go to Mars, but then he says earth is our only planet. Isn’t it true that the time and energy dispensed in efforts to get to Mars might be better used in saving earth? Or are we going to claim we can do both?

This Is The Most Dangerous Time For Our Planet (Stephen Hawking)

As a theoretical physicist based in Cambridge, I have lived my life in an extraordinarily privileged bubble. Cambridge is an unusual town, centred around one of the world’s great universities. Within that town, the scientific community that I became part of in my 20s is even more rarefied. And within that scientific community, the small group of international theoretical physicists with whom I have spent my working life might sometimes be tempted to regard themselves as the pinnacle. In addition to this, with the celebrity that has come with my books, and the isolation imposed by my illness, I feel as though my ivory tower is getting taller. So the recent apparent rejection of the elites in both America and Britain is surely aimed at me, as much as anyone.

Whatever we might think about the decision by the British electorate to reject membership of the EU and by the American public to embrace Donald Trump as their next president, there is no doubt in the minds of commentators that this was a cry of anger by people who felt they had been abandoned by their leaders. It was, everyone seems to agree, the moment when the forgotten spoke, finding their voices to reject the advice and guidance of experts and the elite everywhere. I am no exception to this rule. I warned before the Brexit vote that it would damage scientific research in Britain, that a vote to leave would be a step backward, and the electorate – or at least a sufficiently significant proportion of it – took no more notice of me than any of the other political leaders, trade unionists, artists, scientists, businessmen and celebrities who all gave the same unheeded advice to the rest of the country. What matters now, far more than the choices made by these two electorates, is how the elites react.

Should we, in turn, reject these votes as outpourings of crude populism that fail to take account of the facts, and attempt to circumvent or circumscribe the choices that they represent? I would argue that this would be a terrible mistake. The concerns underlying these votes about the economic consequences of globalisation and accelerating technological change are absolutely understandable. The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining. This in turn will accelerate the already widening economic inequality around the world. The internet and the platforms that it makes possible allow very small groups of individuals to make enormous profits while employing very few people. This is inevitable, it is progress, but it is also socially destructive.

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Dec 012016
 
 December 1, 2016  Posted by at 10:40 am Finance Tagged with: , , , , , , , ,  2 Responses »
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NPC K & W Tire Co. Rainier truck, Washington, DC 1919

Oil Price Surges As OPEC Agrees First Output Cut Since 2008 (G.)
Preet Bharara to Stay On as Manhattan US Attorney Under Trump (WSJ)
Trump’s Tax Cut Means Billion-Dollar Writedowns for US Banks (BBG)
6 Million Americans Are Delinquent On Auto Loans (MW)
‘Classic Ponzi Scheme’: Sydney House Prices 12 Times Annual Income (SMH)
Melbourne Apartment Prices Drop by Most Since 2014 (BBG)
Greece Isn’t ‘Crying Wolf’ on Debt Relief (BBG)
Angry Mobs Lock Up Indian Bankers As Cash Chaos Soars (ZH)
The Pillars Of The New World Order (Pieraccini)
More Than 250,000 People Are Homeless In England (BBC)
Climate Change Will Stir ‘Unimaginable’ Refugee Crisis, Says Military (G.)

 

 

How long will the illusion last?

Oil Price Surges As OPEC Agrees First Output Cut Since 2008 (G.)

The price of oil has surged by 8% after the 14-nation cartel Opec agreed to its first cut in production in eight years. Confounding critics who said the club of oil-producing nations was too riven with political infighting to agree a deal, Opec announced it was trimming output by 1.2m barrels per day (bpd) from 1 January. The deal is contingent on securing the agreement of non-Opec producers to lower production by 600,000m barrels per day. But the Qatari oil minister, Mohammed bin Saleh al-Sada, said he was confident that the key non-Opec player – Russia – would sign up to a 300,000 bpd cut. Russia’s oil minister, Alexander Novak, welcomed the Opec move but said his country would only be able to cut production gradually due to “technical issues”. A meeting with non-Opec countries in Moscow on 9 December has been pencilled in.

Al-Sada said the deal was a great success and a “major step forward”, but the news that Saudi Arabia had effectively admitted defeat in its long-running attempt to drive US shale producers out of business was enough to send the price of crude sharply higher on the world’s commodity markets. Brent crude was trading at just over $50 a barrel following the completion of the Opec meeting in Vienna – an increase of almost $4 on the day. Saudi Arabia will bear the brunt of Opec’s production curbs, having agreed to a reduction in output of just under 500,000 bpd. Iraq has agreed to a 210,000 bpd cut, followed by the United Arab Emirates (-139,000), Kuwait (-131,000) and Venezuela (-95,000). Smaller countries are also reducing output, but Iran – which has only recently returned to the global oil market after the lifting of international sanctions – has been allowed to continue raising output.

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Let’s say that the jury’s out.

Preet Bharara to Stay On as Manhattan US Attorney Under Trump (WSJ)

Preet Bharara, the Manhattan U.S. attorney, has agreed to stay in his current role under the Trump administration, a surprise move that could signal the president-elect is serious about cracking down on Wall Street wrongdoing. Mr. Bharara, famous for his aggressive prosecutions of insider trading and corruption in New York, met with President-elect Donald Trump in Trump Tower on Wednesday. Afterward, Mr. Bharara told reporters that Mr. Trump asked whether he was prepared to remain as U.S. attorney, and Mr. Bharara said he was. “We had a good meeting,” Mr. Bharara said. “I agreed to stay on.” Since 2009, Mr. Bharara has served as the U.S. Attorney for the Southern District of New York, one of the highest-profile U.S. attorney’s offices in the country.

An appointee of President Barack Obama, he rose to prominence after pursuing dozens of insider-trading cases, leading to his moniker as the “sheriff of Wall Street.” The office is also seen as a leader in public corruption, cybercrime and terrorism prosecutions. His office has brought corruption charges against a dozen state lawmakers in New York and convicted the leaders of both legislative houses. Keeping Mr. Bharara appears to be at odds with other picks Mr. Trump has made. Despite campaigning against Wall Street excesses and the largest banks, Mr. Trump has tapped Wall Street investors for key positions in his cabinet, including a former Goldman Sachs executive, Steven Mnuchin, for Treasury Secretary and a billionaire private-equity investor, Wilbur Ross, to run the Commerce Department.

Partly as a result, financial services executives have quickly warmed to the prospect of a Trump presidency. His team has promised to roll back parts of the 2010 Dodd-Frank financial overhaul law enacted in the wake of the financial crisis, saying it has cut back on lending. But the decision to keep Mr. Bharara is likely to temper speculation that a Trump administration might focus less on corporate wrongdoing, white-collar lawyers said.

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“In one fell swoop, a significant part of their net worth goes up in smoke.”

Trump’s Tax Cut Means Billion-Dollar Writedowns for US Banks (BBG)

Donald Trump’s planned U.S. corporate tax cuts could translate to a big one-time earnings hit for many of the biggest U.S. banks, thanks to tax benefits they generated during the 2008 financial crisis. Citigroup would take the deepest earnings hit – perhaps $12 billion or more, according to recent estimates by the bank’s chief financial officer and several banking analysts. Others, including Bank of America and Wells Fargo could face multibillion-dollar writedowns. The banks might have to write down deferred tax assets, which often pile up when a company loses money and can’t immediately enjoy the tax benefits of those losses.

Any writedowns won’t have much impact on capital levels for the banks for regulatory purposes, and lower taxes will allow for higher earnings in the long run. But a one-time hit to earnings can make for a bruising quarter – and even year – for a bank’s results. “It’s a traumatic experience for companies with large” amounts of such assets, said Robert Willens, an independent tax and accounting expert in New York. “In one fell swoop, a significant part of their net worth goes up in smoke.” Deferred tax assets, as disclosed in securities filings, consist of benefits that companies expect to use to cut their future tax bills.

For most companies, the bulk of their value is tied to the current U.S. corporate tax rate of 35%. (Assets stemming from, say, state tax bills are tied to state tax rates.) The assets include unused credits for foreign taxes companies have paid; deductions they’re allowed to take in future years for prior losses; and future tax advantages that stem from so-called “timing differences” – or gaps between when income or expenses are reported to shareholders and to the Internal Revenue Service. Analysts say that calculating the value of assets associated with timing differences can be as much an art as a science.

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America without a car.

6 Million Americans Are Delinquent On Auto Loans (MW)

The number of subprime auto loans sinking into delinquency hit their highest level since 2010 in the third quarter, with roughly 6 million individuals at least 90 days late on their car-loan payments. It’s behavior much like that seen in the months heading into the 2007-2009 recession, according to data from Federal Reserve Bank of New York researchers. “The worsening in the delinquency rate of subprime auto loans is pronounced, with a notable increase during the past few years,” the researchers, led by Andrew Haughwout, said Wednesday in a blog on their Liberty Street Economics site. Weakness among the lowest-rated borrowers plays out against a robustly growing vehicle lending market.

Originations of auto loans have continued at a brisk pace over the past few years, with 2016 shaping up to be the strongest of any year within the NY Fed’s data, which began in 1999. It’s worth noting that the majority of auto loans are still performing well—it’s the subprime loans, those with associated credit scores below 620, that heavily influence the delinquency rates, the researchers said. Consequently, auto finance companies that specialize in subprime lending, as well as some banks with higher subprime exposure are likely to have experienced declining performance in their auto loan portfolios. Credit officials have stressed that the contagion risk to the financial system from poor auto loans isn’t like the risk posed when subprime mortgage lending pushed the U.S. into the Great Recession.

That’s in large part because repossessed cars are easier to resell than bank-owned homes. Cars can’t sink whole neighborhoods with foreclosure blight. Subprime mortgage lending remains at very low levels since the financial crisis. But as the financial system has recovered, subprime auto lending has ramped up with little hesitation. New auto loans to borrowers with credit scores below 660 have nearly tripled since the end of 2009. So far in 2016, about $50 billion of new auto loans per quarter have gone to those borrowers and about $30 billion each quarter has gone to borrowers with scores below 620, according to data the Fed provided, citing credit-score tracker Equifax.

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WHAT? “Property experts disagree furiously about whether prices are in a bubble..”

‘Classic Ponzi Scheme’: Sydney House Prices 12 Times Annual Income (SMH)

Sydney houses now cost 12 times the annual income, up from four times when Gough Whitlam was dismissed. As many first time buyers turn to the bank of mum and dad to top up their deposits, a new report “Parental guidance not recommended” warns Australians are being caught up in a classic “Ponzi scheme”. The report by economic consultancy LF Economics – which has previously sensationally warned of a “bloodbath” when Sydney’s property bubble bursts – estimates it will now take the average first time buyer in Sydney nine years to save a deposit, up from three years in 1975. Baby boomers, who have benefited from skyrocketing prices, are increasingly able to fast track their children’s path to property ownership by either stumping up part of the deposit or putting up their own homes as collateral.

LF Economics, founded by Lindsay David and Philip Soos, warns this may be helping a new generation to over-leverage into mortgages they can’t afford, leaving their parents’ homes exposed. “Unfortunately, this loan guarantee strategy in a rising housing market for securing ever-larger amounts of debt is essentially pyramid or Ponzi finance. This leaves many parents in a dangerous predicament should their children experience difficulties making loan payments, let alone defaulting and suffering foreclosure.” “In reality, many parents – the Baby Boomer cohort – are asset-rich but income-poor. The blunt fact is few parents have enough savings and other liquid assets on hand to meet their legal obligations without selling their home if their children default,” the report warns.

Property experts disagree furiously about whether prices are in a bubble and about the best measure of housing affordability. Treasury secretary John Fraser has said that Sydney house prices are in a “bubble”. But many economists remain wary of the term and point out that supply constraints and strong population growth will underpin prices, even if slower wages growth inhibits further price gains. LF Economics argues that price gains have outstripped the fundamental worth of properties. “Financial regulators have ignored the Ponzi lending practices by lenders, believing the RBA will have the adequate ability to bail them out at taxpayers’ expense the day this classic Ponzi lending scheme breaks down.”

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Bailout?

Melbourne Apartment Prices Drop by Most Since 2014 (BBG)

Apartment prices in Melbourne fell at the fastest pace in more than two years in November, reinforcing concerns about a looming oversupply of units in Australia’s second-largest city. The 3.2% month-on-month drop is the largest such decline since May 2014, according to figures from data provider CoreLogic Inc. This dragged down the overall increase in dwelling values across the nation’s state capitals to 0.2%, the smallest rise since March this year. Record low interest rates put in place by the Reserve Bank of Australia to help ease the economy’s shift away from mining investment and combat low inflation have helped to spur a housing boom in the nation’s biggest centers and the central bank has repeatedly voiced concern that apartment gluts are developing in central Melbourne and Brisbane.

“Risks around the projected large increases in supply in some inner-city apartment markets are coming to the fore,” the RBA said in its quarterly financial stability review in October. Shayne Elliott, CEO of Australia and New Zealand Bank, said Wednesday that the lender had become increasingly cautious about parts of the housing market. He warned about pockets of over-building, particularly in the small apartments segment. “There are emerging signs of stress” in the economy, the head of Australia’s third-biggest bank told a Reuters event in Sydney. The difficulty for both the RBA and commercial lenders in judging the state of the market is that in other areas house prices have been accelerating. In Sydney, where auction clearance rates have been around the 80% mark for the past three months, the median dwelling price has risen to A$845,000 ($625,000).

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Schäuble invites in the vultures.

Greece Isn’t ‘Crying Wolf’ on Debt Relief (BBG)

Paul Kazarian says he’s spent “tens of millions of dollars” mobilizing a team of a hundred analysts to scrutinize Greece’s assets and liabilities. According to him, everyone else – including the IMF, the credit-rating agencies, the EU and the Greek government itself — is massively overstating the problem of the nation’s debt burden relative to economic output. The problem is, the more he tries to convince the world to accept his version of the numbers, the harder it may get for Greece to win the additional debt relief that most economic observers agree is vital to its recovery. Kazarian, an alumnus of (where else) Goldman Sachs, says the investment firm he founded in 1988, Japonica Partners, is the largest private holder of Greek government debt.

Since he first made his interest known about four years ago, he’s declined to be specific about how much he’s invested, or what prices he paid, or whether he’s up or down or sideways on the trade. This isn’t just your standard tale of a bondholder trying to boost the value of his investments by talking his book. What Kazarian has tried to do for the past four years is treat the sovereign nation of Greece the same way he might a private company he’d taken over: by detailing its assets and liabilities, looking for ways to enhance asset value while reducing liabilities, and, most importantly, seeking to install his own managers to take charge. The more you reflect on that latter notion, the more disturbing Kazarian’s larger-than-life presence on the Greek financial scene becomes.

As the keynote speaker at a conference organized by the American-Hellenic Chamber of Commerce in Athens on Monday, the bespectacled, straight-talking American succeeded in turning the afternoon into The Paul Kazarian Show, berating his audience and his fellow speakers with an odd combination of derision and self-effacing charm and dominating the proceedings by sheer force of personality. (In a previous existence, he gained notoriety for firing BB guns into the empty executive chairs in the boardroom of a company he’d seized control of, accompanying the shots with shouts of “Die!”) Presenting a selection of gems from a presentation that runs to more than 110 slides (Kazarian clearly knows them all by heart), the financier leveled a damning accusation against his hosts: Greece, he said, is “crying wolf for debt relief.”

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Payday coming up.

Angry Mobs Lock Up Indian Bankers As Cash Chaos Soars (ZH)

India’s demonetization campaign is not going as expected. Overnight, banks played down expectations of a dramatic improvement in currency availability, raising the prospect of queues lengthening as salaries get paid and people look to withdraw money from their accounts the Economic Times reported. While much of India has become habituated to the sight of people lining up at banks and cash dispensers since the November 8 demonetisation announcement, bank officials said the message from the Reserve Bank of India is that supplies may not get any easier in the near future and that they should push digital transactions. “We had sought a hearing with RBI as we were not allocated enough cash, but we were told that rationing of cash may continue for some time,” said a banker who was present at one of several meetings with central bank officials.

“Reserve Bank has asked us to push the use of digital channels to all our customers and ensure that we bring down use of cash in the economy,” said a banker. This confirms a previous report according to which the demonstization campaign has been a not so subtle attempt to impose digital currency on the entire population. Bankers have been making several trips to the central bank’s headquarters in Mumbai to get a sense of whether currency availability will improve. Some automated teller machines haven’t been filled even once since the old Rs 500 and Rs 1,000 notes ceased to be legal tender, they said. Typically, households pay milkmen, domestic helps, drivers, etc, at the start of the month in cash. The idea is that all these payments should become electronic, using computers or mobiles.

This strategy however, appears to not have been conveyed to the public, and as Bloomberg adds, “bankers are bracing for long hours and angry mobs as pay day approaches in India.” “Already people who are frustrated are locking branches from outside in Uttar Pradesh, Bihar and Tamil Nadu and abusing staff as enough cash is not available,” said CH Venkatachalam, general secretary of the All India Bank Employees’ Association. The group has sought police protection at bank branches for the next 10 days, he added. Joining many others who have slammed Modi’s decision, the banker said that “this is the fallout of one of the worst planned and executed government decisions in decades.”

He estimates that about 20 million people – almost twice the population of Greece – will queue up at bank branches and ATMs over the coming week, when most employers in India pay their staff. In an economy where 98% of consumer payments are in cash, banks are functioning with about half the amount of currency they need. As Bloomberg notes, retaining public support is crucial for Modi before key state elections next year and a national contest in 2019, however it appears he is starting to lose it. “We are bracing ourselves for payday and fearing the worst,” said Parthasarathi Mukherjee, CEO at Laxmi Vilas Bank. “If we run out of cash we will have to approach the Reserve Bank of India for more. It is tough.”

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It’s kind of funny that Trump is seen as the end of a 70-year era.

The Pillars Of The New World Order (Pieraccini)

Looking at US history over a fairly long period of time, it is easy to see the destructive path that has accompanied the expansion of the American empire over the last seventy years. While World War II was still raging, US strategists were already planning their next steps in the international arena. The new target was immediately identified in the assault and the dismemberment of the Soviet empire. With the collapse of the Berlin Wall and the end of the Soviet economic model as an alternative to the capitalist system, the West found itself faced with what was defined as ‘the end of’ history, and proceeded to act accordingly. The delicate transition from bipolarity, the world-order system based on the United States and the Soviet Union occupying opposing poles, to a unipolar world order with Washington as the only superpower, was entrusted to George H. W. Bush.

The main purpose was to reassure with special care the former Soviet empire, even as the Soviet Union plunged into chaos and poverty while the West preyed on her resources. Not surprisingly, the 90’s represented a phase of major economic growth for the United States. Predictably, on that occasion, the national elite favored the election of a president, Bill Clinton, who was more attentive to domestic issues over international affairs. The American financial oligarchy sought to consolidate their economic fortunes by expanding as far as possible the Western financial model, especially with new virgin territory in the former Soviet republics yet to be conquered and exploited. With the disintegration of the USSR, the United States had a decade to aspire to the utopia of global hegemony. Reviewing with the passage of time the convulsive period of the 90’s, the goal seemed one step away, almost within reach.

The means of conquest and expansion of the American empire generally consist of three domains: cultural, economic and military. With the end of the Soviet empire, there was no alternative left for the American imperialist capitalist system. From the point of view of cultural expansion, Washington had now no adversaries and could focus on the destruction of other countries thanks to the globalization of products like McDonald’s and Coca Cola in every corner of the planet. Of course the consequences of an enlargement of the sphere of cultural influence led to the increased power of the economic system. In this sense, Washington’s domination in international financial institutions complemented the imposition of the American way of life on other countries. Due to the mechanisms of austerity arising from trap-loans issued by the IMF or World Bank, countries in serious economic difficulties have ended up being swallowed up by debt.

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Not surprised. A country that needs to refind itself.

More Than 250,000 People Are Homeless In England (BBC)

More than a quarter of a million people are homeless in England, an analysis of the latest official figures suggests. Researchers from charity Shelter used data from four sets of official 2016 statistics to compile what it describes as a “conservative” total. The figures show homelessness hotspots outside London, with high rates in Birmingham, Brighton and Luton. The government says it does not recognise the figures, but is investing more than £500m on homelessness. For the very first time, Shelter has totted up the official statistics from four different forms of recorded homelessness. These were: • national government statistics on rough sleepers • statistics on those in temporary accommodation • the number of people housed in hostels * the number of people waiting to be housed by social services departments (obtained through Freedom of Information requests).

The charity insists the overall figure, 254,514, released to mark 50 years since its founding, is a “robust lower-end estimate”. It has been adjusted down to account for any possible overlap and no estimates have been added in where information was not available. Charity chief executive Campbell Robb said: “Shelter’s founding shone a light on hidden homelessness in the 1960s slums. “But while those troubled times have faded into memory, 50 years on a modern-day housing crisis is tightening its grip on our country. “Hundreds of thousands of people will face the trauma of waking up homeless this Christmas.

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Just in case you thought things are bad now.

Climate Change Will Stir ‘Unimaginable’ Refugee Crisis, Says Military (G.)

Climate change is set to cause a refugee crisis of “unimaginable scale”, according to senior military figures, who warn that global warming is the greatest security threat of the 21st century and that mass migration will become the “new normal”. The generals said the impacts of climate change were already factors in the conflicts driving a current crisis of migration into Europe, having been linked to the Arab Spring, the war in Syria and the Boko Haram terrorist insurgency. Military leaders have long warned that global warming could multiply and accelerate security threats around the world by provoking conflicts and migration. They are now warning that immediate action is required.

“Climate change is the greatest security threat of the 21st century,” said Maj Gen Munir Muniruzzaman, chairman of the Global Military Advisory Council on climate change and a former military adviser to the president of Bangladesh. He said one metre of sea level rise will flood 20% of his nation. “We’re going to see refugee problems on an unimaginable scale, potentially above 30 million people.” Previously, Bangladesh’s finance minister, Abul Maal Abdul Muhith, called on Britain and other wealthy countries to accept millions of displaced people.

Brig Gen Stephen Cheney, a member of the US Department of State’s foreign affairs policy board and CEO of the American Security Project, said: “Climate change could lead to a humanitarian crisis of epic proportions. We’re already seeing migration of large numbers of people around the world because of food scarcity, water insecurity and extreme weather, and this is set to become the new normal. “Climate change impacts are also acting as an accelerant of instability in parts of the world on Europe’s doorstep, including the Middle East and Africa,” Cheney said. “There are direct links to climate change in the Arab Spring, the war in Syria, and the Boko Haram terrorist insurgency in sub-Saharan Africa.”

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