Jan 212019
 


Martin Luther King, Jr. following his 1963 arrest in Birmingham

 

 

Rebranding MLK (Fikre)
A Call to Reinvestigate American Assassinations of the 1960s (CN)
The Number Of Births In China Hit Its Lowest Level Since 1961 (CNBC)
China Economic Growth Lowest In 28 Years (MW)
China Real Estate Sales Growth Slows Down (R.)
Theresa May ‘Considers Amending Good Friday Agreement’ To Break Deadlock (Ind.)
May Tries To Break Brexit Deadlock By Winning More EU Concessions (R.)
No Solutions To Irish Backstop In May’s Brexit Call With Cabinet (G.)
Bizarre Turn Of Events Could Push May’s Brexit Deal Through After All (Ind.)
Clashes in Athens Over Neighbour’s Name Change (BBC)
World’s 26 Richest People Own As Much As Poorest 3.8 Billion (G.)

 

 

Martin Luther King Jr. Day. He’s been dead long enough that everyone feels safe, if not entitled to, appropriating his name and celebration. But who in America today truly lives up to his legacy and message? Not many. The screwed up scenes at a high school, and the way media and individuals react to it, make that abundantly clear. There are many voices calling for serious harm to, if not murder of, a group of schoolchildren, voices who will in their very next breath seek to take possession of Dr. King’s name.

It’s time for all Americans, and not just Americans either, to find a nice bright mirror and face the beams in their own eyes. All sides focus on promoting hate of the others, and really, that is the opposite of what Dr. King said. How could you forget? You don’t solve anything be demanding other people change, you solve things only by changing yourself. You have no more right to hate Trump and his supporters than they have of hating you, or anyone else.

MLK: “a slogan ‘Power for Poor People’ would be much more appropriate than the slogan ‘Black Power.’”

Rebranding MLK (Fikre)

Lost in the chorus of politicians, pundits and media personalities who are praising MLK is the core message that he was pushing before he was felled on the balcony of the Lorraine Motel. King evolved in his thinking; instead of seeking Civil Rights for “African-Americans”, he made the fatal decision to fight for economic justice for all. King realized that the infringements against “black” folks in America were interconnected to the injustices felt by marginalized people throughout the world. That awakening is the reason he traveled to Memphis, by standing up for striking sanitation workers, he was hoping to form a bridge between poor folks irrespective of their skin color.

The establishment love people who lead sectional movements—those who seek exclusive justice are doing the work of the status quo—what they will not abide are those who try to unify the oppressed and inspire collective actions. King paid with his life for having the courage to pursue inclusive justice. After he was murdered, institutions of power—from government, academia to mainstream media and beyond—kicked in, stealthy erased King’s legacy and replaced it with disinformation. What has taken place over the past fifty years is a systematic and coordinated effort to blacken his narrative and dilute the power of his message. What MLK fought for, and ultimately died on behalf of, was for equality and fairness for all. By narrowing the scope of his cause and containing his sacrifice to only as a struggle for “black” people, opinion leaders successfully ghettoized him in an effort to lessen his appeal to a broader constituency.

[..] “One unfortunate thing about [the slogan] Black Power is that it gives priority to race precisely at a time when the impact of automation and other forces have made the economic question fundamental for blacks and whites alike. In this context a slogan ‘Power for Poor People’ would be much more appropriate than the slogan ‘Black Power.’” This was a quote from King in August of 1967, eight months before he was executed.

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All for it. But who’s impartial and strong enough to do it?

A Call to Reinvestigate American Assassinations of the 1960s (CN)

To mark Martin Luther King Jr. Day a group of academics, journalists, lawyers, Hollywood artists, activists, researchers and intellectuals, including two of Robert F. Kennedy’s children, are calling for new investigations into four assassinations of the 1960s. On the occasion of Martin Luther King Jr. Day, a group of over 60 prominent American citizens is calling upon Congress to reopen the investigations into the assassinations of President John F. Kennedy, Malcolm X, Martin Luther King Jr., and Senator Robert F. Kennedy.

* We call upon Congress to establish continuing oversight on the release of government documents related to the presidency and assassination of President John F. Kennedy, to ensure public transparency as mandated by the JFK Records Collection Act of 1992. The House Committee on Oversight and Government Reform should hold hearings on the Trump administration’s failure to enforce the JFK Records Act.

* We call for a major public inquest on the four major assassinations of the 1960s that together had a disastrous impact on the course of American history: the murders of John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy. This public tribunal, shining a light on this dark chapter of our history, will be modeled on the Truth and Reconciliation process in post-apartheid South Africa. The inquest — which will hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims — is intended to show the need for Congress or the Justice Department to reopen investigations into all four assassinations.

* On Martin Luther King Jr. Day, we call for a full investigation of Reverend King’s assassination. The conviction of James Earl Ray for the crime has steadily lost credibility over the years, with a 1999 civil trial brought by Reverend King’s family placing blame on government agencies and organized crime elements. Following the verdict, Coretta Scott King, the slain leader’s widow, stated: “There is abundant evidence of a major, high-level conspiracy in the assassination of my husband.” The jury in the Memphis trial determined that various federal, state and local agencies “were deeply involved in the assassination … Mr. Ray was set up to take the blame.” Reverend King’s assassination was the culmination of years of mounting surveillance and harassment directed at the human rights leader by J. Edgar Hoover’s FBI and other agencies.

* We call for a full investigation of the Robert F. Kennedy assassination case, the prosecution of which was a mockery of a trial that has been demolished by numerous eyewitnesses, investigators and experts — including former Los Angeles County Coroner Dr. Thomas Noguchi, who performed the official autopsy on Senator Kennedy. The forensic evidence alone establishes that the shots fired by Sirhan Sirhan from in front of Senator Kennedy did not kill him; the fatal shot that struck RFK in the head was fired at point–blank range from the rear. Consequently, the case should be reopened for a new comprehensive investigation while there are still living witnesses — as there are in all four assassination cases.

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I looked this one up: Chinese population in 1961 was about 670 million. Today it’s more than twice that. That would seem to say birth rates have halved.

The Number Of Births In China Hit Its Lowest Level Since 1961 (CNBC)

The number of babies born in China in 2018 was the lowest the country has seen in nearly 60 years, according to Chinese financial services firm Wind Information. China on Monday reported that there were 15.23 million births last year — the lowest since 1961 when 11.87 million births were reported, data on Wind showed. Last year’s birth figure was 11.6 percent lower than 17.23 million in 2017, according to Wind. The release of China’s latest birth data puts the country’s population at 1.395 billion in 2018, the Associated Press reported, citing data by the National Bureau of Statistics. That means the population grew 3.81 percent compared to a year earlier, according to the news wire. AP also reported that the Chinese government estimated that its population will peak in 2029 at 1.442 billion, and then start to decline in the year after that.

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And that’s just official numbers. Economics professor Xiang Songzuo put it as low as 1.67% in December.

China Economic Growth Lowest In 28 Years (MW)

China’s economic expansion languished to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy. The 6.6% growth rate for 2018 reported Monday is the slowest annual pace that China has recorded since 1990. The economic downturn, which has been sharper than Beijing expected, deepened in the final months of 2018, with fourth quarter growth rising 6.4% from a year earlier. Adding to the gloom was the trade conflict with Washington. The uncertain outlook for Chinese exporters caused companies to delay investing and hiring and in some cases even to resort to layoffs–a practice that is often discouraged by China’s stability-obsessed Communist Party rulers. The official jobless rate ticked up to 4.9% last month from 4.8% in November.

In the southern technology and export-manufacturing center of Shenzhen, for instance, many private makers of electronics, textiles and auto parts furloughed workers more than two months before the Lunar New Year holiday, which begins in February, according to business owners and local officials. The neighboring city of Guangzhou saw growth slump to 6.5% last year–well short of the 7.5% annual target set by the city government–as trade tensions hit the city’s manufacturing sector hard. Some economists and investors have said China’s economy is far more anemic than the government’s 6.6% rate of expansion for 2018. They note the government’s move on Friday, just ahead of Monday’s data release, to cut the 2017 growth rate to 6.8% from 6.9%, which they said provides a slightly lower base, giving a slight boost to the fresh 2018 data.

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Consumer spending in general is slowing in China. That’s the biggest danger for its economy.

China Real Estate Sales Growth Slows Down (R.)

Growth in property investment in China cooled to the second slowest pace in 2018 in December, adding to signs of a further slackening in the real estate market in a blow to a key driver economic growth. Real estate investment, which mainly focuses on the residential sector but includes commercial and office space, rose 8.2 percent in December from a year earlier, down from 9.3 percent in November, according to Reuters calculations based on data released by National Bureau of Statistics (NBS) on Monday. That was just ahead of the slowest pace of growth last year at 7.7 percent recorded for October. For the full year, property investment increased 9.5 percent from the year-earlier period, down from 9.7 percent in January-November.

In December, property sales by floor area, a major indicator of demand, rose a touch by 0.9 percent from a year earlier, the first gain in four months and compared with November’s 5.1 percent drop. For 2018, property sales by area rose a modest 1.3 percent from a year earlier, official data showed. Analysts say a continued downturn in sales on the back of tight government controls to curb speculation could add to the growing pressure on the world’s second-largest economy. The real estate sector is a key pillar of the economy, so any further weakness in sales could influence the pace and scope of fresh stimulus measures expected from Beijing this year.

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It took decades to negotiate the Good Friday Agreement, after 1000s of lives were lost. May should not be allowed to touch it.

Theresa May ‘Considers Amending Good Friday Agreement’ To Break Deadlock (Ind.)

Theresa May is considering an attempt to amend the Good Friday Agreement in a bid to break the Brexit deadlock and win support for a negotiated exit deal, it has been reported. Ministers believe the move could avoid the UK having to commit to a backstop as part of the prime minister’s “plan B”, The Daily Telegraph reported on Sunday. The EU has insisted on a backstop measure to ensure an open border remains between Northern Ireland and the Republic after the UK leaves the bloc. Ms May has been forced to find alternatives to her original Brexit deal after it was crushed in the Commons on Tuesday.

Under the PM’s plan, it is reported, London and Dublin would either agree a new set of principles or add words to the Good Friday Agreement in order to guarantee an open border. The 1998 peace deal effectively brought an end to the Troubles after years of failed talks, and established a power-sharing structure to accommodate unionist and nationalist politicians. It follows separate reports that Ms May planned to pitch to the Irish government a bilateral treaty that would remove the need for the backstop so hated by many Conservative MPs; the arrangement would see the UK enter into a temporary customs union with the EU, and Northern Ireland agree to abide by European rules on goods until a subsequent deal was reached.

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Parliament demanded a Plan B today. May has none. She speaks 1530 GMT.

May Tries To Break Brexit Deadlock By Winning More EU Concessions (R.)

British Prime Minister Theresa May on Monday will try to crack the deadlock over Brexit by setting out proposals in parliament that are expected to focus on winning more concessions from the European Union. With just over two months left until the United Kingdom is due to leave the European Union on March 29 there is no agreement in London on how and even whether it should leave the world’s biggest trading bloc. After her Brexit divorce deal was rejected by 402 lawmakers in the 650-seat parliament last week, May has been searching for a way to get a deal through parliament.

Attempts to forge a consensus with the opposition Labour Party failed so May is expected to focus on winning over 118 rebels in her own party and the small Northern Irish party which props up her government with concessions from the EU. In a sign of just how grave the political crisis in London has become, the Daily Telegraph reported that May was even considering amending the 1998 Good Friday Agreement which ended 30 years of violence in Northern Ireland. The Daily Telegraph said EU sources cast May’s plan a non-starter as a renegotiation of such a significant international treaty would require the consent of all the parties involved in Northern Ireland. May told British ministers she would focus on securing changes from Brussels designed to win over rebel Conservatives and the Northern Irish DUP, The Times said.

May will make a statement in parliament at about 1530 GMT and put forward a motion in parliament on her proposed next steps on Brexit, though some lawmakers are planning to wrest control of Britain’s exit from the government. After May’s motion is published, lawmakers will be able to propose amendments to it, setting out alternatives to the prime minister’s deal.

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Time to send her away. She’s a dead end.

No Solutions To Irish Backstop In May’s Brexit Call With Cabinet (G.)

Theresa May is expected to reject calls to forge a cross-party consensus on Brexit when she lays out her plan B to parliament on Monday, choosing instead to back new diplomatic efforts in Brussels to renegotiate the Irish backstop. The prime minister held a conference call with her bitterly divided cabinet from the country retreat of Chequers on Sunday evening. Cabinet sources said the consensus on the 90-minute call was to renew efforts to find acceptable changes to the backstop arrangement but that the conversation was light on specifics. One said there were “no actual solutions” proposed during the call. “It is difficult to know – as ever – what she will do,” another said. “But the broad agreement is on the need to bring DUP and Tory rebels on board.”

Despite her claim in the wake of last week’s significant defeat in parliament that she would speak to “senior parliamentarians” from all parties to seek a compromise, government sources insisted her overriding priority was to prevent a historic split in the Tory party. Several senior Conservative MPs have suggested they could form a breakaway party if May opted to support a customs union – one of Labour’s central demands, which is also backed by Tory supporters of a Norway-style soft Brexit. Whitehall sources said the prime minister’s chief of staff, Gavin Barwell, had counselled her to consider a customs union after last week’s catastrophic defeat, when her deal was rejected by an overwhelming majority of 230 votes. But when the government tables a formal statement on Monday, setting out its next steps, it is instead expected to focus on seeking changes to the Irish backstop in order to win over Jacob Rees-Mogg’s European Research Group and the DUP.

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Party before country.

Bizarre Turn Of Events Could Push May’s Brexit Deal Through After All (Ind.)

Yvette Cooper is in many ways the alternative leader of the opposition. The Labour MP who chairs the home affairs select committee will table a bill in the House of Commons on Monday, under the catchy title of the European Union (Withdrawal) (No 3) Bill, which could be decisive in breaking the Brexit deadlock. It could lead to parliament being forced to make a straight choice between Theresa May’s deal and postponing Brexit in order to hold a new referendum. If that is what happens, I think there would be a small majority for the prime minister’s deal. The importance of Cooper’s bill is that it changes the default setting in law. At the moment, if parliament fails to act, the UK will leave the EU on 29 March.

Cooper’s bill says that, if a deal has not been approved by 7 March, the government would be required to seek an extension of the Article 50 deadline. That would mean asking the EU to postpone the UK’s departure until the end of this year – and EU leaders have said they would agree to an extension if it were to hold another referendum. This would transform the situation in the House of Commons. Jacob Rees-Mogg and the rest of the cohort of Conservative MPs who want to leave without a deal would have to think again. At the moment they are happy to vote everything down, knowing that this gets them what they want. But Cooper’s bill would take what they want off the table. They would then have to choose between the prime minister’s deal and putting off Brexit for at least nine months.

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They would still get to call themselves Macedonians. Insult and injury. Tsipras should be very careful.

Clashes in Athens Over Neighbour’s Name Change (BBC)

Protesters have clashed with police in the Greek capital Athens at a big rally to oppose the government’s deal with Macedonia on changing its name. Police fired tear gas at some of those attending a protest which attracted tens of thousands to the city. The deal, which is yet to be approved, designates Greece’s northern neighbour as Republic of North Macedonia. The name Macedonia is sensitive for many Greeks who say it implies a claim on the Greek province of the same name. Years of wrangling finally brought an agreement last June between Greece’s left-wing Prime Minister Alexis Tsipras and his Macedonian counterpart. A vote on the deal, which aims to end a 28-year row between the nations, is set to take place in the Greek parliament this week.

The dispute dates back to 1991 and the break-up of Yugoslavia. Macedonia was a Yugoslav republic and adopted the name Macedonia when it became an independent nation. Greece has long argued the use of the name implied a territorial claim and cultural appropriation. At the UN the country was formally known as the Former Yugoslav Republic of Macedonia (Fyrom). [..] Greek nationalists argue that the name Macedonia can only refer to the Greek province of the same name. The dispute has led to Greece to blocking Macedonia’s hopes of joining Nato and the EU. Under the deal, the country’s language would be Macedonian and its people known as Macedonians (citizens of the Republic of North Macedonia). The move has met with sharp resistance in both countries because nationalists believe it erodes their identity.


EPA

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They’re not going to solve the issue by themselves, they can’t help it.

World’s 26 Richest People Own As Much As Poorest 3.8 Billion (G.)

The growing concentration of the world’s wealth has been highlighted by a report showing that the 26 richest billionaires own as many assets as the 3.8 billion people who make up the poorest half of the planet’s population. In an annual wealth check released to mark the start of the World Economic Forum in Davos, the development charity Oxfam said 2018 had been a year in which the rich had grown richer and the poor poorer. It said the widening gap was hindering the fight against poverty, adding that a 1% wealth tax would raise an estimated $418bn (£325bn) a year – enough to educate every child not in school and provide healthcare that would prevent 3 million deaths. Oxfam said the wealth of more than 2,200 billionaires across the globe had increased by $900bn in 2018 – or $2.5bn a day.

The 12% increase in the wealth of the very richest contrasted with a fall of 11% in the wealth of the poorest half of the world’s population. As a result, the report concluded, the number of billionaires owning as much wealth as half the world’s population fell from 43 in 2017 to 26 last year. In 2016 the number was 61. Among the findings of the report were: • In the 10 years since the financial crisis, the number of billionaires has nearly doubled. • Between 2017 and 2018 a new billionaire was created every two days. • The world’s richest man, Jeff Bezos, the owner of Amazon, saw his fortune increase to $112bn. Just 1% of his fortune is equivalent to the whole health budget for Ethiopia, a country of 105 million people. • The poorest 10% of Britons are paying a higher effective tax rate than the richest 10% (49% compared with 34%) once taxes on consumption such as VAT are taken into account.

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Dec 092018
 
 December 9, 2018  Posted by at 10:31 am Finance Tagged with: , , , , , , , , , , , ,  


Edouard Manet Berthe Morisot with a bouquet of violets 1872

 

Incoming House Judiciary Chair Planning To End Probe Into FBI, DOJ (ZH)
France Is The New Tax Hell In Europe And Beyond (RT)
Paris Under Siege As Gilets Jaunes Open ‘Act IV’ – 4th Weekend Of Protest (O.)
No Hope Of Success And No Plan B – But Theresa May Won’t Blink (O.)
UK Cabinet Splits Over Second Referendum On Brexit Deal (G.)
Majority Of UK Now Wants To Remain In The EU – Poll (Ind.)
Theresa May Warns Of ‘Uncharted Waters’ Ahead Of Key Vote (BBC)
EU Will Negotiate If May Loses Commons Brexit Vote – Prodi (G.)
China Threatens Canada With ‘Grave Consequences’ If Huawei CFO Not Freed (R.)
Putin Doesn’t Rule Out Extending Turkish Stream Pipeline Into Greece (RT)
COP24 Fails To Adopt Key Climated Change Report (BBC)

 

 

But of course. Let’s invite more chaos in.

Incoming House Judiciary Chair Planning To End Probe Into FBI, DOJ (ZH)

During a break during former FBI Director James Comey’s heated closed-door testimony on Capitol Hill on Friday, incoming House Judiciary Chairman Jerry Nadler confirmed to reporters what many had already suspected: That Nadler (and probably his fellow Democratic leaders) would put the kibosh on the House’s investigation into alleged political bias at the highest levels of the FBI and DOJ as they launched an investigation into the Trump campaign – an investigation that eventually morphed into the Mueller probe. While Democrats prepare to ramp up investigations into everything from Trump’s “war on the media” to his involvement in his family business, Nadler told a group of reporters that he intends to end the House Judiciary Committee’s involvement in the Congressional probe as soon as he takes the reins next year.

Asked why he intends to end the committee’s involvement in the probe, Nadler responded that “it was a waste of time to begin with” and a “distraction” from the real-wrong doing here – that is, lawbreaking committed by Republicans, according to the Hill. “Yes, because it is a waste of time to start with,” Nadler said in response to a question about whether he would end the probe. Nadler characterized the Republican investigation as a political sideshow that aims to distract from special counsel Robert Mueller’s investigation into possible ties between the Trump campaign and Russia. “The entire purpose of this investigation is to be a diversion of the real investigation, which is Mueller. There is no evidence of bias at the FBI and this other nonsense they are talking about,” he continued.

If the House investigation into suspected FBI malfeasance is just a “sideshow”, as Nadler claims, how would he explain the fact that the FBI knew the allegations contained in the Steele dossier – the linchpin of the FBI’s FISA warrant application that kicked off the Russia probe in earnest – were bogus before applying for surveillance? Or the many conflicts of interest between senior FBI officials involved with the probe (Andrew McCabe, Bruce Ohr, Peter Strzok, and, yes, Comey himself) – or the fact that McCabe was fired following after the DOJ’s inspector general confirmed that McCabe had lied under oath to try and conceal the fact that he told an FBI spokesman to leak a story about the FBI’s investigation into the Clinton Foundation just days before the election. McCabe could still face criminal charges from his lies. But Congress’s attempt to hold the FBI accountable is just a “distraction?”

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Not unimportant when it comes to the yellow vests.

France Is The New Tax Hell In Europe And Beyond (RT)

While the dust has not yet settled in the streets of Paris, after sweeping protests against fuel tax hikes, it just so happens that France has taken the crown from Denmark as the most taxed country in 2017, the OECD found. Among the 34 developed members of the Organization for Economic Cooperation and Development (OECD), Emmanuel Macron leads the nation with the highest tax-to-GDP ratio, the organization reported. France leads with 46.2% of GDP against the average of 34.2% of other members, thus dropping the long-standing leader in the rating, Denmark.

The Scandinavian country’s numbers, meanwhile, shrank to 46%, down by 0.2 since last year. Sweden, Italy, and Greece round out the top five, while Mexico is the last on the list at 16.2%. Notably, tax revenues for OECD member states, on average, reached historically high levels in 2017, rising to 34.2% of GDP. It is up only slightly from 34%, the previous peak recorded by the organization in 2016.

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Quite the series of demands. But hard to gauge how much support they have; there are not leaders or anything.

Paris Under Siege As Gilets Jaunes Open ‘Act IV’ – 4th Weekend Of Protest (O.)

A charter of gilets jaunes’ “suggestions to end this crisis” has been circulating on Facebook. While far from “official” – the movement has no agreed representatives – it does illustrate the diverse, and sometimes contradictory, nature of their demands:

Economy/work A full review of taxation, with no citizen to be taxed at more than 25% of income; an immediate 40% increase in the minimum wage, pensions and benefits; “mass hirings” in the state sector to restore quality of services in hospitals, schools, etc; 5m new homes; make banks “smaller”.

Politics France’s constitution to be rewritten “by the people and for the interests of the people”; lobbying to be banned; France should leave the EU; recover €80bn lost to tax evasion each year; halt and/or reverse all privatisations; removal of “useless” speed cameras; reform of education system, removal of all “ideologies”; quadruple budget of judicial system, which must be simplified, free and accessible for all; break up media monopolies and end cosy relationship between media and the political class; open media up to the people.

Health/environment 10-year guarantee on products to end planned obsolescence; ban plastic bottles; limit power of pharmaceutical companies; ban GM foods, carcinogenic pesticides, monoculture; reindustrialise France to reduce imports and therefore pollution.

Geopolitics Pull France out of Nato and foreign wars; end the plunder of French-speaking Africa; prevent migration flows that cannot be welcomed or integrated given current “civilisational crisis”; scrupulous respect for international law and engagements.

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Tuesday is the big vote in the Commons. May looks certain to lose big. So, chaos in France AND the UK. Where are Britain’s yellow vests anyway?

No Hope Of Success And No Plan B – But Theresa May Won’t Blink (O.)

For several weeks Theresa May has been holding private meetings in Downing Street and the Commons with MPs [..] She has used all her powers of persuasion to try to win them around ahead of Tuesday’s historic “meaningful vote” on her deal. Tory whips have tried to cajole their wavering backbenchers day and night, arguing the case for the May deal and reminding the more ambitious among them where their best career interests lie. Two weeks ago May made the campaign a national one – writing directly to the people of Britain and asking them to put more pressure on their MPs to support her. A special Tory website called Back the Brexit Deal was launched by the party to rally grassroots Tories behind the cause, with limited success.

Constituency chairmen were lobbied heavily, too. Ominously for the prime minister, however, the ultra-hard sell has achieved almost nothing. Some Tories even think it has had the reverse effect to that intended – making people focus in more detail on her deal than they would have done, only for them to conclude they could never back it. One senior Conservative said the party machine had deployed every resource it could muster but had failed totally. “Whether it is our backbenchers, or the party faithful, or the public, it is the same. If anything, I think the whole ‘going to the country thing’ has made things worse.”

[..] By this weekend more than 100 backbench Tory MPs had declared themselves ready to vote against May’s deal. Surveys of Tory members show they are against, too, by a big majority. After a dreadful week in which May’s government was found to be in contempt of parliament for refusing to publish the full legal advice on Brexit, the chief whip, Julian Smith, has been telling No 10 that it is on course for a huge defeat. [..] More junior members of the government are rumoured to be ready to quit before Tuesday because they can’t live with the deal as it is. With two days to go, there is no sign May is ready to delay, change course or blink at all. One senior Tory said: “If she has a plan B, no one knows what it could be. It looks like a crisis with no solution. She seems ready to march on into the gunfire.”

Labour is keen to make out that Tuesday’s vote will be tighter than everyone expects. It is desperate to promote this view in case May limits a defeat to far less than 100. [..] But with all but a handful of the 257 Labour MPs, the entire block of 35 SNP members, all but one of the 11 Liberal Democrats, and the 10 DUP members set to vote against it – and more than 100 Tories on record as being opposed – the arithmetic points to a far worse outcome for the prime minister.

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Divisions everywhere. And opportunism. If you’re in the Cabinet, and May loses real bad, what’s your political future?

UK Cabinet Splits Over Second Referendum On Brexit Deal (G.)

A deep cabinet split has opened up over whether Theresa May should back a second referendum in a final attempt to end the political deadlock over Brexit, as senior Conservatives predicted on Saturday night that her blueprint for leaving the EU was heading for a crushing House of Commons defeat. Adding to a mounting sense of constitutional crisis ahead of Tuesday’s crucial parliamentary vote, No 10 is braced for more resignations of ministers and aides who want another referendum, or who believe May’s deal fails to deliver on Brexit. Will Quince, the Colchester MP and aide to the defence secretary Gavin Williamson, quit his post on Saturday night in protest at the Brexit deal.

Cabinet ministers have told the Observer that attempts to convince May to delay the vote to avoid one of the largest and most humiliating defeats in recent parliamentary history had not been heeded. This was despite what they saw as a clear danger that such a result could provoke a leadership challenge and split the party irrevocably. Some cabinet ministers now believe that May is so wedded to her Brexit deal that her only method of gaining approval will be through another referendum – and that the arguments for a second vote are emerging as stronger than those for a soft Brexit. The prime minister has so far refused to entertain any idea of a second public vote.

One cabinet source said it might prove to be the only way of saving May’s deal and her reputation. “She is so committed to her deal, and a second referendum could now be the only way of getting it. The polls have been remarkably stable for a while, but there does seem to be some kind of movement [to Remain], and that could well develop in the coming days and weeks.”

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1,500 people is not a large enough poll.

Majority Of UK Now Wants To Remain In The EU – Poll (Ind.)

A majority of the country now think Britain should remain inside the European Union, according to a new poll released days before the critical Brexit vote in parliament. The exclusive research for The Independent shows that, as of this month, 52% favour staying in the trading bloc. The data from pollsters BMG Research reveals support for remaining has grown month by month since the summer, and broke past 50% in December as the complex realities of Brexit were brought home to the country. The poll also revealed that almost half of people think the withdrawal agreement settled by Theresa May is a “bad deal” for Britain, with around as many saying MPs should reject the deal outright when they take the critical decision on Tuesday.

The BMG Research study lays waste to any hope that a concerted publicity drive, which has seen Ms May and her ministers tour the country to persuade people of its merits, has been a success. Instead it shines a light on the deep divisions that still exist, with none of the immediate alternative paths beyond Ms May’s plan – a second referendum, a Norway-style relationship or no deal – enjoying majority support. [..] In a further development ex-European Commission president Romano Prodi said Brussels could renegotiate the deal if MPs vote against it, creating the opportunity for Ms May to seek further concessions.

[..] When BMG asked some 1,500 respondents, “should the United Kingdom remain a member of the European Union, or leave the European Union”, 52% said “remain”, 40% said “leave”, six% said they did not know and one% refused to say. The remain option has been in the high 40s most of this year, but from September to October it rose one point and then another point to 49% in November, meaning it rose three points in December to its current level. When respondents were asked whether they believed the withdrawal agreement and political declaration on the future relations secured by Ms May are a “good deal” or a “bad deal”, 49% chose the latter. Just over one in ten, 13%, said it was a good deal,

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As in something to fear. Whereas her party strangling the poorer is not.

Theresa May Warns Of ‘Uncharted Waters’ Ahead Of Key Vote (BBC)

With two days to go until the crucial Brexit vote, the prime minister has warned MPs they face “uncharted waters” if they reject her deal. Speaking to the Mail on Sunday, the PM said a rejection of her proposals would mean “grave uncertainty” for the UK. She warned MPs their actions could lead to a general election, and there was a “very real risk of no Brexit”. Downing Street has also denied newspaper suggestions that Theresa May could postpone Tuesday’s vote. “The vote is going ahead,” a spokesman said. Last month, the UK agreed a Brexit deal with the EU – but it still needs to be approved by Parliament. Labour, the Liberal Democrats, the DUP, and dozens of Conservative MPs have said they cannot support the deal, meaning it is unlikely to pass.

If the deal is rejected, it is unclear what happens next – with Mrs May insisting her deal was best for the country. “When I say if this deal does not pass we would truly be in uncharted waters, I hope people understand this is what I genuinely believe and fear could happen,” Mrs May said. “It would mean grave uncertainty for the nation with a very real risk of no Brexit or leaving the European Union with no deal. “We have a leader of the opposition who thinks of nothing but attempting to bring about a general election, no matter what the cost to the country. “As someone who cares passionately about my country and my party, I believe Jeremy Corbyn getting his hands on power is a risk we cannot afford to take.”

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Who asked Prodi?

EU Will Negotiate If May Loses Commons Brexit Vote – Prodi (G.)

The EU will come back to the negotiating table if parliament votes down Theresa May’s deal with Brussels, according to Romano Prodi, a former European commission president. Prodi, who twice served as Italian prime minister and had Jean-Claude Juncker’s job until 2004, said that the EU needed to do everything it could to avoid the “economic catastrophe” of a no-deal Brexit. On signing an agreement with the British prime minister last month, Juncker described the draft withdrawal treaty and accompanying political declaration on the future relationship as “the deal – the only deal possible”.

May has also said there is no scope for any further negotiation in Brussels if her deal is rejected when it comes to a vote in the Commons on Tuesday, and that the consequence of it being rejected would be “no deal or no Brexit”. The chancellor, Philip Hammond, described those who believed there could be a renegotiation as “delusional”. But in an interview with the Observer, Prodi suggested it would still be possible to find a negotiated settlement in the increasingly likely event May suffers a heavy defeat in the Commons.

Asked how he expected the commission to respond after the vote, Prodi said: “Negotiate. We must keep free trade between us because it is in the British interests and European interest. The UK has no alternative – the EU is a large part of its trade. Always the problem of Northern Ireland, but it is possible. Common sense helps.” On the EU’s insistence there could be no more negotiations, Prodi added: “Look, when the British parliament has still to vote you are obliged to be in this position. But then of course the day after you start dealing. This is politics.”

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And Canada will seek to blame the US.

China Threatens Canada With ‘Grave Consequences’ If Huawei CFO Not Freed (R.)

China has warned Canada there would be severe consequences if it did not immediately release Huawei’s chief financial officer, calling the case “extremely nasty”. Meng Wanzhou was arrested in Canada on 1 December and faces extradition to the United States, which alleges that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions. The executive is the daughter of Huawei’s founder. If extradited to the US, Meng would face charges of conspiracy to defraud multiple financial institutions, a Canadian court heard on Friday, with a maximum sentence of 30 years for each charge. No decision was reached at the extradition hearing after nearly six hours of arguments and counter-arguments, and the hearing was adjourned until Monday.

In a statement on Saturday, China’s foreign ministry said the vice-foreign minister, Le Yucheng, had issued the warning to release Meng to Canada’s ambassador in Beijing, summoning him to lodge a “strong protest”. China’s official news agency Xinhua reported Le summoned the Canadian ambassador, John McCallum, in protest and urged Ottawa to release Meng immediately or face “grave consequences that the Canadian side should be held accountable for”. Adam Austen, a spokesman for the Canadian foreign minister, Chrystia Freeland, said on Saturday there was “nothing to add beyond what the minister said yesterday”. Freeland told reporters on Friday the relationship with China was important and valued, and Canada’s ambassador in Beijing has assured the Chinese that Meng would receive consular access.

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Greece wants to be everyone’s friend.

Putin Doesn’t Rule Out Extending Turkish Stream Pipeline Into Greece (RT)

Russia is ready to cooperate with Athens in the energy sector, President Vladimir Putin has said, not ruling out the prospect of extending the Turkish Stream gas pipeline into Greece. “We are ready to carry out large infrastructural energy projects together with Greece. It includes the possibility to link Southern Europe through Greece to the Turkish Stream,” Putin said on Friday during a joint conference with Greek Prime Minister Alexis Tsipras in Moscow. “A pipeline from Greece to Italy has been nearly completed. The pipe is built, yet there’s no gas there. Yet we’ll think together on how to fill this line with some real product,” Putin added.

“It’s certainly possible, I don’t rule it out, moreover I believe it to be quite realistic.” Such a project increases the significance of Greece as the “regional energy hub,” Tsipras said on his part, complaining, however, over “double standards” the EU bureaucrats have been showing over the Turkish Stream and other projects involving Russia. Greece used to be one of the countries to host a section of the now-deprecated South Stream gas pipeline. The project, however, met stiff resistance in Brussels, which pressed participating countries – namely Bulgaria – to stop working on it. The project was scrapped late in 2014, ultimately giving way to the Turkish Stream

The Turkish Stream was agreed by Russia and Turkey in October 2016. The first branch will deliver gas to Turkish consumers, while the second one will bring it to countries in southern and south-eastern Europe. In November, Putin and his Turkish counterpart, Recep Tayyip Erdogan, unveiled the offshore section of the pipeline, which is expected to be fully completed late in 2019. So far, there are plans to extend it into Bulgaria, Hungary and Serbia.

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Useless reports anyway. These conferences will not solve a thing. Our political systems don’t allow for that.

COP24 Fails To Adopt Key Climated Change Report (BBC)

Attempts to incorporate a key scientific study into global climate talks in Poland have failed. The IPCC report on the impacts of a temperature rise of 1.5C, had a significant impact when it was launched last October. Scientists and many delegates in Poland were shocked as the US, Saudi Arabia, Russia and Kuwait objected to this meeting “welcoming” the report. It was the 2015 climate conference that had commissioned the landmark study. The report said that the world is now completely off track, heading more towards 3C this century rather than 1.5C. Keeping to the preferred target would need “rapid, far-reaching and unprecedented changes in all aspects of society”. If warming was to be kept to 1.5C this century, then emissions of carbon dioxide would have to be reduced by 45% by 2030.

The report, launched in Incheon in South Korea, had an immediate impact winning praise from politicians all over the world. But negotiators here ran into serious trouble when Saudi Arabia, the US, Russia and Kuwait objected to the conference “welcoming” the document. Instead they wanted to support a much more lukewarm phrase, that the conference would “take note” of the report. Saudi Arabia had fought until the last minute in Korea to limit the conclusions of the document. Eventually they gave in. But it now seems that they have brought their objections to Poland. The dispute dragged on as huddles of negotiators met in corners of the plenary session here, trying to agree a compromise wording. None was forthcoming. With no consensus, under UN rules the passage of text had to be dropped.

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Aug 022015
 
 August 2, 2015  Posted by at 11:01 am Finance Tagged with: , , , , , , , , ,  


Harris&Ewing Boy Scout farm 1917

Who Needs The Fed? The Rate Hike Cometh On Its Own (Reuters)
China Central Bank Official Sees Downward Pressure On Economy Persist (Reuters)
China’s Naked Emperors (Paul Krugman)
China’s Stock Markets: Nearly 25 Years of Wild Swings (WSJ)
Fears For Chinese Economy As Shares Fall (Observer)
Commodities Slide Deeper Into a Rut (WSJ)
In Favour Of Varoufakis’ Plan B (Paul Tyson)
James Galbraith on Greek Plan B (TRN)
Greece May Seek Up To €24 Billion In First New Aid Tranche (Reuters)
Greece May Miss ECB Payment As Germany Says Bailout Timeline Not Realistic (ZH)
Italy’s Anti-Establishment Five Star Party Ready To Govern (AFP)
Liar Loans Pop up in Canada’s Magnificent Housing Bubble (WolfStreet)
MtGox Bitcoin Chief Arrested In Japan (BBC)
In Hideaway for Brazil’s Rich, a New Scandal Emerges (Bloomberg)
Africa’s Biggest Gold Deposit Becomes Burden as Prices Plunge (Bloomberg)
We’re Looking In The Wrong Place To Solve Calais Migrant Problem (Independent)
Bishop Attacks David Cameron’s Lack Of Compassion Over Refugee Crisis (Guardian)

While you were sleeping…

Who Needs The Fed? The Rate Hike Cometh On Its Own (Reuters)

As traders, market pundits and economists jaw over whether the Federal Reserve this year will lift its benchmark lending rate for the first time in almost a decade, several corners of the U.S. bond market are not waiting around. A wide range of short-term interest rates, which tend to be the most sensitive to Fed policy expectations, has been quietly grinding higher for weeks, or in some cases much longer. Several have even surpassed their levels of two years ago during the bond market’s “taper tantrum,” when prices dropped steeply and yields shot up as the Fed pondered whether to halt its massive asset-purchase program.

Banks, money market mutual funds and other investors do not want to be stuck with low-yielding debt when the U.S. central bank finally does begin raising interest rates, something it last did in June 2006. Generally positive comments about the economy by the Fed at the conclusion of its latest policy meeting on Wednesday signaled to many that a rate rise could come as early as September. “The confidence is starting to rise about a rate hike,” said Gennadiy Goldberg, interest rate strategist at TD Securities in New York. “You want to be compensated for at least one hike.” For example, overnight bank borrowing rates have been inching up for the better part of a year and are around 36% more costly than in May 2014, when they fell to a record low.

Yields on investment-grade corporate bonds are holding near recent two-year highs, and the premium paid for holding them relative to Treasuries is the steepest since September 2013. And even as yields on bond market benchmarks such as the 10-year Treasury note and 30-year T-bond have seen only intermittent upward pressure, those on shorter-dated Treasuries are decidedly higher. The yield on two-year Treasury notes, at 0.73% on Thursday, was just a tick from a four-year high and more than three times that of May 2013. Rates on T-bills with durations of less than a year are at their highest so far this year. Yields, or rates, move inversely to the price of bonds.

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All that comes from China officials is politicized nonsense.

China Central Bank Official Sees Downward Pressure On Economy Persist (Reuters)

Downward pressure on China’s economy will persist in the second half of the year as growth in infrastructure spending and exports is unlikely to pick up, a senior central bank official was quoted as saying. Chinese companies are not optimistic about business prospects according to the central bank’s second-quarter survey, Sheng Songcheng, the director of the statistics division of the People’s Bank of China (PBOC), was quoted as saying by the National Business Daily on Saturday. Pressured by uneven domestic and export demand, cooling investment and factory overcapacity, China’s economic growth is expected to slow to around 7% this year, the lowest in a quarter of a century, from 7.4% in 2014.

A plunge in the country’s share markets since mid-June has added to worries about the economy, and reinforced expectations that policymakers will roll out more support measures in coming months to avert a sharper slowdown. The PBOC has already cut interest rates four times since November and repeatedly loosened restrictions on bank lending in its most aggressive stimulus campaign since the global financial crisis. Sheng warned about the risks of local government debt, saying that 2 trillion yuan ($322.08 billion) in bond swaps may not be able to fully cover maturing debt, according to the report. Sheng said the PBOC needs to step up the monitoring of local government financing vehicles given the current downturn in property market and limited local government revenues.

Sheng also said he expected second-quarter net profit growth for banks to fall, adding that banks’ exposure to risk “has become clearer”. But he said the real-estate market could rebound in the second half and provide support for the economy. Sheng said he still expects economic growth this year of around 7%, an inflation target of around 1.5% and growth of M2 – a broad-based measure of money supply – of around 12%.

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I’ve said this a lot: “China’s economic structure is built around the presumption of very rapid growth.” Beijing’s trying to make a supertanker change course on a dime.

China’s Naked Emperors (Paul Krugman)

Politicians who preside over economic booms often develop delusions of competence. You can see this domestically: Jeb Bush imagines that he knows the secrets of economic growth because he happened to be governor when Florida was experiencing a giant housing bubble, and he had the good luck to leave office just before it burst. We’ve seen it in many countries: I still remember the omniscience and omnipotence ascribed to Japanese bureaucrats in the 1980s, before the long stagnation set in. This is the context in which you need to understand the strange goings-on in China’s stock market. In and of itself, the price of Chinese equities shouldn’t matter all that much. But the authorities have chosen to put their credibility on the line by trying to control that market — and are in the process of demonstrating that, China’s remarkable success over the past 25 years notwithstanding, the nation’s rulers have no idea what they’re doing.

Start with the fundamentals. China is at the end of an era – the era of superfast growth, made possible in large part by a vast migration of underemployed peasants from the countryside to coastal cities. This reserve of surplus labor is now dwindling, which means that growth must slow. But China’s economic structure is built around the presumption of very rapid growth. Enterprises, many of them state-owned, hoard their earnings rather than return them to the public, which has stunted family incomes; at the same time, individual savings are high, in part because the social safety net is weak, so families accumulate cash just in case. As a result, Chinese spending is lopsided, with very high rates of investment but a very low share of consumer demand in GDP.

This structure was workable as long as torrid economic growth offered sufficient investment opportunities. But now investment is running into rapidly decreasing returns. The result is a nasty transition problem: What happens if investment drops off but consumption doesn’t rise fast enough to fill the gap? What China needs are reforms that spread the purchasing power — and it has, to be fair, been making efforts in that direction. But by all accounts these efforts have fallen short. For example, it has introduced what is supposed to be a national health care system, but in practice many workers fall through the cracks.

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But there are no markets left these days. There’s only QE.

China’s Stock Markets: Nearly 25 Years of Wild Swings (WSJ)

In the two years after China opened its stock markets, shares soared 1200% and twice fell by half. Investors seeking IPO shares rioted, overturning cars and smashing windows, leading police to use tear gas and fire their guns in the air to quell the disturbance. China will celebrate the 25th anniversary of the opening of its stock markets later this year, and not much has changed since their founding. They vacillate between big government-driven rallies and equally dramatic selloffs that leave once-euphoric investors disillusioned and angry. “China’s stock markets have developed quickly and their accomplishments are great, but they are very irregular,” Zhu Rongji, China’s premier at the time, said in 2000. “If they are to receive the people’s trust, the investors’ trust, then they have a lot of work to do.”

Stocks are down by 29% from their peak in June, and investors have continued to sell shares despite the strongest efforts ever by Beijing to prop up prices. The current bear market—defined as a fall of 20% or more from a peak—is the 27th that investors have suffered in the past 25 years. It is the 21st worst in terms of losses. Shares have lost half their value three times, and plummeted by two-thirds once, in 1993-1994, when the Shanghai Composite Index fell by 67% from its peak to its low point. The 27 bull markets have been equally dramatic, though none has come close to the initial 1200% gain. The market has gained more than 100% on eight occasions. The most recent bull market, which began in December 2012 and stretched until June, making it the longest in China’s history, clocked in at 164%.

The reopening of the Shanghai market, which dated to the 1860s and had been closed since the Communist takeover in 1949, signaled a victory for economic reformers led by Deng Xiaoping. The Shenzhen market, created in 1990, was a boost for the southern Chinese city that was home to some of the most far-reaching economic overhauls. Still, the government maintained heavy control over the markets. Investors based their buy and sell decisions on what they thought Beijing would do next. The 1992 riots, in a tense period just three years after the Tiananmen Square crackdown, highlighted the perception among investors that the government effectively ran the stock markets. Hundreds of thousands of people lined up over a hot August weekend to get applications to invest in initial public offerings, which they believed would soar because every IPO had to be approved by the government.

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Can we have a bit more depth from the Observer next time?

Fears For Chinese Economy As Shares Fall (Observer)

[..] there are growing concerns about what the stock price rollercoaster reveals about the health of the world’s second largest economy. Christine Lagarde, the managing director of the IMF, played it cool when asked about the Chinese market gyrations in a press conference on Wednesday. She pointed out that the market was still up an extraordinary 80% over the past year, and added she was not surprised the government in Beijing was intervening to prevent the “disorderly functioning” of markets. “That is the duty of central authorities,” she said. “The fact that they want to maintain a level of liquidity that is commensurate with an orderly process is quite good.”

In other words, while some have condemned Beijing’s efforts to arrest the share slide as clunky and authoritarian, Lagarde saw it as little different to the scramble by western governments during the 2008 crisis to prevent their financial systems from seizing up. She was relaxed, too, about the potential impact of the share price slide on China’s real economy – the shops, factories and farms that create jobs and generate growth. “We believe that the Chinese economy is resilient and strong enough to withstand that kind of significant variation in the markets,” she said. Yet many analysts believe that as well as the bursting of a financial bubble, the downturn in the stock market reflects a wider economic slowdown.

Robert Shapiro, a former economic adviser to Bill Clinton, who now works at US consultancy Sonecon, says: “The Chinese leadership have had a fundamental policy of driving growth sufficiently great to generate employment for about 10 million people a year. The main way they’ve done this is through public investment, or semi-public investment. A lot of these projects are now going bust, because there’s nobody to purchase the apartments, and there are no businesses to rent the offices.”

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This is a trend far from finished.

Commodities Slide Deeper Into a Rut (WSJ)

Commodity prices tumbled anew, plunging the S&P GSCI Total Return index to its worst monthly loss since November 2008 and deepening a yearslong rout that few observers expect to moderate. The index, which tracks a basket of commodities, fell to its lowest level since 2002 on Friday, according to data from S&P Dow Jones Indices. All but one of the 24 index components posted losses for July. Investors in commodity markets are confronting threats from a slowdown in China, an anemic global economy and the prospect of higher U.S. interest rates from the Federal Reserve.

The dollar, which has rallied this summer on expectations of tighter U.S. monetary policy, is also pressuring prices of raw materials, which are traded in the U.S. currency and become more expensive for buyers in other countries when the buck rallies. Hopes that China has seen the worst of its economic slowdown were spurned after the country’s stock market dived in July, notching its worst month in six years. China is the largest consumer of raw materials, and investors now fear that problems in its equity market will reverberate across the economy in coming months as cash-strapped consumers abort purchases of new cars, homes and other goods. Europe is battling to stave off another economic downturn. A weaker euro hasn’t buoyed exports from the region, and growth and inflation remain stubbornly low.

This dims any prospect of higher demand for raw materials from the region. Commodity prices are also under pressure as supply of many raw materials runs ahead of global demand. Companies that grow soybeans or mine for coal outside the U.S. are opting to keep up production because weaker domestic currencies keep their costs low, while a stronger dollar means they bring home larger profits despite falling prices. Against this backdrop, many investors are choosing to give commodities the cold shoulder. “Folks are being very cautious in terms of where they want to apply their capital, we’ve seen that in commodities…it just continues to be an area that people want to avoid,” said Dan Farley at State Street Global Advisors.

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Excellent write-up. The term ‘financial realism’ must be a keeper.

In Favour Of Varoufakis’ Plan B (Paul Tyson)

Mr Varoufakis’ plan B, including the mode in which he developed this plan, is a function of his rejection of the social and political unaccountability of foreign financial power within the Greek nation. Perhaps it may also be a moral rejection, under extreme circumstances, of the validity of laws that facilitate the destruction of the Greek finance sector by the troika. Given that Varoufakis was given political authority by his Prime Minister to pursue this plan, then perhaps his mode of pursuit should be evaluated in relation to the political agendas he was politically authorized to advance. The salient evaluation questions are then would this plan save, in some form, the personal savings of the Greek people, and would it facilitate an operational finance sector for Greece, after Grexit?

I think there can be little doubt that Varoufakis’ plan B would have been the best practical option for the Greeks if they had of been forced out of the Eurozone after June 5 referendum, if Syriza had held fast to its original platform. In thinking about the rules of finance outside of the box mandated to him by the troika, Varoufakis acts out of a concern to promote the wellbeing of the Greek people. Such free and creative thinking, and such motivations, are an affront to the financial realism of the troika because Greece is a small and indebted player in someone else’s financial game, ridiculously seeking to operate outside of the rules that those in power have set in place to suit themselves. This Greek rule-bending ambition, from a position of weakness, violates the basic principles of financial realism.

It is true, Varoufakis defies the laws of financial realism. However, he does not take this stance up out of naivety. Indeed, Varoufakis is all too aware of how financial realism operates. What makes him such a political anomaly is that he is also aware of three other things. Firstly, as an “erratic Marxist” and a gifted mathematician and political economist, Varoufakis is aware that indeterminacy is a basic feature in all human arenas of belief and action. This gives him a philosophical awareness of the dialectic between necessity and freedom which enables him to believe in politics rather than simply in power. This delineates him from the blind determinacy and complete political indifference of dedicated financial realists, both in Brussels and in the mainstream media.

Secondly, he is aware that financial realism violates the basic principles of democratic accountability, national sovereignty and moral responsibility. As he believes in that which financial realism violates, he must reject financial realism. Thirdly, he is aware that the rules of finance do not have to be set up to function in financial realist terms. He is intelligent enough to be able to think outside the box, and morally and philosophically courageous enough to make practical plans on the basis of genuinely creative initiatives. In today’s very conformist world of power, this sort of leader is very hard to find. These three factors make Varoufakis a potentially radical political non-conformist in the Eurozone, who just might upset the whole apple cart of the financial realist status quo.

This is why the likes of Schäuble loathe Varoufakis. Yanis threatens the very philosophical foundations of their power. In order to preserve the power of the financial realists, Varoufakis simply must not be taken seriously. Hence, all this patronising media dribble about his clothes, motorbike and hair. Hence, all these relentless media beat-ups about any action he takes that is not coherent with financial realism. Hence all these red herrings about how undiplomatic he is without comment on how sensible and genuinely interested in constructive outcomes he is. The media loves to analyse his style and manner, but seldom has any serious interest in the substance of what he says.

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” In that respect, and that’s a very important respect, the parliament in Greece is no longer even remotely a sovereign entity.”

James Galbraith on Greek Plan B (TRN)

PERIES: So James, let’s begin with what your role was in deriving Plan B. GALBRAITH: Well, I had to do background research and to assemble experiences of other countries and other situations, including some of the experiences in the United States during the depression, to basically to put together for the use of the Greek government of a list of problems, challenges that would have to be faced if Greece were forced against its will to exit the eurozone. This was contingency planning, it was precautionary.

PERIES: And did it include a process to deal with printing the drachma, and reviving the mint? GALBRAITH: Well you know, if you have to completely go over to a new banknote you’re going to have a considerable time lag before it becomes available. So we were concerned, for example, with how you handle the need for cash liquidity during that intervening period. That was a substantial challenge, for example.

PERIES: Okay. Could you expand on some of the intricacies of what Plan B looked like? GALBRAITH: That’s a discussion I think for another time, but there were a great many things that you would worry about. Fundamentally if you’re, have to transition currency you have a considerable cost of making that transition. The challenge is how to protect the most vulnerable people in society from those costs. How to protect, for example, retirees. How to protect people who are in need of healthcare. And after that immediate transition has passed there’s a question of how you manage the new currency, how you in particular control foreign exchange transactions and the exchange rate.

PERIES: Let’s get to the, so the relationship with Europe and the Troika here. In this op-ed that Varoufakis penned in FT he complains, and I quote, there is a hideous restriction of national sovereignty imposed by the Troika. Here he is complaining about being denied access to departments of his own ministries which he says is pivotal in implementing innovative policies. So I guess the question is, who does collect the taxes and who has access to the tax system and tax collection data in Greece? GALBRAITH: We were not engaged in anything that was internal to the operations of the finance ministry. But there are issues in which the, in the dictat that was imposed on Greece in July, for example, there are further inroads on the sovereignty of the Greek state, the imposition of requirements that major offices, including the Statistical Office, be taken basically out of the control of Greek government and placed more or less directly in the hands of the creditor institutions.

And that’s problematic. The most problematic thing of all along that line is the requirement in the terms that were dictated to Greece that new proposals to the parliament not even be made by the government unless they’ve been previously approved by the creditors. So that is in some sense a blatant, a flagrant violation of the basic principle of the European Union, which is that it’s built upon representative democracy. In that respect, and that’s a very important respect, the parliament in Greece is no longer even remotely a sovereign entity.

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But nothing for the Greeks.

Greece May Seek Up To €24 Billion In First New Aid Tranche (Reuters)

Greece may seek €24 billion in a first tranche of bailout aid from international lenders in August to prop up its banks and repay debts falling due at the ECB, a pro-government Greek newspaper said in its early Sunday editions. Athens is now in talks with the EC and IMF to secure up to €86 billion in bailout aid. It will be its third bailout since 2010. Avgi newspaper, which is close to the leftist Syriza government, said Greek authorities expected to conclude talks with lenders by mid-August. The first tranche of €24.36 would be used to channel €10 billion as an initial recapitalization to Greek banks, €7.16 billion to repay an emergency bridge loan, €3.2 billion toward Greek bonds held by the ECB and other payments, Avgi said.

It has been estimated that Greek banks may require up to €25 billion to be recapitalized, a shortfall exacerbated by an outflow of deposits when a stalemate with lenders threatened Athens’ place in the euro zone. The flood of money leaving the country culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown. In exchange for funding Greece has accepted reforms including making significant pension adjustments, increasing value added taxes, overhauling its collective bargaining system, and measures to liberalize its economy and limit public spending. If the talks are not completed in time, European authorities may have to provide further temporary financing as they did with a July bridge loan, though Avgi said that possibility had not been discussed with lenders.

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1000 things could go wrong.

Greece May Miss ECB Payment As Germany Says Bailout Timeline Not Realistic (ZH)

Greek PM Alexis Tsipras won a hard fought victory over party rivals on Thursday when Syriza’s central committee voted to postpone an emergency congress until after formal discussions on the country’s third bailout program are complete. Syriza has been grappling with bitter infighting since more than 30 MPs in Tsipras’ parliamentary coalition defected during a vote on the first set of bailout prior actions, forcing the PM to rely on opposition votes to clear the way for formal discussions with creditors. The party dispute was exacerbated by reports that ex-Energy Minister and incorrigible Grexit proponent Panayiotis Lafazanis (along with several Left Platform co-conspirators) planned to storm the Greek mint and seize the country’s currency reserves.

Fed up, Tsipras told 200 members of Syriza’s central committee on Thursday that essentially, they could either hold a party referendum on the bailout on Sunday or wait until September to sort things out, leading us to note that “were Syriza to vote on whether or not Greece should follow through on the agreement with creditors, the market could be in for an event that is far more dramatic and important than the original referendum.” Lafazanis refused to go along with the idea. “How many referenda are we going to hold? We’ve already done one and we won with 62% of the vote”, he said. Ultimately, the party approved a September congress. This gives Tsipras some “breathing space,” FT notes, “but Thursday’s highly charged debate signalled that the Left Platform, which supports an end to austerity and a ‘Grexit’ from the euro, would continue to oppose a fresh bailout.”

And the party’s radical leftists aren’t alone in their opposition to the third program for Athens. On Thursday, FT reported that according to “strictly confidential” minutes from the IMF’s Wednesday board meeting, the Fund will not support the new bailout until the debt relief issue is decided and until it’s clear that Greece “has the institutional and political capacity to implement economic reforms.” Somehow, all of this must be worked out in the next three weeks. Greece must make a €3.2 billion payment to the ECB on August 20 and if the bailout isn’t in place by then, it’s either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the Greek economy but the banking sector and then, in short order, the government.

The question is whether Germany can be reasonably expected to take it on faith that i) the Greek political situation will not eventually result in Athens walking back its austerity promises, and ii) that the IMF will eventually hold up its end of the deal once Berlin approves some manner of debt re-profiling for the Greeks. Now, according to Focus magazine, there are questions as to whether the timetable for cementing the bailout agreement is realistic. German lawmakers may now have to postpone a Bundestag vote and Athens has already discussed the possibility of taking a second bridge loan from the EFSM, Focus says.

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Keep your eye on them. They don’t sit still.

Italy’s Anti-Establishment Five Star Party Ready To Govern (AFP)

Italy’s anti-establishment Five Star party, founded in 2009 by former comedian Beppe Grillo, is itching to govern and has a man primed for the top job. The movement celebrated a shock success in 2013’s general election when it snapped up a whopping 25.5% of the votes, becoming the second biggest political force behind the centre-left Democratic Party. “Today we are ready, much more than in 2013,” Luigi di Maio, one of Five Star’s most prominent members, told AFP. Di Maio, 29 years old and the youngest deputy president of the lower house of parliament in Italian history, has become the new face of the movement, displacing its loud and truculent founder, who is now rarely seen in public.

The pair could not be more different: where bearded, wild-eyed Grillo, 67, shouted abuse to rouse the crowds, Di Maio, who hails from Naples and studied law, speaks quietly but firmly and dresses in an impeccable suit and tie, never a hair out of place. He has tried to restore credibility to the Five Star (M5S) after a fallout within the party forced the ex-comic to take a step back. While Grillo called last October for the country to leave the euro “as soon as possible”, Di Maio is more prudent – perhaps having watched Greece teeter on the edge of a “Grexit”, which some warned could force the country to exit from the EU. “Our line doesn’t foresee a straightforward exit from the euro”, he says, insisting that it would only ever be considered if the common currency “continues to strangle our economy”.

The party would like a reformed eurozone but believes centre-left Prime Minister Matteo Renzi lacks “the authority” in Europe to make that happen. Renzi, 40, is the Five Star’s main adversary in the run-up to the next general election, scheduled to be held in 2018. And Di Maio – who began following Grillo back in 2007 – is often named by political watchers as the man to challenge the PM. [..] The Five Star party “continues to grow because Italian politics continues to be a ‘rubber wall'”, he says, describing the way the hopes and ambitions of the population appear to bounce straight off the walls of power and disappear into nothing.

Polls published this week show the Five Star gaining ground on the Democratic Party, with 25% of those polled now favouring the anti-establishment movement compared to 34% for Renzi’s party, which has dropped in popularity since last year. The movement is keen to seize the moment to make its mark – especially now that even the left has been hit by corruption scandals. “It seems to us that we are elected when the Italians see all the nastiness the (mainstream) political world is capable of,” he says. His mobile phone beeps. A breaking news alert tells him that the Senate has just voted to protect a centre-right senator suspected of graft, fraud and racketeering, by refusing to strip him of his political immunity.

The vote passed thanks to several members of the centre-left Democratic Party, who were afterwards accused of having saved the senator’s skin because they had received favours from him when he was chair of the budget committee. “You see, things never change,” Di Maio says with a smile.

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Quelle surprise!

Liar Loans Pop up in Canada’s Magnificent Housing Bubble (WolfStreet)

For a long time, the conservative mortgage lending standards in Canada, including a slew of new ones since 2008, have been touted as one of the reasons why Canada’s magnificent housing bubble, when it implodes, will not take down the financial system, unlike the US housing bubble, which terminated in the Financial Crisis. Canada is different. Regulators are on top of it. There are strict down payment requirements. Mortgages are full-recourse, so strung-out borrowers couldn’t just mail in their keys and walk away, as they did in the US. And yada-yada-yada. But Wednesday afterhours, Home Capital Group, Canada’s largest non-bank mortgage lender, threw a monkey wrench into this theory.

Through its subsidiary, Home Trust, the company focuses on “alternative” mortgages: high-profit mortgages to risky borrowers with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. They include subprime borrowers. So it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September: “falsification of income information.” Liar loans. Liar loans had been the scourge of the US housing bust. Lenders were either actively involved or blissfully closed their eyes. And everyone made a ton of money.

So Home Capital revealed that it has suspended “during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers,” who’d together originated nearly C$1 billion in single-family residential mortgages in 2014. That’s 5.3% of the company’s total outstanding loan assets, and 12.5% of its total single-family mortgage originations in 2014. That’s a big chunk. The company, however, didn’t disclose why it took so long to disclose this. It said an “external source” had warned it about income falsification on mortgage applications submitted by a number of brokers. Its investigation did not find any evidence of falsified credit scores or property values, it said.

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Not a trust booster.

MtGox Bitcoin Chief Arrested In Japan (BBC)

Japanese police have arrested the CEO of the failed company MtGox, which was once the world’s biggest exchange of the virtual currency, bitcoin. Mark Karpeles, 30, is being held in connection with the loss of bitcoins worth $387m last February. He is suspected of having accessed the exchange’s computer system to falsify data on its outstanding balance. MtGox claimed it was caused by a bug but it later filed for bankruptcy. Japan’s Kyodo News said a lawyer acting on Mr Karpeles’ behalf denied his client had done anything illegal. Mr Karpeles is suspected of benefiting to the tune of $1m, the agency said. In March 2014, a month after filing for bankruptcy, MtGox said it had found 200,000 lost bitcoins. The firm said it found the bitcoins – worth around $116m – in an old digital wallet from 2011. That brings the total number of bitcoins the firm lost down to 650,000 from 850,000. That total amounts to about 7% of all the bitcoins in existence.

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Brazil’s economy has already conceded defeat.

In Hideaway for Brazil’s Rich, a New Scandal Emerges (Bloomberg)

Just south of Rio de Janeiro, along a strip of coastline known for its white-sand beaches and high-end resorts, Brazil’s next big corruption scandal is starting to unfold. This one bears striking similarities to the colossal bribery case that has engulfed state-run oil giant Petrobras pushed Brazil toward its worst recession in a quarter century and left President Dilma Rousseff fighting for her political survival. That’s no coincidence: Many of the players are the same. At the center of this story is another state-run company, Eletrobras, and its Angra III project, a nuclear power plant tucked into a bay with jungle-covered islands that have become something of a playground for Brazil’s rich and famous. Five of the builders whose executives have been jailed on allegations they bribed officials at Petrobras also won contracts to build the 14.9 billion-real ($4.4 billion) nuclear plant.

“The model is the same as Petrobras,” said Adriano Pires, head of CBIE, a Rio de Janeiro-based energy and infrastructure consultant. “Brazil’s government created a system in which big state-owned companies are used for political objectives and are in charge of these big infrastructure consortiums. It’s an atmosphere that favors corruption.” The sweeping investigation into Petrobras – dubbed “Carwash” by prosecutors after a gas station used to launder money – has helped make Brazil’s real the world’s worst-performing major currency this year, wiped out $33 billion in the market value of Petrobras in the past year and tanked the bonds of builders including Odebrecht and OAS. This new phase has earned the nickname “Radioactivity.”

Federal Police on Tuesday arrested the former head of Eletrobras’s nuclear unit, Eletronuclear, and the president of builder Andrade Gutierrez’s energy unit. The arrest warrants were among 30 court orders issued based on testimony by Dalton Avancini, the CEO of builder Camargo Correa SA, who said his firm and others won contracts for Angra III by paying kickbacks, police Chief Igor Romario de Paula told reporters in Curitiba, Brazil. Camargo Correa didn’t respond to requests for comment. In the same testimony, Avancini also pointed his finger at another Eletrobras project, the 30 billion-real Belo Monte hydroelectric dam deep in Brazil’s Amazon Jungle, a person with direct knowledge of the matter told Bloomberg News in March.

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Sure, gold will recover. Question is what will happen in the meantime.

Africa’s Biggest Gold Deposit Becomes Burden as Prices Plunge (Bloomberg)

After production delays and fatal accidents, the plunging price of bullion is making Africa’s richest gold deposit the biggest burden for owner Gold Fields. And the bond market’s taking note. The 81 million-ounce resource at South Deep near Johannesburg is still burning cash after Gold Fields bought it for $3 billion in 2006. The mine has helped lift the company’s break-even price to $1,105 an ounce, according to Moody’s Investors Service. Yields on the company’s bonds climbed to a six-month high during July as gold fell 6.7% to $1,093 an ounce. “You’ve got a perfect storm now, with a low gold price environment and the potential for South Deep to continue to consume cash,” Douglas Rowlings at Moody’s said.

“The question on everybody’s mind is how much more cost can sustainably be taken out of South Deep and other mines?” The failure to exploit South Deep profitably is hastening the decline of South Africa’s gold-mining industry, which has produced a third of all the world’s bullion over 120 years. The country is today ranked sixth in the world among gold producers, down from first just eight years ago. South Deep, with the potential to produce 700,000 ounces a year costing as little as $900 an ounce for the next 70 years, may change that. Yet its complex ore body has so far proved too difficult for Gold Fields to extract profitably, even after $1 billion of investment over nine years.

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Britain looks everywhere BUT the right place.

We’re Looking In The Wrong Place To Solve Calais Migrant Problem (Independent)

Parkinson’s Law declares that work expands to fill the time available for its completion. But its author, the British historian Cyril Northcote Parkinson, coined a second less well-known adage. Parkinson’s Law of Triviality took the example of the committee asked to approve a new nuclear reactor, a new bike shed for the clerical staff and a rise in the price of coffee in the canteen. It asserted that people will always spend most time talking about the smallest issue, because the big one is generally beyond their comprehension. The Triviality Principle clearly applies to what is being called “the Calais migrant crisis”. So the biggest row has been over whether David Cameron should use words like “swarm” when describing the migrants trying to board UK-bound trucks coming through the Channel Tunnel.

Secondary stories include how terrible it is that British holidaymakers are having the start of their holidays delayed – and how useless the French are at maintaining law and order. But there is very little focus on the real problem. Perhaps that is because the real problem is so intractable. Politicians and press – committed as they are to facile solutions and easy scapegoating – are reluctant to acknowledge their impotence in the face of an issue of international complexity. That is why David Cameron, after Friday’s crisis committee meeting, was unable to come up with anything better than: “We rule nothing out in taking action to deal with this very serious problem. We are absolutely on it. We know it needs more work.” Indeed it does. His critics were not impressed.

The current moral panic about illegal migrants is based on two facts that are comparatively minor in the wider context of a global movement of refugees that is now bigger than at any time since the Second World War. The first is that the number of migrants at Calais has risen from around 600 in January to 5,000 today. The second is that this larger figure has caused the migrants’ tactics to change; stealthy attempts to slip unnoticed aboard lorries bound for England have given way to an ability to surge through police lines by sheer weight of numbers. Hence the word swarm. There is a new, brazen aggression in the attitude of the migrants that one police officer put down to the grimness of the ordeal so many of them have endured in the perilous crossings of the Mediterranean, which have increased dramatically over the past year.

Lorry drivers fear the Stanley knives that the men wield to cut their way through the tarpaulins of their trucks – though it has to be said that the only deaths around Calais this year have been those of nine desperate migrants. Yet the 5,000 migrants camped out in Calais are a drop in the tide of human misery that has flowed from the massive dislocation in countries like Syria, Iraq, Libya, Somalia, Eritrea and Sudan. War has now uprooted half the entire population of Syria. More than four million Syrians are refugees in neighbouring countries. Only a small percentage have made it into Europe. Around 170,000 migrants arrived in Italy last year. This year Greece has taken the most of any country, with 63,000. Last year Germany gave asylum to 41,000; Sweden took 31,000; and France 15,000. The UK accepted 10,050. At the last summit on how Europe should share the burden of incomers the British government announced it would take none.

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As I said yesterday.

Bishop Attacks David Cameron’s Lack Of Compassion Over Refugee Crisis (Guardian)

The Church of England has made a dramatic intervention in the migrant crisis, delivering a stern rebuke to David Cameron for his “unhelpful” rhetoric. Speaking with the backing of the church, the bishop of Dover accused senior political figures, including the prime minister, of forgetting their humanity and attacked elements of the media for propagating a “toxicity” designed to spread antipathy towards migrants. After another tense day in Calais, following a night in which fewer migrants tried to enter the Eurotunnel terminal in northern France, the bishop, the Right Rev Trevor Willmott, urged Cameron to ameliorate his rhetoric. “We’ve become an increasingly harsh world, and when we become harsh with each other and forget our humanity then we end up in these standoff positions,” he said.

“We need to rediscover what it is to be a human, and that every human being matters.” On Thursday the prime minister drew international opprobrium when he described migrants trying to reach Britain as a “swarm” and promised to introduce strong-arm tactics, including extra sniffer dogs and fencing, at Calais. On Saturday No 10 announced it had also agreed with France to bolster security around Eurotunnel, with reinforcements joining the 200 guards already on patrol. Extra CCTV, infra red detectors and floodlighting will also be funded. Throughout Saturday disquiet continued to rise over Cameron’s handling of the issue.

Willmott said: “To put them [migrants and refugees] all together in that very unhelpful phrase just categorises people and I think he could soften that language – and that doesn’t mean not dealing with the issue. It means dealing with the issue in a non-hostile way.” Save the Children also voiced dismay at the way political discourse had taken a “sour turn”. In a piece published online by the Observer, Justin Forsyth, chief executive of the international charity, echoed Willmott’s call to remember the fact that the migrants were humans and many were refugees fleeing horrific abuse or extreme danger. “We are in danger of shutting our hearts to the desperation of the people pleading at the door, refugees not economic migrants,” he said, adding that Britain needed to pull its weight in accepting more refugees.

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Aug 012015
 
 August 1, 2015  Posted by at 11:22 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle August 1 2015


Harris&Ewing “Congressional baseball game. President and Mrs. Wilson.” 1917

Coal Mine Worth $624 Million Three Years Ago Sold for $1 (Bloomberg)
Carlyle Fund Walloped in Commodities Rout (WSJ)
Raoul Pal, Who Called Dollar Rally, Sees -German- Catastrophe Ahead (CNBC)
Why 99% Of Trading, Worth $32 Trillion, Is Pointless (MarketWatch)
OPEC Shale War Leaves Big Oil Companies as Surprise Victims (Bloomberg)
Who Really Benefits From Bailouts? (Ritholtz)
The Euro, Like The Gold Standard, Is Doomed To Fail (Ann Pettifor)
Tsipras Survives for Now as Party Rebels Blast Greece Rescue (Bloomberg)
Greek PM Defends Varoufakis and Controversial ‘Plan B’ (Reuters)
Alexis Tsipras: I Ordered Varoufakis To ‘Defend Greece’ (Telegraph)
Greek Stock Market To Reopen Monday, With Restrictions (CNN)
Greek Bailout Is Far From Being A Done Deal (Andrew Lilico)
Unaccompanied Refugee Minors Find A Home Away From Home in Athens (Kath.)
Prosecutor Summons Ex-PM Samaras’ Aide Over €5.5million HSCB Bank Account (KTG)
Italian Youth Unemployment Rises to its Highest Level Ever (Bloomberg)
People Smuggling: How It Works, Who Benefits, How It Can Be Stopped (Guardian)
David Cameron To Send Dogs And Fences To Quell Calais Migrant Crisis (Guardian)
We Can’t Stop The Flow Of Migrants To Europe, Only Rehouse Them (Guardian)
As World Mourned Cecil The Lion, 5 Endangered Elephants Slain in Kenya (WaPo)
Climate Models Are Even More Accurate Than You Thought (Guardian)

“Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday [..] It was valued at $7.3 billion in 2008.”

Coal Mine Worth $624 Million Three Years Ago Sold for $1 (Bloomberg)

The destructive force of a collapse in world coal prices has been underscored by the sale of a mine valued at A$860 million ($631 million) three years ago for just a dollar. Brazilian miner Vale and Japan’s Sumitomo sold the Isaac Plains coking-coal mine in Australia to Stanmore Coal Ltd., the Brisbane-based company said Thursday in a statement. Sumitomo bought a half stake for A$430 million in 2012. A slump in the price of coking coal, used to make steel, to a decade low is forcing mines to close across the world and bankrupting some producers. Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday, said three people with direct knowledge of the matter. It was valued at $7.3 billion in 2008.

Isaac Plains in Queensland “was one of the most exciting coal projects in Australia,” Investec Plc analysts said in a note to investors on Friday. The site has a resource of 30 million metric tons, according to Stanmore. “The outlook for coal is still very difficult,” Roger Downey, Vale’s executive director for fertilizers and coal, said on Thursday after Stanmore announced the sale. “We see even in Australia mines that are still in the red and at some point that has to change. We have quite adverse and challenging markets.” Coal’s demise is just part of a broader slump in commodity prices, which fell to the lowest in 13 years this month. The benchmark price for coking coal exported from Australia has slumped 24% this year to $85.40 a ton on Friday, according to prices from Steel Business Briefing. The quarterly benchmark price peaked at $330 a ton in 2011.

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More Poof! Now you see it….

Carlyle Fund Walloped in Commodities Rout (WSJ)

Three years after private-equity giant Carlyle Group touted its purchase of a hedge-fund firm, a rout in raw materials has helped drive down holdings in its flagship fund from about $2 billion to less than $50 million, according to people familiar with the matter. The firm, Vermillion Asset Management, suffered steep losses and a wave of client redemptions in its commodity fund after a string of bad bets, including one tied to the price of shipping of dry goods, such as iron ore, coal or grains. At one point, two of Carlyle’s co-founders, David Rubenstein and William Conway, put tens of millions of dollars of their own money in the fund and left it in amid the losses and redemptions, according to people familiar with the matter.

Vermillion is in the midst of a restructuring, its co-founders left at the end of June, and it is pulling back from trading in several markets. A collapsing market for raw materials is spreading pain well beyond commodities specialists to some of the heaviest hitters on Wall Street. This week alone, commodity-trading firms Armajaro Asset Management and Black River Asset Managemen, a unit of agricultural conglomerate Cargill, said they are closing funds. Several other firms that managed billions of dollars already have closed their doors, including London-based Clive Capital and BlueGold Capital Management. Large money managers including Brevan Howard Asset Management and Fortress Investment Group have wound down commodity strategies.

Assets under management at commodity hedge funds have fallen 15%, to $24.1 billion, since their peak in 2012, and nearly 30 firms out of 250 have shut down since that year, according to industry consultant HFR Inc. Commodity firms lost money for three years in a row before 2014, HFR said. Commodities are one of the most challenging markets to invest in, because of their complexities and penchant for volatility. Some of the biggest hedge-fund blowups have involved commodity trading, such as the 2006 collapse of Amaranth Advisors after sustaining more than $5 billion in losses on natural-gas trades.

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As the US economy weakens, the USD will come home, leaving the rest of the world a lot poorer.

Raoul Pal, Who Called Dollar Rally, Sees -German- Catastrophe Ahead (CNBC)

Former hedge fund manager and Goldman Sachs alumnus Raoul Pal isn’t one to shy away from making bold predictions. Back in November 2014, Pal, who is currently the publisher of the Global Macro Investor newsletter and the founder of Real Vision TV, said the U.S. dollar index was poised to make a move the likes of which hadn’t been seen in “many, many years.” Now, after the dollar index surged 10%, Pal is out with a new prediction, and it could spell trouble for global equities. “I think the dollar will go up for another few years from here, so I’m expecting to see, by the end of this year, the dollar up maybe 20%,” said Pal on CNBC’s “Fast Money” this week. “So we’ve got another 10-12% or so to go this year alone, and then next year something similar,” he added.

If true, those predictions could have dire consequences for the global market. According to Pal, a rapidly accelerating bull market for the dollar could lead oil prices to “come back down into the 20s” in the not-so-distant future. “As the dollar gets stronger, global growth is falling and global export growth is falling, and that means generally that commodity prices should fall as well,” he explained. Pal said the slowdown in global growth, spurred by an ever-strengthening dollar, could have deleterious effects on one country in particular. “Germany is the big exporting nation of Europe, and I see them slowing down,” he said. Pal explained that a weaker U.S. economy will bleed into Europe and further impact German growth.

“The first half of this year is the weakest first half since the recession” for the United States, he said. “Europe lags the U.S, so I think that won’t help Germany at all because obviously the U.S. is buying less goods from Germany.” By Pal’s logic, a slowdown in Germany could eventually put all of Europe in harm’s way. “I think Germany is at risk of leading Europe into a recession, which is against everybody else’s opinion.”

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Circle jerk keeps brokers alive.

Why 99% Of Trading, Worth $32 Trillion, Is Pointless (MarketWatch)

An astonishing $32 trillion in securities changes hands every year with no net positive impact for investors, charges Vanguard Group Founder John Bogle. Meanwhile, corporate finance — the reason Wall Street exists — is just a tiny slice of the total business. The nation’s big investment banks probably could work for less than a week and take the rest of the year off with no real effect on the economy. “The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings,” Bogle told Time in an interview. “What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources.”

It’s a lot of money, $32 trillion. Nearly double the entire U.S. economy moving from one pocket to another, with a toll-taker in the middle. Most people refer to them as “stock brokers,” but let’s call them what they are — toll-takers and rent-seekers. Rent-seeking as an occupation is as old as the hills. In exchange for working to build up credentials and relative fluency in the arcane rules of an industry, one gets to stand back from actual work and just collect money. Ostensibly, the job of a financial adviser is to provide advice. Do you actually get that from your broker? It is worth anything? Research shows, over and over, that stock brokers can’t do much of anything demonstrably valuable. They don’t know which stocks will go up or down and when.

They don’t know which asset classes will outperform this year or next. Nobody knows. That’s the point. If you’re among that small cadre of extremely high-level traders who can throw loads of cash at a short-term fluke, fantastic. If you have a mind for numbers like Warren Buffett that allows you to buy companies on the cheap and hold them forever, excellent. If you’re a normal retirement investor trying to get from A to B and retire on time, well, you have a really big problem to face: The toll-taker wants your money.

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Surprise? Really?

OPEC Shale War Leaves Big Oil Companies as Surprise Victims (Bloomberg)

When OPEC started a price war last November, driving oil down to its current $65 a barrel, U.S. shale drillers looked doomed. Six months later, it’s the world’s largest oil companies that are emerging as the unexpected casualties. The reason: the multibillion-dollar projects at the heart of the oil majors’ strategy need prices closer to $100 to make them economically feasible. “Big Oil is today squeezed by two low-cost producers: OPEC and U.S. shale,” said Michele Della Vigna at Goldman Sachs. “Big Oil needs to re-invent itself.” The new period of cheap oil and ample supplies raises a prospect unthinkable as recently as a few months ago – that the world no longer needs all the big, expensive projects planned by companies such as Shell, Chevron. and Total.

Rising supplies from Saudi Arabia, Iraq and perhaps Iran combined with a more efficient shale industry could deliver the bulk of new production. Big Oil will continue to play a significant role, particularly as field developments sanctioned in the era of $100 a barrel come to fruition – but new projects will suffer. Only six months ago, the industry’s thinking was very different. The view then was that shale firms could only survive with $100 oil. The expected wave of bankruptcies never came about, however, and shale output has continued growing as drillers cut costs in response to low prices. Ryan Lance, CEO of ConocoPhillips, said in Vienna on Wednesday that the industry now accepted that the U.S. shale drillers were far more resilient than expected. “They are reducing the cost and restoring the margins that we enjoy at $80 to $90 to get those at $60 to $70,” Lance said in an interview. “That is how resilient the opportunity set is.”

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“Our moral compass informs us that bailouts shouldn’t work to the benefit of the reckless and irresponsible. Reality teaches us a very different lesson.”

Who Really Benefits From Bailouts? (Ritholtz)

I always find it amusing whenever someone expresses surprise that the financial bailouts for Greece haven’t benefitted Greek citizens. “Bailout Money Goes to Greece, Only to Flow Out Again” in the New York Times is just the latest example. “The cash exodus is a small piece of a bigger puzzle over why – despite two major international bailouts — the Greek economy is in worse shape and more deeply in debt.” Unfortunately, this is a feature of bailout, not a bug. A plethora of financial rescues during the past decades has proven quite convincingly that this isn’t an aberration. Follow the money instead of following the headlines. That’s how you learn who profits from a bailout.

Look around the world – Japan, Sweden, Brazil, Mexico, Ireland, the U.S. and now Greece to learn who is and isn’t helped by these enormous government-backed bailouts. No, it isn’t the Greek people, nor even their banks. They never were the intended beneficiaries of the bailouts, nor were Irish citizens in that bailout. Indeed, homeowners in the U.S. were little more that incidental recipients of aid as a%age of total rescue spending. You probably learned the phrase “moral hazard” during the financial crisis. In short, what it means is that the bailouts rescued leveraged, reckless speculators from the results of their unwise professional folly and gave them an incentive to do it all over again. They were and the intended rescuees.

Do you think I am exaggerating? Consider the U.S. bailout in its manifold forms, from TARP to ZIRP to QE. How many bondholders suffered losses from their poor investment decisions? With the exception of holders of Lehman Brothers’ debt and a handful of banks that weren’t deemed too big to fail, just about every other bondholder was made whole, 100 cents on the dollar. Thanks to rescue plans such as the Trouble Asset Relief Program, holders of bonds from a diverse assortment of failed and failing companies suffered literally no losses. AIG? Zero losses. Fannie Mae and Freddie Mac? Zero losses. Citigroup and Bank of America? Zero losses. Morgan Stanley, Merrill Lynch, Goldman Sachs, Bear Stearns? Zero losses.

History teaches us that when companies fail, they file either a reorganization or liquidation in a bankruptcy court. The exceptions are when well-placed executives are friendly with Congress (Chrysler 1980) or members of the Joint Chiefs of Staff (Lockheed 1972) or Treasury secretaries (all of Wall Street except Dick Fuld in 2008-09). Having well-connected corporate executives on your board or in senior management sure comes in handy during an emergency.

[..] In the case of Greece, the money flows in large part from European governments and the IMF through Greece, and then to various private-sector lenders. We all call it a Greek bailout, because if it were called the “Rescue of German bankers from the results of their Athenian lending folly,” who would support it? Our moral compass informs us that bailouts shouldn’t work to the benefit of the reckless and irresponsible. Reality teaches us a very different lesson.

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A fetish.

The Euro, Like The Gold Standard, Is Doomed To Fail (Ann Pettifor)

Pierre Werner was appointed by the EU Council of Ministers on 6 March 1970, to chair a committee of experts to design a monetary system for the EU. The key elements of his committee’s recommendations was to be developed subsequently by the Delors Committee of twelve central bankers, which reported in 1989. Both sets of proposals – the Werner Report and the Delors Report – replicated the financial architecture of the nineteenth century gold standard. The parallels between the two systems include the abandonment by governments of control over exchange rates; the loss of a central bank accountable to the state; the initial euphoria as an over-valued exchanged rate cheapens imports & capital mobility encourages reckless lending; subsequent deflationary pressures; the absence of a co-ordinating body to check imbalances across the zone, and finally growing political resistance to the monetary system.

However it is important to note also just how much the two systems differ. The genius of those who designed the European Monetary Union (EMU) was this: unlike the architects of the gold standard, which attempted to remove central bank and state control over the exchange rate – Delors’s bankers simply abolished all European currencies, and replaced them with a new, shared currency, the euro – well beyond the reach of any state. That currency – the euro – not only acts as a store of value and facilitates financial transactions across borders – it also acts as a powerful symbol of European unity.

So in addition to serving the interests of Luxembourg bankers and European financiers – the euro was in part created, and heavily sold to citizens, as a perceived way and a symbol for bringing Europe and Europeans together. Like gold under the gold standard, the currency acquired the status of a fetish for many, both amongst the European elites in Brussels and Frankfurt, but also amongst those in periphery countries.

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Tsipras needs the discord. Apparently that is hard to fathom.

Tsipras Survives for Now as Party Rebels Blast Greece Rescue (Bloomberg)

Greek Prime Minister Alexis Tsipras staved off an immediate challenge to his premiership, though failure to appease his party’s hard-left fringe brought early elections into view. After 12 hours of talks, the central committee of the anti-austerity Syriza party decided in the early hours of Friday to hold an emergency congress in September, in which Tsipras’ move to accept a strings-attached rescue program from international creditors will be put to the vote. Leaders of the party’s Left Platform protested that will be too late to stop the bailout, but failed in their bid to force a party congress this weekend. “We opted for a difficult compromise and a recessionary program, we admit it”

With the government vulnerable, Finance Minister Euclid Tsakalotos meets representatives from international creditors on Friday to discuss the austerity measures his party has long opposed. The quarrel within Syriza, in power since January, means that Tsipras will have to rely on opposition parties’ support to approve measures attached to Greece’s emergency loans, a situation he has said isn’t sustainable. “Tsipras might call an early election as a way to reinforce his mandate,” Roubini analysts wrote in a note to clients. “It cannot yet be known if a new government – or Tsipras’s second mandate – would lead to stronger compliance with the creditors’ terms or would merely be a sign of Tsipras’s intention to push for better terms, including debt reduction.”

Former Energy Minister Panagiotis Lafazanis, who leads the Left Platform, opposed the September confidence vote, arguing the government will have signed a new bailout with creditors by then, and it will be all but impossible to annul bilateral agreements ratified by parliament. Lafazanis led a revolt of more than 30 Syriza lawmakers this month against the upfront actions demanded by European states and the IMF, effectively stripping Tsipras of his parliamentary majority. The central committee’s decision to hold a congress in September, approving a motion by Tsipras, “is a parody,” the Platform said in a statement. In a separate statement posted on the website of government-affiliated Avgi newspaper, 17 members of the central committee said they are resigning from the body, protesting the “transformation” of Syriza into a pro-austerity party.

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“If our partners and lenders had prepared a Grexit plan, shouldn’t we as a government have prepared our defense?”

Greek PM Defends Varoufakis and Controversial ‘Plan B’ (Reuters)

Prime Minister Alexis Tsipras acknowledged on Friday that his government had made covert contingency plans in case Greece was forced out of the euro, but rejected accusations that he had plotted a return to the drachma. Tsipras was forced to respond to the issue in parliament after former finance minister Yanis Varoufakis this week revealed efforts to hack into citizens’ tax codes to create a parallel payment system, prompting shock and outrage in Greece. The disclosure heaped new pressure on Tsipras, who is also battling a rebellion within his Syriza party and starting tough talks with the European Union and International Monetary Fund to seal a third bailout program in less than three weeks.

“We didn’t design or have a plan to pull the country out of the euro, but we did have emergency plans,” Tsipras told parliament. “If our partners and lenders had prepared a Grexit plan, shouldn’t we as a government have prepared our defense?” He compared the plan to a country preparing its defenses ahead of war, saying it was the obligation of a responsible government to have contingency arrangements in place. He did not directly refer to Varoufakis’ disclosure of plans to hack into his ministry’s software to obtain tax codes. But Tspiras said the idea of a database giving Greeks passwords to make payments to settle arrears was hardly “a covert and satanic plan to take the country out of the euro”.

Tsipras also defended his embattled former finance minister, who has continued to create headaches for the government since being ousted earlier this month. “Mr. Varoufakis might have made mistakes, as all of us have … You can blame him as much as you want for his political plan, his statements, for his taste in shirts, for vacations in Aegina,” Tsipras said. “But you cannot accuse him of stealing the money of Greek people or having a covert plan to take Greece to the precipice.”

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What about this is not clear?

Alexis Tsipras: I Ordered Varoufakis To ‘Defend Greece’ (Telegraph)

Greek prime minister Alexis Tsipras launched a staunch defence of his embattled former finance minister on Friday, as he spoke for the first time about the secret “Plan B” he ordered from Yanis Varoufakis. Following almost a week of silence, Mr Tsipras told his parliament he had authorised preparations for a system of “parallel liquidity” should the ECB pull the plug on the Greek banking system. “I personally gave the order to prepare a team to prepare a defence plan in case of emergency,” said Mr Tsipras, who compared Greece’s situation with being on a war footing. “If our creditors were preparing a Grexit plan, should we not have prepared our defences?” But the prime minister said he “did not have, and never prepared, plans to take the country out of the euro”.

Since the airing of the “Plan B” talks, in a recorded conversation between Mr Varoufakis and city investors, two private lawsuits have been brought against the divisive politician, raising the prospect of a criminal prosecution over charges relating to treason. Opposition parties in Greece have also called for the former Essex University economist to have his parliamentary immunity from criminal charges revoked over his role in the clandestine plans. However, the prime minister rejected accusations from some that the blueprint amounted to a “coup d’etat” against his government. “You can blame him as much as you want for his political plan, his statements, for his taste in shirts, for vacations in Aegina.” “But you cannot accuse him of stealing the money of Greek people or having a covert plan to take Greece to the precipice”, said Mr Tsipras.

The four main heads of Greece’s creditor powers met with current finance minister Euclid Tskalatos on Friday, as both sides race to secure an agreement by the second week of August. Greece’s institutions are said to be demanding the government scrap a “solidarity tax” of 8pc on incomes of more than €500,000, a levy which only affects 350 people but which lenders want to abolish to deter tax evasion. They also want Athens’ Leftist government to scrap fuel subsidies and liberalise professions such as ship-building before an agreement for a new €86bn bail-out can proceed. Progress on securing a third international bail-out for Greece hit the rocks on Wednesday night after the IMF said it was unwilling to consider providing any more money until the reforms were agreed and Europe finally granted a programme of debt relief to Greece.

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Casino.

Greek Stock Market To Reopen Monday, With Restrictions (CNN)

The Athens stock exchange will reopen Monday, more than a month after Greece’s financial crisis forced the authorities to suspend all trading. But there will be some restrictions for local investors, the Greek finance ministry said, to prevent more money flooding out of the banking system. They will only be allowed to buy shares with existing holdings of cash, and won’t be able to draw on their Greek bank accounts. Greece’s banks were bleeding cash at a furious pace on fears the country’s debt crisis would force it to abandon the euro. Capital controls were introduced on June 29, including the closure of banks and financial markets. ATM withdrawals were limited to €60 per day.

The banks reopened on July 20, after Europe agreed in principle to a new bailout, but withdrawals remain limited to €420 a week. Some capital controls have been relaxed, so Greek companies could make payments abroad. Shares in the biggest Greek banks were tanking before the market closure – Piraeus Bank lost 57% this year, while Alpha Bank is down 29%. The benchmark Athens index has dropped 32% over the last 12 months. The European Central Bank has approved the reopening of the exchange. The ECB doesn’t control the stock market, but its opinion is crucial because it is keeping the Greek banking system afloat with regular injections of cash.

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Getting more undone by the minute.

Greek Bailout Is Far From Being A Done Deal (Andrew Lilico)

Yesterday everyone learned what those who had been watching closely had realised for some time: the IMF won’t (at least for now) be offering a third loan to Greece. The IMF believes that Greece has not sufficiently stuck to the conditions of previous loans and that its debts after a third bailout would be unsustainably high. That means an IMF loan would not enable Greece to return to financial markets to fund itself (a normal requirement for an IMF loan). It might be added that the IMF would not be confident, either, that Greece could obtain further financing from alternative sources – ie its Eurozone partners, whose patience is clearly spent.

Given that Greece defaulted on an IMF payment only a few weeks ago – an action which placed it in a not-so-elite group of international pariah states that had ever done so – the IMF not wanting to lend to it again should hardly be a surprise. Many commentators appear to assume the Eurozone will simply shrug off IMF non-involvement and cover the difference themselves. After all, back in 2009/2010 when the first Greek bailout was initially mooted, many EU Member States and institutions would have preferred the IMF not to be involved. But the country that was most adamant the IMF had to be in was Germany. And again for the current discussions about a third bailout to be given authority to proceed, the German government promised the Bundestag that the IMF would be in.

So now we have the following stand-off. The Germans insist the IMF must be part of a third bailout; the IMF says it cannot be in unless Greece’s debts are forgiven on a scale that would make them sustainable; the Germans refuse even to contemplate debt forgiveness whilst Greece remains in the euro. Could this derail the whole deal? Yes. Indeed I would assume that this scenario was so obviously likely that some parties to the mid-July talks probably only ever agreed to what they did because they expected it to fall apart in just this way.

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Bless you: “The center is a response to intolerance, to the “migrants go home” attitude..”

Unaccompanied Refugee Minors Find A Home Away From Home in Athens (Kath.)

Next-door neighbor Katerina comes over to the house almost every day to have a coffee in the garden and bring a “little something for the kids.” The Hospitality Center for Unaccompanied Minors in the Athenian neighborhood of Ano Petralona, which went into operation in late May, is currently home to 18 children aged 13-17, and is a hub of social activity. The hostel for young migrants who crossed Greek borders without a guardian is run by the nongovernmental organization Praksis, which took on the responsibility of housing dozens of young refugees from countries including Syria, Afghanistan and Pakistan who were being held at migrant detention centers such as Amygdaleza, north of Athens.

The detention centers were closed down by the then new government as one of its first orders of business, citing “inhuman” living conditions. However, one of the first issues then to rise was what was to happen to the minors. The government was short of cash, prompting Alternate Minister for Immigration Policy Tasia Christodoulopoulou to reach out to the Latsis Foundation for help. “Surprisingly fast for a public organization,” says Latsis Foundation Executive Board secretary Dimitris Afendoulis, the ministry and the foundation created the hostel, which can take in 24 guests at a time, in a house in Ano Petralona within just a few months. There are currently 99 minors still waiting to be placed in similar facilities, while authorities estimate that some 2,500 children make their way through Greece alone every year.

“This center may provide just a small amount of relief for the thousands of children waiting to find shelter in this country but on a symbolic level it is an amazing initiative, particularly as it happened thanks to funding from a private foundation,” says Christodoulopoulou. “We have a funding gap as far as European Union funds are concerned and such initiatives contribute to social solidarity and awareness.” “Caring for and protecting unaccompanied minors brings together all those people who have the capability to contribute,” says Afendoulis, adding that the foundation has also undertaken to cover the hostel’s operating costs until EU funding becomes available.

The center is a response to intolerance, to the “migrants go home” attitude, says Antypas Tzanetos, president of the Praksis board. “It is a response with actions, not words,” he adds.

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Lagarde list years later.

Prosecutor Summons Ex-PM Samaras’ Aide Over €5.5 Million HSCB Bank Account (KTG)

“I wish we had ten Papastavrou!” It was former Prime Minister Antonis Samaras who had praised the morals of his close aide Stavros Papastravou, a lawyer consultant at the Prime Ministry, during a speech in the Greek Parliament. Now, one of the ‘ten’ the real Stavros Papastavrou has been summoned by an Athens financial crimes prosecutor to give explanation about €5.5 million in his accounts at the HSBC Geneva branch. Papastavrou’s name was one of more than 2,000 Greek names on the so-called Lagarde list of wealthy Greek depositors with accounts at HSBC Geneva branch that was ‘stolen’ by former bank employee Herve Falciani in 2009. The Lagarde-List has been in the hands of the Greek authorities since 2010.

“Prosecutor Yiannis Dragatsis called lawyer Stavros Papastavrou to answer questions regarding his suspected involvement in tax evasion and money laundering through an account containing 5.5 million euros that was among hundreds on a list submitted to the Greek authorities in 2010 by then-French Finance Minister Christine Lagarde, currently managing director of the IMF. Papastavrou’s legal counsel requested an extension so that the former prime minister’s adviser can prepare his defense. A new date will be set for his deposition after the August 15th break.” (ekathimerini)

According to several Greek media, Papastavrou claims that the money does not belong to him but to Israeli businessman Sabi Mioni. Papastavrou is reportedly co-holder of the account together with his mother and his father who deceased some years ago. Papastavrou had alleged that he was just managing the bank account. The former aide has to prove through documents that he is telling the truth, but also Mioni has to testify in the case. In his testimony in 2013, Mioni had claimed that he had given access to one of his corporate bank accounts to Papastavrou.

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Recovery.

Italian Youth Unemployment Rises to its Highest Level Ever (Bloomberg)

Italy’s jobless rate unexpectedly rose in June as businesses continue to dimiss workers amid concerns that the country’s exit from recession may not be sustainable. Youth unemployment jumped to a record-high 44.2%. Unemployment increased to 12.7% from a revised 12.5% in May, statistics agency Istat said in a preliminary report in Rome on Friday. The median estimate in a survey of nine analysts called for a rate of 12.3%. Youth unemployment in June rose to the highest rate since the series began in 2004, from 42.4% in May. Employment dropped for a second month in a row, with about 22,000 jobs lost in June alone, according to the report.

Joblessness in the euro area’s third-largest economy has been at 12% or above for more than two years as the record slump deepened before GDP started to rise again at the end of 2014. On Monday, the IMF said in a report that “without a significant pick-up in growth,” it would take Italy “nearly 20 years to reduce the unemployment rate to pre-crisis” levels of about half the current one. Prime Minister Matteo Renzi’s changes to Italy’s labor code showed early results as the number of open-ended contracts taking effect in the first half increased, the government said. Still, executives’ confidence declined this month amid doubts on the outlook for economic recovery and employment.

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Bad idea to focus on smuggling. The refugees need the attention.

People Smuggling: How It Works, Who Benefits, How It Can Be Stopped (Guardian)

One of the most distressing elements of the worldwide migrant crisis is that people who have risked all for a better life should be held to ransom by smugglers. The lines between migration and human trafficking all too easily converge. While migration implies a level of individual choice, migrants are sometimes detained and even tortured by the people they pay to lead them across borders. Following the cash across borders – through a network of kingpins, spotters, drivers and enforcers – is central to understanding how this opaque and complex business works. Everyone agrees there is not enough data. No one knows how many migrants are smuggled. However, enough is known about the money paid – by Eritreans, Syrians, Rohingya, and Afghans, among others – to demonstrate it is a multimillion-dollar business.

As Europe debates measures ranging from military attacks to destroying smugglers’ boats to increasing asylum places, what more can be done to prosecute those profiting at the crossroads of dreams and despair? How much do migrants pay? The cost varies depending on the distance, destination, level of difficulty, method of transport (air travel is dearer and requires fake documents) and whether the migrant has personal links to the smugglers, or decides to work for them. The UN Office on Drugs and Crime (UNODC) says journeys in Asia can cost from a few hundred dollars up to $10,000 (£6,422) or more. For Mexicans wanting to enter the US, fees can run to $3,500, while Africans trying to cross the Mediterranean can pay up to $1,000, and Syrians up to $2,500.

Abu Hamada, 62, a Syrian-Palestinian refugee, reckons he has earned about £1.5m ($2.3m) over six months by smuggling people across the Mediterranean from Egypt. A place on a boat from Turkey to Greece costs between €1,000 and €1,200(£700 and £840), say migrants. Afghans pay between €10,000 and €11,000 to get to Hungary, which includes help from smugglers. The UNODC says smugglers operating from Africa to Europe earn about $150m annually, while those from Latin America to North America are believed to earn roughly $6.6bn a year. Money is often paid in instalments as a migrant moves from one group of smugglers to the next. For example, migrants from Afghanistan often use informal remittance systems, such as hawala. Funds are deposited with a hawaladar in Afghanistan, and on each stage of the journey the migrant will contact that person to release money to other hawaladars in transit countries.

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Morons.

David Cameron To Send Dogs And Fences To Quell Calais Migrant Crisis (Guardian)

Extra sniffer dogs and fencing will be sent to France to help deal with the Calais migrant crisis, and Ministry of Defence land will be used to ease congestion on the UK side of the Channel tunnel, David Cameron has said. Speaking in Downing Street after chairing a meeting of the Cobra emergency committee, the prime minister said the situation was “unacceptable” and that he would be speaking to the French president, François Hollande, later on Friday. Cameron said: “This is going to be a difficult issue right across the summer. “I will have a team of senior ministers who will be working to deal with it, and we rule nothing out in taking action to deal with this very serious problem. “We are absolutely on it. We know it needs more work.”

The Cobra meeting came after another night during which police in France blocked people from reaching the Channel tunnel. About 3,000 people from countries including Syria and Eritrea are camping out in Calais and trying to cross into Britain illegally by climbing on board lorries and trains. France bolstered its police presence. The tunnel was temporarily closed on Friday morning while officials carried out an inspection after more migrants attempted to enter overnight at the entrance in Coquelles. French police attempted to form a ring of steel around the tunnel on Thursday night, prompting an evening of scuffles and standoffs with migrants attempting to breach the terminal in Calais. Up to a hundred migrants attempted to overrun police lines at a petrol station near the Eurostar terminal but were held back by baton-wielding gendarmes and riot vans.

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It’ll take a long time and a lot of deaths before people accept this.

We Can’t Stop The Flow Of Migrants To Europe, Only Rehouse Them (Guardian)

Rarely since 1558, when Queen Mary lost the town to the French, can Calais have ruffled as many British feathers as it has this July. British lorry-drivers, British holidaymakers, and British booze-runners – they’ve all had their journeys wrecked by a recent rise in refugees attempting to break into the Calais end of the Channel tunnel. Without wanting to entirely dismiss their experiences, it is nevertheless useful to remember that the Calais crisis is just a tiny part of a wider one. Of the nearly 200,000 refugees and migrants who have reached Europe via the Mediterranean this year, only 3,000 have made their way to Calais. This means that the migrants at Calais constitute between 1% and 2% of the total number of arrivals in Italy and Greece in 2015.

Far from the UK being a primary target for refugees, the country is much less sought-after than several of its northern European neighbours, notably Sweden and Germany. And while the chaos at Calais may seem unique, many more migrants arrive every week on the shores of Italy and Greece than will reach northern France all year. Debunking this Anglo-centrism is not an academic exercise. It is crucial to understanding how the Calais crisis can be better managed. Britain’s responses to the phenomenon are based on the assumption that it is a local problem. They include building more fences (Theresa May’s proposed recourse), sending in the army (Nigel Farage’s), or clearing the camp entirely (the default reaction in years gone by).

Such solutions presuppose that the crisis is a one-off event peculiar to the British-French border, and that these migrants – once cordoned-off and forgotten about – won’t come back and try again. But such short-termism ignores a vital fact: the migrants at Calais are merely the crest of the biggest global wave of mass migration since the second world war. Others will keep coming in their wake, whether we like it or not. Previous camp clearances over the past decade have ultimately not stopped the flow at Calais. Why would they work now?

[..] For many, the implications of this will be hard to swallow. But the reality is clear: the only logical, long-term response to the Calais crisis is to create a legal means for vast numbers of refugees to reach Europe in safety. This may sound counter-intuitive. But at the current rate, whether we like it or not, 1 million refugees will arrive on European shores within the next four or five years. Whether they set up camps at Calais depends on how orderly we make that process of resettlement.

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Time to act?!

As World Mourned Cecil The Lion, 5 Endangered Elephants Slain in Kenya (WaPo)

While the world mourned Cecil, the 13-year-old lion that was allegedly shot by an American hunter in Zimbabwe, an even more devastating poaching incident was quietly carried out in Kenya. Poachers killed five elephants in Tsavo West National Park on Monday night. The carcasses were recovered by rangers on Tuesday morning — what appeared to be an adult female and her four offspring, their tusks hacked off. While the killing of the lion in Zimbabwe has attracted the world’s attention, the death of the five elephants has received almost no coverage, even though elephants are under a far greater threat from poachers than lions. Their tusks can be sold in Asia for more than $1,000 per pound.

“It’s just devastating,” said Paul Gathitu, a spokesman for Kenya Wildlife Service. “It took us completely by surprise.” Kenyan investigators say the poachers crossed the border from neighboring Tanzania, slaughtered the elephants and then quickly returned to their base, making them difficult to track. Tsavo stretches along the border for more than 50 miles. Rangers heard gunshots ring out on Monday evening. They searched all night through the vast park and discovered the carnage the next morning. There was blood and loose skin where the tusks were cut off. Kenyan authorities say the poachers escaped on motorcycles, carrying their loot.

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“..sea surface temperatures haven’t been warming fast as marine air temperatures, so this comparison introduces a bias that makes the observations look cooler than the model simulations.”

Climate Models Are Even More Accurate Than You Thought (Guardian)

Global climate models aren’t given nearly enough credit for their accurate global temperature change projections. As the 2014 IPCC report showed, observed global surface temperature changes have been within the range of climate model simulations. Now a new study shows that the models were even more accurate than previously thought. In previous evaluations like the one done by the IPCC, climate model simulations of global surface air temperature were compared to global surface temperature observational records like HadCRUT4. However, over the oceans, HadCRUT4 uses sea surface temperatures rather than air temperatures. Thus looking at modeled air temperatures and HadCRUT4 observations isn’t quite an apples-to-apples comparison for the oceans.

As it turns out, sea surface temperatures haven’t been warming fast as marine air temperatures, so this comparison introduces a bias that makes the observations look cooler than the model simulations. In reality, the comparisons weren’t quite correct. As lead author Kevin Cowtan told me,

“We have highlighted the fact that the planet does not warm uniformly. Air temperatures warm faster than the oceans, air temperatures over land warm faster than global air temperatures. When you put a number on global warming, that number always depends on what you are measuring. And when you do a comparison, you need to ensure you are comparing the same things.

The model projections have generally reported global air temperatures. That’s quite helpful, because we generally live in the air rather than the water. The observations, by mixing air and water temperatures, are expected to slightly underestimate the warming of the atmosphere.

The new study addresses this problem by instead blending the modeled air temperatures over land with the modeled sea surface temperatures to allow for an apples-to-apples comparison. The authors also identified another challenging issue for these model-data comparisons in the Arctic. Over sea ice, surface air temperature measurements are used, but for open ocean, sea surface temperatures are used. As co-author Michael Mann notes, as Arctic sea ice continues to melt away, this is another factor that accurate model-data comparisons must account for.

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Jul 302015
 
 July 30, 2015  Posted by at 9:41 am Finance Tagged with: , , , , , , ,  


Harris&Ewing Harding inauguration 1921

The Great Reset – Act II (Russell Napier)
Treason Charges: What Lurks Behind The Bizarre Allegations (Varoufakis)
This Is A Recipe For A European Civil War (AEP)
The Defeat Of Europe (Yanis Varoufakis)
If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well (ZH)
In Defence Of Yanis Varoufakis (El-Erian)
Yanis Varoufakis Is Being Pilloried For Doing What Had To Be Done (Legrain)
After Greece, Everyone Will Want A Plan B To Leave The Euro (MarketWatch)
Bulgaria, Greece’s New Treasury (Novinite)
Hay For Cheese? Barter Booms in Cash-Squeezed Rural Greece (Reuters)
Tsipras Faces New Challenge From Syriza Hardliners Over Greek Bailout (FT)
‘Iron Lady’ To Play Central Role In Next Act Of Greek Bailout Drama (Guardian)
Spain Thinks Its Workers Are Not Really As Unemployed As They Say (Economist)
Nigel Farage On EU Referendum And The Mess In Dover-Calais (BBCBreakfast)

The Automatic Earth has been warning of deflation since its inception. There is no other possible outcome once deleveraging starts. And deleveraging has been postponed, and postponed only, through QE programs. Which are a bottomless pit.

The Great Reset – Act II (Russell Napier)

In May 2011 this analyst changed his mind about the impact of the monetary love being spread around the world by developed world central bankers. He stopped forecasting higher inflation and instead foresaw the return of deflation. Fresh from the battering in the deflationary storm of 2007-2009 investors did not want to hear that such monetary love would be in vain. They counted on central bankers then, just as they are counting on them now, to restore a level of nominal GDP growth that can prevent the severe burning of another painful deleveraging through default. Central bankers, the argument goes, need to boost financial asset prices to achieve higher nominal growth and that higher growth, when finally achieved, will be good for asset prices anyway.

So while their love may be for higher nominal GDP growth, the goodwill this spreads to asset prices should be priced in if it succeeds in creating inflation. However, a list of some prices that have been falling from last year – gold, steel, iron ore, copper, crude, coffee, cocoa, live cattle, hogs, orange juice, wheat, sugar, cotton, natural gas, silver, platinum, palladium, aluminium and tin – must raise questions as to whether there is reflation or whether this monetary love is in vain. This analyst is told that such major decline in prices across a broad spectrum of commodities and products represents a supply shock and not the failure of central banks to spur demand! Such supply side synchronicity is highly unlikely. This is nothing less than a failure to reflate and it is due to the growing crisis in Emerging Markets.

It was in a report called The Great Reset, in May 2011, that this analyst suggested the world was more likely to move towards deflation rather than higher inflation. There were many reasons for this change of mind, but key to it was a realisation that EM external surpluses had peaked. That sounds like a rather esoteric reason to change from an inflationist to deflationist stance, and it was not one that was of any concern to investors. However, the end of a long period (1998-2011) when external surpluses, combined with exchange-rate intervention policies, forced EM to create more domestic high-powered money, while simultaneously depressing the yields on US Treasuries, seemed both important and deflationary. Crucially, The Great Reset predicted this decline in EM external surpluses would produce tighter monetary policy in both EM and the developed world despite the efforts of central bankers to prevent it.

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Smear.

Treason Charges: What Lurks Behind The Bizarre Allegations (Varoufakis)

The bizarre attempt to have me indicted me on… treason charges, allegedly for conspiring to push Greece out of the Eurozone, reflects something much broader. It reflects a determined effort to de-legitimise our five-month long (25th January to 5th July 2015) negotiation with a troika incensed that we had the audacity to dispute the wisdom and efficacy of its failed program for Greece. The aim of my self-styled persecutors is to characterise our defiant negotiating stance as an aberration, an error or, even better from the perspective of Greece’s troika-friendly oligarchic establishment, as a ‘crime’ against Greece’s national interest. My dastardly ‘crime’ was that, expressing the collective will of our government, I personified the sins of:

• Facing down the Eurogroup’s leaders as an equal that has the right to say ‘NO’ and to present powerful analytical reasons for rebuffing the catastrophic illogicality of huge loans to an insolvent state in condirion of self-defeating austerity

• Demonstrating that one can be a committed Europeanist, strive to keep one’s nation in the Eurozone, and, at the very same time, reject Eurogroup policies which damage Europe, deconstruct the euro and, crucially, trap one’s country in austerity-driven debt-bondage

• Planning for contingencies that leading Eurogroup colleagues, and high ranking troika officials, were threatening me with in face-to-face discussions

• Unveiling how previous Greek governments turned crucial government departments, such as the General Secretariat of Public Revenues and the Hellenic Statistical Office, into departments effectively controlled by the troika and reliably pressed into the service of undermining the elected government.

It is amply clear that the Greek government has a duty to recover national and democratic sovereignty over all departments of state, and in particular those of the Finance Ministry. If it does not, it will continue to forfeit the instruments of policy making that voters expect it to utilise in pursuit of the mandate they bestowed upon it. In my ministerial endeavours, my team and I devised innovative methods for developing the Finance Ministry’s tools to deal efficiently with the troika-induced liquidity crunch while recouping executive powers previously usurped by the troika with the consent of previous governments.

Instead of indicting, and persecuting, those who, to this day, function within the public sector as the troika’s minions and lieutenants (while receiving their substantial salaries from the long-suffering Greek taxpayers), politicians and parties whom the electorate condemned for their efforts to turn Greece into a protectorate are now persecuting me, aided and abetted by the oligarchs’ media. I wear their accusations as badges of honour. The proud and honest negotiation that the SYRIZA government conducted from the first day we were elected has already changed Europe’s public debates for the better. The debate about the democratic deficit afflicting the Eurozone is now unstoppable. Alas, the troika’s domestic cheerleaders do not seem able to bear this historic success. Their efforts to criminalise it will crash of the same shoals that wrecked their blatant propaganda campaign against the ‘No’ vote in the 5th July referendum: the great majority of the fearless Greek people.

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“So we now have a Europe where the political temperature is rising to boiling point: where the EMU elites are refusing to shift course; and where mischievous lawyers are concocting criminal charges against anybody daring to explore a way out of the trap.”

This Is A Recipe For A European Civil War (AEP)

It has come to this. The first finance minister of a eurozone country to draw up contingency plans for a possible euro exit is under investigation for treason. Greece’s chief prosecutor is examining criminal charges against a five-man “working group” in the country’s finance ministry for the sin of designing a “Plan B”, a parallel system of euro liquidity and bank payments that could – in extremis – lead to a return of the drachma. It is hard to see how a monetary union held together by judicial power, coercion and fear in this way can have a future in any of Europe’s ancient nation states. The criminalisation of any Grexit debate shuts off the option of an orderly return to the drachma, even though there is a high probability – some say a near certainty – that the latest EMU loan package for Greece will prove unworkable and precipitate the country’s exit from the single currency within a year.

As a matter of practical statecraft, this is sheer madness. The Greek newspaper Kathimerini – the voice of the oligarchy – reported that the charges would include “breach of duty, violation of currency laws and belonging to a criminal organisation”, as well as violating data privacy by hacking into the Greek tax base. The prosecutor appears to have latched onto a legal suit by a private lawyer accusing Yanis Varoufakis of treason. It is nothing less than an attempt to destroy the mercurial former finance minister, lest he return as an avenging political force. The Greek “Plan B” was approved from the outset by prime minister Alexis Tsipras. It was designed originally to create an alternative source of euro liquidity if the ECB cut off emergency funding for the Greek banking system.

The ECB did in fact do exactly that – arguably violating the ECB’s Treaty to uphold financial stability, and acting ultra vires in a purely political move as the enforcer of the creditors – when the Syriza government threw down the gauntlet with an anti-austerity referendum. Mr Varoufakis insists that his plan was based on California’s IOU scheme in 2009 to cover tax rebates and to pay contractors when liquidity dried up after the Lehman crisis. His purpose was to reflate the economy within the eurozone, not to leave it. Yet it had a double function, and there lies the alleged treason. “At the drop of a hat it could be converted to a new drachma,” he said.

Pablo Iglesias, the pony-tailed leader of Spain’s Podemos movement, has drawn his own conclusions after watching Europe’s first radical-Left government in modern times brought to its knees by liquidity asphyxiation, and then further crushed by internal forces within Greece. He accused Germany of imposing a Carthaginian settlement as punishment for daring to call a referendum, and warned that the “limits of democracy in Europe” are now brutally clear. The lesson to be learned is that if Podemos is elected in Spain it must expect a trial of strength (“medir fuerzas”) and make sure it takes power in the fullest sense. You can interpret this how you will, but there is a hint of Leninist defiance in these words, a warning that Podemos may feel compelled to launch pre-emptive strikes against the entreched positions of the Spanish establisment, in the media, the judiciary, the security forces and the commanding heights of the economy.

The fate of Syriza has clearly tainted the radical-Left brand. The EMU creditor powers have shown all too clearly that if you buck the system, your country will pay a bitter price. It is hard to explain to Spanish voters – or indeed to anybody – how Mr Tsipras could accept a package of draconian demands rejected by the Greek people in a landslide vote just a week earlier. Podemos has lost its electoral lead and has dropped to 17pc in the polls, trailing the Socialists by a wide margin. But it would be premature to conclude that this is the end of the story. The deeper message – still entering the collective consciousness – is that no Leftist government can pursue sovereign policies within the constraints of EMU.

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Le Monde Diplomatique has posted the article in picture format. Click the link to read.

The Defeat Of Europe (Yanis Varoufakis)

Le Monde Diplomatique has posted the article in picture format. Click the link to read.

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And Schäuble. And many others.

If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well (ZH)

What makes matters confusing, is that the core allegation made by Varoufakis, namely that the Troika controls Greece tax revenues and had to be sabotaged, was strictly denied: European Commission spokeswoman Mina Andreeva on Tuesday described as “false and unfounded” Varoufakis’s claims that Greece’s General Secretariat for Public Revenues is controlled by the country’s creditors. In other words, if Andreeva is right, then Varoufakis’ transgression of threatening to hijack the Greek tax system was merely hot air, and the former finmin is guilty of nothing more than self-aggrandizement.

On the other hand, if Greece does find it has a legal basis to criminally charge Varoufakis with treason merely for preparing for a Plan B, then it brings up an interesting question: if Varoufakis was a criminal merely for preparing for existing the Euro, then comparable treason charges should also be lobbed against none other than Varoufakis’ nemesis – Eurogroup president and Dutch finance minister Jeroen Dijsselbloem. Recall from the November 28 post that “Netherlands, Germany Have Euro Disaster Plan – Possible Return to Guilder and Mark”, to wit:

The Dutch finance ministry prepared for a scenario in which the Netherlands could return to its former currency – the guilder. They hosted meetings with a team of legal, economic and foreign affairs experts to discuss the possibility of returning to the Dutch guilder in early 2012. At the time the Euro was in crisis, Greece was on the verge of leaving or being pushed out of the Euro and the debt crisis was hitting Spain and Italy hard. The Greek prime minister Georgios Papandreou and his Italian counterpart Silvio Berlusconi had resigned and there were concerns that the eurozone debt crisis was spinning out of control – leading to contagion and the risk of a systemic collapse.

A TV documentary broke the story last Tuesday. The rumours were confirmed on Thursday by the current Dutch minister of finance, Jeroen Dijsselbloem, and the current President of the Eurogroup of finance ministers in a television interview which was covered by EU Observer and Bloomberg. “It is true that [the ministry of] finance and the then government had also prepared themselves for the worst scenario”, said Dijsselbloem.

This is precisely what Varoufakis was doing too.

“Government leaders, including the Dutch government, have always said: we want to keep that eurozone together. But [the Dutch government] also looked at: what if that fails. And it prepared for that.” While Dijsselbloem said there was no need to be “secretive” about the plans now, such discussions were shrouded in secrecy at the time to avoid spreading panic on the financial markets.

Again, precisely like in the Greek scenario. In fact, if throwing people in jail, may round up Wolfi Schauble as well:

Jan Kees de Jager, finance minister from February 2010 to November 2012, acknowledged that a team of legal experts, economists and foreign affairs specialists often met at his ministry on Fridays to discuss possible scenarios. “The fact that in Europe multiple scenarios were discussed was something some countries found rather scary. They did not do that at all, strikingly enough”, said De Jager in the TV documentary. “We were one of the few countries, together with Germany. We even had a team together that discussed scenarios, Germany-Netherlands.”

When the EU Observer requested confirmation from Germany, the German ministry of finance did not officially deny that it had drawn up similar plans, stating simply: “We and our partners in the euro zone, including the Netherlands, were and still are determined to do everything possible to prevent a breakup of the eurozone.” [..] This is quite a revelation. At that time the German finance minister Wolfgang Schauble had said that the Euro could survive without Greece. Whether it could survive without the Dutch is another matter entirely.

Fast forward 3 years when Greece, too, was making preparations for “preventing the breakup of the eurozone” in doing precisely what Schauble wanted as recently as three weeks ago: implementing a parallel currency which would enable Greece to take its “temporary” sabbatical from the Eurozone. So one wonders: where are the legal suits accusing Dijsselbloem and Schauble of the same “treason” that Varoufakis may have to vigorously defend himself in a kangaroo court designed to be nothing but a spectacle showing what happens to anyone in Europe who dares to give Germany the finger, either literally or metaphorically.

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El-Erian comes laden with salt.

In Defence Of Yanis Varoufakis (El-Erian)

From blaming him for the renewed collapse of the Greek economy to accusing him of illegally plotting Greece’s exit from the eurozone, it has become fashionable to disparage Yanis Varoufakis, the country’s former finance minister. While I have never met or spoken to him, I believe that he is getting a bad rap (and increasingly so). In the process, attention is being diverted away from the issues that are central to Greece’s ability to recover and prosper – whether it stays in the eurozone or decides to leave. That is why it is important to take note of the ideas that Varoufakis continues to espouse. Greeks and others may fault him for pursuing his agenda with too little politesse while in office. But the essence of that agenda was – and remains – largely correct.

Following an impressive election victory by his Syriza party in January, Greece’s prime minister, Alexis Tsipras, appointed Varoufakis to lead the delicate negotiations with the country’s creditors. His mandate was to recast the relationship in two important ways: render its terms more amenable to economic growth and job creation; and restore balance and dignity to the treatment of Greece by its European partners and the IMF. These objectives reflected Greece’s frustrating and disappointing experience under two previous bailout packages administered by “the institutions”. In pursuing them, Varoufakis felt empowered by the scale of Syriza’s electoral win and compelled by economic logic to press three issues that many economists believe must be addressed if sustained growth is to be restored: less and more intelligent austerity; structural reforms that better meet social objectives; and debt reduction.

These issues remain as relevant today, with Varoufakis out of government, as they were when he was tirelessly advocating for them during visits to European capitals and in tense late-night negotiations in Brussels. Indeed, many observers view the agreement on a third bailout programme that Greece reached with its creditors – barely a week after Varoufakis resigned – as simply more of the same. At best, the deal will bring a respite – one that is likely to prove both short and shallow. [..] Now that he is out of office, Varoufakis is being blamed for much more than failing to adapt his approach to political reality. Some hold him responsible for the renewed collapse of the Greek economy, the unprecedented shuttering of the banking system, and the imposition of stifling capital controls.

Others are calling for criminal investigations, characterising the work he led on a plan B (whereby Greece would introduce a new payments system either in parallel or instead of the euro) as tantamount to treason. But, love him or hate him (and, it seems, very few people who have encountered him feel indifferent), Varoufakis was never the arbiter of Greece’s fate. Yes, he should have adopted a more conciliatory style and shown greater appreciation for the norms of European negotiations; and, yes, he overestimated Greece’s bargaining power, wrongly assuming that pressing the threat of Grexit would compel his European partners to reconsider their long-entrenched positions. But, relative to the macro situation, these are minor issues.

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Another thing I said days ago. Surprise me, tell me something new. Alternatively: read me.

Yanis Varoufakis Is Being Pilloried For Doing What Had To Be Done (Legrain)

Yanis Varoufakis has few friends in official circles these days. Greece’s outspoken former finance minister has long been loathed by his erstwhile eurozone counterparts, on whom he counterproductively impressed their mediocrity. Since he has been jettisoned by his prime minister, Alexis Tsipras, and criticised Greece’s capitulation to Germany’s iniquitous demands, his former Syriza colleagues are losing patience with him too. He is becoming the perfect fall guy for having devised a daring escape plan in the event that Greece’s creditors shut down its banking system and severed its international economic ties – as they eventually did. While Varoufakis’s plan to create a parallel payments system based on the country’s tax register was certainly unorthodox, it was completely understandable.

Until the recent revelations, Varoufakis was being criticised for standing up to Greece’s eurozone creditors without preparing a Plan B in case negotiations failed. As many experts and commentators, including me, advised, the Greek government needed to prepare for a parallel currency to provide liquidity to the economy in case eurozone authorities turned off the taps. That way it could credibly threaten to default on its debts while remaining in the eurozone – and thus, it hoped, convince its creditors to offer the debt relief that the depressed Greek economy desperately needed to recover.

But now it turns out Varoufakis did have a plan B, he is being attacked for that too. Some criticise the supposed recklessness and duplicity of preparing for a parallel currency that could have become a new drachma, given the government’s official commitment to staying in the euro. But that is disingenuous. Governments should and do prepare for all sorts of eventualities. The Bank of England is right to prepare for the possibility of Brexit, which may happen even though it is not government policy. One hopes that Whitehall has plans for dealing with a nuclear winter or a catastrophic epidemic. Varoufakis was right to prepare for how to cope with an outcome that wasn’t just possible, but likely.

Others object that the plan wouldn’t have worked. But why not? In principle, the idea of setting up a parallel payments system involving people’s tax numbers is ingenious. Since the value of the parallel currency would derive from the fact that the Greek government accepted it as payment for overdue, current and future taxes, it makes a lot of sense. Given that it takes time to print and distribute banknotes, starting with a purely electronic system is also sensible.

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Part of why the tapes were leaked?!

After Greece, Everyone Will Want A Plan B To Leave The Euro (MarketWatch)

Surely now every finance minister in Europe is going to be continually asked whether they, like the Greeks, have put in place a contingency plan for an alternative currency. It will be a very hard question to answer. If they say no, then they look irresponsible — after all, one of the key tasks of any government is to prepare for all kinds of terrible things that might happen. If they say yes, however, then they undermine their membership in the single currency. It is lose-lose — but that does not mean it is not going to happen. The Irish? They will certainly be expected to have a plan in place, given the underlying strength of their economy, and what happened to them last time around. The Spanish? With the rise of their own anti-austerity parties, they will certainly need to prepare for all eventualities.

The same is true of the Italians and the Portuguese. Once the questions start, they will be impossible to stop. The trouble is, that is now how a currency is mean to work. No one ever asks the governor of Virginia what plans he has put in place should the state decide to pull out of the dollar. No one asks the leader of Manchester Council whether they have prepared for leaving the sterling zone, or the leaders of Osaka whether they might replace the yen. It would be like asking whether they planned to colonize Mars — – the question would be too far-fetched to even be put. It simply wouldn’t happen. That is because properly functioning currency systems are permanent.

The Greeks and the German have changed that. Varoufakis’s legacy is, in truth, a reversible euro. A country might be a member, but only for the moment, and only so long as it works. It will always have a Plan B stored away somewhere, just in case. And yet, that is not a currency. It is fixed-exchange-rate system. The problem is that fixed-currency systems don’t often survive an economic shock. The euro is staggering on for now. But the chances of it surviving the next big wave or turmoil in the markets have just been dramatically reduced.

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Hilarious in its tragedy.

Bulgaria, Greece’s New Treasury (Novinite)

A short trip to Bulgaria is the only thing Greeks have to do to circumvent capital controls, German weekly Der Spiegel says. “Strict controls which actually had to save Greece’s banks from collapse, are leading to a mass exodus to the poorest EU member state,” it reports in a Tuesday article. Up to €14,000 are successfully transferred to Bulgaria every week despite capital controls. Something not only “normal citizens” do (with thousands having opened bank accounts there), but also companies which open branch offices or move their headquarters to the country, Der Spiegel argues. This is partly owned to the fact that one is allowed to have €2000 daily (or €14,000 weekly) transferred from their account for a trip abroad.

A bank employee in Bulgaria is quoted as saying that for Greek citizens it is quite easy to have accounts set up in her bank in either leva (the Bulgarian currency, BGN) or euro – all it takes is an ID document and wait for two hours. “We have many foreign clients. Of course, Greeks too,” she told the author of the article. Greeks are fearing that a return to the drachma might cost much of their wealth. “In the months when Greece’s crisis peaked they have withdrawn around EUR 45 B from their bank accounts. Now they are bringing the money abroad.” For companies, low corporate and personal taxes in Bulgaria turn out attractive, being at 10% compared to Greece’s 29% of corporate tax. The latter rate was introduced to comply with the demands of international lenders.

Lower minimum wage and levels of red tape add to Bulgaria’s appeal, and Greek entrepreneurs are able to set up a Bulgaria-based subsidiary normally in just a week. As a result, there were 11 500 entities with Greek participation in Bulgaria, 2500 more than the year before. Krasen Stanchev, an economist with the Institute for Market Economy, is quoted as saying that some EUR 4.5-5 B have been invested by Greek companies into Bulgaria since the crisis began. “Until a few years ago Greece was still a beacon of hope and a role model for other countries in the Balkans. We were a developed economy, integrated into the West, part of the center of Europe… Now even Albania looks more attractive,” an entrepreneur is quoted as saying.

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Something tells me the Greeks will come out of this in good shape.

Hay For Cheese? Barter Booms in Cash-Squeezed Rural Greece (Reuters)

Panagiotis Koutras, a cattle herder and farmer, recalls how he sold clover for animal feed worth 2,000 euros to a farmer who did not have cash and paid him in wheat. Another farmer offered his heavy equipment to cover €4,000 of a €6,000 bill for products Koutras had supplied him. Kostas Zavlagas, who produces cotton, wheat, and clover recounted how he gave bales of hay and machine parts to another farmer who did not have cash to pay him. “He is going to pay me back in some sort of product when he is able to, maybe in cheese,” says 47-year-old Zavlagas. “It’s representative of the daily issues that farmers face and why they turn to barter trading to resolve them.”

Still, for the country’s tax inspectors, the practice raises questions about whether it is fuelling endemic tax dodging since it is difficult to monitor whether receipts are issued to ensure value-added-tax is paid. “Barter is not illegal as long as the relevant legal documents are issued for every transaction,” said Christos Kyriazopoulos, research director at the finance ministry’s anti-corruption unit. “But we are closely monitoring the phenomenon, it’s something that we have our eyes on.” Many Greeks are reluctant to encourage the use of barter or to talk about it openly, fearing it symbolizes a society moving in reverse after seven years of economic crisis.

“Of course, a barter economy is something that we shouldn’t aspire to and should be a thing of the past – the last time we had it on a large scale was when we were under occupation,” says Stamatis of the Mermix platform, referring to Nazi German rule during World War Two. “But aren’t capital controls a financial form of occupation?”

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“The IMF is part of the so-called “quadriga” of bailout monitors that also includes the EC, the ECB and, for the first time, the European Stability Mechanism, the EU’s own bailout fund.”

Tsipras Faces New Challenge From Syriza Hardliners Over Greek Bailout (FT)

Alexis Tsipras will on Thursday face an unprecedented challenge to his authority, as the central committee of his governing Syriza party meets to discuss the prime minister’s plan to hold a snap election as soon as Greece signs up to a €86bn third bailout. After abandoning its earlier vows of unity, Left Platform, an anti-bailout faction of the party led by Panayotis Lafazanis, the former energy minister, appeared to be preparing for a showdown that could split Syriza and deprive Mr Tsipras of his parliamentary majority. The development was a reminder of the threats facing Greece’s prime minister as he tries to finalise a bailout deal with international creditors that is deeply unpopular within his own leftwing party.

Mr Tsipras has so far succeeded at winning parliamentary support for two packages of reforms connected to the bailout even as he has expressed his own misgivings about them. In the process, he appears to have energised Mr Lafazanis, a former Communist party official who has advocated a return to the drachma. The prime minister is expected to propose an extraordinary party congress for September, provided his government can meet its own tight deadline of August 12 to strike a deal with creditors. The central committee meeting also coincides with the arrival in Athens of Delia Valesescu, the IMF’s new head of mission. The IMF is part of the so-called “quadriga” of bailout monitors that also includes the EC, the ECB and, for the first time, the European Stability Mechanism, the EU’s own bailout fund.

Earlier this week technical experts from the EU and IMF gained access to the national accounting office at the finance ministry for the first time since Syriza came to power in January, reflecting a more accommodating attitude towards the creditors since Yanis Varoufakis, the combative finance minister, stepped down earlier this month. Mr Tsipras’s newfound willingness to negotiate tough economic reforms with the deeply unpopular bailout monitors in order to keep Greece in the euro has left Mr Lafazanis sounding disappointed and increasingly angry.

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Maybe Romanians are good with diktats?

‘Iron Lady’ To Play Central Role In Next Act Of Greek Bailout Drama (Guardian)

Delia Velculescu, the Romanian economist chosen to lead the International Monetary Fund’s negotiating team in Greece, was dubbed the “iron lady” during the fraught talks over Cyprus’s bailout. Given the poor relationship between Athens and its creditors, her toughness will be tested anew in the coming days. Velculescu arrives in Athens on Thursday amid uncertainty over the IMF’s willingness to throw its weight behind a third bailout for the stricken eurozone state. Alexis Tsipras, the Greek prime minister, hopes to negotiate a deal before 20 August, but the IMF will subject any agreement to rigorous examination. The IMF has indicated that it regards Greece’s debt burden as unsustainable, and any new deal must include debt relief.

It is far from clear whether Athens’ eurozone creditors are ready to offer this. Velculescu will have to decide what role the Washington-based lender is willing to play in any new rescue – and what should be expected of Greece in return. Velculescu is not well known in her native Romania, having left for the US to attend university and later joined the IMF. “Inside Romanian financial institutions, she’s known due to her position at the IMF, but among journalists and the general public she is mostly unknown,” said Cristian Pantazi, editor-in-chief of Hotnews, an online Romanian news agency. “People who do know her here characterise her as a very serious and dedicated professional.”

Velculescu holds a masters and PhD in economics from Johns Hopkins University in Maryland, and has been at the IMF since 2002. She co-authored an earlier IMF review of the Greek economy in 2009, and this, coupled with her time in Cyprus as the IMF’s chief representative between 2012 and 2014, has led to her securing a prominent role in trying to resolve the ongoing crisis in Greece. [..] it was the Cyprus bailout in 2013 that made her name. It was the Cypriot media who portrayed Velculescu as an “iron lady” who was very tough and demanding in terms of fiscal consolidation and the requirements she made on the country. However, those who dealt with her during Cyprus’s bailout talks have a different viewpoint.

“She had a reputation for being tough, but I didn’t experience the toughness in my dealings with her,” said Marios Clerides, general manager at the Cooperative Central Bank in Cyprus. “She and the troika came across as resolved rather than aggressive,” he added. “She has quite a negative reputation in Cyprus,” said Alexander Apostolides, an economics historian at the European University Cyprus, who was a presidential adviser during the negotiations. “We are a male-dominated society and the fact that she was a woman caused some issues,” he said, but added that in his experience she was “a person willing to listen to other ideas and alternatives, more ready than others to hear other approaches”.

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Good work. Steve will be able to point out tons of erroneous assumptions in mainstream economics.

Help Make Minsky Easier To Use (Steve Keen)

Minsky has been programmed almost exclusively by Dr Russell Standish, and $10,000 will buy 100 hours of Russell’s programming time. About A$230,000 has been spent on it so far-with US$128,000 coming from an initial INET grant (when the US$ was worth less than the A$), US$78,000 from a Kickstarter campaign, and sundry other amounts from supporters like Bruce Ramsay, who runs the Ending Overlending page that is linked to from this blog. This funding enabled Russell to build the basic functionality Minsky needed, along with a lot of innovative smarts that set it apart from its much more established rivals in system dynamics programs like Matlab’s Simulink, Vensim, Stella and Vissim that cost thousands of dollars a copy and have been around for decades.

For example, Minsky is the only system dynamics program that lets you use Greek characters and symbols, superscripts and subscripts; it runs plots dynamically while a simulation is running (which only Vissim also does in the system dynamics product space), it s the only program that lets you insert variables and operators by typing directly onto the canvas rather than having to use the mouse and toolbox palettes; and of course it s the only program that supports double-entry bookkeeping to allow complex inter-related financial accounts to be simulated dynamically. But the program is still incomplete.

Some basic things like an IF/THEN/ELSE block are missing; some aspects of grouping don’t work properly yet, you can’t save part of a Minsky file as a toolkit, and so on. I’m putting $10,000 of my own cash in to get these things done now and there are many other features that should be added. These range from simple things like adding shortcut keys for Save As to the final ambitions I have for the program enabling it to model multiple sectors and multiple economies at once. If we can raise another $30,000 or so, we can also address one of the main complaints that I hear about Minsky: to quote my good friend Tom Ferguson, INET’s Research Director, from our dinner together in London last month, “Why is Minsky so hard to use?”

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Crack down on the poor.

Spain Thinks Its Workers Are Not Really As Unemployed As They Say (Economist)

He had the dishevelled air of a bon vivant, someone who enjoyed his food and cared little for appearances. When he showed up in the tiny hillside village of Gaucin at the beginning of the year, driving an old car and asking for directions, no one knew who he was, or cared. But he eased into village life, gossiping with the locals in the bars, mostly about who owned what in the area. He had done his homework on Owners Direct and Airbnb, two home-rental websites, and had a list of a hundred houses that were being rented out to holidaymakers. Next he began asking about villagers who were working part-time for cash as cleaners, gardeners or handymen, some of them officially claiming to be unemployed. Soon the word spread: the taxman had come to town.

The inspectors have come to villages like Gaucin to tackle the Spanish government’s difficulties in collecting revenue, in the face of economic problems that have driven much of the country’s business activity into the shadows. Spain’s economy has been growing lately, creating 411,000 net jobs in the second quarter according to figures released on July 23rd by the national statistics agency. But while unemployment fell 1.4 %age points, it is still an agonising 22.4%, having remained above 20% for five years. As elsewhere in southern Europe, this prolonged stagnation has encouraged workers and businesses to dodge taxes by shifting to the black market.

While northern European countries now promote electronic transactions, shopkeepers and housecleaners in Spain are happy to accept cash in order to dodge value-added tax of 21%. The grey economy is estimated to make up between a fifth and a quarter of Spain’s GDP. The government’s tax crackdown has netted almost €35 billion extra for the state’s coffers in the past three years. But the tax agency (or Agencia Tributaria) sees scope to improve that take. It plans to step up surveillance of social media and e-commerce sites, as well as of businesses such as hotels and restaurants which it suspects of keeping two sets of accounts to under-report income. Members of the public are encouraged to blow the whistle, and to report any payments of €2,500 or more in cash. Tax inspectors are offered financial incentives to meet ambitious targets.

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Go Nigel go.

Nigel Farage On EU Referendum And The Mess In Dover-Calais (BBCBreakfast)

UKIPs Nigel Farage on the EU referendum campaign, and moving it forward as all the other Eurosceptics are lazy bastards, and the immigration mess on Dover-Calais route with illegal immigrants smuggling themselves onto Eurotunnel trains.

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Jul 282015
 
 July 28, 2015  Posted by at 9:02 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle July 28 2015


John Collier FSA housing project for Martin aircraft workers, Middle RIver, MD 1943

Weakness in Asia Batters Currencies Abroad (WSJ)
Wealth Doesn’t Trickle Down, It Just Floods Offshore -$32 Trillion (Guardian)
Hong Kong Is Feeling China’s Pain (Bloomberg)
The Good News in China’s Stock Plunge (Pesek)
How Much Worse Can the Junk-Bond Sell-Off Get? (WolfStreet)
The Few Who Won’t Say ‘Sorry’ for Financial Crisis (Ritholtz)
Varoufakis Unplugged: The London Call Transcript (FT)
Statement on the FinMin’s Plan B Working Group (Yanis Varoufakis’ office)
Varoufakis: It Would Be Irresponsible Not To Have Drawn Up Contingency Plans (E)
Yanis Varoufakis Admits ‘Contingency Plan’ For Euro Exit (Guardian) /td>
Contingency Plans (Paul Krugman)
Greece’s Headache: How To Lift Capital Controls (AFP)
Germany Rides Into Its Greek Colony On The “Quadriga” (Zero Hedge)
IMF Paints Dim Europe Picture, Says More Money Printing May Be Needed (Reuters)
How the Greek Deal Could Destroy the Euro (NY Times)
The Way To Fix Greece Is To Fix The Banks (Coppola)
France Wants To Outlaw Discrimination Against The Poor (Guardian)
Dutch Journalist, MH17 Expert: ‘UN Tribunal Attempt to Hide Kiev’s Role’ (RI)
Potemkin Party (Jim Kunstler)
It’s Really Very Simple (Dmitry Orlov)

Any country heavily dependent on commodities trade must suffer the inevitable.

Weakness in Asia Batters Currencies Abroad (WSJ)

The global commodities slump is testing the resilience of resource-driven economies, pushing currencies from Australia, Canada and Norway to lows not seen since the financial crisis. Weakening energy and metals prices are punishing investors, companies and governments. Slumping demand from China, the world’s biggest purchaser of many materials, is rippling through foreign-exchange markets, reflecting expectations that a valuable source of export growth is drying up. But few countries are being battered as badly as Canada, due to its dependence on the hard-hit energy industry and its central bank’s decision this month to cut its key overnight interest rate for the second time this year.

The Bank of Canada expects Canada’s gross domestic product to rise a paltry 1.1% this year, down from previous forecasts of 1.9% made earlier in the year, as a persistent decline in oil prices and a drop in exports that the central bank described as “puzzling” hampered growth. The decision to reduce rates is adding to the woes of the Canadian dollar, which is called the loonie, underscoring the delicate balance that policy makers must strike at a time of uneven global growth and whipsaw trading in currency markets. At the same time, a boost in exports—often billed as one of the silver linings of a currency’s decline—has yet to arrive.

“My gut feeling is that it’s going to be bad for some time to come,” said Thomas Laskey at Aberdeen Asset Management, which has US$483 billion under management. Mr. Laskey said he is shorting the Canadian dollar—a bet that the currency will fall—until he sees an improvement in Canadian oil-and-gas companies’ investment spending. The loonie is down 8.1% against the U.S. dollar since May 14 in New York trading, making it one of the biggest victims of the steep decline in global commodity prices since then. In that same period, the Australian dollar is down 10% and the Norwegian krone, which is pegged to the euro, has dropped 9.8% against its U.S. counterpart.

Plunging commodity prices and the end of a mining investment boom have pushed the Reserve Bank of Australia to cut interest rates twice this year. The central bank said that while it is open to further easing monetary policy, it is also wary of some of the unintended consequences of lower rates, such as burgeoning real-estate prices in Sydney. Norway’s central bank cut interest rates in June in a bid to boost its flagging economy, which is closely tied to oil exports. Norges Bank said more reductions are likely before the end of the year.

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“Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people. “This new data shows the exact opposite has happened..”

Wealth Doesn’t Trickle Down, It Just Floods Offshore -$32 Trillion (Guardian)

The world’s super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy. James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the IMF and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system.

Comedian Jimmy Carr became the public face of tax-dodging in the UK earlier this year when it emerged that he had made use of a Cayman Islands-based trust to slash his income tax bill. But the kind of scheme Carr took part in is the tip of the iceberg, according to Henry’s report, entitled The Price of Offshore Revisited. Despite the professed determination of the G20 group of leading economies to tackle tax secrecy, investors in scores of countries – including the US and the UK – are still able to hide some or all of their assets from the taxman. “This offshore economy is large enough to have a major impact on estimates of inequality of wealth and income; on estimates of national income and debt ratios; and – most importantly – to have very significant negative impacts on the domestic tax bases of ‘source’ countries,” Henry says.

Using the BIS’s measure of “offshore deposits” – cash held outside the depositor’s home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn and $32tn in financial assets has been hidden from the world’s tax authorities. “These estimates reveal a staggering failure,” says John Christensen of the Tax Justice Network. “Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people. “This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich.”

In total, 10 million individuals around the world hold assets offshore, according to Henry’s analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world’s movers and shakers like to use as homes for their immense riches.

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“Chinese tour group visitors to Hong Kong plunged 40% in the first two weeks of July compared with the same period a year earlier..”

Hong Kong Is Feeling China’s Pain (Bloomberg)

For Hong Kong, it’s been one thing after another when it comes to China. A series of anti-China and pro-democracy protests last year prompted stores to close and mainland tour groups to cancel bookings. Meanwhile, a slowing Chinese economy and President Xi Jinping’s anti-corruption and austerity campaigns have also made the Chinese more wary of buying pricey cognac and Gucci bags in the city. While the biggest outbound destination for Chinese tour groups last year, Hong Kong is in danger of losing its lead to regional rivals such as Thailand and South Korea, as well as mainland alternatives including Shenzhen and Shanghai. Mainland Chinese travelers to Hong Kong last year grew by the slowest pace since 2009, Bloomberg Intelligence data show.

Chinese tour group visitors to Hong Kong plunged 40% in the first two weeks of July compared with the same period a year earlier, the Hong Kong Economic Times reported Monday, citing Michael Wu, head of the city’s Travel Industry Council. With fewer mainland Chinese staying overnight, average daily rates at Hong Kong’s hotels fell for a ninth straight month through June. In addition, China slashed tariffs on products such as face creams and imported sneakers from June 1, reducing Hong Kong’s draw as a cheaper shopping destination. The effect on Hong Kong’s retailers has been immediate and painful. Retail sales fell in four of the five months through May, with jewelry, watches and other high-end gifts the worst hit.

Burberry Group Plc, whose stores in Hong Kong’s Causeway Bay and Tsim Sha Tsui shopping districts sell HK$18,500 ($2,400) handbags and HK$24,000 dresses, has said it may try and lower its rent bill to offset a worsening slump in Hong Kong, while Emperor Watch & Jewellery, which sells Cartier and Montblanc watches, said it may shut one or two of its Hong Kong stores when their leases end this year. And the news out of China doesn’t inspire much confidence. French distiller Remy Cointreau reported first-quarter sales that missed analyst estimates as Chinese wholesalers continued to hold back on cognac orders. Prada also reported first-quarter profit that trailed analyst estimates on slumping sales in China, while foreign carmakers including Audi have stepped up discounts to woo buyers.

So there’s no relief in sight for Hong Kong. The tourism board forecasts overall visitor arrival growth to slow to 6.4% in 2015 from 12% last year, with mainland Chinese tourist arrivals expected to drop by half to 8%. Hong Kong’s economy expanded 2.1% in the first quarter from a year earlier, weaker than a revised 2.4% expansion in October through December. “We’re just too exposed to China,” said Silvia Liu at UBS. “Structurally, until the tourism sector consolidates and Hong Kong finds new growth engines, I don’t see the way out yet.”

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It will force a free market?!

The Good News in China’s Stock Plunge (Pesek)

Panic is in the air as China suffers its biggest one-day stock plunge since 2007. It shouldn’t be. The 8.5% slide in the Shanghai Composite Index is actually a development that could leave China better off eight years from now. I’m focusing on eight both because it’s an auspicious number in Chinese folklore (the Beijing Olympics didn’t begin on 8/8/08 by accident) and Beijing’s idea of nirvana. Growth returning to 8% (relative to this year’s 7% target) would buttress President Xi Jinping’s reformist bona fides. Instead, stocks fell by that much Monday as Xi’s magic has lost potency. Why is that a good thing? It’s at once a reminder that rationality is returning to mainland markets and a message to Xi to stop putting the financial cart before the proverbial horse.

Since mid-June, when shares began sliding, Xi’s market-rescue squad has tried everything imaginable: interest-rate cuts, margin-lending increases, bans on short selling, a moratorium on initial public offerings, hauling supposedly rogue traders in for a talking to, ordering state-run institutions to buy shares, halting trading in at least half of listed companies, you name it. What Xi hasn’t tried is upgrading the economy and financial system in such a way as to help the stock market thrive. To find out what he should do next, Xi could do worse than to check in with Henry Paulson. Even though Paulson might regard with scorn China’s love of the number eight, it was on his watch as Treasury secretary in 2008 that the U.S. had its own brush with financial collapse.

Paulson has been merciless in his all-hype-and-no-fundamentals critique of Xi’s government. “China is especially vulnerable at this point because while its economy has grown and matured, its capital markets have lagged behind,” he wrote in the Financial Times. “It is no surprise that those ideologically opposed to markets would use recent events to make the opposite argument — that to prevent market instability, Beijing should slow the pace of financial liberalisation or perhaps even abandon market-based reforms altogether.” Yet, he argued, “while Beijing’s instinct to protect investors is understandable, the best way of doing so is to create a modern capital market.”

That’s why ambivalence toward Xi’s titanically large market interventions could be a positive. It refocuses Beijing on what’s needed to re-create the vibrant markets that prevail in New York and Hong Kong. Xi’s Communist Party has tried and failed to stabilize things by edict. In fact, heavy-handed manipulation has set back Beijing’s designs on making the yuan a global reserve currency and getting Shanghai shares included in MSCI’s indexes.

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Junk bonds dive with commodities.

How Much Worse Can the Junk-Bond Sell-Off Get? (WolfStreet)

Commodities had once again an ugly week. Copper hit the lowest level since June 2009. Gold dropped below $1,100 an ounce. Other metals dropped too. Agricultural commodities fell; corn plunged nearly 7% for the week. Crude oil swooned, with West Texas Intermediate dropping nearly 7% to $47.97 a barrel, a true debacle for energy junk-bond investors. It was the kind of rout that bottom fishers a few months ago apparently didn’t think was possible. For example, in March, coal miner Peabody Energy had issued 10% second-lien notes due 2022 at 97.5 cents on the dollar. Now, these junk bonds are trading at around 49 cents on the dollar, having lost half their value in four months, and 17% in July alone, according to S&P Capital IQ’s LCD HY Weekly.

Yield-hungry fund managers that bought them at issuance and stuffed them into their bond funds that people hold in their retirement accounts should be sued for malpractice. Among the bonds: Cliffs Natural Resources down 27.6%, SandBridge down 30%, Murray Energy down 21.2%, and Linn Energy down 22.3%, according to Bloomberg. For example, Linn Energy 6.25% notes due in 2019 were trading at 78 cents on the dollar at the beginning of July and at 58 on Friday, according to LCD. There was bloodshed beyond energy, such as AK Steel’s 7.625% notes due in 2021. They were trading at 62 cents on the dollar, down 22% from the beginning of July. “The performance is a disappointment to investors who purchased about $40 billion of junk-rated bonds from energy companies this year, thinking that the worst of the slump was over,” Bloomberg noted.

The riskiest junk bonds, tracked by the BofA Merrill Lynch US High Yield CCC or Below Effective Yield Index, have been hit hard, with yields jumping from the ludicrous levels below 8% of last summer to 12.19% as of Thursday, the highest since July 2012. Note the spike in yield during the “Taper Tantrum” in the summer of 2013 when the Fed discussed ending “QE Infinity.” After which bonds soared once again and yields descended to record lows, until the oil panic set in, as investors in the permanently cash-flow negative shale oil revolution were coming to grips with the plunging price of oil. But in the spring, bottom fishers stepped in and jostled for position as energy companies sold them $40 billion in new bonds, including coal producer Peabody. Now a lot of people who touched these misbegotten bonds are scrutinizing their burned fingers.

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“..the Gramm-Leach-Bliley Act of 1999..”

The Few Who Won’t Say ‘Sorry’ for Financial Crisis (Ritholtz)

“Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. My mother lived it as a result of a finance company making a mortgage loan that a bank would not make. – Former U.S. Senator Phil Gramm”

Many elected or appointed officials have a specific belief system that they may act upon in the implementation of policies. When the policies that flow from those beliefs go terribly wrong, it is natural to want to learn why. As is so often the case, that underlying ideology is usually a good place to begin looking. In the aftermath of the great credit crisis, we have seen all manner of contrition from responsible parties. Most notably, Alan Greenspan admitted error, saying as much in Congressional testimony. Greenspan was unintentionally ironic when he answered a question about whether ideology led him down the wrong path when it came to preventing irresponsible lending practices in subprime mortgages: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

Other contributors to the crisis have been similarly humbled. In “Bailout Nation,” I held former President Bill Clinton, and his two Treasury secretaries, Robert Rubin and Larry Summers, responsible for signing the ruinous Commodity Futures Modernization Act that exempted derivatives from regulation and oversight. The CFMA was passed as part of a larger bill by unanimous consent, and that Clinton signed on Dec. 21, 2000. Clinton joined Greenspan in admitting his contribution to the credit crisis, as well as saying the advice he received from his Treasury secretaries – Rubin and Summers – was wrong. The CFMA removed the standard regulations that all other financial instruments follow: reserve requirements, counter-party disclosures and exchange listings.

Bloomberg reported that Clinton said his advisers argued that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people will buy them and they don’t need any extra protection. The flaw in that argument was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency.” Even the American Enterprise Institute changed the name of its “Financial Deregulation Project” to the more benign “program on financial policy studies.” That is as close to an apology as we can expect for its part in pushing for market deregulation.

The exception to any post-crisis self-reflection is former Senator Phil Gramm. Although he was one of the chief architects of the radical gutting of financial regulations and oversight rules during the two decades that preceded the financial crisis, the former senator remains a stubborn believer that banks and markets can regulate themselves. Perhaps more than anyone else, Gramm drove the legislation that allowed banks to get much bigger and derivatives to run wild. His name is on the law – the Gramm-Leach-Bliley Act of 1999 – that overturned the Glass-Steagall Act, a Depression-era law that forced commercial banks to get out of the risky investment-banking business.

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It really is very revealing. How about: “Marsh wraps up the teleconference [..], reminding everyone Varoufakis’ remarks were under the so-called Chatham House rules, which means the information can be passed on but Varoufakis should not be cited as the source of the information.

Varoufakis Unplugged: The London Call Transcript (FT)

The London-based Official Monetary and Financial Institutions Forum, headed by two ex-Financial Times scribes – chairman John Plender and managing director David Marsh – on Monday released a 24-minute audiotape of a teleconference they held nearly two weeks ago with Yanis Varoufakis, the former Greek finance minister. Details of the call were first revealed by the Greek daily Kathimerini, and much of most sensational revelations Varoufakis made were about a surreptitious project he and a small team of aides worked on to set up a parallel payments system that could be activated if the European Central Bank forced the shutdown of the Greek financial system.

But Varoufakis also made some other interesting allegations, including claims the IMF believes the Greek bailout is doomed and that Alexis Tsipras, the Greek prime minister, offered him another ministry shortly after he was relieved as finance minister. We’ve had a listen to the entire call, and transcribed most of it – excluding some inconsequential asides to the teleconference’s hosts, Messrs Marsh and Norman Lamont, the former UK finance minister.

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Have the tapes taken Plan B off the table for good?

Statement on the FinMin’s Plan B Working Group (Yanis Varoufakis’ office)

During the Greek government’s negotiations with the Eurogroup, Minister Varoufakis oversaw a Working Group with a remit to prepare contingency plans against the creditors’ efforts to undermine the Greek government and in view of forces at work within the Eurozone to have Greece expelled from the euro. The Working Group was convened by the Minister, at the behest of the Prime Minister, and was coordinated by Professor James K. Galbraith. It is worth noting that, prior to Mr Varoufakis’ comfirmation of the existence of the said Working Group, the Minister was criticized widely for having neglected to make such contingency plans. The Bank of Greece, the ECB, treasuries of EU member-states, banks, international organisations etc. had all drawn up such plans since 2012.

Greece’s Ministry of Finance would have been remiss had it made no attempt to draw up contingency plans. Ever since Mr Varoufakis announced the existence of the Working Group, the media have indulged in far-fetched articles that damage the quality of public debate. The Ministry of Finance’s Working Group worked exclusively within the framework of government policy and its recommendations were always aimed at serving the public interest, at respecting the laws of the land, and at keeping the country in the Eurozone. Regarding the recent article by “Kathimerini” newspaper entitled “Plan B involving highjacking and hacking”, Kathimerini’s failure to contact Mr Varoufakis for comment and its reporter’s erroneous references to “highjacking tax file numbers of all taxpayers” sowed confusion and contributed to the media-induced disinformation.

The article refers to the Ministry’s project as described by Minister Varoufakis in his 6th July farewell speech during the handover ceremony in the Ministry of Finance. In that speech Mr Varoufakis clearly stated: “The General Secretariat of Information Systems had begun investigating means by which Taxisnet (Nb. the Ministry’s Tax Web Interface) could become something more than it currently is, to become a payments system for third parties, a system that improves efficiency and minimises the arrears of the state to citizens and vice versa.” That project was not part of the Working Group’s remit, was presented in full by Minister Varoufakis to Cabinet, and should, in Minister Varoufakis’ view, be implemented independently of the negotiations with Greece’s creditors, as it will contribute considerable efficiency gains in transactions between the state and taxpayers as well as between taxpayers.

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What I said yesterday.

Varoufakis: It Would Be Irresponsible Not To Have Drawn Up Contingency Plans (E)

Google Translate: Official statement issued by Yanis Varoufakis to be placed in relation to what came to light during the last two days after the publication of “Kathimerini” leaving clear spikes in the newspaper, noting that it would be irresponsible not to have alternative plans the Ministry of Finance . In its notification, the former Minister of Finance notes that “During the negotiations, and until the day of the Referendum, the t. Finance Minister. Yanis Varoufakis, as required, and at the behest of Prime Minister, oversaw working group which, coordinator Professor James K. Galbraith , elaborating emergency plan and response of the government to undermine plans by lenders , including the country known extrusion projects outside the eurozone. ”

Former Finance Minister points out that before the announcement that there was such a group accept continuous and intense criticism for the lack of response plan in the country to undermine plans by lenders. He adds, in fact, that “The Bank of Greece (which had, for example, ready PNP plan for a bank holiday), the ECB, the EU country governments, banks and international organizations have such groups and design by 2012. Indeed, it would be of utmost irresponsibility not drafted such plans the Ministry of Finance . ” “Since the t. Minister of Finance, announced the existence of that working group, the media inundated with imaginative “story” that affect the quality of public debate by trying to delineate as a group “conspiring” to restore national currency. This is pure slander.

The working group of the Ministry of Finance has always worked in the government policy and recommendations had as a permanent reference to the public interest, compliance with legality and stay in the country in the eurozone, “noted the statement of Yanis Varoufakis press office. In response to the “Daily report” leaves clear spikes in the newspaper stating that ” the pension “neglected” to request explanations and commentary by Mr. Varoufakis Before publishing inaccurate references to “tapping AFM of all taxpayers.” So, deliberately or not, sowed confusion contributed to widespread misinformation of SMEs “.

“In substance, the report appears to refer to plans of the Ministry of Finance that section. Minister stated boldly in the account at the ministry handover ceremony on July 6 with the following reference: The General Secretariat of Information Systems has started to process how whom taxisnet can become something more than what it is, be a payment system and to third parties, a system that increases efficiency and minimizes arrears of government to citizens and to businesses “noted the statement.

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What I said.

Yanis Varoufakis Admits ‘Contingency Plan’ For Euro Exit (Guardian)

Greece’s former finance minister, Yanis Varoufakis, has been thrust back in the spotlight as he vigorously defended plans to launch a parallel payment system in the event of the country being ejected from the euro. Saying it would have been “remiss” of him not to have a “plan B” if negotiations with the country’s creditors had collapsed, the outspoken politician admitted that a small team under his control had devised a parallel payment system. The secret scheme would have eased the way to the return of the nation’s former currency, the drachma. “Greece’s ministry of finance would have been remiss had it made no attempt to draw up contingency plans,” he said in a statement.

But Varoufakis, who resigned this month to facilitate talks between Athens’ left-led government and its creditors, denied that the group had worked as a rogue element outside government policy or beyond the confines of the law. “The ministry of finance’s working group worked exclusively within the framework of government policy and its recommendations were always aimed at serving the public interest, at respecting the laws of the land, and at keeping the country in the Eurozone,” the statement said. Earlier on Monday the Official Monetary and Financial Institutions Forum, which had organized a conference call between Varoufakis and investors, released a recording of the conversation held between the former minister and financial professionals on 16 July .

Varoufakis is heard saying that he ordered the ministry’s own software programme to be hacked so that online tax codes could be copied to “work out” how the payment system could be designed. “We were planning to create, surrepticiously, reserve accounts attached to every tax file number, without telling anyone, just to have this system in a function under wraps,” he says, adding that he had appointed a childhood friend to help him carry out the plan. “We were ready to get the green light from the PM when the banks closed.” The plan was denounced by Greek opposition parties, which in recent weeks have called for Varoufakis to be put on trial for treason. The academic-turned-politician has been blamed heavily for the handling of negotiations with Greece’s creditors which saw Greece come close to leaving the eurozone.

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” I think he called it wrong, but God knows it was an awesome responsibility – and we may never know who was right.”

Contingency Plans (Paul Krugman)

People are apparently shocked, shocked to learn that Greece did indeed have plans to introduce a parallel currency if necessary. I mean, really: it would have been shocking if there weren’t contingency plans. Preparing for something you know might happen doesn’t show that you want it to happen. Someday, maybe, we’ll know what kind of contingency plans the United States has had over the years. Plans to invade Canada? Probably. Plans to declare martial law in the event of a white supremacist uprising? Maybe. The issue now becomes whether Tsipras was right to decide not to invoke this plan in the face of what amounted to extortion from the creditors. I think he called it wrong, but God knows it was an awesome responsibility – and we may never know who was right.

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Be its own master?!

Greece’s Headache: How To Lift Capital Controls (AFP)

It is just the headache Greece’s government does not need right now: How can it loosen the capital controls that are shielding its banks, but strangling the rest of the economy? For the past month, Greece has been financially cut off from the rest of the world. It is almost impossible for most Greeks to take money out of the country, thanks to a raft of capital control measures put in place on June 29 amid fears of a catastrophic bank run. For companies, the capital controls have meant waiting for a government commission to sign off on large bills owed to foreign firms – a process that has slowed payments so much that distrustful suppliers started asking to be paid in advance.

Bank of Greece chief Yannis Stournaras on Friday loosened the restrictions to allow banks to greenlight companies’ foreign payments up to €100,000 But people remain unable to open new foreign bank accounts, buy shares, or transfer large sums of money. Athens is tolerating two main exceptions to the rules: Greek students abroad can receive €5,000 per quarter, while citizens having medical treatment in other countries can receive up to €2,000. Cash withdrawals were limited to €60 per day after Greeks emptied ATMs, worried for the safety of their savings. Greek Economy Minister Giorgos Stathakis warned on July 12 that it could be “several months” before it is deemed safe to lift the measures completely.

Announced in the throes of the crisis, when Greece appeared to be teetering on the brink of a chaotic eurozone exit, the capital controls were brought in with just one immediate concern in mind: protect the banks. Some €40 billion euros have left the banks’ coffers since December. As the world waits to see whether Greece and its creditors can hammer out a bailout worth up to €86 billion, staving off a panicked outpouring of the country’s cash remains a paramount concern. According to Diego Iscaro, an economist at consultancy IHS, the problem with capital controls is that they are “easy to implement but very difficult to lift.” Or as Moody’s analyst Dietmar Hornung put it: “Confidence (in the banks) is lost quickly, but it takes time to restore it.”

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“Apparently (and unfortunately), this is not a joke.”

Germany Rides Into Its Greek Colony On The “Quadriga” (Zero Hedge)

With creditors’ motorcades having officially returned to the streets of Athens in the wake of Greek lawmakers’ approval of the second set of bailout prior actions last Wednesday, tensions are understandably high. After all, these are the same “institutions” which Yanis Varoufakis famously booted from Greece after Syriza swept to power in January, and they’ve come to represent the oppression of the Greek people and are now a symbol of the country’s debt servitude. Although an absurd attempt was made to rebrand the dreaded “troika” earlier this year, the new and rather amorphous moniker – “the institutions” – never really stuck and perhaps because everyone involved felt the need to put a new name to the group that Greeks regard as the scourge of the Aegean in order to make negotiators feel safer on their trips to Athens, creditors have now added the ESM to their collective and rebranded themselves “The Quadriga.” Apparently (and unfortunately), this is not a joke. Here’s MNI:

The source from the Commission also noted that the group formerly known as Troika is now being renamed as “Quadriga”, to note the inclusion of the ESM in the talks. “Quadriga is the name inspired by Commission President, Jean-Claude Juncker for the new Greek project” the Commission source said, adding that “the EU side is a bit nervous of not knowing the IMF stance.”

We assume the reference to the IMF’s “stance” there refers to the size of the bailout and the prospects for debt relief and not to the new nickname choice, but whatever the case, here’s the definition of “quadriga” from Wikipedia:

A quadriga (Latin quadri-, four, and iugum, yoke) is a car or chariot drawn by four horses abreast (the Roman Empire’s equivalent of Ancient Greek tethrippon). It was raced in the Ancient Olympic Games and other contests. It is represented in profile as the chariot of gods and heroes on Greek vases and in bas-relief. The quadriga was adopted in ancient Roman chariot racing. Quadrigas were emblems of triumph; Victory and Fame often are depicted as the triumphant woman driving it. In classical mythology, the quadriga is the chariot of the gods; Apollo was depicted driving his quadriga across the heavens, delivering daylight and dispersing the night.

We’re not sure what’s more ironic there, the fact that an image which once appeared on Greek ceramics is now the symbol of serfdom or the fact that it’s the “chariot of the gods”, who in this case would be eurocrats and IMF officials. As amusing – and somewhat sad – as this is, perhaps the most tragically ironic part of the entire rebranding effort is that one of the most significant representations of a quadriga the world over sits atop the Brandenburg Gate in Berlin.

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IMF tells China central bank to cool it down, and at the same time tells ECB to turn up the heat. Vested interests?!

IMF Paints Dim Europe Picture, Says More Money Printing May Be Needed (Reuters)

The IMF warned on Monday that the euro zone’s prospects were modest and that more money printing than planned may be needed. Contrasting the IMF’s relative gloom, however, German think tank Ifo reported improving confidence the 19-country bloc’s largest economy. The IMF, saying medium-term growth would be subdued, urged the ECB to keep its money presses rolling, perhaps beyond the target late next year. “The important thing is that the ECB intends to stay the course until September 2016 and that, we think, will be necessary,” said Mahmood Pradhan, deputy director of the IMF’s European department, referring to QE. Letting the €1 trillion plus scheme to buy chiefly government bonds run longer could be better still, he suggested. “It may need to go beyond that,” he said.

Worries about the global economy, prompted by a slowdown in China where shares slid more than 8% on Monday , are weighing on many countries in Europe. Manufacturing confidence in the Netherlands, with huge exposure to international trade though several of Europe’s largest ports, slipped back in July, reflecting pessimism among companies over the prospects for the coming three months. Finnish consumer and industry confidence also weakened in July compared to the previous month. But the data was mixed, with the positive Ifo report on German business confidence after two monthly drops and the ECB reporting a boom in lending for home buyers, which could bolster the bloc’s economy.

The ECB also said is M3 measure of money circulating in the euro zone, which is often an early indicator of future economic activity, grew by 5.0% in June, in line with the previous month. But lending to companies fell by 0.2% in June. This was a slower pace of decline for the 11th month in a row, but still suggested most of the ECB’s largest is going to consumers not companies. In its report on the euro zone, the IMF said that the bloc was getting stronger thanks to lower oil prices, a weaker euro and central bank action, but that medium-term prospects were for an average potential growth of just 1%. The IMF said euro area GDP should accelerate to 1.7% next year from 1.5% in 2015, with inflation of 1.1% from zero.

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“In essence, Germany established that some democracies are more equal than others.”

How the Greek Deal Could Destroy the Euro (NY Times)

Indeed, the European institutions led by Germany seem to have decided that waging an ideological battle against a recalcitrant and amateurish far-left government in Greece should take precedence over 60 years of European consensus built painstakingly by leaders across the political spectrum. By imposing a further socially regressive fiscal adjustment, the recent agreement confirmed fears on the left that the EU could choose to impose a particular brand of neoliberal conservatism by any means necessary. In practice, it used what amounted to an economic embargo — far more brutal than the sanctions regime imposed on Russia since its annexation of Crimea — to provoke either regime change or capitulation in Greece. It has succeeded in obtaining capitulation.

Through its actions, Germany has made a broader political point about the governance of the euro. It has confirmed its belief that federalism by exception — the complete annihilation of a member state’s sovereignty and national democracy — is in order whenever a eurozone member is perceived to challenge the rules-based functioning of the monetary union. In essence, Germany established that some democracies are more equal than others. By doing so, the agreement has sought to remove politics and discretion from the functioning of the monetary union, an idea that has long been very dear to the French.

The negotiations leading to the Greek agreement also destroyed the constructive ambiguity created by the Maastricht Treaty by making it absolutely clear that Germany is prepared to amputate and obliterate one of its members rather than make concessions. Germany appears to believe that the single currency ought to be a fixed exchange-rate regime or not exist at all in its current form, even if this means abandoning the underlying project of political integration that it was always meant to serve. Finally, and perhaps most importantly, Germany signaled to France that it was prepared to go ahead alone and take a clear contradictory stand on a critical political issue.

This forceful attitude and the several taboos it broke reveal that the currency union that Germany wants is probably fundamentally incompatible with the one that the French elite can sell and the French public can subscribe to. The choice will soon be whether Germany can build the euro it wants with France or whether the common currency falls apart. Germany could undoubtedly build a very successful monetary union with the Baltic countries, the Netherlands and a few other nations, but it must understand that it will never build an economically successful and politically stable monetary union with France and the rest of Europe on these terms.

Over the long run, France, Italy and Spain, to name just a few, would not take part in such a union, not because they can’t, but because they wouldn’t want to. The collective GDP and population of these countries is twice that of Germany; eventually, a confrontation is inevitable.

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Yeah, but which banks? Only the Greek ones? Would that suffice? How about the rest of Europe?

The Way To Fix Greece Is To Fix The Banks (Coppola)

Successive bailout strategies for Greece have failed to grasp the nettle of the zombie banks. The banking sector is highly concentrated, with 90% of banking assets held by four players — Alpha Bank, Eurobank, Piraeus Bank and National Bank of Greece (not to be confused with Bank of Greece, which is the central bank). All four required recapitalisation in 2012 when the “public sector involvement” restructuring impaired their holdings of Greek sovereign debt. The funds to do this were provided by eurozone and IMF creditors via the Hellenic Financial Stability Fund, the entity created in 2010 to channel bailout funds to banks. The HFSF now holds majority stakes in all four. However, recapitalising did not mean restructuring them. Nor did it mean ensuring good practice in balance sheet management.

Although the proximate cause of the 2012 bailout was the PSI, their performance had declined sharply since 2008 and they have been persistently lossmaking since about 2010. The biggest single-year loss was in 2012, but the underlying decline in profitability is actually far more damaging both to the banks themselves and to the Greek economy. The headline explanation for the banks’ problems is lack of liquidity. From 2009, successive credit rating downgrades of their own bonds and Greek sovereign debt increased their cost of funding at the same time as deposit flight increased their need of it. They lost market access in 2009 and have since relied entirely on eurosystem aid, both funding from the ECB and emergency liquidity assistance from Bank of Greece. Since March 2015, only ELA has been available, and this is currently capped by the ECB.

The banks’ dependence on official sector liquidity makes it easy to claim that their problems are caused by the restriction of it — what the former Greek finance minister Yanis Varoufakis called “asphyxiation”. Although providing liquidity beyond their credit appetite does not increase lending, restricting liquidity does force them to avoid activities that could create funding gaps. Lending, by its very nature, creates a funding gap: if banks are not confident of being able to obtain the funding to settle loan drawdowns, they will not lend. But liquidity restriction is not the whole story. The other side of the banks’ balance sheets is also to blame for the credit crunch. Since 2009, non-performing loans have risen considerably and now make up at least a third of Greek bank assets: some estimates put the figure as high as 50%.

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They can start with Greece then.

France Wants To Outlaw Discrimination Against The Poor (Guardian)

In France it could soon be illegal to discriminate against people in poverty. Under proposed legislation – already approved by the senate and likely to be passed by the chamber of deputies – it would be an offence in France to “insult the poor” or to refuse them jobs, healthcare or housing. Similar laws banning discrimination on the grounds of social and economic origin already exist in Belgium and Bolivia, but the French version is said to be the most far-reaching. Anyone found guilty of discrimination against those suffering from “vulnerability resulting from an apparent or known economic situation” would face a maximum sentence of three years in prison and a fine of €45,000.

It is easy to judge the proposed French law as showing the worst excesses of the state, or to bemoan the practicalities of how difficult it could be to implement. But most of us are content to outlaw discrimination on the grounds of race, religion, or sex. Is it so ridiculous to add poverty to that list? And if it does feel ridiculous, why is that? Whether it’s the discrimination of people in poverty or how government should respond to it, this is not a problem just for other countries. “People think that because we are poor, we must be stupid,” Oréane Chapelle, an unemployed 31-year-old from Nancy told Le Nouvel Observateur. Micheline Adobati, 58, her neighbour, who is a single mother with no job and five children, said: “I can’t stand social workers who tell me that they’re going to teach me how to have a weekly budget.”

One study reported by The Times found that 9% of GPs, 32% of dentists and 33% of opticians in Paris refused to treat benefit claimants who lacked private medical insurance. Doctors say they are “reluctant to take on such patients for fear that they will not get paid”. Does any of this sound familiar? These are attitudes – and even outright discrimination – that have been growing in Britain for some time. You can hear it in stories about local authorities monitoring how much people drink or smoke before awarding emergency housing payments. Or when politicians respond to a national food bank crisis by saying the poor are going hungry because they don’t know how to cook. It is there in the fact that it’s now all too common for landlords to refuse to rent flats to people on benefits. Britain is front and centre of its own discrimination of the poor – whether that’s low-income workers, benefit claimants, or the recurring myth that these are two separate species.

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Another farce that keeps on giving.

Dutch Journalist, MH17 Expert: ‘UN Tribunal Attempt to Hide Kiev’s Role’ (RI)

The proposed UN-backed MH17 tribunal is a “desperate attempt to hide Kiev’s responsibility”, Dutch journalist and blogger Joost Niemoller argues in his post “How Chess Player Putin Wins the MH17 Game”. Niemoller is no layman. In October 2014 he published a book on the MH17 disaster whose title De Doofpotdeal (“The Cover Up Deal”) summarizes its key argument. The inside flap explains what the author means:

“The Netherlands took charge of the investigation into the cause of the disaster, but agreed to grant a covert deal to Kiev. It thus became a pawn in an international political chess game. Unvarnished Cold War rhetoric is making a comeback. Putin here is the ultimate bad guy. What he says is labeled as poisonous propaganda in the West. Meanwhile, it seems, all those concerned suffer from tunnel vision. Can we still be assured that the investigators do their work independently and objectively?”

In his piece, Niemoller laments the shortcomings of the Dutch Safety Board, the body charged with conducting the investigations on the MH17 disaster. The ever-postponed deadline – the final report might be released at the end of the year, hence one and a half year after the crash, but that too is still uncertain – he finds perplexing:

“When the co-operating countries, the JIT (Joint Investigation Team), intend to complete their probe, is not known. Then, something gets leaked to the press: ‘At the end of this year’. With which legal framework? It is not yet known. Under which conditions? No idea. How will the co-operation between the Ukrainian, the JIT and Dutch Safety Board unfold?” “Everything is vague and secret. That is not the way it should be for such an important study.”

Niemoller contrasts this with the approach taken by Moscow:

“Russia proposed last year to conduct an international study based on research carried out by the UN – and not by means of a secret deal of countries, where one of the possible culprits, namely Ukraine, has veto power.”

Niemoller, a Dutchman, laments the dubious role of his country, especially when considering that it was the one affected most by the MH17 tragedy: 193 of the 298 victims were Dutch. And yet, Niemoller says:

“What we know for sure is that the Netherlands from day zero intensely cooperates with Kiev. What we know is that the Russians are kept out and that there is a blame game played against Putin.”

Now Niemoller focuses his attention on the role Russia is about to play. He argues that Moscow holds all the cards, and that Kiev & co apparently hold none:

“When the Russians said that if a BUK had been fired by the separatists, they would have certainly seen it on their radar, the Russians indicated that they know much more”. “After a year, there is still no evidence of that alleged separatist Buk on the table. Kindergarten-level work from Bellingcat has been dismissed. And there was no ‘Buk-track’ through the Donbas region.”

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“..1) our society faces a crisis, and 2) the existing political parties are not up to the task of comprehending what society faces.”

Potemkin Party (Jim Kunstler)

The “to do” list for rearranging the basic systems of daily life in America is long and loaded with opportunity. Every system that is retooled contains jobs and social roles for people who have been shut out of the economy for two generations. If we do everything we can to promote smaller-scaled local farming, there will be plenty of work for lesser-skilled people to do and get paid for. Saying goodbye to the tyranny of Big Box commerce would open up vast vocational opportunities in reconstructed local and regional networks of commerce, especially for young people interested in running their own business.

We need to prepare for localized clinic-style medicine (in opposition to the continuing amalgamation and gigantization of hospitals, with its handmaidens of Big Pharma and the insurance rackets). The train system has got to be reborn as a true public utility. Just about every other civilized country is already demonstrating how that is done — it’s not that difficult and it would employ a lot of people at every level. That is what the agenda of a truly progressive political party should be at this moment in history. That Democrats even tolerate the existence of evil entities like WalMart is an argument for ideological bankruptcy of the party. Democratic Presidents from Carter to Clinton to Obama could have used the Department of Justice and the existing anti-trust statutes to at least discourage the pernicious monopolization of commerce that Big Boxes represented.

By the same token, President Obama could have used existing federal law to break up the banking oligarchy starting in 2009, not to mention backing legislation to more crisply define alleged corporate “personhood” in the wake of the ruinous “Citizens United” Supreme Court decision of 2010. They don’t even talk about it because Wall Street owns them. So, you fellow disaffected Democrats — those of you who can’t go over to the other side, but feel you have no place in your country’s politics — look around and tell me who you see casting a shadow on the Democratic landscape. Nobody. Just tired, corrupt, devious old Hillary and her nemesis Bernie the Union Hall Champion out of a Pete Seeger marching song.

I’ve been saying for a while that this period of history resembles the 1850s in America in two big ways: 1) our society faces a crisis, and 2) the existing political parties are not up to the task of comprehending what society faces. In the 1850s it was the Whigs that dried up and blew away (virtually overnight), while the old Democratic party just entered a 75-year wilderness of irrelevancy. God help us if Trump-o-mania turns out to be the only alternative. Oh, by the way, notice that the lead editorial in Monday’s New York Times is a plea for transgender bathrooms in schools. What could be more important?

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The western model has died.

It’s Really Very Simple (Dmitry Orlov)

The old world order, to which we became accustomed over the course of the 1990s and the 2000s, its crises and its problems detailed in numerous authoritative publications on both sides of the Atlantic—it is no more. It is not out sick and it is not on vacation. It is deceased. It has passed on, gone to meet its maker, bought the farm, kicked the bucket and joined the crowd invisible. It is an ex-world order. If we rewind back to the early 1980s, we can easily remember how the USSR was still running half of Europe and exerting major influence on a sizable chunk of the world. World socialist revolution was still sputtering along, with pro-Soviet regimes coming in to power here and there in different parts of the globe, the chorus of their leaders’ official pronouncements sounding more or less in unison.

The leaders made their pilgrimages to Moscow as if it were Mecca, and they sent their promising young people there to learn how to do things the Soviet way. Soviet technology continued to make impressive advances: in the mid-1980s the Soviets launched into orbit a miracle of technology—the space station Mir, while Vega space probes were being dispatched to study Venus. But alongside all of this business-as-usual the rules and principles according which the “red” half of the globe operated were already in an advanced state of decay, and a completely different system was starting to emerge both at the center and along the periphery. Seven years later the USSR collapsed and the world order was transformed, but many people simply couldn’t believe in the reality of this change.

In the early 1990s many political scientists were self-assuredly claiming that what is happening is the realization of a clever Kremlin plan to modernize the Soviet system and that, after a quick rebranding, it will again start taking over the world. People like to talk about what they think they can understand, never mind whether it still exists. And what do we see today? The realm that self-identifies itself as “The West” is still claiming to be leading economically, technologically, and to be dominant militarily, but it has suffered a moral defeat, and, strictly as a consequence of this moral defeat, a profound ideological defeat as well. It’s simple.

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Jul 242015
 
 July 24, 2015  Posted by at 8:48 am Finance Tagged with: , , , , , , , , , , ,  


Harris&Ewing WSS poster, Washington DC 1917

Why The Casino Is In For A Rude Awakening, Part I (David Stockman)
Gold Is In Its Worst Slump Since 1996 (CNN)
Cheap Money Is Here to Stay (Pesek)
A 50% Stock Market Plunge Would Not Be A Surprise (Blodget)
Forced Austerity Will Take Greece Back 65 Years (Jim Fouras)
Greece Braces For Troika’s Return To Athens (Guardian)
Italy’s Plan B For An Exit From The Euro (Beppe Grillo)
Beppe Grillo Wants Nationalisation Of Italian Banks, Exit From Euro (Guardian)
Grillo Calls For Italy To Throw Off Euro ‘Straitjacket’ (FT)
Italy Leans While Greece Tumbles (Bloomberg)
Interview: Yanis Varoufakis (ABCLateline)
“Why I Voted ‘YES’ Tonight” (Yanis Varoufakis)
Why I’ve Changed My Mind About Grexit (Daniel Munevar)
The Eurozone’s German Problem (Philippe Legrain)
The Return of the Ugly German (Joschka Fischer)
Schäuble – The Man Behind the Throne (Martin Armstrong)
German FinMin Schäuble’s Tough Tone Heightens Uncertainty Over Bailout (WSJ)
Greece: Out of the Mouth of “Foreign Affairs” Comes the Truth (Bruno Adrie)
Greek Store Closures Spike As Recession, Austerity Return (AP)
A Few Thoughts On Greek Shipping And Taxes (Papaeconomou)
Greek Financial Crisis Makes Its Migration Crisis Worse. EU Must Help. (WaPo)
Abenomics Needs To Be ‘Reloaded’, Warns IMF (CNBC)
Australia Weighs Steps to Rein In Sydney Property (WSJ)

“..to understand the potentially devastating extent of the coming asset deflation cycle, it is important to reprise the extent of the just completed and historically unprecedented global capital investment boom.”

Why The Casino Is In For A Rude Awakening, Part I (David Stockman)

The reason that the Bloomberg index will now knife through the 100 index level tagged on both the right- and left-hand side of the chart is the law of supply and demand – along with its first cousin called variable cost pricing and a destructive interloper best described as zombie finance. The latter is what becomes of central bank driven bubble finance when the cycle turns, as it is now doing, from asset accumulation and inflation to asset liquidation and deflation. But to understand the potentially devastating extent of the coming asset deflation cycle, it is important to reprise the extent of the just completed and historically unprecedented global capital investment boom.

Thus, in the case of the global mining industries, CapEx by the top 40 miners amounted to $18 billion in 2001. During the original boom cycle it soared to $42 billion by 2008, and then after a temporary pause during the financial crisis, reaccelerated once again, reaching a peak of $130 billion in 2013. Owing to the collapse of commodity prices as shown above, new projects and greenfield investments have pretty much ground to a halt in iron ore, met coal, copper and the other principal industrial materials, but there is a catch. Namely, that big projects which were in the pipeline when commodity prices and profit margins began to roll-over in 2012, are being carried to completion owing to the sunk cost syndrome. This means that available, on-line capacity continues to soar.

The poster child for that is the world’s largest iron ore port at Hedlund, Australia. The latter set another shipment record in June owing to still rising output in mines it services – a record notwithstanding the plunge of iron ore prices from a peak of $190 per ton in 2011 to $47 per ton a present. The ramp-up in E&P investment for oil and gas was similar. Global spending was $100 billion in the year 2000, but had risen to $400 billion by 2008 and peaked at $700 billion in 2014. In the case of hydrocarbon E&P investment, however,the law of variable cost pricing works with a vengeance because “lifting costs” even for shale and tar sands are modest compared to the front-end capital investment. Accordingly, the response of production to plunging prices has been initially limited and will be substantially prolonged.

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“All of that is creating an anti-inflationary environment that sucks the air out of the gold market.”

Gold Is In Its Worst Slump Since 1996 (CNN)

So much for predictions that gold would spike to $2,000 an ounce. The yellow metal is in a deep slump. It’s down more than 40% from its 2011 peak and crashing back toward $1,000. The slide just keeps getting worse. Gold has declined for 10 straight days. That’s the longest losing streak for gold since September 1996. To put that into perspective, back then oil prices were fetching just $19 a barrel, New York Yankees rookie shortstop Derek Jeter was nearing his first World Series title and rap fans were mourning the death of Tupac Shakur. So why is gold getting creamed? It comes down to three key factors: a strong U.S. dollar, China slowing down its gold purchases and little worry about inflation anymore.

1. Strong dollar: A strong greenback hurts commodities that are measured in dollars because it makes them more expensive for overseas buyers. It’s a double negative for gold because the precious metal is supposed to be a hedge against inflation and the devaluing of currency. “Gold has taken it on the chin with the strength in the dollar. Over the past week or so, it was almost like a perfect storm,” said Bob Alderman, head of wealth management at Gold Bullion International, a provider of precious metals. The U.S. dollar lost ground against most currencies on Thursday, giving gold a short reprieve. Gold prices ticked up 0.2% to $1,093 an ounce. But over the coming months, the dollar is expected to keep climbing.

2. China, Iran & Greece: Gold plummeted by as much as $40 an ounce in mere minutes after China’s central bank gave a rare update on how much gold it’s hoarding. The numbers showed the world’s largest gold producer has been stockpiling gold reserves at a slower pace than previously thought, spooking gold investors. Gold has also been hurt by easing tensions in Europe and the Middle East. Iran’s landmark nuclear agreement with the West has lessened some fears about a conflict in that volatile region. Those fears had allowed gold, and more so oil, to trade at a premium. Likewise, Greece landed a last-minute deal with its creditors that allows the crisis-ravaged country to stay in the euro. Investors are no longer speculating about a Greek exit or the long-term implications for the currency union. “The new bailout softened the fear of contagion. That was not a good thing for gold,” said Alderman.

3. What inflation? Inflation worries also remain muted. When gold topped $1,900 in September 2011, some investors bought gold because they feared the Federal Reserve’s money printing would cause runaway inflation. But inflation continues to undershoot the Fed’s goals despite extremely low interest rates and years of massive bond purchases. “Over the last 5,000 years gold has been a store of value that will be there for a time when there is inflation. There is no inflation now,” said George Gero at RBC Capital Markets. In fact, the recent collapse in the commodities complex is only lowering inflation and inflation expectations. Everything from coffee, sugar, beans to crude oil is heading south. Industrial metals like copper and aluminum have renewed their tumble in recent days as soft global economic growth hurts demand and supply gluts deepen. All of that is creating an anti-inflationary environment that sucks the air out of the gold market.

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Does China have a choice?

Cheap Money Is Here to Stay (Pesek)

For decades, central banks lorded over markets. Traders quivered at the omnipotence of monetary authorities – their every move, utterance and wink a reason to scurry for safe havens or an opportunity to score huge profits. Now, though, markets are the ones doing the bullying. Take New Zealand and Australia. Yesterday, the Reserve Bank of New Zealand slashed borrowing costs for the second time in six weeks even as housing prices continue to skyrocket. A day earlier, its counterpart across the Tasman Sea (already wrestling with an even bigger property bubble of its own) said a third cut this year is “on the table.” Just one year ago, it seemed unthinkable that officials in Wellington and Sydney, more typically known for their hawkishness and stubborn independence, would join the global race toward zero.

But with commodity prices sliding, China slowing and governments reluctant to adopt bold reforms, jittery markets are demanding ever-bigger gestures from central banks. Even those presiding over stable growth feel the need to placate hedge funds, lest asset markets falter. When this dynamic overtakes countries such as New Zealand (growing 2.6%) and Australia (2.3%), it’s hard not to conclude that ultralow rates will be the global norm for a long, long time. Indeed, the major monetary powers that are easing – Europe, Japan, Australia and New Zealand – have all suggested rates may stay low almost indefinitely. Those angling to return to normalcy, meanwhile – the Fed and Bank of England – are pledging to move very slowly. Even nations with rising inflation problems, like India, are hinting at more stimulus.

“As interest rates continue to fall across most of the globe, central banks are also united in their main message: Once rates have come down, they’re likely to stay down,” says Simon Grose-Hodge of LGT Bank. “And when they finally do tighten, the ‘normal’ rate is going to be a lot lower than it used to be.” Could the People’s Bank of China be next? “With underlying GDP growth still looking weak, more monetary policy moves are likely,” says Adam Slater of Oxford Economics. “And China may even face the prospect of short-term rates dropping towards the zero lower bound.”

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But Henry expects a resurge. On what basis, though?

A 50% Stock Market Plunge Would Not Be A Surprise (Blodget)

As regular readers know, for the past ~21 months I have been worrying out loud about US stock prices. Specifically, I have suggested that a decline of 30% to 50% would not be a surprise. I haven’t predicted a crash. But I have said clearly that I think stocks will deliver returns that are way below average for the next seven to 10 years. And I certainly won’t be surprised to see stocks crash. So don’t say no one warned you! So far, these concerns have just made me sound like Chicken Little. The S&P 500 is up strongly from where I first sounded the alarm. That’s actually good for me, because I own stocks. But my concerns haven’t changed. Earlier this year, for the first time, I even put (some) money where my mouth is!

In February, I changed the “dividend reinvestment” policy on my S&P 500 fund. (I’m an indexer — I think stock-picking is generally a lousy strategy for individuals.) Specifically, I stopped reinvesting dividends. I’m a long-term investor, so I don’t really care what stocks do next. This dividend change was a bet that, at some point in the future, I will be able to reinvest the cash from these dividends in stocks at lower prices than today. If stock prices never fall below today’s level, this will cost me money. It will also make me feel dumb for (sort of) trying to time the market. But at some point you’ve got to put some money behind what your analysis is telling you. What my analysis is telling me is:

1) stocks are extremely expensive and will eventually revert toward historical means, probably via a sharp correction of 30% to 50%

2) long-term stock returns from today’s level will be about 2% per year — nothing to write home about

So if I think there’s risk of a crash, why don’t I just sell everything? For the reasons outlined below. Again, I don’t care if the stocks I own tank, as long as they don’t tank permanently. A crash will just give me a chance to buy more at lower prices.

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Jim Fouras is a former speaker of the Queensland Parliament.

Forced Austerity Will Take Greece Back 65 Years (Jim Fouras)

It’s hard to believe that in the last five years, Greece’s financial situation is comparable to those dark days when Germany invaded Greece. For example: a 25% decline in GDP; 25% unemployment (50% among youth); 40% of children living below the poverty line; soaring suicides rates; people cannot afford basic medicines and health care. Austerity measures are suffocating Greece and causing a brain drain that will damage it for generations. German leader Angela Merkel, in unison with the Troika, has forced austerity programs on the Greeks. For five years, Merkel has dominated the crisis management of the Greek economy through her insistence on fiscal rigour and cuts despite a huge economic slump and impoverishment of Greek society.

The IMF has argued internally for at least three years that the organisation was breaching its own rules by taking part in any bailout that held little prospect of achieving the debt sustainability that the IMF rescues prescribed. IMF boss Christine Lagarde ignored this advice. Nobel prize-winning economist Joseph Stigliz argues that “when the IMF arrives in a country, they are only interested in one thing. How do we make sure that banks and the financial institutions are paid … they are not interested in development or what helps a country get out of poverty”. The Troika has assumed their bailout programs would reduce Greece’s debt to well below 110% (of GDP) by 2022. The Guardian has published IMF documents showing that under the best-case scenario, which includes a growth projection of 4% per year for the next five years (a ridiculous assumption), the country’s debt level will drop to 124% Greece’s debt level is now 175% and the nation slid back into recession.

The Greek economy will continue to slide unless there is a significant reduction of its debt and policies that allow Greece to grow at a rate to service those debts. Two days before the recent referendum, the IMF conceded that the crisis-ridden country needs up to 60 billion euros of extra funds over the next three years and large-scale debt relief. Germany will not accept debt relief, consequently it is not the Troika’s agenda. Greece is being forced to sell assets worth €50 billion with the proceeds earmarked for a trust fund supervised by its creditors — foreign leaders demanding almost total surrender of its national fiscal sovereignty. It would be difficult to imagine any sensible seller taking part in such a fire sale. The Greek Parliament will now vote for their country to be poorer.

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“How Greeks will react remains unclear, with much depending on media coverage.”

Greece Braces For Troika’s Return To Athens (Guardian)

Greece is bracing for the return to Athens of officials representing the reviled “troika” of creditors as the debt-stricken country prepares to start negotiations for a third bailout. Mission chiefs with the EU, ECB and IMF fly into the Greek capital on Friday for talks on a proposed €86bn (£60bn) bailout, the third emergency funding programme for Athens since 2010. The return of the triumvirate, a day after internationally mandated reforms were pushed through the parliament by MPs, marks a personal defeat for the prime minister, Alexis Tsipras, who had pledged never to allow the auditors to step foot in Greece again. How Greeks will react remains unclear, with much depending on media coverage.

“The press will almost certainly make a big deal out of this and the government will try to play it down,” said Aristides Hatzis, a leading political commentator. “But given what people have gone through recently it might seem rather trivial and that is to Tsipras’ advantage. Their presence will definitely reinforce the realisation that another bailout is here.” Much has changed for Tsipras, the young firebrand catapulted into office on promises to eradicate the biting austerity policies that over five years have created record levels of unemployment and poverty. In the six months since his election, the radical leftist has been brought face-to-face with the brute force of fiscal rectitude and a German-dominated Europe.

Addressing parliament ahead of the crucial vote, Tsipras, who succumbed to the demands of foreign lenders earlier this month – accepting an ultimatum to find €12bn of savings, by far the heaviest austerity package to date – conceded that his government had been defeated. But he insisted the alternative – bankruptcy and exit from the euro – would have been catastrophic. He told MPs: “We chose a difficult compromise to avert the most extreme plans by the most extreme circles in Europe.” [..] “We are turning our back on our common battles when in essence we say … austerity and giving into blackmail is a one-way street,” said Panagiotis Lafazanis, who heads the Left Platform, the far-left faction around which mutinous MPs rally around. “Greece does not have a future as a blackmailed eurozone colony under memorandum [bailout],” added the former minister who now advocates a return to the drachma.

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” The drama of the Euro will keep going as long as the Americans want it to, that is until the definitive approval of the TTIP by which the USA will place Europe in subjugation..”

Italy’s Plan B For An Exit From The Euro (Beppe Grillo)

Tspiras couldn’t have done a worse job of defending the Greek people. Only profound economic short-sightedness together with an opaque political strategy could transform the enormous electoral consensus that brought him into government in January into the victory for his adversories, the creditor countries, only six months later, in spite of winning the referendum in the mean time. An a priori rejection of a Euroexit has been his death sentence. Like the PD, he was convinced that it’s possible to break the link between the Euro and Austerity. Tsipras has handed over his country into the hands of the Germans, to be used like a vassal. Thinking that it’s possible to oppose the Euro only from within and presenting oneself without an explicit Plan B for an exit, he has in fact ended up by depriving Greece of any negotiating power in relation to the Euro.

So it was clear from the beginning that Tsipras would have crashed even though Varoufakis did try to react a few times. Only Vendola, the PD and the media inspired by the Scalfari-style lies (among many) of the United States of Europe and of those who are nostalgic about the Ventotene Manifesto could have believed in a Euro without Austerity. And they are obliged to go on believing in this so as not to have to admit that there is an exit opportunity after seven years of economic disasters. The consequence of this political disaster is before everyone’s eyes:
– Explicit Nazi-ism on the part of those that have reduced the periphery of Europe to a protectorate by using the debt, with alarming echoes of historical parallels.
– Mutism or explicit support for Germany by the oher European countries perhaps because of opportunism (north) or because of subordination (periphery).
– Financial markets that are celebrating the end of democracy with new highs.
– Expropriation of the national wealth by mortgaging €50 billlion of Greek property that ended up in the fund created by Adolf Schauble so as to get to rake in the cash from the war debts.

It was all thought out, foreseen, and planned down to the last detail. The drama of the Euro will keep going as long as the Americans want it to, that is until the definitive approval of the TTIP by which the USA will place Europe in subjugation in a way that is not dissimilar to how Germany is subjugating the periphery. By now the Euro is an explicit battle between the creditors and the debtors. It’s not useful for our government to try to appear to be on the virtuous side of the winners – those supporting the Euro – and supporting reform. It’s not possible to reform the Euro from within but the fight must be fought on the outside and we must abandon this anti-democratic straitjacket. Our debt and lack of growth together with deflation, place us neatly in the category of those who are beaten by debt. Thus we’d do well to prepare ourselves with a government that is explicitly anti-Euro to defend ourselves from the final assault on the wealth of the Italian people who are ever more at risk, unless we reclaim our monetary sovereignty.

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“[This] is how not to lose the first battle we will face when the time comes to break away from the union and the ECB..”

Beppe Grillo Wants Nationalisation Of Italian Banks, Exit From Euro (Guardian)

The populist leader of Italy’s second largest political party has called for the nationalisation of Italian banks and exit from the euro, and said the country should prepare to use its “enormous debt” as a weapon against Germany. Former comedian-turned-politician Beppe Grillo, who transformed Italian politics when he launched his anti-establishment Five Star Movement in 2009, has long been a bombastic critic of the euro. But his stance hardened significantly in a blogpost on Thursday in which he compared the Greek bailout negotiations to “explicit nazism”. Grillo constructed what he called a “Plan B” for Italy, which he said needed to heed the lessons of Greece so that it was ready “when the debtors come round”.

His plan called for Italy to adopt a clear anti-euro stance and to shake off its belief that – if forced to accept tough austerity – other “peripheral” countries would come to its aid. Grillo said Italy had to use its enormous €2tn (£1.4bn) debt as leverage against Germany, implying that the potential global damage of an Italian default would stop Germany from “interfering” with Italy’s “legitimate right” to convert its debt into another currency. He said Greece’s hand had been forced by the threat of bankruptcy to its banks, and that Italy therefore needed to nationalise its banks and shift to another currency. “[This] is how not to lose the first battle we will face when the time comes to break away from the union and the ECB,” Grillo wrote.

Setting aside Grillo’s colourful language and analogies, analyst Vincenzo Scarpetta of Open Europe said there was some merit to his arguments. “That blogpost does have some elements of truth,” Scarpetta said. “The lesson from Greece was that if you want to be in the eurozone you have to agree to rules of austerity.” The strength of anti-euro sentiment in Italy is easy to overlook since Matteo Renzi, the centre-left prime minister and head of the Democratic party, is a strong defender of Italy’s role in the eurozone. But Scarpetta pointed out that supporters of the Five Star Movement, coupled with supporters of the rightwing Northern League, which is also anti-euro, means that about 40% of Italians are at least sympathetic to anti-euro sentiments.

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No, really, M5S was the biggest single party in the latest elections. Renzi got in because of a ‘vote link’ between his party and another one.

Grillo Calls For Italy To Throw Off Euro ‘Straitjacket’ (FT)

Beppe Grillo, the leader of Italy’s populist Five Star Movement, has launched a full-throated attack on the euro, saying Rome should abandon what he called an “anti-democratic straitjacket”. Mr Grillo, whose party is the second most popular in Italy, demanded the government formulate a “plan B” to exit the single currency and “take back our monetary sovereignty”. The comedian has become an increasingly trenchant critic of the euro at a time of rising euroscepticism across the Italian political landscape, spurred in part by the agonies of Greece and its prolonged bailout talks. But his attack on the single currency in an extensive blog post was nonetheless remarkable for its ferocity.

It suggests Mr Grillo sees a political opportunity in doubling down on his anti-euro message in the wake of Greece’s last-minute acceptance of exacting terms for a third bailout. It is also a sign of political contagion, or concerns that populist forces might gain traction from the Greek crisis. The Five Star Movement has been rising steadily in the polls since March. It is now garnering the support of nearly 25% of Italian voters and has narrowed the gap with the ruling centre-left Democratic party led by Matteo Renzi, the prime minister. Mr Grillo was particularly scathing about Alexis Tsipras, the Greek prime minister, whom he had professed to admire before the deal was reached. “It would be difficult to defend the interests of the Greek people worse than Tsipras did,” Mr Grillo wrote.

“His refusal to exit the euro was his death sentence. He was convinced that he could break the marriage between the euro and austerity, but ended up delivering his country into Germany’s hands, like a vassal.” To avoid that fate, Mr Grillo said Italy should use its heavy debt load — worth more than €2tn, or 130% of GDP — as a threat. “[The debt] is an advantage that allows us to be on the offensive in any future negotiation, it is not a bogeyman that should make us bite at any request from our creditors,” he said.

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“Its €2.3 trillion debt, more than 132% of GDP, is second only to Greece in the euro area. Italy has lost a quarter of its industrial output, and GDP has contracted by 9% since 2007.“

Italy Leans While Greece Tumbles (Bloomberg)

Viewed from Berlin or London, the financial woes of Italy and Greece can look dangerously similar. Both sit on mountains of public debt and suffer from double-digit unemployment. So why hasn’t Italy had to shutter banks, submit to austerity measures in return for emergency loans, and contemplate an exit from the euro? For now Italy is chugging along, paying its debts and selling bonds. Its benchmark stock index is up 25% this year. It’s emerging from a record recession even as Greece enters a new slump after a brief rebound in 2014. Rome-based Eni, Europe’s No. 4 oil company, is pumping 1.7 million barrels per day globally and says output will keep rising. Finmeccanica sells helicopters to corporations and armed forces from the U.K. to China. Carnival cruise liners are made in Fincantieri’s Trieste shipyard.

Italian luxury goods, from Fendi to Ferrari, are at the top of consumer shopping lists. Among European manufacturers, Italy trails only Germany in production. The Greeks? They’ve got tourism and shipping and little else, says Marc Ostwald, a fixed income strategist at ADM Investor Service in London. Greek exports fell 7.5% in the first quarter, while Italy’s rose more than 3%. Tourism in Italy generated about €34 billion last year, almost triple what it did in Greece. With 60 million residents, Italy is more than five times as populous as Greece. History makes a difference, too. Rebuilding from World War II, Italy set off on the Dolce Vita boom years, popularizing the Vespa scooter and making a mark in international design.

Nutella, a nut-based chocolate spread introduced after the war, had annual sales of €8.4 billion last year, making the Ferrero family one of Italy’s richest. Greece, by contrast, went from government by junta in the 1960s and 1970s to a republic run by a political elite and a bloated government in the 1980s. Cutting its civil service and pension costs down to an appropriate size lies at the heart of the struggle between Greece and Europe on economic reform. Italy’s strength as an industrial exporter has provided stability, helping the country build up gold reserves of $90 billion—the world’s third-biggest stash after the U.S. and Germany and more than 20 times what Greece holds. Just a single Italian bank needed a public bailout after the 2008 crisis, even as dozens of lenders in northern Europe had to dip into state coffers to stay open.

[..] Italy may yet become another Greece. Aside from the recent uptick in growth, its numbers are grim. The global financial crisis of 2008-09, followed by the euro debt crisis, triggered the deepest and longest recessions in Italy’s postwar history. Its €2.3 trillion debt, more than 132% of GDP, is second only to Greece in the euro area. Italy has lost a quarter of its industrial output, and GDP has contracted by 9% since 2007. As a member of the euro zone, Italy can’t counter falling foreign demand by devaluing its currency, as it often did when the lira was in use. Unemployment is 12.5%, and 45% among youth—many of whom flee abroad. “Some of my best pupils, who speak English and other languages, have had to move to the U.K. or Germany to find jobs and a better future,” says Ivo Pezzuto at Università Cattolica in Milan

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“..we don’t believe in it and we should not be trying to implement a program whose logic we contest.”

Interview: Yanis Varoufakis (ABCLateline)

EMMA ALBERICI: What was the point of the referendum then? The Greek people told you they didn’t want you to cave in to the demands from your eurozone partners and the IMF, but then that’s exactly what you’ve ended up doing.

YANIS VAROUFAKIS: That’s an excellent question, isn’t it? Let me remind you that on that night, the night of the referendum when I discovered that my prime minister and my government were going to move in the direction that you’ve mentioned, I resigned my post. That was the reason why I resigned, not because anybody else demanded it.

EMMA ALBERICI: So would it surprise you if you were forced back to the polls and indeed if you lost the next election?

YANIS VAROUFAKIS: Nothing would surprise me these days in Europe. We seem to be doing the wrong thing consistently. It’s a comedy of errors, from 2010 onwards. It’s my considered opinion that the responsible thing to do for our party will be to hand over the keys of government to those who believe in this program, in this fiscal consolidation reform program and the new loan, ’cause we don’t believe in it and we should not be trying to implement a program whose logic we contest.

EMMA ALBERICI: And it’s curious because at a time when Australia is debating a rise in the GST from 10 to 15%, the Greek people have seen their GST go up from 13 to 23% on public transport and processed foods. I mean, you didn’t get voted in to government – you actually got voted into government promising the opposite: no more austerity.

YANIS VAROUFAKIS: Precisely. It’s the reason why I resigned. To increase VAT in a broken economy like Greece to 23%, in an economy where the problem is not that the tax rates were too low, but the tax take was too low because of tax evasion. I spent five months in the Ministry of Finance trying to devise ways of having a new social contract between the state and the Greek people, the basis of which would be: we will reduce the rates for you, but you will pay it and you will not evade. And then you have the troika of lenders, the creditors, ruthlessly, effectively implementing the policies of a coup d’etat and putting our Prime Minister in a position where he had to choose between measures like the ones you mentioned, pushing VAT up to exorbitant heights, and therefore condemning our tax take to be reduced significantly or having our banks remain shut forever. This is a major assault both on rationality and on European democracy.

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“with the hope that my comrades will gain some time, and that we, all of us, united, will plan a new resistance to autocracy, misanthropy, and the (facilitated) acceleration and deepening of the crisis.”

“Why I Voted ‘YES’ Tonight” (Yanis Varoufakis)

[..] .. in the document that I had sent to the institutions, I was merely accepting the responsibility of a “new Civil Code” and certainly not the one they would dictate. Nor would I have ever imagined that our government (under the supervision of the Troika) would accept to submit all those changes to the Parliament under the label “urgent”, thus negating all the adjustments and annulling the Parliament. Last Wednesday I had no other choice but to vote with a thunderous NO. Mine came to stand beside the NO that 61.5% of our compatriots answered to a capitulation under the infamous TINA (there is no alternative). I

have denied this for the past 35 years in all 4 continents where I have lived. Today, tonight, those two measures, which I had myself proposed on February, are introduced to the Greek Parliament in a manner that I had never imagined; a manner which adds no credit to the government of SYRIZA. My disagreement with the way we handled the negotiations after the referendum is essential. And yet, my main goal is to protect the unity of SYRIZA, to support A.Tsipras, and to stand behind E.Takalotos. I have already explained all that in my article with the title Why I voted NO published in EfSyn .

Accordingly, today I will vote YES, for two measures that I, myself, had proposed, albeit under radically different conditions and requirements. Unfortunately I am certain that my vote will not be of any help to the government towards our common goals. And that is because the Euro Summit “prior actions’ deal was designed to fail. I will, however offer my vote with the hope that my comrades will gain some time, and that we, all of us, united, will plan a new resistance to autocracy, misanthropy, and the (facilitated) acceleration and deepening of the crisis. (i) This morning, while participating at the Financial Committee of the parliament, I ascertained that no colleague of mine, not even the Minister of Justice, agreed with the new civil code. It was a sad spectacle.

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Daniel Munevar is a 30-year-old post-Keynesian economist from Bogotá, Colombia. From March to July 2015 he worked as a close aide to former Greek finance minister Yanis Varoufakis”

Why I’ve Changed My Mind About Grexit (Daniel Munevar)

What do you make of the latest bailout agreed between Greece and its creditors? Well, first of all it’s still not clear that there will be an actual agreement – there are several parliaments that need to approve their country’s participation in an ESM bailout. And even if they somehow reach an agreement, there is simply no way it can work. The economics of the program are just insane. They haven’t announced the precise fiscal targets yet, but if we look at the Debt Sustainability Analyses (DSAs) published by the IMF and the Commission, they both state that the target should be a 3.5% primary surplus in the medium term.

But if you look at what has happened over the course of the past five years, Greece has managed to ‘improve’ its structural balance by 19 points of GDP. During that same time, GDP has collapsed by about 20% – that’s an almost one-to-one relation. So if you start from -1% – which is the general assumption for this year – to make it to 3.5 means you need an adjustment of over 4% of GDP, which means GDP will collapse by another 4 points between now and 2018. This brings us to another point, which is that the current agreement is just a taste of things to come. The final Memorandum of Understanding (MoU) is definitely going to contain much harsher austerity measure than the ones currently on the table, to offset the drop in GDP that we have witnessed in the past months as a result of the standoff with the creditors.

The problem is that these Memorandums are turning Greece into a debt colony: you’re basically creating a set of rules which, as the government misses its fiscal targets – knowing for a fact that it will –, will force the government to keep retrenching even more, which will cause GDP to collapse even further, which will mean even more austerity, etc. It’s a never-ending vicious circle. This underscores one of the core problems of this whole situation: i.e., that the institutions have always disentangled the fiscal targets from the debt sustainability analyses. The logic of having debt relief is that it allows you to basically have lower fiscal targets and distribute over time the impact of fiscal consolidation. But in Greece’s case, even if there is debt relief on the scale that they are suggesting – which is unlikely – Greece will still have to implement massive consolidation, on top of everything that has been already done.

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“.. in exchange for these loans, Merkel obtained much greater control over all eurozone governments’ budgets through a demand-sapping, democracy-constraining fiscal straitjacket..”

The Eurozone’s German Problem (Philippe Legrain)

The eurozone has a German problem. Germany’s beggar-thy-neighbor policies and the broader crisis response that the country has led have proved disastrous. Seven years after the start of the crisis, the eurozone economy is faring worse than Europe did during the Great Depression of the 1930s. The German government’s efforts to crush Greece and force it to abandon the single currency have destabilized the monetary union. As long as German Chancellor Angela Merkel’s administration continues to abuse its dominant position as creditor-in-chief to advance its narrow interests, the eurozone cannot thrive – and may not survive. Germany’s immense current-account surplus – the excess savings generated by suppressing wages to subsidize exports – has been both a cause of the eurozone crisis and an obstacle to resolving it.

Before the crisis, it fueled German banks’ bad lending to southern Europe and Ireland. Now that Germany’s annual surplus – which has grown to €233 billion, approaching 8% of GDP – is no longer being recycled in southern Europe, the country’s depressed domestic demand is exporting deflation, deepening the eurozone’s debt woes. Germany’s external surplus clearly falls afoul of eurozone rules on dangerous imbalances. But, by leaning on the European Commission, Merkel’s government has obtained a free pass. This makes a mockery of its claim to champion the eurozone as a rules-based club. In fact, Germany breaks rules with impunity, changes them to suit its needs, or even invents them at will. Indeed, even as it pushes others to reform, Germany has ignored the Commission’s recommendations.

As a condition of the new eurozone loan program, Germany is forcing Greece to raise its pension age – while it lowers its own. It is insisting that Greek shops open on Sundays, even though German ones do not. Corporatism, it seems, is to be stamped out elsewhere, but protected at home. Beyond refusing to adjust its economy, Germany has pushed the costs of the crisis onto others. In order to rescue the country’s banks from their bad lending decisions, Merkel breached the Maastricht Treaty’s “no-bailout” rule, which bans member governments from financing their peers, and forced European taxpayers to lend to an insolvent Greece. Likewise, loans by eurozone governments to Ireland, Portugal, and Spain primarily bailed out insolvent local banks – and thus their German creditors.

To make matters worse, in exchange for these loans, Merkel obtained much greater control over all eurozone governments’ budgets through a demand-sapping, democracy-constraining fiscal straitjacket: tougher eurozone rules and a fiscal compact.
Germany’s clout has resulted in a eurozone banking union that is full of holes and applied asymmetrically. The country’s Sparkassen – savings banks with a collective balance sheet of some €1 trillion ($1.1 trillion) – are outside the European Central Bank’s supervisory control, while thinly capitalized mega-banks, such as Deutsche Bank, and the country’s rotten state-owned regional lenders have obtained an implausibly clean bill of health.

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Fischer (German Foreign Minister and Vice Chancellor from 1998-2005) is still a major voice in Germany. But he’s been awkwardly silent.

The Return of the Ugly German (Joschka Fischer)

In terms of foreign policy, Germany rebuilt trust by embracing Western integration and Europeanization. The power at the center of Europe should never again become a threat to the continent or itself. Thus, the Western Allies’ aim after 1945 – unlike after World War I – was not to isolate Germany and weaken it economically, but to protect it militarily and firmly embed it politically in the West. Indeed, Germany’s reconciliation with its arch-enemy, France, remains the foundation of today’s European Union, helping to incorporate Germany into the common European market, with a view to the eventual political unification of Europe. But in today’s Germany, such ideas are considered hopelessly “Euro-romantic”; their time has passed.

Where Europe is concerned, from now on Germany will primarily pursue its national interests, just like everybody else. But such thinking is based on a false premise. The path that Germany will pursue in the twenty-first century – toward a “European Germany” or a “German Europe” – has been the fundamental, historical question at the heart of German foreign policy for two centuries. And it was answered during that long night in Brussels, with German Europe prevailing over European Germany. This was a fateful decision for both Germany and Europe. One wonders whether Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble knew what they were doing. To dismiss the fierce criticism of Germany and its leading players that erupted after the diktat on Greece, as many Germans do, is to don rose-tinted glasses.

Certainly, there was nonsensical propaganda about a Fourth Reich and asinine references to the Führer. But, at its core, the criticism articulates an astute awareness of Germany’s break with its entire post-WWII European policy. For the first time, Germany didn’t want more Europe; it wanted less. Germany’s stance on the night of July 12-13 announced its desire to transform the eurozone from a European project into a kind of sphere of influence. Merkel was forced to choose between Schäuble and France (and Italy). The issue was fundamental: Her finance minister wanted to compel a eurozone member to leave “voluntarily” by exerting massive pressure.

Greece could either exit (in full knowledge of the disastrous consequences for the country and Europe) or accept a program that effectively makes it a European protectorate, without any hope of economic improvement. Greece is now subject to a cure – further austerity – that has not worked in the past and that was prescribed solely to address Germany’s domestic political needs. But the massive conflict with France and Italy, the eurozone’s second and third largest economies, is not over, because, for Schäuble, Grexit remains an option. By claiming that debt relief is “legally” possible only outside the eurozone, he wants to turn the issue into the lever for bringing about a “voluntary” Grexit.

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“Behind the curtain, the federalization of Europe is the ultimate goal, although politicians always denied that in front of the curtain.”

Schäuble – The Man Behind the Throne (Martin Armstrong)

Many Europeans are starting to see a very hard-line German position championed by Schäuble, which they are characterizing behind the curtain as a more selfish edge by demanding painful measures from Athens and resisting any firm commitment to granting the Greek relief from crippling debt, despite the fact that it was such debt relief that enabled Germany to recover. Yet the position of Schäuble from the outset was his vision that the other nations must coordinate with the core, of which the other nations were not actually regarded. That perception of a selfish Germany has been fueled by Schäuble’s statement suggesting that Greece would get its best shot at a substantial cut in its debt ONLY if it was willing to give up membership in the European common currency. Schäuble is expected to take his tough stance once again with the next crash candidate. For many, that appears to be Italy, which is now considered the greatest risk within Euroland. Yet, his views are spelled out in his 1994 paper.

Schäuble seems to have foresaw the crisis back in 1994, distinguishing between core members and non-core members. Therefore, his thinking is quite different from that of France. Paris has jumped the gun after the Greece disaster and now want a core Europe push, but clearly with Italy as a full-fledged member into a new federalized Europe. Behind the curtain, the federalization of Europe is the ultimate goal, although politicians always denied that in front of the curtain. The curtain is starting to be drawn, but the equal federalization of Europe was never part of the German mindset. There seems to be a conflict emerging between Germany and France because France wiped out its economy with insane taxation. It too will fall in this next downward cycle.

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Schäuble has of course been at least as detrimental as Varoufakis to the conversation, but he’s still in place. Go figure.

German FinMin Schäuble’s Tough Tone Heightens Uncertainty Over Bailout (WSJ)

Germany’s finance chief departed for his annual vacation on a posh North Sea island on Thursday, leaving the capital to mull a summer mystery that could decide Greece’s fate: What’s going on with Wolfgang Schäuble? Over the past two weeks, the 72-year-old Mr. Schäuble has puzzled even German officials who know the finance chief well with remarks questioning the wisdom of a new bailout for Greece. He has also hinted he might resign over differences with Chancellor Angela Merkel. The comments mark a shift to a more hawkish tone for Germany’s longest-serving national politician, whose career has been defined by loyalty to his political allies and to the idea of European integration.

They also underscore the fragility of last week’s agreement among eurozone leaders to work toward a new bailout deal for Greece, which governments will need to sign off on as early as next month. A person who works closely with Mr. Schäuble said the minister remained guided by a commitment to European interests—and that giving in to Greek demands, for instance, by forgiving debt would damage the EU’s credibility. The Finance Ministry is working to lay the groundwork for a new bailout, the person said, even though Mr. Schäuble’s preferred solution would have been for Greece to agree to a temporary “timeout” from the euro.

But Mr. Schäuble’s open skepticism over whether a new bailout would work has heightened uncertainty over what would happen once officials representing international creditors reached a preliminary deal with Athens, which is expected in the middle of next month. Over the weekend, Mr. Schäuble mused in response to a German magazine interviewer’s question about his differences on Greece with Ms. Merkel that he would resign if someone forced him to violate the responsibilities of his office. “I could go to the president and ask for my dismissal,” Mr. Schäuble told Der Spiegel, before adding that he wasn’t, in fact, considering resigning.

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“Greece was only a pipe through which French and German banks, for the most part, saved themselves.”

Greece: Out of the Mouth of “Foreign Affairs” Comes the Truth (Bruno Adrie)

In an article by Mark Blyth titled “A Pain in the Athens: Why Greece Isn’t to Blame for the Crisis” and published on July 7th 2015 in Foreign Affairs, one discovers surprising statements, which are all the more surprising when one knows that this magazine is published by the Council on Foreign Relations that gathers the American élite, the New-Yorker banking élite being there for the most part. According to the author, “Greece has very little to do with the crisis that bears its name”. And, to make us understand this, he invites us to “follow the money—and those who bank it”. According to him, the origins of the crisis are not to be looked for in Greece but “in the architecture of European banking”.

Indeed, during the first decade of the euro, European banks, attracted by easy money, granted massive loans in what the author calls “the European periphery”, and, in 2010, in the middle of the financial crisis, banks had accumulated impaired periphery assets corresponding to €465 billion for French banks and €493 billion for German banks. “Only a small part of those impaired assets were Greek”, but the problem is that, in 2010, Greece published a revised budget equivalent to 15% of the GDP. Nothing to be afraid of actually since it only represented 0.3% of the Eurozone’s GDPs put together. But, because of their periphery assets and above all a leverage rate* twice as high—that is to say twice as risky—as the American banks’, European banks feared that a Greek default would make them collapse.

This is what really happened. The banks’ insatiable voracity led them, as always, to act carelessly, and, as they did not accept their failure, as always, they made sure that others would foot the bill. Nothing new under the golden sky of the Banking Industry, unless, this time, it went a bit further than usual. These banks set up the Troïka program in order to “stop the bond market bank run”. And no matter if it increased unemployment by 25% and destroyed the third of the country’s GDP. It doesn’t make much difference to the bankers. This is what the rescue plans have been used for. Apparently aimed at Greece, they were created by and for the major European banks. Today, given that the Greek can no longer pay French and German banks, even the European taxpayers are solicited.

Greece was only a pipe through which French and German banks, for the most part, saved themselves. On the total amount of €203 billion that represents the two rescue plans (2010-2013 and 2012-2014), 65% went right to the banks’ vaults. Some people even go so far as to say that 90% of the loans did not pass through Greece. This approach, expressed in the columns of Foreign Affairs, cannot be seen as heterodox. It is even confirmed by the ex-director of theBundesbank, Karl Otto Pöhl, who acknowledged that the rescue plan was meant to save the banks, and especially the French banks, from their rotten debts.

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The idea is to get the whole population on its kness.

Greek Store Closures Spike As Recession, Austerity Return (AP)

Running a business in Koukaki is becoming a struggle. Shop-owners in the central Athens neighborhood, one of the capital city’s most financially diverse, are finding it a lot more difficult to get by. They could be cutting hair or selling extra-large shirts – it makes no difference. Their tales of hardship can be repeated up and down the country of nearly 11 million people. Empty storefronts are again a feature of Greeces towns and cities amid a crisis that put Greece’s future in the euro in doubt. The downturn worsened after the late-June decision by the Greek government to impose a series of strict controls on the free flow of money, with a paltry 60-euro a day limit on daily withdrawals from ATMs. Though banks reopened this week for the first time in more than three weeks, the ATM withdrawal limit is unchanged and cash is becoming scarce.

For an economy where cash payments are the norm, that’s a problem. In Koukaki, about 2 kilometers south of downtown Athens, 65-year-old mechanic Giorgos Prasinoudis is angry. His wife and 11-year-old daughter have already moved to Germany – the country that’s ironically blamed for many of the economic and social problems afflicting Greece. On Wednesday, he sat drinking coffee on the sidewalk outside his motorcycle repair shop, with posters of bikes and children’s drawings pinned to the wall. Hes closed the store after 32 years. A “For Sale” sign is taped to the window. “It’s over for Greece. We won’t recover for another 50 years,” he said. “The country borrowed so much money, those who benefited left the country, and ordinary people have been handed the bill …

I hope my daughter learns German and doesn’t come back. Not even for a holiday.” Prasinoudis is one of the countless victims of Greeces economic crisis. Locked out of international bond markets in the spring of 2010, the country has relied on foreign rescue money to pay its debts – on condition that tough austerity measures, such as cuts to spending and increases in taxes were imposed. The cost has been huge. A million jobs, mostly in the private sector, have been lost since then ? around a fifth of the country’s workforce. But after appearing to stabilize last year, the Greek economy has gone into reverse but unemployment remains high. At last count, unemployment was still over 25% and more than 50% for the under-25s.

Alongside the capital controls, the government imposed a new round of austerity, raising sales taxes and levies on businesses, while maintaining emergency taxes on households that have eaten up disposable incomes. Early Thursday, parliament approved a second round of measures demanded by rescue creditors for a new bailout. Retail associations fear a return to the peak levels of unemployment around 2012 when they were hit by a surge of business failures.

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“The argument that shipping companies will migrate to substantially higher cost locations to avoid tonnage taxes seems ludicrous.”

A Few Thoughts On Greek Shipping And Taxes (Papaeconomou)

We have all witnessed a lot of Greek drama during the past few weeks as the impasse between the Greek government and its international creditors reached its climax. It now appears that after months of terse negotiations between the two parties, Greece has finally agreed to pass and implement austerity measures in exchange for financial aid. One of the innocent bystanders in all this has been the Greek shipping community. As part of the broad agreement between Athens and the Eurozone, the Greek government has undertaken to increase the tonnage tax, a flat tax that is assessed each year on all ships that are managed by shipping companies based in Greece.

As expected the shipping community has been up in arms crying foul over the proposed tax and threatening to leave to more tax-friendly locales like Monaco, Dubai, or Singapore. This has made me wonder: what would be the effect of increased tonnage tax on a shipping company’s running costs?

[..] Let’s assume for example that the Greek government unilaterally doubles the tonnage tax in accordance with the agreement provision. Star Bulk Carriers will have to pay an additional $129 per ownership day. Is this amount really the straw that will break the camel’s back and force a mass exodus of Greek shipping companies to greener pastures? I don’t think so. But let’s further assume that Greek shipping companies do decide to move to Monaco, Dubai, Singapore, or even London or New York. Have shipping executives done a cost of living comparison between say Monaco or New York City and Athens? The argument that shipping companies will migrate to substantially higher cost locations to avoid tonnage taxes seems ludicrous.

I believe the lobbying on behalf of Greek ship-owners is not about tonnage taxes, but about keeping their income tax-free status. Greek ship-owners are some of the hardest-nosed traders you can find. I don’t believe a tempest in a teapot will cloud their business acumen. I suspect that they will cut a deal with the taxman sooner or later, and if I may add, for the benefit of both sides.

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EU doesn’t want to help.

Greek Financial Crisis Makes Its Migration Crisis Worse. EU Must Help. (WaPo)

Greece’s problems are many. Thanks to the financial crisis, citizens have endured long ATM lines and shortages in stores. Greece may be the last place in Europe equipped to handle its newest problem: record numbers of migrants, particularly Syrians, arriving daily by boat. Since the beginning of 2015, an astounding 79,338 migrants have arrived by sea, 60% of whom are Syrian. Slightly more migrants have transited to Greece than to Italy, a reversal from 2014, when Italy received 170,100 migrants and Greece only 34,442 total, according to estimates from the International Organization for Migration. These migrants pay traffickers exorbitant fees and risk their lives on dangerous journeys. Once arrived, they find the small communities on Greece’s many islands totally overwhelmed and unable to help. Most try to move northwards, to states like Hungary, via the Balkans.

Other migrants remain in hungry squalor throughout Greece. UNHCR recently reported more than 3,000 refugees in makeshift accommodations at a site on the northern Aegean island of Lesbos. Refugees kept in detention centers have limited access to electricity and water. Dozens sleep on makeshift pallets in the Kos police station courtyard. Greece’s financial crisis exacerbates xenophobia and discrimination against migrants. While many Greeks have rallied to help the migrants, the far-right portrays these migrants as taking precious resources and sullying Greek culture. Golden Dawn, a far-right party, said “We will do everything we can to protect the Greek homeland against immigrants.” Even before the 2015 surge, 84% of adults in Greece wanted decreased immigration — the highest proportion in the world — according to 2012 and 2014 Gallup interviews.

And Greece’s No. 1 industry, tourism, could suffer. Migrants crowd the sidewalks of island resort towns beside vacationers, but the contrast could hardly be starker between the wet and hungry arrivals from Iraq, Afghanistan and Syria, and the European tourists who dine on fine meals and rest in posh surroundings. Many migrants fleeing conflict-ridden states have walked almost 40 miles across Greece, sick, exhausted and sometimes pregnant, because they were not allowed to take public or private transportation due to a law that equated anyone assisting migrants with human smugglers. The law — overturned this month — kept both private citizens and public buses from driving migrants that landed in Greece without being rescued by coast guards.

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It needs to be abandoned.

Abenomics Needs To Be ‘Reloaded’, Warns IMF (CNBC)

Japan needs to reduce its reliance on a weak yen to reflate its economy, the IMF warned, as it called on authorities to speed up “high impact” structural reforms and prepare for further monetary easing. “The Bank of Japan needs to stand ready to ease further, provide stronger guidance to markets through enhanced communication, and put greater emphasis on achieving the 2% inflation target in a stable manner,” the IMF said in its 2015 Article IV Consultation with Japan published late Wednesday. Under current policies, the central bank won’t meet its 2% inflation target in the medium-term, or over a five-year horizon, according to the international lender. After rising to 1.5% in mid-2014, core inflation – excluding fresh food and the effects of the consumption tax increase – has declined rapidly and has been close to zero since February 2015.

“Abenomics needs to be reloaded so that policy shortcomings do not become a drag on growth and inflation,” the IMF said. Abenomics refers to three-pronged economic revival plan launched by Prime Minister Shinzo Abe in late 2012, consisting of monetary easing, fiscal expansion and structural reforms. Deeper structural reforms must accompany further easing if the government is to achieve its inflation goal, the IMF stressed. “With the exception of corporate governance and some progress on female labor force participation, structural reforms have not yet been in areas that could provide the biggest bang for the buck,” it said.

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Much too late.

Australia Weighs Steps to Rein In Sydney Property (WSJ)

Fast-rising house prices are prompting regulators in New Zealand and Australia to try, or consider, measures to prick nascent bubbles in single cities, an unusual move for any country. In Auckland, New Zealand’s biggest city, property prices have jumped 17% over the past year, compared with a nationwide average of 9.3%, and now are more than 50% higher than eight years ago. Sydney prices have risen about four times as fast as those in almost all other Australian state capitals in the past 12 months. It is rare for countries to focus tough new clamps on a single city or district. But a surge in homegrown speculators, and of buyers from countries such as China, has left too many people chasing too few properties in Sydney and Auckland.

Policy makers are increasingly concerned that a sudden crash could derail their economies. In Australia, Sydney-specific regulation is merely under discussion. But in New Zealand, measures to limit the impact of a price surge in Auckland are in place already: From October, real-estate investors in the city will be required to put down deposits of at least 30% on properties they want to purchase. No such rules will apply to property investment in other cities. Until now, Australian policy makers have sought to temper house-price growth by restricting lending to speculators and making it costlier to provide mortgages to residential buyers generally, anywhere in the country. In the past several weeks, however, the central bank has made clear it sees the issue as essentially a local one, describing soaring prices in the nation’s most populous city as “crazy.”

The narrowing focus on Sydney has triggered speculation that similar moves to New Zealand’s may be in the offing, steered by the banking regulator. “The boom is now quite singularly in Sydney,” said George Tharenou at UBS. “It’s difficult and very micro to target Sydney house prices, but it’s getting to the point where it needs to be considered.” Earlier this month, Citigroup said the risk of a crash had become so real that it was time to stop banks lending so freely to Sydney property investors specifically. “The horse has already bolted,” said Paul Brennan at Citi Research, Australia. “Additional prudential measures directed at the Sydney market may be unavoidable, even if it is late in the cycle.”

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