Dec 252018
 
 December 25, 2018  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , , , ,  


Caravaggio Nativity with St. Francis and St. Lawrence 1600

 

The Stock Market Just Booked Its Ugliest Christmas Eve Plunge — Ever (MW)
Japan’s Nikkei Drops 5% After Wall Street Slide Deepens (CNBC)
US Crude Plunges 6.7%, Settling At 18-Month Low At $42.53 (CNBC)
‘The Worst Is Yet To Come’: Experts Say Global Bear Market Coming (CNBC)
In Defense of the Fed (Stephen S. Roach)
Trump, Annoyed By Resignation Letter, Pushes Out Mattis Early (R.)
Mnuchin Holds Calls With Heads Of America’s 6 Biggest Banks Amid Shutdown (F.)
Facebook Is The ‘Biggest Concern’ Among The FAANGs (CNBC)
China Won’t Resort To Massive Monetary Stimulus Next Year – PBOC (CNBC)
Gatwick Drones Pair ‘No Longer Suspects’ (BBC)
Gatwick Police Say They Cannot Discount Possibility There Was No Drone (Ind.)
‘Home Alone’: Bored Trump Tweets Up Storm During Christmas Shutdown (RT)

 

 


Bette Davis and Joan Crawford were not each other’s biggest fans

 

 

I kid you not: plenty people are blaming this on Trump, too.

The Stock Market Just Booked Its Ugliest Christmas Eve Plunge — Ever (MW)

Never mind finding coal in your stocking for the holidays. Wall Street investors scored a rare — and unwanted — gift this year. The S&P 500 index fell by 2.7% Monday, marking the first session before Christmas that the broad-market benchmark has booked a loss of 1% or greater — ever. That statistic has been confirmed by Dow Jones Market Data, which said the largest decline in the index on the trading day before Christmas was Dec. 23 in 1933.

The Dow Jones Industrial Average finished down 653 points, or 2.9%, representing its worst decline on the session prior to Christmas in the 122-year-old blue-chip gauge’s history. Check out the table below from Dow Jones Market Data:

U.S. stock indexes ended trading at 1 p.m. Eastern Time on Christmas Eve and will be closed on Christmas. The current dynamic in the market has it set for its worst monthly and yearly decline in about a decade, amid nagging concerns that the Federal Reserve is normalizing interest rates too rapidly, and that a continuing tariff dispute between China and the U.S. could devolve and help lead to a domestic recession, as international economies are already demonstrating signs of a slowdown. Also stoking anxiety was a tweet from Treasury Secretary Steven Mnuchin to assess the health of the banking system, which has raised some questions about liquidity among those institutions that had not previously been raised. Treasury officials insist that the calls to bank executives were just a routine checkup.

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The ongoing success of Abenomics.

Japan’s Nikkei Drops 5% After Wall Street Slide Deepens (CNBC)

Japan’s Nikkei retreated to a 20-month low on Tuesday after a slide on Wall Street deepened with a series of unnerving U.S. political developments. The Nikkei share average ended the day down 5.01 percent at 19,155.74 after brushing its lowest since late April 2017. The day’s performance put the index well into bear market territory — off more than 20 percent since its October high. Japan’s broader Topix closed 4.88 percent lower at 1,415.55 after touching 1,412.90, its weakest since November 2016.

Meanwhile, in China, the Shanghai Index posted losses of more than 2 percent by mid-day, but then gained some ground back into the afternoon. Chinese sectors lost ground across the board, led by financial shares and energy firms as oil prices slumped. So far this year, the Shanghai stock index is down about 24 percent. Those Asia moves followed Wall Street stocks extending their steep sell-off on Monday, with the S&P 500 down nearly 15 percent so far this month, as investors were rattled by the U.S. Treasury secretary’s convening of a crisis group and by other political developments.

Many financial markets in Asia, Europe and North America are closed on Tuesday for Christmas Day. “Negative sentiment has replaced logic, as is often the case during a sell-off. A third of the selling is induced by panic, another third by loss-cutting and the remaining third by speculators trying to make a profit from the market rout,” said Takashi Hiroki, chief strategist at Monex Securities in Tokyo. “The sell-off is triggered almost entirely by developments in the U.S. markets, rather than by negative factors unique to the domestic market.”

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Oil swings too much to be safe.

US Crude Plunges 6.7%, Settling At 18-Month Low At $42.53 (CNBC)

U.S. crude plunged nearly 7 percent on Monday, hitting its lowest levels in a year and half, as the oil market fell in tandem with equities amid deepening turmoil in Washington DC. The Dow Jones Industrial Average plummeted more than 600 points, while the S&P 500 closed in bear market territory. Both stock indexes were buffeted by headlines out of Washington, including a government shutdown and President Donald Trump’s reported desire to fire Federal Reserve chair Jerome Powell over the central bank’s interest rate increases.

The selling in global risk assets on Christmas Eve deepened a nearly three-month slide in oil prices. From peak to trough, U.S. crude has fallen nearly 45 percent from its 52-week high at the start of October. Brent has fallen as much as 42 percent over the same period. “For now, there’s no place to hide in any of these markets. Oil’s being taken down with the stock market and the negative sentiment that’s sweeping across really everything, and for now the downward pressure is going to persist,” John Kilduff, founding partner at energy hedge fund Again Capital told CNBC’s “Closing Bell” on Friday.

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The so-called experts see themselves as mighty smart when all they’ve done is suck from the fed’s trough. Humbug!

‘The Worst Is Yet To Come’: Experts Say Global Bear Market Coming (CNBC)

Volatility on Wall Street has led shares across the globe on a wild ride in recent months, resulting in a number of stock markets dipping into bear territory. That’s set to worsen in the new year, experts told CNBC on Monday. Bear markets — typically defined as 20 percent or more off a recent peak — are threatening investors worldwide. In the U.S., the Nasdaq Composite closed in a bear market on Friday and the S&P 500 entered one on Monday. Globally, Germany’s DAX and China’s Shanghai Composite have also entered bear market levels. Major market risks remain, experts said. The Federal Reserve is likely to continue raising interest rates and worries about a global economic slowdown — made worse by a trade war between the U.S. and China — are mounting.

“I would love to be more optimistic but i just don’t see too many positives out there. I think the worst is yet to come next year, we’re still in the first half of a global equity bear market with more to come next year,” Mark Jolley, global strategist at CCB International Securities, told CNBC’s “Squawk Box.” For Jolley, the big risk lies in the credit markets. With the Fed projecting another two interest rate hikes in 2019, companies will find it increasingly difficult to service their debt causing some to default or get downgraded, he said. Such weakness in the credit markets will spill over to stocks, noted Jolley. “My core scenario will be a credit event, which will further weigh on equity markets, which will definitely weigh on high growth sectors like tech,” he said.

More generally, investors have fewer reasons to be optimistic now because the Fed tightening monetary policy means there will be less money for investments, said Vishnu Varathan, head of economics and strategy at Mizuho Bank. “There is really no conviction for markets to buy back because they’re not sure this is the bottom, and so they are thinking this is the proverbial falling knives,” Varathan told CNBC’s “Squawk Box.”

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The Fed spent the past 10 years making sure its member banks kept on making indecent amounts of money. And now they need to be defended?

In Defense of the Fed (Stephen S. Roach)

I have not been a fan of the policies of the US Federal Reserve for many years. Despite great personal fondness for my first employer, and appreciation of all that working there gave me in terms of professional training and intellectual stimulation, the Fed had lost its way. From bubble to bubble, from crisis to crisis, there were increasingly compelling reasons to question the Fed’s stewardship of the US economy. That now appears to be changing. Notwithstanding howls of protest from market participants and rumored unconstitutional threats from an unhinged US president, the Fed should be congratulated for its steadfast commitment to policy “normalization.”

It is finally confronting the beast that former Fed Chairman Alan Greenspan unleashed over 30 years ago: the “Greenspan put” that provided asymmetric support to financial markets by easing policy aggressively during periods of market distress while condoning froth during upswings. Since the October 19, 1987 stock-market crash, investors have learned to count on the Fed’s unfailing support, which was justified as being consistent with what is widely viewed as the anchor of its dual mandate: price stability. With inflation as measured by the Consumer Price Index averaging a mandate-compliant 2.1% in the 20-year period ending in 2017, the Fed was, in effect, liberated to go for growth.

And so it did. But the problem with the growth gambit is that it was built on the quicksand of an increasingly asset-dependent and ultimately bubble- and crisis-prone US economy. Greenspan, as a market-focused disciple of Ayn Rand, set this trap. Drawing comfort from his tactical successes in addressing the 1987 crash, he upped the ante in the late 1990s, arguing that the dot-com bubble reflected a new paradigm of productivity-led growth in the US. Then, in the early 2000s, he committed a far more serious blunder, insisting that a credit-fueled housing bubble, inflated by “innovative” financial products, posed no threat to the US economy’s fundamentals. As one error compounded the other, the asset-dependent economy took on a life of its own.

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Someone better collect some pieces on Mattis from 2 years ago. Won’t look anything like the sainthood declarations he’s getting today.

Trump, Annoyed By Resignation Letter, Pushes Out Mattis Early (R.)

U.S. President Donald Trump on Sunday said he was replacing Defense Secretary Jim Mattis two months earlier than had been expected, a move officials said was driven by Trump’s anger at Mattis’ resignation letter and its rebuke of his foreign policy. On Thursday, Mattis had abruptly said he was quitting, effective Feb. 28, after falling out with Trump over his foreign policy, including surprise decisions to withdraw all troops from Syria and start planning a drawdown in Afghanistan. Trump has come under withering criticism from fellow Republicans, Democrats and international allies over his decisions about Syria and Afghanistan, against the advice of his top aides and U.S. commanders.

The exit of Mattis, highly regarded by Republicans and Democrats alike, added to concerns over what many see as Trump’s unpredictable, go-it-alone approach to global security. Trump said Deputy Defense Secretary Patrick Shanahan would take over on an acting basis from Jan. 1. In announcing his resignation, Mattis distributed a candid resignation letter addressed to Trump that laid bare the growing divide between them, and implicitly criticized Trump for failing to value America’s closest allies, who fought alongside the United States in both conflicts. Mattis said that Trump deserved to have a defense secretary more aligned with his views.

Trump, who tweeted on Thursday that Mattis was “retiring, with distinction, at the end of February,” made his displeasure clear on Saturday by tweeting that the retired Marine general had been “ingloriously fired” by former President Barack Obama and he had given Mattis a second chance.

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The only interesting question: why go public with something so ordinary?

Mnuchin Holds Calls With Heads Of America’s 6 Biggest Banks Amid Shutdown (F.)

No need to panic. That was the message Treasury Secretary Steven Mnuchin sought to convey after holding unscheduled Sunday afternoon calls with the heads of the largest banks in America, Jamie Dimon of JPMorgan, Brian Moynihan of Bank of America, Michael Corbat of Citigroup, Tim Sloan of Wells Fargo, David Solomon of Goldman Sachs and James Gorman of Morgan Stanley. In a statement released by Treasury, Mnuchin said these CEOs confirmed “markets continue to function properly.” These bankers also assured Mnuchin their firms have the liquidity to fund themselves and their lending activities, and reported no clearance or margin issues on their trades, Treasury said.

A decade ago, such calls and terse press releases were routine Sunday events as Treasury officials, the Federal Reserve, and bank heads worked together to stem the worst financial panic since the Great Depression. This time, however, Mnuchin’s unusual efforts come amid a growing economy where credit is flowing freely. Instead of a financial panic, his comments seemed aimed at market concerns coming from political turmoil in Washington.

On Monday, Mnuchin will convene a call with the President’s Working Group on financial markets “to discuss coordination efforts to ensure normal market operations,” bringing together the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission, the Commodities Futures Trading Commission, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Commission.

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They’re all grossly overvalued.

Facebook Is The ‘Biggest Concern’ Among The FAANGs (CNBC)

One industry analyst has sounded the alarm on Facebook, calling the company the “biggest concern” among the so-called FAANG stocks. “The digital economy operates on trust, and they’ve broken trust on so many levels,” Ray Wang, principal analyst and founder at Silicon Valley-based Constellation Research, told CNBC’s “Squawk Box” on Monday. The FAANG stocks consist of Silicon Valley tech giants Facebook, Amazon, Apple, Netflix and Google-parent Alphabet.

Wang said many of Facebook’s trust woes have been “centralized” around Chief Operating Officer Sheryl Sandberg, who was in the spotlight after a New York Times report in mid-November about the executive and the social media company’s internal operations. The Times report came on the back of a series of scandals and incidents which have mired Facebook in controversy and sent its stock sinking in 2018. As of its last close after extended hours trade on Dec. 21, the company’s stock price was more than 40 percent off its 52-week high. Asked about the possibility of Sandberg departing from Facebook, Wang said it was “in the rumor category.”

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China’s afraid of the exchange rate.

China Won’t Resort To Massive Monetary Stimulus Next Year – PBOC (CNBC)

China will not resort to “flood-like” stimulus in monetary policy next year, although it will consider more cuts as needed to reserves held at commercial banks, local media quoted a central bank adviser as saying in a report on Tuesday. The Chinese economy will face downward pressure in 2019, while the pace of growth will gradually stabilize, the 21st Century Business Herald quoted Sheng Songcheng, an advisor to the People’s Bank of China (PBOC), as saying. “Monetary policy will remain prudent and won’t be a ‘flood.’ Otherwise, funds will likely flow into the property sector again,” Sheng was quoted as saying by the state-backed newspaper.

There remains room for further cuts in banks’ reserve requirement ratios (RRRs), and Sheng does not recommend broad-based reductions in interest rates, it said. China will bolster support next year for its economy, the world’s second-largest, by cutting taxes and keeping liquidity ample, the official Xinhua news agency said after last week’s Central Economic Work Conference, an annual closed-door gathering of party leaders and policymakers. [..] On exchange rates, the central bank adviser said China should defend the yuan at the key seven-per-dollar level. “The key threshold of seven per dollar is very important. If the yuan weakens past that crucial point, the cost of stabilizing the exchange rate will be greater,” Sheng was quoted as saying.

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The level of incompetence is sobering.

Police tell BBC News they “cannot discount the possibility that there may have been no drone at all”.

Gatwick Drones Pair ‘No Longer Suspects’ (BBC)

A man and woman arrested in connection with drone sightings that grounded flights at Gatwick Airport have been released without charge. The 47-year-old man and 54-year-old woman, from Crawley, West Sussex, had been arrested on Friday night. Sussex Police said there had been 67 reports of drone sightings – having earlier cast doubt on “genuine drone activity”. Det Ch Supt Jason Tingley said no footage of a drone had been obtained. And he said there was “always a possibility” the reported sightings of drones were mistaken.

However, he later confirmed the reported sightings made by the public, police and airport staff from December 19 to 21 were being “actively investigated”. “We are interviewing those who have reported these sightings, are carrying out extensive house-to-house inquiries, and carrying out a forensic examination of a damaged drone found near the perimeter of the airport.” Det Ch Supt Tingley said it was “a working assumption” the device could be connected to their investigation, but officers were keeping “an open mind”.

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‘We are working with human beings saying they have seen something..’ Cue 150,000 ruined holidays.

Gatwick Police Say They Cannot Discount Possibility There Was No Drone (Ind.)

Detectives investigating the Gatwick drone attacks which caused three days of chaos for passengers say it is possible there never were any drones. Police do not have any footage of the flying machines at the airfield and are relying on accounts from witnesses and the discovery of a damaged device. The revelation by Detective Chief Superintendent Jason Tingley came after the couple arrested by Sussex Police on Friday night were released without charge. Asked about speculation there never was a drone, he said: “Of course, that’s a possibility. We are working with human beings saying they have seen something. “Until we’ve got more clarity around what they’ve said, the detail – the time, place, direction of travel, all those types of things – and that’s a big task.”

Mr Tingley said one of the “working theories” was that the damaged drone found close to the airport in Sussex was responsible for causing the disruption. “Always look at it with an open mind, but actually it’s very basic common sense that a damaged drone, which may have not been there at a particular point in time has now been seen by an occupier, a member of the public, and then they’ve told us, ‘we’ve found this’. “Then we go and forensically recover it and do everything we can at that location to try and get a bit more information.” [..] Gatwick Airport has offered a £50,000 reward through Crimestoppers for information leading to the arrest and conviction of those responsible for the chaos.

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It doesn’t matter what anybody does, Trump still hoards the attention.

‘Home Alone’: Bored Trump Tweets Up Storm During Christmas Shutdown (RT)

With the US government shut down due to the dispute over funding President Donald Trump’s border wall, and his family in Florida, the chief executive has chosen to spend the Christmas holiday taking potshots at critics on Twitter. Funding for about a quarter of US government services ran out on Friday at midnight, as Senate Democrats refused to endorse a House funding bill that would’ve given Trump $5.7 billion for the border wall. Trump was supposed to celebrate Christmas at Mar-a-Lago with his family, but elected to stay in the White House instead, tweeting up a storm.

Trump tweeted twenty times on Thursday, as the shutdown loomed. He continued posting on Friday (ten), Saturday (seven) and Sunday (eight), then ramped up the schedule on Monday, with ten tweets by the early afternoon. In addition to his usual complaints about “Fake News” and Democrats, Trump has also taken aim at the Federal Reserve, praised Saudi Arabia, and dismissed Washington’s envoy to the anti-ISIS coalition as an “Obama appointee” who gave Iran $1.8 billion “in CASH” as part of the “horrific” nuclear deal. He also complained, tongue firmly in cheek, about being “all alone (poor me) in the White House waiting for the Democrats to come back and make a deal on desperately needed Border Security.”

Though Trump’s Twitter tirades usually trigger the trolls, that last one brought up a multitude of call-backs to the president’s cameo in 1992’s Christmas comedy ‘Home Alone 2: Lost in New York.’

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Jul 312018
 
 July 31, 2018  Posted by at 8:46 am Finance Tagged with: , , , , , , , , , ,  


René Magritte The son of man 1946

 

‘Prophet Of Doom’ Predicts Stock Market Will Plunge More Than 50% (MW)
Prepare For Biggest Stock-Market Selloff In Months – Morgan Stanley (MW)
US Treasury Raises 2018 Borrowing Need To $1.33 Trillion (ZH)
QE Turns Ten (Stephen Roach)
Fruits of the Great 2017 GOP Tax Cut Scam (Lendman)
Britain’s Borrowing Binge Continues As Brexit Looms (Ind.)
Brexit: UK Warns EU Of Tit-For-Tat Measures Over Financial Services (G.)
Trump Offer To Meet Iran President Rouhani Dismissed By Both Sides (G.)
The Ubiquity of Evil (Craig Murray)
World’s Largest King Penguin Colony Has Declined By 90% (G.)
Charities Damned For ‘Abject Failure’ In Tackling Sexual Abuse (G.)

 

 

We take John Hussman seriously.

‘Prophet Of Doom’ Predicts Stock Market Will Plunge More Than 50% (MW)

John Hussman, president of Hussman Investment Trust, describes himself as an economist, a philanthropist, and a “realist optimist often viewed as a prophet of doom” on his Twitter profile. That last bit may be the one investors care about on Monday as the stock market shows signs of unraveling on the back of the tech sector’s stumble. Hussman’s claim to fame includes forecasting the market collapses of 2000 and 2007-2008. Since then, however, he’s also become known as a permabear for his repeated calls for sharp stock market declines and his oft-repeated mantra of “overbought, overvalued, overbullish” as the bull market continues into its ninth year by some measures. Hussman says he’s learned from and addressed past errors.

In his most recent call, he argued that measured “from their highs of early-2018, we presently estimate that the completion of the current cycle will result in market losses on the order of -64% for the S&P 500 index, -57% for the Nasdaq-100 Index, -68% for the Russell 2000 index, and nearly -69% for the Dow Jones Industrial Average.” He admits the numbers seem extreme but says they are backed up what he refers to as the “Iron Law of Valuation.” “The higher the price investors pay for a given set of expected future cash flows, the lower the long-term investment returns they should expect. As a result, it’s precisely when past investment returns look most glorious that future investment returns are likely to be most dismal, and vice versa,” he writes.

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Tech.

Prepare For Biggest Stock-Market Selloff In Months – Morgan Stanley (MW)

The U.S. stock market has been partying all throughout July, and a hangover is coming. That is according to analysts at Morgan Stanley, who said that Wall Street’s rally is showing signs of “exhaustion,” and that with major positive catalysts for trading now in the rearview mirror, there’s little that could continue to propel equities higher. “With Amazon’s strong quarter out of the way, and a very strong 2Q GDP number on the tape, investors were finally faced with the proverbial question of ’what do I have to look forward to now?’ The selling started slowly, built steadily, and left the biggest winners of the year down the most. The bottom line for us is that we think the selling has just begun and this correction will be biggest since the one we experienced in February,” the investment bank wrote to clients.

The decline “could very well have a greater negative impact on the average portfolio if it’s centered on tech, consumer discretionary and small-caps, as we expect.” A correction is technically defined as a decline of at least 10% from a recent peak. Both the Dow Jones Industrial Average DJIA and the S&P 500 corrected in early February, on concerns that inflation was returning to markets. While the Dow remains in correction territory—meaning it hasn’t yet risen 10% from its low of the pullback—the S&P exited just last week, following its longest stint in correction territory since 1984. The Nasdaq Composite Index never fell into correction.

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Infinity and beyond.

US Treasury Raises 2018 Borrowing Need To $1.33 Trillion (ZH)

America’s funding needs are starting to grow at a dangerous pace. Even before the NYT reported of Trump’s startling suggestion of a further $100 billion tax cut in the form of an inflation-adjusted capital gains tax cost basis which mostly benefits the wealthy, earlier today the U.S. Treasury said it expects to borrow $56 billion more during the third quarter than previously estimated, while market participants expect shorter-dated Treasuries to absorb the brunt of the new supply as the Trump administration grapples with a mushrooming budget deficit.

In the Treasury’s latest quarterly Sources and Uses table, it revealed that it expects to issue $329 billion in net marketable debt from July through September, and $56 billion more than the $273 billion estimated three months ago, in April. assuming an end-of-September cash balance of $350 billion, matching its previous estimate. It also forecast $440 billion of borrowing in the final three months of the year, with a $390 billion cash balance on December 31. The borrowing estimate for the third quarter is the highest since the same period in 2010 and the fourth largest on record for the July-September quarter, according to Reuters. In the second quarter, net borrowing totaled $72 billion, slightly below the earlier prediction of $75 billion.

The US fiscal picture continues to darken as a result of rising social security costs, military spending and debt service expenses while corporate tax income is declining after last year’s tax reforms. As a result, the federal budget deficit is expected to reach $833 billion this year, up from $666 billion in the budget year ended last September, a number that is well below the net funding demands for the US Treasury. The new projections put total net borrowing at $769 billion for the second half of 2018 and a whopping $1.33 trillion for the whole year.

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The Fed has been granted far too much power. We’re going to regret that.

QE Turns Ten (Stephen Roach)

November 2018 will mark the tenth anniversary of quantitative easing (QE) — undoubtedly the boldest policy experiment in the modern history of central banking. The only thing comparable to QE was the US Federal Reserve’s anti-inflation campaign of 1979-1980, orchestrated by the Fed’s then-chair, Paul Volcker. But that earlier effort entailed a major adjustment in interest rates via conventional monetary policy. By contrast, the Fed’s QE balance-sheet adjustments were unconventional and, therefore, untested from the start.

[..] The most important lesson pertains to traction — the link between Fed policy and its congressionally mandated objectives of maximum employment and price stability. On this count, the verdict on QE is mixed: The first tranche (QE1) was very successful in arresting a wrenching financial crisis in 2009. But the subsequent rounds (QE2 and QE3) were far less effective. The Fed mistakenly believed that what worked during the crisis would work equally well afterwards. An unprecedentedly weak economic recovery – roughly 2% annual growth over the past nine-plus years, versus a 4% norm in earlier cycles – says otherwise. Whatever the reason for the anemic recovery – a Japanese-like post-crisis balance-sheet recession or a 1930s style liquidity trap – the QE payback was disappointing.

From September 2008 to November 2014, successive QE programs added $3.6 trillion to the Fed’s balance sheet, nearly 25% more than the $2.9 trillion expansion of nominal GDP over the same period. A comparable assessment of disappointing interest-rate effects is reflected in recent “event studies” research that calls into question the link between QE and ten-year Treasury yields. A second lesson speaks to addiction – namely, a real economy that became overly reliant on QE’s support of asset markets. The excess liquidity spawned by the Fed’s balance-sheet expansion not only spilled over into equity markets, but also provided support for the bond market. As such, monetary policy, rather than market-based fundamentals, increasingly shaped asset prices.

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QE, tax cuts, it’s all just a great wealth transfer.

Fruits of the Great 2017 GOP Tax Cut Scam (Lendman)

David Stockman estimates the great GOP tax cut heist will increase the federal debt to around $35 trillion by 2028. Most discretionary US spending goes for militarism, war-making, corporate welfare, and police state harshness. According to Americans for Tax Fairness (ATF), the fruits of last year’s great GOP tax cut heist were as follows: 4.3% of workers got wage hikes or bonuses – 6.7 million out of 155 million. Only a handful of employers provided them so far – 407 out of 5.9 million. Corporate predators are getting 11-fold as much in tax breaks as they’re giving workers in extra pay and bonuses – $77 billion v. $7 billion.

Corporate predators are spending 88 times the amount on stock buybacks as on worker wage hikes and bonuses – $7 billion v. $617 billion. Trump’s highly touted “middle class miracle” was a colossal Big Lie. It’s been a bonanza for corporate predators, high net-worth households, and real estate tycoons like himself – a scam for ordinary Americans. It’s ballooning the deficit, social benefits being slashed to help pay for it, a clearly transparent wealth transfer scheme. Economists know tax cuts don’t create jobs and stimulate growth unless benefits help workers substantially. When money is in the pockets of ordinary people, they spend it, best accomplished through higher wages, at least keeping pace with inflation.

Post-9/11, America has been thirdworldized to benefit corporate predators and high net-worth individuals at the expense of working households. Ordinary Americans have been scammed to make privileged ones richer. Separately, according to Americans for Tax Fairness (ATF), healthcare insurers intend instituting huge premium increases in 2019. They’ll range from around 12% to a whopping 91% requested by a Maryland insurer.

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Credit Cards ‘R’ Us.

Britain’s Borrowing Binge Continues As Brexit Looms (Ind.)

Britain’s credit card fuelled spending binge continues apace, according to the latest figures from the Bank of England. Lending via plastic rose by an annualised 9.5 in June, outpacing other forms of unsecured credit (8.5 per cent). Mortgage lending, by contrast, ticked up by a more modest 3.2 per cent. The release of the figures followed a report by the Office for National Statistics that last week found UK consumers collectively spent more than they earned in 2017, the first time that has happened in almost 30 years. It looks like we’re due a repeat this year. How much of a worry is this? Regulators say most people can afford to repay what they have borrowed.

However, the Prudential Regulatory Authority, that oversees institutions’ financial soundness, last year undertook a review of consumer lending that resulted in what could be read as a shot across the industry’s bows. The Financial Conduct Authority, meanwhile, tweaked its rules in July, making it clear that it wanted lenders to asses not just whether consumers can repay what they have borrowed but whether they can do so “affordably and without this significantly affecting their wider financial situation”. It follows a speech in March by Jonathan Davidson, the watchdog’s director of supervision, in which he said that “a firm whose business model is predicated on selling products to customers who can’t afford to repay them is not acceptable, nor is it a sustainable long-term strategy”.

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Yeah, the UK is really in a position to utter threats.

Brexit: UK Warns EU Of Tit-For-Tat Measures Over Financial Services (G.)

UK negotiators have told their counterparts in Brussels that about 7,000 European-based investment funds that rely on British clients for their cash and profits will be hit by regulators unless the EU changes its position on the City of London after Brexit. As frustration grows within Whitehall at what is seen as a dogmatic position taken by the EU’s chief negotiator, Michel Barnier, the British side has upped the ante by making an implicit threat to EU interests. A section of a UK presentation made to the European commission’s negotiators last week, and seen by the Guardian, says that unless Brussels allows all UK sectors of the City of London to continue to operate after Brexit as they do today, at least initially, obstacles to European financial interests operating in the UK could also be put in place.

The British government says the EU’s “equivalence regime”, under which UK providers would have the right to offer financial services in the European economic area after Brexit, does not cover enough sectors or provide adequate assurances to UK-based banks and fund managers. The UK also wants equivalence decisions to be made collaboratively between Brussels and Whitehall on whether parts of the financial sector will be able to continue to operate across the Channel as regulations diverge after Brexit. As it stands, a declaration of equivalencecan be easily revoked with only 30 days’ notice under existing EU legislation. The EU is resisting, and insists it will not offer a bespoke deal on financial services. It says that what works for US financial services providers will have to work for the UK.

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Peace with Russia, peace with Iran, that’s not the playbook, Donald.

Trump Offer To Meet Iran President Rouhani Dismissed By Both Sides (G.)

Donald Trump has said he would “certainly meet” Iranian president Hassan Rouhani without preconditions, a move that was later rejected by Trump’s own administration and one of Rouhani’s advisers. Speaking during a joint news conference with Italy’s prime minister, Giuseppe Conte, Trump said he would meet Iran “anytime they want to”. “I’ll meet with anybody,” he said. “There’s nothing wrong with meeting.” Asked whether he would set any preconditions, Trump was clear. “No preconditions, no. If they want to meet, I’ll meet any time they want,” he said. “Good for the country, good for them, good for us and good for the world. No preconditions. If they want to meet, I’ll meet.”

Trump’s apparently spontaneous overture marked a significant shift in tone and follows escalating rhetoric in the wake of his dumping in May of the landmark Iran nuclear accord. The administration is set next month to begin reimposing sanctions that had been lifted under the 2015 deal and has been ratcheting up a pressure campaign on the Islamic republic that many suspect is aimed at regime change. After the comment, secretary of state Mike Pompeo appeared to contradict Trump, listing preconditions that had to be met first. He told CNBC on Monday: “If the Iranians demonstrate a commitment to make fundamental changes in how they treat their own people, reduce their malign behaviour, can agree that it’s worthwhile to enter in a nuclear agreement that actually prevents proliferation, then the president said he’s prepared to sit down and have a conversation with him,” he said.

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Murray on his time as a UK diplomat.

The Ubiquity of Evil (Craig Murray)

I had served as First Secretary in the British Embassy in Poland, and bumped up startlingly against the history of the Holocaust in that time, including through involvement with organising the commemoration of the 50th anniversary of the liberation of Auschwitz. What had struck me most forcibly was the sheer scale of the Holocaust operation, the tens of thousands of people who had been complicit in administering it. I could never understand how that could happen – until I saw ordinary, decent people in the FCO facilitate extraordinary rendition and torture. Then I understood, for the first time, the banality of evil or, perhaps more precisely, the ubiquity of evil. Of course, I am not comparing the scale of what happened to the Holocaust – but evil can operate on different scales.

I believe I see it again today. I do not believe that the majority of journalists in the BBC, who pump out a continual stream of “Corbyn is an anti-semite” propaganda, believe in their hearts that Corbyn is a racist at all. They are just doing their job, which is to help the BBC avert the prospect of a radical government in the UK threatening the massive wealth share of the global elite. They would argue that they are just reporting what others say; but it is of course the selection of what they report and how they report it which reflect their agenda.

The truth, of which I am certain, is this. If there genuinely was the claimed existential threat to Jews in Britain, of the type which engulfed Europe’s Jews in the 1930’s, Jeremy Corbyn, Billy Bragg, Roger Waters and I may humbly add myself would be among the few who would die alongside them on the barricades, resisting. Yet these are today loudly called “anti-semites” for supporting the right to oppose the oppression of the Palestinians. The journalists currently promoting those accusations, if it came to the crunch, would be polishing state propaganda and the civil servants writing railway dockets. That is how it works. I have seen it. Close up.

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Bye my friends. I’m going to miss you. Something bad.

World’s Largest King Penguin Colony Has Declined By 90% (G.)

The planet’s largest colony of king penguins has declined by nearly 90% in three decades, researchers have warned. The last time scientists set foot on France’s remote Île aux Cochons – roughly half way between the tip of Africa and Antarctica – the island was blanketed by 2m of the penguins, which stand about a metre tall. But recent satellite images and photos taken from helicopters show the population has collapsed, with barely 200,000 remaining, according to a study published in Antarctic Science. Why the colony on Île aux Cochons has been so decimated remains a mystery.

“It is completely unexpected, and particularly significant since this colony represented nearly one third of the king penguins in the world,” said lead author Henri Weimerskirch, an ecologist at the Centre for Biological Studies in Chize, France, who first set eyes on the colony in 1982. Climate change may play a role. In 1997, a particularly strong El Niño weather event warmed the southern Indian Ocean, temporarily pushing the fish and squid on which king penguins depend south, beyond their foraging range. “This resulted in population decline and poor breeding success for all the king penguin colonies in the region,” Weimerskirch said.

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This goes back to 2002. Nothing has changed.

Charities Damned For ‘Abject Failure’ In Tackling Sexual Abuse (G.)

Charities have shown “complacency verging on complicity” in responding to sexual abuse that is endemic across the sector, according to a damning report by MPs. In the report, the international development committee (IDC) said the aid sector had a record of “abject failure” in dealing with longstanding concerns about exploitation by its own personnel and appeared more concerned for their reputations than for victims. The response to abuse claims has been reactionary and superficial, it added. MPs called for the establishment of an independent aid ombudsman to support survivors and for a global register of aid workers to prevent abusers moving through the system.

Stephen Twigg, the committee chairman, said the sector’s failure to deal with the issue had left victims at the mercy of those who sought to use power to abuse others. The report, published on Tuesday, also criticised the UN, which it said had failed to display sustained leadership in tackling abuse, and said the historical response of the UK’s Department for International Development (DfID) was disappointing. The committee launched its inquiry into sexual exploitation and abuse after revelations that Oxfam covered up claims that its staff had used sex workers while working in the aftermath of the 2010 Haiti earthquake. The sector has faced intense scrutiny, with further allegations of sexual misconduct emerging at Save the Children.

Twigg said the aid sector was first made aware of concerns in 2002, when a report by the UN agency for refugees (UNHCR) and Save the Children documented cases of abuse. Despite this, and a series of other warnings, little action was taken. “There are so many reports that go back over this period of 16 years and the system has failed to respond anything close to adequately over the period,” the Labour MP said. “This is 16 years of failure by the entire international system of governments, the UN and the aid sector.”

Read more …

Aug 212017
 
 August 21, 2017  Posted by at 9:28 am Finance Tagged with: , , , , , , , ,  


Elliott Erwitt Waiting for a Streetcar in Downtown Pittsburgh 1950

 

Ron Paul: 50% Stock Market Plunge ‘Conceivable,’ But Not Trump’s Fault (CNBC)
Zombies Propped Up As China’s Debt Swaps Surpass $100 Billion (BBG)
China’s Plunge Protection Team Claims “State Meddling” Stabilizes Markets (ZH)
House Of Cards: Lending Culture Is Leaving Australians Vulnerable (Abc)
Diesel Scandal Is A Risk To German Economy, Says Ministry (R.)
Britain and EU Clash Over Brexit Timetable for Trade Deal (BBG)
NAFTA Negotiations Start in Secrecy. Lobbying Heats Up (WS)
Beware the “The Cultural Civil War” Narrative (CHS)
Rob Ford, Donald Trump and the New Direction of Political Polarization (Towhey)
When Exactly Will the Eclipse Happen? (Wolfram)

 

 

Paul’s just guessing on the numbers, but the risks are obvious. And Trump will be blamed anyway.

Ron Paul: 50% Stock Market Plunge ‘Conceivable,’ But Not Trump’s Fault (CNBC)

Ron Paul’s sell-off prediction just got more severe. The former Republican Congressman from Texas believes escalating dysfunction in Washington will create even more pain for Wall Street. “A 50% pullback is conceivable,” Paul said on “Futures Now” recently. “I don’t believe it’s ten years off. I don’t even believe it’s a year off. ” According to his calculations, it would cut the S&P 500 Index in half, to 1212, and the blue-chip Dow Jones Industrial Average would collapse to 10,837. Paul noted that there’s a lot of chaos in Washington right now, with an “unpredictable president” and those who are inclined to “tear him apart” but if the market takes that big of a tumble, he doesn’t see it as Trump’s fault.

“It’s all man-made. It’s not the fault of Donald Trump in the last week. If the market crashes tomorrow and we have a great depression, he didn’t do it in six months. It took more like six or ten years to cause all these problems that we’re facing,” he said. What’s more, it would come at the expense of businesses who are counting on reforms such as tax cuts and fewer regulations, according to Paul. Paul, who is also known for his presidential runs, originally made his case for a somewhat more benign 25% downturn on June 29 on “Futures Now.” He argued Wall Street is overestimating the strength of the economy, and the Federal Reserve kept interest rates too low for too long. He said the situation for stocks could turn ugly as soon as October. Stocks will try to bounce back on Monday from multiple losing weeks in a row. The Nasdaq just saw its fourth consecutive week of losses. Meanwhile, the Dow & S&P 500’s losing streak now sits at two weeks.

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China’s way of propping up coal and steel. Too big to fail.

Zombies Propped Up As China’s Debt Swaps Surpass $100 Billion (BBG)

Almost a year after China rolled out steps to rein in soaring corporate leverage, concerns are rising that undeserving companies are benefiting while households are getting saddled with risks. China unveiled guidelines for debt-to-equity swaps in October, part of measures to trim the world’s biggest corporate debt loads. The idea was that healthy firms would use the program to cut interest-bearing borrowings, while bloated companies would be shunned. But it hasn’t always worked out that way, even as the total value of swaps reached 776 billion yuan ($116 billion) in the second quarter when volumes jumped to a record, according to Natixis. While China’s State Council said in October that zombie firms may not take part, 55% of the swaps last quarter were in the coal and steel industries, which are plagued by overcapacity, Natixis says.

The stakes are high for lenders and even individual investors, some of whom buy wealth management products repackaged from the swaps. The absence of a clear definition of “zombie” is part of the problem, according to Fitch Ratings. Views vary on whether further guidelines on the program released this month by the banking regulator will help address these issues. The program is attracting bad companies because they see debt-to-equity swaps as a way to get a bailout, said Chi Lo, Greater China senior economist at BNP Paribas Asset Management. “You can imagine the zombie companies will be just like cancer cells that eat into the system.”

The swaps generally work like this: A bank agrees to take over a company’s debt from its original lenders. The bank sets up a unit which has other shareholders that help share risk. The unit assumes the debt and conducts a transaction with the company to convert it into equity. It can then dispose of the stake. In the most recent draft guidelines released earlier this month by the China Banking Regulatory Commission, a bank is required to own no less than a 50% stake in the unit conducting the swaps. The guidelines also say that the units can sell bonds and borrow from the interbank market.

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That’s the same claim the Fed and ECB make, just in other words.

China’s Plunge Protection Team Claims “State Meddling” Stabilizes Markets (ZH)

It was two years ago, in June of 2015, when just as the Shanghai Composite was flirting with 5,000 and when literally the local banana stand guy was trading stocks, that the Chinese stock bubble burst, unleashing an unprecedented selling spree, a 40% drop in just two months, and Beijing’s nationalization of the stock market, courtesy of the domestic plunge protection team, the China Securities Regulatory Commission also known as the “National Team”. The decision by local authorities to effectively shut down price discovery had a huge confidence crushing impact on local investor confidence. As Gavekal Research put it overnight, “the lack of trust was crystallized by the decision in the summer of 2015 to “shut down” the equity markets for a while and stop trading in any stock that looked like it was heading south.

That decision confirmed foreign investors’ apprehension about China and in their eyes set back renminbi internationalization by several years, if not decades.” Understandably, with the realization that China (or any other nation for that matter), no longer has a an efficient, discounting stock market, but merely a policy tool meant to inspire confidence on the way up, and punish short sellers and “speculators” on the way down, the China Securities Regulatory Commission kept a low profile: after all why remind traders and investors that the local market only exists in the imaginations of several Beijing bureaucrats who sit down every day to decide the “fair value” of all market-traded equities. That changed last week, when for the first time in years, the Chinese Plunge Protection Team broke its silence and said that “state meddling has successfully stabilized China’s US$7 trillion stock market by curbing volatility and steering valuations to rational levels.”

For those stunned by the idiocy in the circular statement above, don’t worry it’s not just you: China indeed just said that the local market has become more efficient as a result of more manipulation. What is far more shocking, however, is that most central bankers around the world would agree with this statement.

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The banking system will fall with real estate, exposure to mortgage debt is 60%. And Australian banks own New Zealand banks.

House Of Cards: Lending Culture Is Leaving Australians Vulnerable (Abc)

A decade of housing price rises, low interest rates and relatively easy credit has left Australians carrying the second-highest level of household debt in the world. And despite efforts to tighten lending and to address problems in the lending culture, the ABC’s Four Corners program has learnt bank staff and mortgage brokers are still required to meet tough lending targets and some staff are threatened with dismissal if they do not meet the banks’ requirement to sign up more mortgages. The problems in the lending culture were acknowledged by the banks themselves earlier this year in a review conducted by the former public service chief, Stephen Sedgwick. Incentive payments and lending targets are still a primary motivator for bank staff. Internal performance expectations for Westpac bank lenders, obtained by Four Corners, include targets of six-to-nine home-finance requests a week and between two and three home-loan drawdowns a week.

Another economist who has raised the alarm is former banker Satiyajit Das. He said the 60% exposure to mortgage debt in Australia’s banks was “extremely high”. That figure “is at least 20% higher than Norway, and also higher than Canada, which is a very comparable economy to Australia”, he said. Australia’s feverish housing market has contributed but Mr Das said other countries that had experienced rapid house price rises did not have the same potentially dangerous exposure. “One of the biggest housing bubbles in the world is Hong Kong, but the Hong Kong banks have only got exposure to the housing market of around 15%,” he said. Exposure to housing debt at Australian levels, Mr Das said, would leave banks more vulnerable in the case of any housing downturn. “If there is a downturn then obviously the losses will build up quite quickly,” he said.

[..] Gerard Minack, the former head of developed market strategy at Morgan Stanley, said Australia had been led down this path by current tax arrangements and lenders who had been increasingly willing to leverage up borrowers. This, he said, had created “a massive affordability problem” that will exacerbate the pain associated with any downturn. Australia now has a household-debt-to-income ratio of 190%. “For every $1 of household income, there’s [nearly] $2 of debt,” Mr Minack said.

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Preparing Germans for a lenient attitude by their government (ahead of the Merkel re-election). Sorry guys, but carmakers are too big to fail. Can’t blame Angela…

Diesel Scandal Is A Risk To German Economy, Says Ministry (R.)

The emissions scandal ensnaring German carmakers is a risk to Europe’s largest economy, the finance ministry said on Monday. In its monthly report, the ministry named the issue, which broke out almost two years ago after Volkswagen admitted to cheating US diesel emissions tests, as a threat to Germany along with Britain’s decision to leave the European Union and protectionist trade policies by the US government. But it has said it was impossible to put a figure on the potential damage it could cause. The car industry is Germany’s biggest exporter and provides about 800,000 jobs. “Risks linked to how Brexit will shape out and future US trade policies remain,” the ministry said. “In addition, the so-called diesel crisis should be classified as a new risk to the German economy even though its effects are not possible to quantify at the moment.”

Strong household and state spending provided most of the impulse for the German economy in the second quarter when growth was measured at 0.6%. Weaker net foreign trade dampened growth, as exports grew strongly less than imports. The ministry said it expected the industrial sector to continue its upswing also in the third quarter, pointing to robust orders and strong business sentiment indicators. But the diesel crisis could cloud the German growth outlook, it said, adding: “Given the importance of the automotive industry [the diesel crisis) must be classified in the medium term as a risk to the overall economic development.” German politicians and car bosses agreed earlier in August to overhaul engine software on 5.3m diesel cars to cut pollution and try to repair the industry’s battered reputation.

EU antitrust regulators are also investigating allegations of a cartel among a group of German carmakers, a measure that could result in hefty fines for the companies. In April, Volkswagen was ordered to pay a $2.8bn criminal penalty in the United States for cheating on emissions tests. The company is also paying $1.5bn in a civil case brought by the US government and spending $11bn to buy back cars and offer other compensation. Back in Europe, German carmakers VW, Audi, Porsche, Mercedes and BMW face questions over whether they colluded to bring down the cost of components – including some used to control diesel emissions.

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How is it possible that just one party does these negotiations?

Britain and EU Clash Over Brexit Timetable for Trade Deal (BBG)

Britain and the European Union are at odds over how soon the Brexit talks can pivot towards a trade deal just a week before negotiations are set to resume. Adopting a provocative posture, U.K. Prime Minister Theresa May’s government declared at the weekend that it’s “stepping up pressure” on the bloc to shift the discussions away from the terms of separation as soon as October. The use of fighting words in the past has not budged the EU and in a sign the U.K. will be disappointed, Slovenian Prime Minister Miro Cerar told the Guardian that “the process will definitely take more time than we expected.”

Signs of fresh discord may unnerve investors after the pound last week under-performed all of its Group of 10 counterparts. By giving out more details of where it stands and spelling out its demands, the U.K. wants to change the narrative that it’s been too vague, and by doing so jolt the EU into talking trade sooner. With the clock ticking down to the U.K.’s March 2019 departure, and the two sides clashing over many key issues, Brexit Secretary David Davis seems bent on reviving a debate over whether talks should run in parallel rather than in the strict order the EU has laid out.

Such an ambition will draw short shrift from the EU. Its chief negotiator, Michel Barnier, last week reiterated that the other 27 governments won’t allow trade talks to start until “sufficient progress” has been made resolving residency rights, the U.K.’s exit bill and the border with Ireland. The original hope was to reach this milestone in October – in time for a summit of EU leaders – but that is now in doubt amid criticism within the EU of sluggish progress and a lack of detail from the British. “There are so many difficult topics on the table, difficult issues there, that one cannot expect all those issues will be solved according to the schedule made in the first place,” Slovenia’s Cerar told the Guardian. “What is important now is that the three basic issues are solved in reasonable time.”

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The NAFTA talks may well end up being as tough as the Brexit ones.

NAFTA Negotiations Start in Secrecy. Lobbying Heats Up (WS)

The first round of re-negotiating the North American Free Trade Agreement between the US, Canada, and Mexico began on Wednesday and is scheduled to last through Sunday. And the one thing we know about it is this: Despite promises in March by US Trade Representative Robert Lighthizer (USTR) that the negotiations would be transparent, the USTR now considers the documents and negotiations “classified” and they’ll be cloaked in secrecy. But corporate lobbyists have access. And they’re all over it. The Electronic Frontier Foundation put it this way: “Once again, following the failed model of the Trans-Pacific Partnership (TPP), the USTR will be keeping the negotiating texts secret, and in an actual regression from the TPP will be holding no public stakeholder events alongside the first round. This may or may not set a precedent for future rounds, that will rotate between the three countries every few weeks thereafter, with a scheduled end date of mid-2018.”

But during his confirmation hearing in March, Lighthizer had promised to make the negotiations transparent and to listen to more stakeholders and the public. The EFF reported at the time that in response to Senator Ron Wyden question – “What specific steps will you take to improve transparency and consultations with the public?” – Lighthizer replied in writing: “If confirmed, I will ensure that USTR follows the TPA [Trade Promotion Authority, aka. Fast Track] requirements related to transparency in any potential trade agreement negotiation. I will also look forward to discussing with you ways to ensure that USTR fully understands and takes into account the views of a broad cross-section of stakeholders, including labor, environmental organizations, and public health groups, during the course of any trade negotiation.

He said that “we can do more” to ensure that we “have a broad and vigorous dialogue with the full range of stakeholders in our country.” Senator Maria Cantwell tried to have Lighthizer address the skewed Trade Advisory Committees that currently advise the USTR, by asking: “Do you agree that it is problematic for a select group of primarily corporate elites to have special access to shape US trade proposals that are not generally available to American workers and those impacted by our flawed trade deals?” Lighthizer replied: “It is important that USTR’s Trade Advisory Committees represent all types of stakeholders to ensure that USTR benefits fully from a diverse set of viewpoints in considering the positions it takes in negotiations.”

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You’re being played.

Beware the “The Cultural Civil War” Narrative (CHS)

The play is as old as civilization itself: conjure up extremists (paying them when necessary), goad the formation of opposing extremists, then convince the populace that these extremists have been normalized, i.e. your friends and neighbors already belong to one or the other. This normalization then sets up the relentless demands to choose a side – the classic techniques of misdirection and false choice. Just as you’re sold a triple-bacon cheeseburger or a hybrid auto, you’re being sold a completely fabricated cultural civil war. There have always been extremists on every edge of the ideological spectrum, just as there have always been religious zealots. In a healthy society, these fringe pools of self-reinforcing fanaticism are given their proper place: they are outliers, representing self-reinforcing black holes of confirmation bias of a few.

In times of social, political and financial stress, such groups pop up like mushrooms. In times of media saturation, a relative handful can gain enormous exposure and importance because the danger they pose sells adverts and attracts eyeballs/viewers. Add a little fragmentation, virtue-signaling, demands for ideological conformity and voila, you get a deeply fragmented and deranged populace that is incapable of recognizing the dire straits it is in or recognizing the structural sources of its impoverishment and powerlessness. In other words, you get an easily mallable populace at false war with itself.

There is always common ground for those who dare to seek it. The Powers That Be are blowing up the bridges as fast as they can, whipping up fear and hatred of the Other, fanning the flames of extremism and claiming extremists are now normalized and everywhere. All of this is false. Would you buy an entirely manipulated cultural civil war if it was advertised as such? If not, then don’t buy into the false (but oh so useful to the ruling elites) narrative of an “inevitable cultural Civil War.”

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Excellent piece by G. Mark Towhey, “a key player on the team that helped elect Rob Ford as mayor of Toronto”.

Rob Ford, Donald Trump and the New Direction of Political Polarization (Towhey)

You are not a typical American. Not even close. The typical American doesn’t read lengthy articles in policy journals. The typical American gets up far too early in the morning, after too little sleep, works too hard for too long in a job that pays too little, before heading home, feeding the kids, cleaning the house, and collapsing into bed far too late. He or she has precious little time to consume news: a fleeting glimpse of pithy headlines, maybe a two-minute newscast on the radio if they drive to work or a few minutes of local TV news—mostly weather and sports scores. It is through this lens that typical Americans view the world beyond their personal experience and that of friends and family. It’s through this lens that they assess their government and judge their politicians.

These are the typical Americans who elected Donald Trump. They weren’t alone in voting for Trump, and they didn’t cast their ballots by mistake. They chose Trump because, out of the available alternatives, he best represented their view of the world. I am not a typical American, either. In fact, I’m a Canadian. I was a key player on the team that helped elect Rob Ford as mayor of Toronto—North America’s fourth largest city. I helped him craft a campaign platform that resonated with typical Torontonians and, later, helped him translate that platform into an actionable governing agenda. I helped him get things done. Three years later, Ford fired me as his chief of staff when I insisted that he go to rehab to address the personal demons that were destroying both him and his mayoralty. My experience with Ford has given me an unusual perspective on the recent presidential election, the Trump phenomenon, and the rise of a new and powerful political force that favors unorthodox candidates.

No, you and I are not typical at all. We have time to read (and, apparently, to write) long-form articles in policy journals. We can pause our breadwinning labor and child-rearing duties long enough to consider hypotheticals and to ruminate, now and then, on an idea or two. We may not recognize this as a luxury in our modern world, but we should. Amid all that rumination, however, we rarely stop to think that what motivates us does not necessarily excite typical Americans, the people who elected Donald Trump some six years after their northern cousins elected Rob Ford in Toronto. Almost by mistake, this bloc of typical citizens—overstressed, under-informed, concerned more with pragmatic quality of life issues than idealistic social goals—has become a powerful political movement. And we didn’t see them coming. Conventional political leaders seem to completely misunderstand them, and even their own champions often appear to disrespect them. They do so at their peril.

In 2010, Rob Ford was a dark horse candidate in the race to be mayor of Toronto. He later became internationally notorious for his very public battles with drug addiction and frequent appearances as a punch line in late-night television monologues. But his 2010 campaign was based on his understanding of the struggles typical residents endured and their limited time for politics. Ford boiled his campaign down to “Respect for Taxpayers” and “Stop the Gravy Train.” His message was concise and understandable. It fit on a bumper sticker. It could be passed by word of mouth from one person to the next without loss of meaning or impact. That it meant something different to everyone was not a weakness but a strength—no matter what you thought the “gravy train” was, everyone wanted it stopped.

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In case you want to know Absolutely Everything about the eclipse, here’s Stephen Wolfram.

When Exactly Will the Eclipse Happen? (Wolfram)

A total solar eclipse occurs when the Moon gets in front of the Sun from the point of view of a particular location on the Earth. And it so happens that at this point in the Earth’s history the Moon can just block the Sun because it has almost exactly the same angular diameter in the sky as the Sun (about 0.5° or 30 arc-minutes). So when does the Moon get between the Sun and the Earth? Well, basically every time there’s a new moon (i.e. once every lunar month). But we know there isn’t an eclipse every month. So how come? Well, actually, in the analogous situation of Ganymede and Jupiter, there is an eclipse every time Ganymede goes around Jupiter (which happens to be about once per week). Like the Earth, Jupiter’s orbit around the Sun lies in a particular plane (the “Plane of the Ecliptic”).

And it turns out that Ganymede’s orbit around Jupiter also lies in essentially the same plane. So every time Ganymede reaches the “new moon” position (or, in official astronomy parlance, when it’s aligned “in syzygy”—pronounced sizz-ee-gee), it’s in the right place to cast its shadow onto Jupiter, and to eclipse the Sun wherever that shadow lands. (From Jupiter, Ganymede appears about 3 times the size of the Sun.) But our moon is different. Its orbit doesn’t lie in the plane of the ecliptic. Instead, it’s inclined at about 5°. (How it got that way is unknown, but it’s presumably related to how the Moon was formed.) But that 5° is what makes eclipses so comparatively rare: they can only happen when there’s a “new moon configuration” (syzygy) right at a time when the Moon’s orbit passes through the Plane of the Ecliptic.

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Aug 032016
 
 August 3, 2016  Posted by at 8:23 am Finance Tagged with: , , , , , , , , ,  


NPC O Street Market, Washington DC 1925

Bank Shares Plunge Across Europe As Stress Tests Warn Of Contagion (G.)
Bank of England’s Stress Tests ‘Worse Than Useless’ (Ind.)
Global Bond Market Rally Unravels as Japan Shows Limit to Demand (BBG)
HSBC Reports 29% First-Half Profit Slump (G.)
Bitcoin Sinks After Hackers Steal $65 Million From Exchange (BBG)
The One-Size Euro Might Not Be So Tight After All (BBG)
China Inc. Has $1 Trillion in Cash That It’s Too Scared to Spend (BBG)
China’s Trouble With Bubbles (BBG)
Investment In Greek Economy Fell 66% Between 2007 And 2015 (Kath.)
Pay Time: The Big Squeeze On Small Business (West)
Vancouver Enacts 15% Property Tax To Stave Off Chinese Investment Surge (AFR)
Furious Sheep (Dmitry Orlov)
Why Capitalism Has Turned Us Into Narcissists (G.)
What Kind Of School Punishes A Hungry Child? (G.)
Bodies Of 120 Migrants Washed Up On Libya Shores In Past 10 Days (R.)

 

 

“Once contagion spreads from Italy to Germany and then to the UK, we will have a new banking crisis but on a much grander scale than 2007-08.”

Bank Shares Plunge Across Europe As Stress Tests Warn Of Contagion (G.)

Bank shares across Europe have slumped, as investors digested the results of health checks on major lenders and the impact of low interest rates on their long-term health. Shares in Germany’s Commerzbank hit record lows after a warning that profits would be down this year. This compounded the findings of stress tests by the European Banking Authority watchdog last week, which left the Frankfurt-based institution in the bottom half of the results from health checks on 51 major lenders. The worst performer in the stress tests, Italy’s Banca Monte dei Paschi di Siena (MPS), suffered a 16% in its shares on Tuesday and Italy’s biggest bank Unicredit fell 7% after heavy losses the day before.

The pan-European bank stock index was down 3.5% as the prospect of prolonged period of low interest rates makes it more difficult for banks to make profits. The Bank of England will conduct a bank industry assessment this year, which prompted the Adam Smith Institute – a leading thinktank – to publish a report calling for the abandonment of the “worse than useless” stress tests unless changes can be made. Kevin Dowd, professor of finance and economics at Durham University, and author of the report, said: “As the EU banking system goes into a renewed crisis, the UK banking system is in no fit state to withstand the storm. Once contagion spreads from Italy to Germany and then to the UK, we will have a new banking crisis but on a much grander scale than 2007-08.

“The Bank of England is asleep at the wheel again, and we will be back to beleaguered banksters begging for bailouts – and the taxpayer will be ripped off yet again, but bigger this time.”

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Stress tests are meant to be useless. Pure lipstick.

Bank of England’s Stress Tests ‘Worse Than Useless’ (Ind.)

The Bank of England’s annual stress tests of the UK’s banks, designed to ensure Britain’s lenders will not be at the heart of another destructive financial crisis, have been branded “worse than useless”, by a new report. Kevin Dowd, professor of finance and economics at Durham University, argues in a paper published today by the Adam Smith Institute that the Bank’s tests, which model various adverse economic scenarios each year such as a major fall in UK house prices or a Chinese property crash, have a series of “fatal flaws” and that the central bank is “asleep at the wheel”. “The purpose of the stress-testing programme should be to highlight the vulnerability of our banking system and the need to rebuild it. Instead, it has achieved the exact opposite, portraying a weak banking system as strong”.

Professor Dowd warns that the eurozone banking system is on the precipice of another crisis, which will also engulf the UK’s major lenders. “Once contagion spreads from Italy to Germany and then to the UK, we will have a new banking crisis but on a much grander scale than 2007-08” he said. “The Bank of England is asleep at the wheel again, and we will be back to beleaguered banksters begging for bailouts – and the taxpayer will be ripped off yet again, but bigger this time.” Among the flaws in the Bank’s testing exercise identified by Professor Dowd are the fact that the stress tests rely on analytical “risk weights” for banks’ assets, which have been much criticised for potentially underplaying the true riskiness of various assets such as mortgages and sovereign debt.

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A potential global earthquake.

Global Bond Market Rally Unravels as Japan Shows Limit to Demand (BBG)

The record-setting global bond market rally is coming undone. Bonds in Bank of America’s G-7 Government Index yielded 0.58% on average, the highest level in five weeks. The move is a rebound from the record low of 0.45% set in July. Japan led the selloff, and yields are rising from Australia to Germany. Global bonds surged from the end of June as the U.K.’s vote to leave the EU drove expectations the global economy would slow enough to keep the Federal Reserve from raising interest rates. Now investors and analysts are questioning whether yields dropped too far. Donald Trump said U.S. interest rates are artificially low, while Bill Gross said record-low yields aren’t worth the risk. A rally in long-term Japanese government bonds is probably over, according to PIMCO.

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BBG: “Pretax earnings fell 45% to $3.61 billion from a year earlier..”

HSBC Reports 29% First-Half Profit Slump (G.)

HSBC has admitted it is breaching a US regulator’s order to bolster its defences against financial crime as it announced a slump in first-half profits. The UK’s biggest bank also announced a $2.5bn share buyback following the sale of its Brazilian business in a move intended to demonstrate its financial strength. As the bank reported a 29% fall in first-half profits to $9.7bn, it also made a series of legal disclosures that confirmed it had received requests for information from various regulatory and law enforcement authorities around the world in relation to Mossack Fonseca, the Panama law firm linked to tax-haven companies.

Among the legal disclosures is a reference to an order agreed in October 2010 with the US Office of the Comptroller of the Currency which required the bank to “establish an effective compliance risk management programme across HSBC’s US businesses”. “HSBC Bank USA is not currently in compliance with the OCC order. Steps are being taken to address the requirements of the orders,” HSBC said, without providing details. In February the bank had revealed an official monitor it installed after a $1.9bn fine over money laundering four years ago had raised “significant concerns” about the slow pace of change to its procedures to combat crime. “Through his country-level reviews the monitor identified potential anti-money laundering and sanctions compliance issues that the [department of justice] and HSBC are reviewing further.”

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Bitcoin has turned into a Chinese bubble machine. “Chinese exchange OKCoin was the largest overall bourse for trading in the digital currency, over 90% of which is denominated in the Chinese yuan.”

Bitcoin Sinks After Hackers Steal $65 Million From Exchange (BBG)

Bitcoin plunged after one of the largest exchanges halted trading because hackers stole about $65 million of the digital currency. Bitcoin slumped 5.3% against the dollar as of 10:17 a.m. on Wednesday in Tokyo, bringing its two-day drop to 13%. Prices also sank 6.2% on Monday, although it was not clear if that initial move was related to the hack. Hong Kong-based exchange Bitfinex said on Tuesday that it halted trading, withdrawals and deposits after discovering the security breach. The exchange said it was still investigating details and cooperating with law enforcement, but acknowledged that some bitcoin have been stolen from its users.

“Yes – it is a large breach,” Fred Ehrsam, co-founder of Coinbase, a cryptocurrency wallet and trading platform, wrote in an e-mail. “Bitfinex is a large exchange, so it is a significant short term event, although Bitcoin has shown its resiliency to these sorts of events in the past.” Bitfinex confirmed in a message to Bloomberg News on Wednesday that the hackers took 119,756 bitcoin, or about $65 million at current prices. More than $1.5 billion has been wiped out from bitcoin’s market capitalization this week, according to research from CoinDesk. “We will look at various options to address customer losses later in the investigation,” Bitfinex wrote in a blog post. “We ask for the community’s patience as we unravel the causes and consequences of this breach.”

The Hong Kong exchange was the largest for U.S. dollar-denominated transactions over the past month, according to bitcoincharts.com. Chinese exchange OKCoin was the largest overall bourse for trading in the digital currency, over 90% of which is denominated in the Chinese yuan.

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Between the lines you can see just how faulty the design of the euro is. It makes the rich countries much richer, but the poor so much poorer that the system MUST collapse. Greed is blind.

The One-Size Euro Might Not Be So Tight After All (BBG)

It’s a given that the euro can’t have the right exchange rate for all of its 19 diverse members, all of the time. Yet at the helm of the ECB, Mario Draghi may be making it a closer fit for more countries, more of the time. Angel Talavera, an economist at Oxford Economics in London, has calculated for Bloomberg Benchmark what would have been the equilibrium exchange rate for 8 euro-area economies between 2011 and 2015 ” the rate that would be best suited to an economy’s domestic and external profiles. Germany’s economic strength and positive balance of payments would warrant the euro trading at around $1.40, while Greece’s woes would require it to be below parity with the dollar.

At the beginning of Draghi’s term, the euro was too strong for pretty much everyone, and has typically aligned itself more to the needs of “core” economies, Germany included. That hasn’t been helpful. “What would normally happen with a country that has its own currency is that the currency will appreciate or depreciate over time to help correct those imbalances,” Talavera said. “In the case of the Eurozone obviously you can’t have both things happening, so those imbalances are not correcting, but rather amplifying most of the time.” His calculations bear this out. At the height of the sovereign-debt crisis in 2011 the spread between the optimal rate for Germany and Greece was $0.32. By the end of last year the gap had widened to $0.42.

Given the structure of the euro, though, there may be only so much that the current set of policies can do. According to Talavera’s Oxford Economics study, the ECB’s monetary policy has always been plagued by a paradox: while it has has been “generally right for the common currency area as a whole, it has proven to be wrong for most of its individual members most of the time.”

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Really? So what are their debts at the same time?

China Inc. Has $1 Trillion in Cash That It’s Too Scared to Spend (BBG)

Never before have China’s companies had so much cash and so little to spend it on. With investment opportunities sparse amid the country’s weakest economic expansion in a quarter century, Chinese firms reported an 18% jump in cash holdings during their latest quarter, the biggest increase in six years. The $1.2 trillion stockpile – which excludes banks and brokerages – grew at a faster pace than in the U.S., Europe and Japan, according to data compiled by Bloomberg. While there are worse problems than having too much cash, China Inc.’s unprecedented hoard is frustrating both policy makers and investors. Because companies lack the confidence to spend on new projects, government attempts to boost growth by pumping money into the financial system are falling short.

Stockholders, meanwhile, would rather see bigger dividends or share buybacks than a buildup of idle cash on corporate balance sheets. “This is actually becoming a bigger and bigger issue,” said Herald van der Linde at HSBC. “Cash is becoming a point of debate.” The impulse to hoard instead of invest is relatively new for a country where corporate risk-taking has been rewarded for much of the past 25 years. But as economic growth moves deeper below 7% from double-digit levels just a few years ago, the change in mindset has been stark. Growth in China’s private spending on fixed assets, which topped 10% last year, slowed to 2.8% in the six months through June, the weakest level on record. “The drivers aren’t there” for Chinese firms to invest, said Sean Taylor at Deutsche Asset Management in Hong Kong.

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Moving into ever more and newer bubbles is the only thing that keeps China going.

China’s Trouble With Bubbles (BBG)

The collapse of China’s stock markets a year ago was eye-catching, but in the end, hardly earth-shattering. Despite the pain for millions of retail investors, the fact is that stocks remain a small part of the financial system in China. Their brief, giddy rise and spectacular collapse never really threatened the wider Chinese economy, let alone the global financial system. That doesn’t mean the rest of the world should rest easy, however. While equities remain subdued, bubbles are growing in bonds and real estate – two markets that play a much bigger role in the mainland economy. The question is whether Chinese regulators can handle a new crisis any better than the old one.

Faith that China can safely manage fast-growing, debt-fueled bubbles assumes its regulators aren’t just as good as their peers in the rest of the world, they’re better. Last year’s events should call that confidence into question. Throughout the first half of 2015, policymakers allowed leverage to grow unchecked. When the market peaked and margin calls accelerated the decline, the combined force of financial regulators, public security officials and the state press were powerless to stop the slide. The situation places a premium on policies, rather than personalities, that can prevent things from unraveling. China needs to find a way to tap the brakes on credit without sending the markets into a downward spiral. Tighter rules and larger capital requirements for wealth management products – a key source of risk – are a start.

But as long as loan growth continues to accelerate faster than GDP, it’s hard to argue that a true basis for stability has been established. For evidence the underlying problems remain unsolved, look no further than China’s other asset markets. One might’ve expected that after the trauma of the stock crash, Chinese investors would become a shade more cautious. Nothing could be further from the truth. The equity boom-and-bust was followed almost immediately by a similar cycle in the metal market, which saw steel prices surge almost 80%. Property prices in Shenzhen are up 64% in the last nine months. Leveraged bets in the fixed income market mean yields continue to creep down, even as default risks grow.

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Thank the IMF for this.

Investment In Greek Economy Fell 66% Between 2007 And 2015 (Kath.)

Investment in the Greek economy plummeted more than 60% between 2007 and 2015, according to data published in Eurobank’s weekly bulletin on Tuesday. According to the lender’s economists, fixed capital investment declined by €40 billion or 66.1% during the period in question. At the same time, Greece’s GDP fell €56.7 billion. The Eurobank document described the drop in investment since 2007 as “deep and prolonged.” The reduction in investment was mainly felt in the housing market (€23.8 billion euros), followed by machinery and equipment (€12.1 billion) and other types of construction (€2.3 billion).

Eurobank said some of the key reasons for the dramatic slide in the amount of capital being invested in the Greek economy were the increases and frequent changes in taxation, the rising cost of capital, the reduction in lending by banks, the rise of uncertainty, an inability to create an investor-friendly environment despite some progress in this area, and expectations of weak economic activity. The lender also notes that net fixed capital formation, which measures gross investment minus depreciation, has been in negative territory since the end of 2010. The most recent data show that the annual shortfall is close to €11 billion.

To underline how damaging the last few years, and the collapse in investment described earlier, have been for the Greek economy, Eurobank’s weekly report pointed out that unemployment in December 2007 was at 8.1%, meaning there were just 403,000 people out of work. By the end of 2015, the jobless rate had risen to 24.2%, with 1.1 million people without work. During this eight-year spell, 860,000 jobs disappeared.

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Time for Fonterra to collapse. It’s too big for its own good.

Pay Time: The Big Squeeze On Small Business (West)

US cereal giant Kellogg’s and New Zealand milk multinational Fonterra have put the squeeze on local suppliers by stretching their payment terms out to a crushing 120 days. Along with other multinationals such as Unilever and Nestle, Kellogg’s and Fonterra already had their suppliers on 90-day terms, a punishing delay for family businesses who have to pay staff and a slew of other costs within the month. The move to 120 days does not bode well for small business, already fed up with “being used as a bank”, as one framed it. “Small business is the engine room of the economy,” he said, declining to be named for fear of reprisals, “And we are bankrolling these multinationals. I’ve got staff, super, rent and electricity to pay: and GST and payroll tax to collect. I can’t tell my staff to wait for 120 days to be paid”.

Kellogg’s was ducking for cover when rung for comment, its media team refusing to return calls. Fonterra issued this statement via a spokesperson: “In 2011, we identified that international best practice was to pay vendors supplying goods and services on a 60 day global standard payment from the end of the month in which the invoice was received. Part of our 2015 business transformation was to speed up compliance to this global standard term. We have 20,000 vendors globally and 16,000 or 80% of them have had no change to their payment terms.” According to a Fonterra document seen by this reporter, however, the new terms are “1st of the month, 3 months following invoice date”.

As for Fonterra’s claim of “international best practice”, payment terms in Europe have been moving the other way, by law. Since March 2013, the maximum delay for companies in the EU to for pay for goods and services is 30 days, unless agreed by both parties in writing, in which case it may be 60 days.

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Get ready for the NAFTA law suits.

Vancouver Enacts 15% Property Tax To Stave Off Chinese Investment Surge (AFR)

As of Tuesday, foreign buyers of property in Vancouver, which like Sydney is one of the world’s hottest real estate markets, will have to pay a 15% transaction tax. Property prices in Vancouver trail only Sydney and Hong Kong on the list of the world’s least-affordable housing markets, a Demographia survey shows. Trying to correct that, the NSW government said two months ago that it would levy a 4% stamp-duty surcharge on foreign buyers beginning next year and also charge an extra 0.75% land-tax surcharge on residential real estate, where prices are buoyed by incoming investment from mainland China. British Columbia legislators passed the new law on Friday going into a three-day holiday weekend even as local property agents called for exemptions for deals made to buy but not yet complete.

The new tax means non-Canadian residents buying a $2 million home will have to pay an additional $300,000 in tax. “While investment from outside Canada is only one factor driving price increases, it represents an additional source of pressure,” British Columbia Finance Minister Michael de Jong said in a statement. “This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs. A surge in purchases by Chinese property buyers has resulted in driving up the value of more than 90% of detached homes in Vancouver to more than C$1 million ($1.04 million), compared with 19% 10 years ago. Vancouver’s average home price is Canada’s highest, at $1.2 million, the Royal Bank of Canada estimates.

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“Should you be asked what does matter to you, concentrate on such issues as the candidates’ body language, fashion sense and demeanor.”

Furious Sheep (Dmitry Orlov)

you have to understand the way the electoral game is played. It is played with money—very large sums of money—with votes being quite secondary. In mathematical terms, money is the independent variable and votes are the dependent variable, but the relationship between money and votes is nonlinear and time-variant. In the opening round, the moneyed interests throw huge sums of money at both of the major parties—not because elections have to be, by their nature, ridiculously expensive, but to erect an insurmountable barrier to entry for average citizens. But the final decision is made on a relatively thin margin of victory, in order to make the electoral process appear genuine rather than staged, and to generate excitement.

After all, if the moneyed interests just threw all their money at their favorite candidate, making that candidate’s victory a foregone conclusion, that wouldn’t look sufficiently democratic. And so they use large sums to separate themselves from you the great unwashed, but much smaller sums to tip the scales. When calculating how to tip the scales, the political experts employed by the moneyed interests rely on information on party affiliation, polling data and historical voting patterns. To change the outcome from a “lose-win” to a “lose-lose,” you need to invalidate all three of these:

• The proper choice of party affiliation is “none,” which, for some bizarre reason, is commonly labeled as “independent,” (and watch out for American Independent Party, which is a minor right-wing party in California that has successfully trolled people into joining it by mistake). Be that as it may; let the Furious Sheep call themselves the “dependent” ones. In any case, the two major parties are dying, and the number of non-party members is now almost the same as the number of Democrats and Republicans put together.

• When responding to a poll, the category you should always opt for is “undecided,” up to and including the moment when you walk into the voting booth. When questioned about your stands on various issues, you need to remember that the interest in your opinion is disingenuous: your stand on issues matters not a whit (see study above) except as part of an effort to herd you, a Furious Sheep, into a particular political paddock. Therefore, when talking to pollsters, be vaguely on both sides of every issue while stressing that it plays no role in your decision-making. Should you be asked what does matter to you, concentrate on such issues as the candidates’ body language, fashion sense and demeanor.

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This reviewer misses the point entirely, as evidenced by stupid things like “A cheerful worker is as much as 12% more productive.”

Why Capitalism Has Turned Us Into Narcissists (G.)

It is no wonder that the notion of happiness has been taken into public ownership, given the remarkable spread of spiritual malaise around the globe. Around a third of American adults and close to half in Britain believe that they are sometimes depressed. Even so, more than half a century after the discovery of antidepressants, nobody really knows how they function. Work over which individuals have little control can heighten the risk of heart disease. (Co-operatives, by contrast, are apparently good for your health.) So-called austerity has made people sicker and driven some to death. Vastly unequal nations such as the UK and the US breed mental health problems far more than more egalitarian ones such as Sweden.

Illness, absenteeism and “presenteeism” (coming into work purely to be physically present) are estimated to cost the US economy as much as $550bn (£417bn) a year. There is evidence that a competitive ethos can trigger mental illness among the winners as well as the losers, not least in the case of sport stars. Despite the living disproof known as Donald Trump, the more you chase after money, status and power, the lower your sense of worth is likely to be. Given their pathologically upbeat culture, Americans tend to downplay their dejectedness, while the French, with their suspicion that happiness is unsophisticated, are more likely to under-report it. It is the kind of thing that cavorts at the end of piers wearing a striped jacket and red plastic nose.

Happiness is excellent for business. A cheerful worker is as much as 12% more productive. A science of human sentiments – what Davies calls “the surveillance, management and government of our feelings” – is thus one of the fastest growing forms of manipulative knowledge. So is market research into shopping, which now uses extensive face-scanning programmes in order to reveal customers’ emotional states. The more bright-eyed neuroscientists claim they are close to discovering a “buy button” in the brain.

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if you’re still wondering why Brexit happened after reading this, good luck and good night. Britain is a thoroughly sick nation. Not saying it’s unique in that. But…

What Kind Of School Punishes A Hungry Child? (G.)

Michaela community school in Wembley was widely criticised last week for placing children in “isolation” because their parents were late with lunch payments. The lunches are compulsory, with parents being charged £75 upfront for each six-week period. Fall even a week behind, and you may be warned that your child faces “lunch isolation”, where “they will receive a sandwich and a piece of fruit only”. That’s not counting the side order of segregation and humiliation. The child will spend the whole 60 minutes away from their friends, and “only when the entire outstanding amount is paid in full will they be allowed into ‘family lunch’ with their classmates”.

“A sandwich is fine – at least the child is being fed,” you might think. But a sandwich is not “fine”. The School Food Plan, by Leon founders Henry Dimbleby and John Vincent, states that only 1% of packed lunches, which typically comprise a sandwich and snacks, meet the nutritional requirements for school meals. It is easier to get nutrients into a hot meal. After the story broke, Michaela’s headteacher, Katharine Birbalsingh, insisted she was not punishing children for being poor: the sanction didn’t apply to pupils receiving free school meals (more than one in five of those at the school) or whose families had money problems. The problem was the small number of families who were “playing the system”, “trying to get other poor families to pay for their child’s food” and “betraying their children”.

We have heard these accusations before. Back in 2013, Lord Freud claimed that food bank users were simply abusing a free facility, thus demonstrating his lack of understanding of the obstacles between a hungry mother and a food bank parcel. A willingness to seek help, for example. Swallowed pride. A referral from a doctor or social worker. Perhaps the bus fare to the nearest centre, with children in tow.

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The.Beat.Goes.On.

Bodies Of 120 Migrants Washed Up On Libya Shores In Past 10 Days (R.)

The bodies of 120 migrants have washed up on the shores of Libya in the past 10 days, not from previously known shipwrecks in the Mediterranean, the International Organization for Migration (IOM) said on Tuesday. A total of 4,027 migrants or refugees have died worldwide so far this year, three-quarters of them in the Mediterranean while trying to reach Europe, IOM spokesman Joel Millman told a briefing. That represents a 35% increase on the global toll during the first seven months of 2015, he said.

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