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Japan is the catalyst that could bring the record-setting bull market for stocks across the globe to a screeching halt, according to Société Générale’s uberbear Albert Edwards. The prominent SocGen strategist says surprise monetary tightening in Japan could be the trigger that finally upend what has been an protracted and unrelenting global rally for assets considered risky. While most investors are busy eyeing rate increases in the U.S. and tapering by the ECB in the eurozone, Edwards says they should also watch developments in the world’s third-largest economy, Japan, where corporate profits are surging and inflation has picked up.

“We’ve been looking for surprises and one thing that can catch us out is if the Bank of Japan starts tightening. If it actually follows the Fed and the ECB and announces some sort of tapering,” he said, speaking at SocGen’s annual strategy conference in London on Tuesday. “This could be far more important than the Fed. A lot of major trends start with Japan. People don’t focus on Japan enough in my view,” he added. Investors on Tuesday got a taste of how BOJ tightening can rattle the markets. The central bank said it would buy less of its long-dated bonds, sparking speculation Gov. Haruhiko Kuroda could back away from its ultraloose monetary policy as early as this year. The surprise announcement sent global bond markets into spin on Tuesday. The yield on 10-year U.S. Treasury notes jumped above 2.5% to its highest since March and the 30-year bond yield logged its biggest one-day jump since Dec. 19.

[..] The BOJ has for years been among the most accommodative central banks in the world and as recent as December reaffirmed its commitment to aggressive qualitative and quantitative-easing program, also known as QQE. With inflation stubbornly running below the BOJ’s 2% annual target, the central bank has since early 2016 kept interest rates in negative territory and even introduced a 0%-target for its 10-year government bond yields to avoid deflation. The determined efforts by the BOJ to boost consumer prices have turned investors against the yen with data from the Commodity Futures Trading Commission showing an extreme bearishness toward the Japanese currency. However, downbeat investors on the yen could be caught flat-footed if inflation starts to pick up, prompting the BOJ to halt easing efforts, Edwards warned.

A concerted effort to let markets implode. And blame Trump.

• Central Banks Ready To Pop The ‘Everything’ Bubble (Smith)

Many people do not realize that America is not only entering a new year, but within the next month we will also be entering a new economic era. In early February, Janet Yellen is set to leave the Federal Reserve and be replaced by the new Fed chair nominee, Jerome Powell. Now, to be clear, the Fed chair along with the bank governors do not set central bank policy. Policy for most central banks around the world is dictated in Switzerland by the Bank for International Settlements. Fed chairmen like Janet Yellen are mere mascots implementing policy initiatives as ordered. This is why we are now seeing supposedly separate central banking institutions around the world acting in unison, first with stimulus, then with fiscal tightening. However, it is important to note that each new Fed chair does tend to signal a new shift in action for the central bank.

For example, Alan Greenspan oversaw the low interest rate easy money phase of the Fed, which created the conditions for the derivatives and credit bubble and subsequent crash in 2008. Ben Bernanke oversaw the stimulus and bailout phase, flooding the markets with massive amounts of fiat and engineering an even larger bubble in stocks, bonds and just about every other asset except perhaps some select commodities. Janet Yellen managed the tapering phase, in which stimulus has been carefully and systematically diminished while still maintaining delusional stock market euphoria. Now comes the era of Jerome Powell, who will oversee the last stages of fiscal tightening, the reduction of the Fed balance sheet, faster rate increases and the final implosion of the ‘everything’ bubble.

As I warned before Trump won the election in 2016, a Trump presidency would inevitably be followed by economic crisis, and this would be facilitated by the Federal Reserve pulling the plug on fiat life support measures which kept the illusion of recovery going for the past several years. It is important to note that the mainstream media is consistently referring to Jerome Powell as “Trump’s candidate” for the Fed, or “Trump’s pick” (as if the president really has much of a choice in the roster of candidates for the Fed chair). The public is being subtly conditioned to view Powell as if he is an extension of the Trump administration. This could not be further from the truth. Powell and the Fed are autonomous from government.

[..] So, why is the media insisting on misrepresenting Powell as some kind of Trump agent? Because Trump, and by extension all the conservatives that support him, are meant to take the blame when the ‘everything’ bubble vaporizes our financial structure. Jerome Powell is “Trump’s guy” at the Fed; so any actions Powell takes to crush the recovery narrative will also be blamed on the Trump administration.

Bond markets want their cake and eat it. First, low yields are a good thing; then rising yields show how good everything has become.

• The $50 Trillion Question for Bonds (BW)

Government bond yields, exemplified by the benchmark 10-year U.S. Treasury, have enjoyed three decades of decline. Their recent jump is prompting a heated debate over whether that bull market is over. It matters because there’s more riding on the question than ever before.

The value of benchmark bonds eligible for inclusion in the Bloomberg Barclays Global Aggregate Bond Index, which includes government, corporate and securitized debt from 24 local currency markets, has doubled in the past decade to almost $50 trillion.

While calling the turn in bonds, especially in Europe, has been a widow-making trade in recent years, recent moves certainly look like the trend is no longer your friend. The yield on the two-year Treasury has about doubled in the past year, and is a whisker away from 2%. Even at its current super-low level of about 0.55%, the 10-year German yield is up from its nadir of about minus 0.2% reached in July 2016.

Here’s the thing, though. Even if government bond yields are on a sustained path to higher levels, it’s arguably a positive sign for the global economy. A return to more normal borrowing costs would reinforce hopes that the world is finally free from the debilitating aftershocks from the financial crisis. Moreover, the new normal is still likely to be at lower levels than the old normal. Note that in the past 30 years, the 10-year Treasury yield peaked at about 9.4% in August 1988 and plateaued at 1.36% in July 2016. Its current poke above 2.5% still leaves it at about half of its three-decade average. For central banks seeking to normalize monetary policy, rising government bond yields will come as something for a relief. For investors who bought at the peak of the bull market, however, there could be painful times ahead.

Only game in town.

• China Weighs Slowing or Halting Purchases of US Treasuries (BBG)

China added to bond investors’ jitters on Wednesday as traders braced for what they feared could be the end of a three-decade bull market. Senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. The news comes as global debt markets were already selling off amid signs that central banks are starting to step back after years of bond-buying stimulus. Yields on 10-year Treasuries rose for a fifth day, touching the highest since March. China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the officials’ recommendations have been adopted.

The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people [..] “With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics,” said Michael Leister at Commerzbank. “Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields.” The Chinese officials didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of U.S. securities have sometimes been a geopolitical football in the past.

[..] Any reduction in Chinese purchases would come just as the U.S. prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen. “It’s a complicated chess game as with everything the Chinese do,” said Charles Wyplosz, a professor of international economics at the Graduate Institute of International and Development Studies in Geneva. “For years they have been bothered by the fact that they are so heavily invested in one particular class of U.S. bonds, so it’s just a question of time before they would try to diversify.”

The dollar is still king.

• Is Beijing Bluffing On Treasuries? (BBG)

The Bloomberg News report that senior government officials in Beijing recommended slowing or halting purchases of U.S. Treasuries is encountering a wall of skepticism, and rightly so. Even China’s State Administration of Foreign Exchange said Thursday that the report “might have cited wrong sources or may be fake news.” There’s a third possibility: that Beijing floated a trial balloon to see how the market would react.To the extent China would have to scoop up incoming dollars to keep the value of the yuan from rising too much too soon, what else can it possibly purchase with those dollars? Treasuries maturing in five years pay 2.32%. If China tries to alter the composition of its $3.1 trillion foreign-exchange war chest by swapping dollars to buy comparable securities denominated in any of the world’s main reserve currencies, it will find German bunds and British gilts paying even less.

Japanese and Swiss bonds offer somewhat higher yields. However, if every central bank in the world had given up on the world’s most liquid security every time it got a half-percent extra yield somewhere else, the dollar’s share in the world’s known reserves wouldn’t have held above 60% for almost a quarter-century. (It’s 63.5% now.) If Beijing wants a bargaining chip in trade tensions with the U.S., it should look elsewhere.In 2009, the Chinese central bank did try to diversify away from the dollar. The euro’s share in known global reserves peaked at 28% a few months after Wen Jiabao, the then Chinese premier, said he was “worried” about the huge amount of money his country had lent to the U.S.Then he – and the world – got something rather more real to worry about as the European debt crisis became an existential threat to that region’s single currency. According to the most recent data from the IMF, the euro’s share in worldwide foreign-exchange reserves is now down to 20%.

As 2018 progresses, we’ll see many reports, across the globe, of taxes owed on 2017 crypto gains.

• South Korea’s Largest Cryptocurrency Exchanges Raided For Tax Evasion (R.)

South Korea’s largest cryptocurrency exchanges were raided by police and tax agencies this week for alleged tax evasion, people familiar with the investigation said on Thursday. “A few officials from the National Tax Service raided our office this week,” an official at Coinone, a major cryptocurrency exchange in South Korea, told Reuters. “Local police also have been investigating our company since last year, they think what we do is gambling,” said the official, who spoke on condition of anonymity. He said Coinone was cooperating with the investigation. Bithumb, the second largest virtual currency operator in South Korea, was also raided by the tax authorities on Wednesday.

“We were asked by the tax officials to disclose paperwork and things yesterday,” an official at Bithumb said, requesting anonymity due to the sensitivity of the issue. South Korean financial authorities had previously said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime. The crackdown on Seoul-based operators of some of the world’s busiest virtual currency exchanges comes as the government attempts to calm frenzied demand for cryptocurrency trading in Asia’s fourth largest economy. Bitcoin’s 1,500% surge last year has stoked huge demand for cryptocurency in South Korea, drawing college students to housewives and sparking concerns about a gambling addiction.

They’re getting serious.

• South Korea Preparing Bill That Will Ban All Cryptocurrency Trading (CNBC)

South Korea’s justice minister said on Thursday that a bill is being prepared to ban all cryptocurrency trading in the country. That news is a major development for the cryptocurrency space, as South Korea is one of the biggest markets for major coins like bitcoin and ethereum. According to industry website CryptoCompare, more than 10% of ethereum is traded against the South Korean won — the second largest concentration in terms of fiat currencies behind the dollar. Meanwhile, 5% of all bitcoin are traded against the won. “There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Park Sang-ki said at a press conference, according to the ministry’s press office.

Bitcoin tumbled more than 12% following Park’s remarks, according to CoinDesk’s bitcoin price index that tracks prices from four exchanges. At 1:26 p.m. HK/SIN, the cryptocurrency price retraced some of its losses to trade at $13,547.7. Park added that he couldn’t disclose more specific details about proposed shutdown of cryptocurrency trading exchanges in the country, adding that various government agencies would work together to implement several measures. Reuters further reported that a press official said the proposed ban on cryptocurrency trading was announced after “enough discussion” with other government agencies including the nation’s finance ministry and financial regulators.

Cryptocurrency trading in South Korea is very speculative and similar to gambling. Major cryptocurrencies like bitcoin and ethereum are priced significantly higher in the country’s exchanges than elsewhere in the world. For example, bitcoin traded at $17,169.65 per token at local exchange Bithumb, which was a 31% premium to the CoinDesk average price. That difference in price is called a “kimchi premium” by many traders. [..] earlier this week, industry data provider CoinMarketCap tweeted that it would exclude some South Korean exchanges in price calculations due to the “extreme divergence in prices from the rest of the world” and for “limited arbitrage opportunity.”

Beijing doesn’t see bitcoin as an asset to its power politics.

• China Moves To Shutter Bitcoin Mines (CNBC)

China is moving to eradicate the country’s bitcoin mining industry over concerns about excessive electricity consumption and financial risk, reflecting authorities’ judgment that cryptocurrencies are not a strategic industry. A multi-agency task force has instructed provincial governments to “actively guide” companies in their respective regions to exit the cryptocurrency mining industry, according to a document seen by the Financial Times. The move to pressure miners follows China’s shutdown of local bitcoin exchanges and its ban on initial coin offerings. Miners create new bitcoins by solving complex maths problems whose solutions are used to validate new bitcoin transactions. Though ostensibly a computational task, the reliance on raw computing power makes the process more akin to industrial manufacturing than traditional high-technology businesses.

Many bitcoin miners have established operations in remote areas without even registering a company. Some have also skirted Chinese regulations that forbid end users from purchasing electricity directly from power producers rather than grid operators. China mines about three-quarters of the world’s bitcoins, according to Liao Xiang, chief executive of Lightningasic, a Shenzhen-based mining operation. Chinese miners have taken advantage of cheap electricity in regions rich in coal or hydroelectric power, including Xinjiang, Inner Mongolia, Sichuan and Yunnan. The global industry accounts for 0.17% of global electricity consumption, more than 161 individual countries, according to Digiconomist, a website that tracks the industry.

[..] Bitcoin mining “consumes a large amount of electricity and also encourages a spirit of speculation in ‘virtual currencies'”, according to the document. Mining operations contradict efforts to prevent financial risk and to discourage activities that “deviate from the needs of the real economy”, it added. The internet finance task force, which includes the People’s Bank of China, has previously led regulatory tightening efforts on peer-to-peer lending and online consumer loans. The order does not call on regional authorities to shut mining operations directly, but rather to squeeze them out by strictly enforcing policies on electricity consumption, land use, tax collection and environmental regulation

How Democrats sell out Dreamers.

• Buy Off Trump With the Wall (Lowry)

There is a very easy way for Democrats to get major concessions from President Donald Trump on immigration: Give him his Wall. This is the key to a deal codifying the Deferred Action for Childhood Arrivals program, the Obama-era de facto amnesty for a segment of so-called Dreamers. All it takes is giving Trump a plausible start to the Wall that the president can then, in his inimitable way, promote as the greatest structure built on a border since Hadrian began his famous handiwork at the northern limit of the Roman Empire in 122. That the Democrats very likely won’t do this speaks to their irrational aversion to a Wall that they can’t view dispassionately any more than Trump can. It used to be that enhanced security on the border, and yes, a physical structure that in places is effectively a wall, had bipartisan support.

The Secure Fence Act of 2006 passed the House by a vote of 283-138 and the Senate 80-19. It called for building roughly 700 miles of double-layer fencing on the border, and no one seemed to believe that the United States had irreparably sullied its reputation. This wasn’t the first time anyone had thought of a fence, of course. There had been barriers in the San Diego area for a very long time, although not particularly robust ones. Beginning in the 1980s, more serious structures were built. According to the San Diego Union-Tribune, there are 46 miles of fencing overall and 13 miles of double fencing in the San Diego-Tijuana corridor, where there used to be a nightly influx of undocumented immigrants. In some sections, the barriers are 10-feet-tall military helicopter pads indistinguishable from a wall.

Again, no one believes San Diego has closed itself off from the world by adopting a common-sensical and — in this urban area — effective prophylactic against illegal immigration. But Democrats now find find physical barriers on the border offensive, especially if they have enough solidity to be called a Wall. One immigration advocate, in a typical sentiment, told The Huffington Post that the Wall is a “tool to instill hate and division.” This lunacy has rapidly become Democratic orthodoxy. Harry Enten of 538 notes that in 2006 almost 40% of Democrats supported building a Wall. By February of last year, Democrats were against it by 89% to 8%.

The hostility toward the Wall is part of a broader Democratic leftward lurch on immigration, but also a simple schoolyard calculus that if Trump supports something, they must oppose it. This forecloses the most basic legislative give-and-take. If Nancy Pelosi and Chuck Schumer gave Trump something significant on the Wall, they would be able to find their way home — as John Jay said after concluding an unpopular treaty with the British in 1795 — by the light of their own burning effigies. Their voters would scorn them as traitors complicit in the alleged horrid bigotry of Donald J. Trump.

Well, no. Just another instance of everything being insinuated, in the hope that a sliver is remembered. Fake news.

• Russian Bid To Influence Brexit Vote Detailed In New US Senate Report (G.)

Russia’s attempts to influence British democracy and the potential vulnerability of parts of the UK political system to anti-democratic meddling during the EU referendum have been detailed in a report prepared by the US Senate. The report by Democrats on the Senate foreign relations committee, titled Putin’s asymmetric assault on democracy in Russia and Europe: implications for US national security, pinpoints the way in which UK campaign finance laws do not require disclosure of political donations if they are from “the beneficial owners of non-British companies that are incorporated in the EU and carry out business in the UK”. This opacity, the report suggests, “may have enabled Russian-related money to be directed with insufficient scrutiny to various UK political actors”.

“Investigative journalists have also raised questions about the sources of sudden and possibly illicit wealth that may have been directed to support the Brexit ‘Leave’ campaign.” The UK Electoral Commission has already launched an investigation into the issue. The senators point out that Ukip and its then-leader, Nigel Farage, did not just fan anti-EU sentiment but also “criticised European sanctions on Russia, and provided flattering assessments of Russian President Putin”. The report adds that although officially the Russian government asserted its neutrality on Brexit, its English-language media outlets RT and Sputnik covered the referendum campaign extensively and offered ‘’systematically one-sided coverage’’. The senators also challenge the adequacy of the investigations by Facebook and Twitter into the allegations of widespread social media interference by the Russians during the referendum.

They reference University of Edinburgh research showing more than 400 Russian-run Twitter accounts that had been active in the US election had also been actively posting about Brexit. In addition, the senators noted that research conducted by a joint team of experts from the University of California at Berkeley and Swansea University reportedly identified 150,000 Twitter accounts with various Russian ties that disseminated messages about Brexit. The report also points to the vast flow of Russian money into the UK, including the London property market. It records how the Metropolitan police noted that a total value of £180m in properties in the UK had been put under investigation as possibly purchased with corrupt proceeds by secretive offshore companies.

Overall the report breaks little new ground in terms of fresh evidence but says the picture remains incomplete. “The allegations that have emerged of Russian interference prior to the Brexit referendum are all the more stunning given the innate resilience within British society to the Kremlin’s anti-democratic agenda,” the senators wrote. The report, which chronicles Russian disinformation efforts in 19 countries, calls on Donald Trump to assert leadership on Russian meddling in the 2016 presidential election, saying: “Never before in American history has so clear a threat to national security been so clearly ignored by a US president.”

Don’t hold your breath. US and UK want revenge.

• Assange Gets Ecuador ID; ‘First Step’ To Diplomatic Immunity? (RT)

The Ecuadorian ID reportedly granted to Julian Assange could mark his first step to obtaining diplomatic immunity, as Ecuador wants to resolve Assange’s indefinite embassy stay, human rights activist Peter Tatchell told RT. “Granting an identity card is potentially the first step towards granting citizenship of Ecuador. And there is a possibility that he could be then granted a diplomatic status, which would give him diplomatic immunity,” Tatchell said. He added that diplomatic immunity would mean that the WikiLeaks co-founder would be “free to leave the embassy and travel to Ecuador and the British government would not be able to lay a finger on him.”

Ecuadorian media reports Assange was given an ID card issued on December 21, citing “reliable sources” and providing the civil registry number of the document. The whistleblower also uploaded a photo of himself on Twitter wearing a yellow, blue and red shirt, the colors of the Ecuadorian flag, but made not comments on the issue. nEcuador usually issues such ID cards for people claiming residency status, which are called cedulas. It is, however, unclear whether Assange was granted residency status or full citizenship.

However, Tatchell says “the Ecuadorian government has made it very clear that it wants a resolution [of this whole situation around Assange] and they are prepared to negotiate [to give] a way for Julian Assange [to leave] the embassy.” He added that “granting him [Assange] an identity card is a new development that can open the door for further things in the future.” The Vienna convention on diplomatic relations states that someone who holds a diplomatic passport is immune from prosecution, the activist explained. It is still no guarantee, however. “There is still a possibility that, even if he was granted diplomatic immunity by the Ecuadorians, the British government might still try to snatch him,” Tatchell said, although “many British officials would be glad to see Assange getting a diplomatic passport and leaving [the UK],” he added.

Debt. Colony. Forever.

• Greece to Remain Under Lenders’ Supervision Until 2059 – Handelsblatt (GR)

In a report about Greece’s new omnibus bill and a potential break from its bailout in August 2018, German newspaper Handelsblatt claims the country will remain under lenders’ supervision for another 40 years. The newspaper says the enormous bill, which was introduced to parliament on Tuesday and is expected to be put to vote next Monday, is highly detailed but lawmakers have not been given enough time to scrutinize it. “The plan is that the multi-bill will pass from the Greek parliament before the next Eurogroup meeting on January 22, so that Greece’s lenders can release the next €5.5 billion bailout tranche, leading the country out of its bailout obligations by August 2018,” the paper notes. It adds that the short time afforded to lawmakers to study the bill and debate it is exactly what Greek PM Alexis Tsipras needs for a smooth vote.

The German paper also notes protests and strikes against the bill scheduled for next Friday and Monday. In spite of the fact the bill will lead to further wage and pension cuts, as well as tax increases, the government majority in parliament — despite vocal unhappiness from some of Tsipras’ own SYRIZA lawmakers — is expected to vote for it, the report says. “Tsipras has pledged to his supporters that the country will break its austerity vicious circle next August and throw out its despised lenders for good,” the report adds. “But with the country committed to more austerity measures until 2022, that is self-delusion.” “A total of 80% of the Greek debt remains in the hands of the country’s lenders,” Handelsblatt concludes. “This means that until Greece pays up its debt, which, with today’s rates it will manage to do by 2059, the country will be under its lenders’ financial supervision.”

Same findings as the German report last year. This is the food chain that feeds us.

• Insect Declines: New Alarm Over Mayfly Is ‘Tip Of Iceberg’ (G.)

Modest levels of pollution found in many English rivers are having a devastating impact on mayflies, new research suggests, killing about 80% of all eggs. Clouds of emerging mayflies were once a regular sight on English summer evenings and they are a key part of the food chain that supports fish, birds and mammals. The finding that even pollution well below guidelines can cause serious harm adds to concerns about plummeting insect numbers. In October, a study found that the abundance of flying insects has plunged by 75% in 25 years, prompting warnings that the world is “on course for ecological Armageddon”, with profound impacts on human society.

Paul Knight, chief executive of Salmon and Trout Conservation (STC), which is conducting an in-depth three-year survey of rivers, said: “The results of this groundbreaking new study are irrefutable. We believe this is just the tip of the iceberg. Lose your invertebrates and other species will follow.” The new research looked at the blue-winged olive, a common mayfly present across the British Isles and most of continental Europe. Its numbers have fallen significantly in recent decades and it has almost vanished from some English rivers. The prime suspects for this decline are fine sediment and phosphate pollution in rivers, which are washed off farmed fields and also result from untreated sewage. Some research has been done on how the larval and adult stages of mayflies are affected by pollution, but not on their eggs.

“The young life stages are the most vulnerable, just as with human babies,” said Nick Everall, at the Aquascience Consultancy and who led the research published in the journal Environmental Pollution. Blue-winged olive eggs are laid on river beds and then have to survive for up to eight months over winter before hatching into nymphs. However, experiments in the laboratory found that the fine sediment settles on the eggs and suffocates them, by preventing oxygen transferring into the egg. The sediment can also allow fungus to grow and kill the eggs, while phosphate is known to affect the development of eggs.

The Cynical Society:

1) The BBC broadcasts David Attenborough’s new Blue Planet 2 series, in which one episode is all about -plastics- pollution
2) All of Britain watches, so the national conversation becomes ‘something must be done’
3) May has to do/say something, but the plastics industry are her friends, and she judges it’s all lip service anyway that will fade (and those who really care are not her voters)
4) She decides to pay only lip service too, and pushes the issue forward by 25 years, i.e. not her problem

• Theresa May Vows To Eliminate UK Plastic Waste By 2042 (Ind.)

Theresa May will commit the UK to eliminating all avoidable plastic waste by 2042 as she launches the Government’s environmental plan for the next 25-years. Under the pledge waste such as the carrier bags, food packaging and disposable plastic straws that litter the country and pollute the seas would be abolished. But the target was given a frosty reception from environmental groups with one leading organisation saying it “lacks urgency, detail and bite”, while another said the country “can’t afford to wait” so long. The broader 25-year plan, first promised three years ago, will also urge supermarkets to set up “plastic-free aisles” for goods with no packaging and confirm plans to extend the 5p charge for carrier bags to all English retailers.

It comes as the Government seeks to burnish its environmental credentials with recent pledges on animal protection and plastic microbeads. But with concern growing around plastic waste, Ms May will say: “We look back in horror at some of the damage done to our environment in the past and wonder how anyone could have thought that, for example, dumping toxic chemicals, untreated, into rivers was ever the right thing to do. “In years to come, I think people will be shocked at how today we allow so much plastic to be produced needlessly. [..] Friends of the Earth CEO Craig Bennett said: “A 25 year plan is clearly needed – but with the nation facing an accelerating environmental crisis we can’t afford to wait a quarter of a century for urgent action to tackle the issues that already threaten our lives, health and planet.”

He went on: “If Theresa May wants to champion the environment she must spell out the bold measures her Government will take in the next few weeks and months.” WWF Chief Executive Tanya Steele welcomed “any step” to reduce plastic waste, adding that plastic-free aisles can spur change. But she said: “If we really want to solve this problem, we need to think bigger and ultimately move towards an end to single-use plastics.” Shadow Environment Secretary Sue Hayman said the plan was now “years behind schedule” branding the plan “a cynical attempt at rebranding the Tories image”. She went on: “[It] appears to contain only weak proposals with Britain’s plastic waste crisis kicked into the long grass.” Liberal Democrat leader Vince Cable said “The Conservatives should be eliminating all avoidable plastic waste now – a target of 2042 beggars belief.”

Debt Rattle November 30 2017

Nov 302017

November 30, 2017 Posted by Raúl Ilargi Meijer at 9:36 am Finance Tagged with: bitcoin, depression, food bank, Greece, hunger, imperialism, lobster, pesticide, plastic, refugees, Visegrad 11 Responses »

Roger Viollet Great Paris Flood, Gare Saint-Lazare 1910

• Goldman Warns Highest Market Valuations Since 1900 Mean Pain Is Coming (BBG)

• The Last Time This Happened Was Just Months Before The Great Depression (ZH)

• Pecking Order (Ben Hunt)

• The Bitcoin Debate: Max Keiser vs. Steve Keen (RT)

• Why We Can’t Trust Basic Economic Figures (Qz)

• What Americans Spent The Most Money On In The Third Quarter (ZH)

• Monetary Imperialism (Michael Hudson)

• One In 10 London Families Rely On Food Banks To Survive (Ind.)

• Half A Million UK Children Go To School Hungry Every Day (Ind.)

• All Is Not Well In The Visegrad Economies (CER)

• Pressure On Greece To Scrap Arms Deal With Saudi Arabia (G.)

• Greece Moves Hundreds Of Asylum Seekers From Lesvos To Mainland (R.)

• Common Pesticide Can Make Migrating Birds Lose Their Way (G.)

• ‘Shocking’ Rise In Rubbish Washing Up On UK Beaches (G.)

• Lobster Found With Pepsi Logo ‘Tattoo’ (G.)

Bubble, anyone?

• Goldman Warns Highest Market Valuations Since 1900 Mean Pain Is Coming (BBG)

A prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to translate into pain for investors, according to Goldman Sachs. “It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s,” Goldman Sachs International strategists including Christian Mueller-Glissman wrote in a note this week. “All good things must come to an end” and “there will be a bear market, eventually” they said. As central banks cut back their quantitative easing, pushing up the premiums investors demand to hold longer-dated bonds, returns are “likely to be lower across assets” over the medium term, the analysts said.

A second, less likely, scenario would involve “fast pain.” Stock and bond valuations would both get hit, with the mix depending on whether the trigger involved a negative growth shock, or a growth shock alongside an inflation pick-up. “Elevated valuations increase the risk of draw-downs for the simple reason that there is less buffer to absorb shocks,” the strategists wrote. “The average valuation percentile across equity, bonds and credit in the U.S. is 90%, an all-time high.” A portfolio of 60% S&P 500 Index stocks and 40% 10-year U.S. Treasuries generated a 7.1% inflation-adjusted return since 1985, Goldman calculated – compared with 4.8% over the last century. The tech-bubble implosion and global financial crisis were the two taints to the record.

Low inflation has prevailed in the current period, just as it did alongside economic growth in the 1920s and 1950s, according to the Goldman report. “The worst outcome for 60/40 portfolios is high and rising inflation, which is when both bonds and equities suffer, even outside recessions.” An increase in policy rates triggered by price pressures “remains a key risk for multi-asset portfolios. Duration risk in bond markets is much higher this cycle,” they wrote.

Bubble? Hell, no.

• The Last Time This Happened Was Just Months Before The Great Depression (ZH)

As Goldman observes: “we are closing in on the longest 60/40 bull market in history – there has been no 10% drawdown in real terms since 2009. A passive long-only balanced portfolio has delivered attractive risk-adjusted returns since the 90s. A favourable ‘Goldilocks’ macro backdrop, supported by the ‘Great Moderation’ and the central bank put, has boosted returns in both equities and bonds. However, after the recent ‘bull market in everything’, valuations across assets are as expensive as they have been this century, which reduces the potential for returns and diversification in balanced portfolios. Some more statistics: “We are nearing the longest bull market for balanced equity/bond portfolios in over a century – a simple 60/40 portfolio (60% S&P 500, 40% US 10-year bonds) has not had a drawdown of more than 10% since the GFC trough (8.7 years) and has delivered a 143% return (11% p.a.) since then.”

And when was the last time a balance portfolio had such a tremendous return? Goldman answers again: “The longest run has been during the Roaring 20s, ending with the Great Depression. The second longest run was the post-war ‘Golden age’ in the 50s – the 90s Boom has been in third place but is now fourth, after the current run. In other words, one would have to go back to some time in early 1929 to be looking at the kind of returns that a balanced “60/40” portfolio is generating today. In fact, the current period of staggering returns without a 10% total drawdown is now 8.7 years. How long was the comparable period in the 1928s? 9.1 years. Which means that if history is any guide, the second great depression is just around the corner.

If we can agree that trickle down is just a ruse invented to trick the gullible, we should also agree that any and all QE is robbery in plain daylight.

• Pecking Order (Ben Hunt)

Step One in the Pecking Order Lie is to promote a narrative of trickle-down economics — that making the rich even richer is a good thing for the non-rich. This is exactly what Ben Bernanke is saying here, that the Fed’s extraordinary efforts to prop up the stock market aren’t just good for the rich, but will be good for everyone once the “wealth effect” kicks in and the rich start spending their money. Whenever someone uses the phrase “wealth effect”, they are promoting a trickle-down narrative. How does trickle-down monetary policy work? By spending TRILLIONS of dollars to buy financial assets, the world’s central banks have inflated the prices of ALL financial assets, EVERYWHERE in the world. This is not a secret plan. This is not a hidden agenda. This is the avowed purpose of what central bankers call Large Scale Asset Purchases (LSAPs).

The goal is to force us to “reach for yield”. The goal is to force us to buy more and more risky assets (stocks) at higher and higher prices. The Fed is trying to make the stock market go up. And they’re succeeding. Here’s a great chart from TCW showing how this works. The orange line is the growth rate of the US economy. The blue line is the growth rate of how rich we are. By tripling the stock market, the Fed has made us much richer than our economy has grown … SOOO much richer than our economy has grown. But the goodies of a trebled stock market aren’t evenly distributed. Who owns stocks? If we’re talking about households, leaving aside pension funds and endowments and other institutional investors, it’s the rich, mostly. And that household share of the Central Bankers’ Bubble doesn’t increase linearly with wealth, but exponentially, meaning that the really rich own a lot more stocks than the merely rich, so the really rich have gotten a lot richer than the merely rich.

Here’s a chart from Deutsche Bank showing the impact (it’s a year old, so the effect is even more pronounced today with the stock market 20% higher). Thirty years ago, the non-rich (the bottom 90% of American households by income) owned 35% of American household wealth. Today they own about 22%. Forty years ago, the really rich (the top 1/10th of 1% of American households by income) owned about 7% of American household wealth. Today they, too, own about 22%. Moreover, the gains of the really rich have mirrored the losses of the non-rich, which means that the well-off and merely rich (the remaining 9.9% of American households) haven’t seen much of a change one way or another.

Now this shift in relative wealth of the non-rich and the really rich didn’t start with the Central Bankers’ Bubble and its narrative of trickle-down wealth effects from monetary policy. It started roughly in 1980 with the Reagan narrative of trickle-down wealth effects from fiscal policy. And before we make overly facile comparisons with the 1920s and 1930s, this chart isn’t taking into account pensions and social security and other safety net features of the modern semi-sorta-welfare state. So I don’t know how historically abnormal today’s level of significant wealth inequality might be, whether it’s Louis XVI level inequality or simply robber baron level inequality. But I know that it IS.

Love Max (as does Steve), but he doesn’t look good here. You don’t enter a discussion with Steve Keen without even trying to listen. And I remember Max pushing silver the same way he does bitcoin.

• The Bitcoin Debate: Max Keiser vs. Steve Keen (RT)

Netherlands as a (quasi-) legal money launderer.

• Why We Can’t Trust Basic Economic Figures (Qz)

Donald Trump doesn’t know what he’s talking about when he decries America’s trade deficits with countries around the world—and that’s not his fault. None of us do. Thanks to offshoring practices like those revealed in the Paradise and Panama Papers, global investment figures are “a big black hole,” says Daniel Haberly, an economic geographer at the University of Sussex. “We don’t really know what the world economy actually looks like. That’s the big burning question for me. We have this picture of what it looks like on paper but in reality it’s probably something completely different.” Look no further than the UK for an example of how crazy investment statistics are. The first name on its list of top foreign direct investors doesn’t surprise—it’s the world’s biggest economy, the United States.

Second place, however, isn’t such a behemoth. According to British government stats, the Netherlands supposedly shoveled £139.8 billion ($186 billion), 28% of its GDP, into the UK in 2015. Anglo-Dutch ties run long and deep, but can a country of just 17 million people really be investing so much cash into Britain alone? Quite simply, no. The Netherlands is not just a smallish European trading nation—it’s also one of the world’s biggest conduits for cash going to and from tax havens. When the British government broke down its FDI statistics this year (chapter 6), it realized that only 34.5% of that money actually came from the Netherlands; much of the rest being from European subsidiaries of big US companies or… from British companies rerouting their money.

The US political system failing to tackle healthcare, with a ton of examples how to do it across the world, tells you all you need to know about how morally bankrupt it is.

• What Americans Spent The Most Money On In The Third Quarter (ZH)

One month ago, when the BEA released its first estimate of the hurricane-impacted economy during the third quarter (which came in at a stronger than expected 3.0%) we were surprised to report that according to the Department of Commerce, in the third quarter the biggest driver of marginal spending was car sales (technically Motor Vehicles and Parts), which increased by $15.6 billion to $463.5 billion. Which, as we said at the time and considering recent US and global automakers data, was paradoxical in light of the ongoing decline in overall sales in the second half of 2017, and it was far too early to expect the post-hurricane spending spree. It was also surprising because as Americans splurged on cars, they pulled back on gasoline purchases, which was the single biggest detractor to spending, subtracting a marginal $3.5 billion in PCE, to $283.6 billion.

In any case, we concluded by saying that “we now await for the revisions to this initial estimate over the coming two months, because something tells us that the auto spending spree will be thoroughly revised well lower.” One month later, when the BEA released its second Q3 GDP estimate, it appears we were right: the contribution from motor vehicles was indeed revised lower, but not nearly as dramatically as we expected, only from a marginal increase of $15.6 million to $13.5 million. And yet, many other line items did see a downward revision, which means that something had to increase sharply to compensate for the downward revisions among other spending components.

Sure enough, something did: the old faithful “plug” which has saved the US economy every quarter for the past 4 years: Healthcare, or as it is better known, Obamacare, because with Trump failing to repeal Obama’s signature health law, it means that Healthcare will merrily “contribute to GDP” for years to come, by being the single biggest marginal spending item for the foreseeable future.

Finally, for a comparison of how dramatically the contribution of “Healthcare” was revised higher, here is a chart showing side by side the change in spending among all key line items. One can almost hear the orders “from above” to make GDP 3% or higher at any cost when looking at this chart.

Must. Read. Like anything Hudson.

• Monetary Imperialism (Michael Hudson)

In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade and “foreign aid” (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping their assets and imposing austerity. The reality since World War I is that the United States has taken the lead in shaping the international financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it. Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach and the drive by its bankers and bondholders for short-term gains.

The dollar-centered financial system is leaving more industrial as well as Third World countries debt-strapped. Its three institutional pillars – the IMF, World Bank and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics, Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements put in place after World War II. The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries, and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and avoid the current economic slowdown and debt deflation.

After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury. The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange also were pushed into financial collapse. The debt deflation was much like that of Third World debtors a generation ago, and today’s southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

Medieval third world.

• One In 10 London Families Rely On Food Banks To Survive (Ind.)

One in 10 London families are relying on charity handouts to eat and food banks are facing unprecedented strain in the run-up to Christmas, new figures reveal. One in four London parents worry about being able to afford to feed their children, the research found, while almost one in five have to choose between heating their homes or feeding their family. The exclusive poll, conducted by Kellogg’s to mark the start of The Independent and Evening Standard Help a Hungry Child campaign, exposed the devastating choices facing parents around the country as food banks struggle to keep up with growing demand. At least 146,798 three-day emergency parcels were handed out by Trussell Trust foodbanks in December 2016, a 47% spike compared to the average for the overall 2016/17 financial year, according to the charity.

Children accounted for 61,093 of those affected. Now the charity is warning 2017 could herald an even higher increase, following a 13% surge in food bank usage during the first six months of this year. The figures are revealed as a Labour MP urges the Government to accurately measure the number of people going hungry with a food insecurity bill. Emma Lewell-Buck, a member of the All-Party Parliamentary Group on Hunger, will present the cost-neutral bill to the Commons on Wednesday. It will ask the Government to incorporate questions about how often people go without food into national surveys. She called rising food bank usage a “massive dereliction of state duty” and is urging Theresa May to take urgent action to recognise the scale of the problem.

“They have to admit what everybody already knows that the levels of hunger are far higher than we have realised,” she said. “It is the duty of the state, there is no way food banks should have filled the gap left by the welfare state that this Government has created.” She added: “Now food banks are becoming a pillar of the welfare state and they should not be and they should never have been.” The South Shields MP said getting a measure on the true scale of the numbers going hungry would force the Government into taking a more proactive stance in tackling hunger.

Talk about a failed society…

• Half A Million UK Children Go To School Hungry Every Day (Ind.)

When money is tight eight-year-old Emma’s parents are forced to send their daughter to school, tummy rumbling, without any breakfast. In the evening, she fills up on plain pasta or reduced microwave meals – cheap food her parents can afford. Emma says she often feels too tired to concentrate on her schoolwork. The situation Emma lives with is the devastating reality faced by the 500,000 children across the UK who go to school hungry each day. Eight million people in Britain – the world’s sixth largest economy – are living in food poverty, according to the United Nations (UN). And an estimated 870,000 children in England may be going to bed hungry each night because their parents are unable to provide the meals they need.

But not eating isn’t the only problem – access to nourishing and nutrient-filled food is simply out of reach for thousands of families living on the breadline, with far-reaching consequences for too many of Britain’s children. Dr George Grimble, a medical scientist at University College London, said the situation was “disastrous” for developing children, resulting in malnourishment, obesity and squandered potential. “When people are in poverty they are forced to buy the cheapest foods – filling but nutrient-lacking food,” Dr Grimble told The Independent. “Food poverty in the community overlays to a large extent on disease malnutrition.” More than 60% of paediatricians believe food insecurity contributed to the ill health among children they treat, according to a 2017 survey by the Royal College of Paediatricians and Child Health.

The harrowing hunger stats sit juxtaposed with the fact 100 million tons of food is wasted each year across the EU. More than 400 million meals’ worth of edible food was sent to landfill in 2016 which could have been redistributed to feed hungry people across Britain, according to the Government’s waste advisory body, Wrap.

“..succumbed to populists..” is too easy a cop-out. These countries will define Europe going forward.

• All Is Not Well In The Visegrad Economies (CER)

On the face of it, the Visegrad countries – the Czech Republic, Hungary, Poland and Slovakia – are doing well economically. The data for GDP per head suggest a gradual convergence in living standards with Western Europe. They continue to attract a disproportionate share of inward investment in EU manufacturing, and their integration into EU-wide supply chains helps to explain why they are now collectively Germany’s most important trade partner, ahead of China and the US. But the political situation across the Visegrad is anything but rosy. Voters in all four countries have succumbed to populists. The reasons for this populism are complex, but economics probably provides a bigger part of the explanation than the positive headline numbers suggest.

In 2016, GDP per head in the Visegrad four (adjusted for price differences) ranged from 64% of eurozone levels in Poland to 82% in the Czech Republic. The Czech Republic, Slovakia and Poland have experienced significant convergence in GDP per head with the eurozone over the last ten years (though it should be noted that the dire performance of the eurozone economy over that period was a major reason for this). But what matters to the average person is not GDP growth, but personal income growth, and hence living standards. And here the Visegrad picture is less reassuring. In 2016 worker ‘compensation’ (wages and salaries and other benefits) ranged from just 50% of the eurozone’s in Hungary to 59% in the Czech Republic. And the rate of convergence of compensation with the eurozone average has been slower than the rate of convergence of GDP.

Growth in consumption across the Visegrad countries has lagged behind growth in GDP, resulting in a sharp fall in consumption as a share of overall spending. This has happened in nearly all developed economies over the last decade, but the scale of the decline in all four Visegrad economies has been much greater. Average households have not seen enough of the fruits of economic growth. Those rewards have gone disproportionately to the owners of capital, and in these countries, that tends to mean foreigners. In the Czech Republic, Hungary, and Slovakia, the most important sectors are largely or wholly foreign-owned. The Polish economy is much bigger and more diversified than the other three, but the level of foreign ownership is still very high.

How about the pressure on US, France, UK?

• Pressure On Greece To Scrap Arms Deal With Saudi Arabia (G.)

The Greek government has announced it will abide by any EU embargo on Saudi Arabia as it faces criticism over a controversial arms deal, including from its own MPs. As cracks appeared in the leftist-led coalition over the €66m weapons agreement with the kingdom, the administration’s spokesman said Athens would apply the law “by the letter” if EU sanctions were announced. “We are waiting to see the decisions of the European parliament and will act accordingly,” said Dimitris Tzannakopoulos. “The process is frozen.” Mounting tensions within the ruling Syriza party have matched international condemnation of the agreement by human rights groups. Amnesty International has said the munitions could end up being used by the Gulf state in its war against neighbouring Yemen, where civilian populations have borne the brunt of the conflict.

“[We] call on Greece to immediately rescind the sale and transfer of military equipment to Saudi Arabia and to refuse approval of the transport of every type of conventional weapons, ammunitions and war material to point of conflicts in Yemen,” the rights group said. Prominent members of the ruling Syriza party have questioned the morality of selling arms to Saudi Arabia, and on Tuesday the Greek parliament’s military procurements committee also hinted it may scrap the deal. “Greece is a hub of stability, peace and friendship in the greater region and that is what it should be exporting,” the former deputy European affairs minister Nikos Xydakis told the Guardian. “There is no need for this [deal] to go through and frankly when we’re talking about €66m, not €66bn, it isn’t worth the trouble. It’s not the sort of money that will save Greece.”

Whose initiative? Brussels, Berlin?

• Greece Moves Hundreds Of Asylum Seekers From Lesvos To Mainland (R.)

Greek authorities on Thursday said they have moved a few hundred asylum seekers from the island of Lesvos to the mainland in an effort to ease overcrowding in its camps. Thousands of asylum seekers have become stranded on Lesbos and four other islands close to Turkey since the European Union agreed a deal with Ankara in March 2016 to shut down the route through Greece. “I came to heaven from hell,” said 30-year old Mohammad Firuz, who lived for two months in a state-run camp in Lesvos.

Firuz was among 300 people, many of them women and children, aboard a ferry that reached the port of Piraeus early on Thursday morning. The asylum seekers would be taken to camps and apartments in the mainland, authorities said. Lesvos is now hosting some 8,500 asylum-seekers, nearly three times the capacity of state-run facilities. Violence often breaks out, mainly over delays in asylum procedures and poor living standards. Lesvos residents went on strike earlier this month to protest against European policies they say have turned it into a “prison” for migrants and refugees.

This is just too nuts. Ban the shit.

• Common Pesticide Can Make Migrating Birds Lose Their Way (G.)

The world’s most widely used insecticide may cause migrating songbirds to lose their sense of direction and suffer drastic weight loss, according to new research. The work is significant because it is the first direct evidence that neonicotinoids can harm songbirds and their migration, and it adds to small but growing research suggesting the pesticides may damage wildlife far beyond bees and other insects. Farmland birds have declined drastically in North America and Europe in recent decades and pesticides have long been suspected as playing a role. The first evidence for a link came in 2014 when a study in the Netherlands found that bird populations fell most sharply in the areas where neonicotinoid pollution was highest, with starlings, tree sparrows and swallows among the most affected.

“The reason our new study is special is this is not a correlation – it is actual experimental evidence,” said Prof Christy Morrissey, at the University of Saskatchewan in Canada, who said the results shocked her. “The effects were really dramatic. We didn’t anticipate the acute toxicity, because the levels [of neonicotinoid] we gave them were so low. Three neonicotinoids were banned from use on flowering crops in the European Union in 2013 due to unacceptable risks to bees and other pollinators and a total outdoor ban is being considered. Canada is also considering a total ban. Neonicotinoids now pollute the environment across the world and pressure is growing to slash pesticide use, which research shows would not reduce food production on almost all farms.

The new research, published in the peer-reviewed journal Scientific Reports, analysed the effect of the neonicotinoid imidacloprid on white-crowned sparrows that migrate from the southern US and Mexico to northern Canada in summer. Birds were given doses equivalent to less than a single corn seed and within hours became weak, developed stomach problems and stopped eating. They quickly lost 17-25% of their weight, depending on the dose, and were unable to identify the northward direction of their migration. “Basically, these birds became lost,” said Morrissey. Control birds that were not exposed to the insecticide were unaffected.

Again: ban the shit.

• ‘Shocking’ Rise In Rubbish Washing Up On UK Beaches (G.)

The rubbish washing up on the UK’s beaches is continuing to increase, rising by 10% in 2017, the Marine Conservation Society’s (MCS) annual beach clean has revealed. Much of the waste is plastic, leading the MCS to call on the government to urgently introduce a charge on single-use plastic items, such as straws, cups and cutlery. The chancellor, Philip Hammond, recently announced the government is considering such action. About 12m tonnes of plastic litter enters the oceans every year, killing millions of marine animals. People are also believed to be inadvertently eating the plastic, potentially contaminated with toxic chemicals, via seafood. The MCS beach clean in September saw 7,000 volunteers scour 340 beaches and collect an average of 718 pieces of rubbish every 100 metres.

The survey uses a standard methodology and data from the last decade and shows a rising tide of litter along the coast. Most of the litter is small, unidentifiable fragments of plastic, broken down in the sea from larger objects and often mistaken for food by fish and birds. But 20% of the rubbish is packaging from “on the go” food and drink, such as cups, bottles, cutlery, stirrers and sandwich packets. “Our beach clean evidence shows a shocking rise in the amount of litter this year,” said Sandy Luk, MCS chief executive. “Our oceans are choking in plastic. We urgently need a levy on single-use plastic as a first step.” “We are concerned we are continuing on this upwards trend,” said Lizzie Prior, beach and river clean project officer at the MCS. “Plastic never goes away – it does not decompose. It just goes to smaller and smaller pieces and becomes much more harmful for our marine environment.”

She said the tax on plastic bags introduced in 2015, which has seen their use drop by 85%, had a rapid impact, with the number of bags found on beaches down by 40% since 2014. “It is really fantastic to see that small charge completely changed people’s behaviour,” she said. “A levy [on other single use plastic] would be a fantastic next step.”

Any day now, McDonald’s will start beaming ads onto the surface of the moon.

• Lobster Found With Pepsi Logo ‘Tattoo’ (G.)

Concerns over debris littering the world’s oceans are back in the spotlight after a Canadian fishing crew found a lobster with the blue and red Pepsi logo imprinted on its claw. Trapped in the waters off Grand Manan, New Brunswick, the lobster had been loaded onto a crate to have its claws banded when Karissa Lindstrand came across it. Lindstrand, who drinks as many as 12 cans of Pepsi a day, quickly spotted the resemblance. “I was like: ‘Oh, that’s a Pepsi can,’” she said. On closer look, it seemed more like a tattoo on the claw. “It looked like it was a print put right on the lobster claw.” Neither she or any of the crew had seen anything like it. More than a week after the find, debate has swirled over how it might have come to be: some believe the lobster might have grown around a can that ended up at the bottom of the ocean.

Others speculate that part of a Pepsi box somehow become stuck on the lobster. Lindstrand disputes these theories. The image on the claw was pixelated, she said, suggesting it couldn’t have come from a can. And the image on a Pepsi box is far too large to be what she saw on the claw. The logo looked like it came from a printed picture, but paper would have deteriorated in the ocean. “I’m still trying to wrap my brain around what exactly it was,” she said. The find comes amid growing concerns over the amount of debris accumulating in the world’s oceans. Between 5m and 13m tonnes of plastic leak into the world’s oceans each year to be ingested by sea birds, fish and other organisms, leading the record-breaking sailor Dame Ellen MacArthur to warn that by 2050 the sea could have more plastic in it than fish, by weight.

Debt Rattle November 16 2017

Nov 162017

November 16, 2017 Posted by Raúl Ilargi Meijer at 9:47 am Finance Tagged with: austerity, Bezos, China, corruption, foreign reserves, Greece, Monsanto, plastic, Saudi, sorcery 8 Responses »

Leonardo da Vinci Salvator Mundi 1513

• Landmark Study Links Tory Austerity To 120,000 Deaths (Ind.)

• Jeremy Corbyn Will Inevitably Become UK Prime Minister – Varoufakis (BI)

• Why Care More About Benefit Scroungers Than Billions Lost To The Rich? (G.)

• No Evidence Of Russian Interference In Brexit, PM May Admits In Parliament (RT)

• China’s Outbound Investment Plunged 41% On Year In January To October (BBG)

• Senior China Minister Says Some Officials Practice Sorcery (R.)

• Corruption in China Could Lead To Soviet-Style Collapse – Graft Buster (ToI)

• The Complete Idiot’s Guide To The Biggest Risks In China (ZH)

• Why the Anti-Corruption Drive in Saudi Arabia is Doomed to Fail (CP)

• Saudi Walks Back Escalation As Dramatic Moves Backfire (AP)

• Friendly Reminder That Jeff Bezos Is Trying To Take Over The Universe (CJ)

• Why Japan Knocks Down Its Houses After 30 Years (G.)

• Kyle Bass: Investors to Pour Billions into Greece after Political Change (GR)

• Lesvos Reaches Breaking Point, Mayor Declares General Strike (G.)

• Monsanto, US Farm Groups Sue California Over Glyphosate Cancer Warnings (R.)

• Plastics Found In Stomachs Of Deepest Sea Creatures (G.)

It doesn’t get much more damning than this. Nothing Monty Python about it.

• Landmark Study Links Tory Austerity To 120,000 Deaths (Ind.)

The Conservatives have been accused of “economic murder” for austerity policies which a new study suggests have caused 120,000 deaths. The paper found that there were 45,000 more deaths in the first four years of Tory-led efficiencies than would have been expected if funding had stayed at pre-election levels. On this trajectory that could rise to nearly 200,000 excess deaths by the end of 2020, even with the extra funding that has been earmarked for public sector services this year. Real terms funding for health and social care fell under the Conservative-led Coalition Government in 2010, and the researchers conclude this “may have produced” the substantial increase in deaths.

The paper identified that mortality rates in the UK had declined steadily from 2001 to 2010, but this reversed sharply with the death rate growing again after austerity came in. From this reversal the authors identified that 45,368 extra deaths occurred between 2010 and 2014, than would have been expected, although it stops short of calling them “avoidable”. Based on those trends it predicted the next five years – from 2015 to 2020 – would account for 152,141 deaths – 100 a day – findings which one of the authors likened to “economic murder”. The Government began relaxing austerity measures this year announcing the end of its cap on public sector pay rises and announcing an extra £1.3bn for social care in the Spring Budget. Over three years the additional funding for social care is expected to reach £2bn, which Labour leader Jeremy Corbyn said was “patching up a small part of the damage” wrought by £4.6bn cuts.

[..] The papers’ senior author and a researcher at UCL, Dr Ben Maruthappu, said that while the paper “can’t prove cause and effect” it shows an association. And he added this trend is seen elsewhere. “When you look at Portugal and other countries that have gone through austerity measures, they have found that health care provision gets worse and health care outcomes get worse,” he told The Independent. One of his co-author’s, Professor Lawrence King of the Applied Health Research Unit at Cambridge University, said it showed the damage caused by austerity “It is now very clear that austerity does not promote growth or reduce deficits – it is bad economics, but good class politics,” he said. “This study shows it is also a public health disaster. It is not an exaggeration to call it economic murder.”

After a report like that, yes. The Tories have taken things too far.

• Jeremy Corbyn Will Inevitably Become UK Prime Minister – Varoufakis (BI)

Yanis Varoufakis, former finance minister of Greece and author of “Adults in the Room: My Battle with the European and American Deep Establishment,” explains that Jeremy Corbyn as Prime Minister may be a likely scenario and that this would be beneficial for the UK economy. The following is a transcript of the video. Isn’t it astonishing that after Jeremy Corbyn was being described as “the longest suicide note by the Labour Party” about a year ago, today there is an air of inevitability in a Corbyn-led government. I think it’s a delicious irony and I’m very excited by this transition from impossibility to inevitability. In the interests of full disclosure, I’m a friend of Jeremy Corbyn, a supporter, I’ve worked with his team and will continue to do so.

I believe that the re-orientation of British politics under Corbyn and in particular of the Labour Party is highly beneficial, not only to the large strata within British society that have been discarded in the last 20 to 30 years, but interestingly also for British business that produces real stuff as opposed to the City of London and various other service sectors that produce precarious jobs and nothing much of substance. British manufacturing has been left in the margins for far too long and the dearth of investment in fixed capital is something that this Conservative government has absolutely no interest in, or no concept of. A Labour, Corbyn-led government, might be what is necessary in order to create better circumstances both for labour and manufacturing capital in the United Kingdom.

“Quite simply, people get hurt when the rich don’t pay their taxes.”

• Why Care More About Benefit Scroungers Than Billions Lost To The Rich? (G.)

Will the Paradise Papers shift the public’s focus? The leaks alone are seemingly not enough. The 2016 British Social Attitudes survey was conducted just four months after the release of the Panama Papers. Even then, the British public remained more concerned about benefit claimants than tax avoiders. Fundamentally, the Paradise Papers are about numbers – vast sums of money disappearing offshore that could be spent on public services here in the UK. However, as the former chair of the UK Statistics Authority, Andrew Dilnot, has often pointed out, people are bad at dealing with numbers on this scale. Unless you are an economist or a statistician, numbers in the millions and billions are just not particularly meaningful.

The key is to link these numbers to their consequences. The money we lose because people like Lewis Hamilton don’t pay some VAT on their private jet means thousands more visits to food banks. The budget cuts leading to rising homelessness might not have been necessary if Apple had paid more tax. Fewer people might have killed themselves after a work-capability assessment if companies like Alphabet (Google) had not registered their offices in Bermuda, and the downward pressure on benefits payments was not so intense. The causal chains connecting these events are complex and often opaque, but that does not make their consequences any less real, especially for those who have felt the hard edge of austerity.

The Paradise Papers have dragged the murky world of offshore finance into the spotlight. However, calls for change may founder against the British public’s persistent focus on the perceived crimes of the poor. That is, unless we – as academics, politicians, journalists and others – can articulate how the decisions of the very rich contribute to the expulsion of the vulnerable from the protection of state-funded public services. Quite simply, people get hurt when the rich don’t pay their taxes.

Oh, cut it out.

• No Evidence Of Russian Interference In Brexit, PM May Admits In Parliament (RT)

Theresa May has rejected allegations that Russia interfered in the Brexit referendum. Speaking during Prime Minister’s Questions, she stated: “If they care to look at the speech on Monday, they will see that the examples I gave were not in the UK.” During a speech May gave at the Lord Mayor’s banquet, the British leader accused Russia of meddling in European elections, hacking attacks on western government institutions, and spreading fake news. During the customarily confrontational Prime Minister’s Questions, May said that, in her speech, she had indeed cited “Russian interference” occurring “in a number of countries in Europe.” However, she denied that this applied in any way to her own country.

Following the session, a spokesperson for Labour leader Jeremy Corbyn said that “I think we need to see more evidence about what’s being talked about. “In relation to Russia and tensions between NATO and Russia and western powers and Russia more generally, Jeremy has made clear on a number of occasions that we need to see an attempt through dialogue to ratchet down tensions with Russia.” May was responding to a question from Labour MP Mary Creagh, who referred to an assertion by Foreign Secretary Boris Johnson that he had seen no evidence of Russia interfering in the Brexit referendum. Johnson made the comment during an appearance before a Commons committee hearing on November 1. Upon prompting by a senior civil servant, Johnson replied “nyet,” and added in English that there was “not a sausage” of evidence.

Once again: China needs its foreign reserves.

• China’s Outbound Investment Plunged 41% On Year In January To October (BBG)

China’s non-financial outbound investment slumped to $86.3 billion in January to October, plunging 41% from a year earlier, as projects in some industries dried up. There were no new real estate, sports or entertainment deals for the period, the Commerce Ministry said in a statement Thursday. Most outbound investment was in leasing and business services, manufacturing, wholesale and retail sales and information technology services. “Irrational” outbound investment has been curbed further, the ministry said, repeating the language it has used this year as authorities push to halt capital outflows.

That’s reversing an unbroken streak of acceleration since at least 2010: Outbound investment soared 44.1% last year to $170.1 billion, about four times the 2009 level, Mofcom data show. “The combination of hardened capital controls and a crackdown on outbound M&A has dented China’s overseas investment,” said Tom Orlik, chief Asia economist at Bloomberg Economics in Beijing. “A short-term downturn was necessitated by the pressing need to stabilize the yuan. Sustained for too long, falling overseas investment would be tough to square with ambitions for greater international influence through the Belt and Road program.”

In which sorcery is somehow the opposite of socialism.

• Senior China Minister Says Some Officials Practice Sorcery (R.)

Some top Chinese officials are guilty of practicing sorcery and would rather believe in gurus and Western concepts of democracy than the Communist Party, a senior minister wrote on Thursday, warning of the danger they presented to its survival. China guarantees freedom of religion for major belief systems such as Buddhism, Christianity and Islam, but party members are meant to be atheists and are barred from what it calls superstitious practices, such as visits to soothsayers. Recent years have seen several cases of officials jailed as part of President Xi Jinping’s crackdown on corruption being accused of superstition, part of the party’s efforts to blacken their names.

Some senior officials in leadership positions had “fallen morally”, their beliefs straying from the correct path, wrote Chen Xi, the recently appointed head of the party’s powerful Organisation Department that oversees personnel decisions. “Some don’t believe in Marx and Lenin but believe in ghosts and gods; they don’t believe in ideals but believe in sorcery; they don’t respect the people but do respect masters,” he wrote in the official People’s Daily, referring to spiritual leaders or gurus. People in China, especially its leaders, have a long tradition of turning to soothsaying and geomancy to find answers to their problems in times of doubt, need and chaos. The practice has grown more risky amid Xi’s war on graft, in which dozens of senior officials have been imprisoned.

Large scale arrests in the future?

• Corruption in China Could Lead To Soviet-Style Collapse – Graft Buster (ToI)

China must step up its battle against corruption in order to safeguard against a Soviet-style collapse, the country’s second most senior graft buster said in an editorial on Wednesday. Yang Xiaodu, the deputy secretary of the Central Commission for Discipline Inspection, who was promoted to the ruling Communist Party’s 25-strong Politburo last month, said failure would risk the “red country changing colour”. In unusually direct and strongly worded criticism of previous administrations, Yang said “in a previous period”, corruption had been allowed to fester to such an extent that the party’s leadership had weakened, with supervision soft, and ideology apathetic. “It had developed to the point where if not rectified, the country could change colour,” Yang wrote in the official People’s Daily.

“The future fate of the party and the country’s people could follow the same old road to ruin as the Soviet Union and the Eastern Bloc.” President Xi Jinping, like many officials before him, is steeped in the party’s long-held belief that loosening control too quickly or even at all could lead to chaos and the break up of the country. The party regularly implores cadres to study the collapse of the Soviet Union in the early 1990s. Yang’s editorial is the latest salvo signalling that the intensity of Xi’s signature war on corruption would not wane despite the departure of Xi’s right-hand man, Wang Qishan, who was widely seen as China’s second most powerful politician before being replaced as anti-corruption chief in a leadership reshuffle last month. Wang’s replacement, Zhao Leji, wrote a similarly strongly worded editorial in the People’s Daily on Saturday.

Not doing well. At all.

• The Complete Idiot’s Guide To The Biggest Risks In China (ZH)

With both commodities and Chinese stocks suffering sharp overnight drops, it is hardly surprising that today trading desks have quietly been sending out boxes full of xanax their best under-25 clients (those veterans who have seen one, maybe even two 1% market crashes), along with reports explaining just what China is and why it matters to the new generation of, well, traders. One such analysis, clearly geared to the Ritalin generation complete with 3 second attention spans, comes from Deutsche Bank which in a few hundred words seeks to explain the key risks threatening the world’s most complex centrally-planned economy, and ground zero of the next financial crash. Which, one day after our summary take on why the Chinese commodity, economic and financial crash is only just starting (as those who traded overnight may have noticed), is probably a good place to reiterate some of the more salient points.

As Deutsche Bank’s Zhiwei Zhang writes in “Risks to watch in the next six months”, the key thing to keep in mind about China now that the 19th Party Congress is in the rear-view mirror, is that the government is likely to tolerate slower growth in 2018. Han Wenxiu, the deputy head of the Research Office of the State Council, said that GDP growth at 6.3% in 2018-2020 would be sufficient to achieve the Party’s 2020 growth target. And while this is a positive message for the long term, it indicates growth will likely slow in 2018. And, as DB warns, recent economic data suggest the economic cycle has indeed cooled down. For all those seeking key Chinese inflection points, here are the three big red flags involving China’s economy:

For the first time since Q4 2004, fixed asset investment (FAI) growth turned negative in real terms in Q3 this year.

Growth of property sales for the nation turned negative as well in October, the first time since 2015.

The property market boom in Tier 3 cities is also losing momentum.

We hope not to have lost by now all the Millennial traders who started reading this post. To those who persevered, here – in addition to the risks facing the economy – are the other two main risks facing China’s investors: (rising) inflation and (rising) interest rates.

The most corrupt are the most powerful. Cue China.

• Why the Anti-Corruption Drive in Saudi Arabia is Doomed to Fail (CP)

The problem in resource-rich states is that corruption is not marginal to political power, but central to acquiring it and keeping it. Corruption at the top is a form of patronage manipulated by those in charge, to create and reward a network of self-interested loyalists. It is the ruling family and its friends and allies who cherrypick what is profitable: this is as true of Saudi Arabia as it was true of Libya under Gaddafi, Iraq under Saddam Hussein and his successors, or Iraqi Kurdistan that was supposedly different from the rest of the country. Corruption is a nebulous concept when it comes to states with arbitrary rulers, who can decide – unrestrained by law or democratic process – what is legal and what is illegal. What typifies the politics of oil states is that everybody is trying to plug into the oil revenues in order to get their share of the cake.

This is true at the top, but the same is the case of the rest of the population, or at least a large and favoured section of it. The Iraqi government pays $4bn a month to about seven million state employees and pensioners. These may or may not do productive work, but it would be politically risky to fire them because they are the base support of the regime in power. Anti-corruption drives don’t work, because if they are at all serious, they soon begin to cut into the very roots of political power by touching the “untouchables”. At this point principled anti-corruption campaigners will find themselves in serious trouble and may have to flee the country, while the less-principled ones will become a feared weapon to be used against anybody whom the government wants to target.

A further consequence of the traditional anti-corruption drive is that it can paralyse government activities in general. This is because all officials, corrupt and incorrupt alike, know that they are vulnerable to investigation. “The safest course for them is to take no decision and sign no document which might be used or misused against them,” a frustrated American businessman told me in Baghdad some years ago. He added that it was only those so politically powerful that they did not have to fear legal sanctions who would take decisions – and such people were often the most corrupt of all.

Wishful thinking?

• Saudi Walks Back Escalation As Dramatic Moves Backfire (AP)

Saudi Arabia’s dramatic moves to counter Iran in the region appear to have backfired, significantly ratcheting up regional tensions and setting off a spiral of reactions and anger that seem to have caught the kingdom off guard. Now it’s trying to walk back its escalations in Lebanon and Yemen. On Monday, the kingdom announced that the Saudi-led coalition fighting Shiite rebels in Yemen would begin reopening airports and seaports in the Arab world’s poorest country, days after closing them over a rebel ballistic missile attack on Riyadh. The move came just hours after Lebanese Prime Minister Saad Hariri, who shocked the nation by announcing his resignation from the Saudi capital on Nov. 4, gave an interview in which he backed off his strident condemnation of the Lebanese militant Hezbollah, saying he would return to the country within days to seek a settlement with the Shiite militants, his rivals in his coalition government.

The two developments suggest that Saudi Arabia’s bullish young crown prince, Mohammed bin Salman, may be trying to pedal back from the abyss of a severe regional escalation. “This represents de-escalation by the Saudis,” said Yezid Sayigh, a senior fellow at the Carnegie Middle East Center in Beirut. “The general trend is that the Saudis are going to back off and this is largely because of the unexpected extent of international pressure, and not least of all U.S. pressure.” Mohammed bin Salman, widely known by his initials, MBS, has garnered a reputation for being decisive, as well as impulsive. At just 32 years old and with little experience in government, he has risen to power in just three years to oversee all major aspects of politics, security and the economy in Saudi Arabia. As defense minister, he is in charge of the Saudi-led war in Yemen.

He also appears to have the support of President Donald Trump and his son-in-law, senior adviser Jared Kushner, who visited the Saudi capital earlier this month. Saudi partners in the Gulf and the Trump administration rushed to defend the kingdom publicly after a rebel Houthi missile was fired at the Saudi capital, Riyadh, from Yemen last week. A top U.S. military official also backed Saudi claims that the missile was manufactured by Iran. However, Saudi Arabia’s move to tighten an already devastating blockade on Yemen in response to the missile was roundly criticized by aid groups, humanitarian workers and the United Nations, which warned that the blockade could bring millions of people closer to “starvation and death.” Saudi Arabia’s decision to ease the blockade after just a week suggests it bowed to the international criticism, and did not want the bad publicity of even more images of emaciated Yemeni children and elderly people circulating online and in the media.

“WaPo ran sixteen smear pieces on Bernie Sanders in the span of sixteen hours at the hottest point in the Democratic presidential primary battle.”

• Friendly Reminder That Jeff Bezos Is Trying To Take Over The Universe (CJ)

Jeff Bezos, currently the wealthiest human being on planet Earth, did not purchase the Washington Post in 2013 because he was expecting newspapers to make a lucrative resurgence. This self-evident fact doesn’t receive enough attention. I will say it again for emphasis: Jeff Bezos, who has used his business prowess to become the wealthiest person in the world, did not purchase the Washington Post in 2013 because he was expecting newspapers to make a profitable comeback. That did not happen. What did happen is the world’s richest plutocrat realizing that he needed a mouthpiece to manufacture public support for the neoliberal corporatist establishment that he is building his empire upon. This is why WaPo ran sixteen smear pieces on Bernie Sanders in the span of sixteen hours at the hottest point in the Democratic presidential primary battle.

[..] Last year Silicon Valley venture capitalist Chamath Palihapitiya said that Amazon is “a multi-trillion-dollar monopoly hiding in plain sight.” In June Stacy Mitchell, co-director of the Institute for Local Self-Reliance, wrote that Amazon is trying to “control the underlying infrastructure of the economy.”\ Bezos continues to get cozier and cozier with the US power establishment as his empire metastasizes across human civilization. He kicked WikiLeaks off Amazon servers in 2010, he scored a 600 million dollar contract with the CIA in 2013, he joined a Pentagon advisory board in 2016, he hung out with Defense Secretary James Mattis in August, and he’s spent nearly ten million dollars this year lobbying the federal government, which is likely what led to an NDAA amendment gifting Amazon a $54 billion market it’s expected to dominate as a supplier to the Pentagon. Billion. With a ‘b’.

[..] I gave this story a jokey headline, but seriously, watch Jeff Bezos very closely. Your future is increasingly more likely to be imperiled by new money tech plutocrats like him than by old money plutocrats like Soros and the Rothschilds.

Interesting. Earthquakes are no. 1 incentive.

• Why Japan Knocks Down Its Houses After 30 Years (G.)

In the suburban neighbourhood of Midorigaoka, about an hour by train outside Kobe, Japan, all the houses were built by the same company in the same factory. Steel frames fitted out with panel walls and ceilings, these homes were clustered by the hundreds into what was once a brand new commuter town. But they weren’t built to last. Daiwa House, one of the biggest prefabricated housing manufacturers in Japan, built this town in the 60s during a postwar housing boom. It’s not unlike the suburban subdivisions of the western world, with porches, balconies and rooflines that shift and repeat up and down blocks of gently curving roads. Most of those houses built in the 60s are no longer standing, having long since been replaced by newer models, finished with fake brick ceramic siding in beiges, pinks and browns.

In the end, most of these prefabricated houses – and indeed most houses in Japan – have a lifespan of only about 30 years. Unlike in other countries, Japanese homes gradually depreciate over time, becoming completely valueless within 20 or 30 years. When someone moves out of a home or dies, the house, unlike the land it sits on, has no resale value and is typically demolished. This scrap-and-build approach is a quirk of the Japanese housing market that can be explained variously by low-quality construction to quickly meet demand after the second world war, repeated building code revisions to improve earthquake resilience and a cycle of poor maintenance due to the lack of any incentive to make homes marketable for resale. In Midorigaoka, even the newer homes built in the 80s and 90s are nearing the end of their expected lifespan.

Under normal circumstances, their days might be numbered. But down at the end of one block, there’s a sign things are changing. Scaffolding surrounds a vacant house on a corner and workers from Daiwa House are clanging away inside. They’re not demolishing the house but refurbishing it – reorganising the floor plan, knocking down walls, opening up the kitchen and enhancing the insulation. Rather than tear down the house so the next buyer can build something new, they’re rebuilding it from the inside and putting it back on the market. It’s a relatively rare commodity, but something that is increasingly common across Japan: a secondhand home.

I’ve long predicted that Greece will be much less peaceful once Syriza loses power. But yeah, the whole country’s put up for sale, so foreigners are certain to take over.

• Kyle Bass: Investors to Pour Billions into Greece after Political Change (GR)

Hedge fund manager, Kyle Bass, believes that Greece will come out of the crisis and investors will pour billions into its economy once the government changes, according to a CNBC report. The founder and chief investment officer of Hayman Capital Management; which manages an estimated $815 million in assets, is closely following the course of the Greek economy and political situation, and has invested in Greek bank stocks. Bass says that foreign investors are waiting on the sidelines for a political shift to take place in 2018. “My best guess is a snap election for prime minister will be called between April and September of next year and Prime Minister Alexis Tsipras will lose power. When that happens, there will be a massive move into the Greek stock market. Big money will flow in as investors feel more confident with a more moderate administration,” Bass said.

“It’s going to take Kyriakos Mitsotakis; president of New Democracy, the Greek conservative party, to be voted in as prime minister to reform the culture and rekindle investor confidence,” the investor said. “I have no doubt 15 billion euros in bank deposits will come back to Greek banks if he’s elected. The stock and bond markets will also jump following the election.” Bass says that global investors are waiting for the political change in order to invest in real estate, energy and tourism. So far, the hedge fund manager noted, Greece has proceeded with privatizations of its main port; regional airports; its railway system; the largest insurance company, and there are more important ones to be completed within the next two years. “There is so much potential in Greece,” Bass said, noting that investors are waiting for the right moment to enter, the CNBC report concludes.

Europe just lets it get worse.

• Lesvos Reaches Breaking Point, Mayor Declares General Strike (G.)

With reception centers on Lesvos bursting at the seams and dozens more migrants arriving daily, the island’s mayor, Spyros Galinos, on Tuesday declared a general strike for Monday in protest. Currently, some 1,500 people – including hundreds of small children – are stranded on the island living in tents, and fears are growing that winter may bring a new humanitarian crisis. In total, there are more than 8,000 migrants and refugees on Lesvos, a favored destination of traffickers bringing people over from neighboring Turkey. “Lesvos has a population of 32,000 residents and there are at the moment 8,300 migrants and refugees,” Galinos told Kathimerini. Moreover, local police union members held a protest over deteriorating working conditions.

“The situation on Lesvos has fueled insecurity among citizens. The police force is dealing exclusively with the migrant issue,” the union chief Dimitris Alexiou said. “We are not expendables,” he added. And with flows to the eastern Aegean islands from Turkey showing no signs of letting up, locals and migrants have reached the end of their tether. Since the beginning of November, 1,603 people have arrived on the islands. In September, 6,000 people arrived from Turkey, the same number as in October. On Monday, another 101 migrants landed on eastern Aegean islands, while more than 400 arrived over the weekend. The situation in the Moria camp on Lesvos is a case in point.

“Conditions at Moria have reached breaking point as the facility is three times over capacity,” said Michael Bakas, coordinator of the northern Aegean branch of the Ecologist Greens, who escorted visiting Group of the Greens MEP and vice chairwoman of the European Parliament’s Subcommittee on Human Rights Barbara Lochbihler. Bakas said about 1,000 children are currently stranded at the camp. The issue will be discussed at the EU assembly on Wednesday.

Monsanto must now have as many lawyers as scientists on its payroll. Time to say enough is enough.

• Monsanto, US Farm Groups Sue California Over Glyphosate Cancer Warnings (R.)

Monsanto and U.S. farm groups sued California on Wednesday to stop the state from requiring cancer warnings on products containing the widely used weed killer glyphosate, which the company sells to farmers to apply to its genetically engineered crops. The government of the most populous U.S. state added glyphosate, the main ingredient in Monsanto’s herbicide Roundup, to its list of cancer-causing chemicals in July and will require that products containing glyphosate carry warnings by July 2018. California acted after the World Health Organization’s International Agency for Research on Cancer (IARC) concluded in 2015 that glyphosate was “probably carcinogenic”. For more than 40 years, farmers have applied glyphosate to crops, most recently as they have cultivated genetically modified corn and soybeans.

Roundup and Monsanto’s glyphosate-resistant seeds would be less attractive to customers if California requires warnings on products containing the chemical. In the lawsuit, filed in federal court in California, Monsanto and groups representing corn, soy and wheat farmers reject that glyphosate causes cancer. They say the state’s requirement for warnings would force sellers of products containing the chemical to spread false information.“Such warnings would equate to compelled false speech, directly violate the First Amendment, and generate unwarranted public concern and confusion,” Scott Partridge, Monsanto’s vice president of global strategy, said in a statement.

The controversy is an additional headache for Monsanto as it faces a crisis around a new version of an herbicide based on another chemical known as dicamba that was linked to widespread U.S. crop damage this summer. The company, which is being acquired by Bayer AG for $63.5 billion, developed the product as a replacement for glyphosate following an increase of weeds resistant to the chemical. Monsanto has already suffered damage to its investment of hundreds of millions of dollars in glyphosate products since California added the chemical to its list of products known to cause cancer, according to the lawsuit.

Weep.

• Plastics Found In Stomachs Of Deepest Sea Creatures (G.)

Animals from the deepest places on Earth have been found with plastic in their stomachs, confirming fears that manmade fibres have contaminated the most remote places on the planet. The study, led by academics at Newcastle University, found animals from trenches across the Pacific Ocean were contaminated with fibres that probably originated from plastic bottles, packaging and synthetic clothes. Dr Alan Jamieson, who led the study, said the findings were startling and proved that nowhere on the planet was free from plastics pollution. “There is now no doubt that plastics pollution is so pervasive that nowhere – no matter how remote – is immune,” he said. Evidence of the scale of plastic pollution has been growing in recent months. Earlier this year scientists found plastic in 83% of global tapwater samples, while other studies have found plastic in rock salt and fish.

Humans have produced an estimated 8.3bn tonnes of plastic since the 1950s and scientists said it risked near permanent contamination of the planet. Jamieson said underlined the need for swift and meaningful action. “These observations are the deepest possible record of microplastic occurrence and ingestion, indicating it is highly likely there are no marine ecosystems left that are not impacted by anthropogenic debris.” He said it was “a very worrying find.” “Isolating plastic fibres from inside animals from nearly 11 kilometres deep (seven miles) just shows the extent of the problem. Also, the number of areas we found this in, and the thousands of kilometre distances involved shows it is not just an isolated case, this is global.”

[..] The team examined 90 individual animals and found ingestion of plastic ranged from 50% in the New Hebrides Trench to 100% at the bottom of the Mariana Trench. The fragments identified include semi-synthetic cellulosic fibres, such as Rayon, Lyocell and Ramie, which are all microfibres used in products such as textiles, to plastic fibres that are likely to come from plastic bottles, fishing equipment or everyday packaging. Jamieson said deep-sea organisms are dependent on food “raining down from the surface which in turn brings any adverse components, such as plastic and pollutants with it.” “The deep sea is not only the ultimate sink for any material that descends from the surface, but it is also inhabited by organisms well adapted to a low food environment and these will often eat just about anything.”

This microscopic arrow worm has eaten a blue plastic fibre that is blocking the passage of food along its gut. Photograph: Richard Kirby/Courtesy of Orb Media

Debt Rattle September 11 2017

Sep 112017

September 11, 2017 Posted by Raúl Ilargi Meijer at 9:06 am Finance Tagged with: bitcoin, earnings, Florida, insurers, Irma, liar loans, plastic, sea salt, tap water, Tesla 2 Responses »

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.

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.”

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.

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.”

“..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.

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.

“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.

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.

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.

“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?”

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.

Debt Rattle August 22 2017

Aug 222017

August 22, 2017 Posted by Raúl Ilargi Meijer at 8:35 am Finance Tagged with: bubble, cash, Civil War, debt ceiling, hate, Monsanto, plastic, refugees, repricing, Syngenta 6 Responses »

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.

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.

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.

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.

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…

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:

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.

“..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.

“..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.

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?

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.

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.

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.

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.

Debt Rattle August 16 2017

Aug 162017

August 16, 2017 Posted by Raúl Ilargi Meijer at 8:57 am Finance Tagged with: American Dream, China, crazy, crisis, debt, fish, leverage, plastic, property, Syria, war 2 Responses »

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.

“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.

“..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.

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.”

“..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.”

“..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.

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.

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.

“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”.

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.”

Debt Rattle July 29 2017

Jul 292017

July 29, 2017 Posted by Raúl Ilargi Meijer at 9:09 am Finance Tagged with: Amazon, bank run, carmakers, Pakistan, plastic, Russia, sanctions, Trump, Wells Fargo 2 Responses »

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:

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.

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.

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).

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.

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.

“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.

“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.

“..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.

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.

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.”

Debt Rattle July 26 2017

Jul 262017

July 26, 2017 Posted by Raúl Ilargi Meijer at 9:24 am Finance Tagged with: affordability, avoidance, Bolivia, bubble, Greece, plastic, poverty, sanctions, semen, zombie 4 Responses »

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.”

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.”

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.

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.

“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.”

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.

“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.

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%.

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.”

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.

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.

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.”

Debt Rattle July 20 2017

Jul 202017

July 20, 2017 Posted by Raúl Ilargi Meijer at 8:49 am Finance Tagged with: Australia, Brexit, CIA, coal, Deutsche, mega farm, plastic, Qatar, refugees, single payer, stairs, Syria 4 Responses »

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.

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.

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.”

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.

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.

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.

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.

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.”

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.

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.

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.

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.”

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.

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.

Debt Rattle April 10 2017

Apr 102017

April 10, 2017 Posted by Raúl Ilargi Meijer at 8:21 am Finance Tagged with: BoE, cash, credit, Great Barrier, John Clarke, Libor, plastic, Sydney, Syria, Toronto, Trump 9 Responses »

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.

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.

“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.

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:

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.

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.”

“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.

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…

“..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.

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.”

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.

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.

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.”