Apr 232017
 
 April 23, 2017  Posted by at 2:31 pm Finance Tagged with: , , , , , , , , , ,  11 Responses »
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René Magritte Le Cri du Coeur 1960

 

Austerity is over, proclaimed the IMF this week. And no doubt attributed that to the ‘successful’ period of ‘five years of belt tightening’ a.k.a. ‘gradual fiscal consolidation’ it has, along with its econo-religious ilk, imposed on many of the world’s people. Only, it’s not true of course. Austerity is not over. You can ask many of those same people about that. It’s certainly not true in Greece.

IMF Says Austerity Is Over

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor.

In Greece, the government did not increase spending in 2016. Nor is the country’s era of spending cuts at an end. So did the IMF ‘forget’ about Greece? Or does it not count it as part of the rich world? Greece is a member of the EU, and the EU is absolutely part of the rich world, so that can’t be it. Something Freudian, wishful thinking perhaps?

However this may be, it’s obvious the IMF are not done with Greece yet. And neither are the rest of the Troika. They are still demanding measures that are dead certain to plunge the Greeks much further into their abyss in the future. As my friend Steve Keen put it to me recently: “Dreadful. It will become Europe’s Somalia.”

An excellent example of this is the Greek primary budget surplus. The Troika has been demanding that it reach 3.5% of GDP for the next number of years (the number changes all the time, 3, 5, 10?). Which is the worst thing it could do, at least for the Greek people and the Greek economy. Not for those who seek to buy Greek assets on the cheap.

 

But sure enough, the Hellenic Statistical Authority (ELSTAT) jubilantly announced on Friday that the 2016 primary surplus was 4.19% (8 times more than the 0.5% expected). This is bad news for Greeks, though they don’t know it. It is also a condition for receiving the next phase of the current bailout. Here’s what that comes down to: in order to save itself from default/bankruptcy, the country is required to destroy its economy.

And that’s not all: the surplus is a requirement to get a next bailout tranche, and debt relief, but as a reward for achieving that surplus, Greece can now expect to get less … debt relief. Because obviously they’re doing great, right?! They managed to squeeze another €7.3 billion out of their poor. So they should always be able to do that in every subsequent year.

The government in Athens sees the surplus as a ‘weapon’ that can be used in the never-ending bailout negotiations, but the Troika will simply move the goalposts again; that’s its MO.

A country in a shape as bad as Greece’s needs stimulus, not a budget surplus; a deficit would be much more helpful. You could perhaps demand that the country goes for a 0% deficit, though even that is far from ideal. But never a surplus. Every penny of the surplus should have been spent to make sure the economy doesn’t get even worse.

Greek news outlet Kathimerini gets it sort of right, though its headline should have read “Greek Primary Surplus Chokes Economy“.

Greek Primary Surplus Chokes Market

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion.

The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors. There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure.

The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor of lightening the country’s debt load.

Eurogroup head Dijsselbloem sees no shame in admitting this last point :

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF

“That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

That’s just plain insane, malicious even. Greek PM Tsipras should never have accepted any such thing, neither the surplus demands nor the fact that they affect debt relief, since both assure a further demise of the economy.

Because: where does the surplus come from? Easy: from Troika-mandated pension cuts and rising tax levels. That means the Greek government is taking money OUT of the economy. And not a little bit, but a full 4% of GDP, over €7 billion. An economy from which so much has already vanished.

The €7.369 billion primary surplus, in a country of somewhere between 10 and 11 million people, means some €700 per capita has been taken out of the economy in 2016. Money that could have been used to spend inside that economy, saving jobs, and keeping people fed and sheltered. For a family of 3.5 people that means €200 per month less to spend on necessities (the only thing most Greeks can spend any money on).

I’ve listed some of the things a number of times before that have happened to Greece since the EU and IMF declared de facto financial war on the country. Here are a few (there are many more where these came from):

25-30% of working age Greeks are unemployed (and that’s just official numbers), well over 1 million people; over 50% of young people are unemployed. Only one in ten unemployed Greeks receive an unemployment benefit (€360 per month), and only for one year. 9 out of 10 get nothing.

Which means 52% of Greek households are forced to live off the pension of an elderly family member. 60% of Greek pensioners receive pensions below €700. 45% of pensioners live below the poverty line with pensions below €665. Pensions have been cut some 12 times already. More cuts are in the pipeline.

40% of -small- businesses have said they expect to close in 2017. Even if it’s just half that, imagine the number of additional jobs that will disappear.

 

But the Troika demands don’t stop there; they are manifold. On top of the pension cuts and the primary surplus requirement, there are the tax hikes. So the vast majority of Greeks have ever less money to spend, the government takes money out of the economy to achieve a surplus, and on top of that everything gets more expensive because of rising taxes. Did I ever mention businesses must pay their taxes up front for a full year?

The Troika is not “rebalancing Greece’s public finances in a growth-friendly manner”, as Dijsselbloem put it, it is strangling the economy. And then strangling it some more.

There may have been all sorts of things wrong in Greece, including financially. But that is true to some degree for every country. And there’s no doubt there was, and still is, a lot of corruption. But that would seem to mean the EU must help fight that corruption, not suffocate the poor.

 


Yes, that’s about a 30% decline in GDP since 2007

 

The ECB effectively closed down the Greek banking system in 2015, in a move that’s likely illegal. It asked for a legal opinion on the move but refuses to publish that opinion. As if Europeans have no right to know what the legal status is of what their central bank does.

The ECB also keeps on refusing to include Greece in its QE program. It buys bonds and securities from Germany, which doesn’t need the stimulus, and not those of Greece, which does have that need. Maybe someone should ask for a legal opinion on that too.

The surplus requirements will be the nail in the coffin that do Greece in. Our economies depend for their GDP numbers on consumer spending, to the tune of 60-70%. Since Greek ‘consumers’ can only spend on basic necessities, that number may be even higher there. And that is the number the country is required to cut even more. Where do you think GDP is headed in that scenario? And unemployment, and the economy at large?

The question must be: don’t the Troika people understand what they’re doing? It’s real basic economics. Or do they have an alternative agenda, one that is diametrically opposed to the “rebalancing Greece’s public finances in a growth-friendly manner” line? It has to be one of the two; those are all the flavors we have.

You can perhaps have an idea that a country can spend money on wrong, wasteful things. But that risk is close to zilch in Greece, where many if not most people already can’t afford the necessities. Necessities and waste are mutually exclusive. A lot more money is wasted in Dijsselbloem’s Holland than in Greece.

In a situation like the one Greece is in, deflation is a certainty, and it’s a deadly kind of deflation. What makes it worse is that this remains hidden because barely a soul knows what deflation is.

Greece’s deflation hides behind rising taxes. Which is why taxes should never be counted towards inflation; it would mean all a government has to do to raise inflation is to raise taxes; a truly dumb idea. Which is nevertheless used everywhere on a daily basis.

In reality, inflation/deflation is money/credit supply multiplied by the velocity of money. And in Greece both are falling rapidly. The primary surplus requirements make it that much worse. It really is the worst thing one could invent for the country.

For the Greek economy, for its businesses, for its people, to survive and at some point perhaps even claw back some of the 30% of GDP it lost since 2007, what is needed is a way to make sure money can flow. Not in wasteful ways, but in ways that allow for people to buy food and clothing and pay for rent and power.

If you want to do that, taking 4% of GDP out of an economy, and 3.5% annually for years to come, is the very worst thing. That can only make things worse. And if the Greek economy deteriorates further, how can the country ever repay the debts it supposedly has? Isn’t that a lesson learned from the 1919 Versailles treaty?

The economists at the IMF and the EU/ECB, and the politicians they serve, either don’t understand basic economics, or they have their eyes on some other prize.

 

Apr 202017
 
 April 20, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , ,  5 Responses »
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Fra Filippo Lippi 1406-1469 The Virgin Mary

 


The IMF Says Austerity Is Over (Tel.)
Reflation Trades of 2016 Deflate With Remarkable Speed (R.)
IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)
Securities-Based Loans Are Scaring Fiscal Experts (NYP)
Telling the Truth: (P + G) – M = I (MarkGB)
You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)
Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)
The EU’s Collapse Is Now “Imminent” (Doug Casey)
Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)
40% of Spanish Children Live in Poverty (EurA)
Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)
Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)
So It Goes (Oliver Stone)
A Melting Arctic Changes Everything (BBG)

 

 

Yeah, sure, just come look in Greece. Where the IMF itself demands ever more austerity. While claiming austerity is over.

The IMF Says Austerity Is Over (Tel.)

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor. “Their aggregate fiscal stance is expected to remain broadly neutral in 2017 as well as in the following years.” The British Government is still trying to reduce the deficit but at a slower pace, as Philip Hammond, the Chancellor, wanted to ease spending cuts following the vote for Brexit last year.

Although extra spending may be welcomed by those who want funds for specific projects or public services, the IMF is worried that governments are still heavily indebted and need to be careful with their budgets. The US government, for instance, should use the current economic growth spurt as a chance to get its finances under control. “In the United States, where the economy is close to full employment, fiscal consolidation could start next year to put debt firmly on a downward path,” the IMF said. That contrasts heavily with President Donald Trump’s plans to spend more on infrastructure and defence while cutting taxes, a combination that risks ramping up the budget deficit. “These policies are expected to generate rising deficits over the medium term.

As a result, the US debt ratio is projected to increase continuously over the five-year forecast horizon,” the IMF warned. Overall the IMF believes government debts “should stabilise in the medium term, averaging more than 100pc of GDP, rather than decline as previously expected.” With debts that high, governments have to walk a fine line to use fiscal policy to support sustainable economic growth, but avoid dangerous over-indebtedness. “Fiscal policy is generally seen as a powerful tool for promoting inclusive growth and can contribute to stabilising the economy, particularly during deep recessions and when monetary policy has become less effective,” said the IMF.

Read more …

How can anyone get this right if they can’t even properly define inflation?

Reflation Trades of 2016 Deflate With Remarkable Speed (R.)

Stocks, bond yields and the dollar are all falling, yield curves are flattening and sterling is marching higher. The “reflation” trades of 2016 that were supposed to mark a turning point in global markets are fading. Fast. The question for investors is whether this is the play book for the rest of the year, or whether the trends of 2016 will resume in the second half of the year. What is clear is that much of the conviction with which investors went into 2017 has been lost. This week, Goldman Sachs ditched its long-standing bullish call on the U.S. dollar, and Deutsche Bank did likewise with their gloomy sterling outlook. Following the developed world’s two most seismic events last year – the U.S. presidential election and Brexit – investors around the world had positioned for a broad-based reflation trade.

Trump’s surprise election victory was supposed to unleash a wave of tax cuts, banking deregulation and fiscal largesse that would lift U.S. – and global – growth. Meanwhile, sterling’s 20% plunge after the Brexit vote was supposed to pave the way for a surge in UK equities and inflation. This, indeed, is how it played out as 2017 got underway. The Federal Reserve raised interest rates twice, the dollar reached a 14-year peak, Wall Street hit record highs, and government bond yield curves around the world steepened to the benefit of banks and financial stocks. But it is now unraveling, in large part due to a clear slowdown in U.S. growth and signs that global inflation is leveling off. Flatter yield curves where short- and long-term bond yields are close to each other suggest economic uncertainty.

[..] Citi’s economic surprises indexes for most of the world’s major economies have been heading south for the past month. The U.S. index has suddenly tumbled to lows not seen since November, and is below all its peers apart from Japan’s. And inflation expectations are showing signs of peaking too. The dollar is now down 2.5% year-to-date (but still up 2% since the U.S. election; U.S. bank stocks are down 10% from their February peak (but still up 20% from the election); and sterling is down 13% against the dollar since the Brexit vote last June (but it has been down as much as 20%). Estimates of first quarter U.S. growth have been slashed in recent weeks, with the Atlanta Fed’s closely-watched GDPNow model pointing to just 0.5% compared with around 2.5% less than two months ago.

Read more …

All it takes is a few rate hikes.

IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)

U.S. corporate debt has ballooned on cheap credit to levels exceeding those prevailing just before the 2008 financial crisis, a potential threat to financial stability, the IMF warned in its latest review of the top threats to markets and banks. High corporate leverage could become problematic as the Federal Reserve raises short-term interest rates, the IMF warned, since higher borrowing costs could hinder the ability of firms to service debts. While borrowing costs remain low, debt servicing as a proportion of income has risen to its highest level since 2010, raising questions over firms’ ability to service their debts, according to the IMF’s study of nearly 4,000 U.S. firms accounting for about half of the economywide corporate sector balance sheet.

Companies have added $7.8 trillion of debt and other liabilities since 2010, while issuing $3 trillion of equity, net of buybacks, according to the IMF. The IMF’s message stands in contrast to the one being sent by the corporate bond market, which has been rallying for more than a year now. In early March, the average spread between junk-rated corporate bond yields and U.S. Treasury yields reached 3.44 percentage points, its lowest point since July 2014, according to Bloomberg Barclays data. It was most recently at 3.92 percentage points, still a very low level by historical standards, indicating that investors don’t see the debt as very risky.

Read more …

So you buy mortgage backed securities, and then use them as collateral for a loan that lets you buy more securities. The serpent and the tail.

Securities-Based Loans Are Scaring Fiscal Experts (NYP)

Forget subprime mortgages – one of Wall Street’s biggest risks doesn’t even show up on most banks’ balance sheets. Financial insiders are getting increasingly worried over the popularity of securities-based loans, or SBLs – a risky form of debt marketed to wealthy investors who typically use it to buy big assets like houses. The loans, which are taken against pools of stocks and bonds, offer borrowers cheap money fast without having to sell their underlying securities – an attractive option when the Dow is rising. But if markets crash, brokers can unload their clients’ holdings at fire-sale prices – and go after the house to cover the the vig. Fears of such ugly scenarios are growing as the Fed hikes interest rates, stocks are hitting all-time highs, and high-net-worth individuals are using this form of “shadow margin” to borrow more against stocks and bonds in their portfolios than ever before.

It’s not clear how much debt has been taken out in the form of SBLs, and a lack of regulatory oversight is partly to blame. Finra, the brokerage regulator, doesn’t track it, nor does the Securities and Exchange Commission — even though both have warned investors about the risks. However, several advisers surveyed by The Post estimated there is between $100 billion and $250 billion in outstanding SBLs among all brokerages. At least one concerned financial executive is in talks with lawyers to file a whistleblower case over the issue against a major bank with the Securities and Exchange Commission, The Post has learned. “When the market does turn, and it will at some point, it will be a major disaster,” said the exec, who requested confidentiality in exchange for speaking on the issue with The Post.

Read more …

Here’s what I think will lead to UBI: poor old people. I skipped all the examples and links provided here. Do read them. “Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency.”

Telling the truth: (P + G) – M = I (MarkGB)

Telling the truth has never been popular with politicians. They believe that it would prevent them from getting elected. Making new promises that will never be kept, and covering up the unaffordability of old promises…is how politicians get elected. The pattern is well worn and predictable: they use promises to ‘bribe’ people to vote for them, then they fail to deliver, then they blame someone else, then they change the subject…rinse and repeat…meanwhile the really important stuff get’s brushed under the carpet or kicked down the road…choose your own metaphor. There are few greater examples of this than the approaching crisis in pensions: A tale that has been decades in the telling, the climax will be a calamity that the corporate media doesn’t want to look at, and politicians never mention or acknowledge. Short of being strapped to a metal chair and entertained with an electrical massage they never will…which is a nice thought but regrettably still illegal, at least on the mainland.

[..] Despite the dark pleasure it would give me to label our political and economic elites: ‘as thick as two short planks’…the truth is that many of them are not. It’s far worse than that I’m afraid. They are ‘liars’. The politicians, central bankers, economists and journalists who understand the situation we face, but do nothing to address it, are discrediting the positions of responsibility that they hold…by lying through omission, by obfuscation, through denial, by issuing false and/or misleading information, and via the good old fashioned ‘art’ of bull$hitting straight to camera. Finally, and on a slightly lighter note, for anyone reading this who has been brainwashed with the idea that any theory or observation that can’t be reduced to an equation, is not real ‘economics’…here is an equation for you (but don’t expect your professor to like it):

(P + G) – M = I

Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency. Throughout recorded history, this equation has never failed to balance eventually…ask any legionnaire.

Read more …

Another -more palatable?!- way of phrasing UBI.

You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)

Democrats have begun the presidency of Donald Trump exiled to the political wilderness. They’ve lost the White House, both houses of Congress, a shocking number of state governments, while the “blue state” vote has turned out to be really just the “blue city” vote. The party has cast about for solutions, battling it out over identity politics, the proper opposition strategy, and more. But Democrats might consider taking a cue from Trump himself. Namely, his relentless promises to bring back good-paying American jobs. “It’s the first and most consistent thing he discusses,” observed Mike Konczal, a fellow at the Roosevelt Institute, after reviewing Trump’s speeches. The President understands, as The New York Times’s Josh Barro noted, that most Americans think the purpose of private business is to provide good jobs, not merely turn a profit.

Even Trump’s xenophobia and white nationalism are not totally separate from this: Kicking out all the immigrants and rolling foreign competitors are critical components of how he would restore jobs. Democrats tend to treat jobs as the happy by-product of other goals like infrastructure revitalization or green energy projects. Or they treat deindustrialization and job dislocation as regrettable inevitabilities, offering training, unemployment insurance, health care, and so on to ameliorate their effects. All these policies are worthy. But a job is not merely a delivery mechanism for income that can be replaced by an alternative source. It’s a fundamental way that people assert their dignity, stake their claim in society, and understand their mutual obligations to one another. There’s pretty clear evidence that losing this social identity matters as much as the loss of financial security.

The damage done by long-term joblessness to mental and physical health is rivaled only by the death of a spouse. It wreaks havoc on marriages, families, mortality rates, alcoholism rates, and more. The 2008 crisis drove long-term unemployment into the stratosphere, and today it remains near a historic high. Trump went right at this problem, telling Michigan in October of 2016: “I am going to bring back your jobs.” Period. Democrats should consider making the same moon shot promise. But unlike Trump, they should back it up with a policy plan. And there’s an idea that could do the trick. It emerges naturally from progressive values. It’s big, bold, and could fit on a bumper sticker. It’s generally called the “job guarantee” or the “employer of last resort.” In a nutshell: Have the federal government guarantee employment, with benefits and a living wage, to every American willing and able to work.

Read more …

More pension troubles. Today Japan, tomorrow your neck of the woods.

Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)

Their youth long gone, members of Japan’s generation of “parasite singles” face a precarious future, wondering how to survive once the parents many depended on for years pass away. Some 4.5 million Japanese aged between 35 and 54 were living with their parents in 2016, according to a researcher at the Statistical Research and Training Institute on a demographic phenomena that emerged two decades ago, when youthful singles made headlines for mooching off parents to lead carefree lives. Now, without pensions or savings of their own, these middle-aged stay-at-homes threaten to place an extra burden on a social welfare system that is already creaking under pressure from Japan’s aging population and shrinking workforce.

Hiromi Tanaka once sang backup for pop groups, and epitomized the optimism of youth. “I got used to living in an unstable situation and figured somehow it would work out,” Tanaka told Reuters as she sat at the piano in a small parlor of an old house connected to her elderly mother’s next door. Now aged 54, Tanaka relies on income from giving private singing lessons to a dwindling number of students, and her mother’s pension to make ends meet. She has no pension plan of her own, and has used up most of her savings. “My father died last year so pension income was halved,” she said. “If things go on like this, my mother and I will fall together.” Tanaka is one of the growing ranks of “life-time singles,” whose numbers hit a record in 2015, according to data released this month that showed that among 50-year-olds, 1 in 4 men and 1 in 7 women were unmarried.

“During the ‘bubble economy’ until the mid-1990s, the 20-somethings were happily amusing themselves. They thought by the time they were in their 30s, they’d be married,” said Masahiro Yamada, a Chuo University sociologist who coined the term “parasite singles” in 1997. “But one-third never married and are now around age 50,” Yamada said. The trend is not only a factor behind Japan’s low birthrate and shrinking population. It also puts an extra damper on consumption since new household formation is a key driver of private spending. And since about 20% of the middle-aged stay-at-home singles rely on parents for support, they also threaten to weigh on social safety nets. “Once they use up inherited assets and savings, when nothing is left, they will go on the dole,” Yamada said.

Read more …

Casey gets lots of things spectacularly wrong. The EU did need trade pacts etc., to enhance, guarantee quality control. The EU did a lot of good things. But it got taken over by the shit that floats to the top: “The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway.”

The EU’s Collapse Is Now “Imminent” (Doug Casey)

A free trade pact between different governments is unnecessary for free trade. An individual country interested in prosperity and freedom only needs to eliminate all import and export duties, and all import and export quotas. When a country has duties or quotas, it’s essentially putting itself under embargo, shooting its economy in the foot. Businesses should trade with whomever they want for their own advantage. But that wasn’t the way the Europeans did it. The Eurocrats, instead, created a treaty the size of a New York telephone book, regulating everything. This is the problem with the EU. They say it is about free trade, but really it’s about somebody’s arbitrary idea of “fair trade,” which amounts to regulating everything. In addition to its disastrous economic consequences, it creates misunderstandings and confusion in the mind of the average person.

Brussels has become another layer of bureaucracy on top of all the national layers and local layers for the average European to deal with. The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway. The EU was built upon a foundation of sand, doomed to failure from the very start. The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish. There are linguistic, religious, and cultural differences, and big differences in the standard of living. Artificial political constructs never last. The EU is great for the “elites” in Brussels; not so much for the average citizen.

Meanwhile, there’s a centrifugal force even within these European countries. In Spain, the Basques and the Catalans want to split off, and in the UK, the Scots want to make the United Kingdom quite a bit less united. You’ve got to remember that before Garibaldi, Italy was scores of little dukedoms and principalities that all spoke their own variations of the Italian language. And the same was true in what’s now Germany before Bismarck in 1871. In Italy 89% of the Venetians voted to separate a couple of years ago. The Italian South Tyrol region, where 70% of the people speak German, has a strong independence movement. There are movements in Corsica and a half dozen other departments in France. Even in Belgium, the home of the EU, the chances are excellent that Flanders will separate at some point.

Read more …

Another feature brought to you by the Troika.

Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)

People in Greece can’t afford to have more than one child, and many are opting to have none at all. Fertility doctor Minas Mastrominas tells the New York Times that some women have decided not to conceive, and single-child parents have been asking him to destroy their remaining embryos. He said: “After eight years of economic stagnation, they’re giving up on their dreams.” It isn’t just Greece suffering low birth rates. In fact the trend spreads to most of Europe, with Spain, Portugal and Italy also reporting dangerously low rates. Unemployment continues to be a serious issue in Greece. Rates are slightly lower than in 2016 when they were 23.9%, but are still very high at 23.5%. The slump has affected women more, with unemployment rates at 27% compared to 20% of men.

Child tax breaks and subsidies for large families have decreased, and the country stands at having to lowest budget in the EU for family and child benefits. During the height of the crisis, women postponed childbirth in favour of working. As the years dragged on, the rate of fertility decreased, making it biologically more difficult to conceive. Additionally, gender equality came to a standstill, and many women of ‘childbearing age’ were denied employment, or had their contract changed to part time involuntarily, as soon as they got pregnant. One of the most prominent areas that will be detrimentally affected is pensions and the welfare system. Additionally, according to Eurostat, such low birth rates – under 2.1 – could create a demographic disaster. This will have a knock-on effect on pensions, with fewer young people working.

Read more …

And the children we do have, we treat like this. No wonder there are fewer of them.

40% of Spanish Children Live in Poverty (EurA)

Spain has the EU’s third highest rate of child poverty, after Romania and Greece. EURACTIV Spain reports. After the economic crisis and years of austerity, child poverty is on the rise in wealthy countries, according to Unicef. In Spain, the proportion of children living below the poverty line increased by 9 percentage points between 2008 and 2014, to reach almost 40%. While child poverty in general rose significantly, the sharpest increase (56%) was among households of four people (two adults and two children) living on less than €700 per month, or €8,400 per year. Spain has the third widest gap in the EU, behind Latvia and Cyprus, between the levels of social protection offered to children and people over 65. During the crisis, Spain’s oldest citizens were much better protected than its youngest.

According to the Spanish Statistical Office, cited by Unicef, investment in the social protection of families fell by €11.5 billion between 2009 and 2015. Unicef also highlighted that families with children, large families, single-parent families and teenagers suffered the most from the effects of poverty. As for Madrid’s response to the crisis, the UN’s agency for children criticised its failure to contain child poverty. “Social protection policies are very fragmented and very unequal, with little focus on children,” Unicef said. For the organisation, this is due, among other causes, to the strong link between social security and workers’ contributions, and the fact that many of the state’s family aid programmes take the form of tax credits, which have little impact on low earners.

Read more …

They’ll get it awfully wrong. It’s too late in the game.

Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)

Ontario is expected to impose a tax on “non-resident speculators” when it announces new measures Thursday to cool the red-hot housing market in Toronto, according to people familiar with the plans. The measures are intended to improve housing affordability, and address both supply and demand, the people said, speaking on condition of anonymity because the plans are not yet public. The measures are also said to include a new tax aimed at curbing purchases from non-resident speculators. [..] Home prices in the Toronto area climbed 6.2% last month, the biggest one-month gain on record, according to a benchmark price index by the Canadian Real Estate Association, and are up almost 30% in the past 12 months. Bank of Canada Governor Stephen Poloz said last week the price gains are “divorced” from the typical measures of demand, such as income growth and demographics, and said they are unsustainable.

“The focus has to be on runaway prices, more so than affordability per se,” Robert Hogue, a senior economist at Royal Bank of Canada, said in a phone interview. “The risk now is about expectations in the market, or market psychology, as you have both sellers and buyers expecting much higher prices.” The Toronto Star reported earlier, without saying where it got the information, that Sousa will announce some 10 measures ranging from rent controls to a new tax on speculators. The move comes a week before the province tables its budget on April 27, and two days after Sousa said the government recognizes that “now” is the time to address runaway home prices. Sousa on Tuesday met Canadian Finance Minister Bill Morneau and Toronto Mayor John Tory, who said that possible steps include taxing homes left empty for speculative purposes. Rent increases on newer buildings may be limited to about 1.5% above the inflation rate, which was at 2% in February, the Star reported.

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Daddy, please tell the story again of why we have regulators!

Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)

America’s chief federal banking regulator admits it failed to act on numerous “red flags” at Wells Fargo that could have stopped the fake account scandal years earlier. One particularly alarming red flag that went unheeded: In January 2010, the regulator was aware of “700 cases of whistleblower complaints” about Wells Fargo’s sales tactics. An internal review published on Wednesday by the Office of the Comptroller of the Currency found that the regulator didn’t live up to its responsibilities. The report found that oversight of Wells Fargo was “untimely and ineffective” and federal examiners overseeing the bank “missed” several opportunities to uncover the problems that led to the creation of millions of fake accounts. The review painted a damning picture of the OCC’s ability to spot what in retrospect should have been obvious problems at one of the nation’s biggest banks.

The OCC did confront Carrie Tolstedt, then head of Wells Fargo’s community bank, about the stunning number of whistleblower claims. However, there are no records that show that federal inspectors “investigated the root cause,” or force Wells Fargo to probe it. It’s now clear that root cause of Wells Fargo’s problems – both the creation of fake accounts and the related 5,300 firings – was the notoriously aggressive sales goals targets set by senior management. At one point, rank and file bankers were asked to open as many as eight accounts per customer. That’s why the bank has eliminated them. From top management to Wells Fargo’s board of directors, everyone turned a blind eye to these issues. There’s evidence now that some of this was flagged as early as 2004 to management.

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Stone states the obvious.

So It Goes (Oliver Stone)

I confess I really had hopes for some conscience from Trump about America’s wars, but I was wrong – fooled again! – as I had been by the early Reagan, and less so by Bush 43. Reagan found his mantra with the “evil empire” rhetoric against Russia, which almost kicked off a nuclear war in 1983 – and Bush found his ‘us against the world’ crusade at 9/11, in which of course we’re still mired. It seems that Trump really has no ‘there’ there, far less a conscience, as he’s taken off the handcuffs on our war machine and turned it over to his glorified Generals – and he’s being praised for it by our ‘liberal’ media who continue to play at war so recklessly. What a tortured bind we’re in. There are intelligent people in Washington/New York, but they’ve lost their minds as they’ve been stampeded into a Syrian-Russian groupthink, a consensus without asking – ‘Who benefits from this latest gas attack?’

Certainly neither Assad nor Putin. The only benefits go to the terrorists who initiated the action to stave off their military defeat. It was a desperate gamble, but it worked because the Western media immediately got behind it with crude propagandizing about murdered babies, etc. No real investigation or time for a UN chemical unit to establish what happened, much less find a motive. Why would Assad do something so stupid when he’s clearly winning the civil war? No, I believe America has decided somewhere, in the crises of the Trump administration, that we will get into this war at any cost, under any circumstances – to, once again, change the secular regime in Syria, which has been, from the Bush era on, one of the top goals – next to Iran – of the neoconservatives. At the very least, we will cut out a chunk of northeastern Syria and call it a State.

Abetted by the Clintonites, they’ve done a wonderful job throwing America into chaos with probes into Russia’s alleged hacking of our election and Trump being their proxy candidate (now clearly disproved by his bombing attack) – and sadly, worst of all in some ways, admitting no memory of the same false flag incident in 2013, for which again Assad was blamed (see Seymour Hersh’s fascinating deconstruction of this US propaganda, ‘London Review of Books’ December 19, 2013, “Whose sarin?”). No memory, no history, no rules – or rather ‘American rules.’ No, this isn’t an accident or a one-off affair. This is the State deliberately misinforming the public through its corporate media and leads us to believe, as Mike Whitney points out in his brilliant analyses, “Will Washington Risk WW3” and “Syria: Where the Rubber Meets the Road,” that something far more sinister waits in the background.

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BBG can’t even run a story on climate anymore without adding “..the emerging risk of an emboldened and growing Russian empire..”, and more of such useful hints.

A Melting Arctic Changes Everything (BBG)

The story of the Arctic begins with temperature but it’s so much more—this is a tale about oil and economics, about humanity and science, about politics and borders and the emerging risk of an emboldened and growing Russian empire. The world as a whole has warmed about 0.9 degrees Celsius (1.7 degrees Fahrenheit) since 1880. Arctic temperatures have risen twice that amount during the same time period. The most recent year analyzed, October 2015 to September 2016, was 3.5C warmer than the early 1900s, according to the 2016 Arctic Report Card. Northern Canada, Svalbard, Norway and Russia’s Kara Sea reached an astounding 14C (25F) higher than normal last fall. Scientists refer to these dramatic physical changes as “Arctic amplification,” or positive feedback loops. It’s a little bit like compound interest.

A small change snowballs, and Arctic conditions become much less Arctic, much more quickly. “After studying the Arctic and its climate for three-and-a-half decades,” Mark Serreze, director of the National Snow and Ice Data center, wrote recently. “I have concluded that what has happened over the last year goes beyond even the extreme.” The heat is making quick work of its natural prey: ice. Scientists track the number of “freezing-degree days,” a running seasonal tally of the amount of time it’s been cold enough for water to freeze. The 2016-2017 winter season has seen a dramatic shortfall in coldness—more than 20% below the average, a record. Sea ice has diminished much faster than scientists and climate models anticipated. Last month set a new low for March, out-melting 2015 by 23,000 square miles.

Compared with the 1981-2010 baseline, the average September sea-ice minimum has been dropping by more than 13% per decade. A recent study in Nature Climate Change estimated that from 30-50% of sea ice loss is due to climate variability, while the rest occurs because of human activity. Receding ice decreases the Earth’s overall reflectivity, making the Arctic darker and therefore absorbing even more heat. The ice is not all the same age or thickness, although it has become somewhat more uniform. In 1985, about 45% of Arctic sea ice was made up of older and thicker multi-year ice. By 2016, that number shrank to 22%.

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Apr 132017
 
 April 13, 2017  Posted by at 8:44 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Eruption of Mount Vesuvius 1944

 


Former GM Vice Chair: I Think Tesla Is Doomed (CNBC)
It’s Time for Bank Hardball (Tan)
America In the Age of Hypocrisy, Hubris, and Greed (Frank)
Trump Flips On Five Core Campaign Promises In Under 24 Hours (ZH)
Trump Lays Groundwork for Federal Government Reorganization (BBG)
The Politics of the IMF (WF)
If An Electorate Falls In The Forest, Is Their Voice Heard? (DDMB)
NY Fed Boss May Have Blabbed During Blackout (Crudele)
The Potential For The Disastrous Rise Of Misplaced Power Persists (Assange)
No Greek Pensions Expected To Avoid Cuts (K.)
IMF Chief Lagarde Says ‘Halfway’ There On Greek Talks (R.)
Stop Pretending on Greek Debt (BBG)
Detention Of Child Refugees Should Be Last Resort, Brussels Says (G.)
Crucified Man Had Prior Run-In With Authorities (Petri)

 

 

More on the Ponzi.

Former GM Vice Chair: I Think Tesla Is Doomed (CNBC)

GM’s former Vice Chairman Bob Lutz dropped a whole lot of reality on some unsuspecting Tesla cheerleaders on CNBC this morning. “I am a well known Tesla skeptic. Somehow it’s levitating and I think it’s Elon Musk is the greatest salesman in the world. He paints this vision of an unlimited future, aided and abetted by some analysts. It’s like Elon Musk has been beamed down from another planet to show us mortals how to run a company.” “The fact is it’s a constant cash drain. They’re highly dependent on federal government and state incentives for money which constantly flows in. They have capital raises all the time.” “Even the high-end cars that they build now cost more to build than they’re able to sell them for.” “Mercedes, BWM, Volkswagen, GM, Audi and Porsche are all coming out with 300-mile [range] electric luxury sedans…I think they’re doomed.”

“Their upside on pricing is limited because everybody else sells electric vehicles at a loss to get the credits to be able to sell the sport utility vehicles and the pickup trucks. So that puts a ceiling on your possible pricing.” “And if he can’t make money on the high-end Model S and Model X’s which sell up to $100,000, how in the world is he going to make money on a $35,000 small car? Because I have news for you, 42 years of experience, the cost of a car doesn’t come down proportional to it’s price.” “If you have a situation where the cost of producing a car, labor and materials, is higher than your sell price, your business model is flawed. And it’s doomed and it’s going to fail.”

“The battery plant, in my estimation, is a joke. There are no cost savings from making a lithium ion plant bigger than other people lithium ion plants, because making lithium ion cells is a fully automated process anyway. So, whether you got full automative in a small building or 10x full automation in a big building, you’re not saving any money.”

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Break up the banks!

It’s Time for Bank Hardball (Tan)

Wall Street’s top executives should be pressed for substantive answers to harder-hitting questions about long-term performance. That’s a notion being trumpeted by well-known bank analyst Mike Mayo, who has never been one to shy away from criticizing the companies he covers. And boy, does he have a point. On Wednesday, Mayo published some questions he plans to ask Citigroup’s Chairman Michael O’Neill and CEO Michael Corbat at its annual general meeting later this month. They haven’t truly been held accountable for the lender’s mediocre returns, which includes its inability to meet a targeted return on tangible common equity of 10% by 2015, a goal that has since been pushed to 2019. Mayo’s solutions include another round of restructuring, or, if something is structurally wrong, perhaps the bank should break up.

Another valid question is why Citi feels the need measure its financial and share price performance against European lenders Barclays, Deutsche Bank and HSBC? (The question is somewhat rhetorical: It’s so the bank doesn’t place dead last, which it would on most metrics if compared with U.S. rivals). And oddly enough, it removes its weaker European counterparts for compensation comparison purposes. The same can’t be said for Bank of America, which in addition to reviewing its closest five U.S. competitors, evaluates the performance at worse-off European banks such as Credit Suisse and Royal Bank of Scotland as well as similarly-sized U.S.-based companies such as Coca-Cola and General Electric. This seems unnecessary and almost like an easy way to justify Chairman and CEO Brian Moynihan’s potentially outsized $20 million in annual pay.

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“For Americans who work for a living however, nothing ever seems to improve.”

America In the Age of Hypocrisy, Hubris, and Greed (Frank)

“The whole world wants to know about what the hell is happening with us. So let’s talk about it. I live in Washington now, and the people I live among have no idea how people live here in the Midwest, not the faintest idea… The last couple of years here in America have been a time of brisk prosperity according to official measurements, with unemployment down and the stock market up. For Americans who work for a living however, nothing ever seems to improve. Wages do not grow, median household income is still well below where it was in 2007. Economists have a way of measuring this, they call it the ‘labor share of the Gross National Product’ as opposed to the share taken by stockholders. The labor share of Gross National Product’ hit its lowest point since records were started in 2011, and then it stayed there right for the next couple of years.

In the fall of 2014, with the stock market hitting an all time high, a poll showed that nearly 3/4 of the American public believed that the economy was still in recession, because for them it was. There was time when average Americans could be counted upon to know correctly whether the country was going up or down, because in those days when America prospered, the American people prospered as well. These days things are different. Let’s look at it in a statistical sense. If you look at it from the middle of the 1930’s (the Depression) up until the year 1980, the lower 90% of the population of this country, what you might call the American people, that group took home 70% of the growth in the country’s income.

If you look at the same numbers from 1997 up until now, from the height of the great Dot Com bubble up to the present, you will find that this same group, the American people, pocketed none of this country’s income growth at all. Our share of these great good times was zero, folks. The upper 10% of the population, by which we mean our country’s financiers and managers and professionals, consumed the entire thing. To be a young person in America these days is to understand instinctively the downward slope that so many of us are on.”

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And gets away with it.

Trump Flips On Five Core Campaign Promises In Under 24 Hours (ZH)

Blink, and you missed Trump’s blistering, seamless transformation into a mainstream politician. In the span of just a few hours, President Trump flipped to new positions on several core policy issues, backing off on no less than five repeated campaign promises. In a WSJ interview and a subsequent press conference, Trump either shifted or completely reversed positions on a number of foreign and economic policy decisions, including the fate of the US Dollar, how to handle China and the future of the chair of the Federal Reserve.

Goodbye strong dollar and high interest rates In an announcement that rocked currency markets, Trump told the WSJ that the U.S. dollar “is getting too strong” and he would prefer the Federal Reserve keep interest rates low. “I do like a low-interest rate policy, I must be honest with you,” Mr. Trump said. “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting—that will hurt ultimately,” he added. “Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good.”

Labeling China a currency manipulator Trump also told the Wall Street Journal that China is not artificially deflating the value of its currency, a big change after he repeatedly pledged during his campaign to label the country a currency manipulator. “They’re not currency manipulators,” the president said, adding that China hasn’t been manipulating its currency for months, and that he feared derailing U.S.-China talks to crack down on North Korea. Trump routinely criticized President Obama for not labeling China a currency manipulator, and promised during the campaign to do so on day one of his administration.

Yellen’s future Trump also told the Journal he’d consider re-nominating Yellen to chair the Fed’s board of governors, after attacking her during his campaign.” I like her. I respect her,” Trump said, “It’s very early.” Trump called Yellen “obviously political” in September and accused her of keeping interest rates low to boost the stock market and make Obama look good. “As soon as [rates] go up, your stock market is going to go way down, most likely,” Trump said. “Or possibly.”

Export-Import Bank Trump also voiced support behind the Export-Import Bank, which helps subsidize some U.S. exports, after opposing it during the campaign. “It turns out that, first of all, lots of small companies are really helped, the vendor companies,” Trump told the Journal. “Instinctively, you would say, ‘Isn’t that a ridiculous thing,’ but actually, it’s a very good thing. And it actually makes money, it could make a lot of money.” Trump’s support will anger conservative opponents of the bank, who say it enables crony capitalism.

NATO Finally, Trump said NATO is “no longer obsolete” during a Wednesday press conference with NATO Secretary General Jens Stoltenberg, backtracking on his past criticism of the alliance. During the campaign, he frequently called the organization “obsolete,” saying did little to crack down on terrorism and that its other members don’t pay their “fair share.” “I said it was obsolete. It is no longer obsolete,” the president said Wednesday. Trump has gradually become more supportive of NATO after it ramped up efforts to increase U.S. and European intelligence sharing regarding terrorism.

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There could be some advantages to a clean-up, but guaranteed they’re going to screw this up by cutting at the wrong places.

Trump Lays Groundwork for Federal Government Reorganization (BBG)

President Donald Trump is issuing a presidential memorandum that will call for a rethinking of the entire structure of the federal government, a move that could eventually lead to a downsizing of the overall workforce and changes to the basic functions and responsibilities of many agencies. The order, which will go into effect Thursday, also will lift a blanket federal hiring freeze that has been in place since Trump’s first day in office almost three months ago and replace it with hiring targets in line with the spending priorities the administration laid out in March, said Mick Mulvaney, director of the Office of Management and Budget. The move is a part of Trump’s campaign pledge to “drain the swamp” and get rid of what the administration views as inefficiencies in the federal government, Mulvaney said.

It comes as the White House also is trying to curb the size of many government agencies through a proposed budget that calls for historically deep spending cuts to everything from medical research to clean-energy programs. The push to reshape the government as well as the budget cuts are almost certain to draw opposition from Congress. “We think at the end of the day this leads to a government that is dramatically more accountable, dramatically more efficient, and dramatically more effective, following through on the very promises the president made during the campaign and that he put into place on day one,” Mulvaney said. He said the administration is starting with a “blank sheet of paper” as to how the government should operate and has set up a website to solicit ideas.

One solution may be to organize it by function, like putting all areas that deal with trade under one department, or to break up large departments into a number of smaller agencies. As an example, Mulvaney said there are 43 different workforce-training programs across at least 13 agencies – without a single point person in charge of them – that could be brought under one roof. “We’re now transitioning into the smarter, more surgical plans of running the government,” Mulvaney said in an interview on MSNBC Wednesday morning.

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Useful background. “..the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.”

The Politics of the IMF (WF)

At the historic New Hampshire-based Bretton Woods Conference of 1944, delegates from 44 nations across the globe came together to create the International Monetary Fund (IMF) and the World Bank. The former was officially founded on 27 December 1945 with 29 member countries; financial operations commenced on 1 March 1947. From that first meeting in New Hampshire, it was established that the thrust of the IMF’s mission would be to promote greater economic cooperation within the international arena. Though today the IMF maintains its mandate has remained as such, over the years the organisation has evolved alongside a changing global landscape, becoming an extraordinarily powerful organisation as a result.

[..] .. the US played an undeniably dominant role in establishing the IMF and dictating how it would operate. A crucial factor in its make up, and in the US’ ongoing influence within the organisation, was the distribution of voting power among member states. Rather than allocating votes in accordance with the size of a member’s population – which would be the most democratic approach to take – the US instead pushed for voting power to correspond with the volume of contributions made. Unsurprisingly, those contributions made by the US, the world’s biggest economy, were far greater than those of any other member state.

By contributing $2.9bn – double the amount made by the UK, the second biggest contributor at the time – the US was guaranteed twice the number of voting rights, together with veto privileges and a blocking minority. The manoeuvre enabled the superpower to secure near-absolute control of the IMF’s activities. In order to further consolidate its dominant role, the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.

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“The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.”

If An Electorate Falls In The Forest, Is Their Voice Heard? (DDMB)

It was not until the June 1883 publication of the magazine The Chautauquan that the question was put as such: “If a tree were to fall on an island where there were no human beings would there be any sound?” Rather than pause to ponder, the answer followed that, “No. Sound is the sensation excited in the ear when the air or other medium is set in motion.” A vexatious debate has ensued ever since, one that eventually stumped the great Albert Einstein who finally declared “God does not play dice.” In recognizing this, Einstein also resolved himself to the quantum physics conclusion, that there is no way to precisely predict where individual electrons can be found – unless, that is, you’re Divine.

Odds are high that the establishment, which looks to ride away with upcoming European elections, is emboldened by quantum physics. The entrenched parties appear set to retain their power holds, in some cases by the thinnest of margins. What is it the French say about la plus ca change? Is it truly the case that the more things change the more they stay the same? Is this state of stasis sustainable, you might be asking? Clearly the cushy assumption is that the voices of those whose votes will not result in change will be as good as uncast, unheard and unremarkable. Except…and this is a big ‘except’ – time is on the side of the castigated and for one simple reason – they are young.

[..] And then there is the matter of the refugee crisis, the cost of which few in the United States fully appreciate. Faced with impossible living conditions and no access to work in Jordan, Turkey and Lebanon, hundreds of thousands have opted to risk the journey to Europe. In 2015, 1.3 million asylum seekers landed in Europe, half of whom traced their origins to Syria, Afghanistan and Iraq. That number plunged in 2016 to 364,000 owing mainly to a deal between the EU and Turkey which blocks the flow of migrants to Europe. The cost, not surprisingly, is enormous. Europeans spend at least $30,000 for every refugee who lands on her shores. By some estimates, the cost would have been one-tenth that, as in $3,000 per refugee, had the journey to Europe NOT been made in the first place.

[..] At some point demographics will start to matter. The situation in France is no doubt grave, with youth unemployment at nearly 24%. But that pales in comparison to Italy where 39% of its young workers don’t have jobs to go to, day in and day out. Older voters determined to keep the establishment intact will begin to die off. In their wake will be a growing majority of voters who are increasingly disenfranchised, disaffected and despondent. If there’s one lesson Europeans can glean from their allies across the Atlantic, it’s that bullets can be dodged, but not indefinitely. As we are learning the hard way, necessary reforms are challenging to enact. Avoidance, though, will only succeed in feeding anger and despair. The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.

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There’s a lot of that going on. Stanley Fisher does it too.

NY Fed Boss May Have Blabbed During Blackout (Crudele)

Back in 2011, I caught William Dudley, the president of the New York Federal Reserve Bank, having meetings he wasn’t supposed to have with some of Wall Street’s top players. And nobody cared. Nobody cared despite the fact that Dudley could have easily passed along all sorts of confidential information to these people, who would have immediately known how to profit enormously from what they were being told. I am mentioning this because the head of the Richmond, Va., Fed, Jeffrey Lacker, abruptly resigned last week for doing far less bad than Dudley might have done. Lacker says he took an October 2012 phone call from an analyst at an investment advisory firm and had a conversation about something the Fed was considering — the purchase of $40 billion worth of mortgage bonds — to try to help the economy.

[..]Lacker is a pipsqueak compared with Dudley, who has a permanent position on the Fed’s policymaking Open Market Committee — and whose bank controls the trading operations for the whole Fed. I looked it up, and Lacker’s conversation with the analyst didn’t occur during the Fed’s so-called blackout period, which starts a week before its policy meetings. As I wrote back in 2011, several of Dudley’s meetings did. During these blackout periods, Fed officials are supposed to clam up — and make no public pronouncements, which I assume would cover Dudley’s informal dinners. As I wrote back in January 2011, I have no way of knowing what Dudley discussed at his blackout-period meetings. But unless he and his guests sat mute and expressionless during their meetings, there’s a good likelihood that something could be gleaned from the New York Fed president’s remarks.

Just so those investigators in the “separate” investigation don’t have to go to any trouble, I’m going to repeat here some of what I wrote back then. At one of the questionable Dudley meetings, in March 2009, the Fed’s blackout period ran from March 10 to 18. On March 11, Dudley met with Jan Hatzius, chief economist of Goldman Sachs. Dudley had once worked at Goldman, so he and Hatzius were friends. Dudley’s calendar says it was an “informal meeting” that took place from 6 p.m. to 7 p.m. at the Pound and Pence restaurant near the New York Fed. That was on Dudley’s calendar, as was the notation “PRE-FOMC BLACKOUT PERIOD,” written in bold, all caps. So his assistant was clearly trying to warn him about restrictions. Let’s hope the separate investigation that Lacker mentioned is of the New York Fed. And, if they don’t already, investigators now know where to look.

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WikiLeaks wants the same thing as the WaPo? Are we sure?

The Potential For The Disastrous Rise Of Misplaced Power Persists (Assange)

The media has a long history of speaking truth to power with purloined or leaked material — Jack Anderson’s reporting on the CIA’s enlistment of the Mafia to kill Fidel Castro; the Providence Journal-Bulletin’s release of President Richard Nixon’s stolen tax returns; the New York Times’ publication of the stolen “Pentagon Papers”; and The Post’s tenacious reporting of Watergate leaks, to name a few. I hope historians place WikiLeaks’ publications in this pantheon. Yet there are widespread calls to prosecute me. President Thomas Jefferson had a modest proposal to improve the press: “Perhaps an editor might begin a reformation in some such way as this. Divide his paper into 4 chapters, heading the 1st, ‘Truths.’ 2nd, ‘Probabilities.’ 3rd, ‘Possibilities.’ 4th, ‘Lies.’

The first chapter would be very short, as it would contain little more than authentic papers, and information.” Jefferson’s concept of publishing “truths” using “authentic papers” presaged WikiLeaks. People who don’t like the tune often blame the piano player. Large public segments are agitated by the result of the U.S. presidential election, by public dissemination of the CIA’s dangerous incompetence or by evidence of dirty tricks undertaken by senior officials in a political party. But as Jefferson foresaw, “the agitation [a free press] produces must be submitted to. It is necessary, to keep the waters pure.” Vested interests deflect from the facts that WikiLeaks publishes by demonizing its brave staff and me. We are mischaracterized as America-hating servants to hostile foreign powers.

But in fact I harbor an overwhelming admiration for both America and the idea of America. WikiLeaks’ sole interest is expressing constitutionally protected truths, which I remain convinced is the cornerstone of the United States’ remarkable liberty, success and greatness. I have given up years of my own liberty for the risks we have taken at WikiLeaks to bring truth to the public. I take some solace in this: Joseph Pulitzer, namesake of journalism’s award for excellence, was indicted in 1909 for publishing allegedly libelous information about President Theodore Roosevelt and the financier J.P. Morgan in the Panama Canal corruption scandal. It was the truth that set him free.

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Madness.

No Greek Pensions Expected To Avoid Cuts (K.)

The Labor Ministry’s main plan to save 1% of GDP from 2019 pension expenditure provides for reductions even to very low pensions if the recalculation process shows a difference from the original calculation according to the previous method, the so-called “personal difference.” The ministry is trying to avoid having to impose very big cuts – the personal difference is estimated to range up to 40% – and sources say it is hoping to cap the reductions at 20 or 25%. The final decisions will be made when the creditors’ representatives return to Athens later this month.

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Lagarde wants Greece on its knees. She keeps insisting on more pension cuts, without any regard for the effects on Greek people. That will make the economy worse, not better. And she knows it.

IMF Chief Lagarde Says ‘Halfway’ There On Greek Talks (R.)

IMF chief Christine Lagarde on Wednesday said Greece was heading in the right direction on reforms but talks on its bailout and the IMF’s potential role in it were “only halfway through.” Greece and its international lenders are negotiating reforms the country needs to carry out to maintain a sustainable growth path in the years following the end of its bailout program, which ends in mid-2018. “What I have seen in the last couple of weeks is heading in the right direction. We are only halfway through in the discussions,” Lagarde told a conference in Brussels. Last week, eurozone finance ministers agreed the “overarching elements” of reforms needed in Greece in exchange for a new loan under its 86-billion-euro program, the third since 2010.

The new loan is needed to pay debt due in July. Talks are continuing and no date is fixed yet for the return of negotiators to Athens. The Greek government believes negotiators could go back to Greece after the IMF Spring Meetings on April 21-23. “We are still elaborating under what terms we could possibly give some lending to the country. We are not there yet,” Lagarde said, adding any IMF loan to Greece would have to abide by strict conditions. She said debt restructuring will be needed to guarantee the sustainability of Greek finances. The scope of the restructuring “will be decided at the end of the program,” but “the modalities have to be decided upfront,” Lagarde said.

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They have no interest in solving Greece’s problems.

Stop Pretending on Greek Debt (BBG)

Greece and its creditors say they’ve made progress in their endless negotiations over the country’s debts – enough to avoid a default on payments worth more than €7 billion in July. That’s good, but it was the easy part. The definitive settlement that Greece and the European Union both need still isn’t in sight. For the past seven years, the IMF and euro-zone institutions have supported Athens with loans in exchange for fiscal austerity and structural economic reform. This strategy has failed to break Greece’s vicious circle of a shrinking economy and higher debt. Europe needs to bring this spiral to an end without further delay – by putting Greece’s debts on a credibly downward path. The IMF has made it clear that it will only take part in a rescue program that includes a realistic assessment of debt sustainability.

This is a welcome break from the past: Time and again, creditors have deluded themselves that Greece can run implausibly high budget surpluses for years. Germany, especially, is keen to keep the IMF involved. With luck, Berlin might be willing to adjust the creditors’ proposals accordingly. Greece has gone through nearly a decade of punishing austerity. Its unemployment rate is still stuck near 25%. Last week’s deal includes further tax and pension reforms worth 2% of GDP. If consumers and companies are to spend and invest again, they must see an end to the tunnel. Economic necessity and political feasibility point to the same conclusion: Firm fiscal restraint is essential – but not so firm as to be self-defeating.

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It shouldn’t be a last resort, it should be no resort. This is the EU trying to deflect attention away from its own deplorable failings by pointing to Hungary. Don’t fall for it.

Detention Of Child Refugees Should Be Last Resort, Brussels Says (G.)

Detention of child refugees should be “a last resort”, the European commission has said, in remarks that will be seen as a rebuke to Hungary where asylum seekers, including minors, are being held in barbed-wire fenced camps. The statement from Brussels is part of a long awaited plan to protect child refugees in Europe. About 386,300 children made an asylum claim in the EU in 2016, a six-fold increase since 2010 that has left some countries struggling to cope. The EU plan comes one day after Germany announced it was halting refugee transfers to Hungary, until Budapest stops the systematic detention of all asylum seekers.

Under the EU’s Dublin regulation, asylum seekers are to be returned to the first country they registered in. Routine detention of refugees is banned. Hungary announced last month that all asylum seekers older than 14 would be kept in converted shipping containers on the border while their claims were assessed. About 110 people were living in the camps, including four unaccompanied children, and children with their families, when the UN refugee agency assessed the camps last week. The situation for asylum seekers had worsened since the new law came into effect, the UNHCR said, as the organisation also warned of “highly disturbing reports” of police violence meted out to refugees attempting to cross the border.

[..] Hungary already risks being taken to the European court of justice for failure to take in a mandatory quota of asylum seekers, a decision imposed on Budapest in September 2015. The clock is ticking towards a deadline to disperse 160,000 asylum seekers from Greece and Italy to other EU member states (excluding the UK) by September 2017. The EU’s most senior official on migration warned that Hungary risked being taken to the European court of justice if it failed to meet its target. “From September the relocation scheme is ending. This does not mean it is going to die. It will continue,” said Dimitris Avramopoulos, the European commissioner for home affairs, . “EU countries who do not want to be part of our policy, they will be confronted with measures we can take,” he said, in a coded reference to court action that could land governments with hefty fines.

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It’s that time of year.

Crucified Man Had Prior Run-In With Authorities (Petri)

The gentleman arrested Thursday and tried before Pontius Pilate had a troubled background. Born (possibly out of wedlock?) in a stable, this jobless thirty-something of Middle Eastern origin had had previous run-ins with local authorities for disturbing the peace, and had become increasingly associated with the members of a fringe religious group. He spent the majority of his time in the company of sex workers and criminals. He had had prior run-ins with local authorities — most notably, an incident of vandalism in a community center when he wrecked the tables of several licensed money-lenders and bird-sellers.

He had used violent language, too, claiming that he could destroy a gathering place and rebuild it. At the time of his arrest, he had not held a fixed residence for years. Instead, he led an itinerant lifestyle, staying at the homes of friends and advocating the redistribution of wealth. He had come to the attention of the authorities more than once for his unauthorized distribution of food, disruptive public behavior, and participation in farcical aquatic ceremonies. Some say that his brutal punishment at the hands of the state was out of proportion to and unrelated to any of these incidents in his record. But after all, he was no angel.

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Apr 072017
 
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Fred Stein Times Square at Night 1947

 


Eyewitness Says Syrian Military Anticipated US Raid (ABC)
The Biggest Stock Bubble In US History (IRD)
The Unavoidable Pension Crisis (Roberts)
Americans Are Taking Out The Largest Mortgages On Record (MW)
Global Debt Explodes At ‘Eye-Watering’ Pace To Hit £170 Trillion (Tel.)
Wall Street Doubts Trump Wants to Split Up Biggest US Banks (BBG)
Fed’s Asset Shift To Pose New Test Of Economy’s Recovery, Resilience (R.)
M5S Plans To ‘Revolutionize Democracy’ With Online Voting, E-petitions (LI)
Arms Sales Becoming France’s New El Dorado, But At What Cost? (F24)
Guns Are The True Cause Of Hunger And Famine (G.)
Greece’s Dark Age: How Austerity Turned Off The Lights (R.)
On Dimitris Christoulas: ‘He Is A Part Of History Now’ (AlJ)

 

 

“I think Secretary of Defense [General] James Mattis gave the president a list of options, this being the smallest…”

Eyewitness Says Syrian Military Anticipated US Raid (ABC)

Syrian military officials appeared to anticipate Thursday’s night raid on Syria’s Shayrat airbase, evacuating personnel and moving equipment ahead of the strike, according to an eyewitness to the strike. Dozens of Tomahawk missiles struck the airbase near Homs damaging runways, towers and traffic control buildings, a local resident and human rights activist living near the airbase told ABC News via an interpreter. U.S. officals believe the plane that dropped chemical weapons on civilians in Idlib Province on Tuesday, which according to the Syrian Observatory for Human Rights killed 86 people, took off from the Shayrat airbase. The attack lasted approximately 35 minutes and its impact was felt across the city, shaking houses and sending those inside them fleeing from their windows. Both of the airport’s major runways were struck by missiles, and some of its 40 fortified bunkers were also damaged.

Local residents say the Russian military had used the airbase in early 2016 but have since withdrawn their officers, so the base is now mainly operated by Syrian and Iranian military officers. There is also a hotel near the airport where Iranian officers have been staying, though it was not clear whether it was damaged. The eyewitness believes human casualties, at least within the civilian population, were minimal, as there was no traffic heading toward the local hospital. [..] Former National Security Adviser and ABC News contributor Richard Clarke said this attack, one of the quickest displays of force by a new president in recent history, is largely “symbolic.”

Following a 2013 chemical weapons attack that killed more than 1400 people outside of Damascus which a U.S. government intelligence assessment concluded likely used a nerve agent, the Obama administration threatened retaliation but ultimately called off planned airstrikes after Assad agreed to turn over the majority of his chemical weapons arsenal to an international watchdog group. Trump has attempted to blame Obama’s “weakness” for the worsening violence in Syria. “This attack on one air base seems more symbolic,” Clarke said. “I think Secretary of Defense [General] James Mattis gave the president a list of options, this being the smallest. It was a targeted attack not designed to overwhelm the Syrian military … I think the president was trying to differentiate himself from his predecessor.”

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“Tesla has never made money and never will make money. Next to Amazon, it’s the biggest Ponzi scheme in U.S. history.”

The Biggest Stock Bubble In US History (IRD)

Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).

We talk about the tech bubble that fomented in the late 1990’s that resulted in an 85% (roughly) decline on the NASDAQ. Currently the five highest valued stocks by market cap are tech stocks: AAPL, GOOG, MSFT, AMZN and FB. Combined, these five stocks make-up nearly 10% of the total value of the entire stock market. Money from the public poured into ETFs at record pace in February. The majority of it into S&P 500 ETFs which then have to put that money proportionately by market value into each of the S&P 500 stocks. Thus when cash pours into SPX funds like this, a large rise in the the top five stocks by market cap listed above becomes a self-fulfilling prophecy. The price rise in these stocks has nothing remotely to do with fundamentals. Take Microsoft, for example (MSFT). Last Friday the pom-poms were waving on Fox Business because MSFT hit an all-time high.

This is in spite of the fact that MSFT’s revenues dropped 8.8% from 2015 to 2016 and its gross margin plunged 13.2%. So much for fundamentals. In addition to the onslaught of retail cash moving blindly into stocks, margin debt on the NYSE hit an all-time high in February. Both the cash flow and margin debt statistics are flashing a big red warning signal, as this only occurs when the public becomes blind to risk and and bet that stocks can only go up. As I’ve said before, this is by far the most dangerous stock market in my professional lifetime (32 years, not including my high years spent reading my father’s Wall Street Journal everyday and playing penny stocks).

Perhaps the loudest bell ringing and signaling a top is the market’s valuation of Tesla. On Monday the market cap of Tesla ($49 billion) surpassed Ford’s market cap ($45 billion) despite the fact that Tesla delivered 79 thousand cars in 2016 while Ford delivered 2.6 million. “Electric Jeff” (as a good friend of mine calls Elon Musk, in reference to Jeff Bezos) was on Twitter Monday taunting short sellers. At best his behavior can be called “gauche.” Musk, similar to Bezos, is a masterful stock operator. Jordan Belfort (the “Wolf of Wall Street”) was a small-time dime store thief compared to Musk and Bezos. Tesla has never made money and never will make money. Next to Amazon, it’s the biggest Ponzi scheme in U.S. history. Without the massive tax credits given to the first 200,000 buyers of Tesla vehicles, the Company would likely be out of business by now.

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And to think even without demographics pensions look screwed too, just from financial engineering and insane debt levels.

The Unavoidable Pension Crisis (Roberts)

There is a really big crisis coming. Think about it this way. After 8 years and a 230% stock market advance the pension funds of Dallas, Chicago, and Houston are in severe trouble. But it isn’t just these municipalities that are in trouble, but also most of the public and private pensions that still operate in the country today. Currently, many pension funds, like the one in Houston, are scrambling to slightly lower return rates, issue debt, raise taxes or increase contribution limits to fill some of the gaping holes of underfunded liabilities in their plans. The hope is such measures combined with an ongoing bull market, and increased participant contributions, will heal the plans in the future. This is not likely to be the case. This problem is not something born of the last “financial crisis,” but rather the culmination of 20-plus years of financial mismanagement.

An April 2016 Moody’s analysis pegged the total 75-year unfunded liability for all state and local pension plans at $3.5 trillion. That’s the amount not covered by current fund assets, future expected contributions, and investment returns at assumed rates ranging from 3.7% to 4.1%. Another calculation from the American Enterprise Institute comes up with $5.2 trillion, presuming that long-term bond yields average 2.6%. With employee contribution requirements extremely low, averaging about 15% of payroll, the need to stretch for higher rates of return have put pensions in a precarious position and increases the underfunded status of pensions. With pension funds already wrestling with largely underfunded liabilities, the shifting demographics are further complicating funding problems.

One of the primary problems continues to be the decline in the ratio of workers per retiree as retirees are living longer (increasing the relative number of retirees), and lower birth rates (decreasing the relative number of workers.) However, this “support ratio” is not only declining in the U.S. but also in much of the developed world. This is due to two demographic factors: increased life expectancy coupled with a fixed retirement age, and a decrease in the fertility rate. In 1950, there were 7.2 people aged 20–64 for every person of 65 or over in the OECD countries. By 1980, the support ratio dropped to 5.1 and by 2010 it was 4.1. It is projected to reach just 2.1 by 2050. The table below shows support ratios for selected countries in 1970, 2010, and projected for 2050:

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Happy days!

Americans Are Taking Out The Largest Mortgages On Record (MW)

For the past few years, the housing market has been unbalanced. Strong demand and lean supply keep pushing prices higher and higher. On Wednesday, a fresh piece of data confirmed that trend. The Mortgage Bankers Association’s weekly purchase loan data showed that the average size of a home loan was the largest in the history of its survey, which goes back to 1990. Higher prices have a few different effects on the market. Buyers have to make tradeoffs on the kinds of homes they can afford, or may be shut out of ownership altogether. They may also adjust their borrowing. Larger mortgage sizes may reflect not just more expensive properties, but also more leveraged ones.

The 20% down payment is a relic: the median down payment in 2016 was 10%. For first-time buyers, it was 6%. First-timers and other buyers of less-expensive homes are more leveraged now than they were at the height of the housing bubble a decade ago. Home loan sizes aren’t the only things that have changed in the years since MBA started its survey. Back at the start of the survey, the median mortgage size was only about 3.3 times the median annual income. It’s now over five times as big – though buyers get bigger homes and lower interest rates.

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Over $70 trillion since 2008.

Global Debt Explodes At ‘Eye-Watering’ Pace To Hit £170 Trillion (Tel.)

Global debt has climbed at an “eye-watering” pace over the past decade, soaring to a fresh high of £170 trillion last year, according to the Institute of International Finance (IIF). The IIF said total debt levels, including household, government and corporate debt, climbed by more than $70 trillion over the last 10 years to a record high of $215 trillion (£173 trillion) in 2016 – or the equivalent of 325pc of GDP. It said emerging markets posed “a growing source of concern” to financial stability and the global economy as debt burdens in these countries climb at a rapid pace. The IIF data showed the increase was partly driven by a “spectacular rise” in emerging markets, where total debt stood at $55 trillion at the end of 2016, or 215pc of total emerging market GDP.

Debt has risen from $16 trillion in 2006 and $7.4 trillion in 1996. The body, which represents the world’s top financial institutions, said a wave of maturing debt this year presented a “growing refinancing risk”. It estimates that more than $1.1 trillion of emerging market bonds and loans will mature this year, with dollar-denominated debt accounting for a fifth of all redemptions. It said China faced around $40bn of dollar-denominated redemptions this year, while Russia faced redemptions of $20bn. International bodies including the IMF and OECD have warned that rising interest rates in the US could bring an end to an emerging market corporate debt binge as companies in these countries see their debt servicing costs rise in local currency terms. “While risks associated with currency mismatches may not be as acute as during past emerging market debt crises, the overall emerging market debt burden – particularly as global interest rates head higher – is a growing source of concern,” the IIF said in a note.

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Goldman is not a consumer bank. They might actually profit from this.

Wall Street Doubts Trump Wants to Split Up Biggest US Banks (BBG)

President Donald Trump and his advisers have vowed to bring back a Depression-era law that would cleave the biggest U.S. lenders in half by separating commercial and investment banking operations. Wall Street doesn’t expect that to happen. After chief economic adviser Gary Cohn reiterated the administration’s stance toward the Glass-Steagall Act in a private meeting with lawmakers on Wednesday, analysts said they viewed any radical regulatory changes as unlikely. Shares of Bank of America and JPMorgan Chase, which would be most affected by the rule, rose Thursday after Bloomberg first reported on Cohn’s comments. Reinstating Glass-Steagall, which was created after the banking crises of the 1930s and repealed in 1999, would require a rewriting of U.S. banking rules. The Dodd-Frank Act took more than a year of work by Congress.

The Trump administration hasn’t put forward a detailed plan and the revisions proposed by House Republicans don’t involve the return of Glass-Steagall. “Anything resembling Glass-Steagall is so far from happening that it’s hard to envision,” said Ian Katz, an analyst at Capital Alpha. “It simply isn’t a priority issue in Congress.” The Republicans who control the House and the Senate want to loosen banking regulations, not make them stricter, Katz wrote. The Republican Party made restoring Glass-Steagall part of its platform, and Trump sometimes criticized the big banks during the campaign, saying “I’m not going to let Wall Street get away with murder.” Since taking office, he’s appointed Cohn and several other former Goldman Sachs bankers to top posts, and said that he’ll look to JPMorgan CEO Jamie Dimon for advice about regulatory reform.

Treasury Secretary Steven Mnuchin said during his confirmation hearing that he opposes the old Glass-Steagall, but supports a “21st Century” version. He didn’t elaborate on what he meant. “If you’ve listened to all the rhetoric on regulation, we’ve no real guidance on where we are going,” said Christopher Wheeler, an Atlantic Equities analyst in London. “The uncertainty is immense and what you have to believe is that things will continue as they are.” The regulation might not mean that commercial and investment banks have to be separated, Cowen Group analyst Jaret Seiberg wrote in a report. Instead, the government could require that broker-dealers be subsidiaries of holding companies, rather than banks, he said. That would mean that the brokerage arm would have to be separately funded. “Cohn was the most likely obstacle within the Trump White House,” Seiberg wrote. “With him supporting Glass-Steagall’s restoration, there is no one in the inner circle left to fight it.”

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More uncharted territory. We tend to forget, but for 10 years now they’re grasping in the dark. They have no idea what they do, all they have to go on are outdated textbooks that were flawed to begin with. Time to audit the Fed and then close it.

Fed’s Asset Shift To Pose New Test Of Economy’s Recovery, Resilience (R.)

The Federal Reserve’s coming decision to reduce its massive asset holdings will set off a complex dance with global investors and the U.S. Treasury as it tries to put a final end to policies used to fight the 2007 financial crisis without upending the economy along the way. It is a feat with no clear precedent, according to analysts and officials involved in the process: a central bank trying to squeeze trillions of dollars out of markets it has supported for a decade, and in the process likely pushing up the cost of home buying, corporate finance and an array of other activities. Though final decisions have not been made, the Fed may shift policy as soon as the end of this year, and over 2018 begin pulling anywhere from $20 billion to $60 billion a month out of bond markets, according to a review of current Fed asset holdings.

For several years during the crisis, the Fed added to its holdings of U.S. Treasury bonds and securities backed by home mortgages to the tune of $85 billion a month before the program was slowed. The purchases were an emergency measure made necessary because the Fed’s short-term interest rate – its primary tool to encourage people and businesses to spend and invest – had already been cut to zero. With the economy still in freefall, the asset purchases added to demand for financial securities, and are thought to have held down long-term interest rates in general, a boost to the home-building and other industries in particular. The central bank is already raising its short-term interest rate and has managed a series of increases without slowing the economy. When it starts to scale back the size of its $4.5 trillion stockpile of Treasury bonds and mortgage-backed securities – essentially reversing the purchases it made during the crisis – it will pose a stiff new test of the economy’s resilience.

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This was always the plan. Use technology to strengthen democracy.

M5S Plans To ‘Revolutionize Democracy’ With Online Voting, E-petitions (LI)

Italy’s anti-establishment Five Star Movement party plans to introduce online voting and public referendums to increase “democracy and transparency” in the country’s capital. Five Star councillors presented the draft resolution at Rome’s city hall on Monday, where it will be debated. They claimed the proposed ideas would take the city “from Mafia Capitale [the ongoing corruption scandal which has seen dozens of Rome politicians and businessmen put on trial] to direct democracy and transparency in five years”. The ideas suggested included online consultations and participatory budgeting. The latter process would give citizens more say in how Rome money is spent, and has already been introduced by Five Star-led local authorities in some areas, including Mira and Ragusa.

In a blog post, leader Beppe Grillo said that within a year, a Five Star government would introduce public petitions which can be created online and sent directly to the Italian parliament for discussion – a system which already exists in the UK, for example. “It should be the citizens and the local community who govern cities through the Internet, using collective intelligence,” said Grillo. “The web is revolutionizing the relationship between citizens and institutions making direct democracy feasible, as applied in ancient Greece.” Angelo Sturni, one of the councillors behind the proposal, said: “We also want to experiment with electronic voting in referendums, using the American model.” Discontent over widespread corruption in Rome, as revealed in the Mafia Capitale trial, was one of the main factors in Five Star candidate Virginia Raggi’s victory in mayoral elections last June.

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UK, France, Germany, Holland, Belgium: merchants of death. Government sponsored murder.

Arms Sales Becoming France’s New El Dorado, But At What Cost? (F24)

When Qatar agreed to buy 24 French Rafale fighter jets in a €6.3 billion contract at the end of April, it represented yet another major success for France’s arms industry, coming hot on the heels of further multi-billion euro sales of Rafales to Egypt and India. The deals have been hailed by Hollande and his government. According to France’s Minister of Defence Jean-Yves Le Drian, in comments made to the Journal du Dimanche newspaper Sunday, the Qatar contract brought the value of the country’s arms exports to more than €15 billion this year so far. That sum is already more than the €8.06 billion for the whole of 2014, which itself was the highest level seen since 2009 – suggesting a continued upward trajectory for the French arms trade and one that is providing a much-needed salve to the country’s economic woes.

But some of these deals have raised more than a few eyebrows, with anti-arms trade campaigners critical of France’s willingness to sell weapons to countries with less than stellar human rights records. These concerns are only set to rise when Hollande heads first to Doha on Monday and then Saudi Arabia’s capital of Riyadh the day after, where furthering the recent success of the French arms industry is likely to be one of his top priorities. Saudi Arabia has already proved a lucrative trading partner for French arms manufacturers, most recently in a deal signed in November that saw the kingdom buy $3 billion-worth (€2.7 billion) of French weapons and military equipment to supply the Lebanese army. The oil-rich country is currently on something of an arms spending spree. Last year, the Saudis surpassed India to become the world’s biggest arms importer, upping its spending by 54% to €5.8 billion, according to a report by industry analyst IHS.

France, thanks to some adept diplomatic manoeuvering in recent years, is well placed to take advantage of the Saudi cash cow. Paris has been an increasingly close ally of Riyadh ever since it was among the most vocal in backing military intervention against Syria’s President Bashar al-Assad, a key ally of Shiite Iran – one of Sunni Saudi Arabia’s main regional rivals. “You’re seeing political fractures across the region, and at the same time you’ve got oil, which allows countries to arm themselves, protect themselves and impose their will as to how they think the region should develop,” Ben Moores, author of the IHS report, told AP in March. France, of course, is not alone in striking lucrative arms deals in the region. The US remains the biggest arms exporter to the Middle East, with $8.4 billion (€7.5 billion) worth of weapon sales in 2014, while the UK and Germany are also major players.

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And this is what the merchants of death leave behind.

Guns Are The True Cause Of Hunger And Famine (G.)

Last year, the World Bank revised its position on conflict – upgrading it from being one of many drivers of suffering and poverty, to being the main driver. In Somalia, despite some political progress the conflict has put more than half the population in need of assistance, with 363,000 children suffering acute malnutrition. In north-east Nigeria, conflict with Boko Haram has left 1.8m people still displaced, farmers unable to grow crops, and 4.8 million people need food. In Yemen, an escalation in conflict since 2015 has worsened a situation already made dire by weak rule of law and governance. Now more than 14 million people need food aid. Only if we understand conflict can we understand hunger. South Sudan is another example. I worked there for two years following the signing of the comprehensive peace agreement in 2005.

Right now a place called Koch, where Mercy Corps works, is in what the famine early warning systems network calls a “level 4 emergency phase”. This means that people will start to die of hunger in a matter of months if they don’t receive enough aid. Until recent years, Koch was a thriving community with fertile land. It has been destroyed in armed clashes since conflict broke out in South Sudan in December 2013. Families have had to move time and time again and disease is rampant due to the lack of clean water. As one father of five told our team in Koch: “My house was burnt, everything was looted and I do not know how to rebuild my life.” Across the places where we work and where people are facing starvation, the pattern is the similar.

Hunger is not some freak environmental event; it is human-made, the result of a deadly mix of conflict, marginalisation and weak governance. Yet watching some of the news and the crisis appeals, one could be forgiven for thinking that what we need is another Live Aid song and airdrops of food. Red Nose Day has been criticised for portraying Africa as a place where “nothing ever grows”. A recent social media campaign to send a plane filled with food to Somalia gathered support: a noble gesture, but not a long-term solution. Mercy Corps’ own emergency response is not the long-term answer either.

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It’s easy to label something ‘theft’, but for Greeks it’s either go illegal or sit in the dark, freeze etc. Still can’t believe this is the European Union.

Greece’s Dark Age: How Austerity Turned Off The Lights (R.)

Kostas Argyros’s unpaid electricity bills are piling up, among a mountain of debt owed to Greece’s biggest power utility. His family owe €850 to the Public Power Corporation (PPC), a tiny fraction of the state-controlled firm’s 2.6 billion euros ($2.8 billion) in unpaid bills. Argyros picks up only occasional work as an odd-job man. “When you only work once a week, what will you pay first?” said the 35-year-old, who lives in a tiny apartment in an Athens suburb with his unemployed wife and four small children. The Argyros family are emblematic of deepening poverty in Greece following seven years of austerity demanded by the country’s international creditors. They burn wood to heat their home in winter, food is cooked on a small gas stove, and hot water is scarce.

The only evening light is the blue glare of a TV screen, for fear of racking up more debt. Five-watt lightbulbs provide a dim glow and Argyros worries about the effect on their eyesight. More than 40% of Greeks are behind on their utility bills, higher than anywhere else in Europe. People in poor neighborhoods are also increasingly turning to energy fraud, meaning that the problem for PPC is much higher than the mountain of unpaid bills suggests. Power theft is costing PPC around €500-600 million a year in lost income, an industry official said, requesting anonymity because he was not authorized to divulge the numbers. Public disclosures by the Hellenic Electricity Distribution Network Operator HEDNO, which checks meters, show that verified cases of theft climbed to 10,600 last year, up from 8,880 in 2013 and 4,470 in 2012.

Authorities believe theft is far higher than the cases verified by HEDNO, another official said, declining to be named. Households in the country are equipped with analog meters, which are easy to hack. One of the most common tricks is using magnets, which slow down the rotating coils to show less consumption than the real amount, a HEDNO official said. Some websites even offer consumers tips and tricks on power fraud. For households who have had their electricity cut off, a group of activists calling themselves the “I Won’t Pay” movement have taken it upon themselves to reconnect the supply. The group says it has done hundreds this year. PPC, which has a 90% share of the retail market and 60% of the wholesale market, is supposed to reduce this dominance to less than 50% by 2020 under Greece’s third, 86 billion euro bailout deal.

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It’s time to make this personal. Against Schäuble and Dijsselbloem, Merkel and Rutte and Hollande. They are killing people. There’s nothing innocent about that. Making it personal is the only thing that’ll work. Bring it to their doorstep. Literally to their doorstep.

On Dimitris Christoulas: ‘He Is A Part Of History Now’ (AlJ)

On the morning of April 4, 2012, a gunshot sounded amid the city’s hustle and bustle. As passers-by rushed to work through Syntagma Square in central Athens, Dimitris Christoulas had taken his life with a shotgun a few metres from the Greek parliament. The 77-year-old pensioner, a former pharmacist, had left a note in his pocket. “The occupation government literally annihilated my ability to survive,” he wrote. “I depended on my decent pension, which I alone and without the support of the state, paid for 35 years.” His only daughter, Emmy Christoula, had known nothing about his plans. But, speaking as the fifth anniversary of his death approached, she confidently described her father’s public suicide as a political act. Her father woke up in the morning, got dressed, and wrote two identical notes – putting one in his pocket and leaving the other on his kitchen table for his daughter to read.

He took the subway to the square, site of the country’s most important protests for more than a century. When Dimitris arrived at Syntagma, he texted his daughter – “It’s the end, Emmy,” he wrote – and switched off his phone. Greek morning television talk shows broke the news of Christoulas’s suicide a few minutes after it happened. Hundreds soon gathered to pay their respects. Flowers, letters and notes of resistance were left by the tree where he chose to take his life. Spaniards wrote songs of his resistance. Irish poets wrote odes to him. His funeral turned into a rally against the austerity measures imposed on Greece, when the country’s debt payments became too onerous to pay amid the worldwide recession. The country’s creditors called for harsh spending cuts and steep tax increases so that Athens could make the payments. Protests and riots became a staple of life in Athens in the years that followed.

Five years on from Christoulas’ suicide, the crisis has only grown deeper. Greece’s debt is 175% of its GDP. Greek officials have cut retirees’ pensions 17 times to around half of their value before the recession, according to the Greek Association of Pensioners. Budget cuts have also been implemented in education, health, and welfare services. Lenders must improve most government decisions. Unemployment stands at more than 23%. A fourth bailout agreement is expected soon. According to the Greek Statistical Service, suicides have increased by 68% since 2008, the first year Greek economic growth stagnated. “I’m of a certain age and don’t have the power of dynamically reacting,” wrote Christoulas in his suicide note. “I can’t find another solution to a dignified end, as soon I’d have to start scavenging through the garbage to find my own food.”

Christoulas’ suicide became a symbol of the devastating effects of austerity on the Greek people. Until then, the majority of the stories published in the international media on the issue were about lazy Greeks who deserved their comeuppance for living off debt for so many years. “[My father] taught me that you shouldn’t just follow history, you should write it,” said Emmy, adding that she has accepted her father’s decision but still aches from his absence. Emmy describes her father as a wiry and lean man who had long participated in public life. Her first childhood memories include sitting on his shoulders at pro-democracy rallies against Greece’s military government in the 1970s. The police brutality didn’t deter father and daughter from participating.

Read more …

Apr 042017
 
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Esther Bubley Child living in alley near US Capitol 1943

 


Living Standard Will Fall Without Productivity Boost, Warns IMF (G.)
67% Of Low-Income Americans Worry A Lot About Hunger, Homelessness (ZH)
The Issue With China Isn’t Trade, It’s Excess Savings (Pettis)
Toronto Bidding Wars So Fierce That Homebuyers Skip Inspections
Can Housing Bubbles Be Stopped? (WSJ)
Cernovich Explains How He Learned About Susan Rice (ZH)
The Deep State Now Works For The ‘Good Guys’ (AlJ)
The Deep State Now Works For The ‘Good Guys’ (AlJ)
Putin Derangement Syndrome Arrives (Matt Taibbi)
Euro MPs ‘Unanimously’ Condemn Dijsselbloem’s No-Show (AFP)
Greek Pensions Hot Potato Puts Tsipras in Tight Spot on Bailout (BBG)
Austerity-Crushed Greek Households Keep Cutting Food Purchases (TNH)
Youth Unemployment Shows Euro-Area Recovery Not Working for All (BBG)
Erdogan Says Turks In Europe Should Defy ‘Grandchildren Of Nazism’ (R.)
Yes, Let’s Allow The Syrian People To Decide For Themselves (Ron Paul)
New Evidence Undermines EU Report Tying Refugee Rescue Group To Smugglers (IC)
The Vanishing Art Of Seizing The Day (Krznaric)

 

 

Interesting. I’m sure Lagarde has no idea why productivity fell. She has some textbook explanation, for sure, but her ‘solutions’ are bland: education and technology. But those were available all along as productivity was falling. Plus, technology costs jobs too. Then again, for the IMF there’s always ‘reforms’ of course: more globalization. But wait: that also costs jobs. Question then: if you lose enough jobs, will productivity rise?

Living Standard Will Fall Without Productivity Boost, Warns IMF (G.)

The head of the IMF has issued a stark warning that living standards will fall around the world unless governments take urgent action to increase productivity by investing in education, cutting red tape and incentivising research and development. Christine Lagarde used a speech in Washington to tell policymakers they could not simply wait for innovation to drive up productivity growth and help living standards recover from the legacy of the global financial crisis. She highlighted a poor global record on productivity growth in recent years and said IMF analysis suggested GDP in advanced economies would be about 5% higher today if the pre-crisis trend had continued for total factor productivity growth – a broad measure of what goes into production, such as research spending.

“That would be the equivalent of adding another Japan – and more – to the global economy,” the IMF managing director in a speech to the American Enterprise Institute. Legarde warned the world could not afford to leave productivity growth in the doldrums. “Another decade of weak productivity growth would seriously undermine the rise in global living standards. Slower growth could also jeopardise the financial and social stability of some countries by making it more difficult to reduce excessive inequality and sustain private debt and public obligations. “Leaning back and waiting for artificial intelligence or other technologies to trigger a productivity revival is simply not an option.”

[..] In the UK, productivity growth has been sluggish for years and is behind most other big economies, prompting the chancellor, Philip Hammond, to pledge more investment in infrastructure and other areas with a £23bn national productivity investment fund. Calling on all governments to do more, Lagarde sought to emphasise productivity as the most important source of higher income and rising living standards. “For example, the average American worker today works only about 17 weeks to live at the annual real income level of the average worker in 1915,” she said. That kind of progress had been seen in many countries, she added. “But this engine of prosperity has slowed down in recent years, with negative consequences for growth and incomes that look very hard to unwind.”

She also echoed concerns over how rapid changes in technology had cost jobs in some sectors, hitting lower skilled workers hardest. Governments must help such workers through targeted education programmes, Lagarde said. That in turn would help solve productivity problems and create more inclusive and sustainable growth.

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Bit of a vague survery, but who today is going to be surprised at the outcome?

67% Of Low-Income Americans Worry A Lot About Hunger, Homelessness (ZH)

Something unexpected happened on the road to Obama’s economic “recovery” – according to Gallup, over the past two years, a record two-thirds, or an average of 67% of lower-income U.S. adults, up from 51% from 2010-2011, have worried “a great deal” about the problem of hunger and homelessness in the country. They are not alone: concern has also increased among middle- and upper-income Americans, but they still worry far less than do lower-income Americans. Some details: since 2001, worry has been highest among those residing in lower-income households, likely because those with limited financial resources are more at risk of going hungry or becoming homeless. A consistent majority of lower-income adults worried about the problem before 2012, but that has only increased in the past five years. Concern among middle-income Americans in 2016-2017 falls just short of the majority level at 47%, while 37% of upper-income Americans are worried.

Rising concern among all income groups could be a result of the political and media attention devoted to U.S. income inequality in recent years. Americans may also worry more about hunger and homelessness when other issues are not dominating the national consciousness, such as the economy and budget deficit were in 2010-2011 and terrorism was in the years after 9/11. Overall, 47% of Americans now worry about hunger and homelessness “a great deal,” according to Gallup’s March 1-5 survey, tied with 2016 as the high in the trend. Previously, concern had been as low as 35% in 2004 and as high as 45% in 2001, the first year Gallup asked the question.

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In which paying off debt is counted towards savings. And not savings at household level.

The Issue With China Isn’t Trade, It’s Excess Savings (Pettis)

trade imbalances were mostly determined by direct differences in the cost of traded goods, while capital flowed from one country to another mainly to balance trade flows. Today, however, conditions have changed dramatically. Capital flows dwarf trade flows, and investment decisions by fund managers determine their direction and size. This has profound implications for trade. Large, persistent trade surpluses such as the one China runs with the U.S. are no longer the consequence of explicitly mercantilist measures. Instead, they’re driven by policies that distort domestic savings rates by subsidizing production at the expense of households. Take Germany, for example. After a decade of trade deficits and high unemployment, worried leaders in Berlin implemented labor reforms in 2003-05 whose main effect was to weaken wage growth.

As unemployment dropped and business profits surged, the reforms also shrunk the share of national income allocated to ordinary households, driving down the consumption share as well. German businesses, blessed with higher profits, responded unhelpfully. They paid down debt instead of investing the profits, increasing the share of national income devoted to savings. As the growing gap between German savings and investment soon became among the largest in history, so did the German trade surplus. German banks exported the excess savings into other European countries, no longer protected by the interest-rate and currency adjustments proscribed under the rules of the euro. By 2009, after insolvency prevented one European country after another from absorbing any more of the German tsunami of capital outflows, these shifted to countries outside Europe.

While the experiences of China and Japan may seem different on the surface, they were broadly similar in impact. China, for example, severely repressed interest rates in order to boost growth. This simultaneously reduced the household share of Chinese GDP to among the lowest ever recorded and raised Chinese savings to among the highest – so high that, even with the fastest-rising investment in the world, China still needed large trade surpluses to make up for weak domestic demand. What happens next is the most confusing part for economists who don’t understand how trade has changed. When new capital pours into advanced economies that have always had easy access to investment – such as the U.S. and southern Europe – it doesn’t boost investment further. Instead it automatically causes savings to contract.

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Not a bubble. Why of sound mind gets into this?

Toronto Bidding Wars So Fierce That Homebuyers Skip Inspections

In Toronto, some homebuyers are so desperate to win bidding wars that they’re rushing to make offers without even getting an inspection. The average price for a detached home in Canada’s largest metropolitan area jumped to C$1.21 million ($905,950) in February, up a third from a year earlier, amid a dearth of properties for sale. In the same period, Toronto-based home-inspection firm Carson Dunlop saw a 34% drop in volume. Murray Parish, president of the Ontario Association of Home Inspectors, said he’s seen a 30% decline at his firm, Parish Home Inspections. “The bottom line is we are in a shortage of supply,’’ said Tasis Giannoukakis, a Century 21 broker based in Toronto, adding that it’s not uncommon to see bids of as much as C$200,000 over the asking price.

“That pressure is what’s causing everybody to remove the conditions on an inspection.’’ Home-price increases in North America’s fourth-largest city and its suburbs have outpaced growth in places including Manhattan, Vancouver, Seattle and San Francisco, leading local officials to search for ways to control price gains and spurring concerns a correction may be coming. The frothy market, buoyed by low interest rates, is resulting in frenzied bidding wars, causing many shoppers to leave once-standard clauses such as a professional home inspection and financing contingencies out of their purchase offers. A move away from inspections isn’t unique to Toronto.

Vancouver, Canada’s hottest real estate market until Toronto took that mantle last year, saw a surge in unconditional purchase offers in the first half of 2016, said Adil Dinani, an agent with Royal LePage West Real Estate Services in the West Coast city. The same is true in hot U.S. markets. Mark Attarha, president of Bay Sotheby’s International Realty, which has seven offices in the in San Francisco Bay area, said he’s seeing a spate of offers without contingencies, along with a raft of “overbidding.” Attarha estimates that 75% of prospective buyers he works with are accepting a home-inspection report from the seller rather than ordering their own or including an inspection clause in their purchase offers.

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Let your house do the work for you: “Demand in Melbourne is driving up valuations of house land plots by $7,500 a week..”

Can Housing Bubbles Be Stopped? (WSJ)

From Australia to Canada, authorities are learning a hard lesson in their efforts to curb the foreign money flooding their property markets: deterrents quickly lose their punch. In recent years, regulators in several countries have raised taxes on residential real-estate purchases, required banks to demand bigger down payments and taxed empty homes—to little long-term avail. Now they are trying again. Australian regulators on Friday ordered banks to limit the flow of interest-only loans—a villain in the U.S. subprime mortgage crisis—to 30% of new loans from about 40% now and to restrict loans to people making small down payments. The country’s corporate regulator said on Monday it was investigating whether lenders and mortgage brokers are inappropriately promoting interest-only loans.

New South Wales state, home to Sydney, is considering a further property-tax rise for foreigners. The moves are an attempt to blunt a price rise that has resumed after the last crackdown starting in late 2014. House prices in Sydney and Melbourne, the nation’s two biggest cities, rose by about 19% and 16% in the year through Mar. 31, much of it in the last six months, according to an analysis by data company CoreLogic released on Monday. The median house price in Sydney hit $821,000 last year, according to Demographia, a U.S. think tank. It said the figure, equivalent to 12.2 times the average annual wage, made Sydney the world’s second most expensive city after Hong Kong on a house-price-to-income ratio. Demand in Melbourne is driving up valuations of house land plots by $7,500 a week, said Giles Bray, a local mortgage broker.

Developers are now building 300-square-foot apartments—roughly a third of the average new American unit—with 8-foot ceiling heights to pack in more units. In the past three years, foreigners have bought thousands of them sight unseen. “They are poorly built and lack light,” Mr. Bray said. The gains are testing the limits of government measures aimed at preventing housing bubbles from developing in cities around the world. The frothiness is driven by ultralow interest rates at central banks that spur investors to hunt for returns in tangible assets. Chinese investors also are a big driver of the phenomenon. The concern: foreign, speculative investors are making properties unaffordable for locals and adding economic risk because these buyers are more likely to flee in a downturn. In 2010 the Reserve Bank of Australia tightened policy to cool things off. But lately the central bank has been keeping rates at a record-low 1.5% to aid an economy that is still struggling to adjust at the end of a long mining boom.

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The Susan Rice story has many quirks. A big one: what did Obama know? RandPaul wants her to testify under oath to that. It could go a long way towards proving Trump’s wiretap allegations. But also very odd: BBG and NYT sat on the story for -at least- days. And yes, Cernovich is a bit of an oddball. But he has proof, something that’s still sorely lacking for all of the Russia narrative. So much so that it doesn’t matter anymore if proof comes eventually: the US media have published millions of words of innuendo and accusations without any proof. That may work in the echo chamber, but it kills your credibility outside of it.

Cernovich Explains How He Learned About Susan Rice (ZH)

Ever since Mike Cernovich dropped the bombshell report over the weekend outing Obama’s National Security Advisor, Susan Rice, as the person behind the unmasking of the identity of various members of Trump’s team who were ‘incidentally’ surveilled during the 2016 campaign, a report which was subsequently confirmed by Eli Lake of Bloomberg earlier this morning, everyone has been wondering who within the Trump White House or the intelligence community supplied him with such a massive scoop. But, as it turns out, Cernovich didn’t need a ‘deep throat’ within the NSA or CIA for his blockbuster scoop, all he needed was some well-placed sources inside of a couple of America’s corrupt mainstream media outlets. As Cernovich explains below, his sources for the Susan Rice story were actually folks working at Bloomberg and the New York Times who revealed that both Eli Lake (Bloomberg) and Maggie Haberman (NYT) were sitting on the Susan Rice story in order to protect the Obama administration.

“Maggie Haberman had it. She will not run any articles that are critical of the Obama administration.” “Eli Lake had it. He didn’t want to run it and Bloomberg didn’t want to run it because it vindicates Trump’s claim that he had been spied upon. And Eli Lake is a ‘never Trumper.’ Bloomberg was a ‘never Trump’ publication.”

“I’m showing you the politics of ‘real journalism’. ‘Real journalism’ is that Bloomberg had it and the New York Times had it but they wouldn’t run it because they don’t want to run any stories that would make Obama look bad or that will vindicate Trump. They only want to run stories that make Trump look bad so that’s why they sat on it.”

“So where did I get the story? I didn’t get it from the intelligence community. Everybody’s trying to figure out where I got it from. I got it from somebody who works in one of those media companies. I have spies in every media organization. I got people in news rooms. I got it from a source within the news room who said ‘Cernovich, they’re sitting on this story, they’re not going to run it, so you can run it’.”

“If you’re at Bloomberg, I have people in there. If you’re at the New York Times, I have people in there. LA Times, Washington Post, you name it, I have my people in there. I got IT people in every major news room in this country. The IT people see every email so that’s how I knew it.”

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“Anyone, including experienced journalists, who raises questions or recommends caution is immediately dismissed as a Putin stooge or a Trump apologist by an army of progressives convinced, with obdurate certainty, of who is guilty and what is true.”

The Deep State Now Works For The ‘Good Guys’ (AlJ)

US progressives are clinging on to false heroes like the FBI and CIA in their existential battle to dethrone Trump. [..] In Comey’s case, his rather abrupt and miraculous transformation from devil to saint came after his March 20 testimony before a House Intelligence Committee where he finally, belatedly, confirmed that the FBI was indeed investigating the disturbing, cob-web-like connections between the Trump campaign team and Russia before, during and after the presidential election. Ah, now that the G-men are on the case, the indictments would surely follow, the familiar progressive chorus wrote. Trump’s days are numbered. Resignation and impeachment are in the offing. The cavalry is riding to America’s rescue. Comey’s role in torpedoing Clinton’s chances at becoming America’s first female president has fast receded into the rear-view mirror.

The political executioner has become a prince of probity and the rule of law. Defying history and credulity, joining Comey and the FBI in the progressives’ new-found white knight brigade are, incredibly, the CIA and the National Security Agency (NSA). Like the FBI, the spooks are also being widely celebrated as guardian angels in the existential battle to dethrone the treasonous King. The thinking – such as it is – goes something like this: the CIA and NSA must have the surreptitious “goods” on Trump and his gang of Russian mob and FSB consorting thugs that they will, in time, share with Americans and the world. The “goods” perhaps involves oodles of various types of intercepted and incriminating communications and possibly even a notorious Moscow hotel videotape, starring the deviant king himself.

And the hope is that, taken together, it will all eventually expose and doom him. Apparently, these days, the “deep state” is no longer working for the bad guys, but the good guys. It has, in effect, changed sides. Sure, the deep state may have denied Clinton her rightful and long overdue crown and has, for years, systematically spied on, collected and stored intimate details about the lives of countless people with little or no oversight, let alone a warrant. But progressives are too busy letting bygones be bygones to remember. The good guys have fixed their crosshairs on Trump and treacherous company and that’s all that matters.

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“One way we recognize a mass hysteria movement is that everyone who doesn’t believe is accused of being in on the plot..” Journalism should not ever be about ‘belief’, but about proven facts. But there are none. oh, and the syndrome doesn’t ‘arrive’, it’s been here for a long time.

Putin Derangement Syndrome Arrives (Matt Taibbi)

So Michael Flynn, who was Donald Trump’s national security adviser before he got busted talking out of school to Russia’s ambassador, has reportedly offered to testify in exchange for immunity. For seemingly the 100th time, social media is exploding. This is it! The big reveal! Perhaps it will come off just the way people are expecting. Perhaps Flynn will get a deal, walk into the House or the Senate surrounded by a phalanx of lawyers, and unspool the whole sordid conspiracy. He will explain that Donald Trump, compromised by ancient deals with Russian mobsters, and perhaps even blackmailed by an unspeakable KGB sex tape, made a secret deal. He’ll say Trump agreed to downplay the obvious benefits of an armed proxy war in Ukraine with nuclear-armed Russia in exchange for Vladimir Putin’s help in stealing the emails of Debbie Wasserman-Schultz and John Podesta.

I personally would be surprised if this turned out to be the narrative, mainly because we haven’t seen any real evidence of it. But episodes like the Flynn story have even the most careful reporters paralyzed. What if, tomorrow, it all turns out to be true? What if reality does turn out to be a massive connect-the-dots image of St. Basil’s Cathedral sitting atop the White House? (This was suddenly legitimate British conspiracist Louise Mensch’s construction in The New York Times last week.) What if all the Glenn Beck-style far-out charts with the circles and arrows somehow all make sense? This is one of the tricks that keeps every good conspiracy theory going. Nobody wants to be the one claiming the emperor has no clothes the day His Highness walks out naked. And this Russia thing has spun out of control into just such an exercise of conspiratorial mass hysteria.

Even I think there should be a legitimate independent investigation – one that, given Trump’s history, might uncover all sorts of things. But almost irrespective of what ends up being uncovered on the Trump side, the public prosecution of this affair has taken on a malevolent life of its own. One way we recognize a mass hysteria movement is that everyone who doesn’t believe is accused of being in on the plot. This has been going on virtually unrestrained in both political and media circles in recent weeks.

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Illustrating what a dud the European Parliament is. They want the man who’s negotiating with Greece to come explain what he does, and he simply refuses. Imagine that in Congress. A Dutch MP said Dijsselbloem is now effectively a ‘persona non grata’ in the European Parliament. And remember: the Eurogroup has no official status, so what can thay do?

Euro MPs ‘Unanimously’ Condemn Dijsselbloem’s No-Show (AFP)

European Parliament lawmakers on Monday “unanimously condemned” the refusal by Eurogroup chief Jeroen Dijsselbloem to appear at a hearing on Greece this week. Dijsselbloem, who is also the Dutch finance minister, has been facing calls to step down since he suggested in an interview in a German newspaper that southern European countries blew their money on “drinks and women”. In the wake of the controversy, the parliament had invited the head of the Eurogroup of eurozone finance ministers to discuss the stalled Greek bailout at this week’s plenary session in Strasbourg. Expectations were that MEP’s would use the opportunity to harshly criticise Dijsselbloem.

“Unanimous condemnation by the European Parliament against Jeroen Dijsselbloem for umpteenth refusal to answer questions on sacrifices made by our citizens,” European Parliament chief Antonio Tajani posted on Twitter. MEP Gianni Pittella, the head of the left-of-centre S&D group, said Dijsselbloem’s refusal to attend was “a further slight after his previous shameful remarks”. “He should resign,” Pittella added. In a letter on Thursday, Dijsselbloem said he was unable to attend the hearing because of a scheduling conflict.

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To repeat: Why are Greek pension costs relatively high? Because “The country hasn’t yet put in place a proper social welfare system”. And it can’t of course, because that would cost money it’s not allowed to spend by Brussels. Let’s see all benefits expenditures for all nations, and then talk again.

Greek Pensions Hot Potato Puts Tsipras in Tight Spot on Bailout (BBG)

Greece is set to miss yet another self-imposed deadline with no accord expected when the Eurogroup meets in Malta on Friday. While there has been “a lot of progress,” there will be no agreement on April 7, Jeroen Dijsselbloem, the group’s chief, said on March 31. “That’s too early.” Europe has become impatient with Greece as the region prepares for Brexit and the threat from emerging populist movements. The failure to reach an accord stems in part from the conflicting political interests of the two sides — Tsipras doesn’t want to face a scheduled general election in 2019 at the same time as pensioners take a cut of as much as 30% in their monthly payments. Creditors worry that if the plan is put in place after 2019, a new government that’s not a signatory of the accord might not implement it.

The IMF, backed by Greece’s euro-area creditors, is pushing Athens to save €1.8 billion, or 1% of GDP, from pension cuts. Greece spends more than 13.3% of its GDP on old-age pensions, the highest proportion in the EU, Eurostat figures show. Greece, which crossed what it once characterized as a red line and accepted the need for pension cuts, is asking creditors to give the country more time to see how measures agreed to last year work before embarking on anything new. The country hasn’t yet put in place a proper social welfare system , making pensions the de facto safety net for many families, supporting several generations. A survey in January showed that 49% of households relied on pensions as a primary source of income.

Further cuts in pensions has become a thorny issue to sell at home as pensioners use their ever-shrinking income to support jobless children at time when youth unemployment stands at more than 40%. Take Panagiotis Papapetrou, for example. The 65-year-old retiree and his wife, who collectively take home a pension of €1,480 a month, support two grown children. “Not only can we not afford any kind of entertainment, but we also have made cuts in our diet,” he said. “We eat less meat and we seek to buy cheap goods.”

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This economy cannot survive. It will keep on shrinking. There is no other possibility as long as there is a Troika. Economies run on consumer spending, and that keeps on falling in Greece. It needs stimulus, not austerity. Europe is creating a powder keg here.

Austerity-Crushed Greek Households Keep Cutting Food Purchases (TNH)

More than seven years into a brutal economic crisis worsened by austerity measures hitting workers, pensioners and the poor, Greek households are continuing to cut food purchases, even for essential items. Repeated salary and pension cuts have left millions unable to keep up, with a survey by the Marketing Laboratory of the Athens University of Economics and Business showing consumers spending almost €40 ($42.72) less a month at supermarkets this year compared to 2016. Average monthly household expenditure came to €274 against €310 a year earlier, with the 13% decline also reflected on supermarket turnover as the sector struggles to lure customers despite sales and 2-for-1 deals.

The study was aimed at average consumers who make up the bulk of supermarket customers drawing a bleak picture of their ability to buy what they want and as more turn away from brand names in favor of cheaper goods. Some 63.4% of Greeks said they buy fewer products and 45.8% buy only the absolute necessities with 54.4% turning to private-label chain products. Data from Nielsen researchers showed that in 2016, some 51% of brand products sold in supermarket were on special offer, up from 33.1% in 2009 and after super markets wouldn’t cut prices despite the crisis, until they were forced to do so by lagging sales. Sales fell another 4% in 2016, driving the cumulative downturn to 18% since 2009, as the crisis began and a year before the then-ruling PASOK Socialists asked for what turned into €326 billion in three bailouts.

The data compiled by Nielsen researchers showed that besides a sharp decline in demand and with more people turning as well to generic brands and looking for offers, that mergers and acquisitions had taken a big bite out of the sector. The phenomenon is likely to continue for several more years with analysts expecting a further drop of 2-3%. In 2016, the sales value of food retailing – including small grocery stores – amounted to about €10.78 billion, down 4.1% from 2015, pushing the sector back to 2005 levels and showing the devastating effect of the crisis and harsh austerity measures that brought big pay cuts, tax hikes, slashed pensions and worker firings. The number of small food retail stores has dropped from about 32,000 in 2005 to 27,000 in 2015 with major chains showing their sales values plummet at the same time with only the discount food chain Lidl showing increases.

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It shows Euro area is not working. Period.

Youth Unemployment Shows Euro-Area Recovery Not Working for All (BBG)

For all the continued momentum in the euro-area recovery, differing prospects for young people across the bloc show the wounds of the debt crisis remain very raw. The unemployment rate for those under age 25 was at 19.4% in February, according to data on Monday. While that’s an improvement compared with a year ago – and is the lowest since 2009 – it’s more than twice the total for the euro-area of 9.5%. In four southern European countries – Greece, Spain, Italy and Cyprus – at least three in 10 young people are still out of work. [..] the unevenness across geography and age groups show how complicated it is for the ECB to set monetary policy for 19 nations.

In Germany, the youth unemployment rate is just 6.6%. That’s lower than the overall rate in Spain has ever been since the euro’s introduction. In Greece, still struggling seven years after its first bailout, the figure in December was almost seven times greater than Germany’s, at 45.2%. Draghi has said that monetary policy can’t take the whole weight of the economic recovery, and repeatedly urged governments to implement reforms to reduce structural unemployment. That’s made harder by the rise of populist parties across Europe, with France and Germany all facing general elections in the coming months.

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Waiting for real craziness over the next 2 weeks.

Erdogan Says Turks In Europe Should Defy ‘Grandchildren Of Nazism’ (R.)

President Tayyip Erdogan on Monday called on Turkish voters in Europe to defy the “grandchildren of Nazism” and back a referendum this month on changing the constitution, comments likely to cause further ire in Europe. Erdogan has repeatedly lashed out at European countries, including Germany and the Netherlands, in campaigning for the referendum, accusing them of “Nazi-like” tactics for banning his ministers from speaking to rallies of Turkish voters abroad. Both the Germans and Dutch have been incensed by the comparisons to Nazism and German Chancellor Angela Merkel has said the references must stop. “With this determination, we will never allow three or four European fascists … from harming this country’s honor and pride,” Erdogan told a packed crowd of flag-waving supporters in the Black Sea city of Rize, where his family comes from.

“I call on my brothers and sisters voting in Europe…give the appropriate answer to those imposing this fascist oppression and the grandchildren of Nazism.” Erdogan is counting on the support of expatriates in Europe, including the 1.4 million Turks eligible to vote in Germany, to pass constitutional changes that would give him sweeping presidential powers. But ties with Europe have deteriorated in the run-up to the campaign. Erdogan last month said Turkey would reevaluate its relationship with the bloc, and may even hold a second referendum on whether to continue accession talks. On Monday, he said he could take the issue of whether Turkey should restore the death penalty to referendum if necessary. “The European Union will not like this. But I don’t care what Hans, George or Helga say, I care what Hasan, Ahmet, Mehmet, Ayse and Fatma say. I care what God says… If necessary, we will take this issue to another referendum as well,” he told the rally.

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“Congress can rein him in with very little effort by saying no money can be spent to deploy US troops to areas where they may encounter hostilities unless a state of war is declared.”

Yes, Let’s Allow The Syrian People To Decide For Themselves (Ron Paul)

Is common sense beginning to creep into US policy in the Middle East? Last week Secretary of State Rex Tillerson said that the longer-term status of Syrian President Assad would be “decided by the Syrian people.” The media reported this as a radical shift in US foreign policy, but isn’t this just stating what should be obvious? What gives any country the right to determine who rules someone else? Washington is currently paralyzed by evidence-free rumors that the Russians somehow influenced our elections, but no one blinks an eye when Washington declares that one or another foreign leader “must go.” It’s only too bad that President Obama hadn’t followed this back in 2011 instead of declaring that Assad had to go and then arming rebel groups who ended up being allies with al-Qaeda.

Imagine how many thousands of lives and billions of dollars would have been saved by following this policy in the first place. Imagine the millions of refugees who could still be in their homes, running their businesses, living their lives. Will the Trump Administration actually follow through on Tillerson’s Syria policy statement? It is too early to tell. The President has illegally sent hundreds of US troops to fight on the ground in Syria. Current US positions in eastern Syria suggest that Washington may be looking to carve out parts of oil-rich areas of the country for some kind of future federation. The White House followed up on Tillerson’s comments by stating that getting rid of Assad was no longer a top priority for the US. This also sounds good. But does this mean that once the current top priority, destroying ISIS, is completed, Washington may return to its active measures to unseat the Syrian president?

Neocons in Washington still insist that the rise of ISIS in Syria was due to President Assad, but in fact ISIS did not appear in Syria until the US began trying to overthrow Assad. They haven’t given up on their desire to overthrow the Syrian government and they do have influence in this Administration. If the Trump Administration is serious about letting the people of Syria decide their fate he needs to take concrete steps. Rather than sending in more troops to fight an ISIS already on its last legs, he must bring US troops home and prohibit the CIA from further destabilizing the country.

It would also be nice if Congress would wake up from its long slumber and start following the Constitution. The President (and his predecessors) have taken this country to war repeatedly without proper Constitutionally-required authority to do so. The president has reportedly decided not to even bother announcing where next he plans to send the troops. Congress can rein him in with very little effort by saying no money can be spent to deploy US troops to areas where they may encounter hostilities unless a state of war is declared.

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Frontex plays a very ugly role here. We saw that coming from miles away.

New Evidence Undermines EU Report Tying Refugee Rescue Group To Smugglers (IC)

Last month, an Italian prosecutor opened an investigation into whether nonprofits working to rescue refugees in the Mediterranean had connections to smuggling operations. “We want to know who is behind all these humanitarian groups that have proliferated in the last few years,” the prosecutor said, and “where all the money they have is coming from.” The implication of the investigation is inflammatory: Why would humanitarian groups want to have anything to do with human traffickers or smugglers? But the idea that nonprofits are directly involved in smuggling people into Europe has swept through conservative media in recent months, fueled by a news report that the EU’s border agency, Frontex, had “accused charities operating in the Mediterranean of colluding with people smugglers.”

The report, which appeared in the Financial Times in December, didn’t name any particular charities, and it quickly started to show holes; within a week, the paper issued a correction and Frontex distanced itself from the accusations. Despite the walk-back, the story stuck, and the Italian prosecutor cited Frontex’s concerns about “collusion with smugglers” in announcing his investigation. The Intercept has obtained a full copy of the Frontex report on which the Financial Times story was based. The report, along with video evidence and interviews with rescue workers who witnessed the incident described in it, further undermines the allegations of collusion. In the report, Frontex does say that people were smuggled to Europe via an NGO ship. But the report provides little evidence for the allegation, and what it does contain is contradicted by the rescue crew.

The confusion shows the fraught conditions of rescue work in the Mediterranean – where smugglers and opportunists do take advantage of refugees and their rescuers, but where the situation is not always so cut and dry. In dire rescues, if a nonprofit accepts help from nearby Libyan boats, they may have no idea who they are working with. “It’s not us that force the people on the boats and cause them to be out there. But once they are out there, we all have to apply maritime law,” said Ruben Neugebauer, who works with the group Sea-Watch. “If there is a boat in distress, we are obliged to help, but also a potential smuggler is also obliged to help.”

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Watching TV. Still far more important than other media. “..television takes up a full 50% of our leisure time..” and “if you live to 75, you will have spent around nine years of your life watching television.”

The Vanishing Art Of Seizing The Day (Krznaric)

Carpe diem – seize the day – is one of the oldest philosophical mottos in Western history. First uttered by the Roman poet Horace over 2,000 years ago, it retains an extraordinary resonance in popular culture. Ask someone to spell out their philosophy of life and there’s a good chance they will say something like “seize the day” or “live as if there’s no tomorrow” – even if they appear to be trapped by routine or paralysed by procrastination. It’s a message found in Hollywood films like Dead Poets Society, in one of the most successful brand campaigns of the last century (“Just Do It”), and in the social media hashtag #yolo (“you only live once”). Almost every language has an equivalent expression for the original Latin phrase. Carpe diem has been a call to arms for everyone from the Jewish sage Hillel the Elder, who in the first century bce asked, “If not now, when?”, to the Rastafarian sage Bob Marley, who sang out: “Wake up and live!”

However, in the course of writing my new book on the vanishing art of seizing the day, I discovered that carpe diem has been hijacked – in part, by the most popular leisure pursuit in the Western world. I loved television as a kid, fitting in an hour before school each day (Thunderbirds, Superheroes) and at least an hour-and-a-half before dinner (5.30: Wheel of Fortune, 6.00: The Goodies, 6.30: Dr Who). What I didn’t realise as a teenager, as I sat on my beanbag in suburban Sydney making the agonising decision whether to break tradition and watch Gilligan’s Island instead of The Goodies, was that I was absorbed in a ritual that ranks as one of the most momentous cultural transformations ever experienced by humankind. Within less than 50 years of the first ever television demonstration in

Selfridges London department store in 1925, around 99 per cent of Western households had a set. Today the typical European or American watches an average of around three hours per day, whether it’s on flat-screen TVs, computers, phones or other devices. This is apart from time spent engaged in digital pursuits such as internet surfing, social media, texting or video games. So television takes up a full 50% of our leisure time, and more time than we spend doing any other single activity apart from work or sleep. Perhaps the best way to grasp how much TV has colonised our lives is to tape the following statistic to your remote control: assuming your viewing habits are somewhere near average, if you live to 75, you will have spent around nine years of your life watching television.

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Mar 252017
 
 March 25, 2017  Posted by at 9:07 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Dorothea Lange Drought hit OK farm family on way to CA 1936

 


With Health Bill Down, Trump Can Still Unleash HHS To Bedevil Obamacare (MW)
The Heart Of The American Dream Has Stopped Beating (DiMartino Booth)
Pension Crisis Too Big for Markets to Ignore (Danielle DiMartino Booth)
The Swamp Drains Trump (Jim Kunstler)
It Was A Very Bad Earnings Season (Snider)
Flynn and Turkish Officials Discussed Kidnapping Erdogan Foe From US (WSJ)
A ‘Deaths Of Despair’ Crisis Is Gripping America (BI)
New Canadian Budget Drops Obsession With Balanced Budgets (Star)
US Debt of $20 Trillion Visualized in Stacks of Physical Cash (Demonocracy)
The Pound Is Going To Take A Huge Hit, According To Deutsche Bank (Ind.)
Leaving Euro Would Not Help France And Italy – ECB Chief Economist (Ind.)
Greece to Break Off Face-to-Face Talks With Creditors (BBG)
Where Next For Greece? (Makropolis)

 

 

Big defeat. But not a knock-out. Trump needs better advisers.

With Health Bill Down, Trump Can Still Unleash HHS To Bedevil Obamacare (MW)

In a spectacular turn of events, a shortage of support prompted Republican leadership to pull their health-care plan from a House of Representatives vote on Friday. The move means that the Affordable Care Act, also know as Obamacare, will remain in place “for the foreseeable future,” according to House Speaker Paul Ryan. Democrats, ACA supporters and opponents of the Republican American Health Care Act quickly hailed the development as a victory. But what was a legislative battle now is likely to move into the executive realm and the Department of Health and Human Services, led by longtime ACA opponent Dr. Tom Price. Experts say there is plenty that President Donald Trump’s administration can do to undermine the ACA. And any poor deterioration in the performance of the ACA could give Republicans a new opening: Trump indicated Friday that he might re-visit health care after Obamacare “explodes.”

“It’s going to be interesting to see how they balance the responsibility for ensuring the government functions with their hatred for the law,” said Spencer Perlman, director of health-care research at Veda Partners. “If they want to completely sabotage it they probably could, and call it a self-fulfilling prophecy.” The latter is all the more likely because the ACA works best with the help of administrative support and resources. Think of the ACA as a plant, one that requires light and tending-to, that gets inherited by a downright hostile owner. The best example of this occurred during enrollment for 2017 exchange plans. The months-long enrollment period began under former President Barack Obama’s administration, which passed the ACA, and ended under President Trump’s administration.

Enrollment, which had looked like it was on track to surpass previous years, dropped off following the transition, which many attributed to a dearth of marketing and promotional activity under Trump. Plus, the ACA’s problems — which may have helped elect Trump — still exist. Many insurers, including UnitedHealth, Humana and Aetna have exited the exchanges on which many participants purchase health insurance, contributing to a 25% on average increase in premiums. “The biggest thing that needs to be done is figuring out some way to attract young, healthy people” to exchange plans, Perlman said. But HHS, under Price’s leadership, seems unlikely to try to improve the law. And “purposefully sabotaging the exchanges and the ACA probably isn’t difficult,” said Perlman. And for that matter, HHS is “probably the only game in town right now” that can do it.

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“..55% of mortgages in active foreclosure were originated between 2004 and 2008..”

The Heart Of The American Dream Has Stopped Beating (DiMartino Booth)

According to ATTOM Data Solutions, the new parent company of RealtyTrac, default notices, scheduled auctions and bank repossessions slid to 933,045 last year, the lowest tally since the 717,522 reported in 2006. Is the final chapter written? Not if you live in judicial foreclosure states such as New York, New Jersey and Florida where ‘legacy’ foreclosures take years to clear. At the end of last year, 55% of mortgages in active foreclosure were originated between 2004 and 2008. Factor in what’s still in the pipeline and one in ten circa 2006 homeowners will have lost their homes before it is all said and done. That helps explain one part of the chart below which was generously shared with me by one Dr. Gates. Longtime readers of these missives will recognize the nom de plume of my inside-industry economic sleuth. His first take on this sad visual, was that, “The heart of the American Dream has stopped beating.” Did that stop your heart as it did my own?

As you can see, after a steady 40-year build, owner-occupied housing has stagnated and sits at the lowest level since 2004. This has sent the homeownership rate crashing to 63.4%, the lowest since 1967. It would be nice to think that things were looking up for would-be homeowners. But it’s difficult to be overly optimistic when the local newspaper reports that house flipping in the Dallas-Ft. Worth area rose 21% in 2016, seven times the national rate. In all, 193,000 properties nationwide were flipped for a quick inside-12-months profit last year, a 3.1 increase to a nine-year high. Moreover, the median age of a flipped home rose to a two-decade high of 37 years, about double the median age of homes flipped before the crisis hit. That translated into a median gross profit of $69,624 on a median selling price of $189,900 in 2016, a neat 49.2% margin, the highest on record. Awesome!

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Very good -and scary- from Danielle DiMartino Booth. I’ve often asked: what happened to pension funds investing in AAA paper? But there’s more: without accounting tricks dominoes would already be falling. This is not some coincidence, it’s actual policy as conducted by The American Academy of Actuaries.

Pension Crisis Too Big for Markets to Ignore (Danielle DiMartino Booth)

The question is why haven’t the headlines presaged pension implosions? As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making. Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007. Credit rating firms have begun downgrading states and municipalities whose pensions risk overwhelming their budgets. New Jersey and the cities of Chicago, Houston and Dallas are some of the issuers in the crosshairs.

Morgan Stanley says municipal bond issuance is down this year in part because of borrowers are wary of running up new debts to effectively service pensions. Federal Reserve data show that in 1952, the average public pension had 96% of its portfolio invested in bonds and cash equivalents. Assets matched future liabilities. But a loosening of state laws in the 1980s opened the door to riskier investments. In 1992, fixed income and cash had fallen to an average of 47% of holdings. By 2016, these safe investments had declined to 27%. It’s no coincidence that pensions’ flight from safety has coincided with the drop in interest rates. That said, unlike their private peers, public pensions discount their liabilities using the rate of returns they assume their overall portfolio will generate.

In fiscal 2016, which ended June 30th, the average return for public pensions was somewhere in the neighborhood of 1.5%. Corporations’ accounting rules dictate the use of more realistic bond yields to discount their pensions’ future liabilities. Put differently, companies have been forced to set aside something closer to what it will really cost to service their obligations as opposed to the fantasy figures allowed among public pensions. So why not just flip the switch and require truth and honesty in public pension math? Too many cities and potentially states would buckle under the weight of more realistic assumed rates of return. By some estimates, unfunded liabilities would triple to upwards of $6 trillion if the prevailing yields on Treasuries were used.

That would translate into much steeper funding requirements at a time when budgets are already severely constrained. Pockets of the country would face essential public service budgets being slashed to dangerous levels. What’s a pension to do? Increasingly, the answer is swing for the fences. Forget the fact that just under half of pension assets are in the second-most overvalued stock market in history. Even as Fed officials publicly fret about commercial real estate valuations, pensions have socked away 8% of their portfolios into this less than liquid asset class. Even further out on the risk and liquidity spectrum is the 10% that pensions have allocated to private equity and limited partnerships.

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“While the nation remains entertained by all this, the Potemkin financial system will wobble, crash, and burn and the humiliation of Donald Trump will be complete.”

The Swamp Drains Trump (Jim Kunstler)

One can’t help marveling at the way the “Russian interference” motif has shifted the spotlight off the substance of what Wikileaks revealed about Clinton Foundation and DNC misdeeds onto Trump campaign officials “colluding” with Russians, supposedly to support their interference in the election. It’s true that the election is way over and the public is no longer concerned with Hillary or her foundation (which is closing shop anyway). But the switcheroo is impressive, and quite confusing, considering recently retired NSA James Clapper just two weeks ago said on NBC’s Meet the Press that there was “no evidence” of collusion Between Trump and Russia. Okay… uh, say what? On Monday, FBI Director James Comey revealed that his agency had been investigating the Trump Campaign since at least last August. Is that so…? Investigating how? Some sort of electronic surveillance?

Well, what else would they do nowadays? Send a gumshoe to a hotel room where he could press his ear on a drinking glass against the wall to eavesdrop on Paul Manafort? I don’t think so. Of course they were sifting through emails, phone calls, and every other sort of electronic communication. Trump’s big blunder was to tweet that he’d been “wiretapped.” Like the FBI patched into a bunch of cables with alligator clips in the basement of Trump Tower … or planted a “bug” in the earpiece of his bedside phone. How quaint. We also don’t have ice boxes anymore, though plenty of struggling weight-watchers across the land speak guiltily of “raiding the icebox.” But if it’s true, as Mr. Comey said, that the FBI had been investigating Trump’s campaign, the people around him, and Trump himself, since August, how could they not have captured some of Trump’s conversations?

[..] So, the long and the short of it is that the RussiaGate story is spinning out of control, and Trump’s adversaries — who go well beyond Congress into the Deep State — might be getting enough leverage to dump Trump. Either they will maneuver him and his people into some kind of perjury rap, or they will tie up the government in such a web of investigative procedural rigmarole that all the country lawyers who ever snapped their galluses will never be able to unravel it. While the nation remains entertained by all this, the Potemkin financial system will wobble, crash, and burn and the humiliation of Donald Trump will be complete. Abandoned by the Republican Party, isolated and crazed in the White House, tweeting out mad appeals to heaven, he’ll either voluntarily pass the baton to Mike Pence or he will be declared unfit to serve and removed under the 25th amendment.

The after-effects of that will be something to behold: a “lose-lose” for both old-line political parties. The Trumpists will never forgive the Republican Party, and the Democrats will have gained nothing. Don’t let the door bang you on the butt on your way out.

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What a surprise.

It Was A Very Bad Earnings Season (Snider)

With nearly all of the S&P 500 companies having reported their Q4 numbers, we can safely claim that it was a very bad earnings season. It may seem incredulous to categorize the quarter that way given that EPS growth (as reported) was +29%, but even that rate tells us something significant about how there is, actually, a relationship between economy and at least corporate profits. Keynes famously said that we should never worry about the long run for there we will all be dead, but EPS has arrived at the long run and there is still quite a lot of living to do. As late as October, analysts were projecting $29 in earnings for the S&P 500 in Q4 2016. As of the middle of the earnings reports last month, that estimate suddenly dropped to just $26.37. In the month since that time, with the almost all of the rest having now reported, the current figure is just $24.15 – a decline of over $2 in four weeks. Therefore, 29% growth is hugely disappointing because it wasn’t 55% growth as was projected when the quarter began.

It is also the timing of the downgrades that is important as it relates to both “reflation” and the economy meant to support it. All throughout last year, in the aftermath of the near-recession to start 2016, EPS estimates for Q4 (and beyond) were very stable, unusually so given the recent past. That shows us how analysts, at least, were expecting the economy to go once it got past “global turmoil.” It was the “V” shaped rebound typical for past cyclical behavior. But it wasn’t until companies actually started reporting earnings that the belief was tested and then found severely lacking. With just $24.15 for Q4, total EPS was for the calendar year less than $95, the ninth straight quarter below the $100 level. More importantly, on a trailing-twelve month basis, EPS don’t appear to be in any hurry (except in future estimates) to revisit the prior peak of $106 all the way back in Q3 2014.

 

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Like a cheap crime novel: Flynn gets paid $530,000 “on behalf of an Israeli company seeking to export natural gas to Turkey”, and ends up discussing kidnapping Erdogan’s enemy. Oh, and Biden knew about this conversation. So Obama knew too.

Flynn and Turkish Officials Discussed Kidnapping Erdogan Foe From US (WSJ)

Retired Army Lt. Gen. Mike Flynn, while serving as an adviser to the Trump campaign, met with top Turkish government ministers and discussed removing a Muslim cleric from the U.S. and taking him to Turkey, according to former Central Intelligence Agency Director James Woolsey, who attended, and others who were briefed on the meeting. The discussion late last summer involved ideas about how to get Fethullah Gulen, a cleric whom Turkey has accused of orchestrating last summer’s failed military coup, to Turkey without going through the U.S. extradition legal process, according to Mr. Woolsey and those who were briefed. Mr. Woolsey told The Wall Street Journal he arrived at the meeting in New York on Sept. 19 in the middle of the discussion and found the topic startling and the actions being discussed possibly illegal.

The Turkish ministers were interested in open-ended thinking on the subject, and the ideas were raised hypothetically, said the people who were briefed. The ministers in attendance included the son-in-law of Turkish President Recep Tayyip Erdogan and the country’s foreign minister, foreign-lobbying disclosure documents show. Mr. Woolsey said the idea was “a covert step in the dead of night to whisk this guy away.” The discussion, he said, didn’t include actual tactics for removing Mr. Gulen from his U.S. home. If specific plans had been discussed, Mr. Woolsey said, he would have spoken up and questioned their legality. It isn’t known who raised the idea or what Mr. Flynn concluded about it. Price Floyd, a spokesman for Mr. Flynn, who was advising the Trump campaign on national security at the time of the meeting, disputed the account, saying “at no time did Gen. Flynn discuss any illegal actions, nonjudicial physical removal or any other such activities.”

[..] On March 2, weeks after Mr. Flynn’s departure from the Trump administration, the Flynn Intel Group, his consulting firm, filed with the Justice Department as a foreign agent for the government of Turkey. Mr. Trump was unaware Mr. Flynn had been consulting on behalf of the Turkish government when he named him national security adviser, White House press secretary Sean Spicer said this month. In its filing, Mr. Flynn’s firm said its work from August to November “could be construed to have principally benefited the Republic of Turkey.” The filing said his firm’s fee, $530,000, wasn’t paid by the government but by Inovo BV, a Dutch firm owned by a Turkish businessman, Ekim Alptekin.

[..] Mr. Woolsey said he didn’t say anything during the discussion, but later cautioned some attendees that trying to remove Mr. Gulen was a bad idea that might violate U.S. law. Mr. Woolsey said he also informed the U.S. government by notifying Vice President Joe Biden through a mutual friend. [..] Inovo hired Mr. Flynn on behalf of an Israeli company seeking to export natural gas to Turkey, the filing said, and Mr. Alptekin wanted information on the U.S.-Turkey political climate to advise the gas company about its Turkish investments.

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“.. he identified three kinds of suicide: altruistic, anomic, and egoistic. Of the three, the most complicated is anomic suicide. Anomie essentially means the breakdown of social values and norms, and Durkheim closely associated anomic suicide with economic catastrophe.”

A ‘Deaths Of Despair’ Crisis Is Gripping America (BI)

[..] this isn’t the first time that social change has caused self-destructiveness on a mass scale. Indeed, 19th-century French sociologist Emile Durkheim wrote about similar problems in his time, and might refer to the plague of white middle-class mortality we see today as “a state of upheaval.” Of course, the lesson of the 2016 presidential election was that working- and middle-class whites are suffering. What Durkheim offers, though, is the argument for why the newly elected government in Washington — voted in by this very constituency — is getting the solution all wrong. The way to fix this problem is not through less government — but through more. Durkheim’s seminal work, the 1897 book “Suicide,” remains one of the most in-depth examinations of why these situations occur in society, and it is as relevant as ever. Its lessons are an indication that as a country, we are moving swiftly, carelessly in the wrong direction.

The Americans we are talking about are white and middle class. They are aged 45-55. They are losing the battle against heart disease and cancer, and they are succumbing to drugs, alcohol and suicide at rates unseen in modern history or in other developed countries. “The combined effect means that mortality rates of whites with no more than a high school degree, which were around 30% lower than mortality rates of blacks in 1999, grew to be 30% higher than blacks by 2015,” Case and Deaton wrote. The easy thing to say is that these people are suffering from economic and social anxiety and leave it at that. What’s harder to pinpoint is what exactly that means and how to fix it. Economic conditions for minorities in the same social class and in the same communities are as hard, if not harder, than they are for middle class whites. But death rates aren’t increasing for them.

This is where Durkheim comes in. He wrote his work in the midst of another state of upheaval, as industrialization was taking over the world and old economic patterns were falling away. This was the beginning of modern life as we now know it. And it was killing people. Durkheim found that the degree to which a person is integrated in society is inversely correlated to their likelihood to engage in life-threatening behaviors and suicide. In his work, he identified three kinds of suicide: altruistic, anomic, and egoistic. Of the three, the most complicated is anomic suicide. Anomie essentially means the breakdown of social values and norms, and Durkheim closely associated anomic suicide with economic catastrophe. [..] One of the big factors, then, in the increase in substance abuse and suicide among the white middle class could be a decline in the social framework as a result of the rapid economic changes seen over the last few decades.

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We’re getting into Steve Keen territory. At last.

New Canadian Budget Drops Obsession With Balanced Budgets (Star)

I’m intrigued by Modern Monetary Theory, which maintains governments can create (or ‘print’) money to fill public needs and can’t go into debt to themselves, though they should keep an eye on inflation.

Sorry, but I’m afraid I don’t agree that Wednesday’s federal budget was a non-event: “cynical,” a “placeholder,” “bafflegab and buzzwords” — as others wrote. I think this budget rocked, in one sense: it did a 180 on the stifling monomania of the last 30 years. I’m referring to the obsession with deficits. As recently as last election, the Liberals promised a balanced budget by the end of their first term. Now their projected deficits are even higher but that promise is gone and the thought process, transformed. Finance minister Bill Morneau blandly says, they’ll “be responsible every step along the way” and “show a decline in net debt to GDP,” which totally shifts the metric. He might as well have trilled, “Tra-la-la, we really don’t care.” It’s a damn earthquake.

For proof, look not at the opposition – Rona Ambrose predictably called it “spending out of control”- but at the journalists, who were left sputtering. It’s so radical they struggled for words. Peter Mansbridge began interviewing Morneau with: “How does it feel to know you’ll likely never have a balanced budget?” I wish Morneau had said, “I’m fine, but is there anything I can do to help you through this?” Mansbridge couldn’t stop, turning plaintively to his panel: “I tried to get him on the deficit … Is there a right and wrong any more?” Jennifer Ditchburn tried to soothe him with, “Deficit is a word they just don’t use any more.”

If I’m hyperventilating, it’s because I’ve led a cramped existence all these years, bowed under the weight of deficitism since I first heard the phrase, “Yeah, but how ya gonna pay for that?” during the 1988 election. No one knew where it came from or how it usurped all other political concerns, like a missive from heaven, or the Fraser Institute. Paul Martin adopted it, using it to sink the Canada we knew, and his own career. Yet, there’s apparently an ebb and flow to these things: a Nanos poll says Canadians now want Ottawa to run deficits as long as overall debt declines relative to GDP. That’s a pretty sophisticated alteration for ordinary folks to make intuitively; it makes you wonder if someone isn’t pulling strings somewhere and decided to drop a new backdrop (to public discourse) over the previous one.

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Nicely done. Like the music.

US Debt of $20 Trillion Visualized in Stacks of Physical Cash (Demonocracy)

Showing stacks of physical cash in following sequence: $100, $10,000, $1 Million, $2 Billion, $1 Trillion, $20 Trillion The faith and value of the US Dollar rests on the Government’s ability to repay its debt. “The money in the video has already been spent”

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Sounds reasonable.

The Pound Is Going To Take A Huge Hit, According To Deutsche Bank (Ind.)

When it comes to the pound, currency analysts at Deutsche Bank have for months proved to be some of the most bearish across the City, but they’ve just turned even more pessimistic in their outlook for the battered currency. In its latest special report on Brexit released this week, the German lender said the pound could fall as a low as $1.06 against the dollar by the end of 2017, or another 15%. “We do not see sterling (currently) fully pricing a hard Brexit outcome,” the bank wrote. “Combined with limited adjustment in the UK’s current account deficit and slowing growth, we see further downside, and forecast $1.06 in by year-end,” it added.

In an interview with Bloomberg in February, George Saravelos, the German lender’s global co-head of foreign exchange, hinted that the bank could cut its official forecast. He said at the time that sterling could still slip by 16% against the dollar to $1.05 cent as the “incredibly complicated” nature of Brexit becomes ever more clear. Most economists’ forecasts are still more optimistic than Deutsche Bank’s, but few expect the currency to recover from its post-referendum lows any time soon. According to poll of more than 60 banks and research institutions conducted by Reuters that was released earlier this month, forecasters on average expect the currency to trade at $1.23 against the dollar by the end of June, and drop to $1.21 in the subsequent three to six months.

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Praet is a true believer.

Leaving Euro Would Not Help France And Italy – ECB Chief Economist (Ind.)

The chief economist of the ECB has warned Italy and France that their economic problems would not be solved by breaking up the single currency. In an interview with Italy’s Il Sole 24 Ore newspaper, Peter Praet, an executive board member of the ECB, said the idea that the euro was the root cause of high unemployment and low growth in certain European countries was a populist “deception”. “What I do worry about is the populist narrative that things were better before the euro,” he said. “This is a deception. We arrived at monetary union after disastrous experiences with floating exchange rates and some unsuccessful attempts of orderly floating. “The devaluations that populists claim is a free lunch and allows to regain competitiveness by miracle proved extremely expensive.”

With specific reference to Italy, he said: “The nostalgic alternative that everything will be all right just by returning to the lira amounts to fooling the people. The cost of a regime change would be huge and the poor would be the ones that suffer the most.” Mr Praet acknowledged that the euro had lost popularity in many European countries, but said that it had been made a “scapegoat” for other economic policy failures by politicians. However, many credible economists argue that in the absence of fiscal stimulus by core countries in Europe that run current account surpluses, the monetary restrictions of the single currency are indeed driving the economic distress of the likes of France, Italy, Portugal and Greece.

Italy’s Five Star movement, currently leading in national opinion polls, has proposed a referendum on Italy’s membership of the single currency. Marine Le Pen’s Front National in France has previously called for the reinstatement of the franc, although she did not reiterate this in the national debate among presidential candidates earlier this week ahead of April’s national elections. The level of Italy’s GDP is barely higher than when the single currency was formed in 2000 and its working age unemployment rate currently stands at 12 per cent. The French unemployment rate is just below 10% and for young people it is double that.

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An outright lie: “Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.”

Greece to Break Off Face-to-Face Talks With Creditors (BBG)

Greece and the institutions managing its bailout review will break off negotiations in Brussels without having cleared a path to conclude the deliberations that would release needed rescue funds. Finance Minister Euclid Tsakalotos, who was meeting with officials from the euro area and the IMF will return to Athens by Saturday. The two sides still have issues to work out, said the official, who asked not to be named in line with policy. Some progress was made and discussions will continue from their respective headquarters, according to a spokesman from the European Stability Mechanism, the euro-area’s bailout monitor. Greece is edging closer to a repeat of the 2015 drama that pushed Europe’s most indebted state to the edge of economic collapse, as the government in Athens and its creditors disagree over reforms to the pension system and the labor and energy markets.

Greece needs to complete the review in order to get the next portion of its aid payment before it has more than €7 billion of bonds come due in July. German Finance Minister Wolfgang Schaeuble increased the pressure on Prime Minister Alexis Tsipras to accede to creditor demands. “Greece has said it wants to stay in the euro,” Schaeuble said in an interview on Deutschlandfunk radio on Friday. “Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.” [..] European Commission President Jean-Claude Juncker urged Greece and its creditors in an emailed statement to reach a deal that respects commitments made on all sides. In response to Tsipras’s letter, Juncker called on the Greeks not to reverse reforms and creditors “to give Greece the desired and necessary room for maneuver to build its own future.”

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Reasonable overview, but any talk of agreements that could lead Greece back to growth is nonsense. The EU would never sign such an agreement. Theie attitude to date has made that abundantly clear.

Where Next For Greece? (Makropolis)

In September last year, when Alexis Tsipras visited New York to speak at the UN Assembly, he held a meeting with some heavyweights of the international investment community. The Greek prime minister was reportedly advised by the participants that if he wanted to build trust in Greece as an attractive investment destination, he should shift focus from his main objective of debt relief towards ensuring Greece’s participation in the ECB’s QE programme. The investors apparently pointed out to the SYRIZA leader that such a development would have a wide range of benefits for Greece and provide the steadiest path towards regaining market access and the successful completion of the current programme, without the need to follow it up with a fourth memorandum of understanding (MoU).

Tsipras seemingly heeded the advice and, just as the second review was about to start, he charted a path out of the crisis. He set out his intention to close the review by December 2016, secure QE at the start of 2017 and dip his toe back into the markets with a small issue or two early this summer when Greece has to roll over the bond that it issued in 2014, when Antonis Samaras was prime minister. However, the timetable Tsipras identified last autumn has gone up in smoke.

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Mar 172017
 
 March 17, 2017  Posted by at 8:54 am Finance Tagged with: , , , , , , , ,  1 Response »
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DPC Wall Street and Trinity Church, New York 1903

 


California Judge Seeks To Prevent Immigration Arrests Inside State Courts (R.)
Collapsing Pensions Will Fuel America’s Next Financial Crisis (MW)
Statoil CEO Warns of Globalization ‘In Reverse’ (BBG)
Treasury’s Mnuchin Says Trump Does Not Want Trade Wars (R.)
Would Trump Budget Cut Meals On Wheels Funding? (BI)
Dutch Election Puts Question Mark Over Eurogroup Chief Dijsselbloem (R.)
Congressman Huizenga Introduces Bill to Oppose IMF’s Third Greek Bailout (YV)
Senators Demand State Department Probe Into Soros Organizations (ZH)
Mounting Costs, Not PBOC, Could Slow China’s Bank Debt Binge (BBG)
Will Chrystia Freeland Finally Ruin Canadian-Russian Relations? (SCF)
The Energy Market Explained (Clarke and Dawe)
Greek Public Health System On Brink, Doctors Warn (K.)
First-Time Asylum Applicants In Greece Up 339% In 2016 (Amna)
Refugees In Greece Suffering After EU Deal With Turkey, Say NGOs (G.)
Child Refugees In Greece Self-Harming And Attempting Suicide (Ind.)
Ai Weiwei Slams ‘Shameful’ Politicians Ignoring Refugees (AFP)

 

 

One very big step over the decency line.

California Judge Seeks To Prevent Immigration Arrests Inside State Courts (R.)

Chief Justice Tani Cantil-Sakauye said she was gravely troubled by recent reports that federal agents were “stalking undocumented immigrants in our courthouses to make arrests,” in a letter addressed to U.S. Attorney General Jeff Sessions and Secretary of Homeland Security John Kelly. “Courthouses should not be used as bait in the necessary enforcement of our country’s immigration law,” Cantil-Sakauye wrote. Trump has vowed to increase deportations and has widened the net of illegal immigrants prioritized for detention and removal. “We will review the letter and have no further comment at this time,” Peter Carr, a spokesman for the U.S. Department of Justice, said in an email.

Immigrant rights groups say federal agents have entered courthouses with increased frequency this year, including in California, Massachusetts, Maryland and Texas, said National Immigration Law Center staff attorney Melissa Keaney. “It’s definitely an issue we’re seeing a tremendous increase in under the new administration,” Keaney said by phone on Thursday. Cantil-Sakauye stopped short of questioning the legal right of federal agents to enter courthouses to locate and detain unauthorized immigrants. Her letter said the presence of immigration agents in California courthouses could undermine “public trust and confidence in our state court system,” which serves “millions of the most vulnerable Californians.”

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I don’t think pensions are in line to be the next crisis, but they will certainly cause one.

Collapsing Pensions Will Fuel America’s Next Financial Crisis (MW)

Washington has a knack for ignoring long-term financial shortfalls and painting overly rosy scenarios about the future to make their numbers work in the here and now. Case in point: Donald Trump’s unrealistic projection that the U.S. economy will grow at 3% this year, when the latest GDP forecasts have actually been reduced to 1.8% by a number of economists. Then there is Social Security. Many politicians are just too intimidated, uninformed or complacent to tackle the unsustainability of Social Security — which by the latest tally will see its trust fund go to zero just 17 years from now, in 2034. But while fudging GDP numbers is dangerous for America’s economic outlook and the demise of Social Security in two decades is a serious long-term concern, America faces a mathematical problem that dwarfs both of these items: A pending pension crisis that could leave millions of Americans high and dry in the very near future.

Sure, it would be difficult for many if the U.S. economy stumbles under misguided Trump policies. And yes, the idea of even modest cuts to Social Security in the coming decades could serious affect millions of seniors. But take a look South Carolina’s government pension plan, which covers roughly 550,000 people – one out of nine state residents – but is a staggering $24.1 billion in the red. This is not a distant concern, but a system already in crisis. Younger workers are being asked to do much more to support the pensions of retirees. An analysis by the The Post and Courier of Charleston noted recently that “Government workers and their employers have seen five hikes in their pension plan contributions since 2012, and there’s no end in sight.” (Most now contribute 8.66% of their pay, vs. 6.5% before the changes.) At the same time, the pension fund has been chasing more stocks and alternative investments instead of relying on stable investments like bonds that may be much less volatile but generate only meager returns.

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Of course Big Oil CEOs like globalization. But it’s still quite something to hear an oil exec claim: “Cross-border cooperation is also essential to solve climate change..”

Statoil CEO Warns of Globalization ‘In Reverse’ (BBG)

After the surprise election of Donald Trump, the head of Norway’s biggest oil company headed to Washington D.C. this month looking for reassurance. He came away as worried as ever. “I was looking for clarity, also some guidance, good advice, and also some people to talk to – new relationships within the administration,” Statoil CEO Eldar Saetre told a conference in Oslo on Thursday. “I have to be honest with you – I didn’t get much of any of it.” Saetre, whose company has stakes in three U.S. onshore areas and in the Gulf of Mexico, was concerned about the protectionist bent of the new president’s rhetoric. Combined with last year’s Brexit vote and looming elections in Europe where nationalists are gaining influence, he sees Trump’s victory as a threat to global free trade.

“From Brexit to Trump, we see warning signs that globalization could be going in reverse,” Saetre said at the annual Swedbank Energy Summit. “For our industry, I believe that would be very negative.” Trump’s energy policies could benefit oil producers in the U.S. by loosening regulations and freeing up more areas for drilling. However, his protectionist agenda could affect economic growth and trading relations with countries from neighboring Mexico to Asia. “Global collaboration and integrated markets have been and will remain key to make our industry prosper,” Saetre said. “Fair, open access to markets are keys to enable investments, value creation and jobs in our industry.” Cross-border cooperation is also essential to solve climate change, making it “more important than ever,” Saetre said.

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Schäuble and Mnuchin. Lovely pair.

Treasury’s Mnuchin Says Trump Does Not Want Trade Wars (R.)

U.S. Treasury Secretary Steven Mnuchin said on Thursday that the Trump administration has no desire to get into trade wars, but certain trade relationships need to be re-examined to make them fairer for U.S. workers. At a news conference with German Finance Minister Wolfgang Schaeuble, Mnuchin said that President Donald Trump views trade as important for economic growth. But when asked whether the Group of 20 finance ministers should explicitly reaffirm their past vow to resist protectionism, Mnuchin repeated his view that some U.S. trade relationships need to be re-examined to make them fairer and more reciprocal. “It is not our desire to get into trade wars,” Mnuchin said. “The president does believe in free trade but he wants free and fair trade.” Differences over trade could become a sticking point for G20 finance officials at a meeting in the spa town of Baden-Baden, Germany this weekend.

Schaeuble told Reuters in an interview that it was unclear whether the anti-protectionism language would remain in the G20 statement to be issued at the meeting’s close on Saturday. Given that Trump’s “America First” agenda, trade issues could be set aside for G20 leaders to tackle at a summit in July, Schaeuble said. But both Schaeuble and Mnuchin both said they had a constructive discussion ahead of the G20 meeting and pledged to work together through differences to promote growth. “It was a good start,” Schaeuble said of the meeting, adding that it was a positive sign for international cooperation and the G20 process. “We have found a good basis to talk openly about issues where we don’t have the same stance from the outset,” Schaeuble said. Mnuchin said the ministers agreed that they should fight currency manipulation.

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This viral story looks sensationalized. Meals on Wheels gets just part of its funding from the Community Development Block Grant program. I included the article anyway because we’re getting into Bizarro World territory here: “You’re only focusing on recipients of the money,” Mulvaney said. “We’re trying to focus on both the recipients of the money and the folks who give us the money in the first place. I think it’s fairly compassionate to go to them and say, ‘Look, we’re not going to ask you for your hard-earned money anymore.'”

Would Trump Budget Cut Meals On Wheels Funding? (BI)

President Donald Trump’s proposed budget, unveiled on Thursday, would cut federal funding for Meals on Wheels, a program that provides daily meals to millions of low-income seniors across the country. White House Office of Management and Budget Director Mick Mulvaney told reporters at a press conference Thursday that Meals on Wheels “sounds great.” But he said that along with other anti-poverty programs, it is “not showing any results.” “We can’t spend money on programs just because they sound good,” Mulvaney told reporters. “We’re not going to spend money on programs that cannot show that they actually deliver the promises that we’ve made to people.”

Trump’s budget would strip $3 billion from the Community Development Block Grant program, which supports a variety of community-development and anti-poverty programs. Those include Meals on Wheels, which provided 219 million meals to 2.4 million seniors in 2016. CNN reporter Jim Acosta asked Mulvaney if the funding cuts were “hard-hearted.” Mulvaney responded that reducing government spending on ineffective programs is “probably one of the most compassionate things we can do.” “You’re only focusing on half of the equation, right? You’re only focusing on recipients of the money,” Mulvaney said. “We’re trying to focus on both the recipients of the money and the folks who give us the money in the first place. I think it’s fairly compassionate to go to them and say, ‘Look, we’re not going to ask you for your hard-earned money anymore.'”

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Get rid of him already. Right now. Then again, Kazimir is probably next in line, and he’s just as bad. Cooler heads should demand a more reasonable, not neo-liberal choice. Fat chance.

Dutch Election Puts Question Mark Over Eurogroup Chief Dijsselbloem (R.)

Jeroen Dijsselbloem may have to stand down as president of the Eurogroup which coordinates policy in the eurozone if he cannot retain his role as Dutch finance minister in a new coalition after his party was routed in Wednesday’s election. The Labor Party crashed from second to seventh place in preliminary results, losing more than three-quarters of its seats and making it hard for victorious liberal Prime Minister Mark Rutte to retain Dijsselbloem in such a senior cabinet post, even though he has made clear his appreciation of his work. Neither man commented on the matter directly Thursday. Dijsselbloem is due to represent the Eurogroup at a G20 meeting in Germany Friday and to chair the monthly meeting of the 19 eurozone finance ministers in Brussels on Monday.

While other eurozone finance ministers may seek his role, there is a lack of obvious contenders, particularly given that many governments will resist appointing a politician from the right because conservatives hold most other top EU jobs. It is just possible Dijsselbloem might retain his Dutch portfolio. There has also been speculation that the Eurogroup could keep him on as chairman even if he loses his national job – although some senior officials say that is most unlikely. Dijsselbloem, whose second 30-month term ends in January, has been popular with fellow ministers, balancing a background on the left with support from conservative Wolfgang Schaeuble, who wields Germany’s power on the Eurogroup and insists on strict terms for Greece and other states awarded bailout loans.

The Dutchman will remain in office for weeks, and possibly months, as Rutte struggles to put together a new coalition after Wednesday’s election. Rutte’s own party lost seats and the anti-immigration party of Geert Wilders finished in second place. Eurogroup rules do not stipulate that its president must be a serving finance minister. But senior eurozone officials have said lately that they do not believe fellow ministers would keep Dijsselbloem on if he lost his main job in The Hague. In the longer term, there has been talk of making the position a full-time one, with its own staff. But that is not yet agreed.

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Dijsselbloem’s ‘friend’ Varoufakis found this.

Congressman Huizenga Introduces Bill to Oppose IMF’s Third Greek Bailout (YV)

Anyone who doubted that the IMF is in deep trouble over its inane involvement in the toxic Greek bailout, and Berlin’s policy of extending Greece’s insolvency ad infinitum while the country’s social economy shrinks, should now have no more doubts. Congressman Bill Huizenga (R-MI), a senior member of the House Financial Services Committee, yesterday introduced the IMF Reform and Integrity Act, which would require the U.S. to oppose the International Monetary Fund’s (IMF) co-financing of a third Greek bailout with the European Stability Mechanism. If such co-financing were to go forward, the bill would prohibit the U.S. from supporting an IMF quota increase until funds are repaid in full.

“The IMF is supposed to be a lender of last resort, not a fig leaf of first resort for Eurozone members,” said Congressman Huizenga. “The IMF isn’t a fund to rescue political parties in creditor nations, nor should it be a junior partner to outside organizations that lack the commitment to do their work. For seven years now, the IMF has been used to shield Eurozone officials from their voters, which has tarnished the Fund’s reputation, prolonged Greece’s misery, and put off hard choices about Europe’s future that must be made regardless. As the IMF’s largest shareholder, the U.S. should ensure that the Fund remains independent and free from politicization that could put taxpayer dollars at risk. This bill will help make that a reality.”

In addition, the IMF Reform and Integrity Act cancels supplementary IMF funds that have already been deactivated, rescinding them and sending those resources back to the U.S. Treasury. The bill also clarifies existing law to require the U.S. Executive Director of the Fund to oppose any loan to a country whose debt is unsustainable.

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Why Putin threw out Soros, and America should too.

Senators Demand State Department Probe Into Soros Organizations (ZH)

Senator Mike Lee (R-UT) and a group of his colleagues are calling on the newly appointed Secretary of State Rex Tillerson to immediately investigate how US taxpayer funds are being used by the State Department and the United States Agency for International Development (USAID) to support Soros-backed, leftist political groups in several Eastern European countries including Macedonia and Albania. According to the letter, potentially millions of taxpayer dollars are being funneled through USAID to Soros’ Open Society Foundations with the explicit goal of pushing his progressive agenda. “Unfortunately, we have received a credible report that, over the past few years, the U.S. Mission there has actively intervened in the party politics of Macedonia, as well as in the shaping of its media environment and civil society, often favoring left-leaning political group over others. We find these reports discoraging and, if true, highly problematic.”

“Much of the concerning activity in Macedonia has been perpetuated through USAID funds awarded to implementing entities such as George Soros’ Open Society Foundations. As the recipient of multiple grant awards and serving as a USAID contractor implementing projects in this small nation of 2.1 million people, our taxpayer funded foreign aid goes far, allowing Foundation Open Society – Macedonia (FOSM) to push a progressive agenda and invigorate the political left. Our foreign aid should only be used to promote a political agenda if it is in the security or economic interests of our country to do so, and even at that, we must be cautious and respectful in such an endeavor. We should be especially wary of promoting policies that remain controversial even in our own country and that have the potential to harm our relationship with the citizens of recipient countries.”

As Fox News pointed out, USAID gave nearly $15 million to Soros’ Foundation Open Society – Macedonia, and other Soros-linked organizations in the region, in the last 4 years of Obama’s presidency alone. “The USAID website shows that between 2012 and 2016, USAID gave almost $5 million in taxpayer cash to FOSM for “The Civil Society Project,” which “aims to empower Macedonian citizens to hold government accountable.” USAID’s website links to www.soros.org.mk, and says the project trained hundreds of young Macedonians “in youth activism and the use of new media instruments.” The State Department told lawmakers that in addition to that project, USAID has recently funded a new Civic Engagement Project which partners with four organizations, including FOSM. The cost is believed to be around $9.5 million. A citizen’s initiative called “Stop Operation Soros” has also published a white paper alleging U.S. money has been funding violent riots in the streets [..]

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Can the shadow sector step in once again?

Mounting Costs, Not PBOC, Could Slow China’s Bank Debt Binge (BBG)

China may avoid having to pull out the big stick when it comes to reining in a record short-term borrowing spree by its smaller banks. The increased cost to lenders of issuing so-called negotiable certificates of deposit will naturally deflate a market that jumped by 90% in February from a year earlier, according to Ping An Securities. Demand is also waning for the securities, used by Chinese banks as a way of leveraging up investments and expanding their balance sheets, with mutual funds cutting their holdings to the lowest level in at least a year in January. “It’s unsustainable for commercial banks to take such high costs,” said Shi Lei at Ping An, a unit of China’s second-largest insurer. “NCDs are now even more expensive than short-term commercial paper. It will be corrected as lenders complete their adjustments in the term structure of the debt.”

Introduced by the People’s Bank of China in 2013 as a fresh source of money for smaller lenders which have difficulty competing for savings against big state banks, NCDs have morphed into a way for them to fund purchases of each other’s wealth-management products. That boosts refinancing risks in a banking system that will see a record 3.65 trillion yuan ($529 billion) of the notes maturing this quarter. This hasn’t escaped the attention of the authorities, with the PBOC looking at classifying NCDs as interbank liabilities, Caixin.com reported in January, a move that would quell growth in the market given limits on how much in interbank debt Chinese lenders are allowed to hold relative to their overall liabilities. The central bank has been ramping up its campaign to contain leverage since August, tightening money-market rates as a way of discouraging borrowing. The PBOC boosted borrowing costs for lenders Thursday, just hours after the Federal Reserve lifted benchmark interest rates.

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It’s remarkable that she still has her job. What a blemish on Canada she is.

Will Chrystia Freeland Finally Ruin Canadian-Russian Relations? (SCF)

On 10 January 2017 Canadian PM Justin Trudeau fired his minister of external affairs, Stéphane Dion, and replaced him with Chrystia Freeland, who was then minister of international trade. This cabinet shuffle might not have gotten much public notice except that Dion is a distinguished parliamentarian, former leader of the party and leader of the opposition, and a former key minister in the Liberal government of Jean Chrétien. Freeland, on the other hand, is a well-known Ukrainian ultra-nationalist and self-declared Russophobe and hater of Russian President Vladimir Putin. The sacking of Dion was also noteworthy because Trudeau had run on an electoral platform in 2015 promising, inter alia, to improve Canadian relations with Russia, spoilt by the Conservative government of Stephen Harper. When Dion became minister of external affairs, he confirmed the Liberal commitment to re-establish more constructive Canadian-Russian relations.

[..] Why should Canadians care one way or another whether their government supports the Ukraine and sends arms and advisors there to strengthen Ukrainian military forces? Well, the most important reason is that the present government in Kiev is illegitimate in spite of democratic appearances. It is the spawn of a violent coup d’état in February 2014, brokered and supported by the United States and the European Union, which overthrew the democratically elected president Viktor Yanukovich. The vanguard of the Kiev coup d’état are neo-Nazi, fascist or ultra nationalist political and paramilitary organisations, notably the political party Svoboda, the paramilitary Pravyi sektor and various other paramilitary forces such as the so-called Azov and Aidar battalions. These paramilitary units were and are used to crush opposition in those parts of the Ukraine controlled by Kiev.

Neo-Nazi violence and intimidation worked in many places, but not in others. In the Crimea, the population united almost to the last man and woman, to toss out the putschist authorities and to vote for reunification with Russia. In the east, in the Donbass, the anti-fascist resistance repulsed Kiev punitive forces with heavy losses. These remarkable feats of arms, redolent of so many others in Russian history, were wasted by Moscow, which disregarded a first principle of war that one never lets an enemy withdraw to fight another day. «He who spares the aggressor», Stalin once remarked, «wants another war.» It may shock some people to hear Stalin quoted, but Plutarch, Sun Tzu, or Clausewitz might have said the same thing. Moscow supported the so-called Minsk peace accords which were never respected by the Kiev authorities. Ultra-nationalists even boasted that they had agreed to Minsk solely in order to rest and refit their beaten forces. It was only a ruse de guerre.

These are the forces which the Canadian government now supports with the enthusiastic backing of Minister Freeland. For her, it must be a lifelong dream-come-true. There has been much press comment during the last week or so about Freeland’s Ukrainian grandfather, Mykhailo Chomiak, a Nazi collaborator during World War II. Freeland claimed that he was only a refugee from Stalinist violence. He might have been, but he also collaborated with Nazi Germany. In many places in Europe, France and Italy, for example, collaborators were summarily shot or imprisoned after the war. In France, more than 5,000 were executed including Pierre Laval, a prominent French politician, who sided with Nazi Germany and vaunted collaboration to oppose the USSR. Another 38,000 French collaborators were jailed. Chomiak was lucky he was not hanged and that he ended up in northern Alberta, to die a well-to-do farmer.

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More brilliance. “We don’t have en energy system. We have an energy market.”

The Energy Market Explained (Clarke and Dawe)

“Wal Socket. Energy Consultant”

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A European crime. One of many perpetrated on Greece.

Greek Public Health System On Brink, Doctors Warn (K.)

The National Health System (ESY) is on the the brink of collapse, according to the Panhellenic Medical Association (PIS), which cited chronic shortages in staff and equipment at public hospitals around the country due to limited finances, and disruptions in the primary healthcare system. The association added that the only reason the health system is still running is due to the efforts of existing staff, whose endurance levels, however, are being put to the test. “The average age of ESY doctors is 60. And these people will be leaving in a few years,” said PIS president Michail Vlastarakos, adding that public hospitals need 6,500 additional permanent medical staff.

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And the EU still hasn’t supplied the promised help for dealing with the applications.

First-Time Asylum Applicants In Greece Up 339% In 2016 (Amna)

There was a 339% increase of in the number of first-time asylum applicants in Greece in 2016, which rose to 49,875 in 2016 from 11,370 in 2015, according to figures released by Eurostat on Thursday. On the basis of these figures, Greece ranks second among EU countries for the total number of asylum applications filed in relation to its population. Germany is first with 8,789 applications per million population, followed by Greece with 4,525 applications per million population. Third is Austria with 4,587, followed by Malta (3,989), Luxembourg (3,582) and Cyprus (3,350). The number of new asylum applicants on an EU level dropped to 1.204 million in 2016, for a percentage change of -4%, but were more than double the number of applicants in 2014. Most asylum applicants in EU member-states were Syrians (28%), Afghans (15%) and Iraqis (11%). In Greece, Syrians accounted for more than half of asylum applicants (53%), Iraqis for 10% and Pakistanis 9%.

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The NGOs themselves are part of the problem too.

Refugees In Greece Suffering After EU Deal With Turkey, Say NGOs (G.)

Greece is being used as a testing ground for degrading asylum policies that fall short of the democratic values Europe would normally uphold, say refugee groups marking the first anniversary of a deal designed to slow arrivals to the continent. The accord struck last year between Turkey and the EU has been praised in some quarters for having slowed arrivals into Europe and reduced deaths in the Aegean sea. But basic human rights were lost in the process, the organisations claim. “Greece has become a testing ground for policies that are eroding international protection standards,” said the Norwegian Refugee Council, International Rescue Committee and Oxfam, in a joint report based on extensive fieldwork on Aegean islands where more than 14,000 men, women and children are trapped in abysmal conditions.

“Over the course of the year, there have been deaths, suicide attempts, people engaging in self harm, and children, women and men exposed to abuse and sexual violence.” The withering assessment, coming almost 12 months to the day since the agreement was reached between Ankara and Brussels, is in stark contrast to the official view of an accord hailed by the EU, at the time, as a breakthrough in the migration crisis. Agreed in exchange for €6bn in refugee aid to Ankara, it was seen as a vital step in resolving a crisis that at its height threatened to tear the bloc apart. Since its implementation, the number of refugees and migrants going to Europe via Turkey has dropped dramatically.

Islands such as Lesbos, which is near Turkey, are reporting 100 arrivals or fewer a day, while in 2015, when more than 1 million people streamed into Europe, it received 10,000 men, women and children over one weekend. But NGOs say the reality on the ground is that the deal has prolonged and exacerbated human suffering. The report found that, incarcerated on Greek islands, asylum seekers had been made to live in substandard and overcrowded conditions for months on end. With limited access to fair and effective asylum procedures they were subject to “a convoluted and constantly changing process” that lacked oversights and checks and balances. Often legal experts were unable to keep track of a system that was impossible for people to navigate alone.

A separate report by Save the Children and Médecins Sans Frontières warned that there were worrying levels of mental health problems among migrants and refugees in the Greek camps. It said people including children as young as nine were cutting themselves, attempting suicide and using drugs to cope with the “endless misery”. Mental health was “rapidly deteriorating due to the conditions created as a result of this deal”, Save the Children said. [..] The report expressed the NGOs’ fears that the deal would become a blueprint for crises elsewhere. “Beyond the deeply concerning situation in Greece, the EU is looking to replicate this model elsewhere, and, in so doing, risks setting a dangerous precedent for the rest of the world,” said the report.

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Creating child zombies.

Child Refugees In Greece Self-Harming And Attempting Suicide (Ind.)

Desperate refugees trapped in Greece are self-harming and attempting suicide as a result of “disastrous” EU policies, aid agencies have warned. More refugees are dying than ever before while attempting to reach Europe, almost a year after a controversial deal was struck with Turkey in an effort to prevent boat crossings across the Aegean Sea. The agreement has stranded thousands of asylum seekers in Greece, where aid agencies say children are among rising numbers of migrants trying to kill themselves after months trapped in squalid camps. Research by Save the Children found more than 5,000 minors are living in “appalling conditions” that are driving a mounting mental health crisis. It has recorded children as young as nine self-harming and 12-year-olds attempting suicide, sometimes filming themselves in the act, as well as a spike in drug and alcohol abuse by teenagers who are exploited by dealers in camps.

Violent protests and deaths are traumatising the youngest and most vulnerable refugees, whose families say they are too scared to let their children play out of sight in case they are hurt or abused. Save the Children staff report that some unaccompanied children live in “24-hour survival mode” and sleep in shifts to try to stay safe, while others disappear or pay smugglers to leave the Greek islands. “The EU-Turkey deal was meant to end the flow of ‘irregular migrants’ to Greece, but at what cost?” said Andreas Ring, Save the Children’s humanitarian representative. “Many of these children have escaped war and conflict only to end up in camps many of them call ‘hell’ and where they say they are made to feel more like animals than humans.” Since 20 March 2016, all migrants arriving on Greek islands have been held, under threat of deportation to Turkey, while their asylum applications are processed, but legal blocks have slowed transfers and left refugees in overcrowded tent camps for up to a year.

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“..you cannot be so short-sighted, you cannot have no vision, you cannot sacrifice human dignity and human rights for political gain..”

Ai Weiwei Slams ‘Shameful’ Politicians Ignoring Refugees (AFP)

Chinese dissident artist Ai Weiwei on Thursday slammed “shameful” politicians who ignore refugees as he launched a giant art installation centered on their fate at the National Gallery in Prague. Called “Law of the Journey”, the show features a 70-metre-long (230-foot-long) inflatable boat with 258 oversize refugee figures. A tribute to the thousands who have drowned crossing the Mediterranean, the piece is Ai’s biggest-ever installation. It will be on display until the end of the year. “My message is very clear: being a politician or a political group, you cannot be so short-sighted, you cannot have no vision, you cannot sacrifice human dignity and human rights for political gain,” Ai told AFP. “I think this is very, very shameful behaviour,” he added.

The Czech Republic and the other post-Communist central European members have rejected EU plans to allow Muslim refugees on their territories throughout the migrant crisis. Immigration from Muslim countries has become a hot political topic in these states, although most refugees have opted for wealthier western countries like Germany or Sweden. “If we see somebody who has been victimised by war or desperately trying to find a peaceful place, if we don’t accept those people, the real challenge and the real crisis is not of all the people who feel the pain but rather for the people who ignore to recognise it or pretend that it doesn’t exist,” said Ai. “That is both a tragedy and a crime,” said the 59-year-old painter, sculptor and photographer. Ai spent the last year visiting such migrant and refugee hotspots as the US-Mexican border badlands to the Turkish-Syrian frontier and crowded holding camps on Greek islands.

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Mar 092017
 
 March 9, 2017  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Marjory Collins “Crowds at Pennsylvania Station, New York” 1942

 


WikiLeaks Says Just 1% Of #Vault7 Covert Documents Released So Far (RT)
US Private Sector Adds 298,000 Jobs In February – ADP (R.)
Trump Begins to Map Out $1 Trillion Infrastructure Plan (WSJ)
US Oil Price Plunges Toward $50 As A Perfect Storm Brews (CNBC)
Professor Steve Keen On The Problem With Europe (DR)
Varoufakis Back In Brussels In Push For ECB Transparency (EUO)
Germans Really, Really Love the Euro (BBG)
The Meltdown in Politics (Martin Armstrong)
Macron Faces A Really Big Problem If He Becomes French President (Con.)
French Insurgents Thrust Establishment Aside in Crucial Election (BBG)
Iceland First Country In The World To Make Firms Prove Equal Pay (Ind.)
Fukushima Clean-Up Falters 6 Years After Tsunami (G.)
Eurostat: Greece Is The Only EU Country Still In Recession (NE)
Greek Farmers Clash With Riot Police In Athens Over Austerity (G.)
It Takes 10 Workers In Greece To Pay One Pension (K.)

 

 

How is this going to affect Apple and Microsoft sales in China?

WikiLeaks Says Just 1% Of #Vault7 Covert Documents Released So Far (RT)

WikiLeaks’ data dump on Tuesday accounted for less than 1% of ‘Vault 7’, a collection of leaked CIA documents which revealed the extent of its hacking capabilities, the whistleblowing organization has claimed on Twitter. ‘Year Zero’, comprising 8,761 documents and files, was released unexpectedly by WikiLeaks. The organization had initially announced that it was part of a larger series, known as ‘Vault 7.’ However, it did not give further information on when more leaks would occur or on how many series would comprise ‘Vault 7’. The leaks have revealed the CIA’s covert hacking targets, with smart TVs infiltrated for the purpose of collecting audio, even when the device is powered off. The Google Android Operating System, used in 85% of the world’s smartphones, was also exposed as having severe vulnerabilities, allowing the CIA to “weaponize” the devices.

The CIA would not confirm the authenticity of the leak. “We do not comment on the authenticity or content of purported intelligence documents.” Jonathan Liu, a spokesman for the CIA, is cited as saying in The Washington Post. WikiLeaks claims the leak originated from within the CIA before being “lost” and circulated amongst “former U.S. government hackers and contractors.” From there the classified information was passed to WikiLeaks. End-to-end encryption used by applications such as WhatsApp was revealed to be futile against the CIA’s hacking techniques, dubbed ‘zero days’, which were capable of accessing messages before encryption was applied. The leak also revealed the CIA’s ability to hide its own hacking fingerprint and attribute it to others, including Russia. An archive of fingerprints – digital traces which give a clue about the hacker’s identity – was collected by the CIA and left behind to make others appear responsible.

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The Trump bull is alive for now.

US Private Sector Adds 298,000 Jobs In February – ADP (R.)

U.S. private employers added 298,000 jobs in February, well above economists’ expectations, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 190,000 jobs, with estimates ranging from 150,000 to 247,000. Private payroll gains in the month earlier were revised up to 261,000 from an originally reported 246,000 increase. The ADP figures come ahead of the U.S. Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists polled by Reuters are looking for U.S. private payroll employment to have grown by 193,000 jobs in February, down from 237,000 the month before. Total non-farm employment is expected to have changed by 190,000. The unemployment rate is forecast to tick down to 4.7% from the 4.8% recorded a month earlier.

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How much of it will be put to good use, and how much merely siphoned off?

Trump Begins to Map Out $1 Trillion Infrastructure Plan (WSJ)

President Donald Trump pushed his White House team on Wednesday to craft a plan for $1 trillion in infrastructure spending that would pressure states to streamline local permitting, favor renovation of existing roads and highways over new construction and prioritize projects that can quickly begin construction. “We’re not going to give the money to states unless they can prove that they can be ready, willing and able to start the project,” Mr. Trump said at a private meeting with aides and executives that The WSJ was invited to. “We don’t want to give them money if they’re all tied up for seven years with state bureaucracy.” Mr. Trump said he would was inclined to give states 90 days to start projects, and asked Scott Pruitt, the new head of the EPA, to provide a recommendation.

He expressed interest in building new high-speed railroads, inquired about the possibility of auctioning the broadcast spectrum to wireless carriers, and asked for more details about the Hyperloop, a project envisioned by Tesla founder Elon Musk that would rapidly transport passengers in pods through low-pressure tubes. “America has always been a nation of great promise, because we dream big,” Mr. Trump said. “We’re going to really dream big now.” The president called for a $1 trillion infrastructure plan last month in his address to a joint session of Congress and added that the projects would be financed through public and private capital. The White House was considering a repatriation tax holiday to generate about $200 billion in funding, but other sources also were being considered, a senior administration aide said.

In the meeting, the president said he aimed to win approval for an infrastructure plan once Congress finishes deliberations on health care and a reform of tax laws. Mr. Trump suggested that an infrastructure plan may be part of the tax-reform debate. “We’ll see what happens,” he said. Vice President Mike Pence, who sat across from the president during the meeting, said that Congress is “committed to the president’s vision.” “There’s a great of interest in Congress in doing this,” Mr. Pence said. “But there’s also just as much interest in listening to leaders in the private sector to identify the capital and identify the needs to be able to finance this in a way that really captures the energy of the American economy.”

Read more …

Time to acknowledge demand isn’t coming back?

US Oil Price Plunges Toward $50 As A Perfect Storm Brews (CNBC)

Oil is on track to break through the key psychological level of $50 a barrel after a ninth straight rise in U.S. crude stockpiles came at exactly the wrong moment, analysts said Wednesday. The amount of crude oil in U.S. storage rose to another record high on Wednesday, jumping 8.2 million barrels from the previous week, the Energy Information Administration reported. The increase was more than four times what analysts expected. Weekly figures also showed U.S. oil production continuing to tick up toward 9.1 million barrels a day, the highest level in more than a year. That provided further evidence that rising American output is confounding efforts by OPEC, Russia and 10 other exporters to reduce global oil inventories by curbing their own output. The data sent U.S. benchmark West Texas Intermediate crude prices plunging more than 5% to a nearly three-month low.

The plunge through a number of lows on Wednesday puts oil on a path to test the December low of $49.95 a barrel, said John Kilduff at energy hedge fund Again Capital. “From there you could accelerate,” he told CNBC, adding that $50 “was the fail-safe.” Kilduff’s downside target, once oil breaks below $50 a barrel, is $42. For the last three months, oil has traded in a range between $49.61 and $55.24. According to Kilduff, all the elements are in place for oil to break below its three-month range: lack of cohesion among OPEC members, bearish statements from oil ministers at CERAWeek conference by IHS Markit and subdued refinery activity as operators perform seasonal maintenance in the United States. On Tuesday, Saudi Oil Minister Khalid al-Falih warned at CERAWeek that the kingdom would only support OPEC’s intervention in markets for a “restricted period of time” and would not “underwrite the investments of others at our own expense and long-term interests.”

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Snippets from an interview. The euro was doomed from the start because of conditions put on it.

Professor Steve Keen On The Problem With Europe (DR)

But the trouble is, you see, they didn’t have to have a single currency combined with the 60% limit on government debt and the 3% limit on government deficits. If they simply had a currency and made no rules whatsoever about that, then it would have been feasible, potentially, to say okay, well it’s not working as well as we would like it to, but not imposing austerity on economies in a downturn, which is what they ended up doing courtesy of those rules. Maybe we need a treasury to make it work better, but it wasn’t just the fact that it was only the central bank, it was also the rules on government spending.

[..] another part of it, which is quite intriguing, I heard in Berlin just recently, is that also, one of the other rules they agreed to, or one of the other objectives they agreed to, not a rule, was to target a 2% rate of inflation. Now what you actually had happen was that Germany hit about 1%, France actually hit about 2%, Italy hit about 3%, the three major trading partners of course on the block. Well, that means, as a result, over every year, German manufacturers were gaining a 2% cost advantage over Italian manufacturers. Which ultimately means of course that people don’t buy Lamborghinis and Fiats anymore, they buy Mercedes, because for the same features they’re cheaper.

It’s not about labour productivity alone, it’s about the rate of inflation, which comes down to the rate of wage change, because the Germans suppressed the rate of wage change, the rate of inflation was lower, and that was 1% below the level they agreed to. Now, if they’d agreed to 2%, and France did 2%, and Italy maybe suppressed its wage change and they hit 2%, you wouldn’t have these imbalances. But they’ve built up over 15 – going on close to 20 years now – and those level of imbalances mean that, fundamentally, Italian industry can’t compete with German industry, not because of productivity differences so much but wage costs combined with that.

[..] That’s why Trump’s complaining about Germany having an undervalued currency, and he’s bloody right on that front. If you can run a 9% of GDP trade surplus, which is the level Germany’s now hit, a lot of that is with the rest of the world, the EU itself overall is balanced, so there’s a huge imbalance – Germany’s got a huge trade surplus with the rest of Europe, but it’s also got it with the rest of the world, and on that scale I think Germany’s trade balance now is the same scale as China’s. Now that’s ludicrous.

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Perhaps the biggest problem with Europe is that transparency and the EU don’t mix. In this case it’s clear why: the ECB was used as a -very blunt- tool for political pressure. Their defense is basically: if we become transparent, we’re no longer independent. And people buy that?!

Varoufakis Back In Brussels In Push For ECB Transparency (EUO)

Former Greek finance minister Yanis Varoufakis has joined forces with the German left-wing MEP Fabio De Masi in a bid to clarify whether the ECB had a legal right to limit the liquidity of Greece’s banks in 2015. The duo told journalists in Brussels on Wednesday (8 March) that they were collecting signatures for a petition to ECB president Mario Draghi, asking him to disclose two legal opinions commissioned by the bank. The first study was ordered in February, before the ECB decided to limit the access of Greek banks to ECB funding and opted instead to open access to the emergency liquidity assistance (ELA) – a fund with more restrictive access conditions. The decision was taken a few days after the radical left-wing Syriza party came to power, with Varoufakis as finance minister.

The second study, in June 2015, was about the ECB’s decision to freeze the amount of money available through the ELA after the Greek government’s decision to hold a referendum on the bailout conditions required by the country’s creditors. The measure was taken over concerns that Greek banks would become insolvent because of the deadlock in bailout talks. It also put more pressure on the Greek government to accept the lenders’ conditions. To avoid a bank run, where large numbers of people withdraw money from their deposit accounts at the same time, the government introduced capital controls. This meant that Greek people were only able to withdraw a maximum of €60 per day. The measure prevented a capital run, but also put pressure on Athens to agree to creditors’ terms for a third bailout.

Varoufakis, who was finance minister at the time, said this was a breach of the independence of the bank. “The ECB has the capacity to close down all the banks of a member state. At the same time, it has a charter which grants it – supposedly – complete independence from politics. And yet, there is no central bank, at least in the West, which has less independence of the political process,” Varoufakis said. He said Draghi was “completely reliant” on the decisions of an “informal group of finance ministers”, referring to the fact that the Eurogroup, which gathers the finance ministers of the 19 eurozone countries, isn’t enshrined in EU treaties. “It is apparent that Draghi didn’t feel that the was on solid legal ground when proceeding with the closing of Greek banks,” Varoufakis said.

[..] In September 2015, Fabio De Masi already asked Draghi for the opinions. But the ECB chief, in a letter made public by the MEP, said the bank does not plan to publish the legal opinions because this would “undermine the ECB’s ability to obtain uncensored, objective and comprehensive legal advice, which is essential for well-informed and comprehensive deliberations of its decision-making bodies”. “Legal opinions provided by external lawyers and related legal advice are protected by legal professional privilege (the so-called ‘attorney-client privilege’) in accordance with European Union case law,” Draghi said. “Those opinions were drafted in full independence, on the understanding that they can only be disclosed by the addressee and only shared with people who need to know in order to take reasoned decisions on the issues at stake,” he added.

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No cashless society there.

Germans Really, Really Love the Euro (BBG)

As worries over the future of the euro zone heat up, the union’s biggest member is doubling down on the single currency in an underappreciated way. Germany’s central bank is by far the biggest issuer of cash in the bloc, with the Bundesbank the source of more euro banknotes in circulation than all of its peers combined. The size of the imbalance is underscored by new data from the ECB, showing nations’ contributions towards the Eurosystem’s consolidated financial statement. Each national central bank, or NCB, has a notional banknote allocation that’s tied to its share of Eurosystem capital. At the end of last year, there were €1.1 trillion euros ($1.25 trillion) in circulation, breaking down like this:

That accounts for how euro cash would be distributed in theory. In order to find out how much cash is actually issued you have to make adjustments that take into account variations in demand, which push the number higher in some countries and lower in others. The adjustments look like this:

The Bundesbank has, since the introduction of the euro in 2002, put a net €327 billion into circulation above its on-paper allocation. By combining the figures in the two charts, we arrive at a true picture of the origin of banknotes in the European economy:

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“The mainstream media are not honorable independent people. They are big business not much different from the banks.”

The Meltdown in Politics (Martin Armstrong)

The bias of the press is getting so bad, they are undermining everything they were supposed to stand for. This is a critical aspect in the decline and fall of an empire, nation, or city state. Once the news is compromised, confidence not just in the press, but in everything crumbles. The mainstream media are not honorable independent people. They are big business not much different from the banks. They lobby for their special deals and the support the status quo. The New York Times at least admitted their coverage of the election was biased. They apologized, but nothing has really changed. “As we reflect on the momentous result, and the months of reporting and polling that preceded it, we aim to rededicate ourselves to the fundamental mission of Times journalism. That is to report America and the world honestly, without fear or favor, striving always to understand and reflect all political perspectives and life experiences in the stories that we bring to you. It is also to hold power to account, impartially and unflinchingly.”

Even if Trump met with Putin, exactly what does that infer? Did it alter the election? No. Even Obama admitted that no hack altered the vote count. So what is the issue? The press aids the Democrats in trying to blame Putin for Hillary’s loss. But there is not a single shred of evidence that ANY of the leaked emails from the Democrats was ever altered or was fake. The Democrats simply got caught with their hand in the cookie jar and blame Putin. So what is all this Russia thing about? It seems to be just a diversion to discredit Trump and stop the agenda of any reform. A simple technical analysis of Democrat v Republican shows that the former is in a major decline and their agenda has been dying. In fact, look out for 2018-2019. Sheer chaos is coming.

In Europe, political forces are also in a state of denial. The EU is collapsing and the politicians refuse to surrender their goals. Instead, they lash out at what they are calling “populism” as with the election of Trump, BREXIT, and the developments in France. The will of the people is not worth anything when it goes against their dreams. So in both cases, we are witnessing the demise of the West. All of this political fighting is setting the stage for the shift from the West to the East of financial power. The wheel of fortune spins. We lost. What is accomplished by overthrowing Trump? What is accomplished by forcing Europe to remain in the EU with unelected people controlling everything from Brussels? If the press succeeds in overturning Trump, what is accomplished? Do they really think everything can go back to the way it was before?

[..] the media in the USA has degenerated to fake news, but in Europe the very same trend has emerged. This is a serious nail in our coffin and mainstream media has indeed become the sword of our own destruction. Can we prevent this outcome? No. All we can do is hopefully learn from our mistakes and this time try to create a system that prevents such an oligarchy from rising. All Republics historically collapse into oligarchies. As we head into 2018, this is going to get really bad. This is going to be a turning point of great importance in the political world.

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A president without a party. Or a program. Doesn’t seem to add up.

Macron Faces A Really Big Problem If He Becomes French President (Con.)

Currently riding high in the polls, Emmanuel Macron, the self-styled “beyond left and right” candidate for the French election, has been tipped to become the next president in May. But if he does, will he actually run the country? This question might sound odd but the nuances of the French political system put Macron in a spot of bother. The president derives their power from the support of a majority in the lower house of parliament, the National Assembly. Macron was a minister for the Socialist Party government but quit in 2016 to form his own political movement. Now he doesn’t even have a party, let alone a majority. Although the constitution of the French Fifth Republic, created by Charles De Gaulle in 1958, extended presidential powers, it did not enable the president to run the country.

There are only a few presidential powers that do not need the prime minister’s authorisation. The president can appoint a prime minister, dissolve the National Assembly, authorise a referendum and become a “temporary dictator” in exceptional circumstances imperilling the nation. They can also appoint three judges to the Constitutional Council and refer any law to this body. While all important tasks, this does not, by any stretch of the imagination, amount to running a country. The president can’t suggest laws, pass them through parliament and then implement them without the prime minister. The role of a president is best defined as a “referee”. Presidential powers give the ability to oversee operations and act when the smooth running of institutions is impeded.

So a president is able to step in if a grave situation arises or to unlock a standoff between the prime minister and parliament, such as by announcing a referendum on a disputed issue or by dismissing the National Assembly. So, why does everyone see the president as the key figure? In a nutshell, it’s because the constitution has never been truly applied. There lies the devilish beauty of French politics. A country known since the 1789 revolution for its inability to foster strong majorities in parliament has succeeded, from 1962, in providing solid majorities.

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This is what happens everywhere, in varying ways. In France, both establishment blocks look to be cast aside.

French Insurgents Thrust Establishment Aside in Crucial Election (BBG)

The old order is fading in France. Every election since Charles de Gaulle founded the Fifth Republic more than half a century ago has seen at least one of the major parties in the presidential runoff and most have featured both. With Republicans and Socialists consumed by infighting and voters thoroughly fed up, polls suggest that neither will make it this year. For the past month, survey after survey has projected a decider between Emmanuel Macron, a 39-year-old rookie who doesn’t even have a party behind him, and Marine Le Pen, who’s been ostracized throughout her career because of her party’s history of racism. “We’ve gone as far as we can go with a certain way of doing politics,” said Brice Teinturier, head of the Ipsos polling company and author of a book on voters’ disillusionment. “Everyone feels the system is blocked.”

Claude Bartolone, the Socialist president of the National Assembly, said in an interview with Le Monde Tuesday he may back Macron because he doesn’t “identify” with the more extreme platform put forward by his party’s candidate Benoit Hamon. De Gaulle’s latest standard-bearer Francois Fillon has spent the past week facing down rebellions in his party triggered by a criminal probe of his finances. Former Prime Minister Manuel Valls hasn’t campaigned for Hamon since losing to him in the primary and Socialist President Francois Hollande hasn’t even endorsed his party’s candidate either. Instead, senior figures from the Socialist camp are endorsing Macron, with former Paris Mayor Bertrand Delanoe the latest to offer his backing on Wednesday. “There’s a breakdown of parties in France,” Francois Bayrou, a two-time centrist candidate who is now backing Macron, said Tuesday on RMC Radio. “There are hostile battles between factions within each party, which has ruined the parties and ruined the image of politics.”

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Crazy that such differences still persist.

Iceland First Country In The World To Make Firms Prove Equal Pay (Ind.)

On International Women’s Day, Iceland became the first country in the world to force companies to prove they pay all employees the same regardless of gender, ethnicity, sexuality or nationality, The country’s government announced a new law that will require every company with 25 or more staff to gain a certificate demonstrating pay equality. Iceland is not the first country to introduce a scheme like this – Switzerland has one, as does the US state of Minnesota – but Iceland is thought to be the first to make it a mandatory requirement. Equality and Social Affairs Minister Thorsteinn Viglundsson said that “the time is right to do something radical about this issue.” “Equal rights are human rights. We need to make sure that men and women enjoy equal opportunity in the workplace. It is our responsibility to take every measure to achieve that,” he said.

The move comes as part of a drive by the Nordic nation to eradicate the gender pay gap by 2022. In October, thousands of female employees across Iceland walked out of workplaces at 2.38pm to protest against earning less than men. After this time in a typical eight-hour day, women are essentially working without pay, according to unions and women’s organisations. Iceland has been at the forefront of establishing pay equality, having already introduced a minimum 40% quota for women on boards of companies with more than 50 employees. The country has been ranked the best in the world for gender equality by the World Economic Forum for eight years running, but despite this, Icelandic women still earn 14 to 18% less than men, on average.

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“Cleaning up the plant [..] is expected to take 30 to 40 years, at a cost Japan’s trade and industry ministry recently estimated at 21.5tr yen ($189bn).” Uh, no, it will cost far more than $189 billion, and it’s to NOT clean up the plant. They have no idea how to do it. It’s all just fantasy.

Fukushima Clean-Up Falters 6 Years After Tsunami (G.)

Barely a fifth of the way into their mission, the engineers monitoring the Scorpion’s progress conceded defeat. With a remote-controlled snip of its cable, the latest robot sent into the bowels of one of Fukushima Daiichi’s damaged reactors was cut loose, its progress stalled by lumps of fuel that overheated when the nuclear plant suffered a triple meltdown six years ago this week. As the 60cm-long Toshiba robot, equipped with a pair of cameras and sensors to gauge radiation levels was left to its fate last month, the plant’s operator, Tokyo Electric Power (Tepco), attempted to play down the failure of yet another reconnaissance mission to determine the exact location and condition of the melted fuel. Even though its mission had been aborted, the utility said, “valuable information was obtained which will help us determine the methods to eventually remove fuel debris”.

The Scorpion mishap, two hours into an exploration that was supposed to last 10 hours, underlined the scale and difficulty of decommissioning Fukushima Daiichi – an unprecedented undertaking one expert has described as “almost beyond comprehension”. Cleaning up the plant, scene of the world’s worst nuclear disaster since Chernobyl after it was struck by a magnitude-9 earthquake and tsunami on the afternoon of 11 March 2011, is expected to take 30 to 40 years, at a cost Japan’s trade and industry ministry recently estimated at 21.5tr yen ($189bn). The figure, which includes compensating tens of thousands of evacuees, is nearly double an estimate released three years ago. The tsunami killed almost 19,000 people, most of them in areas north of Fukushima, and forced 160,000 people living near the plant to flee their homes. Six years on, only a small number have returned to areas deemed safe by the authorities.

[..] Shaun Burnie, a senior nuclear specialist at Greenpeace Germany who is based in Japan, describes the challenge confronting the utility as “unprecedented and almost beyond comprehension”, adding that the decommissioning schedule was “never realistic or credible”. The latest aborted exploration of reactor No 2 “only reinforces that reality”, Burnie says. “Without a technical solution for dealing with unit one or three, unit two was seen as less challenging. So much of what is communicated to the public and media is speculation and wishful thinking on the part of industry and government. “The current schedule for the removal of hundreds of tons of molten nuclear fuel, the location and condition of which they still have no real understanding, was based on the timetable of prime minister [Shinzo] Abe in Tokyo and the nuclear industry – not the reality on the ground and based on sound engineering and science.”

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And it will remain in recession for a long time.

Eurostat: Greece Is The Only EU Country Still In Recession (NE)

Household consumption and a rebound in investment drove economic growth in the euro zone in the last three months of last year, the latest data from EU statistics office Eurostat shows. Eurostat confirmed its earlier estimate that the economy of the 19 countries sharing the euro grew 0.4% quarter-on-quarter and 1.7% year-on-year. It said household consumption added 0.2 % points to the final quarterly growth number and capital investment added another 0.1 points, rebounding from a 0.1 point negative contribution in the third quarter. Growing inventories added another 0.1 points and government spending another 0.1 points while net trade subtracted 0.1 points.

Greece was the only country that was in negative territory, with GDP declining by 1.1% compared with the last quarter of 2015 and by 1.2% compared to the third quarter of 2016. Combined, the eurozone continued steady recovery, with the economy growing by 1.7% year on year and 0.4% on a quarterly basis. Messages were positive in the eurozone core. Germany grew by 1.8% and France by 1.2%, while the third largest economy of the euro, Italy, increasing by 1%. Impressive was the growth of Spain as it reached 3%. Social protection spending in Greece represented 20.5 % of the country’s GDP in 2015.

This is slightly higher than both the Eurozone average ratio (20.1% of GDP) and the EU28 average ratio (19.2% of GDP). Social protection expenditure in EU member-states ranged from 9.6% of GDP in Ireland to 25.6% of GDP in Finland in that year. Eight member-states (Finland, France, Denmark, Austria, Italy, Sweden, Greece and Belgium) spent more than 20% of GDP on social protection while Ireland, the Baltic states, Romania, Cyprus, Malta and the Czech Republic spend less than 13%.

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“Tax rates are expected to reach 26%, while pensions are being cut by as much as 22% by 2022.”

Greek Farmers Clash With Riot Police In Athens Over Austerity (G.)

Farmers who travelled to Athens from Crete have clashed with riot police in the latest unrest on the streets of the Greek capital, prompted by the government’s austerity policies. The confrontation occurred outside the agriculture ministry, where farmers wielding staffs engaged with police firing teargas to prevent them from entering the building. More than 1,100 stockbreeders and farmers arrived on overnight ferries in the early hours of Wednesday, to protest against increases in tax and social security contributions demanded by the creditors keeping Greece afloat. Footage showed the farmers, many wearing black bandanas, smashing the windows of riot vans with shepherds’ staffs, setting fire to rubbish bins and hurling rocks and stones.

When the agriculture minister, Evangelos Apostolou, initially refused to meet a 45-member delegation representing protesters, anger peaked. “Dialogue is one thing, thuggery quite another,” the minister said, before attempts at further talks also foundered. Greek farmers, long perceived to be the privileged recipients of generous EU funds, have historically been exempt from taxation. However, the barrage of cuts and increases in the price of everything from fuel to fertilisers will hit them hard. Tax rates are expected to reach 26%, while pensions are being cut by as much as 22% by 2022. Prof George Pagoulatos, who teaches European politics and economy at the University of Athens, said: “Farmers, in many ways, are a classic example of one of Greece’s protected groups. “In certain rural constituencies, like Crete, they are also electorally very influential.”

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Wages have become too low to pay for pensions. 23% unemployment. Almost half of Greeks depend on pensions to stay alive. More cuts are inevitable. The only way is down.

It Takes 10 Workers In Greece To Pay One Pension (K.)

The constant decline in salaries and the rise of flexible forms of employment are undermining the sustainability of the country’s social security system despite the numerous interventions in terms of pensions. According to social security experts, the slide in the average salary means that it now takes the contributions of 10 workers to pay one pension; before the crisis it required the contributions of four workers. The deterioration of that ratio highlights the system’s viability problem. The main feature of that problem is that the contributions of today’s workers go in their entirety toward covering the pensions of today’s pensioners.

According to data from the new Single Social Security Entity (EFKA), the analysis of employers’ declarations from May 2016 showed that the average salary of 1.4 million workers with full employment amounted to €1,176 per month. The average monthly gross earnings of the 588,000 part-time workers amounted to just €394; their number increased by about 11% from a year earlier. The same data show that bigger enterprises pay higher salaries: Businesses with fewer than 10 employees have an average full-employment salary that amounts to just 58.9% of that paid to employees of companies with more than 10 workers.

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Mar 012017
 
 March 1, 2017  Posted by at 10:46 am Finance Tagged with: , , , , , , , , ,  8 Responses »
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Vivien Leigh in Gone With The Wind, directed by Victor Fleming, 1939

 


Raising Pension Age Will Mean Many People Die Before Getting It (G.)
NY Teamsters Pension Fund Becomes First To Run Out Of Money (NYDN)
US Baby Boomers Forced By Law To Start Drawing From Retirement Funds (MW)
Greek Pensioners Brace For Latest Crisis Cuts (K.)
Merkel Bypasses Schäuble To Push For Greek Review Conclusion (K.)
US Stepping In To Ease Greece, Turkey Tensions (K.)
Trump Touts Unity Strength In Speech To Congress (R.)
Donald Trump and Paul Ryan are Not Political Philosophers (Baker)
This Chart Signals China’s Housing Bubble May Burst Soon (ME)
Russia Seen Dominating European Energy for Two Decades (BBG)
Sydney Home Prices Surge 14.8%, Fastest Annual Pace Since 2002 (BBG)
UK Nuclear Power Stations ‘Could Be Forced To Close’ After Brexit (G.)
Denmark Reduces Food Waste By 25% In 5 Years With Help Of One Woman (Ind.)
The World-Ending Fire – How America’s Farmers Betrayed The Land (G.)

 

 

Lots of retirement and pension scare stories today. I can only hope our readers have taken our warnings through the years to heart.

Raising Pension Age Will Mean Many People Die Before Getting It (G.)

Further increases in the state pension age could push it to the point where many working people die before qualifying for it, MPs have warned, in a report that calls for the end of the “triple lock” guarantee on pensions. The Commons work and pensions select committee report on intergenerational fairness, published on Tuesday, claims that financing the triple lock in future will not be possible without increasing the state pension age to 70.5 years – leaving men in Manchester, Birmingham, Bradford and Blackpool dying on average before they receive their state pension. Under the triple lock, pensions have risen every year since 2010 by whichever is the higher figure out of the rate of inflation, average earnings or a minimum of 2.5%. This has lifted many pensioners out of poverty but the committee said it had resulted in the over-65s taking an “ever greater share of national income”.

In its November 2016 report, the committee recommended that the triple lock be replaced from 2020 by a smoothed earnings link. This would benchmark the state pension to a fixed proportion of average earnings in the long run, but would protect its purchasing power in times of inflation. Citing figures from the Institute of Fiscal Studies, the committee said the state pension age would need to rise to 70.5 years by 2060 to make the triple lock affordable, “meaning today’s young would face working lives of over 50 years before receiving a state pension”. It added: “Making the triple lock sustainable would mean pushing the state pension age over average life expectancy in poorer areas of the UK”. Current male life expectancy is lowest in Blackpool, at 67.5, while it is 68.7 in parts of Bradford and 70.2 in much of Manchester. Tower Hamlets in London’s East End has a male life expectancy of 69.1.

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Dominoes.

NY Teamsters Pension Fund Becomes First To Run Out Of Money (NYDN)

Chmil is one of roughly 4,000 retired Teamsters across New York State suffering a fate that could soon hit millions of working-class Americans — the loss of their union pensions. Teamsters Local 707’s pension fund is the first to officially bottom out financially — which happened this month. “I had a union job for 30 years,” Chmil said. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.” Also on the brink of drying up are the pensions for two Teamster locals — 641 and 560 — in New Jersey, union officials said. Plus 35,000 Teamster members upstate who are part of the money-hemorrhaging New York State Teamsters Pension Fund.

Bigger than all of New York’s Teamster locals combined is the Central States Pension Fund — another looming financial disaster that could leave 407,000 retirees without pensions across the Midwest and South. And there’s still more beyond that, in various industries, officials say. “It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that,” said Chmil, one of five Local 707 retirees who agreed to share their stories with the Daily News last week. “I don’t want other people to have to go through this. We need everyone to wake up and do something; that’s why we’re talking,” said Ray Narvaez. Narvaez, 77, got a union certificate upon retirement in 2003 that guaranteed him a lifetime pension of $3,479 a month. The former short-haul trucker — who carried local freight around the city — started hearing talk in 2008 of sinking finances in his union’s pension fund.

But the monthly checks still came — including a bonus “13th check” mailed from the union without fail every Dec. 15. Then Narvaez, like 4,000 other retired Teamster truckers, got a letter from Local 707 in February of last year. It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000. “They said they were running out of money, that there could be no more in the pension fund, so we had to take the cut,” said Narvaez, whose wife was recently diagnosed with cancer. The stopgap measure didn’t work — and after years of dangling over the precipice, Local 707’s pension fund fell off the financial cliff this month.

With no money left, it turned to Pension Benefit Guaranty Corp., a government insurance company that covers pension. Pension Benefit Guaranty Corp. picked up Local 707’s retiree payouts — but the maximum benefit it gives a year is roughly $12,000, for workers who racked up at least 30 years. For those with less time on the job, the payouts are smaller.

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“Americans who turn 70 1/2 have until April of the following calendar year to make withdrawals or face stiff penalties…”

US Baby Boomers Forced By Law To Start Drawing From Retirement Funds (MW)

Robert Kiyosaki, author of the “Rich Dad” series of books, has for years predicted an epic market crash when baby boomers, forced by law, start drawing from retirement funds in large numbers. That meltdown was supposed to happen last year. Instead, the bull market raged on: It will be eight years old in March, if measured by the 2009 bottom. Kiyosaki has drawn some flak along the way. Kiyosaki hasn’t given up on the prediction, however, he told MarketWatch in a late-January interview and a series of follow-up emails. Baby boomers still need to start drawing money in 2017, he notes: They hold about $10 trillion in tax-deferred savings accounts, according to Bank of New York Mellon; Americans who turn 70 1/2 have until April of the following calendar year to make withdrawals or face stiff penalties. (There were nearly 75 million Boomers in 2015, according to Pew Research.)

“Every time I say that to people they scoff at me,” said Kiyosaki of his baby boomer meltdown theory. “The fact is, they’re pulling the money out…the thing that did happen that I never expected, was the market went up a lot due to the ‘Trump Bump.’” Early in 2016, when stocks posted their worst January since 2009, it looked like Kiyosaki might be right about the market. Stocks recovered only to slide on Brexit last summer and then fall briefly in an autumn pre-election dip. It’s been upward momentum ever since. The surprise election victory of President Donald Trump, who rallied investors with his promise to revamp the economy, further muddied the picture for Kiyosaki’s forecast. While stocks were already up about 4.3% before the election, its outcome boosted the S&P to finish 2016 with a 9.5% gain. The Dow industrials logged their best annual finish in 3 years, up 13.4%.

[..] Kiyosaki says 2016 brought about other, unexpected, crashes. “What has happened instead of a market crash was the crash in interest rates, which are adversely affecting millions of fixed-income retirees, pension plans, and savers — at the same time incentivizing people like me to become debtors, using debt to acquire income-producing real estate,” he said. Most retirement plans assume an 8% return, Kiyosaki said, but “when interest rates are a 1% or 0% or negative%, returns aren’t working.”

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Lots of numbers, but none really matter much. The crux is that if there are Greek pensions that are too high, for instance compared to other European ones, cut them, fine. But don’t cut ones that are already below and and all minimal limits. That is not even worth being labeled policy, it’s simply inhumane.

Greek Pensioners Brace For Latest Crisis Cuts (K.)

One group of Greeks that will look upon the return of creditors to Athens for talks aimed at completing the second review with some trepidation is the country’s 2.7 million pensioners. Since 2010, when Greece signed its first bailout with the eurozone and the IMF, the retirement age and social security contributions have increased, while pensions have come down. There is rarely a review that leaves pensions untouched and this one promises to be no different as lenders are targeting a reduction of annual pension spending by about 1.8 billion euros, or 1% of GDP. The IMF has been the most vociferous among Greece’s lenders regarding the need for a further overhaul of the country’s pension system to make it sustainable in the long run.

Between 2000 and 2010, pension spending in Greece climbed from 11 to 15% of GDP, mostly due to large increases in nominal pensions, generous benefits and options for early retirement. During this period, Greece’s figure was the second highest in the eurozone after that of Italy, according to the IMF. Despite two sets of reforms legislated in 2010 and 2012, pension expenditure continued rising and hit 17.7% in 2015, largely due to a GDP contracting by 25% while the average pension decreased by 8% between 2010 and 2015. The IMF believes the combination of low contribution revenues and high pension spending led to the pension deficit climbing from 7.3% of GDP in 2010 to 11% in 2015, making it by far the highest in the euro area.

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It’s about access to the ECB’s QE program, where Draghi starts buying Greek bonds. And perhaps even the markets too. That would hugely limit Greece’s dependence on the Troika.

Merkel Bypasses Schäuble To Push For Greek Review Conclusion (K.)

Kathimerini understands that German Chancellor Angela Merkel is prepared to do whatever it takes to conclude the second review of Greece’s third bailout so that it can join the ECB’s quantitative easing program (QE), on the condition that the government agrees to a package of pension cuts and a reduced tax threshold – amounting to roughly 2% of GDP. According to sources, Merkel has, to this end, already seized the initiative and met with ECB head Mario Draghi. The German chancellor is also expected to bypass any objections that may be raised by her finance minister, Wolfgang Schaeuble, and will push for a specific outline of what midterm measures for debt relief will look like – once Greece agrees to measures demanded by the IMF.

Draghi, as well as ECB executive board member Benoit Coeure, have already made it clear that Greece can only join the QE mechanism if it concludes the review, and midterm measures for debt relief are in place – which is something that, so far, Schaeuble has opposed. Merkel’s plan stipulates that after a staff level agreement is reached, the Greek Parliament will vote through the measures. When this is done, the specifics of the debt relief measures will be presented as a carrot to Athens. This will open the way for it to join the QE scheme and the IMF to rejoin the Greek program.

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if this is true, it’s massive.

US Stepping In To Ease Greece, Turkey Tensions (K.)

Washington appears to have activated a channel of communication with Ankara in a bid to reduce the recent spike in tensions with Greece in the Aegean Sea. According to sources, the US recently asked Ankara to tone down its aggressive stance in the Aegean. It is not known how Ankara has taken the American initiative, but it is clear that Washington fears a possible incident in the Aegean between the two NATO allies, which could destabilize the alliance’s southeast wing. Meanwhile, the incendiary rhetoric emanating from Ankara, albeit from nongoverment politicians, continued Tuesday with the leader of the ultra-right MHP party Devlet Bahceli speaking of Greek islands that remained “under occupation.” Bahceli is an ally of Recep Tayyip Erdogan and supports the bid by the Turkish president to expand his executive powers in the referendum that will take place in Turkey on April 16.

Citing what he described as international law, Bahceli called for the “unconditional end to the occupation of the islands,” referring to a string of islands and islets in the eastern Aegean. He went even further, referring to the Greek-Turkish war in 1922 and the way the Greek army was defeated by Turkish forces in Asia Minor – without, however, mentioning the Greek population of Turkey which was uprooted as a result of the war. “If [the Greeks] want to fall back into the sea [referring to how the Greek army was pushed out of Asia Minor] and if they are up to it, they are welcome to do it. The Turkish army is ready,” he said. The MHP leader also said the divided island of Cyprus is Turkish. Since the recent escalation of tension between Greece and Turkey, progress in the UN-backed peace talks between Greek and Turkish Cypriots has stalled.

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Most remarkable thing must be that Trump has learned to read from a teleprompter, and was told to stick with only that.

Trump Touts Unity Strength In Speech To Congress (R.)

President Donald Trump told Congress on Tuesday he was open to immigration reform, shifting from his harsh rhetoric on illegal immigration in a speech that offered a more restrained tone than his election campaign and first month in the White House. Trump, in a prime-time address to a country that remains divided over his leadership, set aside disputes with Democrats and the news media to deliver his most presidential performance to date, seeking to regain the confidence of Americans rattled by his leadership thus far. The president’s speech was long on promises but short on specifics on how to achieve a challenging legislative agenda that could add dramatically to budget deficits. He wants a healthcare overhaul, broad tax cuts and a $1 trillion public-private initiative to rebuild degraded roads and bridges.

Trump built a base of support behind his presidential campaign by vowing to fight illegal immigration. In his speech, he took a more moderate tone, appealing to Republicans and Democrats to work together on immigration reform. He said it was possible if both Republicans and Democrats in Congress were willing to compromise, although he also said U.S. immigration should be based on a merit-based system, rather than relying on lower-skilled immigrants. Comprehensive immigration reform eluded his two predecessors, Democrat Barack Obama and Republican George W. Bush, because of deep divisions within Congress and among Americans over the issue. Trump said reform would raise wages and help more struggling families enter the middle class. “I believe that real and positive immigration reform is possible, as long as we focus on the following goals: to improve jobs and wages for Americans, to strengthen our nation’s security, and to restore respect for our laws,” said the Republican president.

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Dean Baker corrects the NYT.

Donald Trump and Paul Ryan are Not Political Philosophers (Baker)

Apparently the paper is confused on this issue since it headlined a front page piece on the budget, “Trump budget sets up clash over ideology within G.O.P.” The article lays out this case in the fourth paragraph: “He [Trump] also set up a battle for control of Republican Party ideology with House Speaker Paul D. Ryan, who for years has staked his policy-making reputation on the argument that taming the budget deficit without tax increases would require that Congress change, and cut, the programs that swallow the bulk of the government’s spending — Social Security, Medicare and Medicaid.” Most of us recognize Donald Trump and Paul Ryan as politicians who hold their jobs as a result of being able to gain the support of important interest groups. It really doesn’t make much difference what their political philosophy is.

Contrary to what the NYT might lead us to believe, this is not a battle of political philosophy, it is a battle over money. On this score, the NYT also gets matters seriously confused. First of all, it is wrong to describe Social Security, Medicare, and Medicaid as “the programs that swallow the bulk of government spending.” Under the law, Social Security can only spend money raised through its designated taxes, either currently or in the past. For this reason, it is not a drain on the rest of the budget unless Congress changes the law. Medicaid would also not rank among the three largest programs. The government is projected to spend $592 billion this year on the military compared to $401 billion on Medicaid.

The claim that Paul Ryan is concerned that these programs would “swallow the bulk of government spending” directly contradicts everything Paul Ryan has been explicitly advocating for years. Ryan has repeatedly put forward budgets that would reduce the size of the federal government to zero outside of the military, Social Security, Medicare, and Medicaid. It is difficult to understand how a major newspaper can so completely misrepresent a strongly and repeatedly stated view of one of the country’s most important political figures.

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Full blown insanity.

This Chart Signals China’s Housing Bubble May Burst Soon (ME)

The probability that a real estate bubble may burst in China is rising. The financial sector heavily depends on real estate, which in turn exposes the entire Chinese economy to systemic risk. This link means that a downturn in real estate could soon spread to other areas of the Chinese economy if banks face liquidity shortfalls. Also, falling housing prices could result in more non-performing loans (NPLs). While NPLs officially account for only 1.75% of all Chinese loans, the government is likely understating the figure. BMI Research, a financial consulting firm, estimated in a 2016 report that NPLs could be close to 20% of loans.

As banks gave more credit to real estate developers and buyers, their profitability stalled. In theory, China’s economy is not based on capitalism and thus doesn’t revolve around profitability; but in practice, money needs to come from somewhere. A company that doesn’t make a profit can’t survive in the long run. The Chinese government can’t afford to let banks fail since it would threaten both the financial system’s health and the key lifeline to state-owned enterprises that provide jobs. This surge in China’s real estate prices, fueled by ongoing credit expansion, are forcing the government to choose between deflating the housing market and slowing growth.

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Pipelines vs pipedreams.

Russia Seen Dominating European Energy for Two Decades (BBG)

Europe has wanted to wean itself from Russian natural gas ever since supplies from its eastern neighbor dropped during freezing weather in 2009. Almost a decade later, the region has never been more dependent. Gazprom, Russia’s state-run export monopoly, shipped a record amount of gas to the European Union last year and accounts for about 34% of the trading bloc’s use of the fuel. Russia will remain the biggest source of supply through 2035, Shell said last week, echoing comments by BP in January. EU lawmakers have had their hearts set on diversifying supplies with liquefied natural gas delivered by tanker from the U.S., where production of the fuel skyrocketed last year. So far, those shipments have failed to materialize amid a lack of firm contracts and higher prices outside Europe. Overall, LNG shipments to the region, led by Qatar, were stagnant last year. “Russia will for sure remain Europe’s largest gas supplier for at least two more decades,” even if most of the incremental gains in EU imports are met by LNG from somewhere else, said Vladimir Drebentsov, chief economist for Russia and CIS at BP in Moscow.

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It was once a good place to live.

Sydney Home Prices Surge 14.8%, Fastest Annual Pace Since 2002 (BBG)

Dwelling values in Australia’s largest city rose at the fastest annual pace in 14-years in February as record-low interest rates outweighed regulatory efforts to avert a housing bubble. Average values in Sydney surged by 18.4%, the biggest jump since December 2002 when the nation was at the tail-end of the early 2000’s housing boom, according to data provider CoreLogic Inc. Across the state capitals combined, values rose by 11.7%. Despite tighter lending restrictions aimed at discouraging speculative buying by landlords, the runaway housing market shows few signs of easing amid strong economic growth, historically low borrowing costs and a tax system that offers perks for property investors. Housing affordability has become a hot-button political issue, with New South Wales premier Gladys Berejiklian promising to make it one of her top priorities.

Last month, she appointed former Reserve Bank of Australia governor Glenn Stevens to advise on the options. Central bank Governor Philip Lowe has signaled he’d prefer not to ease interest rates as it would further inflate Sydney house prices and drive already record household debt even higher, threatening financial stability. “The strong growth conditions across Sydney have provided a substantial wealth boost for home owners,” said Tim Lawless, head of research at CoreLogic. “However, the flipside is that housing costs are becoming increasingly out of reach.” Prices are now almost 8.5 times higher than household incomes in Sydney, according to CoreLogic. There are, however, considerable regional variations. Perth, in the mining heartland of Western Australia that’s suffering as a decade-long investment boom winds down, saw values fall by 4.5% in the year to February.

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You can’t easily tweak internation law on nuclear. For good reasons.

UK Nuclear Power Stations ‘Could Be Forced To Close’ After Brexit (G.)

Nuclear power stations would be forced to shut down if a new measures are not in place when Britain quits a European atomic power treaty in 2019, an expert has warned. Rupert Cowen, a senior nuclear energy lawyer at Prospect Law, told MPs on Tuesday that leaving the Euratom treaty as the government has promised could see trade in nuclear fuel grind to a halt. The UK government has said it will exit Euratom when article 50 is triggered. The treaty promotes cooperation and research into nuclear power, and uniform safety standards. “Unlike other arrangements, if we don’t get this right, business stops. There will be no trade. If we can’t arrive at safeguards and other principles that allow compliance [with international nuclear standards] to be demonstrated, no nuclear trade will be able to continue.”

Asked by the chair of the Commons business, energy and industrial strategy select committee if that would see reactors switching off, he said: “Ultimately, when their fuels runs out, yes.” Cowen said that in his view there was no legal requirement for the UK to leave Euratom because of Brexit: “It’s a political issue, not a legal issue.” The UK nuclear industry would be crippled if new nuclear cooperation deals are not agreed within two years, a former government adviser told the committee. “There is a plethora of international agreements that would have to be struck that almost mirror those in place with Euratom, before we moved not just material but intellectual property, services, anything in the nuclear sector. We would be crippled without other things in place,” said Dame Sue Ion, chair of the Nuclear Innovation and Research Advisory Board, which was established by the government in 2013.

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Bur perhaps none of this matters in the long run, perhaps waste is the inevitable consequence of the need to feel rich, be rich. As Ken Latta put it in his February 23 article here at the Automatic Earth: “wealth is best measured by the capacity to be utterly wasteful”.

Denmark Reduces Food Waste By 25% In 5 Years With Help Of One Woman (Ind.)

Never underestimate the power of one dedicated individual. A woman has been credited by the Danish Government for single-handedly helping the country reduce its food waste by 25% in just five years. Selina Juul, who moved from Russian to Denmark when she was 13 years old, was shocked by the amount of food available and wasted at supermarkets. She told the BBC: “I come from a country where there were food shortages, we had the collapse of infrastructure, communism collapsed, we were not sure we could get food on the table”. Her organisation, Stop Spild Af Mad – which translates as Stop Wasting Food – made all the difference and is recognised as one of the key drivers behind the government’s focus to tackle food waste.

“She was this crazy Russian woman that walked in the door, with a crazy idea about stop wasting food and she has come really far since,” Maria Noel, communication officer of Dagrofa, a Danish retail company, told the BBC. “She basically changed the entire mentality in Danemark,” she added. Ms Juul convinced Rema 1000, the country’s biggest low-cost supermarket chain, to replace all its quantity discounts with single item discounts to minimise food waste. Max Skov Hanser, a grocer at Rema 1000, said the retailer wasted about 80 to 100 bananas every day. However, after the supermarket put up a sign saying “take me I’m single”, it reduced the waste on bananas by 90%. In the past five years Denmark has become one of the leading European countries in the fight against food waste. Last year, a charity in Copenhagen opened Denmark’s first ever food surplus supermarket, which sells products at prices 30 to 50% cheaper than usual retailers.

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On Wendell Berry.

The World-Ending Fire – How America’s Farmers Betrayed The Land (G.)

Berry’s essays roam widely over such topics as “Writer and Region” (an A-grade discussion of The Adventures of Huckleberry Finn), “The Work of Local Culture” and his high-minded disinclination to swap his ancient typewriter for a computer (complete with several shocked technophile responses). But the majority of them return, out of a kind of disgust, to the idea of betrayal, and the way in which the US farming industry has abandoned its responsibility to the terrain it has been cultivating for the last century and a half. The startling aspect of this charge sheet is its proxy villain, which is neither the cereal companies nor the burger chains but the American dream. Ronald Reagan once named his favourite children’s books as Laura Ingalls Wilder’s Little House series, in which the resourceful Ingalls family head west across the newly available prairie states.

Pa chops trees, builds shacks and plants corn while Ma keeps house and thinks the native population “dirty”. To Berry, by contrast, the Pa Ingallses of the 1870s midwest are simply opportunists casting aside the old ways without bothering to reflect on their value, exploiters whose hard work and high moral tone obscure the absence of any real relationship with the land they are bent on despoiling. “A Native Hill”, a series of pointed reflections on the landscape of Henry County, Kentucky, notes that the original inhabitants had managed to preserve its integrity for thousands of years. The pioneers “in a century and half plundered the area of at least half its topsoil and virtually all its forest”, and constructed a road they may not have needed in the first place.

On the one hand, Berry is placing the Native American Indians and Pa Ingalls in false opposition: the effervescing Ingalls brood were different kinds of people – most obviously, nomads and settlers – wanting different things from the world they inhabited. On the other hand, Berry’s agrarian arguments are persuasive. To produce five feet of topsoil, he suggests in “The Making of a Marginal Farm”, takes 50,000 to 60,000 years. Meanwhile, the rallying cries are mounting up: think small; distrust the combines; a family can live for a year off a 60 sq ft vegetable plot; nobody ever did themselves any good by living in a city (he derides “the assumption that the life of the metropolis is the experience, the modern experience … ”).

As for The World-Ending Fire’s implications, you can just about envisage a future in which, once the fossil fuels have run out, necessity forces us all to live in smaller, self-sustaining societies without the benefit of the internal combustion engine. So perhaps Berry will have the last laugh. Whether by that stage in human evolution it will be worth having is another matter.

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Jan 252017
 
 January 25, 2017  Posted by at 11:16 am Finance Tagged with: , , , , , , , , , ,  13 Responses »
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Jack Delano Family of Dennis Decosta, Portuguese Farm Security Administration client 1940


US Demoted To ‘Flawed Democracy’ (CNBC)
David Stockman: Prepare for Fiscal Bloodbath, Not Fiscal Stimulus (DR)
Donald Trump Claims ‘Environmentalism Is Out Of Control’ (Ind.)
Trump Administration Seeks To Muzzle US Agency Employees (R.)
Trump Poised To Build Wall, Ban Many Middle East Immigrants (WSJ)
Trump Pins Keystone, Dakota Pipeline Fate on Renegotiation (BBG)
Pricier Oil Means China’s Foreign Reserves Will Shrink Even Faster (BBG)
A $90 Billion Wave of Debt Shows Cracks in US Real Estate Boom (BBG)
A New Deal to Save Europe (Varoufakis)
The European New Deal (Varoufakis)
Karl Rove’s Prophecy (Unz)
Bumblebee Added to US Endangered Species List (VoA)
Half Of Families In Greece Live On Pensions (Kath.)
Cold Weather Reignites Fears For Refugees Poorly Sheltered In Greece (G.)

 

 

“..Washington can’t point fingers at President Donald Trump for the nation’s downgrade. “The U.S. has been teetering on the brink of becoming a flawed democracy for several years..”

US Demoted To ‘Flawed Democracy’ (CNBC)

The U.S. has been demoted from a full democracy to a flawed democracy for the first time, according to the Economist Intelligence Unit (EIU). Every year, the firm’s Democracy Index provides a snapshot of global democracy by scoring countries on five categories: electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture. Nations are then classified under four types of governments: full democracy, flawed democracy, hybrid regime and authoritarian regime.America’s score fell to 7.98 last year from 8.05 in 2015, below the 8.00 threshold for a full democracy, the EIU announced in a report on Wednesday. That put the world’s largest economy on the same footing as Italy, a country known for its fractious politics.

A flawed democracy is a country with free elections but weighed down by weak governance, an underdeveloped political culture and low levels of political participation, according to the EIU. Other flawed democracies in 2016 included Japan, France, Singapore, South Korea and India, the report said. However, Washington can’t point fingers at President Donald Trump for the nation’s downgrade. “The U.S. has been teetering on the brink of becoming a flawed democracy for several years, and even if there had been no presidential election in 2016, its score would have slipped below 8.00,” the report explained. Instead, dwindling trust in government, elected representatives and political parties is to blame.

“Trust in political institutions is an essential component of well-functioning democracies. Yet surveys by Pew, Gallup and other polling agencies have confirmed that public confidence in government has slumped to historic lows in the U.S. This has had a corrosive effect on the quality of democracy,” the report found. As other developed countries experience a similar trust deficit, contemporary democracy is undergoing a crisis, the EIU said. The increasing role played by non-elected technocrats, increased voter abstention and curbs on civil liberties are among the main symptoms of this global malaise, the EIU said, noting that almost half of the 167 countries covered by its index registered a decline in overall scores between 2006 and 2016.

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“The Congressional Budget Office (CBO) baseline says there will be no recession through 2026. That is 206 months. The longest one we have ever had is about 100 months, under a much better circumstance.”

David Stockman: Prepare for Fiscal Bloodbath, Not Fiscal Stimulus (DR)

“I have lots of hope and zero faith.” “Somehow the idea that Donald Trump is the second coming of Ronald Reagan has gotten in the mix. Wall Street has priced it in. It is just completely wrong.” David Stockman served within the Ronald Reagan administration as the director of the Office of Management and Budget from 1981-1985 and is a two term Congressman. Stockman is also the recent bestselling author of Trumped! His book hits at the heart of exactly what the incoming administration must do in order to correct the dangerous direction toward financial turmoil. Cavuto then pressed on fiscal stimulus and the Reagan approach, where Stockman replied, “We are not going to get big tax cuts. We are in a diametrically different position. In 1980 the public debt was $930 billion, that was 30% of GDP.

There was huge running room and an open balance sheet for the accidental Keynesian stimulus. This resulted from the tax cuts and the defense increase, along with a massive deficit.” “Ronald Reagan actually increased the public debt by $1.8 trillion, or two times more than had been generated by the first 39 presidents.” “Today we have used that all up. We are at $20 trillion of debt.” “The base case forecast is so optimistic, such a rosy scenario, that they are going to need reflow of extra economic growth to get back to where they started. The Congressional Budget Office (CBO) baseline says there will be no recession through 2026. That is 206 months. The longest one we have ever had is about 100 months, under a much better circumstance.”

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Yeah, we need more cars…

Donald Trump Claims ‘Environmentalism Is Out Of Control’ (Ind.)

President Donald Trump has claimed that “environmentalism is out of control”. Mr Trump spent the morning meeting with auto executives as part of a push to bring jobs back to the US. Mr Trump told his guests at the White House that he was looking to ease regulations to help car companies and other businesses wishing to operate in the US. Among the attendees at the breakfast meeting were Ford chief executive Mark Fields, Fiat Chrysler chairman Sergio Marchionne and General Motors chief executive Mary Barra. Mr Trump called on car firms to increase production in the United States and boost American employment, adding that he hoped to see new auto plants built in the country. “We have a very big push on to have auto plants and other plants,” Mr Trump said.

Mr Trump has repeatedly criticised companies for building cars in Mexico and elsewhere and has threatened to impose 35 per cent tariffs on imported vehicles. The President often singled out Ford’s Mexico investments for criticism during his election campaign. The gathering was the first time the CEOs of the big three car makers have met jointly with a US president since a July 2011 session with former president Barack Obama to highlight a deal to raise fuel efficiency standards to 54.5 miles per gallon by 2025. White House spokesman Sean Spicer said on the eve of the meeting that Mr Trump was looking forward to meeting the CEOs and “hearing their ideas about how we can work together to bring more jobs back to this industry”.

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This will only lead to more publicity.

Trump Administration Seeks To Muzzle US Agency Employees (R.)

U.S. President Donald Trump’s administration has moved since he took office last week to curb the flow of information from several government agencies involved in environmental issues, in actions that may have been designed to discourage dissenting views. Employees at the Environmental Protection Agency, the Interior Department, the Department of Agriculture and the Department of Health and Human Services (HHS) have seen directives from the newly minted leadership seeking to limit how they communicate to the public, according to multiple sources. The moves have reinforced concerns that Trump, a climate change doubter, could seek to sideline scientific research showing that carbon dioxide emissions from burning fossil fuels contributes to global warming, as well as the career staffers at the agencies that conduct much of this research.

All of the agencies affected by the actions have some input on issues related to the environment and have been involved in various efforts related to climate change, including effects on natural resources and human health. On Tuesday, a source at the EPA said that staff had been told by members of the Trump administration not to speak to reporters or publish any press releases or blog posts on social media. EPA staff have also been asked not to publicize any talks, conferences, or webinars that had been planned for the next 60 days, the staffer said, asking not to be named. Asked if the EPA had been gagged, White House press secretary Sean Spicer said on Tuesday: “I don’t know … we’re looking into it. … I don’t think it’s a surprise we’re going to review the policies, but I don’t have any info at this time.”

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No surprise here. That may come when these things become real.

Trump Poised To Build Wall, Ban Many Middle East Immigrants (WSJ)

President Donald Trump was set to announce plans to expedite construction of his promised wall along the Mexican border, and was preparing orders banning entry to the U.S. of people from countries deemed risky and suspending the U.S. refugee program, people familiar with the planning said. Trump planned to travel Wednesday to the Department of Homeland Security, where he said he would be announcing his border security plans. Trump has given few details about his promise for a border wall, a project that is estimated to cost at least $10 billion and possibly much more.

Congressional Republicans have been mulling appropriating funds in spending legislation that must pass by April to keep the government funded, but Trump may be able to divert funds from other projects to begin work sooner. The other executive actions on immigration were possible for later in the week. That includes a ban on entry, which was expected to include Iraq, Iran, Syria, Yemen, Somalia, Sudan and Libya, one person familiar with the planning said. During his presidential campaign, Trump initially said he would ban entry by Muslims but later modified his proposal to call for suspending visas to people from any place “where adequate screening cannot occur.”

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“White House spokesman Sean Spicer cast that possible renegotiation of the Dakota Access project as a way to address concerns by stakeholders, including the Standing Rock Sioux Tribe..”

Trump Pins Keystone, Dakota Pipeline Fate on Renegotiation (BBG)

President Donald Trump took steps to advance construction of the Keystone XL and Dakota Access oil pipelines, while demanding a renegotiation to get a better deal for the U.S. government. Trump stopped short of green lighting construction on either pipeline but put a deadline on the government’s review of TransCanada’s proposed Keystone XL to transport Alberta oil sands crude to U.S. refineries. Trump also announced policies to encourage the use of American-made products in U.S. pipeline projects and to curtail federal environmental reviews for major infrastructure projects. “If we’re going to build pipelines in the United States, the pipes should be made in the United States,” Trump said.

The moves, taken on Trump’s fourth full day in office, are a major departure from the Obama administration, which rejected the Keystone proposal in 2015 and has kept Dakota Access blocked since September. Environmentalists, concerned about climate change and damage to water and land, now face an executive branch that’s less sympathetic to their efforts. For the oil industry, it heralds more freedom to expand infrastructure and ease transportation bottlenecks. White House spokesman Sean Spicer cast that possible renegotiation of the Dakota Access project as a way to address concerns by stakeholders, including the Standing Rock Sioux Tribe, which is concerned about Native-American cultural sites and the safety of its water supply.

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As I said a while ago: throw in a major devaluation and see what you get then.

Pricier Oil Means China’s Foreign Reserves Will Shrink Even Faster (BBG)

Much focus is on how China’s capital outflows will impact the world’s biggest pile of foreign-exchange reserves, but another issue in need of attention here is the rally in crude, argues Goldman Sachs. In a country where oil prices play “a disproportionate role” in the balance of payments – and China’s crude output is forecast to fall as much as 7% this year – the commodity’s bullish outlook poses a serious threat to reserves that have already shrunk more than 20% in the past two years. “The outlook for the balance of payments has deteriorated from a year ago, because oil prices are now on an upward trajectory, which could push the current-account surplus to around $200 billion this year, down from $331 billion as recently as 2015,” Goldman analysts Robin Brooks and Michael Cahill wrote in a Jan. 23 note.

That 40% slump is part of the picture for reserves, which contracted to $3.01 trillion at the end of 2016 from a record $3.99 trillion in mid-2014. A stronger dollar will also drive outflows. Goldman estimates the greenback will strengthen 15% by the end of 2019 against its major developed-market peers, so China is likely to keep weakening its currency fixing to maintain stability. The analysts reckon this could trigger a renewed pick-up in capital flight, which abated to $532 billion in 2016 from $736 billion in 2015. China even registered net inflows via its capital and financial accounts in December for the first time for 1 1/2 years.

Still, Goldman sees capital outflows slowing this year to $500 billion, and it expects reserve losses to accelerate to $394 billion from $369 billion in 2016 because the deterioration in the current account, led by surging oil prices, is “so sizable.”

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Like this: “Extremely low interest rates over the last four or five years have forgiven a lot of sins.”

A $90 Billion Wave of Debt Shows Cracks in US Real Estate Boom (BBG)

A $90 billion wave of maturing commercial mortgages, leftover debt from the 2007 lending boom, is laying bare the weak links in the U.S. real estate market. It’s getting harder for landlords who rely on borrowed cash to find new loans to pay off the old ones, leading to forecasts for higher delinquencies. Lenders have gotten choosier about which buildings they’ll fund, concerned about overheated prices for properties from hotels to shopping malls, and record values for office buildings in cities such as New York. Rising interest rates and regulatory constraints for banks also are increasing the odds that borrowers will come up short when it’s time to refinance. “There are a lot more problem loans out there than people think,” said Ray Potter, founder of R3 Funding, which arranges financing for landlords and investors. “We’re not going to see a huge crash, but there will be more losses than people are expecting.”

The winners and losers of a lopsided real estate recovery will be cemented as the last vestiges of pre-crisis debt clear the system. While Manhattan skyscraper values have surged 50% above the 2008 peak, prices for suburban office buildings still languish 4.8% below, according to an index from Moody’s Investors Service and Real Capital Analytics Inc. Borrowers holding commercial real estate outside of major metropolitan areas are now feeling the pinch as they attempt to secure fresh financing, Potter said. The delinquency rate for commercial mortgages that have been packaged into bonds is forecast to climb by as much as 2.4 percentage points to 5.75% in 2017, reversing several years of declines, as property owners struggle with maturing loans, according to Fitch Ratings. That sets the stage for bondholder losses.

Banks sold a record $250 billion of commercial mortgage-backed securities to institutional investors in 2007, and lax lending standards enabled landlords across the U.S. to saddle buildings with large piles of debt. When credit markets froze the following year, Wall Street analysts warned of a cataclysm, with $700 billion of commercial mortgages set to mature over the next decade. “At the depths of the panic, it was just that: panic,” said Manus Clancy, a managing director at Trepp, a firm that tracks commercial-mortgage debt. “That made people’s future expectations extremely bearish. Extremely low interest rates over the last four or five years have forgiven a lot of sins.”

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Yanis ignores the role the decline of growth plays. That is a shame.

A New Deal to Save Europe (Varoufakis)

“I don’t care about what it will cost. We took our country back!” This is the proud message heard throughout England since the Brexit referendum last June. And it is a demand that is resonating across the continent. Until recently, any proposal to “save” Europe was regarded sympathetically, albeit with skepticism about its feasibility. Today, the skepticism is about whether Europe is worth saving. The European idea is being driven into retreat by the combined force of a denial, an insurgency, and a fallacy. The EU establishment’s denial that the Union’s economic architecture was never designed to sustain the banking crisis of 2008 has resulted in deflationary forces that delegitimize the European project. The predictable reaction to deflation has been the insurgency of anti-European parties across the continent.

And, most worrying of all, the establishment has responded with the fallacy that “federation-lite” can stem the nationalist tide. It can’t. In the wake of the euro crisis, Europeans shudder at the thought of giving the EU more power over their lives and communities. A eurozone political union, with a small federal budget and some mutualization of gains, losses, and debt, would have been useful in 1999, when the common currency was born. But now, under the weight of massive banking losses and legacy debts caused by the euro’s faulty architecture, federation-lite (as proposed by French presidential hopeful Emmanuel Macron) is too little too late. It would become the permanent Austerity Union that German Finance Minister Wolfgang Schäuble has sought for years. There could be no better gift to today’s “Nationalist International.”

Simply put, progressives need to ask a straightforward question: Why is the European idea dying? The answers are clear: involuntary unemployment and involuntary intra-EU migration. Involuntary unemployment is the price of inadequate investment across Europe, owing to austerity, and of the oligopolistic forces that have concentrated jobs in Europe’s surplus economies during the resulting deflationary era. Involuntary migration is the price of economic necessity in Europe’s periphery. The vast majority of Greeks, Bulgarians, and Spaniards do not move to Britain or Germany for the climate; they move because they must. Life for Britons and Germans will improve not by building electrified border fences and withdrawing into the bosom of the nation-state, but by creating decent conditions in every European country.

And that is precisely what is needed to revive the idea of a democratic, open Europe. No European nation can prosper sustainably if other Europeans are in the grip of depression. That is why Europe needs a New Deal well before it begins to think of federation. In February, the DiEM25 movement will unveil such a European New Deal, which it will launch the next month, on the anniversary of the Treaty of Rome. That New Deal will be based on a simple guiding principle: All Europeans should enjoy in their home country the right to a job paying a living wage, decent housing, high-quality health care and education, and a clean environment.

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The practical measures in Yanis’ ’manifesto’.

The European New Deal (Varoufakis)

The European New Deal should include five precise goals and the means to achieve them under existing EU treaties, without any centralization of power in Brussels or further loss of sovereignty:

· Large-scale green investment will be funded by a partnership between Europe’s public investment banks (the European Investment Bank, KfW, and others) and central banks (on the basis of directing quantitative easing to investment project bonds) to channel up to 5% of European total income into investments in green energy and sustainable technologies.

· An employment guarantee scheme to provide living-wage jobs in the public and non-profit sectors for every European in their home country, available on demand for all who want them. On condition that the scheme does not replace civil-service jobs, carry tenure, or replace existing benefits, it would establish an alternative to choosing between misery and emigration.

· An anti-poverty fund that provides for basic needs across Europe, which would also serve as the foundation of an eventual benefits union.

· A universal basic dividend to socialize a greater share of growing returns to capital.

· Immediate anti-eviction protection, in the form of a right-to-rent rule that permits homeowners facing foreclosure to remain in their homes at a fair rent set by local community boards. In the longer term, Europe must fund and guarantee decent housing for every European in their home country, restoring the model of social housing that has been dismantled across the continent. Both the employment scheme and the anti-poverty program should be based on a modern version of an old practice: public banking for public purpose, funded by a pragmatic but radical currency reform within the eurozone and the EU, as well as in non-EU European countries. Specifically, all seigniorage profits of central banks would be used for these purposes.

In addition, an electronic public clearing mechanism for deposits and payments (outside the banking system) would be established in each country. Tax accounts would serve to accept deposits, receive payments, and facilitate transfers through web banking, payment apps, and publicly issued debit cards. The working balances could then be lent to the fund supporting the employment and anti-poverty programs, and would be insured by a European deposit insurance scheme and deficits covered by central bank bonds, serviced at low rates by national governments. Only such a European New Deal can stem the EU’s disintegration.

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“We’re an empire now, and when we act, we create our own reality.”

Karl Rove’s Prophecy (Unz)

In a famous exchange between a high official at the court of George W. Bush and journalist Ron Suskind, the official – later acknowledged to have been Karl Rove – takes the journalist to task for working in “the reality-based community.” He defined that as believing “that solutions emerge from your judicious study of discernible reality.” Rove then asserted that this was no longer the way in which the world worked: “We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality – judiciously, as you will – we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.” (Ron Suskind, NYTimes Magazine, Oct. 17, 2004).

This declaration became popular as an illustration of the hubris of the Bush-Cheney government. But we could also see it as fulfilled prophecy. Fulfilled in a manner that no journalist at that time would have deemed possible. Yes, the neoconservatives brought disrepute upon themselves because of the disaster in Iraq. Sure, opposition to the reality Rove had helped create in that devastated country became a first rung on the ladder that could lead to the presidency, as it did for Barack Obama. But the neocons stayed put in the State Department and other positions closely linked to the Obama White House, where they became allies with the liberal hawks in continuing ‘spreading democracy’ by overthrowing regimes. America’s mainstream news and opinion purveyors, without demurring, accommodated the architects of reality production overseen by Dick Cheney.

[..] publications that used to be rightly known as quality newspapers have turned into unreadable rags. The newspaper that was my employer for a couple of decades used to be edited on the premise that its correspondents rather than authorities were always correct in what they were saying. Today greater loyalty to the reality created in Washington and Langley cannot be imagined. For much of northern Europe the official story that originates in the United States is amplified by the BBC and other once reliable purveyors of news and opinion like the Guardian, the Financial Times and the (always less reliable) Economist.

[..] How could Rove’s predictions so totally materialize? There’s a simple answer: ‘they’ got away with momentous lies at an early stage. The more authorities lie successfully the more they are likely to lie again in a big way to serve the purposes of earlier lies. The ‘they’ stands for those individuals and groups in the power system who operate beyond legal limits as a hydra-headed entity, whose coordination depends on the project, campaign, mission, or operation at hand. Those with much power got away with excessive extralegal use of it since the beginning of this century because systems of holding the powerful to account have crumbled on both sides of the Atlantic. Hence, potential opposition to what the reality architects were doing dwindled to almost nothing. At the same time, people whose job or personal inclination leads them to ferret out truth were made to feel guilty for pursuing it.

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Your children’s children are going to love you for this.

Bumblebee Added to US Endangered Species List (VoA)

A small insect is getting a lot of attention in the United States. The rusty patched bumblebee is the first of its species to be declared endangered in the lower 48 states – meaning every state except Alaska and Hawaii. The rusty patched bumblebee is named for a rust-colored line on its back. The U.S Fish and Wildlife Service announced this month it was adding the bee to its endangered species list. The insects are “on the brink of extinction,” according to the service. It said the bees were once found in 28 states. But there now are only small populations remaining in 13 states. The government agency will make a plan to help the dying bees recover. The agency said that such a plan might help other insects, like butterflies.

U.S. officials think land owners can take small steps to help the rusty patched bumble bee. They say land owners can be friendlier towards bees by using native plants in their gardens. The insects directly fertilize many kinds of fruit and vegetable crops. And they fertilize grain crops used to feed cattle and milk cows. It costs billions of dollars to duplicate the job the bees do for free. Land owners are also being urged to cut back on their use of pesticide products. The officials also suggest that gardeners leave their plants alone at the end of the summer instead of cutting them. That way, the bees will have a place to live over the winter. The Fish and Wildlife Service says the rusty patched bumblebee was added to the endangered species list partly because of habitat loss. Other reasons were disease, pesticides and climate change.

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It gets worse by the day.

Half Of Families In Greece Live On Pensions (Kath.)

Greek society is evolving into a sum of households surviving on pensions while its most dynamic section, young people aged between 18 and 35, are abandoning it or considering abandoning it to seek a better life abroad, a survey by the Small Enterprises Institute of the Hellenic Confederation of Professionals, Craftsmen and Merchants (IME GSEVEE) has concluded. The report published on Tuesday suggests that the long-term financial crisis, whose main victims are the middle class, is not only leading to a further decline in incomes and the broadening of inequalities, but also openly threatening social cohesion. The so-called therapy, with its constantly increasing direct and indirect taxes, may lead to primary budget surpluses but this is not returned to taxpayers in the form of public services, as at the same time public spending on health and education is also being reduced.

The survey, conducted between November 14 and 26, used a sample of 1,000 households across Greece. It found that more than three-quarters of households (75.3%) had endured significant declines in their income in 2016. Crucially, 37.1% of households said that they live on less than €10,000 per year, while 49.2% said that their main source of income is pensions. This was actually higher in December 2014 (at 52%), and the small decline is attributed to the cuts in pensions. Salaries are the main source of revenues for 37.9% of households, up from 37.3% in the 2015 survey, while 9% said that they mainly rely on incomes from businesses.

Almost one in every three households has an unemployed member, which amounts to 1.1 million households, while the long-term unemployed amount to 73.3% of all jobless. Financial problems are not limited to the unemployed though, as 22.4% of households also include an employee who earns less than the minimum monthly salary of €586 gross. No wonder 9.7% of respondents said at least one member of their family has left the country.

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The entire aid industry must be overhauled, from EU to NGOs and ‘charities’, or this will continue. Brussels likes the agony because it thinks it’s a deterrent, the NGOs are profit seekers. The model is completely broken.

Cold Weather Reignites Fears For Refugees Poorly Sheltered In Greece (G.)

A new bout of cold weather across southern Europe has reignited fears for thousands of refugees and migrants sheltered in deplorable conditions in Greece. Forecasts of freezing temperatures have also been met with trepidation by international agencies, aid groups and local mayors on islands. “Thousands of people are poised to suffer needlessly in conditions that are becoming increasingly desperate,” said Eva Cossé at Human Rights Watch. “Europe’s failed policies have contributed to immense suffering for people warehoused on the Greek islands.” Greece was the focus of public outcry this month after shocking footage emerged of refugees on Lesbos living in flimsy, snow-swamped tents as an arctic blast sent temperatures plummeting to -14C.

The outcry prompted the government to dispatch a naval ship to temporarily house up to 500 people detained at the island’s vastly overcrowded Moria reception centre. Others were moved into heated containers, hotel rooms and apartments. But the measures have proved inadequate and with more severe weather on the way officials, volunteers and human rights defenders fear the worst. Sub-zero temperatures are expected by Thursday. Since the closure of the Balkan route into Europe, more than 62,000 men women and children have been trapped in Greece, according to government figures. Every day a steady trickle continues to arrive on rickety boats from Turkey, placing increasing pressure on Lesbos and other eastern Aegean islands close to the Asia Minor coast. “It is not much talked about, but this month alone 900 people have reached Greece,” said Gianmaria Pinto, country director of the Norwegian Refugee Council.

“Right now I am on Chios and in one camp there are people living on the beach, in small tents, exposed to the wind and rain. They should be moved to better and more humane conditions and the structures and opportunity for that are only on the mainland.” Under a controversial deal agreed by the EU and Turkey to curb an influx that surpassed a million people in 2015, Greek authorities last year accepted the introduction of a policy of containment in order to process asylum seekers at accelerated rates. By restricting refugees to islands it was hoped “secondary movement” into Europe could be reduced and those undeserving of asylum easily repatriated to Turkey. Instead, the policy has backfired with thousands of refugees being forced to endure dire conditions in overcrowded camps while their asylum requests are processed slowly. Many have been in the facilities since March when the EU-Turkey accord was signed.

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