Sep 112017
 
 September 11, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Edward Hopper Gas 1940

 

Irma Weakens But Continues To Batter Central Florida (NPR)
Reinsurers Will Largely Be Writing the Checks to Pay for Irma Damage (WSJ)
Insurers Ache For Qualified Inspectors After US Hurricanes (R.)
Elon Musk Magically Extends Battery Life Of Teslas Fleeing Irma (ZH)
US Earnings Recovery Remains An Illusion (F.)
Cracks In China Inc’s Rosy Earnings Reveal A Patchier Picture (R.)
China Said to Ban Bitcoin Exchanges While Allowing OTC Trades (BBG)
Australian Banks Sitting on A$500 Billion of ‘Liar Loans’ – UBS (BBG)
Canadian Gold Company Suspends Investments In Greek Mines (AP)
Plastic Fibres Found In 83% of Tap Water Around The World (G.)
Sea Salt Around The World Is Contaminated By Plastic (G.)

 

 

Even hurricanes run out of energy eventually. And water.

Irma Weakens But Continues To Batter Central Florida (NPR)

Irma has weakened since beginning its push up central Florida, but is still a Category 1 hurricane with winds near 85 mph and higher gusts, according to the National Hurricane Center. Its center is about 25 miles northeast of Tampa and continues to move toward the north-northwest. The NHC says Irma is expected to turn northwest later today and further weaken to a tropical storm. Irma’s hurricane force winds extend at least 80 miles from the storm’s center and tropical storm force winds extend as far as 415 miles. The hurricane is forecast to reach the southeastern United States later tonight. The NHC warns coastal areas could see rising water moving inland over the next 36 hours. “This is a life threatening situation,” it said in a bulletin issued at 2 a.m. ET.

Hurricane Irma had touched land again as a Category 3 Sunday afternoon, hitting Marco Island on Florida’s southwest coast, after it plowed through the Florida Keys as a Category 4 earlier in the day. Miami International Airport announced it will remain closed to passenger flights at least through Monday, though some airlines will fly personnel to the airport in preparation for reopening. The airport’s director, Emilio Gonzalez, said via Twitter that the airport had endured wind gusts near 100 mph and “sustained significant water damage throughout.” “The interaction with the Florida Peninsula along with strong southwesterly shear should cause significant weakening, but Irma’s large and powerful circulation will likely maintain hurricane strength until Monday morning at the earliest,” according to the National Hurricane Center’s latest forecast.

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The industry works from Bermuda.

Reinsurers Will Largely Be Writing the Checks to Pay for Irma Damage (WSJ)

A global array of reinsurance companies will bear the financial brunt of Hurricane Irma’s damage to potentially millions of homes across Florida. Irma’s winds are expected to leave tens of billions of dollars in insured damage. And when the insurance money arrives for many homeowners, much of it will be via reinsurance companies—not the carrier on their contract. Reinsurers play an especially large role in Florida’s home-insurance market. Andrew, Katrina and other severe hurricanes from 1992 through 2005 devastated the state’s insurance marketplace. Most brand-name national home insurers sharply reduced their presence. Picking up the slack today is a state-run “insurer of last resort,” Citizens Property Insurance, and some 50 small to midsize home insurers.

Those carriers all are required to buy ample amounts of reinsurance to help ensure they have money for their policyholders, because they don’t have the fat capital cushions of the national carriers. These reinsurance firms are specialty insurers that take on the risk of some of the policies sold by primary insurers. They send insurers money to help pay claims once claims reach contractual, designated levels. As a result, the reinsurers “might end up holding the bag” for much of Irma’s damage to residential properties, said Taoufik Gharib, a senior director at Standard & Poor’s Global Ratings. In addition to reinsurance, the U.S. government’s National Flood Insurance Program will face payouts to those homeowners who hold its policies. Under standard homeowners contracts, insurers cover wind damage but exclude flooding.

Much of Irma’s damage is expected to come from storm surge. The use of so much reinsurance introduces a few worries into the marketplace. The home insurers are exposed to potential disputes with their reinsurers over claims payments, industry analysts note. It also ties the home insurers’ fates to the financial health of their reinsurers. Irma’s arrival is well-timed from one perspective: The global reinsurance industry is awash in capital. As of March, it had a record $605 billion capital cushion, which was built up thanks in large part to relatively few major natural disasters in the U.S. since 2005. “Every company in Florida has reinsurance,” said Joseph Petrelli, president of Demotech, an insurance ratings firm with a specialty in Florida’s homeowners market. “They buy reinsurance for multiple storms, and it is across the entire season.”

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Good luck to all who need it.

Insurers Ache For Qualified Inspectors After US Hurricanes (R.)

Insurers are scrambling to find inspectors in Texas and Florida after fierce hurricanes battered the states one after the other, causing tens of billions of dollars’ worth of property damage in less than two weeks. Although insurers maintain some number of inspectors, known as claims adjusters, across the U.S. year-round, they must redeploy staff from other areas or hire contract workers to fill gaps when catastrophes like Hurricanes Harvey and Irma strike. The speed with which they can do so is critical to residents and business owners awaiting insurance payments. “The one-two punch of Harvey and Irma is no question challenging to the industry,” said Kenneth Tolson, who heads the U.S. property and casualty division of Crawford, which provides claims adjusters and staff after disasters.

Adjusters investigate claims on behalf of property insurers like Travelers, Hartford, Allstate, State Farm and Farmers Insurance. Many other policies are backed by federal or state flood insurance programs. Texas and Florida together have more than 340,000 licensed adjusters, according to state agencies, but it was unclear precisely how many were on the ground. Insurers and industry groups said thousands were headed to affected areas from other parts of the United States. [..] Insurers have been put to the test before. After Hurricanes Katrina and Sandy in 2005 and 2012, it took months for many property owners to receive payouts, partly because there were too few adjusters with the needed expertise. Novice errors like not pulling off drywall to inspect for hidden damage, or not being familiar with software used for loss estimates, can reduce or delay insurance payments, adding to hardships residents are already facing.

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This is the craziest thing. You pay an arm and a leg for a car and then the maker pre-cripples it.

Elon Musk Magically Extends Battery Life Of Teslas Fleeing Irma (ZH)

In what is either a generous act of charity or an unnerving example of the control Tesla exercises over the vehicles it producers, or perhaps both, Tesla CEO Elon Musk has magically unlocked the batteries of every Tesla in Florida to maximize the distance that people fleeing from Hurricane Irma can travel before stopping to refuel at one of the company’s “superstation” charging centers. Typically, these types of over-the-air upgrades can cost thousands – if not tens of thousands – of dollars. But Musk is temporarily offering full battery capacity to all owners of Model S/X 60/60D vehicles with 75 kilo watt battery packs, according to Electrek, a blog that covers electric vehicles. The upgrade will surely help Floridians who are still rushing to escape as the now category 3 storm makes its second landfall near Naples. The upgrade will last through Saturday.

As a Tesla spokesperson explained to Electrek, the company decided on the mass-unlocking strategy after a customer called and asked if the company could upgrade his battery because he was trying to flee the storm. Tesla’s Supercharger network is fairly extensive in Florida and most owners should be able to get by even with a Model S 60 (the shortest range option). A Tesla Model S 60 owner in Florida told Electrek that his Tesla was getting 40 more miles without a charge after Tesla had temporarily unlocked the remaining 15 kilo watts of the car’s software-limited battery pack. “The company says that a Tesla owner in a mandatory evacuation zone required another ~30 more miles of range to optimize his evacuation route in the traffic and they reached out to Tesla who agreed to a temporary access to the full 75 kWh of energy in the battery pack, an upgrade that has cost between $4,500 and $9,000 depending on the model and time of upgrade.”

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“..market trend of rising valuations and falling economic earnings..”

US Earnings Recovery Remains An Illusion (F.)

While analysts hail “the best earnings season in 13 years,” the market has delivered a solidly lackluster response. Over the past month, the S&P 500 is down roughly 1% despite a string of earnings beats. With valuations this stretched, the market no longer appears willing to reward companies merely for beating quarterly expectations. Perhaps more investors now understand that GAAP net income numbers omit valuable information. They include non-operating items, are subject to manipulation, and don’t account for the cost of capital. GAAP earnings don’t drive valuation. What investors should focus on are economic earnings, which make adjustments to exclude non-operating items and account for all sources of capital, both on and off the balance sheet.

My analysis of the latest 10-K and 10-Q filings for the S&P 500 shows that the GAAP earnings growth in the market has not translated to an increase in economic earnings. Through the first two quarters of 2017, GAAP earnings are up $61 billion from their 2016 levels, while economic earnings have declined by $28 billion. Figure 2 shows the source of the discrepancy between GAAP and economic earnings comes mostly from invested capital growth that has outpaced growth in NOPAT. Companies are generating more operating profits, but they require an ever-larger invested capital base to do so. In other words, companies are growing their balance sheets faster than they are growing profits.

Figure 3 expands upon the trend shown in Figure 2. Companies are earning more profit for each dollar of revenue, but they’re also having to invest more capital to earn that revenue. When investors such as Jeremy Grantham argue that margins are higher today than in the past, they miss the balance sheet side of the story. Declining capital turns more than offset the rise in margins.

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Everybody has trouble with their earnings.

Cracks In China Inc’s Rosy Earnings Reveal A Patchier Picture (R.)

At first glance, China Inc’s earnings are off to a roaring start to 2017: first-half net profits surged by nearly a quarter, helped by healthy expansion in the world’s second-largest economy. Last year, the rise was a mere 6%. Robust profits have been a key factor in pushing the benchmark Hong Kong index .HSI to three-year highs and its Shanghai counterpart .SSEC to its strongest levels in 20-months. But the corporate investment and M&A that is driving those earnings is being fueled by growth in debt that is too rapid for comfort, analysts say. Frequent use of one-off gains to lift results and unhealthy fundamentals in some sectors may also give investors pause for thought.

Total debt at some 1,200 firms listed in Shanghai, Shenzhen and Hong Kong as of end-June grew 13% from a year earlier, Reuters calculations show, much faster than the first half of 2016 when the rate was 7.5%. Profits were not used to retire debt in significant quantities over the period and cash levels at those firms, selected for the survey as they have reported earnings for at least two years in a row, shot up 12%. All in all, debt-to-equity ratios were little changed from last year, an indication that hopes of a broad deleveraging for Chinese firms, widely seen as having worrisome debt levels, seem premature. “These earnings improvements are credit driven and I have doubts about the sustainability,” said Andrew Kemp Collier at independent research firm Orient Capital.

China’s property developers have led the way in debt creation, and even if some of the most heavily burdened like China Evergrande did cut back, others kept borrowing. Acquisition-hungry Sunac saw contract sales almost double and gross profit climb 86%, but its total borrowing also jumped, up 60% to nearly $28 billion. “The picture is not as rosy as shown by rising earnings – credit is accumulating faster than nominal growth,” said Natixis Chief Economist Alicia Garcia Herrero, also noting that very short term debt is not captured in conventional leverage ratios.

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“Old users will definitely still trade, but the entry threshold for new users is now very high.”

China Said to Ban Bitcoin Exchanges While Allowing OTC Trades (BBG)

China plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the $150 billion cryptocurrency market after the country outlawed initial coin offerings last week. The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private. Authorities don’t have plans to stop over-the-counter transactions, the people said. China’s central bank said it couldn’t immediately comment. Bitcoin slumped on Friday after Caixin reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months. The country accounts for about 23% of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.

“Trading volume would definitely shrink,” said Zhou Shuoji, Beijing-based founding partner at FBG Capital, which invests in cryptocurrencies. “Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.” While Beijing’s motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month. Bitcoin has jumped about 600% in dollar terms over the past year, fueling concerns of a bubble. The People’s Bank of China has done trial runs of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money.

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One third lies on their loans.

Australian Banks Sitting on A$500 Billion of ‘Liar Loans’ – UBS (BBG)

Here’s something else for policy makers to worry about as they attempt to engineer a soft landing in Australia’s property market. The country’s lenders could be sitting on A$500 billion ($402 billion) of “liar loans,” or mortgages obtained on inaccurate financial information, according to an estimate from. A survey by the firm of 907 Australians who took out a mortgage in the last 12 months found only 67% stated their application was “completely factual and accurate,” down from 72% the previous year. The most common inaccuracies were overstating income and understating living expenses, the survey found. These findings “suggest mortgagors are more stretched than the banks believe, implying losses in a downturn could be larger than the banks anticipate,” analysts including Jonathan Mott wrote in a note to clients dated Sept. 11. UBS is underweight bank stocks. And “liar loans,” the analysts say, was a term coined in the U.S. during the financial crisis. An ominous moniker for Australian lenders.

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Just go away.

Canadian Gold Company Suspends Investments In Greek Mines (AP)

Canadian mining company Eldorado Gold, one of Greece’s largest foreign investors, said Monday it planned to suspend investment at its mines in Greece following what it said are government delays in the issuing of permits and licenses. Eldorado, which runs Greek subsidiary Hellas Gold, operates mines in northern Greece that have faced vehement opposition from parts of local communities on environmental grounds, with protests often turning violent. Eldorado said in an announcement it would continue maintenance and environmental safeguards but would make no further investment in three mines in the Halkidiki area of northern Greece and two projects in the northeastern province of Thrace.

“Despite repeated attempts by Eldorado and its Greek subsidiary, Hellas Gold, to engage constructively with the Greek government, the Ministry of Energy and Environment … and other government agencies, delays continue in issuing routine permits and licences for the construction and development of the Skouries and Olympias projects in Halkidiki, northern Greece,” the company said. “These permitting delays have negatively impacted Eldorado’s project schedules and costs, ultimately hindering the Company’s ability to effectively advance development and operation of these assets.” [..] the Halkidiki mines have been mired in controversy for decades, with Eldorado’s predecessors facing similar protests. Many in the local communities are vehemently opposed to the development of the mines on environmental grounds, saying local forests would be decimated and groundwater could be contaminated.

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“If it’s impacting [wildlife], then how do we think that it’s not going to somehow impact us?”

Plastic Fibres Found In 83% of Tap Water Around The World (G.)

Microplastic contamination has been found in tap water in countries around the world, leading to calls from scientists for urgent research on the implications for health. Scores of tap water samples from more than a dozen nations were analysed by scientists for an investigation by Orb Media, who shared the findings with the Guardian. Overall, 83% of the samples were contaminated with plastic fibres. The US had the highest contamination rate, at 94%, with plastic fibres found in tap water sampled at sites including Congress buildings, the US Environmental Protection Agency’s headquarters, and Trump Tower in New York. Lebanon and India had the next highest rates.

European nations including the UK, Germany and France had the lowest contamination rate, but this was still 72%. The average number of fibres found in each 500ml sample ranged from 4.8 in the US to 1.9 in Europe. The new analyses indicate the ubiquitous extent of microplastic contamination in the global environment. Previous work has been largely focused on plastic pollution in the oceans, which suggests people are eating microplastics via contaminated seafood. “We have enough data from looking at wildlife, and the impacts that it’s having on wildlife, to be concerned,” said Dr Sherri Mason, a microplastic expert at the State University of New York in Fredonia, who supervised the analyses for Orb. “If it’s impacting [wildlife], then how do we think that it’s not going to somehow impact us?”

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The revenge of carbon?!

Sea Salt Around The World Is Contaminated By Plastic (G.)

Sea salt around the world has been contaminated by plastic pollution, adding to experts’ fears that microplastics are becoming ubiquitous in the environment and finding their way into the food chain via the salt in our diets. Following this week’s revelations in the Guardian about levels of plastic contamination in tap water, new studies have shown that tiny particles have been found in sea salt in the UK, France and Spain, as well as China and now the US. Researchers believe the majority of the contamination comes from microfibres and single-use plastics such as water bottles, items that comprise the majority of plastic waste. Up to 12.7m tonnes of plastic enters the world’s oceans every year, equivalent to dumping one garbage truck of plastic per minute into the world’s oceans, according to the United Nations.

“Not only are plastics pervasive in our society in terms of daily use, but they are pervasive in the environment,” said Sherri Mason, a professor at the State University of New York at Fredonia, who led the latest research into plastic contamination in salt. Plastics are “ubiquitous, in the air, water, the seafood we eat, the beer we drink, the salt we use – plastics are just everywhere”. Mason collaborated with researchers at the University of Minnesota to examine microplastics in salt, beer and drinking water. Her research looked at 12 different kinds of salt (including 10 sea salts) bought from US grocery stores around the world. The Guardian received an exclusive look at the forthcoming study. Mason found Americans could be ingesting upwards of 660 particles of plastic each year, if they follow health officials’ advice to eat 2.3 grammes of salt per day. However, most Americans could be ingesting far more, as health officials believe 90% of Americans eat too much salt.

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Aug 222017
 
 August 22, 2017  Posted by at 8:35 am Finance Tagged with: , , , , , , , , ,  6 Responses »
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Pierre Bonnard Nude in an Interior c1935

 

Periods Of Re-Pricing Are Usually Quick And Brutal (Roberts)
US House Price Bubbles 2.0 (Hanson)
QE Is Like Heroin, Says Former UK Treasury Official (G.)
UK Credit Card Lending Booms As Real Wages Fall (Ind.)
Cash is Not The Curse (Mark GB)
US Gross National Debt to Spike by $800 Billion in October? (WS)
Why Peter Costello Is Not Even Half Right On Housing (ND)
Diminishing Returns (Jim Kunstler)
What Would A US Civil War Look Like? (Copley)
Hate is the New Sex (Greer)
Greece Concerns Peak Amid Sudden Spike In Refugee Arrivals (K.)
US Farmers Confused By Monsanto Weed Killer’s Complex Instructions (R.)
UK Blasted Over ‘Shocking’ Export Of Deadly Weedkiller To Poorer Countries (G.)
The Blue Dogs of Mumbai (G.)

 

 

And the longer re-pricing is postponed, through QE etc., the steeper the fall will be.

Periods Of Re-Pricing Are Usually Quick And Brutal (Roberts)

1. Stock prices run in cycles. Periods of re-pricing are usually quick and powerful.

7. Your first loss will often be your best loss. No one is right all the time and you don’t have to be. There are market participants that are immensely profitable by being right only 30% of the time. It is good to have conviction in your investment thesis, but discipline should always trump conviction.

8. Optimism and pessimism in the stock market are contagious. Investor psychology often loses its logic and become emotional. The news media and the most recent price action play a particularly important role in developing moods of mass optimism or pessimism.

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Debt slaves.

US House Price Bubbles 2.0 (Hanson)

A big problem with house prices experiencing even a “moderate” correction of 10% to 20% — already underway in many of the most over-priced regions — is with between 40% and 50% of all house purchases for years being of the “less than 10% down” variety — and because it takes 8% to 10% equity to sell plus the 3% to 10% down payment on the new house — it doesn’t take much downside to swamp the nation in “NEGATIVE EQUITY” once again. And we know for certain that many homeowners rather pay their credit cards and car payments before their mortgage when they are underwater.

ITEM 1) Household income INCREASE needed to Buy the Median Priced House in Key Cities. Bottom Line: On a “national” basis the divergence isn’t too bad…6%. But, in the key cities that drive the US economy, Bubble 2.0 has blown large. This represents significant downside, especially in the sand states, just like in Bubble 1.0.

ITEM 2) DIVERGENCE between Actual Household Income & Income Needed to Buy the Median Priced House. Bottom Line: Here too, on a “national” basis the divergence isn’t too bad…-6%. But, in the key cities that drive the US economy, Bubble 2.0 has blown large.

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It’s worse, actually. Heroin cold turkey is doable though hard. QE cold turkey is definitely not.

QE Is Like Heroin, Says Former UK Treasury Official (G.)

A former senior Treasury mandarin has compared quantitative easing to heroin and called for an end to almost a decade of electronic money printing by central banks. Nick Macpherson was permanent secretary to the Treasury when Bank of England officials started buying UK government bonds to stimulate the economy following the financial crisis. On Monday, he said it was “time to move on” from QE, which is credited with helping Britain into recovery but remains in use nine years later amid concerns over Brexit. Threadneedle Street initially began pumping £200bn into the gilt market in 2009 to boost the economy, before expanding the programme to £435bn, including an extra £60bn following the EU referendum. The bond buying scheme is similar to massive stimulus packages used by other countries, such as the Fed’s $4.5tn of asset purchases (£3.5tn) and the ECB ’s €2.3tn (£2.1tn) plan.

Lord Macpherson’s call comes as pressure mounts on the world’s central bankers to give more clues about how they intend to exit QE in a process known as “normalisation” almost a decade on from the crash. Some indications could be given at a meeting of senior officials at Jackson Hole in the US later this week. Mario Draghi, the ECB governor, is expected to be the star turn at the event watched by global investors, although he is not thought to be preparing to announce the end of QE just yet. While QE is credited with lowering borrowing costs and helping banks to lend more to consumers and businesses, critics say such schemes inflate assets owned by the richest in society, while punishing savers without large amounts of wealth. Macpherson did not single out the specific bond-buying programme of a particular central bank. “QE like heroin: need ever increasing fixes to create a high. Meanwhile, negative side effects increase. Time to move on,” he wrote on Twitter.

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And after all the QE, people are poorer than before.

UK Credit Card Lending Booms As Real Wages Fall (Ind.)

UK consumers are increasingly purchasing goods on plastic with the number of transactions on credit and debit cards jumping 12% in the last year. The increase was the fastest annual rise in the number of card transactions since 2008 and comes after warnings from the Bank of England about the growth of personal debt. Shoppers spent 7.2% more on all types of cards in the year to the end of June, despite real wages falling over the period, data from industry body UK Finance showed. The total value of credit and charge card purchases increased 6.9% over the 12 months with credit card lending accelerating in April, May and June to an annual growth rate of 9%. During those three months, the number of people defaulting on their credit card bills and personal loans “increased significantly”, the Bank of England said in a recent report.

The rise comes as official figures show real earnings have declined. Average pay rose at an annual rate of 2.1% in the three months to June – well below the inflation rate of 2.6% in the year to the end of June. Overall consumer spending was up 1.3% in the year to July, the Office for National Statistics said in a separate release this month. Peter Tutton, head of policy at StepChange debt charity, expressed concern at the findings. “With our research estimating 3.2 million people are using credit cards to pay for everyday household expenses, the growing stock of credit card debt should focus attention on households in financial difficulties,” he said. Mr Tutton said the growth in credit card cash advances was particularly worrying. This type of borrowing is expensive and can be a warning sign that borrowers are facing financial difficulty.

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More on Ken Rogoff and Larry Summers’ crazy ideas of power over people’s money.

Cash is Not The Curse (Mark GB)

There’s a pub in the Welsh hills, not far from where I live, called ‘The Tylers Arms’ – pronounced ‘tillers’. The name originated, I believe, in the 18th century. The local villagers, who all worked on the land, would go there to pick up their wages in the form of ‘tyles’ – some of which would be immediately exchanged for beer, and thus returned to the landowner…who also owned the pub…and the local store. Thus, the ‘tyles’ circulated regularly, providing employment & cheap produce for the villagers, a steady and almost ‘captive’ profit for the landowner, and stability for the community. As the industrial revolution progressed some of the larger UK manufacturers adopted a similar system, but using fiat currency – e.g. there is a ‘village’ in Birmingham known as Bourneville, which was built by the Cadbury family.

Now before anyone thinks I’ve got unresolved baggage on feudalism, a ‘downer’ on capitalism, or a yearning for socialism…hold your horses please…this is about something far more serious than the ‘isms’. This is about who controls the money. The folks who do that…can, and do, call the tune for the rest of us. And that’s what I want to talk about here.

These days our monetary masters are much more sophisticated – our ‘tyles’ are pieces of paper backed by government fiat. You can work for pretty much whomever you like, and you can buy from whomever you like, but one way or another the government will take a cut of everything you earn and everything you spend. You can do the odd ‘swapsie’ with your pals but you can’t pay taxes with home grown tomatoes – the IRS don’t do vegetables – they can’t digitise them or create them with a keystroke so veggies would confuse the poor dears.

What happens next is technical and varies between territories, so let’s just deal with the ‘myth’: The taxman’s ‘cut’ is used to boost the economy on your behalf by spending it on useful things like building roads and bridges. It also includes an ever-growing list of things that you didn’t even realise you need, like cruise missiles & other stuff that goes ‘BANG’, along with other seemingly ‘essential’ services like bribing foreign governments and funding ‘moderate rebels’ to remove the foreign governments that can’t be bribed. Clearly we’ve come a long way from tyles, especially in the case of the dollar, which can used to bribe governments on seven continents. The chap who owned the Tillers never dreamt of such power – this is considered to be progress…

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Now that Goldman rules the White House, default risk is definitely down.

US Gross National Debt to Spike by $800 Billion in October? (WS)

“There is zero chance, no chance we won’t raise the debt ceiling,” swore Senate Majority Leader Mitch McConnell (R., Ky.) at an event in Louisville, Kentucky, on Monday. He who couldn’t get his Republican ducks all lined up in a row to get any major legislation passed this year was confident that the Senate would pass a bill that would raise the debt ceiling so that the government could continue to pay for things that Congress told the Government to pay for, and so that the government could service its debts, rather than default on them. Treasury Secretary Steven Mnuchin was there with him, pleading once again for a “clean” debt-ceiling increase, according to the Wall Street Journal. His “magic super Treasury powers” that allow the government to conserve cash to avoid having to issue more debt will expire at the end of September, he said.

“This is not about spending money,” he said. “This is about paying for what we’ve spent, and we cannot put the credit of the United States on the line.” The debt ceiling is just under $20 trillion. While the government can issue bonds to redeem maturing bonds – and it does this all the time – it cannot allow the gross national debt to go beyond the debt ceiling. But because it has to continue to pay for things that Congress mandated in its various spending bills over the years, the Treasury scrounges up the money from other government accounts, robbing Peter to pay Paul, so to speak. For example it temporarily short-changes the Civil Service Retirement and Disability Fund. These “extraordinary measures,” as they’re called, or the “magic super Treasury powers,” as Mnuchin called it, run out after a while.

Mnuchin said in his last letter to Congress that the out-of-money-date is September 29. But as in the past, the real out-of-money date can probably be stretched into October. These shenanigans make the entire world shake its collective head and pray that Congress, after going through its charade, will for the umpteenth time raise the debt limit. The other option is a US default. Its global consequences are too ugly to even imagine. But this charade has some peculiar effects, beyond its entertainment value: for months on end, it covers up the true extent of US government debt, and the current surge of this debt. This chart shows the gross national debt going back to 2011, including the last two debt-ceiling fights. Note the long flat lines leading into October or November, followed each time by an enormous spike:

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A good example of exatly how stuck governments and central banks are after blowing housing bubbles. There was an Australian tycoon this week who said the Oz bubble won’t pop because people are too heavily invested in property…

Why Peter Costello Is Not Even Half Right On Housing (ND)

When former treasurer Peter Costello called on Monday for interest rates to be ‘normalised’ upwards to stop Australia’s credit bubble getting any larger, he was very nearly half right. As long as the Reserve Bank keeps the official cash rate at the record low of 1.5%, the economy will become increasingly “unbalanced”, as he put it. And although struggling families will protest that they can’t afford higher mortgage repayments, the other side of that coin is that each successive wave of first home owners is taking on even higher debts. The longer that super-low rates persist, the more debt the banks will be able to balance on the shoulders of new home buyers. That has already created huge property-based inequality. But Mr Costello’s comments weren’t focused on that imbalance – he’s worried about the impact that unstable house prices or teetering banks could have on economic growth more generally.

He told The Australian that “once [the price of] money returns to more normal levels” Australia could face a “big problem” with asset prices and the housing market. Quite right, but what could prevent that? A gradual increase in rates will not, in itself, ‘fix’ the housing market. To do that, two other abnormalities need to be addressed. The one mentioned most by Mr Costello’s side of politics is the availability of suitable dwellings – the ‘supply problem’. That is a wildly misunderstood problem, so I will look at it separately in coming days. But bigger than either low rates or the supposed ‘supply problem’ is the abnormality that Mr Costello himself created – tax laws that reward investors for making annual losses in the housing market, so as to reap lightly-taxed capital gains years down the track.

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“..an impenetrable smokescreen of legal blather in the service of racketeering.”

Diminishing Returns (Jim Kunstler)

These two words are the hinge that is swinging American life — and the advanced techno-industrial world, for that matter — toward darkness. They represent an infection in the critical operations of daily life, like a metabolic disease, driving us into disorder and failure. And they are so omnipresent that we’ve failed to even notice the growing failure all around us. Mostly, these diminishing returns are the results of our over-investments in making complex systems more complex, for instance the replacement of the 37-page Glass-Steagall Act that regulated American banking, with the 848 page Dodd-Frank Act, which was only an outline for over 22,000 pages of subsequent regulatory content — all of it cooked up by banking lobbyists, and none of which replaced the single most important rule in Glass-Steagall, which required the separation of commercial banking from trafficking in securities.

Dodd-Frank was a colossal act of misdirection of the public’s attention, an impenetrable smokescreen of legal blather in the service of racketeering. For Wall Street, Dodd-Frank aggravated the conditions that allow stock indexes to only move in one direction, up, for nine years. During the same period, the American economy of real people and real stuff only went steadily down, including the number of people out of the work force, the incomes of those who still had jobs, the number of people with full-time jobs, the number of people who were able to buy food without government help, or pay for a place to live, or send a kid to college. When that morbid tension finally snaps, as it must, it won’t only be the Hedge Funders of the Hamptons who get hurt. It will be the entire global financial system, especially currencies (dollars, Euros, Yen, Pounds, Renminbi) that undergo a swift and dire re-pricing, and all the other things of this world priced in them.

And when that happens, the world will awake to a new reality of steeply reduced possibilities for supporting 7-plus billion people. The same over-investments in complexity have produced the racketeering colossus of so-called health care (formerly “medicine”), in case you’re wondering why the waiting room of your doctor’s office now looks exactly like the motor vehicle bureau. Meanwhile, it’s safe to say that the citizens of this land have never been so uniformly unhealthy, even as they’re being swindled and blackmailed by their “providers.” The eventual result will be a chaotic process of simplification, as giant hospital corporations, insurance companies, and overgrown doctors’ practices collapse, and the braver practitioners coalesce into something resembling Third World clinics.

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“..such a conflict – physical or political – could, equally, lead to a victory for nationalism over globalism, and to the protection of currencies and values.”

What Would A US Civil War Look Like? (Copley)

There is little doubt that the US, despite the evidence that economic recovery is at hand, could spiral into a self-destructive descent of dysfunction, dystopia, and anomie. The path toward a “second civil war” has significant parallels with the causes of the first US Civil War (1861-65). Both events — the 19th Century event and a possible 21st Century one — saw the polarization of a fundamentally urban, abstract society against a fundamentally regional, traditional society. In some respects, it is a conflict between people with long memories (even if those memories are flawed and selective) and people to whom memories and history are irrelevant. Equally, it is a conflict between identity and materialism, with the abstract social groups (the urban populations) the most preoccupied with short-term material gain.

I have covered the US for 50 years, and my earliest view of it was, a half century ago, that its populations would inevitably polarize into protective islands of self-interest, surrounded by seas of unthinking locusts. What is ironic is that the present islands of wealth and power — the cities — have come to represent short-term materialism, as cities have throughout history. But what is interesting is that, despite the global attention on the political/geographic polarizations occurring in the US and other parts of the Western world, there has been a reversion in other parts of the world to a sense of Westphalian or pre-Westphalian nationalism. The fact that “the West” may have ring-fenced Iran, Russia, and so on, with sanctions and other forms of isolation may well be what ensures their enduring status.

They have avoided the contagion of globalism. Russia, indeed, recovered from the Soviet form of globalism in 1991. An urban globalist “victory” over Trump and Brexit would trigger that meltdown toward a form of civil societal collapse – civil war in some form or other – as the regions disavow the diktats of the cities. That would, in turn, bring about the global economic uncertainty which could impact the PRC and then the en-tire world. But such a conflict – physical or political – could, equally, lead to a victory for nationalism over globalism, and to the protection of currencies and values. We have seen this cycle repeated for millennia. It is the eternal battle.

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The Archdruid from a few weeks ago.

Hate is the New Sex (Greer)

It occurred to me the other day that there’s a curious disconnect between one of the most common assumptions most of us make about how to make the world better, on the one hand, and the results that this assumption has had when put into practice, on the other. It’s reminiscent of the realization that led James Hillman and Michael Ventura to title a once-notorious book of theirs We’ve Had A Hundred Years Of Psychotherapy And The World’s Getting Worse. In this case as in that one, something that’s supposed to make things better doesn’t seem to be doing the trick—in fact, quite the opposite—and it’s time that we talked about that. You know the assumption I have in mind, dear reader. It’s the conviction that certain common human emotions are evil and harmful and wrong, and the way to make a better world is to get rid of them in one way or another.

That belief is taken for granted throughout the industrial societies of the modern West, and it’s been welded in place for a very long time, though—as we’ll see in a moment—the particular emotions so labeled have varied from time to time. Just now, of course, the emotion at the center of this particular rogue’s gallery is hate. These days hate has roughly the same role in popular culture that original sin has in traditional Christian theology. If you want to slap the worst imaginable label on an organization, you call it a hate group. If you want to push a category of discourse straight into the realm of the utterly unacceptable, you call it hate speech. If you’re speaking in public and you want to be sure that everyone in the crowd will beam approval at you, all you have to do is denounce hate.

At the far end of this sort of rhetoric, you get the meretricious slogan used by Hillary Clinton’s unsuccessful presidential campaign last year: LOVE TRUMPS HATE. I hope that none of my readers are under the illusion that Clinton’s partisans were primarily motivated by love, except in the sense of Clinton’s love for power and the Democrats’ love for the privileges and payouts they could expect from four more years of control of the White House; and of course Trump and the Republicans were head over heels in love with the same things. The fact that Clinton’s marketing flacks and focus groups thought that the slogan just quoted would have an impact on the election, though, shows just how pervasive the assumption I’m discussing has become in our culture.

Now of course most people these days, when confronted with the sort of things I’ve just written, are likely to respond, “Wait, are you saying that hate is good?”—as though the only alternatives available are condemning something as absolutely bad or praising it as absolutely good. Let’s set that simplistic reaction to one side for the moment, and ask a different question: what happens when people decide that some common human emotion is evil and harmful and wrong, and decide that the way to make a better world is to get rid of it?

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Watch Erdogan. German elections coming up.

Greece Concerns Peak Amid Sudden Spike In Refugee Arrivals (K.)

A sudden spike in the number of undocumented migrants arriving from neighboring Turkey has led to concern on the part of Greek authorities, who expect the next few days to reveal whether the rapid increase is a random occurence or the beginning of a new trend. A total of 643 migrants who had set out from the Turkish coast landed on the islands of the eastern Aegean between Friday and Monday morning, according to government figures. Another 114 people arrived in two separate smuggling boats later on Monday, putting authorities on alert.

Early on Monday, a vessel belonging to the European Union’s border monitoring agency Frontex spotted a smuggling boat off the coast of Chios and intercepted the 53 migrants who had been aboard. Later in the day another 61 migrants were found in a boat that had reached Samos and were also detained. Tensions are already high in reception centers on several Aegean islands. Most of the facilities are at around twice their capacity as hundreds of migrants and refugees await the outcome of asylum applications or deportation orders. Tolerance has been tested in several island communities as dozens of migrants continue to arrive daily from nearby Turkish shores. There are currently more than 14,400 migrants living on camps on Lesvos, Chios, Samos, Kos and Leros.

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Confused? The instructions are impossible to follow, not confusing.

US Farmers Confused By Monsanto Weed Killer’s Complex Instructions (R.)

With Monsanto’s latest flagship weed killer, dicamba, banned in Arkansas and under review by U.S. regulators over concerns it can drift in the wind, farmers and weed scientists are also complaining that confusing directions on the label make the product hard to use safely. Dicamba, sold under different brand names by BASF and DuPont, can vaporize under certain conditions and the wind can blow it into nearby crops and other plants. The herbicide can damage or even kill crops that have not been genetically engineered to resist it. To prevent that from happening, Monsanto created a 4,550-word label with detailed instructions. Its complexity is now being cited by farmers and critics of the product. It was even singled out in a lawsuit as evidence that Monsanto’s product may be virtually impossible to use properly.

At stake for Monsanto is the fate of Xtend soybeans, it largest ever biotech seed launch. Monsanto’s label, which the U.S. Environmental Protection Agency (EPA) reviewed and approved, instructs farmers to apply the company’s XtendiMax with VaporGrip on its latest genetically engineered soybeans only when winds are blowing at least 3 miles per hour, but not more than 15 mph. Growers must also spray it from no higher than 24 inches above the crops. They must adjust spraying equipment to produce larger droplets of the herbicide when temperatures creep above 91 degrees Fahrenheit. After using the product, they must rinse out spraying equipment. Three times. “The restriction on these labels is unlike anything that’s ever been seen before,” said Bob Hartzler, an agronomy professor and weed specialist at Iowa State University. The label instructions are also of interest to lawyers for farmers suing Monsanto, BASF and DuPont over damage they attribute to the potent weed killer moving off-target to nearby plants.

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It’s not ‘shocking’, it’s criminal.

UK Blasted Over ‘Shocking’ Export Of Deadly Weedkiller To Poorer Countries (G.)

Paraquat, a pesticide so lethal that a single sip can be fatal, has caused thousands of accidental deaths and suicides globally, and was outlawed by EU states in 2007. But Swiss pesticide manufacturer Syngenta is exporting thousands of tonnes of the substance to other parts of the world from an industrial plant in Huddersfield. Campaigners have condemned the practice as an “astonishing double standard”, while a UN expert said it was deeply disquieting that the human rights implications of producing a substance for export that is not authorised in the EU were being ignored. “The fact that the EU has decided to ban the pesticide for health and environmental reasons, but they still export it to countries with far weaker regulation and far weaker controls, is shocking to me,” said Baskut Tuncak, the UN special rapporteur on toxic wastes.

Syngenta is responsible for 95% of Europe’s exports of paraquat, which it sells under the brand name Gramoxone. The substance can be absorbed through the skin and has been linked with Parkinson’s disease. Syngenta has exported 122,831 tonnes of paraquat from the UK since 2015, an average of 41,000 tonnes a year, according to export licensing data analysed by the Swiss NGO Public Eye and shared with the Guardian. Since 2015, when a facility in Belgium stopped exporting paraquat, all EU exports of the pesticide have come from Syngenta’s UK base, according to Public Eye. Almost two-thirds of these exports by volume – 62% – go to poor countries, including Brazil, Mexico, Indonesia, Guatemala, Venezuela and India. A further 35% is exported to the US, where paraquat can only be applied by licensed users.

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We are a brilliant species.

The Blue Dogs of Mumbai (G.)

Authorities in Mumbai have shut down a manufacturing company after it was accused of dumping untreated industrial waste and dyes into a local river that resulted in 11 dogs turning blue. The group of strangely coloured canines was first spotted on 11 August, according to the Hindustan Times, prompting locals to complain to the Maharashtra Pollution Control Board about dyes being dumped in the Kasadi river, where the animals often swim. Footage shows the animals roaming the streets with bright blue fur. “It was shocking to see how the dog’s white fur had turned completely blue,” said Arati Chauhan, head of the Navi Mumbai Animal Protection Cell, told the Times. “We have spotted almost five such dogs here and have asked the pollution control board to act against such industries.”

Chauhan had posted images of the blue dogs on the group’s Facebook page, saying the “pollutants from Taloja Industrial area not only ruining the water bodies affecting humans there but also affecting animals, birds, reptiles”. The board investigated, shutting down the company on Wednesday after confirming that canines were turning blue due to air and water pollution linked to the plant. An animal welfare agency managed to capture one of the dogs and wash some of the blue dye off. The group concluded that animal seemed unharmed in all other ways. The Kasadi River flows through an area with hundreds of factories.

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Aug 162017
 
 August 16, 2017  Posted by at 8:57 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Fred Stein Hydrant, New York 1947

 

The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)
After 100 Months of Buying The Dips – Peak Crazy (Stockman)
China Has Got To Fix Its Debt Problem, IMF Says (CNBC)
China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)
UK Risks ‘Losing Its Place As Property-Owning Democracy’
The New American Dream: Rent Your Home From A Hedge Fund (Black)
Trump Signs Order to Speed Up Public-Works Permits (BBG)
German Challenge To ECB QE Asset Buys Sent To European Court (R.)
Washington’s Long War on Syria (Ren.)
Fish Confusing Plastic Debris In Ocean For Food (G.)

 

 

Debt leads to war.

The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)

Totally irresponsible policies by governments and central banks have created the most dangerous crisis that the world has ever experienced. Risk doesn’t arise quickly as the result of a single action or event. No, risk of the magnitude that the world is experiencing today is the result of many years or decades of economic mismanagement. Cycles are normal in nature and in the world economy. And cycles that are the result of the laws of nature normally play out in an orderly fashion without extreme tops or bottoms. “Just take the seasons. They go from summer to autumn, winter and spring, with soft transitions that seldom involve drama or catastrophe. Economic cycles would be the same if they were allowed to happen naturally without the interference of governments.

But power corrupts and throughout history leaders have always hung on to power by interfering with the normal business cycle. This involves anything from reducing the precious metals content of money from 100% to nothing, printing money, leveraging credit, manipulating interest rates, taking total taxes from at least 50% + today from nothing 100 years ago etc, etc. Governments will always fail when they believe that they are gods. But not only governments believe they perform godly tasks but also hubristic investment bankers like the ex-CEO of Goldman Sachs who proclaimed that the bank was doing God’s work. It must be remembered that Goldman, like most other banks, would have gone under if they and JP Morgan hadn’t instructed the Fed to save them by printing and guaranteeing $25 trillion. Or maybe that was God’s hand too?

We now have unmanageable risks at many levels – politically, geopolitically, economically and financially. This is a RISK ON situation that is extremely dangerous and will have very grave consequences. There are numerous risks that can all cause the collapse of the world economy and they all have equal relevance. However, the political situation in the USA is very dangerous for the world. This the biggest economy in the world, albeit bankrupt with debt growing exponentially and real deficits every year since 1960. Before the dollar has collapsed, the US will still be seen as a powerful nation, although a massive economic decline will soon weaken the country burdened by debt at all levels, government, state, and private.

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“There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day.”

After 100 Months of Buying The Dips – Peak Crazy (Stockman)

Just call it Peak Crazy and move on. There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day. The fact that this is happening is a measure of how impaired capital markets have become as a result of massive central bank intrusion. The robo-machines and day traders keep buying the dips because that has “worked” for the last 100 months. There is nothing more to it than residual momentum. Under a regime of honest money and price discovery, the stock market discounts the future. There is no plausible future from here that’s worth 24 times S&P 500 value or 96 times the Russell 2000. Surely the year-ahead earnings boom that Wall Street’s artists have penciled in is not in the slightest bit plausible. With 84% of the S&P 500 reporting Q2 results, LTM earnings are still 1.3% below where they were in September 2014.

Nothing has happened to corporate earnings in the last three years except deflation in the energy, materials and industrial sectors. After hitting $106 per share in September 2014, the global deflation cycle brought them to a low point of $86.44 per share in March 2016 in response to low $30s oil prices. The latter has since recovered to the $50 dollar zone – bringing S&P 500 earnings back to $104.61 during the current quarter. The question remains: How does an aging business cycle and immense global headwinds justify the expectation of a red hot earnings breakout during the next 18 months? Yet that’s what’s happening on Wall Street. We’ve hit nearly $133 per share of GAAP earnings (and $145 of the ex-items variety) for the LTM period ending in December 2018, meaning a prospective surge of 27%.

[..] In this machine driven market, any of these indices could resume their mad momentum based climb. But negative divergences are breaking out everywhere, and that’s usually a sign that the end is near. Margins on debt has again reached an all-time high of $550 billion. The chart below leaves little doubt as to what comes next. After the 2000 peak, margin debt collapsed by 50% as stocks were violently liquidated to meet margin calls. All this while in 2008 the shrinkage of margin debt was even larger – nearly 60%. This time, however, a similar shrinkage would cause a $325 billion decline in margin balances. That’s a lot of stocks on a fire sale.

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“..outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year..”

China Has Got To Fix Its Debt Problem, IMF Says (CNBC)

China’s economy is looking good enough that the IMF is raising its outlook, but the organization is doing so with a strong warning over growing debt in the world’s second-largest economy. The IMF issued its annual review of China on Tuesday, and has revised its growth forecast to 6.7% for 2017, which was up from 6.2%. The organization also said it expects China to average 6.4% growth between now and 2021, versus its previous estimate of 6%. Still, the organization warned that things were far from peachy. “The growth outlook has been revised up reflecting strong momentum, a commitment to growth targets, and a recovering global economy,” the IMF said. “But this comes at the cost of further large and continuous increases in private and public debt, and thus increasing downside risks in the medium term.”

What Beijing needs to do is to seize its current strong growth momentum “to accelerate needed reforms and focus more on the quality and sustainability of growth,” said the report. At the top of that list is working to tackle the debt issue: Going forward, the IMF sees China’s non-financial sector debt to hit nearly 300% of GDP by 2022, up from around 240% last year. Debt-fueled growth, the IMF warned, is a short-term solution that isn’t sustainable in the long run unless China tackles deeper structural issues. Experts have been sounding the alarm bell over this issue for years, urging China to rein in its old model of opening credit lines to fuel investment and spending and to find a better balance between supporting growth and controlling risks to the economy.

Chinese banks extended 825.5 billion yuan (about $123.44 billion) in new loans in July, down from 1.54 trillion yuan in June. Outstanding total social financing — a broad measure of credit and liquidity — came in at 1.22 trillion yuan last month versus 1.78 trillion yuan in June. Part of the drop is seasonal, and it’s “masking an uptick in underlying credit growth,” wrote China economist Julian Evans-Pritchard at Capital Economics. A better way to look at credit creation is to gauge growth in outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year.

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As long as things look good for the Party Congress, who cares?

China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)

Growth in China’s broad money supply slipped to a fresh record low, signaling authorities aren’t letting up in their drive to curb excess borrowing and safeguard the financial system. Aggregate financing stood at 1.22 trillion yuan ($182.7 billion) in July, the People’s Bank of China said on Tuesday, compared with an estimated 1 trillion yuan in a Bloomberg survey. New yuan loans stood at 825.5 billion yuan, versus an projected 800 billion yuan. Broad M2 money supply increased 9.2%, while economists forecast a 9.5% increase . Authorities pushing to cut excess leverage have squeezed the massive shadow bank sector, which shrank for the first time in nine months. Yet with aggregate financing remaining robust and bond issuance rebounding, the central bank is still providing ample support for businesses to avoid derailing growth ahead of a key Communist Party congress this fall.

Slower M2 growth will become a “new normal,” the PBOC said Friday in its quarterly monetary policy report. “The relevance of M2 growth to the economy and its predictability has reduced, and its changes should not be over-interpreted.” “The deleveraging campaign is still focused on the financial sector, which leads to the slowdown in M2 growth,” said Yao Shaohua at ABCI Securities in Hong Kong. “Bank support for the real economy remains solid.” “The easing in credit conditions in July was probably part of the concerted stability play ahead of the Party Congress, thus more likely to be temporary,” said Yao Wei, chief China economist at Societe Generale in Paris. “We’re still looking for more deleveraging measures and tougher regulations afterwards.”

“The divergence between M2 growth and aggregate financing reflects that the PBOC is trying to balance cutting leverage while ensuring enough funds to support the real economy,” said Wen Bin at China Minsheng Banking in Beijing. “Single-digit M2 growth is likely to stretch until year-end. And with ample support from the central bank’s credit supply, the drag effect of financial deleveraging on the economic expansion will be limited.” “Banks are still creating credit, and this credit is important to support economic growth,” said Iris Pang, an analyst at ING in Hong Kong. “If liquidity is too tight, or credit growth shrinks, the whole deleveraging reform will run into the risk that there will be too many defaults and the whole banking system will be shaken up.”

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“..first-time buyer registrations drop by almost 20% on the year..”

UK Risks ‘Losing Its Place As Property-Owning Democracy’

The UK risks losing its place as a property-owning democracy if house prices continue to rise, according to the boss of the UK’s largest independent estate agent. Paul Smith, chief executive of haart, said that “unaffordability is reaching crisis point” and urged the Government to stop “excessive profiteering” at the expense of aspiring home owners. The call comes as official figures showed that the price of the average house in the UK increased by £10,000 last year to £223,000. Property values increased by 0.8% between May and June according to joint figures from the Office for National Statistics, Land Registry and other bodies. In the year to June average prices were up 4.9%, down marginally from 5% growth in the year to May.

The report released on Tuesday said the annual growth rate had slowed since mid-2016 but has remained steady at about 5% this year so far. “House prices continued to rally with unflinching determination once again in June despite the ongoing economic uncertainty,” Mr Smith said. “However this means that the average UK buyer now has to fork out an extra £10,000 more to own a home than the same time last year. “Along with consumer price hikes and falling wage growth, unaffordability is reaching a crisis point. This is creating real impact on the ground as we see first-time buyer registrations drop by almost 20% on the year across our branches.”

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“..if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.”

The New American Dream: Rent Your Home From A Hedge Fund (Black)

About a month ago I joined the Board of Directors of a publicly-traded company that invests in US real estate. The position brings a lot of insight into what’s happening in the US housing market. And from what I’m seeing, the transformation that’s taking place today is extraordinary. Buying and renting out single-family homes has long been the mainstay investment of small, independent, individual investors. The big banks and hedge funds pretty much monopolize everything else. They own the stock market. They own the bond market. They own all the commercial real estate. They even own the farmland. Single-family homes were one of the last bastions of investment freedom for the little guy. (Real estate is how I got my own start in business and investing so many years ago; I was a 21-year-old Army lieutenant fresh out of the academy when I bought my first rental property.)

But all that’s changing now. Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital). If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion. And this is only the latest merger in an ongoing trend. Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes. And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.

[..] medium-sized funds are buying up all the little guys. And mega-funds like Blackstone are buying up all the medium-sized funds. This means there’s essentially an ‘arms race’ building among the world’s biggest funds to control the market, squeezing small, individual investors out of the housing market. [..] the average guy isn’t making any more money, or able to save anything… all while home prices soar to record levels as major funds gobble up the supply. This means that the new reality in America, especially for young people, is that if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.

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Prolonging the emergency with America’s own bridges to nowhere.

Trump Signs Order to Speed Up Public-Works Permits (BBG)

President Donald Trump signed an executive order Tuesday that’s designed to streamline the approval process for building roads, bridges and other infrastructure by establishing “one federal decision’’ for major projects and setting an average two-year goal for permitting. “This over-regulated permitting process is a massive self-inflicted wound on our country,” Trump said in a press conference at Trump Tower in New York. “It’s disgraceful.” Among other things, the president’s order will rescind a previous decree signed by former President Barack Obama that required federal agencies to account for flood risk and climate change when paying for roads, bridges or other structures.

It also allows the Office of Management and Budget to establish goals for environmental reviews and permitting of infrastructure projects and then track their progress – with automatic elevation to senior agency officials when deadlines are missed or extended, according to the order. The order calls for tracking the time and costs of conducting environmental reviews and making permitting decisions, and it allows the budget office to consider penalties for agencies that fail to meet established milestones. Critics say there’s danger in streamlining the reviews. “This is yet another outrageous example of Trump’s insistence on putting corporate interests ahead of people’s health and safety,” said Alex Taurel, deputy legislative director with the League of Conservation Voters, a political advocacy group.

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Way too late.

German Challenge To ECB QE Asset Buys Sent To European Court (R.)

The European Central Bank may be violating laws on monetary financing in its €2.3 trillion ($2.7 trillion) asset purchase programme, Germany’s constitutional court said on Tuesday, and it asked Europe’s top court to make a ruling. In the biggest challenge yet to the ECB’s unprecedented effort to revive growth, the court said bond buys under the scheme may go beyond the bank’s mandate and inhibit euro zone members’ activities. “Significant reasons indicate that the ECB decisions governing the asset purchase programme violate the prohibition of monetary financing and exceed the monetary policy mandate of the European Central Bank, thus encroaching upon the competences of the Member States,” the court said. It said it would ask the European Court of Justice to review the programme.

The ECB acted swiftly to defend the scheme. “The extended asset purchase programme is in our opinion fully within our mandate,” it said in a statement. “That is ultimately for the European Court of Justice to assess.” It said the €60 billion per month asset buys would continue as normal. The European court has already backed the ECB’s more contentious emergency bond purchase scheme known as Outright Monetary Transactions or OMT with only relatively minor limitations, suggesting that the challenge – lodged by several academics and politicians – may face an uphill battle. The decision to pass the issue over to the ECJ means any final ruling will come either after the bond purchases end or near the end of the scheme, which has already been running for over two years and is expected to be wound down next year.

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“The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.”

Washington’s Long War on Syria (Ren.)

From Syria, to Iraq, Iran to Libya, our understandings of the long-wars in the Middle-East as moral, humanitarian interventions designed to democratise and civilise are the result of a carefully crafted propaganda campaign waged by the US and its allies. Each of these uprisings were launched by US proxies, designed to destabilize the regions, justifying regime change that suit the economic interests of its investors, banks and corporations, captured comprehensively in a new book by Canadian author and analyst, Stephen Gowans, Washington’s Long War on Syria. You might be surprised to know that both the Libyan, Syrian and Iraqi government, led by Muammar Gaddafi, Hafez Al Assad, (succeeded by Bashaar Al Assaad) and Sadaam Hussein respectively, were socialist governments. Or Ba’ath Arab Socialist governments, to be precise.

Ba’ath Arab Socialism can be summed up in their constitutions supporting the values of: ‘freedom of the Arab world, freedom from foreign powers and freedom of socialism’. Its doctrine was supported in Libya, as it was in Iraq and Syria. Of course, particularly in Hussein’s case, we cannot claim that these governments were without their problems. Ethnic cleansing is not to be overlooked, but condemned on the strongest grounds. But of course these were not the reasons the US and its allies decided to get into it. In the case of Iraq, it had combined its oil wealth with public ownership of the economy, leading to what is known as ‘The Golden Age’, where, according to a State Department Official: “Schools, universities, hospitals, factories, museums and theatres proliferated employment so universal, a labour shortage developed.”

When the Ba’ath Arab Socialists were driven from power in Iraq, the US installed military dictator, Paul El Briener who set about a ‘de-Ba’athification’ of the government, expelling every member of the Ba’ath Arab Socialist party and imposed a constitution forbidding any secular Arab leader from ever holding office in Iraq again. The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.” Gadaffi would soon be removed by Islamists, backed by NATO forces after Western oil companies agitated for his removal because he was “driving a hard bargain”. Canadian paramilitary forces even quipped that they were “al-Qaeda’s air-force”.

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And then we eat it. Carbon will kill us yet.

Fish Confusing Plastic Debris In Ocean For Food (G.)

Fish may be actively seeking out plastic debris in the oceans as the tiny pieces appear to smell similar to their natural prey, new research suggests. The fish confuse plastic for an edible substance because microplastics in the oceans pick up a covering of biological material, such as algae, that mimics the smell of food, according to the study published on Wednesday in the journal Proceedings of the Royal Society B. Scientists presented schools of wild-caught anchovies with plastic debris taken from the oceans, and with clean pieces of plastic that had never been in the ocean. The anchovies responded to the odours of the ocean debris in the same way as they do to the odours of the food they seek. The scientists said this was the first behavioural evidence that the chemical signature of plastic debris was attractive to a marine organism, and reinforces other work suggesting the odour could be significant.

The finding demonstrates an additional danger of plastic in the oceans, as it suggests that fish are not just ingesting the tiny pieces by accident, but actively seeking them out. Matthew Savoca, of the National Oceanic and Atmospheric Administration and lead author of the study, told the Guardian: “When plastic floats at sea its surface gets colonised by algae within days or weeks, a process known as biofouling. Previous research has shown that this algae produces and emits DMS, an algal based compound that certain marine animals use to find food. [The research shows] plastic may be more deceptive to fish than previously thought. If plastic both looks and smells like food, it is more difficult for animals like fish to distinguish it as not food.”

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Jul 292017
 
 July 29, 2017  Posted by at 9:09 am Finance Tagged with: , , , , , , , ,  2 Responses »
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Dorothea Lange Grocery store in Widtsoe, Utah 1936

 

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)
Congress Checkmates Trump (And The American People) (LR)
Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)
EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)
The Great Transatlantic Bond Divergence Unwind (WSJ)
Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)
Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)
Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)
What Explains amazon.com’s Share Price? (PCR)
Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)
Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

 

 

More incentives for the Fed to trigger a crisis.

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)

Let’s start at the beginning. Bubbles and Busts are both created by The Federal Reserve. Presidents are merely along for the ride. They like to credit themselves for the bubbles, and then look for scapegoats, usually the (non-existent) free market during the busts. But it is The Fed that creates them both. President Trump has made a big (yet understandable) mistake. He’s tried to portray himself as the cause of the current bubble in the stock market. He wants credit where credit is due. In this case, credit is not due. As we already mentioned, the Fed created the current bubble, and did so a long time ago. One look at a chart of the S&P 500 says it all:

Chances are, Trump realizes that most people won’t look at a chart of the stock market and he just wants some good PR. The president wants people to think that he is the reason for the stock market bubble. This is a big mistake. The Fed is the premier member of the so-called “Deep State”. In fact, without The Fed, there would hardly be a “Deep State” to speak of. The Fed sits at the top of the Deep State. They have the ultimate power (that no human beings should ever have) to create new money out-of-thin-air. In case Trump hasn’t figured it out yet, the Deep State does not like him. Should a major decline in the stock market occur during Trump’s Administration, guess who will take the blame? President Trump. After all, he took ownership of the bubble!

Should the market tumble, the mainstream media (that also despises Trump) will have plenty of his quotes, YouTubes, and Tweets to use against him. The economic woes will be pinned on Trump. Will Trump deserve the blame? No, but it’ll be too late. This is not to say that a major decline will occur during Trump’s tenure. Bubbles can take on a life of their own, and this one may last during Trump’s full term. But that’s a risky gamble to make. This bubble is going on almost 10 years now without a serious decline. Should we see a major selloff, Trump has very few friends in the major power centers that will come to his aid. As Peter Schiff points out in this fantastic clip below: The Fed now has their fall guy:

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A curious move. An ultimate power game.

Congress Checkmates Trump (And The American People) (LR)

Yesterday, the US Senate passed HR 3364, the Countering America’s Adversaries Through Sanctions Act by a massive 98 yeas to two nays. Opposing the bill were Sens. Bernie Sanders (I-VT) and Rand Paul (R-KY). The bill passed in the House by 419-3 on Tuesday, with Reps Massie (R-KY), Amash (R-MI), and Duncan (R-TN) opposing. The new sanctions bill ties President Trump’s hands on foreign policy, as he will be forced to ask Congress for permission to ease the measures. Speaking in favor of the legislation, Sen. Bob Menendez (R-NJ) cited the need to send Russia a message that it cannot meddle in US elections, that it cannot annex Crimea, that it cannot invade Ukraine, and that it cannot indiscriminately kill women and children in Syria.

Those of us living in the actual real world recognize that the first count remains unproven and the remaining counts are simply fatuous, fact-free bluster by Washington’s uninformed, group-thinking, foreign policy elites. Fueled by the millions coming in to the military-industrial complex. The House and Senate passed “Countering America’s Adversaries Through Sanctions Act” now goes to President Trump’s desk, where he faces a damned if he does and damned if he doesn’t scenario. A veto would certainly be over-ridden, handing the president a bitter bi-partisan blow that would likely end whatever aspirations he may retain to keep his campaign promises to get along better with Russia.

Similarly, signing the bill signs a death warrant for any foreign policy different than the one served up by the neocons for decades: create enemies; push war propaganda; collect massive checks from military industrial complex; demonize any American refusing to go along; repeat, adding bombs as necessary. Checkmate, President Trump.

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Over 600 would have to leave. Question: why does the US have over 6000 more staff in Russia than vice versa?

Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)

Russia told the United States on Friday that some of its diplomats had to leave the country in just over a month and said it was seizing some U.S. diplomatic property as retaliation for what it said were proposed illegal U.S. sanctions. Russia’s response, announced by the Foreign Ministry, came a day after the U.S. Senate voted to slap new sanctions on Russia, putting President Donald Trump in a tough position by forcing him to take a hard line on Moscow or veto the legislation and anger his own Republican Party. President Vladimir Putin had warned on Thursday that Russia had so far exercised restraint, but would have to retaliate against what he described as boorish and unreasonable U.S. behaviour. Relations between the two countries, already at a post-Cold War low, have deteriorated even further after U.S. intelligence agencies accused Russia of trying to meddle in last year’s U.S. presidential election, something Moscow flatly denies.

The Russian Foreign Ministry said on Friday that the United States had until Sept. 1 to reduce its diplomatic staff in Russia to 455 people, the same number of Russian diplomats it said were left in the United States after Washington expelled 35 Russians in December. It said in a statement that the decision by Congress to impose new sanctions confirmed “the extreme aggression of the United States in international affairs.” “Hiding behind its ‘exceptionalism’ the United States arrogantly ignores the positions and interests of other countries,” said the ministry. “Under the absolutely invented pretext of Russian interference in their “Under the absolutely invented pretext of Russian interference in their domestic affairs the United States is aggressively pushing forward, one after another, crude anti-Russian actions. This all runs counter to the principles of international law.”

[..] An official at the U.S. embassy in Moscow, who declined to be named because they were not allowed to speak to the media, said there were around 1,100 U.S. diplomatic staff in Russia. That included Russian citizens and U.S. citizens. Most staff, including around 300 U.S. citizens, work in the main embassy in Moscow with others based in outlying consulates. The Russian Foreign Ministry said it was also seizing a Moscow dacha compound used by U.S. diplomats to relax from Aug. 1 as well as a U.S. diplomatic warehouse in Moscow.

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Confidence spelled backwards. How to cause a bank run in 3 easy lessons.

EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)

European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed. The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble. The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender. It also come amid a bitter wrangle among European countries over how to deal with troubled banks, roughly a decade after a financial crash that required the ECB to print billions of euros to prevent a prolonged economic slump.

Giving supervisors the power to temporarily block bank accounts at ailing lenders is “a feasible option,” a paper prepared by the Estonian presidency of the EU said, acknowledging that member states were divided on the issue. EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said. “The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” a person familiar with German government’s thinking said. To cover for savers’ immediate financial needs, the Estonian paper, dated July 10, recommended the introduction of a mechanism that could allow depositors to withdraw “at least a limited amount of funds.”

Banks, though, say it would discourage saving. “We strongly believe that this would incentivize depositors to run from a bank at an early stage,” Charlie Bannister of the Association for Financial Markets in Europe (AFME), a banking lobby group, said. The Estonian proposal was discussed by EU envoys on July 13 but no decision was made, an EU official said. Discussions were due to continue in September. The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors’ powers to suspend withdrawals, but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000).

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Price discovery.

The Great Transatlantic Bond Divergence Unwind (WSJ)

Many of the trades embraced by markets after President Donald Trump’s election have been slowly unwinding in 2017. Here’s an important one that could have further to go: the gap between U.S. and German government bond yields. The spread between 10-year Treasurys and bunds ballooned after Mr. Trump’s November victory to a level not seen since before the fall of the Berlin Wall, around 2.3 percentage points by the end of 2016. U.S. yields rose sharply on the idea of reflation and stimulus, while Europe appeared stuck in a rut. At 1.75%age points, the gap is close to its pre-election level. But even that is unusual by historical standards. Between 1990 and 2014, the spread was only rarely wider than one percentage point, and over that period averaged just 0.2 point, according to data from FactSet.

Such a tight relationship between German and U.S. bonds reflected the long global bull market for bonds in the glory years of globalization. Relatively synchronized monetary policy meant yields fell on both sides of the Atlantic together. The Fed’s 2013 taper, followed by signals of coming European Central Bank bond buying helped set the bond markets apart. That both helped weaken the euro and encouraged a rush of bond issuance by U.S. companies in European markets as borrowing costs fell. Where policy goes now is key. Markets doubt how far the Fed might get with its tightening, and seem unflustered by the prospect of the central bank shrinking its balance sheet. Investors may be too relaxed, but in the absence of fiscal stimulus and inflation, much higher yields for Treasurys might be hard to achieve in the near term.

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But they rule Germany. So yeah, some fines etc., but the culture just goes on.

Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)

German’s major automakers were accused in a U.S. lawsuit of acting as a cartel, colluding for nearly two decades to limit the pace of technological advances in their vehicles and stifle competition – allegations that widen the scope of the latest scandal to hit the nation’s auto industry. BMW AG, Daimler AG, Volkswagen AG and its Audi and Porsche brands shared competitive information about vehicle technologies with one another from 1996 through at least 2015 in violation of antitrust laws, according to a complaint filed Friday in San Francisco federal court. “These coordinated actions enabled the manufacturer defendants — the self-named ‘Fünfer-Kreise,’ or Circle of Five — to impose a German automobile premium on consumers premised on superior German engineering, while secretly stunting incentives to innovate,” the suit alleges.

The suit, which seeks class-action status on behalf of U.S. drivers, says the companies agreed to limit the development of vehicle systems, including emissions control. The arrangement allegedly led to the development of so-called “defeat devices” used by Volkswagen to cheat on pollution tests. Plaintiffs claim the operation of convertible roofs, body design, brakes and electronic systems were also part of the “technological innovations inhibited” by the pacts. The supplier of VW’s cheat software, Robert Bosch Gmbh, was also named as a defendant in the lawsuit.

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“The added cost of insurance pushed 274,000 customers into delinquency..”

Elizabeth Warren has called on the Fed to remove Wells Fargo board members. I think if your legal system does not allow you to put these people behind bars, maybe you should look there first. Many of these people should be put before a judge and Wells Fargo should be forced to close. Institutions like that are diseases in a society.

Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)

New revelations that Wells Fargo spent years enrolling unknowing borrowers in costly auto insurance has put the bank under new pressure to answer for a months-long scandal over sales practices that have harmed millions of Americans. The latest news that 800,000 Wells Fargo auto borrowers were improperly charged for insurance rattled investors yet again, and sent its stock down 2.6% on Friday. Shareholders, analysts, lawmakers and consumer advocates demanded answers about how the situation manifested, and why Wells Fargo did not disclose the problems sooner, given existing turmoil over phony deposit and credit card accounts opened in customers’ names without their permission.

“This is a full-blown scandal — again,” said New York City Comptroller Scott Stringer, who oversees public pension funds that hold roughly 11.6 million Wells Fargo shares. “It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm.” Stringer called on the bank to install a new independent chair and “immediately” disclose more information. Wells Fargo first became aware of potential problems a year ago, when the auto lending business began receiving an unusually high number of complaints, Franklin Codel, head of consumer lending, said in an interview. The auto insurance program was quickly suspended, and the problem escalated to senior management, the board and regulators, he said.

Wells Fargo planned to delay public disclosure until it could notify affected customers and reimburse them. “The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they’re going to get their money,” he said. “It’s not a great customer experience to say, ‘Yeah, we’ll get back to you.'” [..] Wall Street analysts expect the financial damage to go beyond the $80 million in reimbursements. In a note on Friday, Piper Jaffray’s Kevin Barker predicted the true cost would be “multiples” of that figure, with lawsuits and further customer remediation. The added cost of insurance pushed 274,000 customers into delinquency, and led to at least 20,000 wrongful repossessions, according to the Times.

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“Community bank” and Wells Fargo in one sentence. Take out the ones that are most guilty and go on as you were.

Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)

Wells Fargo, the lender struggling to overcome a fake-accounts scandal in its community bank, said the division’s new leader is cutting about 70 senior executive jobs. The lender will reduce the number of regional and area presidents to 91, Mary Mack, head of the retail bank, said Friday in a memo to staff, a copy of which was obtained by Bloomberg. Bank spokeswoman Bridget Braxton confirmed the contents of the memo and said employees whose positions are eliminated will remain staff members for 60 days until further steps are decided. Most of the remaining managers will be re-titled as region bank presidents with direct responsibility for more employees than before, in a move aimed at reducing management levels across the branch network, Mack wrote.

Across its 10 geographical divisions, Wells Fargo previously employed 160 regional and area presidents. “Change is hard, yet change is necessary to make sure we are well positioned for the future,” Mack wrote. “In order to truly be better, we must put the right structure in place,” she added. The community-banking division, which houses the retail bank, has generated weaker profit since September when Wells Fargo was fined $185 million because employees had been opening accounts for more than a half decade without customers’ permission. This week, the firm’s consumer operations revealed another scandal, announcing that the bank had charged as many as 500,000 customers for auto insurance they didn’t need.

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“..Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.”

What Explains amazon.com’s Share Price? (PCR)

“Here are today’s top stories on Bloomberg” “Jeff Bezos briefly overtook Bill Gates as the world’s richest person. A surge in Amazon shares Thursday morning in advance of its earnings report gave Bezos a net worth of $92.3 billion, surpassing the Microsoft founder’s $90.8 billion fortune. In afternoon trading, Bezos remains ranked second on the Bloomberg Billionaires Index. Gates has held the top spot since May 2013.” Amazon’s stock closed yesterday at $1,046 per share. Amazon’s profits do not support this extraordinary price. Apple, a very profitable company, has a share price of $150.56, an overprice itself. What or who is making Bezos so rich from an online sales company? Note, amazon.com is just sales. It is not some new manufacturing technology that produces valuable output at low cost.

amazon.com is what Walmart, Sears, and Macy’s do, the difference being that amazon.com is online and Walmart, Sears, and Macy’s are in physical locations where real merchandise can be experienced hands on and tried on for fit. In other words, online purchases are convenient, but you don’t know what you are getting. Does it fit? What is the quality? And so forth. How many times do you send it back before you get what you want? There are two answers to the question about who is making Bezos rich. One is that Wall Street is betting that the collapse of US anti-trust law and regulatory authority—it is still on the books but not enforced, just look at the Big Banks—and the ability of Bezos to use his ownership of the Washington Post, the newspaper of the country’s capital, to support those who support him, ensure that amazon.com will be an online monopoly.

Once this is put in place, amazon’s prices and profits will rise, and the extraordinary amazon.com P/E ratio will come into line with reality. Another is that Bezos’ cooperation with Washington’s spy network over all Americans is paid for by the CIA’s many front companies driving up the price of amazon.com’s stock. As the price of amazon.com rises, so does Bezos’ wealth. I don’t know that either of these answers is correct. What I notice is that Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.

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Just in case you’re thinking things are a mess where you are. His brother is rumored to succeed him.

Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)

On July 28, 2017, the Supreme Court of Pakistan (SCP) rendered a unanimous verdict by a five-member bench that disqualified Prime Minister Nawaz Sharif from holding public office. This outcome was the result of the Panama Leaks, which revealed that the premier and his family owned assets disproportionate to their known sources of income. The opposition Pakistan Tehreek-i-Insaf (PTI), led by Imran Khan, seized on this issue and managed to compel Pakistan’s normally apathetic state institutions to take notice. For over a year, the premier and his family failed to explain how they acquired upscale properties in London. The ruling family dug themselves even deeper into the hole in their effort to establish some kind of cover for their acquisitions by being deliberately inaccurate before the SCP and even forging documents.

Surrounded by sycophants, the premier was evidently badly advised at each step and he and his family have paid a very high political price and could well face jail time. Pakistan has a long tradition of dragging its civilian chief executives over the coals. No prime minister has completed a regular term in office, their tenures cut short by assassination, civilian or military coups, judicial intervention, and intra-party machinations. Many premiers have been overthrown or dismissed for alleged abuse of power, mal-administration, and corruption. Nawaz Sharif and his family, in being unable to account for their wealth, and in their crude attempts at a cover up, have demonstrated that they are evidently crooks.

This said, the Pakistan Muslim League-Nawaz (PML-N) has done a better job of delivering on its campaign promises than any political party in Pakistan’s democratic experience. Pakistan’s energy crisis has eased, the economy is headed towards 6% annual growth, FDI is the highest in a decade, per capita income has risen perceptively, major cities have seen considerable investment in their infrastructure, and the gross level of terrorist violence has declined. Given that the ruling party won in 2013 with as many votes as the next two largest parties combined, its victory in 2018 seemed all but assured.

[..] Since 1947, Pakistan state elites have presided over a massive privatization of public wealth. Entitlements in the form of plots, perks, benefits, are part of an elaborate system of bureaucratically induced shortages that breed systemic corruption and undermines governance. Pakistani private and public sector corporations and entrepreneurs guzzle subsidies and thrive only in a cartelized environment. Any attempt by a government to rationalize the economy or improve productivity is met with howls of protest and demands for more subsidies. Pakistani professionals, be they lawyers, doctors, engineers, educators, behave like mafias, seeking to avoid ethical checks while relentlessly pursuing self-aggrandizement.

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We’ll eat our own crap yet. Garbage in, garbage out.

Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

Plastic microparticles are getting into the flesh of fish eaten by humans, according to a new study. A team of scientists from Malaysia and France discovered a total of 36 tiny pieces of plastic in the bodies of 120 mackerel, anchovies, mullets and croakers. They warned that as plastic attracts toxins in the environment, these poisons could be released into people’s bodies after they ate the fish. The plastics found included nylon, polystyrene and polyethylene. Writing in the journal Scientific Reports, the researchers said: “The widespread distribution of microplastics in aquatic bodies has subsequently contaminated a diverse range of aquatic biota, including those sold for human consumption such as shellfish and mussels.

“Therefore, seafood products could be a major route of human exposure to microplastics. “Microplastics were suggested to exert their harmful effects by providing a medium to facilitate the transport of other toxic compounds such as heavy metals and persistent organic pollutants to the body of organisms. Upon ingestion, these chemicals may be released and cause toxicity.” They suggested people eating the fish examined in this study, which are often dried and sold across Malaysia and neighbouring countries, could consume up to 246 pieces of microplastic a year. However, they added: “The majority of the tested fish in this study did not contain microplastics. Therefore, it is less likely that an individual would ingest the suggested maximum number of microplastics per annum.”

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Jul 262017
 
 July 26, 2017  Posted by at 9:24 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Jackson Pollock Greyed Rainbow 1953

 

The Rise And Fall Of The Property-Owning Democracy (FCFT)
Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)
Australian Housing Affordability the Worst in 130 Years (Soos/David)
There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)
Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)
US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)
The Value of Everything (Jim Kunstler)
Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)
Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)
Insolvent Greece Goes To Market 2.0 (Varoufakis)
Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)
Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

 

 

The article is somewhat confusing to me, bear of little brain and unpopular in China. But it’s good to make the point that bubbles spark poverty.

The Rise And Fall Of The Property-Owning Democracy (FCFT)

Sometime in the late 1980s, a friend who was on the libertarian right of the Conservative Party explained the idea of the property-owning democracy to me. The point, he said, was to detach the respectable working class from their poorer neighbours, encourage them to identify with the middle-class and thereby turn them into Tories. It worked for a while. Middle earners had been doing relatively well since the 1970s and home ownership was within the reach of many once mortgages became more readily available. Helped along by cheap council house sales, home ownership rose. In recent years, though, things have started shifting back the other way. The property-owning democracy is now looking like a one-off event rather than the ongoing process it was meant to be. Property analyst Neal Hudson pointed out that, as a proportion of all tenure, home ownership peaked in 2003 but mortgage ownership peaked in 1996. As older property owners paid off their housing debts, they were not being replaced at the same rate by new mortgagors.

[..] As the Resolution Foundation comments: The typical mortgagor AHC income is now twice that of the typical social renter, and over the past decade this income has grown by 17% compared to just 4% growth for the typical private renter. Even more than was the case before the financial crisis, the living standards split between those who own their own home and those who do not has become a key divide. While the proportion of households owning their own homes has fallen generally, that decline has been sharper among those on low to middle incomes. (Defined by the Resolution Foundation as working-age households with someone in work but with less than the median household income.) In the mid 1990s, over half of those on low to middle incomes were mortgagors. Now that has fallen to a third. Over the same period, private renting among this group rose.

Last week’s report on poverty and inequality by the Institute for Fiscal Studies notes that most of those in poverty (defined as income less than 60% of the median) are now from households where someone is in work. “[R]elative poverty among children and working-age adults has increased and, over the past 20 years or so, has increasingly become an in-work phenomenon due to declines in worklessness, low earnings growth and widening earnings inequality.”

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What bubble?

Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)

Great news ‘Murica – your house has never been worth more than it was in May (according to Case-Shiller’s national home price index). On the slightly less silver-lining side of the equation, April’s 0.28% gain in price was revised to 0.18% MoM drop and May’s proint disappointed at just 0.1% rise MoM. The 20-city property values index increased 5.7% y/y (est. 5.8%). All cities in the index showed year-over-year gains, led by a 13.3% advance in Seattle, an 8.9% increase in Portland and a 7.9% gain in Denver.

After seasonal adjustment, Seattle had the biggest month-over-month increase, at 0.9%, while New York posted a 0.6% decline. “Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

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Just keep paying the piper.

Australian Housing Affordability the Worst in 130 Years (Soos/David)

The astronomical bubble in Australian housing prices has generated plenty of commentary regarding the current lack of affordability. This state of affairs clearly concerns aspiring home buyers everywhere, and Sydney and Melbourne in particular. First home buyers (FHBs) face almost insurmountable odds: the highest price to income and deposit to income ratios, the lowest savings rates, runaway dwelling prices, weak wage growth, including a political and economic establishment hell-bent on ensuring land prices keep on inflating no matter the wider cost to the economy. The legion of vested interests – basically 99% of commentators – choose to contend housing is actually more affordable today than back in the days of high mortgage interest rates, especially when rates peaked at 17% in 1989.

This is demonstrated by the standard mortgage payment to household income formula shown above, assuming 80% loan to value ratio (LVR). Their contention is bogus, however, because the metric is a static one, displaying mortgage payments to income at a particular point in time. The peak in 1989, for instance, is very high if, and only if, prices, interest rates and incomes remain constant over the life of the mortgage. Yet, these variables change by the next period. So, a more dynamic approach is required to assess housing affordability. The correct method was advocated by Glenn Stevens in 1997, Guy Debelle in 2004 and other economists like Dean Baker, who identified the US housing bubble and predicted the Global Financial Crisis in 2002. The important factor to consider is the effect wage inflation has upon mortgage payments.

While high mortgage interest rates result in large mortgage payments relative to income, this only occurs in the early years of the mortgage as high wage growth inflates away the burden. In contrast, borrowers facing high housing prices with low interest rates and poor wage growth face a greater burden across the life of the mortgage due to greater payments to income. This housing affordability analysis is applied to long-term annual data between 1880 and 2016, anchored to the median house price at an LVR of 80% at the start of each decade thereon. While data on mortgage interest rates and wage growth for the years after 2016 cannot be known, they are assumed to hold still at the present rates: 5.4% for the mortgage interest rate and 1.4% for wages. The following chart illustrates the outcome of applying this method, demonstrating the proportion of aggregate mortgage payments to household income over the 25 years of the mortgage. The results are overpowering.

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Well, that’s what Draghi’s QE guarantees.

There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)

The ECB needs to beware of raising interest rates too quickly as there are a significant number of “zombie firms” in Europe that have become too dependent on cheap credit, according to analysis by the Bank of America Merrill Lynch. Barnaby Martin, head of European Credit Strategy at BofA Merrill Lynch, said businesses in Europe which have benefited from the ECB’s corporate bond purchase program would struggle once the bank raises interest rates, expected sometime in 2018. “The worst kept secret in the market is Mario Draghi is going to be tapering monetary policy next year and yet last week he was super, super dovish so I think that we’ve forgotten that monetary policy in Europe is on its way out,” he told CNBC on Tuesday, adding “there’s clearly political pressure for him to move away from this extraordinary era.”

“So the question becomes ‘can we handle a rapid rise in interest rates?’,” he said. ECB stimulus measures as part of its quantitative easing program designed to boost the European economy currently amount to €60 billion ($69.9 billion) a month. Some of this money goes into purchasing corporate bonds. While these purchases have enabled companies to continue to operate and invest, aiding a recovery in the European economy, the bank’s purchases have been credited for keeping ailing companies alive, hence the name “zombies.” The ECB started purchasing corporate bonds in June 2016 as part of its “corporate sector purchase program” (CSPP) and, as of June 7, 2017, its CSPP holdings stood at €92 billion, the bank said.

In a note examining “The rise of the Zombies” BofA Merrill Lynch’s credit strategists Martin, Ionnis Angelakis and Souhair Asba noted that 9% of non-financial companies in Europe (by market cap of Stoxx 600) are zombies, with “very weak interest coverage metrics.” “Note that this is still quite a high number: It was around 6% pre-Lehman, and fell to 5% in late 2013 after the peripheral crisis had faded,” they said. “The plethora of monetary support in Europe over the last 5 years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults.” The analyst team also noted that bond issuance had been concentrated in “the hands of a few.” “Year-to-date, the top 20 bonds issuers have accounted for 40% of supply. In 2015 and 2016, the number was closer to 25%. The result has been that “superfirms” have been quietly building across the credit market,” they noted.

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“The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)

Almost 40% of corporate investments channelled away from authorities and into tax havens travel through the UK or the Netherlands, according to a study of the ownership structures of 98m firms. The two EU states are way ahead of the rest of the world in terms of being a preferred option for corporations who want to exploit tax havens to protect their investments. The Netherlands was a conduit for 23% of corporate investments that ended in a tax haven, a team of researchers at the University of Amsterdam concluded. The UK accounted for 14%, ahead of Switzerland (6%), Singapore (2%) and Ireland (1%). Every year multinationals avoid paying £38bn-£158bn in taxes in the EU using tax havens. In the US, tax evasion by multinational corporations via offshore jurisdictions is estimated to be at least $130bn (£99bn) a year.

The researchers reported that there were 24 so-called “sink” offshore financial centres where foreign capital was ultimately stored, safe from the tax authorities. Of those, 18 are said to have a current or past dependence to the UK, such as the Cayman Islands, Bermuda, the British Virgin Islands and Jersey. The tax havens used correlated heavily to which conduit country was chosen by the multinational’s accountants. The UK is a major conduit for investments going to European countries and former members of the British Empire, such as Hong Kong, Jersey, Guernsey or Bermuda, reflecting the historical links and tax treaties enjoyed by firms setting up in Britain. The Netherlands is a principal conduit for investment ending in Cyprus and Bermuda, among others. Switzerland is used as a conduit to Jersey. Ireland is the route for Japanese and American companies to Luxembourg.

[..] Dr Eelke Heemskerk, who led the research, said that the work showed the importance of developed countries cleaning up their financial sectors. He said: “In the context of Brexit, where you have the UK threatening, unless they get a deal, to change their model to be attractive to companies who want to protect themselves from taxes, well, they are already doing it. “The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

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Russia’s getting an invaluable lesson in self-suffciency. There’s nothing like it.

US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)

Congress moved Tuesday to step up sanctions on a shrinking Russian economy that is already struggling under the weight of low oil prices, high inflation and a battered currency that has sent capital fleeing. In response to Moscow’s interference in the 2016 U.S. presidential election, the House voted overwhelmingly to tighten existing economic sanctions imposed in 2014 following the Russian invasion of Crimea. Among other things, the measures freeze assets and prohibit transactions with specific Russian companies and individuals, restrict financial transactions with Russian firms, and ban certain exports that are used in oil and gas exploration or have possible military uses.

Those 2014 U.S. sanctions were paired with related measures imposed by the European Union, which placed restrictions on business with Russia’s financial, defense and energy sectors. Today, Russia’s economy is still feeling the harsh impact of those measures, which coincided with a crash in global oil prices that cut deeply into revenues from the country’s main export. The loss of oil revenues – a drop of as much as 60%, according to a 2017 Congressional Research Service report — helped spark a collapse in Russia’s currency, the ruble, sending the prices of Russian consumer goods soaring. The Russian economy has also been hurt by a wave of capital flight out of the country, as individual Russians sought to move money offshore and convert their shrinking rubles to dollars and euros to protect their wealth. That money flow slowed in 2014 as U.S. and European sanctions took hold.

Though U.S. sanctions have put pressure on the Russian economy, the impact on American business has been limited because Russia makes up less than 1% of U.S. exports. Only six U.S states count Russia as a significant market for goods and services. Washington, the most reliant, sells roughly 1% of its total exports to Russia, consisting mostly of machinery and farm products. That’s half the level before the 2014 sanctions took effect. European nations, which export greater volumes to Russia than the U.S., imposed their own set of sanctions response to the Crimean annexation.

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“The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic..”

The Value of Everything (Jim Kunstler)

We are looking more and more like France on the eve of its revolution in 1789. Our classes are distributed differently, but the inequity is just as sharp. America’s “aristocracy,” once based strictly on bank accounts, acts increasingly hereditary as the vapid offspring and relations of “stars” (in politics, showbiz, business, and the arts) assert their prerogatives to fame, power, and riches — think the voters didn’t grok the sinister import of Hillary’s “it’s my turn” message? What’s especially striking in similarity to the court of the Bourbons is the utter cluelessness of America’s entitled power elite to the agony of the moiling masses below them and mainly away from the coastal cities. Just about everything meaningful has been taken away from them, even though many of the material trappings of existence remain: a roof, stuff that resembles food, cars, and screens of various sizes.

But the places they are supposed to call home are either wrecked — the original small towns and cities of America — or replaced by new “developments” so devoid of artistry, history, thought, care, and charm that they don’t add up to communities, and are so obviously unworthy of affection, that the very idea of “home” becomes a cruel joke. These places were bad enough in the 1960s and 70s, when the people who lived in them at least were able to report to paying jobs assembling products and managing their distribution. Now those people don’t have that to give a little meaning to their existence, or cover the costs of it. Public space was never designed into the automobile suburbs, and the sad remnants of it were replaced by ersatz substitutes, like the now-dying malls. Everything else of a public and human associational nature has been shoved into some kind of computerized box with a screen on it.

The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic, while the elites who create all this vicious crap spend millions to consort face-to-face in the Hamptons and Martha’s Vineyard telling each other how wonderful they are for providing all the artificial social programming and glitzy hardware for their paying customers. The effect of this dynamic relationship so far has been powerfully soporific. You can deprive people of a true home for a while, and give them virtual friends on TV to project their emotions onto, and arrange to give them cars via some financing scam or other to keep them moving mindlessly around an utterly desecrated landscape under the false impression that they’re going somewhere — but we’re now at the point where ordinary people can’t even carry the costs of keeping themselves hostage to these degrading conditions.

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The kind of independence that tends to be bad for a man’s health.

Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)

Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported. “A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.” Morales has said Bolivia’s past dependence on the agencies was so great that the IMF had an office in government headquarters and even participated in their meetings. Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.

Bolivia’s popular uprising known as the The Cochabamba Water War in 2000 against United States-based Bechtel Corporation over water privatization and the associated World Bank policies shed light on some of the debt issues facing the region. Some of Bolivia’s largest resistance struggles in the last 60 years have targeted the economic policies carried out by the IMF and the World Bank. Most of the protests focused on opposing privatization policies and austerity measures, including cuts to public services, privatization decrees, wage reductions, as well the weakening of labor rights. Since 2006, a year after Morales came to power, social spending on health, education, and poverty programs has increased by over 45%.

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A tour de force by Bill Mitchell. Germany’s profiting so much off of Greece’s despair that it can hide its own economic pitholes with it.

Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)

Effectively the “German Federal Government – through KfW” is providing funds to Greece as part of the bailout. On May 20, 2014, the KfW issued a further press statement – Institution for Growth in Greece (IfG) – which further details the way in which German government bailout support is channeled through the KfW. For example, in relation to the “three planned IfG sub-funds … The Hellenic Republic and KfW — on behalf of the German Federal Government — will each contribute EUR 100 million in funding debt to this sub-fund.” Clear enough. The Süddeutsche Zeitung article says that since 2010, these loans granted to Greece through the KfW have generated 393 million euros of interest income net of refinancing costs [..] A handy sum. And what is more – the profits generated have not been transferred to the Greek government.

Further gains were made on the Greek bailouts via the ECB’s Securities Market Program (SMP), which has generated German gains of around $€952 million, through ECB distributions of the profits to the Member State central banks. A similar story appeared in the English-version of the Handelsbatt next day (July 12, 2017) – Germany Profits From Greek Debt Crisis. It essentially sourced the Süddeutsche Zeitung and made the story more accessible (repeating it in English). It says that: “The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry.”

The issue became public because the Greens parliamentary representatives have challenged the morality of the German government’s decision not to redistribute the profits and the role played by the KfW. The Greens representative was reported as saying that: “The profits from collecting interest must be paid out to Greece … Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget …” It has long been claimed that “Greece’s crisis has helped” Schäuble keep the German fiscal balance in surplus. The KfW have been part of that. We knew back in 2015 that the KfW was helping the Finance Ministry generate fiscal surpluses.

On March 5, 2015, the German daily newspaper Rheinische Post published a report – So geht es den Griechen wirklich – presented a summary of a 40-page document that the German Finance Ministry had provided in response to a demand for information from the Linksfraktion (German Left Party Die Linke). The Finance Ministry document conceded that: “Between 2010 to 2014, the KfW has paid out around 360 million euro in revenues to the German government and in the coming years the federal government is expecting around 20 million euro per year on interest revenues.”

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The Greek economy is worse than ever, but now people trust it?

Insolvent Greece Goes To Market 2.0 (Varoufakis)

Why do I refuse to be impressed by the news of Greece’s return to the markets? “It is because the Greek state and the Greek banks remain deeply insolvent. And, their return to the money markets is a harbinger of the next terrible phase of Greece’s crisis, rather than a cause for celebration”. The above was my answer in a BBC interview on 9th April… 2014! It is also the only answer that fits today’s announcement of Greece’s new bond issue. Indeed, why script a new article, when that old post offers a most helpful response to the question: “What should the world think of Greece’s new bond issue?”

The only thing I need to add to these circa 2014 posts is this: The Tsipras government today is simply rolling over precisely the same bond that the Samaras-Venizelos-Stournaras government issued in 2014 – the subject matter of my criticism above. This is a remarkable U-turn by Mr Tsipras and his ministers. In 2014 they had sided entirely with my criticism of the then government’s argument that Greece’s return to the markets, with the issue of that one bond, was a sign the country was achieving escape velocity from the gravitational pull of its debt-deflationary crisis. Now, they are not only parroting the same arguments as Samaras-Venizelos-Stournaras but they are, lo and behold, rolling over the same bond! I rest my case.

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It’s not that hard.

Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)

Nine out of 10 people want supermarkets to introduce a “plastic-free aisle”, according to a new poll amid rising concern about pollution. The survey – of 2,000 British adults by Populus – was commissioned by campaign group A Plastic Planet, which said it was clear that the public wanted an alternative to “goods laden with plastic packaging”. Evidence of the synthetic substance’s harmful effects on the natural world is growing. Since 1950, humans have produced 8.3 billion tons of the stuff, with 6.3 billion tons being sent to landfill sites or simply being dumped in what scientists described as an “uncontrolled experiment” on the planet. Plastic, which acts like a magnet for toxic chemicals in the environment, breaks down into tiny pieces that are capable of passing through animals’ gut walls and into their body tissue.

The UN warned in a report last year that “the presence of microplastic in foodstuffs could potentially increase direct exposure of plastic-associated chemicals to humans and may present an attributable risk to human health”. A third of seabirds in the North Sea were also found to be suffering “widespread breeding failure”, largely because of plastic waste. The new poll found 91% of people supported aisles free from plastic packaging and 81% said they were concerned “about the amount of plastic packaging that is thrown away in the UK”. Sian Sutherland, a co-founder of A Plastic Planet, said: “It’s becoming increasingly clear that the Great British public wants a fresh alternative to goods laden with plastic packaging. Too much of our plastic waste ends up in oceans and landfill.

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Am I a bad person for thinking that maybe this isn’t such a bad thing? Who wants more of us?

I like the term “semen parameters”. Name for a band. Double billing with Pussy Riot.

Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

Sperm counts have plunged by nearly 60% in just 40 years among men living in the West, according to a major review of scientific studies that suggests the modern world is causing serious damage to men’s health. Pesticides, hormone-disrupting chemicals, diet, stress, smoking and obesity have all been “plausibly associated” with the problem, which is associated with a range of other illnesses such as testicular cancer and a generally increased mortality rate. The researchers who carried out the review said the rate of decline had showed no sign of “levelling off” in recent years. The same trend was not seen in other parts of the world such as South America, Africa and Asia, although the scientists said fewer studies had been carried out there.

One expert commenting on the study said it was the “most comprehensive to date”, and described the figures as “shocking” and a “wake-up call” for urgent research into the reasons driving the fall. Writing in the journal Human Reproduction Update, the researchers – from Israel, the US, Denmark, Brazil and Spain – said total sperm count had fallen by 59.3% between 1971 and 2011 in Europe, North America, Australia and New Zealand. Sperm concentration fell by 52.4%. “Sperm count and other semen parameters have been plausibly associated with multiple environmental influences, including endocrine disrupting chemicals, pesticides, heat and lifestyle factors, including diet, stress, smoking and body-mass index,” the paper said. “Therefore, sperm count may sensitively reflect the impacts of the modern environment on male health throughout the life course.”

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Jul 202017
 
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Margaret Bourke-White Breadline, Kentucky 1937

 

Trump Ends CIA Arms Support For Anti-Assad Syria Rebels (R.)
Did the City of London Just Press the Panic Button on Brexit?
Single Payer Is The Only Real Answer, Says Medicare Architect (IC)
Deutsche Bank Expects Subpoenas Over Trump-Russia Investigation (G.)
Asia’s Coal-Fired Power Boom ‘Bankrolled By Foreign Governments And Banks’ (G.)
When Does a Home Become a Prison? (FAFC)
Saudi-Led Bloc Drops List Of Demands For Qatar (BBC)
Toronto Man Builds Park Stairs For $550, Irking City After $65,000 Estimate (CTV)
US-Style Mega Farms Invade The World (G.)
Australia Was Colonized By Humans 20,000 Years Before Europe (Ind.)
Child Refugees Denied Care Amid Suicide And Abuse In Greek Camps (Ind.)
UK Has Not Taken In Any Child Refugees Under Dubs Scheme This Year (G.)
The World Has Made More Than 9 Billion Tons of Plastic (CNBC)
World’s Plastic Waste Could Bury Manhattan 2 Miles Deep (AP)

 

 

The CIA will not like this. The press just can’t mention Putin enough. But a good decision.

Trump Ends CIA Arms Support For Anti-Assad Syria Rebels (R.)

The Trump administration has decided to halt the CIA’s covert program to equip and train certain rebel groups fighting the government of Syrian President Bashar al-Assad, two U.S. officials said, a move sought by Assad ally Russia. The U.S. decision, said one of the officials, is part of an effort by the administration to improve relations with Russia, which along with Iranian-supported groups has largely succeeded in preserving Assad’s government in the six-year-civil war. The CIA program began in 2013 as part of efforts by the administration of then-President Barack Obama to overthrow Assad, but produced little success, said the officials, both of whom are familiar with the program and spoke on the condition of anonymity.

The decision was made with National Security Adviser H.R. McMaster and CIA Director Mike Pompeo after they consulted with lower ranking officials and before Trump’s July 7 meeting with Russian President Vladimir Putin at the G-20 summit in Germany. It was not part of U.S.-Russian negotiations on a ceasefire in southwestern Syria, the two officials said. One of the officials said the United States was not making a major concession, given Assad’s grip on power, although not on all of Syria, “but it’s a signal to Putin that the administration wants to improve ties to Russia.” A downside of the CIA program, one of the officials said, is that some armed and trained rebels defected to Islamic State and other radical groups, and some members of the previous administration favored abandoning the program.

Before assuming office in January, Trump suggested he could end support for Free Syrian Army groups and give priority to the fight against Islamic State. A separate effort by the U.S. military effort to train, arm and support other Syrian rebel groups with air strikes and other actions will continue, the officials said.

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The real Macron.

Did the City of London Just Press the Panic Button on Brexit?

Oh the irony: EU capitals are trying to attract the very institutions that caused some of the worst financial scandals of the last ten years.

In a sign of growing desperation, the City of London Corporation, the enigmatic city within the city that serves as the ultimate bastion of privilege in the UK, is now trying to appeal to brute populist sentiment to defend its position as the world’s most important financial center. In a memo to the British Treasury, MPs, and financial institutions, the City’s Brexit envoy to the EU, Jeremy Browne, bemoaned that the French are pushing for the most damaging Brexit possible, even if France doesn’t directly benefit. The memo was duly leaked to one of the UK’s most anti-EU newspapers, The Daily Mail: “Browne’s recent meeting at the Banque de France was the worst he had had “anywhere in the EU”. The French, he said, “are crystal clear about their objectives: the weakening of Britain and the ongoing degradation of the City of London” and plotting to “actively disrupt and destroy” the UK’s financial sector when Britain leaves the EU.

France isn’t the only country aggressively trying to poach business from the City of London; so too are Germany, Spain, Luxembourg, the Netherlands and even Italy. But France differs from the rest in one key aspect, says Browne: it “sees Britain and the City of London as adversaries, not partners.” The recent election as president of Emmanuel Macron, a former investment banker at Rothschild & Cie Banque, has merely intensified this dynamic. Paris has promised to unfurl the red carpet for the City of London’s highest paid bankers by offering low tax rates and bank-friendly legislation, including scrapping a proposed financial transaction tax, while also seeking to grow as a clearing center. Clearing is a huge business for the City of London. The U.K. is estimated to handle 75% of all euro-denominated derivatives transactions, equivalent to around €930 billion of trades per day.

It’s also home to roughly 90% of US dollar domestic interest-rate swaps. The world’s largest clearinghouse for interest rate swaps, LCH, is based there and is majority-owned by London Stock Exchange Group Plc. LCH functions as a middle man collecting collateral and standing between derivatives and swaps traders to prevent a default from spiraling out of control. As Bloomberg reports, the role of clearing houses like LCH in global finance has become far more entrenched since the 2008 Financial Crisis and the inexorable expansion of derivatives trading. For years the French government, together with the European Central Bank, has wanted a piece of the action. Ironically, it was the European Court of Justice (ECJ) — the same court whose jurisdiction the UK government is now determined to elude — that, in 2015, stopped that from happening on the grounds that the ECB cannot discriminate against an EU member. But if the UK leaves the EU, and thus the ECJ’s jurisdiction, that ruling will no longer be applicable.

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They had the money but not the interest in the idea,” he lamented, “instead spending a year developing a complex bill that was DOA on [Capitol] Hill.”

Single Payer Is The Only Real Answer, Says Medicare Architect (IC)

Thanks to a pair of defections from more GOP senators late yesterday, the Republican plan to repeal and replace or simply repeal the Affordable Care Act is dead — for now. But the health care status quo is far from popular, with 57% of Americans telling Gallup pollsters in March that they “personally worry” a “great deal” about health care costs. Many health care activists are now pushing to adopt what is called a “single payer” health care system, where one public health insurance program would cover everyone. The U.S. currently has one federal program like that: Medicare. Expanding it polls very well. One of the activists pushing for such an expansion is Max Fine, someone who is intimately familiar with the program — because he helped create it.

Fine is the last surviving member of President Kennedy’s Medicare Task Force, and he was also President Johnson’s designated debunker against the health insurance industry. Fine, now 91, wrote to The Intercept recently to explain that Medicare was never intended to cover only the elderly population, and that expanding it to everyone was a goal that its architects long campaigned for. “Three years after the enactment of Medicare, in Dec. 1968, a Committee of 100 leading Americans was formed to campaign for single payer National Heath Insurance. The campaign leaders were UAW pres. Walter Reuther, Dr. Michael DeBakey, Nat. Urban League Pres Whitney Young and Mary Lasker, a leader in the formation and funding of NIH,” he wrote.

”The NY Times and other newspapers gave front page play to the announcement of the campaign for ‘Medicare for All’ but the Committee gained even more attention when, shortly before xmas, pres-elect Nixon, emerging from his doctor’s office in San Diego, denounced us as socialists who were trying to create a problem when none existed.” Fine noted that this movement towards single payer has “risen and fallen over the years,” reaching a high point in the early 70s when former Democratic Massachusetts Sen. Ted Kennedy’s bill covering all Americans with government health insurance had 36 co-sponsors. But the Democratic Party decided to go a different direction, turning instead to private insurance to cover Americans.

Fine said he met with former First Lady Hillary Clinton’s health care task force in the early 1990’s, and advised them to incrementally expand Medicare, starting first with children and then lowering the age for the elderly. “They had the money but not the interest in the idea,” he lamented, “instead spending a year developing a complex bill that was DOA on [Capitol] Hill.”

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Deutsche already did a review and reported nothing suspicious. Does that make them suspect?

Deutsche Bank Expects Subpoenas Over Trump-Russia Investigation (G.)

Executives inside Deutsche Bank, Donald Trump’s personal bankers, are expecting that the bank will soon be receiving subpoenas or other requests for information from Robert Mueller, the special counsel who is investigating possible collusion between the Kremlin and the Trump campaign. A person close to the matter who spoke to the Guardian on the condition of anonymity said that Mueller’s team and the bank have already established informal contact in connection to the federal investigation. Deutsche’s relationship with Trump and questions about hundreds of millions in loans have dogged the German bank and the White House for months. They have also been the subject of intense scrutiny among some Democrats on Capitol Hill, who have demanded the bank turn over detailed information about the president’s accounts.

The requests for information from Maxine Waters, the top Democrat on the House financial services committee, have focused on whether any Russian entities may have provided financial guarantees for the loans that were made to the president or his immediate family members. The Guardian reported in February that the bank launched a review of Trump’s account earlier this year in order to gauge whether there were any suspicious connections to Russia and did not discover anything suspicious. Ivanka Trump, the president’s daughter and adviser in the White House; her husband, Jared Kushner, who is also a presidential adviser; and Kushner’s mother, Seryl Stadtmauer, are all clients of Deutsche Bank.

US media outlets have reported that Mueller’s investigation into possible Russian collusion with the Trump campaign will include a close examination of the president’s finances and businesses. While Deutsche Bank did engage in banking transactions with Russian banks as late as 2005, including some loan activity, a person familiar with the matter said the activity was not related to Trump’s accounts or his family.

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What a surprise. The same ones that signed on to the Paris Accord, by any chance?

Asia’s Coal-Fired Power Boom ‘Bankrolled By Foreign Governments And Banks’ (G.)

The much-discussed boom in coal-fired power in south-east Asia is being bankrolled by foreign governments and banks, with the vast majority of projects apparently too risky for the private sector. Environmental analysts at activist group Market Forces examined 22 deals involving 13.1 gigawatts of coal-fired power in Indonesia and found that 91% of the projects had the backing of foreign governments through export credit agencies or development banks. Export credit agencies, which provide subsidised loans to overseas projects to assist export industries in their home countries, were involved in 64% of the deals and provided 45% of the total lending. The majority of the money was coming from Japan and China, with the Japan Bank for International Cooperation (JBIC) involved in five deals and the Export-Import Bank of China (Cexim) involved in seven deals.

All the deals closed between January 2010 and March 2017. The China Development Bank was the biggest development bank lending to the projects, imparting $3bn, with a further $300,000 in development funds coming from Korea’s Korea Development Bank. The lending comes despite the world’s biggest development bank – the World Bank – warning last year that plans to build more coal-fired power plants in Asia would be a “disaster for the planet” and overwhelm the deal forged at Paris to fight climate change. “Right now, several key countries supporting the Paris climate change agreement are actively undermining it by trying to expand the polluting coal-power sector in other countries,” said Julien Vincent, executive director of Market Forces.

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The upside down logic of the First American Financial Corporation. They need people to buy and sell, or their business is dead. Your home is a prison if you don’t sell it. But the supply shortage illusion is really gone, guys.

When Does a Home Become a Prison? (FAFC)

In most markets, the seller, or supplier, makes their decision about adding supply to the market independent of the buyer, or source of demand, and their decision to buy. In the housing market, the seller and the buyer are, in many cases, actually the same economic actor. In order to buy a new home, you have to sell the home you already own. So, in a market with rising prices and strong demand, what’s preventing existing homeowners from putting their homes on the market? The housing market has experienced a long-run decline in mortgage rates from a high of 18% for the 30-year, fixed-rate mortgage in 1981 to a low of almost 3% in 2012. Today, five years later, mortgage rates remain just a stone’s throw away from that historic low point.

This long-run decline in rates encouraged existing homeowners to both move more often and to refinance more often, in many cases refinancing multiple times between each move. It’s widely expected that mortgage rates will rise further. This is more important than we may even realize because the housing market has not experienced a rising rate environment in almost three decades! No longer is there a financial incentive to refinance for most homeowners, and there’s more to consider when moving. Why move when it will cost more each month to borrow the same amount from the bank? A homeowner can re-extend the mortgage term another 30 years to increase the amount one can borrow at the higher rate, but the mortgage has to be paid off at some point.

Hopefully before or soon after retirement. Existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate. It makes choosing a kitchen renovation seem more appealing than moving.” There is one more possibility caused by the fact that the existing-home owner is both seller and buyer. In today’s market, sellers face a prisoner’s dilemma, a situation in which individuals don’t cooperate with each other, even though it is seemingly in their best interest to do so. Consider two existing homeowners. They both want to buy a new house and move, but are unable to communicate with each other. If they both choose to sell, they both benefit because they increase the inventory of homes available, and collectively alleviate the supply shortage.

However, if one chooses to sell and the other doesn’t, the seller must buy a new home in a market with a shortage of supply, bidding wars and escalating prices. Because of this risk, neither homeowner sells (non-cooperation) and neither get what they wanted in the first place – a move to a new, more desirable home. Imagine this scenario playing out across an entire market. If everyone sells there will be plenty of supply. But, the risk of selling when others don’t convinces everyone not to sell and produces the non-cooperative outcome. Rising mortgage rates and the fear of not being able to find something affordable to buy is imprisoning homeowners and causing the inventory shortages that are seen in practically every market across the country. So, what gives in a market short of supply relative to demand? Prices. According to the First American Real House Price Index, the fast pace of house price growth, combined with rising rates, has had a material impact on affordability.

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A weird turnaround in an already weird file. Tillerson?

Saudi-Led Bloc Drops List Of Demands For Qatar (BBC)

The four Arab nations leading a boycott of Qatar are no longer insisting it comply with a list of 13 specific demands they tabled last month. Diplomats from Saudi Arabia, the United Arab Emirates, Bahrain and Egypt told reporters at the UN they now wanted it to accept six broad principles. These include commitments to combat terrorism and extremism and to end acts of provocation and incitement. There was no immediate comment from Qatar, which denies aiding terrorists. It has refused to agree to any measures that threaten its sovereignty or violate international law, and denounced the “siege” imposed by its neighbours. The restrictions put in place six weeks ago have forced the gas-rich emirate to import food by sea and air to meet the basic needs of its population of 2.7 million.

At a briefing for a group of UN correspondents in New York on Tuesday, diplomats from the four countries said they wanted to resolve the crisis amicably. Saudi permanent representative Abdullah al-Mouallimi said their foreign ministers had agreed the six principles at a meeting in Cairo on 5 July and that they “should be easy for the Qataris to accept”. This latest development does, on the surface, hint at a possible way out of the current standoff between Qatar and its neighbours. But it is unlikely to provide a permanent solution. The problem comes down to how countries choose to interpret “extremism and terrorism”. Qatar has long prided itself on giving voice to alternative views to the edited, government-approved ones aired by its conservative neighbours. Hence one of the reasons why Qatar’s Al Jazeera network has been such a thorn in their sides. However, the charge levelled against Qatar is that those alternative voices include people committed to the overthrow of governments in the region.

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Please pay $64.450 to comply with bylaws.

Toronto Man Builds Park Stairs For $550, Irking City After $65,000 Estimate (CTV)

A Toronto man who spent $550 building a set of stairs in his community park says he has no regrets, despite the city’s insistence that he should have waited for a $65,000 city project to handle the problem. The city is now threatening to tear down the stairs because they were not built to regulation standards. Retired mechanic Adi Astl says he took it upon himself to build the stairs after several neighbours fell down the steep path to a community garden in Tom Riley Park, in Etobicoke, Ont. Astl says his neighbours chipped in on the project, which only ended up costing $550 – a far cry from the $65,000-$150,000 price tag the city had estimated for the job. “I thought they were talking about an escalator,” Astl told CTV News Channel on Wednesday.

Astl says he hired a homeless person to help him and built the eight steps in a matter of hours. Astl’s wife, Gail Rutherford, says the stairs have already been a big help to people who routinely take that route through the park. “I’ve seen so many people fall over that rocky path that was there to begin with,” she said. “It’s a huge improvement over what was there.” Astl says members of his gardening group have been thanking him for taking care of the project, especially after one of them broke her wrist falling down the slope last year. “To me, the safety of people is more important than money,” Astl said. “So if the city is not willing to do it, I have to do it myself.” City bylaw officers have taped off the stairs while officials make a decision on what to do with it. However, Astl has not been charged with any sort of violation.

Mayor John Tory acknowledged that the city estimate sounds “completely out of whack with reality” on Wednesday. However, he says that still doesn’t justify allowing private citizens to bypass city bylaws to build public structures themselves. “I think everyone will understand that it will be more than $550,” he said on Wednesday. “We just can’t have people decide to go out to Home Depot and build a staircase in a park because that’s what they would like to have.”

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Result: reisistant superbugs.

US-Style Mega Farms Invade The World (G.)

Since the days of the wild west frontier, the popular image of American farming has been of cowboys rounding up steers on wide open ranches, to whoops, whips and hollers. Today, the cowboys on their ranches under wide open skies have been replaced by vast sheds, hulking over the plains, housing tens of thousands of animals each, with the noises and smells spreading far beyond their fences. The US has led the world in large-scale farming, pioneering the use of intensive livestock rearing in hog farms, cattle sheds and sheep pens. There are now more than 50,000 facilities in the US classified as concentrated animal feeding operations (CAFOs), with another quarter of a million industrial-scale facilities below that threshold. Around the world, developing countries in particular were quick to catch up.

Intensive farming of livestock offers many advantages over traditional open ranges, not least economies of cost and scale, more efficient healthcare for the herds and flocks, and ultimately cheaper food. According to the UN, globally CAFOs account for 72% of poultry, 42% of egg, and 55% of pork production. In 2000, there were an estimated 15 billion livestock in the world, according to the Worldwatch Institute. By last year, that had risen to about 24 billion, with the majority of eggs, chicken meat and pork produced on intensive farms. Ranching was never an option in the UK, but most people still expect farms to consist of green fields rather than vast industrial-scale sheds. The reality is an increasing number of livestock are “zero graze”, spending all or almost all of their time indoors in large warehouse-type facilities.

[..] at least 789 megafarms, meeting the US definition of CAFOs, now operate around the UK, with every region of the country hosting several such operations, many of them owned by foreign multinationals. These are the biggest in a wave of intensive farms that has increased by more than a quarter in six years. [..] Emma Slawinski, director of campaigns at Compassion in World Farming, said the problems of mega farms around the world included over-medication, where animals are given antibiotics whether they are needed or not. “Factory-farmed animals are regularly given antibiotics in their feed or water, because of the higher risk of disease when large numbers of animals are kept in these overcrowded conditions. There is strong evidence that this overuse of antibiotics in intensive farming is contributing to antibiotic resistance in human medicine.

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How is this new information?

Australia Was Colonized By Humans 20,000 Years Before Europe (Ind.)

Australia was colonised about 20,000 years before humans first arrived in Europe, according to new research. The discovery of the world’s oldest stone axes with ground edges, ochre used to make “spectacular rock art” and other artefacts in northern Australia pushes back the earliest known presence of humans to 65,000 years ago. Despite the relative closeness of Europe to Africa, where modern humans first evolved about 200,000 to 3000,000 years ago, the first concrete signs of Europeans are about 45,000 years old. In addition to their sophisticated axes, the people who first arrived on Australia’s shores may also have been armed with spears. The objects were found at Madjedbebe within the traditional lands of the Mirarr clan, an area of land that was excluded from the surrounding Kakadu National Park after a lease to mine uranium in the area was granted in 1982.

Representatives of the Mirarr said the research showed the “universal importance” of the area and called for it to receive the “highest level of conservation and protection”. Writing in the journal Nature, the researchers said: “The settlement of Madjedbebe around 65,000 years ago … sets a new minimum age for the human colonisation of Australia and the dispersal of modern humans out of Africa and across south Asia. “The final stages of this journey took place at a time of lower sea level, when northern Australia was cooler and wetter. “Our chronology … extends the period of overlap of modern humans and Homo floresiensis [the hominin species better known as hobbits] in eastern Indonesia to at least 15,000 years and, potentially, with other archaic hominins – such as Homo erectus – in southeast Asia and Australasia.”

In addition to changing the story of our species’ expansion across the globe, the new much older date challenges theories that Australia’s astonishing megafauna – a two-tonne wombat, giant kangaroos that were so big they couldn’t hop and a two-metre-tall bird – were quickly wiped out by humans. “Our chronology places people in Australia more than 20,000 years before continent-wide extinction of the megafauna,” the Nature paper said.

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Deterrent is still the favorite approach for Greece as well as the EU. Cowards.

Child Refugees Denied Care Amid Suicide And Abuse In Greek Camps (Ind.)

Unaccompanied child refugees are being wrongly identified as adults by Greek authorities and denied vital care in squalid camps, a new report has found. Human Rights Watch (HRW) interviewed children as young as 15, who said they had been denied special protections required under international law. The group found Greece’s legal age assessment procedure was not being “followed in practice” on the island of Lesbos, which has been at the epicentre of the Aegean refugee crisis. [..] Under Greek law, the government is supposed to appoint a guardian for each child to represent them in legal proceedings, hear their views and act in their best interests, separating minors into designated areas of “hotspot” processing centres.

The Greek Reception and Identification Service (RIS) is responsible for identifying unaccompanied children and other vulnerable groups, with support from the UN, Frontex border agency and EU, and referring them to social services and information. But HRW said the authority was “failing to meet its responsibilities” and sometimes “arbitrarily” recording ages above those given, sometimes using controversial dental examinations without any other evidence. Those classified as adults are left to fend for themselves at heightened risk of exploitation, trafficking and other abuse, including prostitution, aid workers have warned. “They live in official and unofficial sites with unrelated adult single men; are exposed to inhumane living conditions, including overcrowding, unsanitary conditions, and frequent incidents of violence; and are unable to go to school or otherwise access education,” HRW said.

[..] When there is no space in safe shelters for unaccompanied children, authorities frequently detain them in police stations, immigration detention facilities and asylum processing centres, with 1,149 unaccompanied minors currently awaiting places. The uncertainty and distress provoked by the process is worsening an ongoing mental health crisis in Greek camps, aid workers said, having already warned of increasing rates of suicide and self-harm. [..] Greek officials told HRW that a thorough procedure is followed to establish the ages of asylum claimants [..] The group called on authorities in Greece to bring age assessments in line with international best practice, so proper accommodation, care, education, counselling and legal aid can be given to those who need it.

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Scandalous. But at least something UK and EU can agree on: let ’em rot.

UK Has Not Taken In Any Child Refugees Under Dubs Scheme This Year (G.)

Home Office ministers have tried to deflect cross-party anger as it emerged that not a single extra lone child refugee has been brought to Britain from Europe under the “Dubs amendment” this year. The immigration minister, Brandon Lewis, met accusations that the government was “dragging its feet” by disclosing he will visit Italy and Greece next week to follow up the invitation to refer eligible children to be brought to Britain. But during an urgent Commons question raised by the outgoing Liberal Democrat leader, Tim Farron, he faced cross-party criticism that it was taking too long to process eligible refugee children in Europe to bring them to Britain. Home Office ministers have confirmed in written answers that only 200 children were transferred under Dubs in 2016 after the closure of the Calais camp and 280 local authority places remain to be filled.

The Dubs amendment, known as section 67, was passed in April 2016 amid a campaign to bring 3,000 lone refugee children stuck in camps in Europe to Britain. Ministers initially estimated local authority capacity at 350 but extended it to 480 in April after saying there had been “an administrative error” in the initial figure. Lily Caprani, of Unicef UK, said: “It’s unacceptable that we have seen no children brought under the Dubs scheme this year. As a nation we showed our compassion and our principles when we helped refugee children stranded in Calais, but we were told this was not the end of the story. We are seeing too many children still having to make dangerous journeys to reach safety.”

In the Commons, Farron said it was hard to see the government’s response as anything more than lip service and demanded to know when the “measly commitment” of 480 would be met. “I have visited the camps in Greece and elsewhere – something neither the home secretary nor the prime minister have done. I have met these children who, through no fault of their own, find their lives paused as ministers have chosen to ignore them,” said the Lib Dem leader. “Has the UK government even signed a memorandum of understanding with Greece to get these transfers under way? I know of two young people who signed a consent form to be transferred under Dubs over a year ago. They are still stuck in Greece.”

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Bringing carbon to the surface.

The World Has Made More Than 9 Billion Tons of Plastic (CNBC)

More than 9 billion tons of plastic have been made since the 1950s, and the vast majority of it has been thrown in the trash, says a new study. The paper says it is the first attempt to measure the total amount of plastic produced since the beginning of mass plastic production in the middle of the 20th century. A team of researchers from the University of California, Santa Barbara, the University of Georgia, and the Woods Hole Oceanographic Institution, say that although plastic materials such as Bakelite were in use in the early 20th century, the material’s popularity began to rapidly rise after World War II, making it one of the most commonly used man-made materials. For example, the researchers estimated that the amount of plastic in use now is 30% of all the plastic ever produced.

While that has brought its benefits, such as lower-cost materials or capabilities like water resistance, our love of plastic has also produced a lot of trash. About 7 billion tons of it, by their estimate. And as of 2015, only 9% of the plastic waste produced ended up recycled, and another 12% was incinerated, the researchers found in their report. The remaining 79% has built up in landfills or ended up elsewhere in the environment. The team published their results in the journal Science Advances on Wednesday. To make their estimates, the researchers cobbled together datasets on global plastic production, such as global annual pure polymer (resin) production data from 1950 to 2015, published by the Plastics Europe Market Research Group, and global annual plastic fiber production data from 1970 to 2015 published by The Fiber Year and Tecnon OrbiChem.

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Production is not just growing, growth is still accelerating.

World’s Plastic Waste Could Bury Manhattan 2 Miles Deep (AP)

Industry has made more than 9.1 billion tons of plastic since 1950 and there’s enough left over to bury Manhattan under more than two miles of trash, according to a new cradle-to-grave global study. Plastics don’t break down like other man-made materials, so three-quarters of the stuff ends up as waste in landfills, littered on land and floating in oceans, lakes and rivers, according to the research reported in Wednesday’s journal Science Advances . “At the current rate, we are really heading toward a plastic planet,” said study lead author Roland Geyer, an industrial ecologist at the University of California, Santa Barbara. “It is something we need to pay attention to.” The plastics boom started after World War II, and now plastics are everywhere. They are used in packaging like plastic bottles and consumer goods like cellphones and refrigerators.

They are in pipes and other construction material. They are in cars and clothing, usually as polyester. Study co-author Jenna Jambeck of the University of Georgia said the world first needs to know how much plastic waste there is worldwide before it can tackle the problem. They calculated that of the 9.1 billion tons made, nearly 7 billion tons are no longer used. Only 9% got recycled and another 12% was incinerated, leaving 5.5 billion tons of plastic waste on land and in water. Using the plastics industry own data, Geyer, Jambeck and Kara Lavender Law found that the amount of plastics made and thrown out is accelerating. In 2015, the world created 448 million tons of plastic — more than twice as much as made in 1998.

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Apr 102017
 
 April 10, 2017  Posted by at 8:21 am Finance Tagged with: , , , , , , , , , ,  9 Responses »
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Todd Webb Rue des Plantes, Paris 1950

 

Americans Are Becoming Obsessed With Putting Everything On Credit (MW)
Cash Is Dead. Long Live Cash. (WSJ)
A Change In The Change Of Change (Peters)
Great Debt Unwind: Bankruptcies Surge (WS)
Trump’s Rollback of Bank Regulations Risks a Bondholder Backlash (Street)
Syria Strike Designed To Intimidate North Korea: China State Newspaper (G.)
Is Globalisation Dead? (Pettifor)
Housing Costs Are Pushing People Further Out of Sydney (BBG)
Toronto Mayor Says He’s Open to Sale of City Real Estate Assets
Secret Recording Implicates Bank of England In Libor Manipulation (BBC)
The Fire In The Hold Of The Doomed Euro (Ward)
Tsipras: Debt Relief Prerequisite to Legislate New Measures (GR)
Great Barrier Reef at ‘Terminal Stage’ (G.)
John Clarke has Died

 

 

We need a war on plastic, not cash.

Americans Are Becoming Obsessed With Putting Everything On Credit (MW)

It’s more likely that the last time you bought a pack of gum or a can or soda, you used a credit card. People like their credit cards so much they’re using them even for the tiniest purchases, according to a new survey released Monday from the credit cards site CreditCards.com. Among people with credit cards, 17% said they use them to buy items in brick-and-mortar stores that cost less than $5, up from 11% last year. CreditCards.com surveyed about 1,000 U.S. adults in March 2017. After a lull in the wake of the Great Recession, credit cards are once again being used with increased frequency. The Federal Reserve reported last week that collective credit card debt in the U.S. had reached $1 trillion.

Credit-card debt and auto loan debt balances for people ages 60 and older have also risen since 2008, that Fed data showed, whereas credit-card debt for those 59 and younger has fallen. The Fed, when describing that phenomenon, said lending standards have tightened since the recession, and those who are older may also be more creditworthy. But when consumers can pay their balances each month, turning to credit cards for small purchases isn’t a bad thing, said Matt Schulz, a senior industry analyst for CreditCards.com. Putting more charges on a credit card may indicate consumers feel more optimistic about their financial picture for the future, he said. “People who are chasing rewards realize that those little purchases can add up to a lot of rewards over the course of a year,” he added.

Indeed, several high-profile credit cards offer cash back and perks for spending. For example, Amazon introduced a credit card this year for Prime members that gives 5% cash back on Amazon purchases (Prime itself costs $99 per year.) Some retailers, however, prohibit credit-card purchases below a certain amount to avoid paying transaction fees to the credit-card issuers for such purchases. That said, cash and debit cards still are the go-to options for making small purchases, despite the speed with which credit cards are gaining on them. Of those surveyed, 24% said they use debit cards for small purchases, and 55% said they use cash. It appears younger consumers are behind at least some of the growth in credit card use: Some 70% of baby boomers and their older cohorts, the Silent Generation, still choose cash for small purchases versus 43% of those under 53.

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A little incoherent article, but point taken. Countries that try to go cashless should be careful.

Cash Is Dead. Long Live Cash. (WSJ)

[..] the push to get rid of cash is hitting speed bumps all over. India, for example, is already partly reintroducing its 500- and 1000-rupee bills after the government’s abrupt demonetization program drew sharp criticism for hurting its cash-dependent rural population. The U.S. shows no inclination to pare back its notes. “I’m very conscious of the $100 bill being the world’s reserve currency, and every central bank around the world has stacks of $100 bills where they used to have gold,” Treasury Secretary Jacob Lew said in an interview with The Wall Street Journal shortly before he left office in January. One reason it’s a non-starter in the U.S.: About 8% of people don’t have a checking or savings account, making it all-but-impossible for them to participate in a cashless economy.

Banning cash “would bring the economy and many people to their knees if enforced,” said Hoover Institution economist John Cochrane. In the aboveground economy, card-based and digital payment systems offering ever-greater speed, safety and convenience have been steadily encroaching on paper money, even for small consumer transactions. Euromonitor International, a market-research firm, said the volume of global cash payments in 2016 for the first time fell below payments on credit and debit cards. Some of the growth in cash can be attributed to the financial crisis and the aftermath, when people lost faith in banks, and when ultralow interest rates and anemic investment returns reduced the opportunity costs of holding savings in cash. The number of $100 bills in circulation, worth $1.15 trillion in December, has surged 76% since 2009, according to Federal Reserve data.

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“Brexit was a joke. Trump was a joke..”

A Change In The Change Of Change (Peters)

“The change of change is now negative,” said the CIO. “Global growth is still rising, but the rate of improvement is slowing,” he explained. “Same holds true for global inflation, oil prices, copper, iron ore. Credit growth is slowing in the US, Europe, Japan, China.” If these things were all contracting, we’d plunge into recession, but we’re not there. We’re simply at the point in the cycle where the rate of acceleration is slowing – which is both evidence of a pause, and a precondition for every major turn. “The last time we had a major shift in the change of change was a year ago.” In Jan/Feb 2016, China was imploding. Commodity prices were tanking with equity markets, the dollar soared alongside volatility. Then China unleashed explosive credit stimulus, while the Fed blinked, guiding forward interest rates dramatically lower. Within a short time, the change of change turned positive.

Which is not to say things immediately accelerated, it’s just that they started contracting more slowly. And that marked the time to buy. “Pretty much everything that happened in 2016 can be explained by two things; China and oil prices,” he said. “Literally, that’s it.” China’s stimulus-induced rebound and the oil price recovery is all that mattered. “Brexit was a joke. Trump was a joke. In fact, the only real significance of those events was that they provided investors with opportunities to jump on board the reflation trade at back near Q1 prices.” The reflation trade quietly began in the Q1 collapse, and accelerated off the extreme post-Brexit summer lows in global interest rates. That’s what made last year remarkable. Even investors who missed the first opportunity, had two chances to make a lot of money.” You see, that reward is usually reserved for those who act on the first signs of a change in the change of change.

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Credit shrinks, the Zombies fall.

Great Debt Unwind: Bankruptcies Surge (WS)

Commercial bankruptcy filings, from corporations to sole proprietorships, spiked 28% in March from February, the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012. They’re up 8% year-over-year. Over the past 24 months, they soared 37%! At 3,658, they’re at the highest level for any March since 2013. Commercial bankruptcy filings skyrocketed during the Financial Crisis and peaked in March 2010 at 9,004. Then they fell sharply until they reached their low point in October 2015. November 2015 was the turning point, when for the first time since March 2010, commercial bankruptcy filings rose year-over-year.

Bankruptcy filings are highly seasonal, reaching their annual lows in December and January. Then they rise into tax season, peak in March or April, and zigzag lower for the remainder of the year. The data is not seasonally or otherwise adjusted – one of the raw and unvarnished measures of how businesses are faring in the economy. Note that there is no “plateauing” in this chart: since the low-point in September 2015, commercial bankruptcies have soared 65%! That red spike is the mega-increase in March:

At first, they blamed the oil bust. The price of oil began to collapse in mid-2014. By 2015, worried bankers put their hands on the money spigot, and a number of companies in that sector, along with their suppliers and contractors, threw in the towel and started filing for bankruptcy protection. But now the price of oil has somewhat recovered, banks have reopened the spigot, Wall Street has once again the hots for the sector, new money is gushing into it, and oil & gas bankruptcy filings have abated. So now they blame brick-and-mortar retail which is in terminal decline, given the shift to online sales. I have reported extensively on the distress of the larger chain stores, but brick-and-mortar retailers include countless smaller operations and stores that no ratings agency follows because they’re too small and can’t issue bonds, and many of them are even more distressed.

[..] Now come the consumers – not all consumers, but those with mounting piles of debt and stagnating or declining real incomes, of which there are many. They’d been hanging on by their teeth, with bankruptcy filings consistently declining since 2010. But that ended in November 2016. In December, bankruptcy filings rose 4.5% from a year earlier. In January they rose 5.4%. It was the first time consumer bankruptcies rose back-to-back since 2010. I called it “a red flag that’ll be highlighted only afterwards as a turning point.” In March, consumer bankruptcy filings rose 4% year-over-year, to 77,900, the highest since March 2015, when 79,000 filings occurred, according to the American Bankruptcy Institute data. The turning point has now been confirmed. Total US bankruptcy filings by consumers and businesses in March spiked 40% from February and rose 4% year-over-year to 81,590, the highest since March 2015:

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Trust at risk.

Trump’s Rollback of Bank Regulations Risks a Bondholder Backlash (Street)

President Donald Trump’s pledge to roll back regulations on U.S. banks could face resistance from an influential constituency: bondholders. While stockholders of firms like JPMorgan Chase and Goldman Sachs have cheered Trump’s plans to repeal or soften rules imposed in the wake of the 2008 financial crisis, bond-rater Standard & Poor’s is warning that such a move could undermine the industry’s creditworthiness. Measures like “stress testing,” in which regulators evaluate banks annually to determine if they’re sufficiently prepared to withstand a deep economic or market downturn, have made the firms safer, according to S&P. And so-called resolution planning – the practice of planning in advance how big banks would be wound down following a Lehman Brothers-style collapse – also has contributed to the industry’s resilience, the ratings firm wrote in a March 20 report.

The timetable for any such changes isn’t yet clear, however. Trump in February signed an executive order directing U.S. Treasury Secretary Steven Mnuchin to identify any laws that might impede economic growth or vibrant markets. Those could include the 2010 Dodd-Frank Act, signed by former President Barack Obama to curb risky activities like using excessive borrowings to fuel earnings growth and allowing in-house traders to speculate on markets with proprietary capital. “An overhaul of Dodd-Frank could be detrimental for bank creditors,” S&P wrote in the report. “If changes to Dodd-Frank watered down these features, and if banks reacted to such changes by weakening their financial management, we could lower ratings.” The fresh concerns could contribute to a shift in investor sentiment that’s been mostly positive toward banks since Trump’s surprise election on Nov. 8.

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Xi responds after he’s left Mar-a-Lago.

Syria Strike Designed To Intimidate North Korea: China State Newspaper (G.)

Donald Trump’s decision to attack Syria had also been designed to intimidate North Korean leader Kim Jong-un, a Chinese newspaper has claimed, as G7 foreign ministers meet to discuss the fallout from last week’s missile incursion. The state-run Global Times said a US strike against North Korea would unleash carnage on the Korean peninsula. The US navy has deployed a strike group towards the western Pacific Ocean, to provide a presence near the Korean peninsula. South Korean officials suspect Kim may be planning to hold his country’s sixth nuclear test later this week to mark the 105th anniversary of the birth of founder Kim Il-sung on 15 April, an event a number of foreign journalists have been invited to cover.

In an editorial entitled: ‘After Syria strikes, will North Korea be next?’, the Global Times suggested the US might now be preparing to launch “similar actions” against Pyongyang and warned of catastrophic consequences if it did. “A symbolic strike against North Korea by the US would bring a disaster to the people in Seoul,” the newspaper said, claiming a “decapitation attack” on North Korea was now “highly possible”. Such a strike would “very likely evolve into large-scale bloody war on the peninsula”. The Global Times noted the decision to deploy a strike force to the Western Pacific over the weekend and cautioned Pyongyang against doing anything that might further inflame the situation.

“New nuclear tests will meet with unprecedented reactions from the international community, even to a turning point.” The warnings came after the US secretary of state, Rex Tillerson, claimed that the situation in North Korea had “reached a certain level of threat that action has to be taken”. Asked if the attack on Syria could be seen as a message to Pyongyang, Tillerson told ABC: “The message that any nation can take is: ‘If you violate international norms, if you violate international agreements, if you fail to live up to commitments, if you become a threat to others, at some point a response is likely to be undertaken.”

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“Hayek: state regulation leads to totalitarianism. But instead self-regulating markets led to today’s authoritarians.”

Is Globalisation Dead? (Pettifor)

In the BBC’s brief and pressured half-hour I wanted to get across that globalisation had not delivered on its promise – to make ‘the market’ the main driver of a more effective, more productive economy; to transform societies into nations of ‘shareholders’; to ensure a revolution in homeownership, and to avoid what Hayek called the threat of a totalitarian state. Instead financial globalisation has been an era largely fuelled by carbon (oil and coal) – as had been the case for over a century. However, unlike the Bretton Woods era, post 1970s de-regulated financial globalisation was built on mountains of private and public debt. The first – private debt – led to recurring financial crises, and the second – public debt – rose as private sector activity weakened, and tax revenues fell.

The consequences of these recurring financial crises in ‘advanced’ economies included ‘austerity’, the removal of employment protection, rising housing and education costs, the return of deflationary pressures, high unemployment, falling real wages, low productivity and rising inequality. These crises have led to increased insecurity and over-rapid social and economic change- as well as the greatest financial and economic crisis since 1929 (itself a product of excessive laissez-faire ideology). More widely, the insecurities and dislocations generated by financial globalisation have led whole populations to seek the ‘protection’ of a strong man (e.g. Presidents Trump, Duterte in the Philippines, Modi in India, Erdogan in Turkey, Putin in Russia).

Not that this worries the extreme adherents of laissez-faire – recall how Hayek supported the murderous dictator Pinochet in Chile for his brutal imposition of deregulatory ‘reform’. And so, contrary to Hayek’s expectations, financial globalisation has proved that it is market fundamentalism, and not the regulatory state that is leading the world into an era of authoritarianism and totalitarianism – in the US, Eastern Europe, India and China.

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But politicians will keep saying that it’s all because not enough is being built. Why don’t you raise rates first and see what happens?

Housing Costs Are Pushing People Further Out of Sydney (BBG)

New South Wales has taken over as Australia’s economic engine as the mining investment boom tails off, with central Sydney contributing almost a quarter of the nation’s growth last fiscal year. That success has come with a price. As workers flock to Sydney, an under-supply of housing, coupled with record-low interest rates, has made the city the world’s second-most expensive property market. Home prices jumped 19 percent in the past 12 months, stoking concern home ownership is increasingly beyond the reach of younger people. That’s a big political problem for the state’s new Premier Gladys Berejiklian, who made housing affordability one of her priorities when she took the job in late January. Housing affordability is “a barbecue stopper,” Berejiklian, 46, said in an interview in her Sydney office on Thursday.

“We are convinced if we put downwards pressure on prices through supply, that’s the best way we can solve it as a state government.” Sydney’s housing completions reached a 15-year high in 2016, though Berejiklian says the state is only now playing catch-up after “a decade of under-investment.” “There are about 100,000 dwellings we are behind on in terms of really digging into the demand,” she said. [..] There are several barriers to boosting housing supply in Sydney. The city is bordered by mountains to the west, the ocean to the east and rivers and national parks to the north and south, restricting the supply of new land, while moves to increase housing density in established suburbs have run into opposition from residents. That’s meant in the past three years, almost 70 percent of new detached houses have been built more than 30 kilometers from Sydney’s central business district…

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“..the Canadian government has been trying to find ways to “crystallize” the value in some of its property assets…”

Toronto Mayor Says He’s Open to Sale of City Real Estate Assets

Toronto’s mayor won’t rule out selling some of the city’s prime downtown real estate as he looks to make better use of assets amid an unprecedented property boom. “Would I take that off the table? No, I wouldn’t,” Mayor John Tory said in an interview last week at Bloomberg’s Toronto office. Selling buildings in the city’s costly downtown market probably wouldn’t be “quite as politically charged” as divesting other types of assets, such as the parking authority or power utility Toronto Hydro, he said. The need for North America’s fourth-largest city to fund critical transit upgrades and housing improvements coincides with skyrocketing property prices in the region. Toronto’s real estate portfolio includes 6,976 buildings with 106.3 million square feet (9.9 million square meters), almost half of which is multifamily, according to a Dec. 6 report on the city’s assets.

With all of the demands on the city to raise money for building transit lines and repairing existing housing, then “might you be looking at the business case for handling real estate in a different way? Because this is the most expensive downtown real estate you could possibly have,” said the mayor, elected in 2014. The report, commissioned by the city and conducted by Deloitte, estimates the value of municipal real estate including community housing, parks and forestry is C$27 billion ($20 billion), while the annual operating costs in “core” real estate and facilities management is C$1.1 billion. Tory said he watched with passing interest the federal government’s sale earlier this year of the Dominion Public Building. The historic downtown property beside Toronto’s Union Station sold for about C$275 million ($205 million), according to newspaper reports.

The property was “super underutilized,” BMO analyst Heather Kirk said in an interview, adding the Canadian government has been trying to find ways to “crystallize” the value in some of its property assets. “What a building is worth to the government in current form is totally different than the value to a developer,” Kirk said. “They are buying density.” When asked how any properties might be sold, Tory stressed he didn’t currently have any specific recommendations to make to the city council, although “I just know those are things that sit out there still as options that are in front of the city government to raise money to do the things we have to do,” he said.

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Ehh.. how do you lock up the Bank of England?

Secret Recording Implicates Bank of England In Libor Manipulation (BBC)

A secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama. The 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down. Libor is the rate that banks lend to each other and it sets a benchmark for mortgages and loans for ordinary customers. The Bank of England said Libor was not regulated in the UK at the time. The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England. Libor, the London Interbank Offered Rate, tracks how much it costs banks to borrow money from each other.

As such it is a big influence on the cost of mortgages and other loans. Banks setting artificially low Libor rates is called lowballing. In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates. He tells him: “The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.” Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash. Mr Johnson says: “So I’ll push them below a realistic level of where I think I can get money?” His boss Mr Dearlove replies: “The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing… I am as reluctant as you are… these guys have just turned around and said just do it.”

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The warnings have always been there. Totally ignored.

The Fire In The Hold Of The Doomed Euro (Ward)

The more basic stuff goes back at least twenty years, to the period where trouble was stored up for the future by fanatical federalists cutting every corner and pulling out all the stops to get EMU (the prototype single currency) up and running. Several eminent economists on continents ranging from Australia and the US to the UK and Europe itself made very sound predictions at the time about coming disaster, and they did so saying two related things: 1) It would offer Germany a cheap, fixed currency leading inevitably to its economic dominance, 2) It would point up the economic consequences of imposing one rigid means of exchange on 18 varietal cultures, leading generally to Southern/South Eastern Europe falling behind.

Just to add more weedkiller to the poisonous formulation, the key European leaders not only ignored the advice; they also first, ignored all the data showing that several member States were nowhere near ready to join the eurozone based on agreed criteria; and then second, were implicated in several corrupt deals on commodities – as varied as German butter, Italian wines and Greek olive oil – to cloud the existence of stark differentials in both export and industrial development. For once, the economic naysayers proved to be soothsayers. Messrs Hollande and Muscovici shrink from the limelight about their own book on the subject of cultural difference (fancy that) but it proved to be spot on….as did the musings of Lawson and Thatcher et al in relation to Germany’s dominance.

The Mark from around 1963 until the creation of EMU was the most reliable, performance-related currency on the planet. But only massive debt forgiveness by the victors after the Second World War enabled that outcome. Both the realities in that last paragraph explain why lectures from Hollande and Merkel today – when joined by hypocrisy from Draghi at the ECB – evoke so much hatred of the EU’s prime movers among the so-called ClubMed nations….and those of us Brits in the Brexit camp. I make these points not to be nihilistic, but rather to level the playing field of media coverage that has been so bombed, excavated, deliberately over-watered and then tilted for good luck by Brussels, Wall Street and Berlin obfuscation and mendacity since 2010. A very real outcome of nihilism is being encouraged (and indeed made inevitable) by the EC’s refusal to recognise that – even as the SS Eunatic set sail – there was a raging fire in the hold.

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Big words.

Tsipras: Debt Relief Prerequisite to Legislate New Measures (GR)

The mid-term debt relief measures so that Greece can enter the quantitative easing program is the prerequisite to vote for the new measures, Greek Prime Minister Alexis Tsipras said on Sunday. Addressing the SYRIZA Central Committee, the party leader spoke about the new austerity measures his administration has agreed to with creditors. He spoke of a compromise that had to be made so that measures had to be counter-balanced by social relief measures of equal fiscal value and aid that the Greek negotiating team. “There are measures that are neither necessary, nor are they the ones we would ever choose, but the compromise achieved would have counter-measures that would counterbalance the fiscal impact and generate zero fiscal balance, and both will be legislated and implemented simultaneously,” Tsipras said.

Speaking on the initial agreement reached at the Malta Eurogroup on Friday, the prime minister said that, “After Malta the way for the identification of the medium-term measures for the debt is open. This will send a clear message to the markets that the uncertainty is over.” “Now we will be the ones to decide the fiscal path the country will follow after the end of the program,” Tsipras said, explaining the strategy for the next round of negotiations. He stressed that without medium-term measures for debt relief that would allow Greece to enter the QE program, he would not implement the new measures.

The prime minister also unleashed an indirect attack against main opposition New Democracy claiming that, “Some were scheming so that the evaluation would not close, because they didn’t want us to be the ones who will pull Greece out of the crisis.” He also attacked ND leader Kyriakos Mitsotakis accusing him of “rushing to meet with the German finance minister to get his blessing and undermine the negotiations.” He also said that the conservative party espouses extreme neoliberalism.

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It was a big mistake to put the Great Barrier Reef near Australia.

Great Barrier Reef at ‘Terminal Stage’ (G.)

Back-to-back severe bleaching events have affected two-thirds of Australia’s Great Barrier Reef, new aerial surveys have found. The findings have caused alarm among scientists, who say the proximity of the 2016 and 2017 bleaching events is unprecedented for the reef, and will give damaged coral little chance to recover. Scientists with the Australian Research Council’s Centre of Excellence for Coral Reef Studies last week completed aerial surveys of the world’s largest living structure, scoring bleaching at 800 individual coral reefs across 8,000km. The results show the two consecutive mass bleaching events have affected a 1,500km stretch, leaving only the reef’s southern third unscathed. Where last year’s bleaching was concentrated in the reef’s northern third, the 2017 event spread further south, and was most intense in the middle section of the Great Barrier Reef.

This year’s mass bleaching, second in severity only to 2016, has occurred even in the absence of an El Niño event. Mass bleaching – a phenomenon caused by global warming-induced rises to sea surface temperatures – has occurred on the reef four times in recorded history. Prof Terry Hughes, who led the surveys, said the length of time coral needed to recover – about 10 years for fast-growing types – raised serious concerns about the increasing frequency of mass bleaching events. “The significance of bleaching this year is that it’s back to back, so there’s been zero time for recovery,” Hughes told the Guardian. “It’s too early yet to tell what the full death toll will be from this year’s bleaching, but clearly it will extend 500km south of last year’s bleaching.”

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A really funny man died over the weekend.

John Clarke has Died

We featured quite a few Clarke and Dawe videos through the years. Here’s a few favorites:

How does the financial system work?

European Debt Crisis

The Greek Economy

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Dec 212016
 
 December 21, 2016  Posted by at 9:47 am Finance Tagged with: , , , , , , , ,  1 Response »
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Laurits Andersen Ring At Breakfast 1898

Most Expensive Housing Ever: A 1% Mortgage Rate Surge Changes Everything (MH)
This Christmas Americans Will Spend An Average Of $422 Per Child (EC)
Ray Dalio Says Animal Spirits Under Donald Trump Just Getting Started (F.)
Someone Has to Tell The Fed Inflation Is Not Accelerating (CEPR)
Brace Yourself For Italy’s Bankruptcy (Gavekal)
Italy Bank Rescue Won’t Fill $54 Billion Hole in Balance Sheets (BBG)
Top French Banks Sue ECB To Reduce Capital Demands (R.)
Spanish Banks Lose EU Case on Mortgage Interest Repayments (BBG)
India’s Small Businesses Facing ‘Apocalypse’ (G.)
Let The Yuan Fall Or Not? Beijing’s Big Burning Currency Question (SCMP)
Yuan Bears Strike as Capital Outflows Override PBOC (BBG)
To Problems With China’s Financial System, Add the Bond Market (NYT)
China’s Anticorruption Drive Ensnares the Lowly and Rattles Families (WSJ)
Smog Refugees Flee Chinese Cities As ‘Airpocalypse’ Blights Half A Billion (G.)
Obama Invokes 1953 Law To Indefinitely Block Arctic, Atlantic Drilling (CNBC)

 

 

Income vs prices has never been more expensive. There’s much more in Hanson’s article.

Most Expensive Housing Ever: A 1% Mortgage Rate Surge Changes Everything (MH)

BUILDER HOUSES: The average $361k builder house requires nearly $65k in income assuming a 4.5% rate, 20% down, and A-grade credit. Problem is, 20% + A-credit are hard to come by. For buyers with less down or worse credit, far more than $65k is needed. For the past 30-YEARS income required to buy the average priced house has remained relatively consistent, as mortgage rate credit manipulation made houses cheaper. Bottom line: Reversion to the mean can occur through house price declines, credit easing, a mortgage rate plunge to the high 2%’s, or a combination of all three. However, because rates are still historically low and mortgage guidelines historically easy, the path of least resistance is lower house prices.

The following chart compares Bubble 1.0 (2004 and 2006) to Bubble 2.0 on an apples-to-apples basis using the popular loan programs of each era. Bottom line: Builder prices are up 19% from 2006 but the monthly payment is 43% greater and annual income needed to qualify for a mortgage 83% more.

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‘T is the season to be plastic.

This Christmas Americans Will Spend An Average Of $422 Per Child (EC)

For many Americans, the quality of Christmas is determined by the quality of the presents. This is especially true for our children, and some of them literally spend months anticipating their haul on Christmas morning. I know that when I was growing up Christmas was all about the presents. Yes, adults would give lip service to the other elements of Christmas, but all of the other holiday activities could have faded away and it still would have been Christmas as long as presents were under that tree on the morning of December 25th. Perhaps things are different in your family, but it is undeniable that for our society as a whole gifts are the central feature of the holiday season. And that is why so many parents feel such immense pressure to spend a tremendous amount of money on gifts for their children each year.

Of course this pressure that they feel is constantly being reinforced by television ads and big Hollywood movies that continuously hammer home what a “good Christmas” should look like. Once again in 2016, parents will spend far more money than they should because they want to make their children happy. According to a brand new survey from T. Rowe Price, parents in the United States will spend an average of 422 dollars per child this holiday season… “More than half of parents report they aim to get everything on their kids’ wish lists this year, spending an average of $422 per child, according to a new survey from T. Rowe Price.” To me, that seems like a ridiculous amount of money to spend on a single child, but this is apparently what people are doing.

But can most families really afford to be spending so wildly? Of course not. As I have detailed previously, 69% of all Americans have less than $1,000 in savings. That means that about two-thirds of the country is essentially living paycheck to paycheck. So all of this reckless spending brings with it a lot of additional financial pressure. But because we are a “buy now, pay later” society, we do it anyway. We are willing to mortgage a little bit of the future in order to have a nice Christmas now. Another new survey has found that close to half the country feels “pressure to spend more than they can afford during the holiday season”…

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Possible only -beyond short term- with Fed money. Animal spirits sounds cute, but all investors have is money based on ultra cheap rates.

Ray Dalio Says Animal Spirits Under Donald Trump Just Getting Started (F.)

During the dark days of the financial crisis Ray Dalio, head of the world’s largest hedge fund Bridgewater Associates, published papers and YouTube seminars to describe the forces that drive the economy and explain why severe cycles like the credit collapse occur. The effort was intended to guide productive responses to the implosion of Wall Street, which crippled Main Street, and avert policies that could diminish a recovery. With the Dow Jones Industrial Average nearing a record 20,000, unemployment below 5% and the U.S. economy in the seventh year of a recovery, Dalio’s tomes on ‘how the economic machine works’ aren’t as top of mind as they once were. But that’s not to say Dalio, one of Wall Street’s weightiest hedge fund investors, has lost interest in the subject.

On Tuesday morning, Dalio published a monthly update that indicates he believes the U.S. economy is poised for a sudden and dramatic shift under President-elect Donald Trump. If the economic machine is presently churning along in a steady but somewhat muted recovery from the Great Recession, Dalio believes it may kick into overdrive as Trump implements a pro-business agenda that could stimulate the animal spirits of investors and businesses across United States. “[T]he Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital,” Dalio states in a post published to LinkedIn. He adds, “regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge.”

Dalio believes Trump has staffed his administration with business-people who will be inclined to take quick action on perceived drags on the economy, whether that involves taxation, regulation or labor laws. What’s also clear is Dalio believes there are presently major impediments to the economy that need to be lifted. “This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers,” says Dalio. The Trump administration “wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power,” he adds [..] “A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money. These policies will also have shocking negative impacts on certain sectors,” Dalio says, without describing in more detail the winners and losers.

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The ongoing confusions about what inflation is. One key rule: if spending doesn’t rise, and by a lot, there will be no inflation. There may be higher prices for some things, but that’s not the same. And where could higher spending come from when 2/3 of Americans don’t even have $1000 saved for an emergency?

Someone Has to Tell The Fed Inflation Is Not Accelerating (CEPR)

The Federal Reserve Board raised interest rates last week and seem poised to do so again in the not distant future. The rationale is that the economy is now near or at full employment and that if job growth continues at its recent pace it will lead to a harmful acceleration in the inflation rate. We have numerous pieces raising serious questions about whether the labor market is really at full employment, noting for example the sharp drop in employment rates (for all groups) from pre-recession levels and the high rate of involuntary part-time employment. But the story of accelerating inflation is also not right. This is particularly important, since John Williams, the president of the San Francisco Fed, cited accelerating inflation as a reason to support last week’s rate hike, and possibly future rate hikes, in an interview in the New York Times.

Williams has been a moderate on inflation, so there are many members of the Fed’s Open Market Committee who are more anxious to raise rates than him. A close look at the data does not provide much evidence of accelerating inflation. The core PCE deflator, the Fed’s main measure of inflation, has risen 1.7% over the last year, which is still under the 2.0% target. This target is an average, which means that the Fed should be prepared to allow the inflation rate to rise somewhat above 2.0%, with the idea that inflation will drop in the next recession. Anyhow, the 1.7% rate is slightly higher than a low of 1.3% reached in the third quarter of 2015, but it is exactly the same as the rate we saw in the third quarter of 2014. In other words, there has been zero acceleration in the rate of inflation over the last two years.

Furthermore, even this modest acceleration has been entirely due to the more rapid increase in rent over the last two years. The inflation rate in the core consumer price index, stripped of its shelter component, actually has been falling slightly over the last year. It now stands at 1.1% over the last year. It is reasonable to pull shelter out of the CPI because rents do not follow the same dynamic as most goods and services. In fact, higher interest rates, by reducing construction, are likely to increase the pace of increase in rents rather than reduce them.

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Italy’s banks are about to do the country in.

Brace Yourself For Italy’s Bankruptcy (Gavekal)

Matteo Renzi has joined a long line of Italian prime ministers who failed to “reform” their country. This is another way of saying that he could not wave a magic wand and make Italy competitive with Germany. The grim reality is that no Italian leader stood a chance of changing their country once the fateful decision was made to peg its currency to Germany’s. At the time of the euro’s launch in 1999, I argued that the risk profile of Italy would change from being an economy where there was a high probability of many currency devaluations to the certain probability of eventual bankruptcy. Sadly, that moment is not so far away.

The chart below tells the story of Italy’s recent economic history in two parts, namely, (i) March 1979 to March 1999, and (ii) March 1999 to the present. Italy joined the Exchange Rate Mechanism in 1979 at 443 lira per deutschemark, yet by 1990 frequent devaluations meant that rate had slid to about 750 lira. By the early 1990s, the Bundesbank was overseeing a newly unified German monetary system and in order to fight inflation it had driven real interest rates to 7%. By September 1992 the stresses on the system caused the UK, Sweden and Italy to exit the ERM, which meant another huge currency devaluation, pushing the lira as low as 1250 against the deutschemark, but delivering a huge tourist boom to boot.

Still, from 1979 to 1998 Italian industrial production outpaced that of Germany by more than 10%, while Italian equities outperformed German equivalents by 16% (this indicates that Italian firms were earning a higher return on invested capital than those in Germany). Then came the euro. By 2003 it was clear that Italy was uncompetitive and subsequently, Italian equities have underperformed German equities by -65%, reversing the previous half century’s pattern when Italian equities outperformed on a total return basis. Similarly, since 2003 Italian factory output has lagged Germany’s by 40%.

The diagnosis is simply that Italy has become woefully uncompetitive, and as a result, is not solvent. This much is clear from the perilous state of its banking system, which is always the outcome when banks lend to firms that have been rendered uncompetitive by some reckless central banker. Short of imposing Greek-style slavery on Italy, there is not much hope of solving the problem, but I rather doubt that the Italian electorate will be as patient as its neighbours across the Ionian sea.

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Let Beppe Grillo have a go at this. What does Italy have to lose?

Italy Bank Rescue Won’t Fill $54 Billion Hole in Balance Sheets (BBG)

Italian banks need at least €52 billion ($54 billion) to clean up their balance sheets, much more than the rescue package proposed Monday by the government. The shortfall is an estimate of how much lenders would have to increase loan-loss provisions to allow for the sale of bad debt. It includes the 8 billion euros of provisions UniCredit has said it will add before selling €18 billion of its worst loans and uses that ratio as a proxy for the gap at other banks. The total also includes the 5 billion euros Banca Monte dei Paschi di Siena has been struggling to raise in recent months. The Italian government asked parliament this week to increase the public borrowing limit by as much as €20 billion to potentially backstop Monte Paschi and other lenders.

The rescue package needs to be closer to €30 billion to solve Italy’s bad-debt crisis, according to Paola Sabbione at Deutsche Bank. That conclusion assumes UniCredit and some other lenders can raise about €20 billion through capital markets, asset sales and profit retention – leaving the government to fill the rest of the €52 billion hole. “Some of the publicly traded banks can probably raise some of the funds needed for a cleanup, including Monte Paschi,” said Sabbione, who has covered Italian banks for the past decade. “So the government would have to plug in the rest. But still, at this level, it won’t do the full job.” UniCredit, the nation’s largest lender, plans to increase loan-loss provisions to 75% for nonperforming loans with the lowest chances of recovery and 40% for two other categories considered less dire.

The increased writedowns will help the Milan-based lender sell about a third of its bad loans to asset manager Fortress Investment. UniCredit is planning to raise €13 billion of new equity funding to cover the increased provisions as well as other restructuring costs and to improve its capital ratio. The company’s shares have jumped 15% since the Dec. 13 announcement, giving analysts confidence the bank will have little trouble tapping investors for the funds. Italian banks had €356 billion of bad loans at the end of June and €165 billion of provisions against them, according to the latest Bank of Italy data. To get the worst category to 75% provisioning and the rest to 40%, as UniCredit is doing, would take €52 billion.

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French banks in turn are heavily into Italian banks. Just like they were into Greek banks, but they dodged that one when their political clout made the EU shift their burden onto the Greek pople. Will Italy let them do the same?

Top French Banks Sue ECB To Reduce Capital Demands (R.)

France’s top lenders are suing the ECB to get an exemption from holding capital against deposits parked with a state-owned fund, the most high-profile challenge to supervision from Frankfurt to date. As well as providing euro zone banks with funding, the ECB has been their main regulator for the past two years, tasked with ending cozy relationships between the industry and national authorities that contributed to the financial crisis. The Frankfurt-based institution has been sued repeatedly over its bond-buying programs and by smaller banks seeking to escape its supervision. But this is the first case brought by major banks in the euro zone and is a rare confrontation between France’s financial elite and the ECB’s supervisory board, led by the former head of France’s own banking regulator, Daniele Nouy.

The lawsuits have been brought by BNP Paribas, Societe Generale, Credit Agricole, Credit Mutuel, Groupe BPCE and La Banque Postale over the past few weeks, filings with the European Court of Justice show. Sources with direct knowledge of the cases told Reuters the banks are protesting the ECB’s demand that they set aside capital against special deposits they have with state investment institution Caisse des Dépôts et Consignations (CDC). The legal action comes amid heightened tension between banks and the ECB, which is inundating the financial sector with excess cash to try to stimulate growth while charging banks for depositing it with the central bank overnight. “You are seeing banks more and more go to court to challenge the supervisor,” a senior legal source said. “Years ago that was unthinkable.”

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So, Italy, France and Spain too, all have severely troubled banks.

Spanish Banks Lose EU Case on Mortgage Interest Repayments (BBG)

Competition watchdogs won a partial victory at the EU’s top court over their attempt to force Spanish banks to pay back millions of euros in tax breaks for the acquisition of stakes in foreign firms, Bloomberg News reports. Lenders, including Banco Popular Espanol SA and Banco Bilbao Vizcaya Argentaria SA, may have to give back billions of euros to mortgage customers after a ruling by the court.

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Over 6 weeks later, “India’s Reserve Bank has issued around 1.7 billion new notes, with less than one-third the value of what was removed..”

India’s Small Businesses Facing ‘Apocalypse’ (G.)

India’s vast informal economy has been reeling since 8 November, the morning after India’s prime minister, Narendra Modi, announced the sudden voiding of the country’s two most-used bank notes. It is the largest-scale financial experiment in Indian history: gutting 14 trillion rupees – 86% of the currency in circulation – from the most cash-dependent major economy in the world. More than a month on, India’s Reserve Bank has issued around 1.7 billion new notes, with less than one-third the value of what was removed. The sixth-largest economy in the world is running on 60% less currency than before. Lines outside banks continue to stretch, and India’s small business lobby says its members are facing an “apocalypse”. But Modi insists he isn’t done.

Initially intended to flush out the “black money” said to be hoarded by elites and criminals, the government now frames demonetisation as the first step in a “cashless” revolution to shift the billions of transactions undertaken each day in India online – and onto the radar of tax authorities. This week, labour minister Bandaru Dattatreya announced it would soon be mandatory for employers to pay their staff into bank accounts, a hugely ambitious step in a country where as many as 90% of workers are paid in cash. Already struggling, businessmen such as Sharma are dreading the prospect of more enforced digital migration. “How do you think I can pay the workers with a cheque if they don’t have a bank account?” he asks, in a tiny office thick with incense smoke. “And it takes three days to clear a cheque. What will they eat during those days?”

His reasons are not just altruistic. Apart from potentially raising his tax bill – in a country where just 1% pay income tax – paying salaries electronically would mean giving staff Delhi’s mandated minimum wage, currently 9,724 rupees (£114) per month for unskilled workers. “Right now no one pays the minimum wage that the government decides,” Sharma says. “It will only make things expensive: we will charge the customer.” Outside his workers’ earshot, he adds: “If someone is doing the work of Rs.2000, why should we pay them Rs.15,000?” But workers too are wary of the big push online. Tens of millions of Indians have been given zero-deposit bank accounts in the past two years under a government scheme to boost financial inclusion. But even after demonetisation prompted a rush of new deposits, 23% of the accounts still lie empty.

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Stuck. A large depreciation would be too costly, but keeping it high would eat up foreign reserves.

Let The Yuan Fall Or Not? Beijing’s Big Burning Currency Question (SCMP)

As the Chinese yuan keeps weakening against the dollar, a question is becoming acute for Beijing: should China let the market take its course and permit a deep currency fall or should it keep burning its foreign exchange reserves to support the currency’s value? The debate over what Beijing should do about its currency is heating up as regulators’ ambiguity over the question is becoming costly and unsustainable, particularly since the Federal Reserve raised interest rates. Against Beijing’s desire for a “controllable” depreciation, the government is losing control over capital flight, depleting foreign exchange reserve stockpile at an alarming speed, and failing to convince investors that there is “no fundamental basis for the continuous depreciation”.

Yu Yongding, a renowned Chinese economist who sat on the central bank’s monetary policy committee when the yuan was revalued in July 2005, said it was time for Beijing to reconsider the matter. “The fear of the yuan’s depreciation has become a burden for us,” Yu told a forum over the weekend. Yu, who for years has called for liberalizing the yuan’s exchange rate over years, said China should give up foreign exchange interventions and safeguard its foreign exchange reserves so that China will “have sufficient ammunition” for future rainy days. While Yu’s view is not in line with Beijing’s current policy, it is winning academic support. Xu Sitao, the China chief economist at Deloitte, an auditing firm, said “the best strategy is to let the yuan fall in full, and the worst strategy is slowly depleting foreign exchange reserves”.

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“The currency is facing a triple whammy of accelerating capital outflows, faster U.S. interest-rate increases and concerns over domestic financial markets..”

Yuan Bears Strike as Capital Outflows Override PBOC (BBG)

China’s renewed efforts to curb declines in its currency are doing little to dissuade yuan bears. Traders have turned increasingly negative amid tighter liquidity, sending bets for further losses soaring. The gap between forward contracts wagering on the offshore yuan a year from now versus its current level is heading for a record monthly jump, just as the extra cost for options to sell the currency against the dollar hit a six-month high relative to prices for contracts to buy. The currency is facing a triple whammy of accelerating capital outflows, faster U.S. interest-rate increases and concerns over domestic financial markets as liquidity tightens.

Strategists say its weakening, set to be the biggest this year in more than two decades, may accelerate as the government restores the annual quota for citizens to convert yuan holdings into foreign exchange. President-elect Donald Trump has also threatened to slap 45% tariffs on China’s imports to the U.S. “Bears are adding positions because expectations for the yuan to depreciate are getting stronger and stronger,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “The pressures will likely continue and could get even worse, considering capital outflows and concerns on the reset of individuals’ conversion quota.”

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..in China, state-run banks are by far the main source of funding. Shadow banks.

To Problems With China’s Financial System, Add the Bond Market (NYT)

Chinese officials cheered on the country’s stock market when it reached heady new highs, offering hope that it could become a new source of money to fix China’s economic problems. Then, last year, the market crashed. Now another fast-growing part of China’s vast and increasingly complicated financial market is showing signs of distress: its $9 trillion bond market. Prices for government and corporate bonds have tumbled over the past week, a sell-off that continued on Tuesday. The situation has spooked investors, prompting the government to temporarily restrain some trading and to make emergency loans to struggling financial institutions. The price drops have resulted in higher borrowing costs at a time when more Chinese companies need the money to cope with slowing economic growth. Yields reached new highs again on Tuesday.

In part, China is reacting to financial shifts across the globe. With the Federal Reserve raising short-term interest rates and many expecting the presidency of Donald J. Trump to lead to heavier government spending, investors worldwide are selling bonds. But China is struggling with its own balancing act. The Chinese bond slump also stems from Beijing’s efforts to wring excess money from its financial system and to stop potential bubbles that may lurk in shadowy, hard-to-track corners of its economy. Should it continue with those efforts, bonds could fall further. “The adjustment has not yet finished,” said Miao Zuoxing, a partner at the FXM Brothers Fund. “It will continue and normalize until money is put where the government can see it.”

[..] China has particular reason to worry. As the world’s second-largest economy, after the United States, it relies on a rickety financial system that is mired in debt and susceptible to hidden stresses. Higher overseas interest rates could also prompt more Chinese investors to move their money out of the country, either to chase higher returns elsewhere or to avoid what some see as China’s growing problems. In the mature financial system of the United States, businesses have plenty of ways to get money. They can borrow from a bank, raise money selling stocks or bonds, or seek funds directly from any number of investors.

But in China, state-run banks are by far the main source of funding. That helped power the country’s economic rise, but it also led to loans going to politically connected borrowers rather than to where the economy needed it most. That is one reason the Chinese economy is now stuck with more steel, glass, cement and auto factories than it needs. Particularly in the past two years, China has taken steps to encourage the development of robust stock and bond markets as well as private lenders, needing a way to ensure the flow of money was being directed by profit-minded investors rather than politicians and their allies at state-owned banks.

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Heavy fisted. It’s all history has taught.

China’s Anticorruption Drive Ensnares the Lowly and Rattles Families (WSJ)

When Liu Chongfu returned home to his pig farm in December 2014 after months in detention, he was haunted by what he had done. Under interrogation, he later told his family, he falsely admitted to bribing government officials. Back home, released without being charged, Mr. Liu had nightmares and splitting headaches. His conscience weighed on him, his family said. So he publicly recanted in March 2015. In a written statement sent to the court, he said interrogators had deprived him of sleep and threatened his family to extract a phony confession that helped send four other men to prison. In his statement, also posted online, he said he lied “because they forced me to where there was no other way than death. I didn’t want to die.”

President Xi Jinping has called his anticorruption campaign, one of the leader’s defining initiatives, a “life or death” matter. It is among the most popular elements of his administration, given how corruption has been endemic in China and how it threatens to undermine confidence in Communist Party control. Since the campaign began in 2013, its reach has allowed Mr. Xi to root out resistance to his rule and secure party control over a society that is more prosperous and demanding. Mr. Liu’s confession and retraction suggest a dark side to Mr. Xi’s efforts. Families around China say overzealous authorities have forced confessions, tortured suspects and made improper convictions.

The farmer tried to retract his confession before, while still in detention. “I cannot violate my conscience to do this,” he told his interrogators, according to his statement, a transcript of a video he made with his lawyer. He knew it would send innocent officials to jail, he said, and that “the real tragedy is still to follow.” The four were convicted anyway.

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“I finally saw the blue sky. It was wonderful!”

Smog Refugees Flee Chinese Cities As ‘Airpocalypse’ Blights Half A Billion (G.)

Tens of thousands of “smog refugees” have reportedly fled China’s pollution-stricken north after the country was hit by its latest “airpocalyse” forcing almost half a billion people to live under a blanket of toxic fumes. Huge swaths of north and central China have been living under a pollution “red alert” since last Friday when a dangerous cocktail of pollutants transformed the skies into a yellow and charcoal-tinted haze. Greenpeace claimed the calamity had affected a population equivalent to those of the United States, Canada and Mexico combined with some 460m people having to breathe either hazardous pollution or heavy levels of smog in recent days.

Lauri Myllyvirta, a Beijing-based Greenpeace activist who has been chronicling the red alert on Twitter, said that in an attempt to shield his lungs he was avoiding going outside and using two air purifiers and an industrial grade dust mask “that makes me look like Darth Vader”. “You just try to insulate yourself from the air as much as possible,” said Myllyvirta, a coal and air pollution expert. Others have simply opted to flee. According to reports in the Chinese media, flights to some pollution-free regions have been packed as a result of the smog. Ctrip, China’s leading online travel agent, said it expected 150,000 travellers to head abroad this month in a bid to outrun the smog. Top destinations include Australia, Indonesia, Japan and the Maldives.

Jiang Aoshuang, one of Beijing’s “smog refugees”, told the state-run Global Times she had skipped town with her husband and 10-year-old son in order to spare their lungs. Jiang’s family made for Chongli, a smog-free ski resort about three hours north-west of the capital, only to find it packed with other fugitives seeking sanctuary from the pollution. “It really felt like a refugee camp,” she was quoted as saying. Yang Xinglin, who also fled to Chongli, said she had requested time off from her job at a state-owned real estate firm so she did not have to inhale the smog. “You ask me why I left Beijing? It’s because I want to live,” Yang, 27, told the Guardian.

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But why in the last few days of an 8-year term?

Obama Invokes 1953 Law To Indefinitely Block Arctic, Atlantic Drilling (CNBC)

President Barack Obama on Tuesday moved to indefinitely block drilling in vast swaths of U.S. waters. The president had been expected to take the action by invoking a provision in a 1953 law that governs offshore leases, as CNBC previously reported. The law allows a president to withdraw any currently unleased lands in the Outer Continental Shelf from future lease sales. There is no provision in the law that allows the executive’s successor to repeal the decision, so President-elect Donald Trump would not be able to easily brush aside the action. Trump has vowed to open more federal land to oil and natural gas production in a bid to boost U.S. output. Obama on Tuesday said he would designate “the bulk of our Arctic water and certain areas in the Atlantic Ocean as indefinitely off limits to future oil and gas leasing, though the prospects for drilling in the affected areas in the near future were already questionable.

The lands covered include the bulk of the Beaufort and Chukchi seas in the Arctic and 31 underwater canyons in the Atlantic. The United States and Canada also announced they will identify sustainable shipping lanes through their connected Arctic waters. Canada on Tuesday also imposed a five-year ban on all oil and gas drilling licensing in the Canadian Arctic. The moratorium will be reviewed every five years. “These actions, and Canada’s parallel actions, protect a sensitive and unique ecosystem that is unlike any other region on earth,” Obama said in a statement. “They reflect the scientific assessment that, even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region’s harsh conditions is limited.”

Read more …

Oct 052016
 
 October 5, 2016  Posted by at 9:12 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 5 2016
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DPC El Paso, Texas 1903

Existential Threat To World Order Confronts Elite At IMF Meeting (BBG)
US High-Yield Default Rates Hit 6-Year High (S&P)
Gundlach Says Deutsche Bank Shows Harm of Negative Rates (BBG)
Jeff Gundlach Thinks A ‘Pivot’ Is Coming To Economic Policy (BI)
Pound Sinks To 1985 Low, Is Likely ‘Going To Go Down The Tubes’ (CNBC)
Manhattan Apartment Sales Plunge 20% (BBG)
Rescue of Italy’s Monte dei Paschi Gets ‘Dark’ & ‘Complicated’ (DQ)
China’s Efforts To Shrink Bloated Coal Industry May Have Worked Too Well (BBG)
Obama Warned to Defuse Tensions with Russia (CN)
‘Great Pacific Garbage Patch’ Far Bigger Than Imagined (G.)
At Least 28 Migrants Found Dead Off Libya (AFP)

 

 

Three things: First, in the jargon, “the backlash against globalization” has now become equal to the anti-trade movement. Which is nonsense: preferring another approach to trade is not the same as being against it altogether.

And second, look at that first graph! See that upward line at the end? Well, it’s an IMF growth ‘forecast’. Which are always so wrong, and always revised downward, that you must wonder if the term ‘forecast’ is even appropriate.

Third: “Existential Threat To World Order” ?! Isn’t that perhaps what the IMF and the rest of the elites themselves are?

Existential Threat To World Order Confronts Elite At IMF Meeting (BBG)

Policy-making elites converge on Washington this week for meetings that epitomize a faith in globalization that’s at odds with the growing backlash against the inequities it creates. From Brexit to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years. Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that IMF Managing Director Christine Lagarde says is already “weak and fragile.” The calls for less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible to sudden swings in investor sentiment, as underscored by recent jitters over Deutsche Bank’s financial health.

“The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation,” said Louis Kuijs at Oxford Economics, a former IMF official. “If we lose consensus on what kind of a world we want to have, the world will probably be worse off.” In its latest World Economic Outlook released Tuesday, the fund highlighted the threats from the anti-trade movement to an already subdued global expansion. After growth of 3.2% in 2015, the world economy’s expansion will slow to 3.1% this year before rebounding to 3.4% in 2017, according to the report, keeping those estimates unchanged from July projections. The forecasts for U.S. growth were cut to 1.6% this year and 2.2% in 2017. “We’d like to see an end to the creeping protectionism in the world and more progress on moving ahead with free-trade agreements and other trade-creating measures,” Maurice Obstfeld, director of the IMF’s research department, said.

[..] Perhaps the biggest beneficiary of free trade over the past generation, China, still restricts access to many of its key industries, with economists worried about increasingly mercantilist policies. It’s also seeking a larger role in the existing global framework, with entry of the yuan into the IMF’s basket of reserve currencies on Oct. 1 the most recent example. An all-out trade war would be a disaster for China’s economy, with Trump’s threatened tariff potentially wiping off almost 5% of its GDP, according to a calculation by Daiwa Capital Markets. John Williamson, whose Washington Consensus of open trade and deregulation was effectively the governing ethos for the IMF and World Bank for decades, said the 2008-09 financial meltdown had undercut support for economic integration. “There was agreement on globalization before the crisis and that’s one thing that’s been lost since the financial crisis,” said Williamson.

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Deteriorating quality of debt. Not good.

US High-Yield Default Rates Hit 6-Year High (S&P)

The U.S. speculative-grade default rate has hit a six-year high of 4.79%, while the global default rate has crept to 4.04%, also a six-year high, according to S&P Global Fixed Income Research. Of course, the long-troubled energy sector plays a major role here. Excluding energy and natural gas companies, the U.S. default rate drops to 2.44%. Looking ahead, S&P says the number of ‘Weakest Links’ – issuers rated B- or lower, with either a negative outlook or implication – grew to 249 as of Sept. 20, the second-highest total since 2009.

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“You cannot save your faltering economy by killing your financial system..”

Gundlach Says Deutsche Bank Shows Harm of Negative Rates (BBG)

Famed bond investor Jeffrey Gundlach said Deutsche Bank’s slumping share price highlights the impact of the negative-interest-rate policy in Europe on the region’s lenders and may help prompt central bankers to reconsider their approach. “You cannot save your faltering economy by killing your financial system and one of the clear poster children for this is Deutsche Bank’s stock price,” Gundlach, 56, said at Grant’s Fall 2016 Investment Conference on Tuesday in New York. “If you keep these negative interest rate policies for a sufficient future period of time you are going to bankrupt these banks.” Europe’s banks have seen their value shrink by about $280 billion this year, with Deutsche Bank losing almost half its market value.

Germany’s largest lender extended losses after the U.S. Department of Justice last month requested $14 billion to settle a probe into residential mortgage-backed securities, sparking concerns that it will have to raise capital. While the Frankfurt-based bank would ultimately be rescued by the German government if needed, other banks in the region wouldn’t be able to count on such support, Gundlach said. “Deutsche Bank will be supported by Germany if push comes to shove,” he said. “But what about Credit Suisse, which has shown a similar decline in stock price? Who’s there to bail them out?”

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More Gundlach. “I can bring back inflation by 5:00 pm by giving everyone $1 billion. The lines at BMW lots would be a sight to see..”

Jeff Gundlach Thinks A ‘Pivot’ Is Coming To Economic Policy (BI)

Jeff Gundlach, Wall Street’s bond god, thinks the world of monetary and fiscal policy is about to pivot. “How in the world could we be talking about rates never going up when in fact rates have bottomed?” he asked the crowd of investors at the Grant’s Interest Rates Observer conference in New York City on Tuesday. He explained that it was on July 6th when he decided that the narrative that benchmark interest rates around the world would stay lower for longer was “getting quite old.” He cited several reasons: inflation is picking up, the dollar did not strengthen after the Federal Reserve raised rates the last time. Also there’s this: “In the investment world when you hear ‘never’,” ( as in rates are ‘never going up’), “it’s probably about to happen,” said Gundlach, who is CEO of DoubleLine Funds.

Now, an uptick in inflation and the dollar’s tolerance for higher rates are factors that don’t necessarily require urgency. And generally without urgency there is no change in policy. They are also factors he discussed in his last presentation, ‘Turning Points,’ back in September. But there is one thing that has changed since then. That thing is Deutsche Bank. “You cannot save your faltering economy by killing the financial system,” said Gundlach. That is, in effect, what low rates do. Over the last few weeks the world has watched as Deutsche Bank has struggled to convince investors and the public that it is in a sound fiscal position. Two weeks ago the US threatened the bank with a massive $14 billion fine for transgressions that led up to the financial crisis, and the bank’s stock really started to plummet.

In euros, Deutsche Bank’s stock price has hovered near the single digits. “There’s something about big banks being in the single digits that makes people nervous,” Gundlach said. He believes that Germany will bail out Deutsche Bank, despite the fact that the government has said that it intends to do no such thing. The problem isn’t Deutsche Bank in his mind, though — it’s other banks in a similar position that don’t have countries like Germany to bail them out. He mentioned Credit Suisse, arguing that Switzerland can’t handle a banking catastrophe its size.

So what will the new world order be if rates must go up to save international banks? “I can bring back inflation by 5:00 pm by giving everyone $1 billion. The lines at BMW lots would be a sight to see,” he joked. What he’s saying is that now is the time to pivot to fiscal stimulus. Both presidential candidates Donald Trump and Hillary Clinton have talked about spending hundreds of billions on infrastructure and other investments. Meanwhile, US debt to GDP has been stable since 2011, and no one is really talking about the deficit anymore. Here’s a key chart he showed to the crowd. It was also in his last presentation:

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Sounds doable.

Pound Sinks To 1985 Low, Is Likely ‘Going To Go Down The Tubes’ (CNBC)

Sterling’s tumble isn’t finished, Koon How Heng, a senior foreign-exchange strategist at Credit Suisse, told CNBC, as the currency dropped below July’s post-Brexit referendum low. “We still have a very negative view on the sterling,” Heng said. Sterling was fetching as little as $1.2683 in Asia trading hours on Wednesday, under the $1.2796 low it hit on July 6 in the wake of Brexit. Wednesday’s levels were down from levels over $1.30 last week and well off the high of $1.5018 the currency touched before the June 23 poll. The pair is currently at their lowest level since March 1985, when the pound neared parity with the U.S. dollar amid an acrimonious miners’ strike in the U.K. “Officially, our forecast for sterling dollar is at 1.25,” Heng told CNBC’s “Street Signs” just hours before the currency took its latest leg lower. “We would think it’s going to head lower. It’s probably going to go down the tubes.”

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It’ll take more to prick that bubble.

Manhattan Apartment Sales Plunge 20% (BBG)

There are a lot more apartments available for purchase these days in Manhattan. And fewer people are buying. Sales of previously owned condominiums and co-ops fell 20% in the third quarter from a year earlier as potential buyers grew cautious amid more choices, according to a report Tuesday from appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. There were 5,290 resale apartments on the market at the end of September, 53% more than the number available in late 2013, the lowest point for listings. The swelling inventory is providing an opportunity to New Yorkers shut out of a market in which construction has been dominated by ultra-luxury condos aimed at the wealthiest buyers.

Resales, particularly those priced at less than $1 million, were in chronically short supply in recent years, and those that made it to the market sparked bidding wars. Now, more owners are listing apartments to profit from climbing values, and they’re finding lots of company. “Rapidly rising prices over the years have pulled more sellers into the market hoping to cash out,” Jonathan Miller, president of Miller Samuel, said in an interview. “But buyers are more wary. There isn’t the same intensity of activity to burn through the new supply.”

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Funny, Don Quijones makes the same comparison I did last week between Monte dei Paschi and Goldman’s very lucrative and very shady derivatives deals enabling former Greek governments to hide debt. Italy has indicted MPS, Nomura and Deutsche Bank over MDP. Goldman was never charged over Greece.

Rescue of Italy’s Monte dei Paschi Gets ‘Dark’ & ‘Complicated’ (DQ)

Shares of Monte dei Paschi di Siena, the world’s oldest bank and by now the world’s most famous penny stock, trade at €0.18. Things have gotten so bad that Italy’s financial markets regulator Consob extended the deadline and widened the scope of its ban on short selling of the bank’s shares. The restrictions were initially introduced on July 7 just after the bank’s shares had crashed 20% in one day. Since then they have shed a further 45%. Doubts continue to mount over the chances of success for the bank’s latest rescue program, its third since the Global Financial Crisis began. “The situation has got more complicated,” reported Il Corriere della Sera, one of Italy’s most influential newspapers. It’s also apparently quite “dark” — as in sinister.

“For weeks, MPS has been in the center of dark, worrying maneuvers,” said Azione Mps, an association of the bank’s retail shareholders. If the worst comes to the worst, the institution they’re invested in will either be bailed-in, resulting in a complete loss of their already basically worthless investment, and/or bailed-out by either Italy’s government or the ECB, in the process massively diluting the value of their already basically worthless shares. Nonetheless, “dark” is an interesting turn of phrase, especially given that the Italian bank’s latest desperate bid to save its derriere without outright state intervention is being led by America’s most corrupt financial institution (according to Forbes), JP Morgan Chase.

Also, in recent days MPS’ head offices, fittingly housed within a restored ancient fortress, have been transformed into a gargantuan crime scene after a Milan court ordered MPS, Nomura and Deutsche Bank to stand trial for a string of alleged financial crimes, including crimes that the Bank of Italy, under Mario Draghi’s tutelage, apparently knew about yet sat on its hands. The court also indicted 13 former and current managers from the three banks over the case, with prosecutors alleging they had used complex derivatives trades to conceal losses at MPS, in much the same way that Goldman Sachs helped the Greek government to conceal its mountain of excess debt with complex derivatives.

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Rock and a hard place or two.

China’s Efforts To Shrink Bloated Coal Industry May Have Worked Too Well (BBG)

China’s efforts to shrink its bloated coal industry may have worked too well, too fast. Prices have surged more than 50% this year after the government ordered miners to cut output to ease a glut and help lift the industry out of crisis. Now, as winter looms and fuel demand peaks, the consumer and producer of about half the world’s coal is having to relax some of those controls, or face even higher fuel costs, according to analysts at Citigroup and ICIS China, as well as China Coal Transport and Distribution Association. “The extent of the production cuts earlier this year has been too severe,” David Fang, a director with the CCTD, said. “Now the government is trying to fix the problem by relaxing some controls on output, but there is only limited time now before the winter arrives.”

The government earlier this year unveiled efforts to revitalize the coal industry and throw a lifeline to miners, many of them government-controlled, who struggled to repay debts as prices of the fuel used in power stations fell to the lowest in about a decade amid excess supply. President Xi Jinping’s administration ordered miners to lower output to the equivalent of 276 days of production, from the standard 330 days. And as part of the country’s broader “supply side structural reform,” regulators went after the industry’s massive overcapacity, cutting about 150 million tons of unneeded capacity as of August, out of a target of 500 million tons by 2020. The reforms may be a victim of their own success. Output fell more than 10% in the first eight months of this year, pushing up domestic prices and helping imports, including coking coal used to make steel, rise to the highest since December 2014.

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Veteran Intelligence Professionals for Sanity.

Obama Warned to Defuse Tensions with Russia (CN)

A group of ex-U.S. intelligence officials is warning President Obama to defuse growing tensions with Russia over Syria by reining in the demonization of President Putin and asserting White House civilian control over the Pentagon.
ALERT MEMORANDUM FOR: The President
FROM: Veteran Intelligence Professionals for Sanity
SUBJECT: PREVENTING STILL WORSE IN SYRIA

We write to alert you, as we did President George W. Bush, six weeks before the attack on Iraq, that the consequences of limiting your circle of advisers to a small, relatively inexperienced coterie with a dubious record for wisdom can prove disastrous.* Our concern this time regards Syria. We are hoping that your President’s Daily Brief tomorrow will give appropriate attention to Saturday’s warning by Russia’s Foreign Ministry spokesperson Maria Zakharova: “If the US launches a direct aggression against Damascus and the Syrian Army, it would cause a terrible, tectonic shift not only in the country, but in the entire region.”

Speaking on Russian TV, she warned of those whose “logic is ‘why do we need diplomacy’… when there is power… and methods of resolving a problem by power. We already know this logic; there is nothing new about it. It usually ends with one thing – full-scale war.” We are also hoping that this is not the first you have heard of this – no doubt officially approved – statement. If on Sundays you rely on the “mainstream” press, you may well have missed it. In the Washington Post, an abridged report of Zakharova’s remarks (nothing about “full-scale war”) was buried in the last paragraph of an 11-paragraph article titled “Hospital in Aleppo is hit again by bombs.” Sunday’s New York Times totally ignored the Foreign Ministry spokesperson’s statements.

In our view, it would be a huge mistake to allow your national security advisers to follow the example of the Post and Times in minimizing the importance of Zakharova’s remarks. Events over the past several weeks have led Russian officials to distrust Secretary of State John Kerry. Indeed, Foreign Minister Sergey Lavrov, who parses his words carefully, has publicly expressed that distrust. Some Russian officials suspect that Kerry has been playing a double game; others believe that, however much he may strive for progress through diplomacy, he cannot deliver on his commitments because the Pentagon undercuts him every time. We believe that this lack of trust is a challenge that must be overcome and that, at this point, only you can accomplish this.

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Maybe the clean-up will work. But we add more faster.

‘Great Pacific Garbage Patch’ Far Bigger Than Imagined (G.)

The vast patch of garbage floating in the Pacific Ocean is far worse than previously thought, with an aerial survey finding a much larger mass of fishing nets, plastic containers and other discarded items than imagined. A reconnaissance flight taken in a modified C-130 Hercules aircraft found a vast clump of mainly plastic waste at the northern edge of what is known as the “great Pacific garbage patch”, located between Hawaii and California. The density of rubbish was several times higher than the Ocean Cleanup, a foundation part-funded by the Dutch government to rid the oceans of plastics, expected to find even at the heart of the patch, where most of the waste is concentrated. “Normally when you do an aerial survey of dolphins or whales, you make a sighting and record it,” said Boyan Slat, the founder of the Ocean Cleanup.

“That was the plan for this survey. But then we opened the door and we saw the debris everywhere. Every half second you see something. So we had to take snapshots – it was impossible to record everything. It was bizarre to see that much garbage in what should be pristine ocean.” The heart of the garbage patch is thought to be around 1m sq km (386,000 sq miles), with the periphery spanning a further 3.5m sq km. [..] Following a further aerial survey through the heart of the patch on Sunday, the Ocean Cleanup aims to tackle the problem through a gigantic V-shaped boom, which would use sea currents to funnel floating rubbish into a cone. A prototype of the vulcanized rubber barrier will be tested next year, with a full-sized 100km (62-mile) barrier deployed by 2020 if trials go well.

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1000 on one crappy boat.

At Least 28 Migrants Found Dead Off Libya (AFP)

Twenty-eight Europe-bound migrants were found dead on a day of frantic rescues off Libya on Tuesday, including at least 22 in an overloaded wooden boat, an AFP photographer and the Italian coastguard said. The photographer, who was able to go aboard the vessel, said it appeared that many of the dead had suffocated. He said there were about 1,000 people on three levels. He counted 22 bodies and said there were more dead in the hold. The Italian coastguard – which is coordinating rescue efforts in international waters north of Libya – said 28 bodies had been recovered over the course of 33 operations on Tuesday, while 4,655 migrants had been rescued.

The photographer was travelling on the Astral, a ship chartered by Spanish NGO ProActiva Open Arms, which rescues migrants at sea. Late on Tuesday, the Italian navy took over helping survivors and retrieving bodies, the photographer said. It was yet another day of drama at sea after more than 6,000 migrants, most of them Africans in packed rubber dinghies, were rescued off Libya on Monday. Nine bodies were found in those operations, including a pregnant woman.

Read more …

Sep 182016
 
 September 18, 2016  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 18 2016
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John Collier FSA housing project for Martin aircraft workers, Middle River, MD 1943

Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)
How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)
China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)
Italian Banking Crisis Turns into Mission Impossible (DQ)
Most Likely Scenario For Hanjin Is Liquidation (WSJ)
US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)
Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)
Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)
Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)
France Bans All Plastic Cups, Plates And Cutlery (Ind.)

 

 

“..the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage.”

Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)

Ken Rogoff is by all accounts a brilliant man. The Harvard professor and former IMF chief economist is a chess grandmaster. His thesis committee included current Fed vice-chair Stanley Fischer. But like many survivors of Ivy League hoop jumping, the poor fellow appears to have emerged punch drunk. That’s the only conclusion to be drawn from Rogoff’s new book, The Curse of Cash , which, in effect, proposes a ban on paper currency. It’s terrifying piece of work, for several reasons. [..]

Rogoff’s “cashless society” is an elegant solution to a key problem bedeviling the Federal Reserve: with interest rates at the zero bound, the US central bank has no ammunition left to fight the next recession – because if cuts rates below zero, savers will withdraw their cash and put it under their mattresses. “In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy,” Rogoff writes. “Unfortunately, the existence of cash gums up the works.” That argument is spurious at best. By now, it is fairly clear from experiences in Japan and the US since 2008 that below neutral level interest rates provide little or no net new economic stimulus. At best, easy monetary policy brings forward spending and investment from the future into the present.

However, the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage. Rogoff, one of the country’s top economists, knows this; which is an important clue that there is much more to his proposals than meet the eye. It seems clear that Rogoff’s negative interest rate/cashless society proposal is structured to engineer a back-door US government debt default. Over the long term, by forcing savers, businesses, and banks to give the US government their money, and allowing Washington to repay less of that money each year, the US can legally default – on all that it owes. More worrying for investors: the fact that Rogoff, Ben Bernanke and others are proposing negative rates despite the considerable evidence that they will do no economic good suggests that they believe that the US government cannot pay back its debts – that it is already insolvent.

[..] maybe Rogoff is just as good a player on the public policy front as he is on the chess board. There is a possibility that he wrote The Curse of Cash as a quasi-job application for a higher government post, possibly as Treasury Secretary in a Clinton Administration. “If you give me the job, I’ll help make sure that government can borrow all it wants and it won’t have to pay any of it back,” may be the sub-text to Rogoff’s book. There is a precedent for this. Ben Bernanke’s 2002 “helicopter money” speech is widely credited with having set the ground for his appointment as Fed Chairman several years later. Brilliant? Cynical? Delusional? Or maybe all three? Take your pick. Either way, you haven’t heard the last of Ken Rogoff.

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“Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve. ..”

How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)

News reports paint a picture of a Bank of Japan board that remains solidly in favor of maintaining an ultra-easy monetary policy, but is sharply divided over the best way to proceed as the country’s banking sector feels the pinch of low rates and a flat yield curve. Ideas the Bank of Japan could ultimately move to adjust its program in a way designed to further steepen the yield curve are behind recent market moves, analysts said, and could pave the way for further steepening of yield curves around the world, including U.S. Treasurys. Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve.

That would be a mirror image of a Federal Reserve maneuver dubbed “Operation Twist” that the central bank used in 1961 and 2011 to flatten the yield curve by buying long-term debt and selling short term debt. Bond yields move inversely to prices. There are other measures the Bank of Japan could take to try to steepen the yield curve, including simply changing the mix of maturities it buys or setting a yield target. Christoph Rieger at Commerzbank urged against undertaking an inverse twist, noting that Kuroda has expressed concerns that a “bear steepening” of the yield curve—a phenomenon in which long-term rates rise faster than short term rates—tends to tighten monetary conditions. Obviously, that would blunt the impact of the BOJ’s easing efforts and prove unwelcome in an economy that’s contracting.

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“The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.”

China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)

Housing in major cities in China has seen price hikes over the last year that resemble the famous Dutch “Tulip Fever” bubble of 1637, according to new research by economic consultancy firm Longview Economics. “I think what’s going on in China is troubling … some of the valuations there are really quite extraordinary,” Chris Watling, the CEO of Longview Economics, told CNBC Thursday. “We’ve double checked these numbers about seven times, because I found them quite hard to believe.” The firm’s research found that only San Jose in the Silicon Valley is more expensive than Shenzhen. The Chinese city has seen prices rise 76% since the start of 2015, with the acceleration beginning in April 2015 as the country’s stock market was nearing its peak.

The situation in Beijing and Shanghai is similar, albeit less extreme, the company states. “Housing in some of the tier 1 cities is more expensive than it is in London, which I think itself is on a bubble, Watling added. “The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.” The analysis suggests that the typical home in Shenzhen costs approximately $800,000. Watling said that the house-income ratio in Shenzhen is now running at 70 times, compared to around 16 times in somewhere like London.

China, the biggest economic story of the last 30 years, has soured in the eyes of many analysts. A stock market crash that began in the country last summer has highlighted the vast difficulties Chinese lawmakers are now facing. Watling said Chinese housing was a story built on credit, lots of liquidity and lots of debt. He added that all bubbles, though, once established, will eventually burst and deflate. “It’s simply a question of when,” Watling said in a research note earlier this week, adding that the removal of cheap money would be the likely scenario that would lead to the beginning of the tightening and subsequent prices falls.

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“.. the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.”

Italian Banking Crisis Turns into Mission Impossible (DQ)

[..] for Monte dei Paschi’s latest rescue plan to have any chance of working, both parts of the plan — Part A and Part B — must succeed. Part A consists of a €28 billion bad-loan sale for which JP Morgan Chase, Citi and Italian investment bank Mediobanca are already assembling a bridge loan, in return for very handsome fees. Atlante, Italy’s deeply opaque, Luxembourg-based bank rescue fund, has reportedly agreed to buy the so-called mezzanine tranche in Monte dei Paschi’s bad loan securitization. Apparently demand for heavily discounted, slowly-decomposing bank debt in Italy is high, which is great news considering Italy is purportedly home to roughly a third of all of the bad debt at EU banks.

In a perfect sign of our yield-starved times, last week saw around 250 global investors converge on Venice to attend Banca Ifi s SpA’s “Non-performing Loan” conference. That’s twice as many as last year, reports Bloomberg. In other words, Part A of the rescue plan seems to be coming along nicely — as long as no one asks who will make up the difference between the book value of the bank’s toxic assets and the discount value at which they’re now being sold. As for Part B of the Plan — MPS’ €5 billion cash call scheduled for the end of this year — it’s going nowhere fast. Twice-bitten, thrice-shy investors are no longer buying the hype. Gennaro Pucci at London-based PVE Capital said that even if a significant proportion of MPS’ bad loans were “spun off into a special vehicle,” he would not buy more MPS shares out of fear that the bank could suffer further losses from the remaining soured debt.

This is a serious problem in today’s Italy: as long as the economy continues to stagnate, much of the supposedly good debt currently on the banks’ books will also, sooner or later, end up putrefying. It’s already happened to Banca Popolare di Vicenza, a regional lender that was rescued from bankruptcy late last year by the Atlante fund, but which is already in need of fresh funds. So, too, is Italy’s biggest and only global systemically important financial institution, Unicredit, which has a staggering €80 billion in bad debt on its balance sheets — more than any other European bank. While the downfall of MPS would be enough to cause serious damage to Italy’s already fragile financial system, the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.

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But first a fire sale.

Most Likely Scenario For Hanjin Is Liquidation (WSJ)

Debt-ridden Hanjin Shipping is working on a restructuring plan that calls for the drastic reduction of its owned fleet and returning the vast majority of the ships it charters to their owners, according to people with direct knowledge of the matter. Despite the efforts, these people say the most likely scenario is still that the Korean operator— the world’s seventh-biggest in terms of capacity—will be liquidated, marking one of the shipping industry’s biggest failures. Hanjin filed for bankruptcy protection last month. The South Korean government has strongly indicated it has no plans to bail out the company. A Korean court will decide in December whether to accept the plan or let the company go under, according to court officials in Seoul.

One person with knowledge of Hanjin’s efforts to restructure said the operator is considering a number of scenarios but focusing on one that involves Hanjin keeping up to 15 of its 37 ships, and returning to owners almost all of the 61 chartered vessels. Under that scenario, which is subject to approval by the bankruptcy court, “Hanjin will emerge as a small regional operator in Asia that will move a small part of Korea’s exports,” the person said. [..] Hanjin’s main charterers, including Danaos, Navios and Seaspan, with a combined exposure of more than $1 billion to Hanjin, were hoping for a last-minute intervention by the Korean government that would allow Hanjin to honor its vessel-leasing commitments. That looks less and less likely.

“Hanjin now has two alternatives: either to drastically downsize or to liquidate,” said Iraklis Prokopakis, Danaos’s COO. “We have eight ships chartered to Hanjin and five will be returned. The other three still have cargo on them so I don’t know what will happen.” Danaos has a $560 million exposure to Hanjin. Mr. Prokopakis said the key issue at the December court hearing will be whether Hanjin has enough cash to continue operating, even at a much smaller scale.

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“Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria.”

US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)

The US military has bombed Syrian government positions in the eastern province of Deir el-Zour today, where the Syrian military had been battling ISIS. According to the report, the US attack on Syrian troops “enabled an [ISIS] advance on the hill overlooking the air base.” This is the second time US forces have directly targeted Syrian government troops inside Syria. It would be the first time such an attack produced a battlefield advantage to ISIS. The US attack has killed at least 62 and perhaps as many as 100 Syrian government troops. Earlier today it was reported that the Syrian government had sent some 1,000 members of the elite Republican Guard into the Deir el-Zour province, as battles with ISIS in the area increase.

This US attack has wiped out perhaps 10% of this force and has obliterated Syrian army weapons and other materiel. The US government has admitted to the attack, but claims it was all a mistake. As some observers have pointed out, however, ISIS does not behave as traditional military units. They do not generally gather in large numbers like this or establish “bases.” The US Central Command released a statement earlier today claiming that the US coordinated the strike with the Russians, but Moscow has vehemently denied the claim. In fact, spokesman for the Russian Foreign Ministry Maria Zakharova was quoted by the state news agency Tass as saying that “after today’s attack on the Syrian army, we come to the terrible conclusion that the White House is defending the Islamic State.”

This dramatic development comes as the latest ceasefire begins to crumble. Russia has condemned Washington’s refusal to implement a key component of the agreement, to press US-backed rebels to cease fighting alongside al-Qaeda; and the main US-backed “moderate” Islamist group, Ahrar al-Sham, has refused to take part in the ceasefire at all. Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria. Is today’s attack a turning point in the war, where the US will begin to strike Syrian government forces more frequently? If so, how will Russia and Iran react to this overt shift in US strategy? Is this the flashpoint?

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But that’s all he’s going to get.

Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)

Italian Prime Minister Matteo Renzi blasted the latest European Union summit in Bratislava on Saturday, effectively labeling Friday’s high-level meeting a waste of time. “I don’t think it would be right for Italy to pretend not to notice when things are not getting any better,” Renzi said at a conference in Florence. Hours earlier, he criticized the summit in an interview with TV broadcaster RTV38. “As Italy, we strongly believe that the EU has a future, but we need to be doing things for real, because we have no use for staged events,” he said. Renzi also said he did not partake in the closing press conference with Angela Merkel and Francois Hollande because he was unhappy with the decisions reached concerning economic and migrant policy.

Renzi said Italy would not “serve as a fig leaf” for the likes of France or Germany. In what was the first European summit without the United Kingdom in over four decades, European leaders sought to show unity in the wake of this summer’s Brexit vote. This, Renzi said, “signals a small step forward, but it is still a rather long way away from the idea of Europe that we have in mind.” Renzi castigated the summit for not raising the African migrant issue. The documents “didn’t even mention Africa,” he said. As the first European destination for migrants arriving from Africa, Italy has been left to cope with the influx of refugees largely on its own while politicians debate how to address refugees in Turkey and along the so-called Balkan Route though Greece, eastern and central Europe.

Italy has long pushed for an international agreement with African states that would close migrant routes to Europe in exchange for increased investment. Renzi repeated his critiques of the EU’s austerity policy. While the country is respecting the EU’s strict budget disciplinary rules, he said Italy retains the right to stress that the rules are not working and it is not prepared “to pretend not to notice.”

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Insult to injury. It never stops. Electricity prices were raised 4-5% in Greece. Who can afford that?

Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)

Public properties, including real estate assets, are very often sold for extremely low prices, as the political risk factor supersedes even the crucial financial risk that comes with investing in Greece. The Hellenic Federation of Enterprises (SEV) this week commented on the issue, saying that this institutional shortfall of the Greek state and the lack of trust this generates in the three pillars of power (legislative, executive, judiciary) have turned the optimum utilization of state property into “a political point-scoring battle among parties.” As SEV pointed out, “in many instances we see the state’s assets devalued, owing to the delays that political tensions bring about in privatizations, so that they are sold off at particularly low prices. In other instances the prevailing criterion becomes the price of the privatization, without taking into consideration any distortions created in the market from incomplete planning.”

For the industrialists’ association there is no doubt that “the correct utilization of public property along clear and stable rules and terms of economic efficiency, both for state revenues and for the operation of markets, can become a key growth factor for the economy.” All this becomes clearer when one considers the tenders that the state privatization fund (TAIPED) has been conducting for the concession of real estate assets. As property market professionals observe, in most cases the prices investors offer – particularly in instances of plot development – are just a fraction of each asset’s actual value. The reason for that is not to be found in the financial crisis and the drop in market prices, but in investors’ need to factor the political risk into their calculations regarding the sustainability of their chosen investment, in order to secure the desired returns.

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CNBC tries an odd twist by claiming it’s not really a TTiP protest, but a form of general ‘easy anti-Americanism’. The same tactics as used in Brexit and the US elections. Curious to see when these people will realize these are losing tactics.

Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)

Hundreds of thousands of Germans took to the streets Saturday, in protest of pending trade deals with the United States and Canada. The deals in question are the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union and the Comprehensive Economic and Trade Agreement (CETA) for the Canadian-EU relationship. Neither free trade agreement has been ratified yet, but popular outcry has been growing for the last few years. The demonstrations took place in seven cities throughout Germany: Berlin, Frankfurt, Hamburg, Cologne, Leipzig, Munich and Stuttgart. Organizers told CNBC that the official estimate is 320,000 demonstrators across Germany.

In Berlin, where discussions of trade policy are frequently overheard in cafes and most available surfaces are plastered in posters and stickers against the deals, the largest demonstration of the day took place with about 70,000 attendees, according to the organizers. Earlier, local reports had indicated there could be as many as 80,000 in the German capital, but a heavy downpour close to the start time may have depressed turnout. A broad coalition of organizations helped plan the event, but the stated rationale for opposing the agreements centers on the belief that such deals “primarily serve the interests of powerful economic interest groups, and thus only cement the imbalance between the common good and economic interests,” according to one organization.

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Under TTiP, this would have been impossible.

France Bans All Plastic Cups, Plates And Cutlery (Ind.)

France has passed a new law to ensure all plastic cups, cutlery and plates can be composted and are made of biologically-sourced materials. The law, which comes into effect in 2020, is part of the Energy Transition for Green Growth – an ambitious plan that aims to allow France to make a more effective contribution to tackling climate change. Although some ecologists’ organisations are in favour of the ban, others argue that it has violated European Union rules on free movement of goods. Pack2Go Europe, a Brussels-based organization representing European packaging manufacturers, says it will keep fighting the new law and hopes it doesn’t spread to the rest of the continent. “We are urging the European Commission to do the right thing and to take legal action against France for infringing European law,” Pack2Go Europe secretary general Eamonn Bates told AP. “If they don’t, we will.”

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