Dec 202016
 
 December 20, 2016  Posted by at 9:57 am Finance Tagged with: , , , , , , , ,  


Dorothea Lange Homeless mother and child walking from Phoenix to Imperial County CA 1939

China Talks the Talk on Property Curbs, but Can it Walk the Walk? (BBG)
China May Be Losing Cat-and-Mouse Game With ‘Hong Kong Insurance’ Buyers (BBG)
New Italy PM Asks Parliament To Approve Borrowing €20 Billion For Banks (BBC)
After Aleppo: We Need A New Syria Policy (Ron Paul)
We’re About To Sign A Deal With Canada That’s Just As Bad As TTIP (Ind.)
Britain’s Shame: The People Who Are Homeless, Even Though They’re In Work (G.)
Nine In 10 Jobless Greeks Receive No Unemployment Benefit (Kath.)
Moody’s Voices Concern At ‘Material Delay’ In Greece Debt Relief Talks (G.)
Greek Hospitals Deepen Trauma For Refugee Women Giving Birth (Gill)
Thousands Of US Locales Have Lead Poisoning Worse Than Flint (R.)
Coal Continues Its March Towards Asia (IEA)
Air Pollution In Northern Chinese City Surpasses WHO Guideline By 100 Times (R.)
Japan Pulls Plug On Troubled Fast Breeder Reactor (AFP)
This Is The Polar Bear Capital Of The World, But The Snow Has Gone (G.)

 

 

Now that Trump is sealed in to become America’s 45th president in a month’s time, comparisons to Hitler and nazism seem to become the flavor of the day. Sad. Almost as sad as the multiple deadly attacks that have taken place over the last 24 hours. But there is enough to read about that everywhere. I’ll focus on things that may seem less important.

 

“They absolutely cannot have any significant drop in prices without risking real social instability.”

China Talks the Talk on Property Curbs, but Can it Walk the Walk? (BBG)

China is talking the talk about reining in the speculation that fueled spiraling property prices. The test will be whether it can walk the walk should growth start to falter. [..] With the leadership wed to Xi’s goal of annual growth averaging 6.5 percent through 2020, the challenge will be to achieve that amid another slowdown in the crucial property engine. “Policy makers are trying now to contain the property market by talking,” Zhu said. “That unfortunately is too late and does little to dispel the speculative sentiment and expectation that’s built up over the past one-and-half decades. The situation has already gone beyond a soft landing.” China’s highly leveraged developers are feeling the heat. Regulators in October choked off a key source of funding with the Shanghai Stock Exchange raising the threshold for property firms to sell bonds on their platform.

Medicine being administered to the bond market is also raising risks of dangerous side-effects as policy makers try to discourage risky investments made on borrowed money. Authorities have increased short-term money-market rates and tightened rules on using debt as collateral to buy even more securities. That’s sparked a jump in borrowing costs, prompted firms to cancel bond offerings and fueled speculation defaults will spread next year amid a near-record 4.5 trillion yuan of maturities. Christopher Balding, an associate professor at Peking University in Shenzhen, cites the risk of increased credit growth for mortgages and real estate. Longer-term household loans increased by 569.2 billion yuan last month, accounting for more than two thirds of total new yuan loans. That was just shy of the 571.3 billion yuan record in September. The growth pace is likely to moderate, though “that isn’t saying a lot,” Balding said. “They absolutely cannot have any significant drop in prices without risking real social instability.”

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“They’ve also swiped their credit or debit cards again and again – in one case, as many as 800 times – so that each transaction remained below the limit.”

China May Be Losing Cat-and-Mouse Game With ‘Hong Kong Insurance’ Buyers (BBG)

It’s a game of cat-and-mouse that has gone on for most of this year, with Beijing showing no signs of winning yet. Each time China tightens up on money flowing out of the country for purchases of Hong Kong insurance, new routes seem to emerge. In the latest clampdown, which started on Saturday, MasterCard Inc. and Visa Inc. added restrictions on purchasing all but the cheapest insurance policies using credit cards issued in China, according to people with knowledge of the matter. Chinese have been spending billions of Hong Kong dollars on insurance products that are linked to investments, as a way of channeling money out of China. Chinese residents will “actively seek ways to get around the curbs no matter what,” said Bloomberg Intelligence analyst Steven Lam.

Mainland purchases of Hong Kong insurance may rise to fresh records after reaching a high of HK$18.9 billion ($2.4 billion) in the third quarter, he said. Tenacious mainland buyers have bypassed restrictions by channeling money through online payment services or by using Hong Kong money changers, who allow money to be received in Hong Kong based on domestic transfers to accounts within China. They’ve also swiped their credit or debit cards again and again – in one case, as many as 800 times – so that each transaction remained below the limit. The latest Visa and MasterCard rules restrict multiple swiping. Weakness in the yuan is encouraging Chinese residents to put their money into products denominated in either Hong Kong or U.S. dollars. That’s adding to the headaches for Chinese officials concerned that capital flight could further contribute to yuan depreciation. Outflows are estimated to have totaled more than $1.5 trillion since the beginning of 2015.

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One would almost hope the new technocrats fail miserably.

New Italy PM Asks Parliament To Approve Borrowing €20 Billion For Banks (BBC)

The Italian government will seek parliamentary approval to borrow up to €20bn to support its fragile banking sector and potentially rescue Monte dei Paschi di Siena. The country’s third-largest bank needs to raise €5bn in fresh capital by the end of the month. If Monte dei Paschi cannot arrange a private sector bailout, a state rescue may come as early as this week. It is saddled with bad loans and is deemed to be the weakest major EU bank. Italian Prime Minister Paolo Gentiloni, whose government has only been in office for a week, is under pressure because private investors would suffer any losses under EU bailout rules.

He described the move as a “precautionary measure”, adding: “We believe it is our duty to take this measure to protect savings. I hope all the political movements in parliament share this responsibility.” However, Italy’s economy minister, Pier Carlo Padoan, stressed the funds would be used to ensure adequate liquidity in the banking system and support other struggling banks. Officials have also said they were examining a scheme to compensate retail investors for any losses incurred. Mr Gentiloni’s predecessor, Matteo Renzi, resigned after losing a referendum on constitutional reform and was regularly accused of being too close to the banks.

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“We are a country sitting on $20 trillion in debt, living far beyond our means. Power can oftentimes be an illusion, and in any case it doesn’t last forever.”

After Aleppo: We Need A New Syria Policy (Ron Paul)

Over the past week, eastern Aleppo was completely brought back under control of the Syrian government. The population began to return to its homes, many of which were abandoned when al-Qaeda-linked rebels took over in 2012. As far as I know, the western mainstream media did not have a single reporter on the ground in Aleppo, but relied on “activists” to inform us that the Syrian army was massacring the civilian population. It hardly makes sense for an army to fight and defeat armed rebels just so it can go in and murder unarmed civilians, but then again not much mainstream reporting on the tragedy in Syria has made sense. I spoke to one western journalist last week who actually did report from Aleppo and she painted a very different picture of what was going on there.

She conducted video interviews with dozens of local residents and they told of being held hostage and starved by the “rebels,” many of whom were using US-supplied weapons supposed to go to “moderates.” We cannot be sure what exactly is happening in Aleppo, but we do know a few things about what happened in Syria over the past five years. This was no popular uprising to overthrow a dictator and bring in democracy. From the moment President Obama declared “Assad must go” and approved sending in weapons, it was obvious this was a foreign-sponsored regime change operation that used foreign fighters against Syrian government forces. If the Syrian people really opposed Assad, there is no way he could have survived five years of attack from foreigners and his own people.

Recently we heard that the CIA and Hillary Clinton believe that the Russians are behind leaked Democratic National Committee documents, and that the leaks were meant to influence the US presidential election in Donald Trump’s favor. These are the same people who for the past five years have been behind the violent overthrow of the Syrian government, which has cost the lives of hundreds of thousands. Isn’t supporting violent overthrow to influence who runs a country even worse than leaking documents? Is it OK when we do it? Why? Because we are the most powerful country? We are a country sitting on $20 trillion in debt, living far beyond our means. Power can oftentimes be an illusion, and in any case it doesn’t last forever. We can be sure that the example we set while we are the most powerful country will be followed by those who may one day take our place. The hypocrisy of our political leaders who say one thing and do another does not go unnoticed.

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Still not over. TISA is another one that keeps lurking.

We’re About To Sign A Deal With Canada That’s Just As Bad As TTIP (Ind.)

CETA is an EU-Canada trade deal just like the controversial EU-US deal TTIP. It was secretly negotiated over five years, locks in the privatisation of public services and will permit corporations across the North America to sue European governments in a private justice system. Brexit may not happen for at least two years, but CETA will be voted on in February – if it passes, it will immediately apply to the UK. Inequality is grist to the mill for far-right populists, yet the European Commission and members of the European Parliament (MEPs) are failing to learn the lessons of Brexit and the rise of Nigel Farage and Donald Trump. Instead, it’s big business as usual, and continued support for policies that generate inequality and, in turn, fuel the xenophobic right.

This week there has been a clear demarcation of the crucial choice faced by the EU and UK, which may help determine the future rise of the far right in Europe – and, set against it, the decline of out-of-touch, centre-left parties. On Friday, the International Labour Organisation reported that the top 10% of highest paid workers in Europe together earn almost as much as the bottom 50%. Last week, the European Parliament’s Employment and Social Affairs Committee found that the EU-Canada trade deal CETA will only make this situation worse, “widening the income gap between unskilled and skilled workers thus increasing inequalities and social tensions.” The cross-party committee points to CETA triggering potential job losses of more than 200,000 across the EU.

It goes on to point out what campaigners across Europe have long been saying about accords like CETA, TTIP, and the Donald Trump-opposed TPP: “There is a clear disparity between the levels of protection envisaged for investors and for labour interests and rights.” These investors are not the small businesses that CETA and TTIP’s supporters repeatedly cite. As the report makes clear, CETA has no chapter with specific measures to help small business. The clear disparity between workers and investor interests is perhaps best captured in one key element found across all these deals: the widely opposed “corporate court” private justice system that grants big business the power to sue states for policies that affect their profits. Put more simply, it’s a taxpayer-funded risk insurance scheme for corporations that would swing into play were a government to decide to ban nuclear power, oppose fracking or re-nationalise public services like the railways.

Despite voting to leave the EU, CETA can still affect the UK: the deal could be passed within the next two months, with large swathes of it immediately put in place. After that happens, those already struggling in the UK’s brittle Brexit economy will feel the squeeze of yet more anti-worker policy-making. Yet despite the clear dangers posed by CETA, Liam “Take Back Control” Fox has already signed the UK up to the deal, willfully bypassing UK parliamentary scrutiny along the way.

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“.. over 170,000 Londoners are homeless..”

Britain’s Shame: The People Who Are Homeless, Even Though They’re In Work (G.)


Illustration: Eva Bee

The former Tory minister George Young described the homeless as “what you step over when you come out of the opera”. No, Sir George: today’s homeless deliver your takeaways and pull pints at the local. Then they kip on park benches. Martin, who works for Islington council taking disabled children to school, told me how he’d spent a month sleeping either in Hampstead Heath or by the canal near London Zoo. “I was exhausted all the time,” he said. Some mornings, he’d knock for the children still clutching the bag that held all his belongings. This month, the charity Shelter calculated that over 170,000 Londoners are homeless. Its researchers pieced together the data for how many were both in a job and in temporary accommodation: it amounts to nearly half (47%) of all homeless households in the capital.

Figures like these, and shelters like Scott’s, neatly puncture many of the official boasts about work in post-crash Britain. The ministerial bragging about record employment? That economic miracle would include a third of the people dossing down at Scott’s place. The smugness with which David Cameron talked about the high-tech sharing economy? The Uber driver in that bunk over there might put him right on a few things. All the blether about how strong unions will destroy the economy? The casualised workforce in these improvised dormitories make a good argument for labour protection. Most of all, it proves that two of the hardiest orthodoxies in British politics are now a lie. First, the notion that work pays.

That is why Norman Tebbit told men to get on their bikes, why Gordon Brown fiddled about with tax credits, why George Osborne could get away with attacking “skivers”. But minimum wages, zero-hours contracts and a couple of shifts through a temping agency don’t pay. They certainly don’t pay enough to get you decent accommodation in one of the most expensive housing markets on the planet. When that belief dies, so too must its corollary: that the homeless are always unemployed. “Why are beggars despised? For they are despised universally,” asked George Orwell in Down and Out in Paris and London. “It is for the simple reason that they fail to earn a decent living.” None of the people I met were begging, but each lived within the shadow of the idea that by being homeless, they had become despicable.

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Britain is bad, Greece is worse. “350,000 families without a single employed person..”

Nine In 10 Jobless Greeks Receive No Unemployment Benefit (Kath.)

Nine in 10 jobless Greeks do not receive unemployment benefits, according to a study by the country’s statistical authority (ELSTAT) and the Labor Institute of the General Confederation of Greek Labor (INE/GSEE). The same study found that nearly 74 percent of the unemployed population have been without work for more than 12 months. Meanwhile, there are 350,000 families without a single employed person, while about 300,000 high-skilled workers have left the country in the past six years in search of better prospects, the study showed.

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Why is the entire Eurogroup of finance ministers silent on the feact that Dijsselbloem makes decisions behind their backs?

Moody’s Voices Concern At ‘Material Delay’ In Greece Debt Relief Talks (G.)

Fears that Greece’s seven-year debt crisis is about to enter a troubling new phase have been voiced by one of the world’s leading rating agencies. Moody’s said it was worried by the decision by the European authorities to suspend a debt-relief deal for Greece after the government in Athens gave a Christmas bonus to pensioners, promised free school meals for the poorest children and cancelled a VAT increase. The rating agency said any “material delay” in concluding talks between Greece and its European creditors would make it harder for the troubled country to meet next year’s onerous financial commitments and would increase the risks of bondholders not being paid. After months of negotiations, Europe agreed to limited debt relief to Greece earlier this month by giving Athens longer to pay and reducing the interest rate payable on its loans.

But within days the decision was put on hold by the European Stability Mechanism (ESM) – the Luxembourg-based body that provides help to countries and banks facing financial difficulties – after Alexis Tsipras’s coalition government decided to provide help to pensioners, schoolchildren and VAT payers on the Greek islands. The plans involved spending amounting to €617m – less than 0.5% of Greece’s GDP – but were made without consultation with the country’s creditors. Hardliners in Brussels and in Berlin were outraged by Tsipras’s decision, seen as evidence of backsliding on a commitment made in August 2015 to keep to a tough programme of economic reforms in return for an €86bn bailout. Tsipras says that Greece has overachieved on the budget targets set by Europe and that the money will be going to those hardest hit by austerity. Greece has seen its economy shrink by 30% since its financial crisis began in 2009.

[..] “.. a material delay in the negotiations would raise the credit risk to bondholders. Greece has large upcoming maturities in July 2017, with €2.3bn owed to private-sector bondholders and €3.9bn to the ECB. Greece will be highly challenged to meet these redemptions without completion of the programme’s second review and without the disbursement of €6.1bn of ESM funding by the summer.”

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Troubling, but do be careful about where to lay the blame.

Greek Hospitals Deepen Trauma For Refugee Women Giving Birth (Gill)

Dr Konstantinos Spiriounis, an obstetrician-gynecologist, is a member of the department of municipal clinics and public health in Athens and until June this year worked at one of the city’s main public maternity hospitals, Elena. He says that the country’s economic problems have led to a recruitment crisis, putting hospitals under pressure, but that doctors do their best in difficult circumstances. “There are no new hires happening in the hospitals, so us doctors in Greece in public hospitals have learnt to do the work of two or three people. “Many times the doctors and nurses stay on when their shift ends because there isn’t anyone else to do it. You are always concerned in that you will make a mistake or miss something important, because you are so exhausted. Sometimes we find we’re out of things like gauze or medical tape, and we go buy it ourselves from the pharmacy.”

He says that all women are offered the same service, the best the doctors can provide. “We offer the same to everyone, whether you are Greek or a foreigner. For us, the cry of a baby and the joy of the mother is the same no matter where they are from.” But human rights lawyer Electra Leda Koutra, who worked on the research into birth experiences of refugee mothers, says vulnerable refugees need specific support. “A Greek woman will go home after birth. A refugee woman will be thrown back in a refugee camp or out on the streets [to] incredibly harsh, dangerous, unsanitary conditions.

“Treating refugee women ‘the same as Greeks’ means speaking to them in Greek, giving them no option but male obstetricians, not translating for their medical instructions upon exit from hospital, and not taking into account the conditions they will face right afterwards. All this so-called equal treatment constitutes blatant gender-based violence and discrimination.” The difficulties faced by the women in pregnancy and birth are part of a wider challenge for all refugee families in Greece, that of surviving day to day with no idea of what the future will bring. Since borders closed further west within Europe earlier in 2016, tens of thousands of refugees have been stuck in overstretched Greece and Italy. The EU has promised to disperse 160,000 to other EU countries, only 8,162 people have been found a new home, figures from the European commission show.

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Count me not surprised.

Thousands Of US Locales Have Lead Poisoning Worse Than Flint (R.)

On a sunny November afternoon in this historic city, birthplace of the Pony Express and death spot of Jesse James, Lauranda Mignery watched her son Kadin, 2, dig in their front yard. As he played, she scolded him for putting his fingers in his mouth. In explanation, she pointed to the peeling paint on her old house. Kadin, she said, has been diagnosed with lead poisoning. He has lots of company: Within 15 blocks of his house, at least 120 small children have been poisoned since 2010, making the neighborhood among the most toxic in Missouri, Reuters found as part of an analysis of childhood lead testing results across the country. In St. Joseph, even a local pediatrician’s children were poisoned.

Last year, the city of Flint, Michigan, burst into the world spotlight after its children were exposed to lead in drinking water and some were poisoned. In the year after Flint switched to corrosive river water that leached lead from old pipes, 5 percent of the children screened there had high blood lead levels. Flint is no aberration. In fact, it doesn’t even rank among the most dangerous lead hotspots in America. In all, Reuters found nearly 3,000 areas with recently recorded lead poisoning rates at least double those in Flint during the peak of that city’s contamination crisis. And more than 1,100 of these communities had a rate of elevated blood tests at least four times higher.

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Growth at all costs.

Coal Continues Its March Towards Asia (IEA)

Growth in global coal demand will stall over the next five years as the appetite for the fuel wanes and other energy sources gain ground, according to the latest coal forecast from the International Energy Agency. The share of coal in the power generation mix will drop to 36% by 2021, down from 41% in 2014, the IEA said in the latest Medium-Term Coal Market Report, driven by lower demand from China and the United States, along with fast growth of renewables and strong focus on energy efficiency. But in a sign of coal’s paradoxical position, the world is still highly dependent on coal. While coal demand dropped in 2015 for the first time this century, the IEA forecasts that demand will not reach 2014 levels again until 2021.

However such a path would depend greatly on the trajectory of China’s demand, which accounts for 50% of global coal demand – and almost half of coal production – and more than any other country influences global coal prices. The new report highlights the continuation of a major geographic shift in the global coal market towards Asia. In 2000, about half of coal demand was in Europe and North America, while Asia accounted for less than half. By 2015, Asia accounted for almost three-quarters of coal demand, while coal consumption in Europe and North America had declined sharply below one quarter. This shift will accelerate in the next years, according to the IEA.

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All costs, including that of human lives.

Air Pollution In Northern Chinese City Surpasses WHO Guideline By 100 Times (R.)

Concentrations of airborne pollutants in a major northern Chinese city exceeded a World Health Organisation (WHO) guideline by 100 times on Monday as north China battled with poor air quality for the third straight day. In Shijiazhuang, capital of northern Hebei province, levels of PM 2.5, fine particulate matter, soared to 1,000 micrograms per cubic meter, state-run Xinhua News Agency reported on Monday. That compares with a WHO guideline of an annual average of no more than 10 micrograms. In nearby Tianjin city, authorities grounded dozens of flights for the second day and closed all highways after severe smog blanketed the port city, one of more than 40 in China’s northeast to issue pollution warnings.

PM 2.5 levels hit 334 micrograms per cubic meter in Tianjin as of 4 p.m. local time, according to local environmental protection authorities. In Beijing, PM 2.5 levels were at 212 micrograms per cubic meter. On Saturday, 22 cities issued red alerts, including top steelmaking city Tangshan city in Hebei and Jinan in coal-rich Shandong province. A red alert is the highest possible air pollution warning. Red alerts are issued when the Air Quality Index (AQI) is forecast to exceed 200 for more than four days in succession, 300 for more than two days or 500 for at least 24 hours. The AQI is a different measure from the PM 2.5 gauge.

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After all the fast breeder hype this is what you end up with. But I’m sure there’ll be lots more talk. Coal it is then.

Japan Pulls Plug On Troubled Fast Breeder Reactor (AFP)

Japan has scrapped plans to generate electricity at a multi-billion dollar experimental nuclear reactor, the government said Monday, giving up on the decades-old project due to spiralling costs. Once touted as a “dream reactor,” the Monju facility was designed to generate more fuel than it consumes via nuclear chain reaction, an attractive alternative in a country with few natural resources. But its complex fast breeder reactor technology has been plagued with problems that have left it idle for more than a decade. It has also been a financial black hole since construction began in 1986, given its initial 1 trillion yen ($8.5 billion) construction cost and daily operating costs of 50 million yen, even while shut down. The government “will not restart (Monju) as a nuclear reactor and will take steps to decommission it,” science minister Hirokazu Matsuno told the governor of western Japan’s Fukui prefecture where it is located.

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Wave bye bye.

This Is The Polar Bear Capital Of The World, But The Snow Has Gone (G.)

Churchill, on the banks of the Hudson Bay in Canada, is known as the polar bear capital of the world. Hundreds of bears gather there each year before the sea freezes over in October and November so they can hunt seals again from the ice for the first time since the summer. I first went there 12 years ago at this time of year. The place was white, the temperature was -20C, and the bears were out feeding. This year I came back to make a film for Danish TV and set up live feeds of the bears. It was so different. In mid-November there was no snow or sea ice or ice; the land was green or brown and the temperature was 2C. The bears were walking around on the land waiting for the ice to form. It was like summer.

October had seen unprecedented temperatures all around the Arctic leading to a record-breaking slowdown of sea ice formation. Local people told me they had never seen it like this before. With Geoff York, director of conservation at Polar Bears International, we pored over satellite maps every day. It was shocking. The whole 470,000 sq mile bay was completely ice-free. This is the southernmost colony of polar bears in the world and in the past about 1,000 bears would be there. But studies have shown that in the last 20 years the surface temperature of Hudson Bay has warmed by about 3C. This has had a massive effect on the bear. The western Hudson Bay population has declined by more than 20% in 30 years. It’s the same elsewhere. New analysis of data from the southern Beaufort Sea in north-west Canada and Alaska suggest even greater population declines there.

We saw about 20 bears around Churchill in the 10 days I was there. That’s actually a few more than I saw last time, when I was there 12 years ago, but that was because most of the bears were out on the ice then. The ones we did see this year appeared thin, restless and hungry, and were starting to be more aggressive. There was a mum and a cub and it was very emotional because it looked pretty certain that the cub would not survive much longer. The days of bears in this region having triplets seem to be over. The declining sea ice has decreased hunting opportunities, so the bears are smaller and fewer cubs are being born in this area.

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Dec 072016
 
 December 7, 2016  Posted by at 10:17 am Finance Tagged with: , , , , , , , , ,  


Harris&Ewing Washington snow scenes 1924

Trump: US Must End ‘Destructive Cycle of Intervention and Chaos’ (VoA)
‘Chances Of Italy Staying In Euro For Next 5 Years Below 30%’ (Ind.)
Italian Interior Minister Sees New Elections In February (R.)
‘A Landscape of Exhaustion and Moral Decay’ (G.)
Is Janet Yellen Trying To Screw Donald Trump? (Miller)
Trump’s Air Force One Tweet Was A Brilliant Move (CNBC)
The Equation That Explains It All (Mark St.Cyr)
China Admits “Economic Downturn Just Beginning” (ZH)
China’s Big Savers Are Racking Up More Debt (BBG)
Australia’s Economy Shrinks 0.5%, Most in Eight Years (BBG)
John Key Was Known As The Smiling Assassin. And People Still Liked Him (G.)
Europe’s Still Dithering Over Greece (BBG)
Christmas Spirit Lacking In Greek Bailout Wrangles (R.)
Polar Bear Numbers To Plunge A Third As Sea Ice Melts (AFP)

 

 

If he pulls this off, it’s the biggest thing that’s happened in the US for many decades.

Trump: US Must End ‘Destructive Cycle of Intervention and Chaos’ (VoA)

U.S. President-elect Donald Trump returned Tuesday to his vision of a non-interventionist foreign policy for the United States, saying as he did during his campaign, that he does not want to have American forces fighting “in areas that we shouldn’t be fighting in.” Speaking during a “thank you” rally for his supporters in Fayetteville, North Carolina, Trump said instead his focus will be on defeating terrorists, including the Islamic State group. “We will stop racing to topple foreign regimes that we know nothing about, that we shouldn’t be involved with,” Trump said. He said the U.S. must end what he called a “destructive cycle of intervention and chaos.” Trump pledged to build up the military, but said the purpose would be to project strength, not aggression. After questioning frequently during his campaign whether NATO and other allies were pulling their weight Trump said Tuesday he wants to strengthen “old friendships” and seek new ones.

At the same rally, Trump formally announced he has chosen retired Marine General James Mattis as his nominee for secretary of defense. “Under his leadership, such an important position, we will rebuild our military and alliances, destroy terrorists, face our enemies head on and make America safe again,” Trump said. Michael O’Hanlon, a senior defense expert at the Brookings Institution, called Mattis “one of the best read, best informed and most experienced generals of his generation.” Mattis has served as the head of U.S. Central Command, which carries out U.S. operations in the Middle East, and the Supreme Allied Commander of NATO forces. The retired general will need a congressional waiver in order to be confirmed as secretary of defense. Mattis would otherwise be ineligible to serve because of a law that requires a seven-year wait for former members of the military to serve in the post. He has been retired for less than four years.

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Bold.

‘Chances Of Italy Staying In Euro For Next 5 Years Below 30%’ (Ind.)

The political turmoil set off by the Italian referendum result could endanger the euro, a German business group has warned. Ulrich Grillo, the head of the Federation of German Industries, said that the German industry is worried about the consequences of the referendum, which prompted Premier Minister Matteo Renzi to announce his resignation on Monday. “The risks of a new political instability for economic development, the financial markets and the currency union are increasing further,” he said. Douglas McWilliams from the Centre for Economics and Business Researcg (CEBR), a leading economics consultancy, said it estimated the chances of Italy staying in the Euro for the next five years had fallen below 30% following the vote.

“There is no doubt that Italy could stay in the euro if it were prepared to pay the price of virtually zero growth and depressed consumer spending for another five years or so. But that is asking a lot of an increasingly impatient electorate. We think the chances of their sustaining this policy are below 30%,” he said. German’s foreign minister also expressed concerns about the result, which prompted Prime Minister Matteo Renzi to resign. Speaking during a visit to Greece, Frank-Walter Steinmeier said that while the result of the Italian referendum on constitutional reform was “not the end of the world,” it was also “not a positive development in the case of the general crisis in Europe.”

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After the laws are changed?

Italian Interior Minister Sees New Elections In February (R.)

Italy could have an election as early as February, a minister in Prime Minister Matteo Renzi’s outgoing government said on Tuesday, speaking after talking to Renzi. The comments will add to growing support for a quick vote as the only way to avoid protracted political limbo in Italy following Sunday’s “No” vote on Renzi’s constitutional reforms. Renzi announced he would step down after his heavy defeat. President Sergio Mattarella told him to stay on until parliament had approved the 2017 budget, expected later this week. Then, the president said, Renzi could tender his resignation. Before the referendum, most commentators, and financial markets, assumed that even if Renzi lost and resigned, a temporary unelected government would be installed to tide Italy over until the end of parliament’s term in 2018.

But a chorus of comments from party chiefs suggests consensus may be growing for an early vote in spring. “I forecast there will be the will to go to elections in February,” Interior Minister Angelino Alfano, the head of a small centre-right party that is a crucial part of Renzi’s ruling coalition, told Corriere della Sera daily on Tuesday. Significantly, Alfano said he made his forecast after discussing the issue with Renzi. Renzi is still leader of the centre-left Democratic Party (PD), which has the largest number of parliamentarians, so it is unlikely any new government could be formed without his backing.

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The 1860s that Mark Carney referred to. Well, or today.

‘A Landscape of Exhaustion and Moral Decay’ (G.)

When Mark Carney insisted in a speech at Liverpool John Moores University that the conditions through which we are now living are “exactly the same” as those that British citizens endured during the “lost decade” of the 1860s, he was taking a bit of rhetorical licence. The past is never simply the present dressed up in funny clothes, and the analogy between today’s painful realities and those of 150 years ago doesn’t quite hold. And yet, the governor of the Bank of England had a point. When Overend Gurney collapsed in 1866, it undid once and for all the sense that, give or take a few individual misfortunes, capitalism was a moral force that rewarded skill and hard work. Toppling under a mountain of unsecured debt, the joint stock bank dragged down 200 businesses and a broad tranche of private investors with it, from courtiers to grocers.

As with the Northern Rock crisis in 2007, there were queues of panicky investors lining the streets. More profoundly, now came a dawning realisation that bad things could happen to good people. Thanks to the publication of Charles Darwin’s Origin of Species in 1859, the universe increasingly seemed not only godless but, what was perhaps even worse, indifferent to the sufferings of ordinary folk. The shock of 1866 was doubly hard because, for the previous 15 years, Britain had been sailing on a sea of prosperity and confidence. In 1851, the Great Exhibition had showcased the nation’s position as “the workshop of the world”, the great exporter of industrial goods and technological know-how to the four corners of the globe. Business was thriving, the social discontent of the “hungry” 1840s had receded, and this was, to use the coinage of the historian WL Burn, the “age of equipoise”, a serene and sunny upland of prosperity and social cohesion.

Increasingly, though, there were worrying signs that Britain could not hold on to its trading pre-eminence for much longer. Germany and the United States were playing industrial catch-up, and would soon be making everything from saucepans to spanners more cheaply and better than we ever could. What’s more, with global transport systems stretching further as each year passed, Britain’s grain, and even its dairy and meat produce, would soon be supplied from as far away as Australia and Canada. Domestic farming was about to go into a decline from which, some historians suggest, it has never recovered.

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Stockman at the head of the Fed would be diffferent…

Is Janet Yellen Trying To Screw Donald Trump? (Miller)

[..] But will Yellen’s gambit plunge us into a recession is the question. Just because Wall Street is gorging on high returns doesn’t mean the economy is sound. For eight years and running, the Fed has kept interest rates near zero% in an attempt to spark investment and borrowing. Unemployment has gradually shrunk during the Obama years, yet the workforce participation rate remains low by modern standards. Prior to Election Day, two-thirds of Americans were anxious about their economic future. Stock traders are popping the bubbly while middle America drinks the warm beer of worry. If you’re still in the dark as to why Trump stole the Rust Belt from Hillary, you need not look further than that. Fear aside, Trump’s election has been an Advil to the ongoing economic headache felt by most Americans.

Eight years of Obama’s big spending combined with ultra low interest rates has done precious little to shore up their optimism. Retirees on fixed income can’t get a yield on their savings. Millennials earning a salary for the first time in their life have little incentive to put money away. So you might think: Hey, maybe Yellen’s hinting about raising interest rates is a good thing! Sure, it might cause the S&P 500 to dip. But it’s about time Grandma got a return on her CDs. I’m very skeptical. Interest rates most definitely need to rise, but Yellen’s timing is suspicious. Trump, despite his admiration for low borrowing rates (and debt refinancing), has accused Yellen of keeping the lid on interest rates in order to boost Obama’s legacy. He told CNBC in September that rates were “staying at zero because [Yellen’s] obviously political and she’s doing what Obama wants her to do.” In another interview with Reuters, Trump explained with perfect Trumpian simplicity, “They’re keeping rates down because they don’t want everything else to go down.”

Yellen wasn’t happy about the charges. She fired back at a press conference, saying, “We do not discuss politics at our meetings, and we do not take politics into account in our decisions.” Uh huh. And I’m the Archbishop of Canterbury. [..] What the Fed, serving as America’s central bank, does is balance the money supply to reflect market conditions. When the market is roaring, it’s time to cut off the money spigot so as to rein in inflation. When things are sluggish, pouring cash into the economy is supposed to gin up activity. There are all kinds of ins and outs and what-have-yous involved in the process, including convoluted accounting techniques. But long mythologized story short, the tinkers at the Fed are supposed to act on behalf of the economy, and not the elected shysters in Washington. Every macro-econ student learns that faux civics lesson the first week of class.

[..] A few choices off the top of my head: finance writer and all-around mensch Jim Grant, former Director of the Office of Management and Budget David Stockman, commodity guru Jim Rogers, or former congressional representative and arch-Fed-critic Ron Paul.

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Brilliant is a big word, but the use of Twitter is interesting.

Trump’s Air Force One Tweet Was A Brilliant Move (CNBC)

Another day, another provocative tweet from President-elect Donald Trump. This time, he went after Boeing and the cost of the new Air Force One replacement program. But while the target was different, the goal of Trump’s twitter use remains the same: It’s his negotiating tool and, just as importantly, an instant link to public support that no president has ever been able to use before. But why this tweet and comments and why now? As few people knew before now, the Air Force is actually currently in negotiations with Boeing on the final costs of the two new Air Force One jets it hopes to buy and have in service by 2024. The source of Trump’s $4 billion cost figure in his tweet is not so clear, but the last publicly reported estimate was at $3 billion with costs still rising.

Sure, there are a lot of spending programs that cost more that Trump could target. But are there many more that are as easy for all the voters to understand? Air Force One is an iconic jet that we all know exists and almost everyone can picture quickly in their minds. Our social media/short attention span media culture makes this issue absolutely perfect for Trump to single out on Twitter. And it looks like it may have already worked. About two hours after the tweet, Boeing delivered the following statement: “We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serves the unique requirements of the President of the United States. We look forward to working with the U.S. Air Force on subsequent phases of the program allowing us to deliver the best planes for the President at the best value for the American taxpayer.”

Yes, that “at the best value” phrase at the end of the statement says it all. Who knows exactly how much the Trump tweet just saved the American taxpayers? But considering that it cost him and us nothing for him to send it, even a few hundred grand looks like a big net windfall. And that’s not the only reason why the use of Twitter remains crucial to Trump. Every President of the United States has had the option to use public opinion to promote his agenda, but none before Trump has had an established and instantaneous link with his supporters like he has with Twitter. In the past, the best a president could do was go on national TV and make a long speech. That’s tortuous compared to the quick bang Trump gets by tweeting directly to his 16 million-plus followers and the tens of millions more who instantly hear about his tweets from the news media.

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“..we need more financial chaos (A) To make even more all time “market” highs (C)..”

The Equation That Explains It All (Mark St.Cyr)

If you were just woken from some form of suspended animation from let’s say 2010 (ancient economic history in today’s terms) then informed of the current state of global political affairs and upheavals, U.S. employment (95+million not,) global currency gyrations, interest rates at not only 0% but some -0%, threats of escalating wars, threats of major confrontational war, GDP of the major global economies not only contracting, but below statistical stagnant, governments, as well as central banks with balance sheets of debt calculated in $TRILLIONS, some in the 10’s of, all financed at near or below 0%, and the Fed is only about a week away from raising rates into the teeth of what can only be called “uncertainty,” and much, much more. (There isn’t enough time, or digital ink to list them all.)

Nobody would be surprised if your first reaction based on your prior acumen (the ancient history of 7 years ago whether it be in stocks, business, or both) would to become immediately concerned that whatever portfolio, or wealth you may have had in the markets, may be worth far less today than when you were first put to sleep. And probably becoming ever smaller as you thought about what you might need to do next in order to preserve any that may be left. That is, till someone explained to you the markets you went to sleep knowing of – are no longer – and the reality of the markets today you could never have dreamed up. Even if they let you sleep another decade or longer. Today, the markets you once knew of are better described as the “markets.”

To clear up any confusion as to how, or why, the “markets” can now be at “never before seen in the history of mankind highs” once again after the resounding “NO” vote in Italy, where the entire E.U. experiment is now seriously undermined, and falling apart in real-time (Brexit first, Italy will surely now vote next, etc., etc,) [here] is the calculation that explains it all. For under the rules of: If A = B and B = C, then A = C, you now have the magical formula to understand with Einstein like surety today’s ‘markets.” If you have any doubt to the soundness of this expression, consider the following: If a financial crisis appears (A) The central banks will intervene (B) If the central banks intervene (B) The “markets” go up (C) Thus, we need more financial chaos (A) To make even more all time “market” highs (C)

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“..the decrease reflects Chinese economic downturn, which is just now beginning and will last a long time since China has passed its economic boom period in which many problems were hidden..”

China Admits “Economic Downturn Just Beginning” (ZH)

In what may be the most direct admission that China’s economy is about to grind to a deflationary halt, today China’s Global Times, a newspaper which is seen as a propaganda companion to the official People’s Daily, revealed data showing this year’s proposed salary guidelines according to which there is a broad wage growth declines in virtually every single province on the mainland, which according to the Chinese publication “confirms the country is experiencing an economic slowdown.” Salary guidelines are issued by local governments as a reference to help firms decide how much they should increase their employees’ salaries. They are based on labor market conditions and economic growth, among other factors.

Global Times notes that compared to 2015 salary guidelines, wages in 2016 have grown at a slower rate in virtually all 19 provinces and regions that have so far published their annual guidelines for firms. Northeast China’s Heilongjiang Province has not released salary guidelines for years as the region has been experiencing a recession and therefore wages are not generally increasing. Seventeen provinces have seen a decrease in salary standards, including North China’s Hebei Province, South China’s Hainan Province, Northwest China’s Xinjiang Uyghur Autonomous Region and East China’s Jiangxi Province. The only increases were seen in Southwest China’s Guizhou Province and Beijing Municipality.

“2016’s guidelines have seen a slowing of salary growth after years of increases, which means that the speed of wage growth has surpassed economic growth since China’s labor contract law was adopted in 2007,” Wang Jiangsong, a professor at the China Institute of Industrial Relations, told the Global Times on Tuesday. Confirming that the only way for Chinese wage growth is down, Wang Jiangsong, a professor at the China Institute of Industrial Relations, told the Global Times that “since China’s labor contract law was adopted in 2007, wage increases have surpassed economic growth.” He said the slowdown reflects China’s economic downturn. It also means that local workers will not be happy.

But more troubling was Wang’s next admission: “the decrease reflects Chinese economic downturn, which is just now beginning and will last a long time since China has passed its economic boom period in which many problems were hidden but now those problems will gradually surface.” In short, declining wage growth, with aggregate 2016 demand driven by the biggest credit impulse and expansion in Chinese history. To all those who truly believe in the global reflation these, we wish you the best of luck.

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The shadow banking system gets bigger, not smaller. That should worry Xi to no end.

China’s Big Savers Are Racking Up More Debt (BBG)

China’s savers, who sock away cash like almost no one else in the world, are racking up more debt as borrowing options proliferate. 94% of consumers used a credit or loan in the past year, up from 85% two years ago, according to a survey by market researcher Mintel Group. Peer-to-peer lending via online lenders jumped, while car loans and mortgages nearly doubled, the poll showed. “Huo zai dang xia”, or living in the moment, is the new buzzword. It’s especially prevalent among consumers in their 20s, according to Aaron Guo, a senior analyst for Mintel in Shanghai. “Compared with their parents’ generation, who tend to save more and are sometimes thrifty, youngsters are willing to spend more on products with special features or tailored services,” he said.

That’s a profound shift in attitudes for a nation where saving has long been the bedrock principle of personal financial management and a prerequisite for big milestones like cars, homes and kids. Deposits stand at 59.6 trillion yuan ($8.67 trillion), People’s Bank of China data show. The newfound willingness to borrow from the future to enjoy the present could help support consumption in coming years and nudge the nation’s rebalancing away from old traditional drivers. China’s GDP rose 6.7% in the third quarter from a year earlier on the back of resilient retail sales, which expanded 10.3% in the year to date. The borrowing could be just getting started. China’s household outstanding loans will continue to rise at a rate of 14% for the following five years and exceed 60 trillion yuan by 2021, the Mintel report said.

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Presented as a one-off.

Australia’s Economy Shrinks 0.5%, Most in Eight Years (BBG)

While Australia’s economy shrunk last quarter, it’s probably more of a red flag than a precursor to recession. One of only four quarterly contractions in the past 25 years, the so-called ‘lucky country’ is unlikely to suffer a second consecutive slump — just as in those prior periods. But it’s a wake-up call for lawmakers that recent political timidity and gridlock is unsustainable, as is reliance on monetary policy to support growth with a 1.5% interest rate that may not even fall further. A growing chorus of high-profile economists and international institutions are calling on Australia to follow U.K. and U.S. plans to use infrastructure stimulus, particularly with global borrowing costs so low. But the government has made clear its priority is returning the budget to balance as it seeks to protect a prized AAA credit rating.

Wednesday’s report showed:
• GDP fell 0.5% from previous quarter, when it gained a revised 0.6%
• Decline was driven by slump in construction and government spending
• Result was worst since depths of global financial crisis at the end of 2008 and well below economists’ estimates of a 0.1% drop
• The economy grew 1.8% from a year earlier, compared with a forecast 2.2% gain
• Australian dollar fell almost half a U.S. cent on the data

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Nice put-down of a wanker of a man.“He pulled ponytails instead of grabbing pussies.” Does New Zealand have any competent people in politics?

John Key Was Known As The Smiling Assassin. And People Still Liked Him (G.)

John Key’s legacy will not be defined by great policy achievements; it’s his success as the model of a neoliberal leader – a poster boy for trickle-down economics – that he will be remembered for. Key presided over increasing and gross social inequality with all the glibness of the banker who was known as the “smiling assassin” in his Merrill Lynch days. And people still liked him. In this regard, Key was like a Tony Blair of the South Seas: a certain level of personal charisma and a socially inclusive façade allowed both Key and Blair to sell the nasty side of neoliberalism. Compared with the likes of Donald Trump in the United States and Tony Abbott in Australia, Key was socially moderate in ways that many thought – and hoped – Malcolm Turnbull would have been before he capitulated to the far right of his party on refugees, marriage equality and climate change.

Key was more inclusive, and less divisive. He pulled ponytails instead of grabbing pussies. Key supported marriage equality in New Zealand and, as far as race is concerned, Key’s National party entered into a coalition government with the Maori party not once, but twice. Like Blair, Key had the Teflon gene. Despite ignoring public preferences not to privatise state-owned enterprises (2-1 against in a referendum), increasing the GST during the global financial crisis, and more or less ignoring New Zealand’s chronic child poverty because he blames the victims, none of it stuck. What did stick with Key was his reputation as a smart-money guy who was also likeable, self-effacing and wouldn’t look out of place having a beer with regular folks. Never mind the hundreds of thousands of children living under the poverty line in New Zealand – a country of 4 million – and him brushing off the recommendations of the government panel charged with improving their lot; Key was seen as a good guy and a safe pair of hands.

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It’s time for the international press, including Bloomberg, to stop dithering around the topic and tell Brussels to stop this disgrace.

Europe’s Still Dithering Over Greece (BBG)

This week, the European Union’s finance ministers granted some new debt relief to Greece. The new “short-term” measures are better than nothing – but they’re less than a convincing solution to a problem that has dragged on far too long. The deal, sketched out and agreed to in principle earlier this year, should help the Greek government convince voters to keep accepting much-needed domestic reform. That’s good. It isn’t enough, though, to put the country’s debts and budget plans on a sustainable footing. That’s why the International Monetary Fund, whose support will be necessary to achieve that larger goal, isn’t yet on board. After years of muddling through, the issue still isn’t resolved. In the approach to the latest talks, French Finance Minister Michel Sapin acknowledged that “Greece has made huge efforts. This is the first Greek government in a long time that has implemented its commitments.”

He said it was vital that Europe respond by recognizing its obligation to help ease the country’s debt burden, both as a reward and to encourage further improvements in the business climate. All true. Greece can’t be accused of doing nothing to help itself. The banking system has stabilized after three bouts of recapitalization, and deposits are returning, albeit slowly. The economy is growing modestly. The country posted a primary budget surplus for the first 10 months of this year. State asset sales are proceeding slowly but surely. These efforts justify extending the repayment schedule and swapping some floating-rate debt to fixed payments at the current low rates, as announced. But the expected reduction in Greece’s debts relative to its economic output by 20 percentage points through 2060 is far too timid – while the idea that Greece can achieve an annual primary budget surplus of 3.5% of output throughout the coming decade is a fantasy.

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This is why we are raising funds for Greece (see top of this page). So the poor can have a little bit better Christmas. And a little better prospect for the new year. To counter the devastation unleashed by the EU.

Christmas Spirit Lacking In Greek Bailout Wrangles (R.)

Greece thanked creditors for modest debt relief on St. Nicholas Day in Brussels but did not hide disappointment it won’t get the Christmas gift it wants – a pass on the latest phase of its bailout programme. Athens has been hoping fellow euro zone governments will approve a second review of its third bailout, granted in August last year, before year’s end. A government spokesman said on Tuesday it did not yet rule that out. But others, not least German Finance Minister Wolfgang Schaeuble, made clear that is highly unlikely after a Eurogroup meeting on Monday that revealed differences over how well Greece has done in meeting reform commitments. That left Greece and its allies among its EU partners annoyed at stalemate.

Athens wants to clear the review in order to be able to take advantage of selling bonds to the ECB’s quantitative easing scheme. “We could have got this done by the end of the year but the Germans are not moving,” one EU source said. “Greece has done a lot … We haven’t been so strict in other programmes.” A senior EU official involved in Monday’s talks described them as “useless” in terms of furthering agreement, according to another EU source. Ministers were at odds too on budget targets to set Greece after the bailout regime ends in 2018 – conditions important in persuading the IMF to join in lending. [..] The Eurogroup did agree to a series of short-term adjustments to the structure of Greek debt that will smooth out humps in repayments and should reduce its costs in the long run.

Government spokesman Dimitris Tzanakopoulos called that a “significant success”. But he said Athens still wanted Schaeuble and the IMF to scale back demands for more belt-tightening. “They must stop insisting on continuing a policy of extreme austerity which has been proven destructive for society and also economically ineffective,” he said. Schaeuble made clear he will not be swayed by pleas to forgo economic reforms which, he insisted, were for Greece’s own good.

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Note the effects of chemicals on populations.

Polar Bear Numbers To Plunge A Third As Sea Ice Melts (AFP)

Polar bear numbers could drop a third by mid-century, according to the first systematic assessment, released on Wednesday, of how dwindling Arctic sea ice affects the world’s largest bear. There is a 70% chance that the global polar bear population – estimated at 26,000 – will decline by more than 30% over the next 35 years, a period corresponding to three generations, the study found. Other assessments have reached similar conclusions, notably a recent review by the International Union for the Conservation of Nature (IUCN), which tracks endangered species on its Red List. The IUCN classified the sea-faring polar bear – a.k.a. Ursus maritimus – as “vulnerable”, or at high risk of extinction in the wild.

But the new study, published in the Royal Society’s Biology Letters, is the most comprehensive to date, combining 35 years of satellite data on Arctic sea ice with all known shifts in 19 distinct polar bears groupings scattered across four ecological zones in the Arctic. [..] Researchers led by Eric Regehr of the US Fish and Wildlife Service in Anchorage, Alaska projected three population scenarios out to mid-century, and all of them were bad news for the snow-white carnivores. The first assumed a proportional decline in sea ice and polar bears. Despite year-to-year fluctuations, long-term trends are unmistakable: the ten lowest Arctic ice extents over the satellite record have all occurred since 2007.

The record low of 3.41 million square kilometres (1.32 million square miles) in 2012 was 44% below the 1981-2010 average. This week, the US National Snow and Ice Data Center reported that sea ice extent in October and November was the lowest ever registered for both months. [..] Unfortunately, polar bears face other threats besides a habitat radically altered by the release of heat-trapping greenhouse gases. In the 1980s and 1990s, females and pups were found to have accumulated high levels of toxic PCPs in their tissue and organs. The manmade chemicals – used for decades and banned in many countries in the late 1970s – worked their way up through the food chain, becoming more concentrated along the way.

But a new study, published last week in the Royal Society’s Proceedings B, suggested that declines in some polar bear populations stemmed from contaminated males rendered sterile by the chemicals. “PCB concentrations in the Arctic have levelled off,” said lead author Viola Pavlova, a scientist at the Institute of Hydrobiology in the Czech Republic. “Unfortunately, many other manmade chemicals that are also endocrine disruptors occur in the Arctic and could act similarly,” she told AFP.

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Jul 172015
 
 July 17, 2015  Posted by at 9:46 am Finance Tagged with: , , , , , , , , , ,  


DPC Sternwheeler Mary H. Miller in Mississippi River floating dry dock, Vicksburg 1905

If China Isn’t a Global Risk, What Is? (Pesek)
China’s State-Owned Banks Commit $200 Billion To Stock Rescue (FT)
Sorry To Burst Your Bubble: Debt, Not Stock Prices, Most Worrisome (Economist)
Greece Should Seize Germany’s Botched Offer Of A Velvet Grexit (AEP)
IMF’s Lagarde: Greek Plan ‘Categorically’ Not Viable (FT)
The Crucifixion Of Greece Is Killing The European Project (Guardian)
Merkel ‘Gambling Away’ Germany’s Reputation Over Greece – Habermas (Guardian)
Germany’s Schäuble Deeply Skeptical Of Greek Plan (WSJ)
Greece Bailout Revives Image Of The ‘Cruel German’ (WaPo)
Germany Offers Verdict on Greek Aid After Draghi Backing (Bloomberg)
EU Said to Agree On Balance to €7 Billion Greece Loan (Bloomberg)
Mario Draghi Issues A Resounding Indictment Of The ‘Fragile Euro’ (MarketWatch)
Greek Cleaners Swept Out Of Work After Tsipras U-Turn (FT)
ECB Puts In Place Secret Credit Lines With Bulgaria And Romania (FT)
New ECB Cash Lifeline Could Reopen Greek Banks on Monday (Guardian)
Saving Greece’s Banks Could Mean a Full European Takeover (WSJ)
Protest Parties Can Halt Unrest Amid Greek Crisis – Beppe Grillo (Bloomberg)
Germany, Not Greece, Should Exit the Euro (Ashoka Mody)
How Goldman Sachs Profited From the Greek Debt Crisis (Robert Reich)
The Powerful Have Shown A Really Nasty Side This Month: Great! (Ben Phillips)
US State Pension Funds Face $1 Trillion Funding Gap (Yahoo)
New Zealand Dairy Giant Cuts Jobs As ‘White Gold Rush’ Fizzles (Reuters)
One More Reason Why Polar Bears Are Not Going To Be Okay (WaPo)

” Financial services alone surged 17.4% in the first six months of 2015..”

If China Isn’t a Global Risk, What Is? (Pesek)

The international ratings agency Fitch was downplaying concerns on Thursday that Chinese stocks are a systemic risk to global markets. Many investors, however, are far less sanguine. Take hedge fund billionaire Paul Singer, who worries Beijing’s debt-fueled stock mania could do even more damage than the U.S. subprime crisis. Or Bill Ackman, who runs Pershing Square Capital Management. Asked about Greece on Wednesday, he said: “China is a bigger global threat by far. The Chinese stock market is a fairly remarkable phenomenon and I think kind of a frightening one.” Who’s right – Fitch or market players? The deciding factor could be whether deflation rears its head in China – falling prices, and the prospect of a slowing national economy, would suggest the hedge funds are right.

Let’s consider the data. A common takeaway from China’s better-than-expected data this week is that deflation’s grip is easing. The claimed 7% GDP growth rate, rising middle-class incomes and a pickup in credit would seem to augur well for a stable price outlook in the world’s second-biggest economy. But those numbers are deceiving. For starters, China’s second-quarter performance was pumped up by a stock bubble that’s now losing air. Financial-sector growth combined with government stimulus (and some creative accounting, of course) to boost GDP. Financial services alone surged 17.4% in the first six months of 2015, a dynamic that helped offset a weak real estate market. But, given the recent stock rout that wiped out almost $4 trillion in market value, it should be obvious this isn’t a durable source of growth.

Meanwhile, China’s housing slowdown is a major deflationary event. Real estate has been China’s biggest growth engine since the 2008 global crisis. Now, it’s in negative-growth territory. And that’s having knock-on effects for local-government finances and vital sectors like manufacturing. But there’s another deflationary force confronting President Xi Jinping: the fading of China’s credit super-cycle, in which people and businesses tried to borrow their way out of debt problems. “The world-beating growth in debt of recent years is unlikely to be repeated as worries about financial stability grow,” says Andrew Batson, China research director at consulting firm Gavekal Dragonomics. “This creates another barrier to China’s return to rude inflationary health.”

Let’s say China actually did grow 7% between April and June. That’s still markedly slower than the 12% jump in corporate and household borrowing last month. All that borrowing limits the ability of companies to increase employment and consumers to spend. Outstanding loans for companies and households are now a record 207% of GDP (and growing fast), compared with 125% in 2008. While the government is sure to do more to stabilize growth, “we are far from certain that China is about to exit the deflationary dynamic of recent years,” Batson says. While China’s consumer prices rose 1.4% in June, producer prices plunged 4.8%.

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How crazy are they going to make it before it blows up?

China’s State-Owned Banks Commit $200 Billion To Stock Rescue (FT)

China’s biggest state-owned banks have lent a combined Rmb1.3tn ($209bn) to the country’s margin finance agency in recent weeks to staunch a free-fall in the stock market, casting doubt on whether the recent market rebound is sustainable without government support. China Securities Finance Corp was established in 2011 to lend to securities brokerages and support margin lending to stock investors. Amid the stock market’s dramatic tumble beginning in late June, however, the government has deployed CSF as a conduit for injecting rescue funds into the stock market, writes Gabriel Wildau in Shanghai. CSF has lent to brokerages to finance their stock investment and has also purchased mutual funds directly. But today’s revelations indicate that state support for the stock market is much larger than previously disclosed.

The Shanghai Composite Index has recovered about 15 per cent since its low point on July 10. The magnitude of state support suggests the rally is largely a government-driven phenomenon. Financial magazine Caijing reported on Friday that the country’s sixth-largest lender by assets, China Merchants Bank, provided the largest single loan, at Rmb186bn. The five largest banks — Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications — each provided more than Rmb100bn. In total, 17 banks provided interbank loans worth around Rmb1.3tn through July 13, the magazine reported. The People’s Bank of China had previously said it was “actively assisting” CSF to obtain liquidity through interbank lending, bond issuance, and other methods. The central later confirmed it had provided loans directly to CSF, without specifying an amount.

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“..the crucial variable that separates relatively harmless frenzies from disastrous ones is debt.”

Sorry To Burst Your Bubble: Debt, Not Stock Prices, Most Worrisome (Economist)

When Chinese shares plunged earlier this month, the government tried frantically to limit the damage. It pumped cash into the market, capped short-selling and ordered share buy-backs. Although China was unusually heavy-handed, it was hardly the first country to try to bolster stock prices for fear of the economic harm a crash could bring. Alan Greenspan, as chairman of the Federal Reserve, famously created the “Greenspan put” by giving investors the impression he would cut interest rates to stop stockmarket routs. The underlying rationale for these interventions is an idea that until recently received surprisingly little scrutiny—namely, that stockmarket busts are very damaging for the economy. The link seems clear enough in the case of the crash of 1929, which led in short order to the Depression.

But it is also easy to point to contrary examples. The bursting of America’s dotcom bubble in 2000 wiped out $5 trillion in market value, equivalent to half of GDP. Yet it was followed by a shallow recession. Not all bubbles, it would appear, are equally bad. According to two new papers, the crucial variable that separates relatively harmless frenzies from disastrous ones is debt. In many cases, though certainly not all, stockmarket manias fall into the less worrying category. Writing for the National Bureau of Economic Research, Oscar Jorda, Moritz Schularick and Alan Taylor examine bubbles in housing and equity markets over the past 140 years. The most dangerous, they conclude, are housing bubbles fuelled by credit booms. The least troublesome are equity bubbles that do not rely on debt.

Five years after the bursting of a debt-laden housing bubble, the authors find, GDP per person is nearly 8% lower than after a “normal” recession (ie, one that is not accompanied by a financial crisis). In contrast, five years after a stockmarket crash, GDP per person is only 1% or so lower. If the stock bubble comes alongside a big rise in debt, the damage to GDP per person is 4%. The paper does not explain why housing bubbles are more costly, but a fair inference is that, whereas equity investments tend to be concentrated among the rich, plenty of people lower down the income ladder have wealth tied up in housing.

That makes sense. Stockmarket routs typically harm the economy via the “wealth effect”. When people see that their assets are worth substantially less than before, they spend less, leading to weaker demand and, ultimately, weaker investment. Debt can make this worse. Those who have borrowed to invest may be forced to sell assets to avoid defaulting, further depressing prices and wealth. Banks that have lent to investors or accepted shares as collateral will also suffer losses. That forces them to rein in their lending, harming the economy even more.

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Ambrose in praise of Schäuble. And he makes a case. The thing is, though, that Greece taking the decision leads to something very different from ‘the others’ doing it.

Greece Should Seize Germany’s Botched Offer Of A Velvet Grexit (AEP)

One day we will learn the full story of what went on at the top levels of the German government before the villenage of Greece last weekend. We already know that the EMU accord – if that is the right word – is an economic and diplomatic fiasco of the first order. It does serious damage to the moral credibility of the EU but resolves nothing. There is not the slightest chance that Greece will be able stabilize its debt and return to viability under the Carthaginian settlement imposed on Alexis Tsipras – after 17 hours of psychological “water-boarding”, as one EU official put it. The latest paper by the IMF has torn away the fig-leaf. The country needs a 30-year moratorium on debt payments and probably outright subsidies to recover from the devastation of the past six years. Instead it gets pro-cyclical fiscal contraction of 2pc of GDP by next year.

Some are already comparing the terms to the Versailles Treaty but this does not quite capture the depravity of it. The demands imposed on Germany in 1919 were certainly vindictive and narrow-minded – as Keynes rightly alleged – but they were not, on the face of it, beyond reach. France was forced to pay reparations after the Franco-Prussian War in 1871 that were roughly equivalent to Versailles, albeit in very different circumstances. It dutifully did so, while plotting revenge. What Greece is being asked to do is scientifically impossible. Almost everybody involved in the talks knows this. Yet the lie goes on because the dysfunctional nature of EMU politics and governance makes it impossible to come clean. The country is dishonestly kept in a permanent state of crisis.

Wolfgang Schauble is one of the very few figures who has behaved honourably in this latest chapter. As readers know, I have been highly critical of the hard-bitten finance minister for a long time, holding him directly responsible for the 1930s regime of debt-deflation and contraction imposed on much of Europe, and for refusing to accept that the eurozone’s North-South divide must be closed by both sides. Any policy that puts all the burden of adjustment on the South is destructive and doomed to failure. But he is entirely right to argue that a velvet divorce and an orderly exit from the euro for five years would be a “better way” for Greece, as he did on Germany radio this morning. It would allow the country to regain competitiveness at a stroke without a disastrous over-shoot or the risk that events might spin out of control. It would clear the way for proper debt relief – or a standard IMF-style package.

If accompanied by some sort of Marshall Plan or investment blitz – as Mr Schauble appears to favour – it would set the foundations for genuine recovery. Huge sums of Greek money sitting on the sidelines would probably flood back into the country once the Grexit boil had been lanced. It is a pattern seen time and again in emerging markets across the world over the past 60 years. Instead, total confusion remains. “Nobody knows at the moment how this is supposed to work without a haircut and everybody knows that a haircut is incompatible with euro membership,” said Mr Schauble. To those who say that Grexit would violate the sanctity of monetary union – with incalculable political consequences – one can only reply that it is already too late.

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She was party to that plan, remember?

IMF’s Lagarde: Greek Plan ‘Categorically’ Not Viable (FT)

The head of the IMF said eurozone creditors’ plan for Greece is “categorically” not viable without a reduction in debt. Speaking on France’s Europe1 Radio from Washington, Christine Lagarde reiterated that Greece needs debt relief. She wouldn’t say what amount of relief Greece would need, but said the current plan isn’t viable. Ms Lagarde said the IMF will participate in a “complete” bailout package. She will support a significant extension on Greek debt maturities and reimbursement deadlines. The long-term aim is that Greece returns to the market. Ms Lagarde’s comments echo those call from ECB president Mario Draghi yesterday. He said debt relief is “uncontroversial” and the only question is “what form this takes.” Greek banks are tentatively set to re-open on Monday after the ECB said it would raise its emergency loans to them by €900m, though it’s not yet a done deal.

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It’s already dead.

The Crucifixion Of Greece Is Killing The European Project (Guardian)

You couldn’t have had a clearer demonstration of what democracy now counts for in Europe than this week’s immolation of Greece. In January, after five years of grinding austerity imposed by the troika of creditors had shrunk its economy by a quarter and pushed millions into poverty, Greeks rebelled and elected an anti-austerity government. Following months of fruitless negotiations, the country voted last week to reject the latest cuts, tax rises and privatisations demanded to deal with the disastrous impact of the first phase of austerity. The response of the eurozone’s masters was immediately to ratchet up the pain still further. For the “breach of trust” of daring to put the terms to its people, Athens was to be punished.

So on Monday – threatened with expulsion from the eurozone and economic collapse courtesy of the ECB’s cash blockade – the Greek prime minister, Alexis Tsipras, bent the knee. In exchange for what is called a bailout, but is in reality the imposition of new debts to pay existing creditors, the Greeks must hand over €50bn of public assets to an “independent” privatisation fund. On top of that, they have to inject more austerity into a shrinking economy and reverse any legislation deemed unsuitable by the eurozone’s overlords – in other words, the opposite of everything Tsipras and his Syriza party were elected to do. That’s why European officials were so keen to let it be known that Tsipras had been “crucified” and “mentally waterboarded”.

Greece would be turned into an economic “protectorate”, one purred, where all key decisions would be taken by foreign governments and unelected EU bureaucrats. No wonder Greek leaders declared that they had been subjected to a coup, while the ex-finance minister Yanis Varoufakis compared the “deal” to the Versailles treaty. This is the diktat of a bankers’ ramp that can barely tolerate even a facade of democracy. That’s been a familiar pattern in the developing world for decades, in the guise of IMF and World Bank structural adjustment programmes. But the eurozone has now given it permanent institutional form. The idea that this crisis has simply pitted one democratic mandate – that of Greece – against the hard-pressed taxpayers of 18 other eurozone members is nonsense.

Not only have the loans that bailed out French and German lenders, rather than Greece, been highly profitable. But the real fear of eurozone governments is that if Greece’s rebellion against austerity is rewarded, other European electorates will want to go the same way. Which is why Syriza must not only be defeated, but utterly crushed. That this is about politics more than economics should now be obvious. It’s not just that the austerity imposed on Greece has delivered a 1930s-style depression, or that Ukraine was recently bailed out with generous debt write-offs but without any crucifixions or waterboarding.

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“..cannot be understood as anything other an act of punishment against a leftwing government.”

Merkel ‘Gambling Away’ Germany’s Reputation Over Greece – Habermas (Guardian)

Jürgen Habermas, one of the intellectual figureheads of European integration, has launched a withering attack on the German chancellor, Angela Merkel, accusing her of “gambling away” the efforts of previous generations to rebuild the country’s postwar reputation with her hardline stance on Greece. Speaking about the bailout deal for the first time since it was presented on Monday, the philosopher and sociologist said the German chancellor had effectively carried out “an act of punishment” against the leftwing government of Alexis Tsipras. “I fear that the German government, including its social democratic faction, have gambled away in one night all the political capital that a better Germany had accumulated in half a century,” he told the Guardian.

Previous German governments, he said, had displayed “greater political sensitivity and a post-national mentality”. Habermas, widely considered one of the most influential contemporary European intellectuals, said that by threatening Greece with an exit from the eurozone over the course of the negotiations, Germany had “unashamedly revealed itself as Europe’s chief disciplinarian and for the first time openly made a claim for German hegemony in Europe.” The outcome of the negotiations between Greece and the other eurozone member states, he said, did “not make sense in economic terms because of the toxic mixture of necessary structural reforms of state and economy with further neoliberal impositions that will completely discourage an exhausted Greek population and kill any impetus to growth.”

Habermas added: “Forcing the Greek government to agree to an economically questionable, predominantly symbolic privatisation fund cannot be understood as anything other an act of punishment against a leftwing government.” The Düsseldorf-born philosopher, a former assistant of the prominent Frankfurt School theorist Theodor Adorno, rose to prominence during the student protests in the late 1960s. His works on the establishment of a pan-European political and cultural identity, such as Structural Transformation of the Public Sphere, went on to influence and shape policy debate around the European Union. At the start of the millennium, Habermas was one of the leading drivers behind calls for a European constitution.

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“..whose 70% approval rating makes him more popular than German Chancellor Angela Merkel..”

Germany’s Schäuble Deeply Skeptical Of Greek Plan (WSJ)

German Finance Minister Wolfgang Schäuble said Thursday he didn’t see how a bailout plan for Greece that he helped negotiate could work. Hours later, he asked parliament to pave the way for it anyway. The increasingly outspoken skepticism from the powerful and hawkish Mr. Schäuble has emerged as perhaps the clearest signal this week that even though eurozone officials have agreed to try to rescue Greece, the country’s future in the eurozone is by no means assured. For Mr. Schäuble, a 72-year-old conservative political veteran whose 70% approval rating makes him more popular than German Chancellor Angela Merkel, one problem is Greece’s heavy debt load.

While officials from Greece, France, and the IMF have already warned that Greece’s debt is unsustainable, Mr. Schäuble went further on Thursday and said this high debt load may force Greece to exit the euro. The reason, he said in a German radio interview, is that debt relief for Greece by its creditors—Germany is the biggest—may violate a European Union treaty that prohibits one eurozone country’s debt burden to be shared with others. He suggested Greece may be better off leaving the euro, which would allow its creditors to write down its debt.

“No one knows at the moment how this is supposed to work without a debt haircut, and everyone knows that a debt haircut is incompatible with membership in the monetary union,” Mr. Schäuble said on public radio. “One will try to find a solution. I don’t see it yet, but we are starting with the negotiations and don’t know what the outcome of the negotiations will be.”

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Angela Lecter.

Greece Bailout Revives Image Of The ‘Cruel German’ (WaPo)

A divided Germany rose from the ashes of the Nazi defeat in World War II, weathering the Cold War to transform into one of the good guys. Modern Germany quickly molded itself into the standard-bearer of global pacifism, a hotbed of youth culture and the tree-hugging Lorax of nations in the fight against climate change. But, just like that, the image of the “cruel German” is back. Germany — more specifically, its chancellor, Angela Merkel — has faced years of derision for driving a hard bargain with financially broken Greece, which has received billions in bailouts since 2010. But for both Germany and Merkel, the concessions extracted this week to open fresh rescue talks with Athens appear to have struck a global nerve.

By insisting on years more of tough cuts and making other demands that critics have billed as humiliating, Berlin is wiping out decades of hard-won goodwill. In the aftermath of the deal with Greece, the hashtag #Boycottgermany — calling on users not to buy German products — has started trending on Twitter. Referencing Hannibal Lecter, the cannibal from “Silence of the Lambs,” Europeans are sharing caricatures depicting Merkel as a Greece-eating “Angela Lecter.” A cartoon portraying Wolfgang Schäuble — Merkel’s even-harder-line finance minister — as a knife-wielding killer from the Islamic State militant group has gone viral. Germany was one of more than a dozen nations that insisted on a tough deal with Greece. But Britain’s Daily Mail singled out Germany, saying Greece had surrendered to austerity “with a German gun at his head.”

In the United States, New York Times columnist Paul Krugman this week noted the hate mail he had received from Germany for repeatedly criticizing its tough line on fiscal reforms. The Germans, he wrote, had suggested that as a Jew, he should know “the dangers of demonizing a people.” To that, Krugman responded with sarcasm: “Because criticizing a nation’s economic ideology is just like declaring its people subhuman.” In Greece, those actively supporting the austerity deal are being heckled by their countrymen as “Nazi collaborators.” Another image making the rounds on social media shows a doctored version of the European Union flag, its circle of gold stars against a blue background reshaped into a swastika.

France’s daily Le Figaro declared that “conditions were imposed on a small member state that would have previously required arms.” In a commentary that sneered at Merkel’s “half smile” after the deal was reached, Britain’s Guardian newspaper argued that rather than being cruel to be kind, the terms of the bailout were simply “cruel to be cruel.”

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Discussion ongoing.

Germany Offers Verdict on Greek Aid After Draghi Backing (Bloomberg)

German lawmakers have their say on Greece’s next bailout on Friday after ECB President Mario Draghi said he views the country’s place in the euro as secure. As Europe seeks to line up a three-year aid package worth as much as €86 billion, the lower-house vote is a renewed test of Chancellor Angela Merkel’s struggle to persuade Germans that Greece is still worth helping. While her majority in parliament suggests that passage is assured, Merkel faces growing dissent in her party bloc as she seeks approval to start bailout talks and for a bridge loan to Greece. With the European project under threat, the continent’s most powerful leader is putting her prestige on the line to hold the currency union together.

“The systemic importance of Greece for the entire euro zone hasn’t been demonstrated,” Christian von Stetten, a member of Merkel’s Christian Democratic Union, said Thursday. “There can only be one vote tomorrow, and that is no.” German lawmakers are interrupting their summer recess to return to Berlin for a three-hour floor debate before voting at about 1 p.m. local time. Finland’s parliament gave its approval Thursday. In a closed-door test poll after an appeal for support by Merkel, 48 members of her 310-strong caucus said they would break ranks and vote against the government line, a party official said. That compares with 29 who dissented in February on a vote to extend Greece’s second bailout.

With the IMF urging a debt writedown for Greece that Germany says is impossible under euro rules, Draghi stepped in with an attempt to ease tension. Months of standoffs over aid and austerity between Prime Minister Alexis Tsipras and creditors have led to deposit flight and capital controls, pushing Greece to the brink. “We always acted on the assumption that Greece will remain a member of the euro area,” Draghi told reporters in Frankfurt on Thursday after ECB policy makers granted Greek lenders more emergency liquidity. “There was never a question.”

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Counting the days.

EU Said to Agree On Balance to €7 Billion Greece Loan (Bloomberg)

Euro-area finance ministers authorized a €7 billion bridge loan to Greece, according to Irish Prime Minister Enda Kenny, paving the way for a third bailout that may allow Europe’s most indebted nation to stay in the common currency. The financing deal is expected to be announced on Friday after national parliaments have voted on the aid accord that Prime Minister Alexis Tsipras pushed through his legislature on Monday, according to an official with knowledge of the discussion, who asked not to be named because the talks are private. Member states also must consider whether to move ahead with the full bailout proposed for Greece. The short-term financing is needed so that Greece can meet a €3.5 billion payment due to the ECB on Monday, and keep the country afloat while Tsipras negotiates the details of a three-year bailout of as much as €86 billion.

That aid package would come from the euro-area’s permanent firewall fund, the European Stability Mechanism. “I would expect that Mario Draghi will consider now turning on the tap to some extent of emergency liquidity to keep the banks in Greece having money for their customers,” Kenny said in an interview with Irish broadcaster RTE, referring to the president of the ECB. The bridge loan will come from the European Financial Stabilisation Mechanism, the European Union’s rescue fund, the official said. The EU is still working on safeguards to shield non-euro nations from Greek bailout risk, European Commission spokeswoman Annika Breidthardt told reporters in Brussels.

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“Draghi also took the opportunity to join the IMF in singing from the debt-relief hymnal.”

Mario Draghi Issues A Resounding Indictment Of The ‘Fragile Euro’ (MarketWatch)

Whatever happened to doing “whatever it takes?” That was ECB President Mario Draghi’s pledge to hold the European shared currency together back in 2012, as the market was panicking about the possibility that a fiscally stressed European country might be forced out of the bloc. While Draghi had previously proclaimed that the euro was “irreversible,” the ECB chief’s comments on Thursday were much less emphatic, with Draghi stating that it wasn’t up to the central bank to determine whether or not Greece remains part of the shared currency. “This is a damning indictment of Europe’s single currency area from the individual who almost single-handedly averted a breakup of the bloc three years ago,” Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based advisory firm, in a note.

Had Draghi talked similarly in 2012, “all hell would have broken loose in the markets,” Spiro said. On Thursday, the market either didn’t notice Draghi’s rhetorical shift or didn’t care to fret about it, with the focus squarely on shoring up Greece’s teetering banking sector. According to a tally by Danske Bank, 18 out of the 23 questions Draghi took during his news conference were about Greece. Draghi used the opportunity to emphasize that the ECB always operated under the assumption that Greece would remain a part of the euro. The most crucial news was the ECB president’s decision to raise emergency liquidity assistance to Greek banks by €900 million without toughening the rules governing the collateral the banks must post in return for the funding.

That gives Greek banks, which have been closed for more than two weeks, some breathing room, though capital controls are likely to remain in place for some time. The move was a recognition of the Greek parliament’s approval of the tough austerity measures demanded in return for a third bailout, as well as the agreement in principle by eurozone governments on a bridge loan that will tide Greece over until its bailout is up and running—and would allow Greece to make a €3.5 billion repayment due on July 20. “The decision to grant bridge financing as well as today’s ECB decision to increase ELA are no game-changer, yet, but at least a symbolic leap of faith,” said Carsten Brzeski, eurozone economist at ING in Brussels

The ECB bought Greece more time with its decision to raise the amount of emergency liquidity available to the country’s banks, but Draghi used his bully pulpit to give Greece a vote of confidence while simultaneously highlighting the euro’s deep design flaws. Draghi described the monetary union as “imperfect, and being imperfect is fragile, vulnerable and doesn’t deliver…all the benefits that it could if it were to be completed.” Draghi said the situation underscored the need for further economic and political integration in the eurozone.

Draghi also took the opportunity to join the IMF in singing from the debt-relief hymnal. Draghi told reporters that the concept of debt relief has always been “uncontroversial” and that the only question has been about how to accomplish it within Europe’s legal framework. The IMF has argued that Greece’s debt load is unsustainable and must be trimmed, signaling it could walk away from a third bailout if debt relief isn’t offered. Germany, meanwhile, has insisted that the scope for debt relief within the rules governing the eurozone is very limited.

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These people could be paid in an alternate currency.

Greek Cleaners Swept Out Of Work After Tsipras U-Turn (FT)

For Vagelis Alexiou, the socialist revolution led by Alexis Tsipras lasted just 12 wonderful days. Turfed out of his job as a cleaner in Greece’s ministry of finance two and a half years ago by a cost-cutting government following orders from the country’s creditors, Mr Alexiou was reinstated on July 1 by a decree passed by Mr Tsipras’ ruling leftwing Syriza party. But the Greek prime minister’s defiance, and Mr Alexiou’s wish to return to his job mopping the floors of the ministry, ended on Monday as Athens capitulated to creditors’ demands for further austerity and economic reform in exchange for a desperately needed €86bn bailout. “I wish Mr Tsipras had said no to Brussels,” says Mr Alexiou, sitting outside the ministry in central Athens, his hope of being rehired now in tatters.

“I hope we can still trust him. He wants to help the workers, the poor people . . . but the creditors will not let him.” Swept to power in January by Greeks tired and angry after five years of punishing austerity, Mr Tsipras promised an end to cost-cutting and the legislative oversight from the EU, ECB and IMF, together with a repeal of measures taken by previous governments that slashed public sector jobs and wages. Those hopes ended in the early hours of Monday morning after 17 hours of bruising negotiations in Brussels, when Greece’s prime minister agreed to the most intrusive reform and austerity program ever demanded by the EU in exchange for cash to keep his county from going bankrupt and exiting the euro zone.

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Everyone but Greece can apply. What about Russia?

ECB Puts In Place Secret Credit Lines With Bulgaria And Romania (FT)

The ECB has introduced secret credit lines to Bulgaria and Romania as part of a broader effort to convince foreign regulators not to pull the plug on the local subsidiaries of Greek banks. News of the behind-the-scenes support for the subsidiaries came as ECB governors decided on Thursday to give an extra €900m in emergency funds to Greece’s beleaguered financial sector, a marginal increase to the $89bn in emergency funding it already had. Greece’s Piraeus, National Bank of Greece, Eurobank and Alpha Bank all have substantial assets in central and eastern Europe. If those assets were seized by local regulators, the parent banks would take an immediate capital hit, dealing a potentially terminal blow to Greece’s domestic financial system, which is already hanging by a thread as the country battles to agree a new rescue package with international creditors.

“The fear is that if someone goes first, and pulls the plug, everyone will follow,” said a person familiar with the situation. The person said the ECB had put in place special “swap” arrangements, or bilateral credit lines, with Romania and Bulgaria to reassure them that the Greek banks there would have funding support throughout the current crisis. Similar swap lines, which enable foreign central banks to borrow from the ECB and re-lend that money locally, were used during the eurozone financial crisis, but were typically publicly announced. An official confirmed the existence of the facilities and said they were created to prevent national central banks from doing anything “hastily” and to reassure them that the ECB would be the lender of last resort if the Greek offshoots ran into trouble.

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We already know not all banks will open.

New ECB Cash Lifeline Could Reopen Greek Banks on Monday (Guardian)

Banks in Greece could open their doors on Monday for the first time in three weeks, after the ECB boosted emergency funding for the country’s financial sector by €900m (£630m) and threw its weight behind calls for debt relief for Athens. The ECB president, Mario Draghi, announced the extension of aid to the country’s banks while backing the idea – championed by the IMF but rejected by Germany – that some of Greece’s debts will have to be written off. “It’s uncontroversial that debt relief is necessary and I think that nobody has ever disputed that. The issue is what is the best form of debt relief within our framework, within our legal institutional framework,” said Draghi. “I think we should focus on this point in the coming weeks.”

The ECB’s decision to ease the plight of Greece’s banking system came after the Greek prime minister, Alexis Tsipras, won a crucial parliamentary vote backing the spending cuts and economic reforms he has pledged to implement in exchange for opening talks on an €86bn bailout. The European commission, one of three creditors to Greece along with the IMF and the ECB, also announced it had put together a €7bn bridging loan for Athens. As part of this short-term financing package, George Osborne has backed down over the use of the EU’s bailout fund, the European Financial Stabilisation Mechanism, to finance Greece’s short-term needs. However, the chancellor said there would be an “impregnable ringfence” around the £850m of British money in the fund to prevent any losses to the UK taxpayer.

Speaking after the deal, Osborne said it was a “significant victory and strengthened the protections for the UK in the latest Greek bailout and any future bailouts of eurozone countries”. He added: “I said British taxpayers’ money would not be on the line in any agreement and that’s precisely what we have achieved.” In the event of a default by Greece, non-eurozone countries would be compensated using the profits made on holdings of Greek bonds by the ECB. The head of the Eurogroup, Jeroen Dijsselbloem, said the €7bn financing package was in place and inspectors from the IMF could fly to Athens as early as Monday to oversee implementation of the reform programme.

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This is what the Greek people should be asked: Do you want Europe/Germany to own your whole country outright, including its banks?

Saving Greece’s Banks Could Mean a Full European Takeover (WSJ)

To save its banks, Greece may need to let them go. Doing so would help the economy, but would hand control of the financial sector to eurozone leaders. Two things are needed to give the banks a chance of recovering. First, bad assets must be dealt with and capital increased. Second, links with the Greek state must be severed. Both can be achieved in one action: direct recapitalization of the system with European funds. This may be what eurozone leaders had in mind in bailout proposals that include €25 billion ($27.4 billion) for Greece’s banks. The ECB extended emergency funding on Thursday, but this only relieves a little pressure. Greece’s banks are running out of collateral to swap for extra funds: They could have as little as €8 billion to €10 billion worth, according to a Greek banking executive.

And even if banks can reopen to process certain transactions, withdrawal limits and capital controls will remain in place for some time. The longer they do, the worse the effect on the economy and bank solvency will be. Some or all of Greece’s big-four banks, in which the government holds substantial stakes, are likely to need recapitalizing. Greece has been told it must put into law by next week the European rules that dictate how shareholders and private creditors must bear losses. Until it does so, it can’t get money for its banks from the European Stability Mechanism, the body that supports cash-strapped countries.

The rules do allow public money to be used in shoring-up banks, but usually only after private investors have taken losses. However, public money can be used earlier where private losses would hit depositors and threaten the economy. This is a significant danger for Greek banks because they have relatively weak capital, high levels of bad loans and very little in the way of bonds that can take losses before depositors. Last year, the stability mechanism was itself given the power to put money directly into eurozone banks alongside member countries. If a country can’t afford to put money in, it can recapitalize banks alone.

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The last guard before fascists take over?!

Protest Parties Can Halt Unrest Amid Greek Crisis – Beppe Grillo (Bloomberg)

European anti-establishment parties are the best alternative to halt social unrest as the outcome of the Greek crisis boosts discontent with austerity policies, said Italy’s Five Star founder Beppe Grillo. European institutions are “waffling as they see they are losing support of millions of people saying: ‘We want a Plan B,’” Grillo said Tuesday in an interview in Sardinia. Groups sharing Five Star’s anti-corruption drive and backing so-called bottom-up democracy such as Pablo Iglesias’s Podemos in Spain “are rising as people see them as an alternative,” he said. Greek Prime Minister Alexis Tsipras’s capitulation to the euro region’s creditors this week sent a signal to European critics of austerity that they need to double their efforts.

Their success may lead to new shocks in the region’s political establishment during the next elections, such as in Spain later this year, and again call into question euro-area budget rules. Grillo, who wants Italy to exit the euro and has proposed a referendum on the issue, says ruling parties are unable to counter possible social unrest and the recent surge of far-right movements such as Golden Dawn in Greece. “Golden Dawn has been the symptom of a European nationalism that speaks to people’s instincts,” said Grillo, 66, the founder of Italy’s second-largest party. “Golden Dawn didn’t make it in countries like ours because we worked as a buffer absorbing people’s anger, but that may come now as I expect social unrest, not only in Greece.”

As the Greek deal was announced on Monday, leaders of the Five Star movement lost no time in leading fresh attacks against the euro area’s focus on fiscal discipline. Grillo said in a blog post that day the accord was an “humiliation” for Greece. “We were very surprised” by the outcome, said comedian-turned-politician Grillo, who was in Athens earlier this month to back Tsipras’s call for a “no” vote in the referendum on the creditor’s previous bailout proposal. Grillo, whose Five Star Movement counts 127 lawmakers in the country’s 951-seat parliament’s houses, said the non-binding referendum he proposes would be simpler than the Greek one. “If people will say ‘yes,’ we will stay, otherwise we will exit the euro,” he said. Still, reaching that goal is very difficult because two thirds of the Rome-based Parliament would have to agree to hold the vote.

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Makes a lot of sense. But no common currency at all even more.

Germany, Not Greece, Should Exit the Euro (Ashoka Mody)

The latest round of wrangling between Greece and its European creditors has demonstrated yet again that countries with such disparate economies should never have entered a currency union. It would be better for all involved, though, if Germany rather than Greece were the first to exit. After months of grueling negotiations, recriminations and reversals, it’s hard to see any winners. The deal Greece reached with its creditors – if it lasts – pursues the same economic strategy that has failed repeatedly to heal the country. Greeks will get more of the brutal belt-tightening that they voted against. The creditors will probably see even less of their money than they would with a package of reduced austerity and immediate debt relief. That said, the lead creditor, Germany, has done Europe a service.

By proposing the Greece exit the euro, it has broken a political taboo. For decades, politicians have peddled the common currency as a symbol of European unity, despite the flawed economics pointed out as far back as 1971 by the Cambridge professor Nicholas Kaldor. That changed on July 11, when European finance ministers agreed that it could be both sensible and practical for a member country to leave. “In case no agreement can be reached,” they said, “Greece should be offered swift negotiations for a time-out.” Now that the idea of exit is in the air, though, it’s worth thinking beyond the current political reality and considering who should go. Were Greece to leave, possibly followed by Portugal and Italy in the subsequent years, the countries’ new currencies would fall sharply in value.

This would leave them unable to pay debts in euros, triggering cascading defaults. Although the currency depreciation would eventually make them more competitive, the economic pain would be prolonged and would inevitably extend beyond their borders. If, however, Germany left the euro area – as influential people including Citadel founder Kenneth Griffin, University of Chicago economist Anil Kashyap and the investor George Soros have suggested – there really would be no losers. A German return to the deutsche mark would cause the value of the euro to fall immediately, giving countries in Europe’s periphery a much-needed boost in competitiveness.

Italy and Portugal have about the same GDP today as when the euro was introduced, and the Greek economy, having briefly soared, is now in danger of falling below its starting point. A weaker euro would give them a chance to jump-start growth. If, as would be likely, the Netherlands, Belgium, Austria and Finland followed Germany’s lead, perhaps to form a new currency bloc, the euro would depreciate even further.

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The sordid details.

How Goldman Sachs Profited From the Greek Debt Crisis (Robert Reich)

The Greek debt crisis offers another illustration of Wall Street’s powers of persuasion and predation, although the Street is missing from most accounts. The crisis was exacerbated years ago by a deal with Goldman Sachs, engineered by Goldman’s current CEO, Lloyd Blankfein. Blankfein and his Goldman team helped Greece hide the true extent of its debt, and in the process almost doubled it. And just as with the American subprime crisis, and the current plight of many American cities, Wall Street’s predatory lending played an important although little-recognized role. In 2001, Greece was looking for ways to disguise its mounting financial troubles. The Maastricht Treaty required all eurozone member states to show improvement in their public finances, but Greece was heading in the wrong direction.

Then Goldman Sachs came to the rescue, arranging a secret loan of €2.8 billion for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate. As a result, about 2% of Greece’s debt magically disappeared from its national accounts. Christoforos Sardelis, then head of Greece’s Public Debt Management Agency, later described the deal to Bloomberg as “a very sexy story between two sinners.” For its services, Goldman received a whopping 600 million euros ($793 million), according to Spyros Papanicolaou, who took over from Sardelis in 2005. That came to about 12% of Goldman’s revenue from its giant trading and principal-investments unit in 2001—which posted record sales that year. The unit was run by Blankfein.

Then the deal turned sour. After the 9/11 attacks, bond yields plunged, resulting in a big loss for Greece because of the formula Goldman had used to compute the country’s debt repayments under the swap. By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from €2.8 billion to €5.1 billion. In 2005, the deal was restructured and that €5.1 billion in debt locked in. Perhaps not incidentally, Mario Draghi, now head of the ECB and a major player in the current Greek drama, was then managing director of Goldman’s international division. Greece wasn’t the only sinner. Until 2008, European Union accounting rules allowed member nations to manage their debt with so-called off-market rates in swaps, pushed by Goldman and other Wall Street banks.

In the late 1990s, JPMorgan enabled Italy to hide its debt by swapping currency at a favorable exchange rate, thereby committing Italy to future payments that didn’t appear on its national accounts as future liabilities. But Greece was in the worst shape, and Goldman was the biggest enabler. Undoubtedly, Greece suffers from years of corruption and tax avoidance by its wealthy. But Goldman wasn’t an innocent bystander: It padded its profits by leveraging Greece to the hilt—along with much of the rest of the global economy. Other Wall Street banks did the same. When the bubble burst, all that leveraging pulled the world economy to its knees. Even with the global economy reeling from Wall Street’s excesses, Goldman offered Greece another gimmick. In early November 2009, three months before the country’s debt crisis became global news, a Goldman team proposed a financial instrument that would push the debt from Greece’s healthcare system far into the future. This time, though, Greece didn’t bite.

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Yes, it is. Just not for the immediate victims.

The Powerful Have Shown A Really Nasty Side This Month: Great! (Ben Phillips)

In the Addis talks over tackling tax dodging, and in the EU-IMF talks on Euro-austerity, the powerful have shown a really nasty side this month. That’s great news. How can I say that when we see the suffering that this will cause? How could be I so heartless as to see the opportunity in the crisis? Of course I don’t mean that the suffering is a price worth paying, or even that suffering should be necessary to social change. I only mean this: the suffering has been happening. What has been happening less is the powerful showing how deliberate their actions are. Now we see it. It’s the difference between brutality that has been caught on a cameraphone and broadcast on youtube, and brutality hidden behind a wall.

Events in Addis and in Athens show how business as usual works, who dominates it, and its emptiness. It’s not hidden anymore. As Gandhi noted, first they ignore you, then they laugh at you, then they fight you, then you win. We’ve got to stage three. In the EU-IMF talks on Euro-austerity, we know that terms have been imposed on Greece that aren’t deliverable. We know this because the IMF’s own documents say so. In the Addis talks, we know that the reason we don’t have a global tax body to tackle tax dodging is because the rich countries blocked it – not that people looked at it and decided on a better way, but that poor countries proposed it and rich countries blocked it. We may wish that the powerful were not like that – but if they are it is better that we know that they are.

What Addis showed is there is no reliable “global leadership” from the great powers of the North. Southern government assertiveness, backed up by South-North civil society solidarity, will be key. That’s how we stopped the steamroller of the WTO. As we look at how to tackle inequality and how to combat climate change, it is clear that we are not all on the same side. Sometimes pushing a rock up a hill is hard because it’s a rock and it’s a hill. But sometimes it’s even harder because someone at the top is trying to push that rock back down the hill.

But what’s also clear is this. The powerful don’t usually like having to show the force behind their power except when they actually have to. As social theorists from Gramsci to Chomsky have pointed out, things run much smoother for those in power when there is a semblance of process and consent. That the type of power shown over the Addis talks and the Greece talks has been so nakedly brutal is paradoxically a sign of its weakness. This is what Martin Luther King noted in the struggle for civil rights. We’re relearning it now.

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Pension funds all over did deeper into trouble. Despite the stock market gains. Setting up for a bloodbath.

US State Pension Funds Face $1 Trillion Funding Gap (Yahoo)

More depressing news for workers who depend on a pension to fund their retirement: State-run pension funds faced a $968 billion shortfall in 2013, up $54 billion from the year prior, according to a new report by The Pew Charitable Trusts. When local pension fund shortfalls are factored in, the total pension funding gap surpasses $1 trillion. “Policy makers are going to need to find a way to address [this funding gap] and it’s going to have to come down to some kind of plan to pay it down in an orderly fashion,” said David Draine, a senior researcher at Pew Charitable Trusts. On average, state pension plans were only 74% funded. The implications for workers are huge.

If states don’t find a way to fully fund pension plans, many workers who have dutifully paid into pension plans may not get back what they’ve put in and young workers may not get to participate at all. Fewer than half of states were able to meet their required annual contributions to pension funds in 2013. New Jersey and Pennsylvania were the furthest behind— each was only able to make only half its annual funding contribution. As a result, more than one-third of their state pension funds were unfunded. Overall funding rates were the worst in Illinois (with just 39% funded) and Kentucky (44%), where pension funding levels have declined for three years in a row. Just two states managed to finish the year with 100%-funded pensions: South Dakota and Wisconsin.

It should be noted that Pew’s report only looks at funding rates for 2013 and does not factor in the significant investment gains of 2014 (the S&P 500 index rose around 11% last year, according to data from FactSet). But even if it had, the budget shortfall would still likely exceed $900 billion, the report says.

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NZ is so screwed.

New Zealand Dairy Giant Cuts Jobs As ‘White Gold Rush’ Fizzles (Reuters)

New Zealand dairy exporter Fonterra is cutting jobs in an effort to shore up its cash flows as a slump in global dairy demand, particularly from No. 1 buyer China, threatens to snuff out the country’s “white gold rush”. Dairy prices have more than halved from record highs scaled in 2013, with Chinese buying dropping off dramatically after the world’s second-biggest economy built up excess supplies of milk powder last year just as the economy began to slow. Fonterra, the world’s largest dairy exporter, has dominated the commodity milk powder sector for years and had been rapidly expanding its business in China. But profits have been falling for nearly two years in the face of volatile dairy prices, which sank to a 12 1/2-year low at the latest global auction on Wednesday.

As a result, Fonterra said on Thursday it would cut more than 500 of its 16,000-strong global workforce, and warned more redundancies were likely as it reviews its operations. New Zealand’s dairy exports to China have tumbled 69% since the start of the year compared with 2014, official data shows, whittling Beijing’s share of the country’s total dairy shipments to roughly 16%, from 37% last year. At the same time, a ban by Russia on foreign dairy products, imposed in response to sanctions slapped on the country over its role in the Ukraine conflict, has removed a major buyer of butter and other milk products.

Meanwhile, supply has ramped up as farmers in New Zealand, Europe and the United States have set up dairy farms in hopes of cashing in on a doubling in dairy prices between 2009 and 2013. Production in New Zealand, the world’s biggest dairy exporter, has reached record highs. “It’s really both sides of the equation. We had a period of really high milk prices, and that encouraged additional milk production across the globe,” said Susan Kilsby, dairy analyst at agricultural consultants AgriHQ. “There’s been … no reason to slow production anywhere as feed costs are low so there’s still a lot of signals to encourage milk production. That’s timed with the two largest buyers of dairy products buying less than usual.”

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The world’s biggest land predator goes first?!

One More Reason Why Polar Bears Are Not Going To Be Okay (WaPo)

It seems like every time we turn around, polar bears are catching a tough break. As climate change continues to heat up the planet and Arctic sea ice retreats further each year, conservationists are increasingly concerned that the bears — which use the sea ice as a hunting ground for catching seals — will have less access to the food they need to survive. It’s been an ongoing worry for years, and last week the U.S. Fish and Wildlife Service drove it home again with a new conservation management plan, which identifies climate change and sea ice loss as the primary threat to polar bears. Despite all the doom and gloom, some research conducted in the early 1980s has helped conservationists maintain a glimmer of hope about the polar bear’s ability to survive long periods of time without food.

This research found evidence in polar bear blood samples to suggest that the bears might go into a kind of “walking hibernation” when food is scarce, staying awake but significantly lowering their metabolism in order to use less energy. This would be a useful adaptation during the summer, when sea ice is at its lowest extent and hunting is most difficult. It’s been a tempting theory for more than 30 years — but once again, we’re looking at bad news for the polar bear. A new study, published today in Science, debunks the “walking hibernation” idea with data collected from more than two dozen captured polar bears in the Arctic’s Beaufort Sea, which the researchers spotted and tranquilized from helicopters. The researchers, led by biologist John Whiteman at the University of Wyoming, outfitted bears with devices that collect and transit data remotely to collect data on the bears’ movement and activity and their body temperature.

Their sample included both “ice bears” and “shore bears” — that is, both bears who choose to chase the ice as it retreats north in the summer, looking for seals, and bears who choose to spend their summer on shore. The researchers expected that if bears did indeed exhibit walking hibernation, their activity and temperature would drop down to the kinds of levels usually observed in other bears during true hibernation — that is, very low levels. “If there was hibernation metabolism … you would see all of them have a very steep, abrupt decline in body temperature to about 35 degrees [Celsius] and then remain like that the whole period,” says senior author Merav Ben-David, a professor of wildlife ecology at the University of Wyoming. “But we don’t see that.”

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