Dec 112018
 
 December 11, 2018  Posted by at 8:45 pm Primers Tagged with: , , , , , , , , , , ,  


Wilhelm Trübner A Gorgon‘s head 1891

 

The news still isn’t the news, and I’m getting afraid it never will be again, because not the news just simply sells so much better than plain old real events. Maria Butina suddenly popped back into the public eye, because she was either charged with something or confessed to it. And I’m thinking, excuse me, but that poor girl has been kept in isolation for how long now? And for what reason exactly?

I vividly remember thinking that when she first became ‘news’ for ‘infiltrating’ the NRA, for which there were plenty cute pictures taken, I remember thinking she would have been 22 or 23 years old when as a super- devious Russian redhead she allegedly penetrated the trillion dollar NRA, and the trillion dollar Republican Party, and the Trump campaign, which according to some people is now worth negative $1 trillion.

If any of said organizations allow for a 22-year old to take all of their most secret and damning secrets and send them to her alleged puppet master Vladimir Vladimirovich, I say they deserve everything they’re getting. But it IS the sort of thing that if you want to report it like it’s actual news, you sure need to be convincing, you need proof, that sort of thing, not the anti-Putin innuendo US media rely on as their main standard today. Butina with no proof is just a nice by now 30-year old girl who happens to be Russian.

As for the Trump campaign having a negative $1 trillion value, I derive that from all the people who’ve once again, after a handful Mueller tidbits, started saying the Donald will be impeached any moment now, and many around him will go to jail for decades. You know, I can read too, and that’s not what I see. Much of what I see comes down to the reasoning that Trump has not yet been impeached as President because .. he is the President.

Yes, that is pretty funny, but it’s not humor beyond my abilities, and I’m not a comedian by trade. We’re still, even after those Mueller bits, stuck with Papadopoulos who’s been framed and went to jail for 2 weeks for it (shame on Mueller for that, deep deep shame!), there’s Cohen who lost his tracks in between lying for Trump and lying about Trump, and Manafort, a thirteenth wheel on a wagon of which there are dozens in DC, fixers and handlers.

You tell me why Manafort faces years in jail while Rahm Emanuel became mayor of Chicago. But if you’d actually want to explain, I suggest you prepare well, maybe talk to a few lawyers in the process. Washington attracts shady characters like dung beetles to horse shit and honey bees to Mountain Dew, and only a special counsel would ever think of picking them off one by one if he can’t find any of the actual crimes that he was appointed for to find. Cue: Rahm Emanuel.

 

Meantime my pal in arms Jim Kunstler thinks Michael Flynn is laying low as Mueller whoops his ass because he can, only to hit back at Mueller as soon as he’s freed from what are at best shaky allegations. Talking to a Russian is not a crime, not even, or even especially, when you’re the security adviser to the next president.

Michael Flynn’s real suspicious job was advising Turkey on security issues, but then that’s not what Mueller targeted him for. So yeah, let Flynn rise. And once again, don’t let’s forget that he said when the whole circus began, that he saw no way he could defend himself against anything Mueller might have thrown at him, that his entire family was on the verge of bankruptcy.

“But you talked to a Russian!” say the news media. Cue mushroom clouds in the remote background. But don’t you see, Trump is a criminal with decades of crimes under his belt, and all of his family are too! Look, I don’t know these people, and I’m fine not knowing them, not my cup of tea, but how much time did any of them spend behind bars so far?

And now they would have to go to jail just because Donald was elected president and the DOJ appointed a friendly ex-FBI head special counsel on the basis of a dossier paid for by his political opponents? To what extent does that spell justice to you? Yes, feel free to cue Rahm Emanuel again.

See, if certain people can be sent to jail because they rise too high in certain circles that don’t want them to disturb the power inherent in their sphere, while other operatives from the exact same mold though perhaps another political affiliation, are nominated to lofty and lucrative careers and positions, isn’t there something awry?

Are any of them perfectly innocent? Hell no, but then if they were, they wouldn’t be in the positions they’re in, the very positions that allow Robert Mueller to target them. From that point of view, it obvious it’s just a little power game played out in front of your eyes, you who have nothing to do with it but think you’re supposed to have an opinion on it.

Is Donald Trump a worse and bigger criminal than George H.W. Bush was? One half of America can answer that in no time flat. The other is thinking they wouldn’t be so sure. How many people has the Donald condemned to death so far? And he’s already about half way through the time Bush41 spent in the White House.

Perhaps it’s not about who’s a criminal, but about who’s the prosecutor. And with Mueller’s role in the sordid Whitey Bulger tale, and his even more sordid testimony in the Iraq WMD fantasies that led to millions of legalized murders celebrated as victory by both Washington and the US media, which kettle is blaming which pot here?

 

But hey, I’m ready to be corrected. And it’s by no means just the US that feels twisted these days, either. How about French president Emmanuel Macron, who hadn’t addressed his people live for 10-12 days as the Yellow Vests protests just got worse and more violent by the day, and then yesterday decided to make his long awaited response to them through a pre-recorded video? Honestly, how far removed from reality can one be?

The only answer Macron has to the thousands of people who want him out, and who have been willing to express that opinion in 4 consecutive weekends, is money. He thinks if he gives them €100 a month extra, and some tax breaks, they’ll let them continue on his little Napoleon trip. Well, if they do, we’ll know who they are. But are they? I don’t think Macron counts on that.

And then, as Macron increasingly retreats into his little palace(s), cue Marie Antoinette, only to communicate with the unwashed masses who want him gone through pre-scripted and recorded promises of crumbs off his table in exchange for no power at all, British PM Theresa May reacts to her latest and ostensibly worst -though it’s hard to keep track- defeat by … fleeing the country.

That’s how its ‘leaders’ rule Europe these days. Angela Merkel says she’s gone, though she wants to be Chancellor until 2021 (that way no-one can hold her responsible for anything), Theresa May hops on a plane to Europe to grovel some hopelessly more in her already defeated stance.

And Macron has his servants shove crumbs off his table, a gesture that still costs him more than everything Salvini and Di Maio wanted to do in Italy which got them whistled down by Brussels. C’mon, who still believes in the EU? Everyone’s running away from it.

If Macron must hide from his own French people, how can he reform the EU? If May must flee the UK and go to the EU to get a Brexit deal, what’s her authority back home where 50% voted against that same EU?

And if Merkel can only remain in charge by relinquishing her power, who exactly’s going to run Europe? It’s kind of like the same question as for the US. Who’s going to run it? Not Trump, if Mueller and the Democrats have any say although they lost the election. Not Hillary, says about everyone else.

 

We all tend to think that these things are normal and eternal. Just politics. But all the usual suspects appear to be under siege. In Europe, France, UK, Germany are shaking heavily. Italy’s already overboard. That’s the biggest 4 EU members. That’s the EU. No certainties, no future, though the EU itself will never admit it, and instead just push for more EU.

And what’s certain politically in the US anymore? Trump has eviscerated the entire GOP, and I’m not saying that’s a bad thing. The Democrats killed off Bernie Sanders to allow Hillary to continue her dead before arrival power grab. She came she saw she lost.

My point, I think, is that political strongholds are being defeated everywhere at the same time. And when that happens, there’s always a reason for it. I think that reason can be found in the fact that the global economy is rumbling and crumbling as we speak, with politics and economics acting as precursors for one and other.

Like, Macron can only save his political ass by violating the EU budget terms he just chided Italy for. Merkel can only save her legacy by creating a situation she’s no longer responsible for. And Theresa May would be well advised, now that she’s on the continent, to simply stay there and let Britain figure things out without her.

The US won’t and can’t be so lucky. We’re still up for much more, marathon more, of Trump vs Mueller, and there will be many more courts and judges who have to speak on all of it before there’s anything even remotely resembling a conclusion. Because the whole Mueller circus -reluctantly- threatens to open up a Pandora swamp that’s been DC’s lifeblood forever.

Yeah, you got your Flynn and Manafort, but you also got your Podesta brothers. Yeah, there’s the Trump Foundation, but there’s also the Clinton Foundation, and Uranium One. Who’s worse? Good one!

Both things should be investigated, it shouldn’t just be Trump and Mueller, Hillary and the DNC and Comey etc etc also must be under the microscope. Or America will forever lose its faith in democracy. Not that there’s much of it left, mind you, but hey, at the very least it’s the thought that counts.

Bottom line: it all appears to be about local, domestic, national politics, but don’t be deceived: the global economy is tanking, and all of the political mayhem on all these levels is just a derivative of that. The dinosaurs want to live another day.

None of which is going to make your situation any better, but who knows, you just might feel better about it for a bit. Until you don’t.

 

 

Mar 172018
 
 March 17, 2018  Posted by at 2:16 pm Finance Tagged with: , , , , , , , , , , , ,  


Jacobello Alberegno The Beast of the Apocalypse 1360-90

 

The Guardian ran an article yesterday by one of its editors, David Shariatmadari, that both proves and disproves its own theme at the same time: “An Information Apocalypse Is Coming”. Now, I don’t fancy the term apocalypse in a setting like this, it feels too much like going for a cheap thrill, but since he used it, why not.

My first reaction to the headline, and the article, is: what do you mean it’s ‘coming’? Don’t you think we have such an apocalypse already, that we’re living it, we’re smack in the middle of such a thing? If you don’t think so, would that have anything to do with you working at a major newspaper? Or with your views of the world, political and other, that shape how you experience ‘information’?

Shariatmadari starts out convincingly and honestly enough with a description of a speech that JFK was supposed to give in Dallas right after he was murdered, a speech that has been ‘resurrected’ using technology that enables one to make it seem like he did deliver it.

 

An Information Apocalypse Is Coming. How Can We Protect Ourselves?

“In a world of complex and continuing problems, in a world full of frustrations and irritations, America’s leadership must be guided by the lights of learning and reason, or else those who confuse rhetoric with reality, and the plausible with the possible will gain the popular ascendancy with their seemingly swift and simple solutions to every world problem.”

John F Kennedy’s last speech reads like a warning from history, as relevant today as it was when it was delivered in 1963 at the Dallas Trade Mart. His rich, Boston Brahmin accent reassures us even as he delivers the uncomfortable message. The contrast between his eloquence and the swagger of Donald Trump is almost painful to hear.

Yes, Kennedy’s words are lofty ones, and they do possess at least some predictive qualities. But history does play a part too. Would we have read the same in them that we do now, had Kennedy not been shot right before he could deliver them? Hard to tell.

What’s more, not long before JFK was elected president America had been in the tight and severe grip of J. Edgar Hoover and Joseph McCarthy’s anti-communist campaign, in which lots of reality was replaced with rhetoric, something Kennedy undoubtedly had in mind while writing the speech. JFK was not just addressing future threats, he was talking about the past as well.

But the writer slips into a much bigger faux pas right after: injecting Trump into the picture. It’s fine if someone doesn’t like Trump, but naming him there and then, in an article about ‘information apocalypse’, also means confusing objectivity with regards to your topic with subjectivity concerning your political ideas. While the Kennedy speech item relates to -advancing(?)- technology, a valid part of the apocalypse, mentioning Trump has nothing to do with that apocalypse, at least not objectively. Back to David Shariatmadari:

The problem is, Kennedy never spoke these words. He was killed before he made it to the Trade Mart. You can only hear them now thanks to audio technology developed by a British company, CereProc. Fragments of his voice have been taken from other speeches and public appearances, spliced and put back together, with neural networks employed to mimic his natural intonation. The result is pretty convincing, although there’s a machine-like ring to some of the syllables, a synthetic stutter. Enough to recognise, if you already know, that this is a feat of technology, not oratory.

We like to think of innovation as morally neutral. We empower scientists and engineers to range freely in the hope they might discover things that save labour and lives. The ends to which these are put aren’t the responsibility of the researchers. The agile robots produced by Boston Dynamics might look like they could cheerfully pin you up against a wall and snap your neck, but do we really want to close off this avenue of research? After all, they might equally be capable of performing life-saving surgery. The methods used to resurrect JFK can also help people with illnesses such as motor neurone disease – like the late Stephen Hawking – that affect their ability to speak.

It’s certainly true that we are so ‘geared’ towards progress, we ‘conveniently’ forget and ignore that every next step carries its own shadow side, every yin comes with its yang. ‘Progress’ and ‘innovation’ – and related terms- ring so positive in our eyes and ears it borders on -wilful- blindness. That blindness is set to play a major role in our future, and in our acceptance as gospel of a lot of ‘information’.

“Dual use” of technology is not a new problem. Nuclear physics gave us both energy and bombs. What is new is the democratisation of advanced IT, the fact that anyone with a computer can now engage in the weaponisation of information; 2016 was the year we woke up to the power of fake news, with internet conspiracy theories and lies used to bolster the case for both Brexit and Donald Trump.

Ouch! See, he does it again. This is not an objective discourse on ‘information disinformation’, but a way to make people think -through a method he’s supposed to be exposing- that ‘fake news’ led to Brexit and Trump. That’s a political view, not a neutral one. Yes, there are many voices out there who connect ‘fake news’ directly to things they don’t like, but that’s just a trap.

And as I said, it may have to do with the fact that the writer works for a major newspaper, which of course he wants to, and wishes to, see as some kind of beacon against fake news, but if he lets his own personal views slip into an objective treatment of a topic this easily, it automatically becomes self-defeating.

There is no proof that Trump and Brexit’s success are down to fake news more than their opposite sides, ‘fake news’ is everywhere, and that very much includes the Guardian. The coverage of the UK government accusations against Russia in the poisoning case proves that more than ever.

You can be anti-Trump, anti-Brexit and anti-Putin all you want, but they don’t define fake news or an information apocalypse, any more than ‘commies’ did in the days of Hoover and McCarthy.

We may, however, look back on it as a kind of phoney war, when photoshopping and video manipulation were still easily detectable. That window is closing fast. A program developed at Stanford University allows users to convincingly put words into politicians’ mouths. Celebrities can be inserted into porn videos. Quite soon it will be all but impossible for ordinary people to tell what’s real and what’s not.

That is am almost bewildering line. Does the writer really think ‘ordinary people’ can today tell apart what’s real and what’s not? If his paper had honestly covered his country’s, and his government’s, involvement in the wars all over the Middle East and North Africa over the past decades, would his readers still be supportive of the politicians that today inhabit Westminster?

Or does the paper prefer supporting the incumbents over Nigel Farage and Donald Trump, because it owes its reputation and position and revenues to supporting the likes of Theresa May and Tony Blair? Yeah, I know, with a critical view, yada yada, but when has the Guardian labeled any UK politician a war criminal? Much easier to go after Farage, isn’t it? The question is: what part of this is fake, and what is not?

What will the effects of this be? When a public figure claims the racist or sexist audio of them is simply fake, will we believe them? How will political campaigns work when millions of voters have the power to engage in dirty tricks? What about health messages on the dangers of diesel or the safety of vaccines? Will vested interests or conspiracy theorists attempt to manipulate them?

This appears to make sense, but it does not really. We are way past that. ‘Ordinary people’ have already lost their capacity to tell truth from fiction. Newspapers and TV stations have long disseminated the views of their owners, it’s just that they now have -newfound- competition from a million other sources: the blessings of social media.

The core issue here is that 1984 is not some point in the future, as we for some reason prefer to think. We are living 1984. Perhaps the fact that we are now 34 years past it should give us a clue about that? People tend to think that perhaps Orwell was right, but his predictions were way early. Were they, though?

Also: Orwell may not have foreseen the blessings and trappings of social media, but he did foresee how governments and their media sympathizers would react to them: with more disinformation.

Unable to trust what they see or hear, will people retreat into lives of non-engagement, ceding the public sphere to the already powerful or the unscrupulous? The potential for an “information apocalypse” is beginning to be taken seriously.

This is a full-blown time warp. If it is true that people only now take the potential for an “information apocalypse” seriously, they are so far behind the curve ball that one must question the role of the media in that. Why didn’t people know about that potential when it was an actual issue? Why did nobody tell them?

The problem is we have no idea what a world in which all words and images are suspect will look like, so it’s hard to come up with solutions.

Yes, we do have an idea about that, because we see it around us 24/7. Maybe not with images as fully fabricated as the JFK speech, but the essence is manipulation itself, not the means by which it’s delivered.

Perhaps not very much will change – perhaps we will develop a sixth sense for bullshit and propaganda, in the same way that it has become easy to distinguish sales calls from genuine inquiries, and scam emails with fake bank logos from the real thing.

David, we ARE all bullshitters, we all lie all the time, for a myriad of reasons, to look better, to feel better, to seem better, to get rich, to get laid. It’s who we are. We lie to ourselves most of all. A sixth sense against bullshit and propaganda is the very last thing we will ever develop, because it would force us to face our own bullshit.

But there’s no guarantee we’ll be able to defend ourselves from the onslaught, and society could start to change in unpredictable ways as a result. Like the generation JFK was addressing in his speech, we are on the cusp of a new and scary age. Rhetoric and reality, the plausible and the possible, are becoming difficult to separate. We await a figure of Kennedy’s stature to help us find a way through. Until then, we must at the very least face up to the scale of the coming challenge.

We are not “on the cusp of a new and scary age”, we are in the smack middle of it. We haven’t been able to separate rhetoric and reality, the plausible and the possible, for ages. What’s different from 100 years ago, or 50 years ago, is that now we are faced with an information overload so severe that this in itself makes us less capable of separating chaff from wheat.

So yes, that perhaps is new. But bullshit and propaganda are not. And labeling Trump and Brexit the main threats misses your own topic by miles. You could make an equally valid point that they are the results of many years of bullshit and propaganda by old-style politics and old-style media.

Maybe they’re what happens when ‘ordinary people’ switch off from an overload of bullshit and propaganda forced upon them by people and institutions they grew up to trust. And then feel they were betrayed by. A sixth sense after all.

 

 

Dec 242017
 
 December 24, 2017  Posted by at 5:47 pm Finance Tagged with: , , , , , , , , , ,  


Walter Hege Caryatid overlooking the city of Athens 1930

 

Christmas is the time when the western world makes a doomed attempt to remember a story whose meaning it has long forgotten, and still claim the story as its own every single time, every single year, claim it as its foundation, the foundation of the principles that guide its societies, its politics and its religion.

Western countries, whether they’re predominantly Catholic or Protestant, label themselves Christian, after Jesus Christ, a man their holy scriptures say is/was the Son of their God, and after his teachings, his sermons and the example his own life is supposed to have been for all his followers. Turn the other cheek, help those in need, don’t judge.

But as we celebrate Jesus’ birth at the time of winter solstice, and we acknowledge that he and his parents, Joseph and Maria, were refugees driven into exile, and the only place the birth could take place was a manger far away from their home, we lose out on the connection to our savior from the very first moment.

Because we sit in our warm and cosy homes, surrounded by meals worthy of kings, and presents worthy of princes and princesses, while frail forms and emaciated children are fainting at our doors. While we are quite aware that whatever Jesus meant to say 2000 years ago, and some of that may have been lost over time, one thing we do know is that he didn’t mean this.

There’s no way he meant for us to, two millennia down the road, to look at present day refugees driven into exile far away from home, just like he and his parents were, and not lift a finger to help them. So when politicians like UK PM Theresa May say in their Christmas messages to their nations that they should “take pride in their Christian heritage”, that’s not just empty rhetoric, it’s hollow.

But as long as religion still sells, and there are many countries where it does, perhaps nowhere more than the US, politicians will quote Jesus and do the opposite of what he actually said according to the bible, and all without blinking once. The thirst for power over others does strange things to people, and our societies are still fully unprepared for that, and we still hear them say one thing and do another, and we still believe what they say. We’re suckers for snake oil.

 

Actual clergymen and other people of real faith may be somewhat different from politicians and their flocks, but as long as the Vatican remains opulently rich and clad in gold while Catholics and others around the world live in die in misery, perhaps we should question the link between Jesus and the church, the very link the latter base their entire authority on.

Perhaps, as well, we should question any and all claims of being ‘God’s own country’ made by any and all nations who send their best and bravest to go and kill the best and bravest of other nations for the sake of religion, resources or empire. Nothing of that has anything to do with Jesus.

And perhaps we should look for Jesus not in the people who talk about him, but in those who act like him, and like he told his contemporaries to act. And yeah, that takes me to Greece, and the Automatic Earth for Athens fund.

 

Not in any kind of presumptuous way, mind you, certainly not when it comes to me, but I have met quite a few people who seem to understand Jesus much better than most politicians and church leaders do, they just don’t talk about it, they do it. That much must have become clear through the past 2,5 years and 13-14 articles (for links, see bottom of this article) that I’ve written about them.

The reason I haven’t written much on the topic over the past 9 months or so comes down pretty much to growing pains, for lack of a better term. In my view, my friend Konstantinos and his social kitchen project, O Allos Anthropos (the Other Human), had become too dependent on Automatic Earth readers for donations, which is not a healthy situation for anyone involved.

I didn’t want to continually ask our readers for more money, and O Allos Anthropos needed to find other sources for fund-raising. The problem is that is easier said than done, for multiple reasons. If you have no experience when it comes to fund-raising, it’s hard to know where to start, and it’s hard to organize yourselves to do it. And then you end up broke, as O Allos Anthropos is right now.

Still, I think they could have tried a bit harder, but then, it’s not about me. It’s about the people we help, the refugees and homeless. If you follow my essays at the Automatic Earth a little, you will know that the situation for both groups (and sometimes they’re the same people) is still deteriorating at a rapid pace. And as much as the Greek people are willing to help, most of them are getting poorer fast as well.

Between ever more and higher taxes on the one hand, and ever more cuts to wages and pensions on the other, a recovery of the Greek economy slips further away and out of view by the day, taking people’s ability to take care of the very poorest out with it. And in this case, too, politicians are not going to lend a helping hand unless they see political gain in it.

 

Greek Minister for Migration Yiannis Mouzalas recently said he could not exclude the possibility that refugees would die on the Greek islands this winter. He’s had two years to do just that, though. That’s enough time to run out of excuses to blame the situation on anyone else. But he’s right: people will probably die there this winter.

There are thousands living in summer tents with no heating, surrounded by wet mud and sheer misery, and with sanitation facilities that provide no privacy and are dirtier than many a manger in a stable could be. If anything, they make one think of Joseph and Mary all over again; just worse, probably. The EU reportedly has spent $1.4 billion on the situation so far, and this is the result.

Mouzalas was nominated for the Council of Europe’s human rights commissioner, and it was no big surprise he didn’t get the job. Though with the example of Saudi Arabia chosen to head a key UN human rights panel, anything is possible.

 

There is no way that it’s impossible to build adequate facilities for some 20,000 refugees and migrants with $1.4 billion. If that doesn’t work, and it hasn’t, one can only conclude that various parties involved, the EU, the Greek government, and the alphabet soup of NGOs operating in Greece, don’t see these facilities as their no. 1 priority. Thing is, who’s going to call them on it, and what good would that do?

The only priority the EU has when it comes to refugees is to keep them out; the politicians in power in member states read the polls and see their voters don’t want refugees in their countries. So they fund armies and detention camps in Libya etc., where people are sold for $400 or so in open slave markets. And then they talk about Christian values.

Greece has been completely swamped and torn apart by the issue, granted, but that doesn’t mean Mouzalas and Tsipras et al couldn’t have done -and do- a lot more to guarantee at least minimal human dignity to those stuck, if not incarcerated, on the islands. There are hundreds if not thousands of underage children, women, sick people, elderly, stuck in conditions not even the ass and the oxen were in 2,000 years ago.

There’s no way that’s the best we can do. It’s an utter disgrace that shames any and all Christian values, and the man they were named after.

O Allos Anthropos cannot solve these issues, all it can so is help where it can. First, feed the homeless Greeks and refugees in the cities, especially Athens. Then, make life more bearable for those hardest hit by both their circumstances and the way the political classes and the humanitarian-industrial complex deal with them.

And in the end that’s perhaps the only thing we can do: not try and launch huge movements and sweep away a status quo, but work on a small scale, a human scale, human-to-human. Work on a Jesus scale, rather than a Church scale. I know, there are many churches that do help where they can, but that too is most effective where the scale is smallest.

 

 

Konstantinos has taken O Allos Anthropos to Bodrum in Turkey this summer, a place where many thousands of Syrians and other refugees are now held up instead of sailing to the Greek islands. These people have nowhere to go, Greece is largely off limits – though the numbers crossing are increasing again- while in the countries they fled, the west is fighting for prominence instead of helping them rebuild.

We will not solve this problem, or at least it will take many years, and the needs of the worst-off, both Greeks and refugees, are immediate. The only way we have to save the world, or make it a better place, is one person at a time. Everyone who tries to do anything on a larger scale fails miserably.

So that’s what we’ll do. Konstantinos and I, and all the other people involved. One person at a time. We can only do that with your help tough. So once again, please be generous this Christmas. Do that spirit honor. Let’s make 2018 a good year for everyone who needs help to make it one.

 

 

For donations to Konstantinos and O Allos Anthropos, the Automatic Earth has a Paypal widget on our front page, top left hand corner. On our Sales and Donations page, there is an address to send money orders and checks if you don’t like Paypal. Our Bitcoin address is 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT. For other forms of payment, drop us a line at Contact • at • TheAutomaticEarth • com.

To tell donations for Kostantinos apart from those for the Automatic Earth (which badly needs them too!), any amounts that come in ending in either $0.99 or $0.37, will go to O Allos Anthropos. Every penny goes where it belongs, no overhead. Guaranteed. It’s a matter of honor.

 

Please give generously.

 

 

A list of the articles I wrote so far about Konstantinos and Athens.

June 16 2015

The Automatic Earth Moves To Athens

June 19 2015

Update: Automatic Earth for Athens Fund

June 25 2015

Off to Greece, and an Update on our Athens Fund

July 8 2015

Automatic Earth Fund for Athens Makes First Donation

July 11 2015

AE for Athens Fund 2nd Donation: The Man Who Cooks In The Street

July 22 2015

AE Fund for Athens: Update no. 3: Peristeri

Nov 24 2015

The Automatic Earth -Finally- Returns To Athens

Dec 25 2015

Help the Automatic Earth Help the Poorest Greeks and Refugees

Feb 1 2016

The Automatic Earth is Back in Athens, Again

Mar 2 2016

The Automatic Earth for Athens Fund Feeds Refugees (Too)

Aug 9 2016

Meanwhile in Greece..

Nov 28 2016

The Other Human Needs Your Help This Christmas

Dec 21 2016

The Automatic Earth in Greece: Big Dreams for 2017

Mar 23 2017

The Automatic Earth Still Helps Greeks and Refugees

 

 


Konstantinos and a happy refugee

 

 

May 122015
 
 May 12, 2015  Posted by at 10:06 pm Finance Tagged with: , , , , , ,  


Arthur Rothstein Bank that failed. Kansas 1936

Greece paid off the IMF yesterday with its IMF reserves. Is that a big deal? Whatever you may want to read into this, it’s been obvious for years that Greece needs major debt restructuring if it wants to move forward and have a future as a country -let alone a member of the eurozone-. Instead, the EU/troika anno 2010 decided to bail out German and French and Wall Street banks (I know there’s an overlap)- instead of restructuring the debts they incurred with insane bets on Greece and its EU membership- and put the costs squarely on the shoulders of the Greek population.

This, as I said many times before, was not an economic decision; it was always entirely political. It’s also, by the way, therefore a decision the ECB should have fiercely protested, since it’s independent and a-political and it can’t afford to be dragged into such situations. But the ECB didn’t protest. And ever since the deed was done, Brussels presents it as if it were as unavoidable as Noah building the Ark. It’s not. It’s still just another decision to put banks before people.

And in this case the people have come out on the very short end of a very long stick. That’s what the Greek discussions have been about ever since Syriza was elected, with a substantial majority, to be the government in Athens. And no matter how many times how many people may claim Greece lived above its means for years, it’s obvious that the unemployed and the hungry children and the elderly without health care did not.

The troika says they bailed out the Greek people. The Greek people say only 8-9% of that bailout ever went to them, with the rest going to cover the losses of international systemic banks, and to the utterly corrupt previous Greek political and economic elites, which, coincidentally, the troika was only too happy to strike deals with, so much so that on the eve of the election Greeks were urged to vote the same elites into power once more, even if they were demonstrably to blame for the downfall of the Greek economy.

The troika wants the Syriza government to execute things that run counter to their election promises. No matter how many people point out the failures of austerity measures as they are currently being implemented in various countries, the troika insists on more austerity. Even as they know full well Syriza can’t give them that because of its mandate. Let alone its morals.

It’s a power game. It’s a political game. It always was. But still it has invariably been presented by both the – international- press and the troika as an economic problem. Which has us wondering why this statement by ECB member and Austrian central bank head Ewald Nowotny yesterday, hasn’t invited more attention and scrutiny:

ECB’s Nowotny: Greece’s problem isn’t economic

The Greek problem is more a political question than an economic one, a member of the European Central Bank said Monday. Discussions with political parties such as Greece’s left-wing Syriza and Spain’s Podemos may be refreshing by bringing in new ideas, “but at the end of the day, they must [end in] results,” ECB member Ewald Nowotny said, adding discussions are “not about playing games.”

The central banker declined to speculate on how to solve Greece’s financial problem saying the issue “is much more a political question than an economic question.” Mr. Nowotny also doesn’t see the ECB’s role as creating a federalized financial government inside the euro zone. “We cannot substitute the political sphere,” he said.

That seems, from where we’re located, to change the discussion quite a bit. Starting with the role of the ECB itself. Because, for one thing, and this doesn’t seem to be clear yet, if the Greek problem is all politics, as the central bank member himself says, there is no role for a central bank in the discussions. If Greece is a political question, the ECB should take its hands off the whole Greek issue, because as a central bank, it’s independent and that means it’s a-political.

The ECB should provide money for Greece when it asks for it, since there is no other central bank to provide the lender of last resort function for the country. Until perhaps Brussels calls a stop to this, but that in itself is problematic because it would be a political decision forced on an independent central bank once again. It would be better if the ‘union’, i.e. the other members, would make available what Greece needs, but they -seem to- think they’re just not that much of a union.

In their view, they’re a union only when times are good. And/or when all major banks have been bailed out; the people can then fight over the leftover scraps.

The IMF has stated they don’t want to be part of a third Greek bailout. Hardly anyone seems to notice anymore, but that makes the IMF a party to political decisions too. Lagarde et al claim they can’t loan to countries that don’t take the ‘right’ measures, but who decides which measures are the right ones? What’s more, how does the IMF, in that vein, explain the recent loans to Ukraine? Is Kiev doing better than Athens from an economic point of view? Or is this just us sinking into a deepening political quagmire?

Moreover, if we take Mr. Nowotny on his word, why are there still finance ministers and economists involved in the Greek issue negotiations? Doesn’t that only simply lead to confusion and delay? Every single news outlet in the world has taken over German FinMin Schäuble’s comment that Greece should have a referendum if they want, and that maybe that would clarify matters.

But that is not something for Schäuble to comment on, no more than it would be for Greek FinMin Varoufakis to suggest a referendum in Germany. While everyone would consider the latter preposterous, the same everyone takes the former serious. That’s power politics for you, and a press that’s lost track of its position in the world. A press that’s turned into a propaganda mechanism for whoever’s in charge at any given moment in time.

If the Greek issue is now, or perhaps has always been, an overwhelmingly political one, as Nowotny suggests, why do we still have Varoufakis and Dijsselbloem (who only has a degree in agricultural economics, whatever that may be) and former German secret service head Schäuble, discussing matters? After all, why would you leave political issues up to your finance ministers to discuss? That’s not their field.

If it’s all political, shouldn’t it be the political leaders, Merkel and Juncker and Tsipras, talking instead? Something tells us that might not be such a bad idea in any case. Certainly by now. If the ECB itself already says it’s not about money…

May 112015
 
 May 11, 2015  Posted by at 10:58 am Finance Tagged with: , , , , , , , , , , ,  


Unknown Wharf, Federal artillery, and schooners, City Point, Virginia 1865

ECB’s Nowotny: Greece Much More Political Than Economic Question (Reuters)
Greece’s ‘War Cabinet’ Prepares To Battle EU Creditors As Anger Mounts (AEP)
IMF and ECB Loom Large Over Greece’s Debt Talks (NY Times)
How The ECB Became The Real Villain Of Greece’s Debt Drama (Telegraph)
No Solution In Sight For Greek Crisis – Tsipras’ Impossible Dilemma (Guardian)
EU’s Unraveling Plans For Greek Debt Risks Split Among Creditors (Bloomberg)
IMF Works With Greece’s Neighbors to Contain Default Risks (WSJ)
It’s Not Just Greece, China’s Retreat Threatens European Bonds (Bloomberg)
Farewell To The United Kingdom- Let It Bleed (Tariq Ali)
Cameron Must Accept SNP’s Anti-Austerity Mandate, Or The UK Is Finished (IBT)
Sturgeon Says SNP Is Real Opposition in Commons Amid Labour Woes (Bloomberg)
Anti-Austerity Group Plans Major Protest Outside Bank Of England (Guardian)
The Economist’s Racist Headline Must be Retracted Immediately (Bill Black)
Goldilocks Unemployment: A Disgusting Bowl Of Porridge (Mark St.Cyr)
Italy Must Become A Civilised Country With A Citizen’s Income (Grillo)
The Killing of Osama bin Laden (Seymour Hersh)
Inequality: How Rich Countries Can Make A Difference (Ken Rogoff)
EU Plans Refugee Quotas Forcing States To ‘Share’ Burden (Guardian)

It was always just politics.

ECB’s Nowotny: Greece More Political Than Economic Question (Reuters)

Any solution to Greece’s financial woes is much more of a political than an economic question, European Central Bank policymaker Ewald Nowotny said on Monday, as eurozone finance ministers meet to continue Greek debt talks. Top officials have voiced little optimism about a breakthrough at the meeting. Nowotny declined to suggest a way out of the impasse, reiterating that the ECB’s role was to ensure price and financial stability. Referring to Monday’s Eurogroup meeting he said: “It would be premature to give any details.”

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“We have agreed on a tougher strategy to stop making compromises. We were unified and we have a spring our step once again..”

Greece’s ‘War Cabinet’ Prepares To Battle EU Creditors As Anger Mounts (AEP)

Greece’s “war cabinet” has resolved to defy the European creditor powers after a nine-hour meeting on Sunday, ensuring a crescendo of brinkmanship as the increasingly bitter fight comes to a head this month. Premier Alexis Tsipras and the leading figures of his Syriza movement agreed to defend their “red lines” on pensions and collective bargaining and prepare for battle whatever the consequences, deeming the olive-branch policy of recent weeks to have reached a dead end. “We have agreed on a tougher strategy to stop making compromises. We were unified and we have a spring our step once again,” said one participant. The Syriza government knows that this an extremely high-risk strategy. The Greek treasury is already empty and emergency funds seized from local authorities and state entities will soon run out.

Greece’s mayors warned over the weekend that they would not release any more funds to the central government. The Greek finance ministry must pay the International Monetary Fund €750m (£544m) on Tuesday, the first of an escalating set of deadlines running into August. “We have enough money to pay the IMF this week but not enough to get through to the end of the month. We all know that,” said one minister, speaking to The Telegraph immediately after the emotional conclave. The war council came a day before Greece’s three-headed team – deputy premier Giannis Dragasakis, finance minister Yanis Varoufakis and deputy foreign minister Euclid Tsakalotos – are due to go to Brussels for a crucial meeting with Eurogroup ministers Time is running out for a deal opening the way for the disbursement of €7.2bn under an interim agreement, due to expire in June.

It is even harder to see how the two sides can narrow their enormous differences on a new bail-out programme, which must be intricately negotiated and then approved by the parliaments of the creditor states. German finance minister Wolfgang Schauble said over the weekend that Greece risked spinning into default unless there was a breakthrough soon. “Such processes also have irrational elements. Experiences elsewhere in the world have shown that a country can suddenly slide into insolvency,” he told the Frankfurter Allgemeine.
Greek officials retort that this is a conceptual misunderstanding by the German and North European authorities. Syriza officials say they may trigger the biggest sovereign default deliberately if pushed too far, concluding that it is a better outcome than national humiliation and the betrayal of their electoral vows to the Greek people.

“If it comes to the crunch, Greece must default and go its way,” said Costas Lapavitzas, a Syriza MP and member of the party’s standing committee. “There is no point raiding pension funds to buy time. We just exhaust ourselves for no purpose.” “We went up and down Greece in the elections urging the voters to throw out the old government. The question now is whether we mean what we say, and whether we have the courage of our convictions.”

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“At some point, you have to give up this orthodoxy of saying, ‘This is the right way of doing things.’ This is an unusual case.”

IMF and ECB Loom Large Over Greece’s Debt Talks (NY Times)

Greek leaders have fought fiercely in recent months with politicians from other European countries over relief on Greece’s vast debt load. Yet the power to decide the fate of Greece lies not just in the hands of these national governments, but also with unelected officials at two powerful institutions: the ECB and the IMF. Each is a creditor to Greece, and each is expecting the country to repay it billions of dollars of debt in the coming weeks. The influence of the ECB and the IMF will be felt behind the scenes on Monday, when finance ministers from Greece and other European nations meet in their latest effort to break an impasse that is paralyzing the Greek economy and frightening global markets. Greece is expected to repay €750 million to the monetary fund on Tuesday as scheduled.

For the rest of the year, however, its debt repayments to the fund and the central bank total nearly €12 billion. The politicians at the meeting are racing against the clock to forge a deal that would give Greece enough money to repay both this summer. In theory, both institutions could greatly ease the situation by agreeing to delay repayment, or even forgiving some of their Greek debt. But they see themselves as a special class of creditors — so-called lenders of last resort — that should not write off the money they lend. Still, some sovereign debt specialists say that there is a case for the monetary fund to take a hit on its Greek loans. The institution, they assert, backed the policies that deflated Greece’s economy, making it harder for Greece to service its debt.

“There is no question in my mind that the I.M.F. needs to be part of the debt forgiveness,” said Ashoka Mody, a visiting professor at Princeton and formerly a senior official at the fund. “At some point, you have to give up this orthodoxy of saying, ‘This is the right way of doing things.’ This is an unusual case.” Debt forgiveness from the central bank has even broader support from outside investors and economists because the bank avoided taking a loss on €27 billion worth of Greek bonds in its portfolio while private sector investors lost more than half of their money in the 2012 Greek debt restructuring. Still, there has been no sign that either institution is considering yielding on its payment schedule.

If there are no concrete signs of progress in the talks Monday, a majority of the central bank’s governing council would be in favor of placing additional restrictions on lending to Greek banks as early as this week, people briefed on the council’s discussions said. “Their interest is to get their money back,” said Zsolt Darvas, a senior fellow at Bruegel, a research organization in Brussels. Greek officials, meanwhile, have contemplated steps that would test the institutions’ hard-line stance. Discussions in the Greek government have included assessing the pros and cons of not paying the central bank and the monetary fund. In such a case, which was described as a last-ditch option and not a plan for action, Greece would keep paying debts owed to private sector bondholders and other European governments.

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“In their attempt to respect their duties, the ECB’s policymakers have made themselves political..”

How The ECB Became The Real Villain Of Greece’s Debt Drama (Telegraph)

When a rogue protester scaled the platform occupied by European Central Bank president Mario Draghi at his monthly press conference in April, the usually unruffled Italian could be forgiven for being paralysed by fear. Confronted with female activist shouting “end the ECB dictatorship”, Mr Draghi was showered with pamphlets bearing a list of inchoate threats, accusing the central bank of “autocratic hegemony” and Mr Draghi of being an evil “master of the universe”. As she was swiftly whisked away by ECB henchman, the Twittersphere was soon abuzz with rumours of the identity and possible motivation behind Mr Draghi’s “confetti-bomber.” As it turned out, 21-year old German Josephine Witt, was not a disgruntled Greek citizen demanding answers from the ECB chief.

But the feminist agitator was a stark reminder that technocratic central bankers are not immune from public anger over eurozone economic policy. In the last three months, the Frankfurt-based ECB has become the target of vociferous criticism for its handling of the Greek crisis. Weeks before the confetti attack, Mr Draghi was heckled by a Greek journalist at a press conference in Nicosia. Before that, he was the subject of a tirade from a Greek MEP during an address at the European Parliament. On both occasions, the Italian was shouted down as he was forced to defend his institution’s role in Greece’s debt drama. “In their attempt to respect their duties, the ECB’s policymakers have made themselves political,” Greece’s finance minister Yanis Varoufakis told an audience of academics and economists in Paris last month.

The refrain strikes at the heart of his government’s complaints against the notionally independent ECB. As one of Greece’s three main creditors – alongside the IMF and the European Commission – the central bank is unique in wielding the power that can ultimately force the country out of the single currency. Despite not officially being party to the political negotiations over extending Greece’s bail-out, the ECB has made a number of discretionary moves since the Syriza government was elected just over 100 days ago. When he first swept into power, Prime Minister Alexis Tsipras appealed to Mr Draghi to provide some form of bridging finance to keep the country afloat as he sought to re-write the terms of Greece’s rescue programme. It soon became clear the Italian would not be playing ball. Not only has the ECB rebuffed requests for temporary financial relief, but its disciplinarian stance has led to accusations that it is acting ‘ultra vires’ – taking politically motivated action outside of its legal remit to ensure financial stability in the eurozone.

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“It’s not in anyone’s interests to have a crisis now..”

No Solution In Sight For Greek Crisis – Tsipras’ Impossible Dilemma (Guardian)

“Nothing will change this week,” said Aris Karnachoritis confidently as the waitress handed out bottles of beer and frosted glasses to him and his friends. Constantinos Neocleous, sitting beside him at a table on the beach at Vouliagmeni near Athens, nodded in agreement. “It’s not in anyone’s interests to have a crisis now,” he said. Beyond the beach lay shallow waters of radiant turquoise. Children paddled. Teenagers romped. And from nearby, where a group of young men were playing beach tennis, came the comforting “plock-plock” sound of bat on ball. The talks between Alexis Tsipras’s government and its creditors have dragged on for so long that it has become hard to believe there will ever be a decisive make-or-break juncture.

And never has that been harder to believe than now, with the arrival of summer and the entrancing distractions it brings to a country like Greece. There is a striking disconnection in Athens between the blithe lack of concern that the government evinces, and which it has successfully communicated to much of the public, and the objective seriousness of Greece’s plight. This week Greece and the eurozone face a week of fresh nail-biting uncertainty as the single currency area’s finance ministers prepare to report on progress towards an agreement with Tsipras’s government. On Tuesday Greece is due to repay €770m (£560m) to the IMF. A deal with its creditors on moves to liberalise the economy would give it access to the remaining €7.2bn from a €240bn bailout.

But it has refused to budge on two “red-line” demands – for pension cuts and looser rules on hiring and firing – and hopes of reaching an agreement in time for a meeting of the finance ministers on Monday have gradually seeped away. On Thursday Greece’s finance minister, Yanis Varoufakis, promised that the IMF would nevertheless get its money. Armageddon – a Greek default on its borrowings followed in all likelihood by exit from the eurozone – may once again have been postponed. But for how long?

Beyond the IMF deadline loom far bigger repayments the government has to make to the ECB in the summer. Yet it is already so desperately short of funds that it has ordered local authorities and public bodies to turn over their cash reserves to the central bank. “We have only the money to pay for this month,” conceded Karnachoritis, a young civil engineer, as he sipped his beer. “But that has been the situation for the past two months.” Like his companions, he thought it would take several more months to reach an agreement. “I don’t believe anything will happen before September,” he said.

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“The uneasy relationship with the Eurogroup, which wanted IMF rigor in bailout reviews but not its debt sustainability and financing criteria, is looking increasingly unsustainable..” “Just like the Greek debt.”

EU’s Unraveling Plans For Greek Debt Risks Split Among Creditors (Bloomberg)

Greece’s ballooning debt load is casting doubt over the IMF’s role in future bailouts. The IMF typically needs debt to be sustainable to provide more funds and, with the economy faltering, Greece is heading in the wrong direction. Creditors preparing for talks on Greece this week have just one positive scenario and three negative ones, the most extreme of which is that the government starts paying employees in IOUs, German newspaper Die Welt reported. The European Commission forecast last week that the country’s debt will be 174% of gross domestic product next year, 15 percentage points above the level projected in February. And even that assumes Prime Minister Alexis Tsipras reaches a deal to get previously agreed aid flowing.

The projection means that if there’s an agreement, the Greek leader is still going to hit bureaucratic and political resistance to longer-term support. While the euro area has denied debt relief to Greece and insisted Tsipras observe the terms of the existing bailout, the IMF has signaled its concern over the deterioration in the country’s finances. “The uneasy relationship with the Eurogroup, which wanted IMF rigor in bailout reviews but not its debt sustainability and financing criteria, is looking increasingly unsustainable,” said Michael Michaelides a rates strategist at Royal Bank of Scotland Plc. “Just like the Greek debt.” Asked about the implications of the Commission’s forecasts for Greece, IMF spokeswoman Angela Gaviria referred to a November 2012 statement in which Managing Director Christine Lagarde said Greece’s debt was expected to decrease to 124% of GDP by 2020.

As Greece’s chances of hitting the target recede, it makes it more difficult for the IMF to justify extending additional funds because the Washington-based lender is prohibited by its own rules from lending to countries with unsustainable debts. If the euro area concedes that the debt burden is not sustainable, that would add weight to Greece’s appeal for more debt relief, an offer that its creditors have dangled since 2012 as an incentive to make good on the terms of its bailout. Greece could win a cut in its interest payment and an extension of its repayment period if it sticks to the deal and delivers a primary budget surplus.

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How the IMF grabs more control.

IMF Works With Greece’s Neighbors to Contain Default Risks (WSJ)

The IMF is working with national authorities in southeastern Europe on contingency plans for a Greek default, a senior fund official said—a rare public admission that regulators are preparing for the potential failure to agree on continued aid for Athens. Greek banks are big players in some of its neighbors’ financial systems. In Bulgaria, subsidiaries of National Bank of Greece, Alpha Bank, Piraeus Bank and Eurobank Ergasias own around 22% of banking assets, roughly the same as Greek banks own in Macedonia. Greek banks are also active in Romania, Albania and Serbia. “We are in a dialogue with all of these countries,” said Jörg Decressin, deputy director of the IMF’s Europe department. “We are talking with them about the contingency plans they have, what measures they can take.”

As part of the discussions, the IMF has asked national supervisors to ensure that subsidiaries of Greek banks have enough assets that they can exchange for emergency financing at their own central banks—in case financing from their parent institutions is suddenly cut off—and that deposit-insurance funds are at sufficient levels, he said. Negotiations between Greece and its international creditors—the other eurozone countries and the IMF—have been advancing slowly, despite warnings from Greek officials that the government is close to running out of money. “It would be foolish for anyone in the policy world not to be worried at this stage,” Mr. Decressin said.

European officials expect no breakthroughs at a meeting of the currency union’s finance ministers on Monday. That means Greek lenders will remain under pressure, dependent on relatively expensive liquidity from the Greek central bank and at risk of bank runs in case doubts emerge over their ability to pay out deposits. Overall, the IMF believes that subsidiaries of Greek banks in southeastern Europe should be able to withstand the failure of their parent companies. “Our assessment of the Greek banks in that region is that they are fairly liquid; we have not seen major deposit outflow,” Mr. Decressin said. Because they are subsidiaries, rather than branches, the lenders have to hold their own capital buffers and can refinance themselves at national central banks. That would make it easier to split them off from their parent banks if necessary.

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Elephant, meet room.

It’s Not Just Greece, China’s Retreat Threatens European Bonds (Bloomberg)

European policy makers will be focused on Greek aid talks in Brussels on Monday. Investors may need to look further afield to fully explain the sell-off in the continent’s sovereign debt market. China’s foreign currency reserves had their biggest quarterly drop on record in the first three months of the year and the yuan is trading at the closest to fair value since 2010, according to Goldman Sachs. That means less demand for assets in dollars and euros from the world’s biggest creditor. The Chinese central bank has amassed $3.73 trillion in currency reserves over the past decade in a bid to hold down the value of the yuan and underpin the competitiveness of its exporters.

As the government in Beijing changes gear, cultivating domestic demand to sustain economic growth, it may affect European bond markets just as much as the Greek efforts to win better terms from creditors. “It’s quite clear that China’s foreign exchange reserves can’t grow like before,” said Li Jie, head of the foreign-exchange reserve research center at the Central University of Finance and Economics in Beijing. “There will be fewer and fewer funds available from China for European treasury bonds.” The People’s Bank of China said Sunday it will reduce the one-year lending rate by a quarter of a%age point to 5.1%, in a further sign of the shift in focus.

Germany’s 10-year borrowing costs almost quadrupled over the past three weeks as investors turned against negative yields and those on Italian and Spanish securities breached 2% for the first time this year on May 7. Bonds fell even as the European Central Bank pressed ahead with its €1.1 trillion program of government debt purchases. Euro-area finance ministers are meeting in Brussels on Monday to assess Greece’s plans to meet the terms of its bailout and obtain the aid it needs to stave off a default.

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View from the left.

Farewell To The United Kingdom- Let It Bleed (Tariq Ali)

In England the third party in terms of number of votes cast is UKIP. It gained votes from both Labour and Conservatives, but its 4 million votes (12.6%) obtained just a single seat in Parliament. The Greens with over a million also have a single MP. The absurdity of an electoral system that gives the Conservatives an overall majority (331 seats) with 36.9% of the votes cast, Labour (232 seats) with 30.4% reducing the other English parties to nothingness is clearly long past its sell by date. A serious campaign for a proportional system is needed. The first-past-the-post, winner-takes all system is a malignant cancer that needs to be extracted from the body politic.

What of English radicalism? It’s not a pure accident that a right-wing party like UKIP has become the third force. The effective collaboration between the major trades unions and the Labour leadership meant that building social movements to challenge privatizations and demanding public ownership for utilities, more public housing, local democracy, and the renationalization of the railways fell by the wayside. No other force was capable of organizing an extra-parliamentary base for a rejection and reversal of extreme centre policies. This is the challenge that now confronts all those who want a strategic break with the Thatcher-Blair consensus in England. Not an easy task. Possibilities, however, exist but they require forces on the ground to help create a new movement that speaks for the oppressed and exploited.

The Labour leadership contest is a no-hoper for the Left. The names being touted are worse than useless. What would help a great deal is if early in the new parliament, the handful of left MPs effectively broke from Labour and established a new, radical caucus to link up with forces outside. I doubt that they will and here the Bennite tradition is, to put it at its mildest, unhelpful. Its attachment to Labour at a time when the party broke with its own social-democratic past and opted for a full-blown capitalism was wrong-headed and led to an impasse.

We need an alliance of all radical forces to build an anti-capitalist movement in England. A movement that is both new but also prepared to search the past for help: the Grand Remonstrance of the 17th century, the Chartist rebellions of the 19th century, the more recent developments in South America, Greece and Spain also offer a way forward. As for the Labour Party, I think we should let it bleed. Here the Scottish route offers hope.

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More or less what I was saying yesterday.

Cameron Must Accept SNP’s Anti-Austerity Mandate, Or The UK Is Finished (IBT)

The electoral divergence between Scotland and England is, of course, even more extreme this time. The Tory government has just one seat in Scotland, compared to the 10 Thatcher was left with after the 1987 rout. The other seats are not dominated by a Labour party content to bide its time until it can build a UK-wide majority, but by a pro-independence party that will not accept the legitimacy of Tory rule unless the “vow” which secured the No vote in last year’s referendum is implemented in full. That perhaps wouldn’t pose such a problem for Cameron if the policies that he has received a clear English mandate to implement weren’t so utterly irreconcilable with the policies that the SNP have won an even clearer (in fact much, much clearer) Scottish mandate for.

In Scotland, the democratic will is for an end for austerity, in England it is for swingeing cuts. The ‘One Nation’ rule that Cameron rather oddly promises is almost a contradiction in terms when the nation in question has just spoken with two distinct voices. If London rule is to be maintained, the only way of respecting the Scottish people’s wishes is to exempt them from the austerity imposed on everyone else. That is surely inconceivable. Ironically, a compromise to cover the whole UK probably could have been reached if a Labour minority government had taken office with the support of the SNP.

Cameron chose to whip up irrational fear about that possibility in England, and now he must live with the consequences. In the light of Thursday’s result, the circle can only be squared by constitutional change. Any previous distinction between Nicola Sturgeon’s demands for an end to austerity and for more powers to be transferred to the Scottish Parliament has suddenly vanished, because under a Tory majority government the first is literally impossible without the second.

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But can she speak for all Britons?

Sturgeon Says SNP Is Real Opposition in Commons Amid Labour Woes (Bloomberg)

Scottish First Minister Nicola Sturgeon staked a claim for her nationalists to be seen as the effective opposition to David Cameron’s Tories in the U.K. Parliament as Labour seeks a new leader in the wake of its election defeat. “Given that Labour are entering a period of introspection, questioning their very purpose in life, the SNP is going to be the principal opposition to the Conservatives,” Sturgeon said on BBC Television’s “Andrew Marr Show” Sunday. “There are people in England, Wales and Northern Ireland who will be as disappointed as people in Scotland that we’re looking at a majority Conservative government. We can be a voice for them.”

Sturgeon’s Scottish National Party took 50% of the vote and 56 of the 59 House of Commons seats in Scotland in Thursday’s election, in which the Tories unexpectedly won a parliamentary majority. Labour leader Ed Miliband resigned after the party’s defeat, which saw it lose 40 seats in Scotland. SNP support surged after the failure to achieve a majority for independence from the U.K. in September’s referendum. Cameron “cannot act now as if it’s business as usual in Scotland” and will have to offer the semi-autonomous Scottish government and the Parliament in Edinburgh more additional powers than have already been promised in the wake of the referendum, Sturgeon said.

The prime minister said in a victory speech on Friday that he intends to implement his devolution plans for Scotland as quickly as possible, “to create the strongest devolved government anywhere in the world with important powers over taxation.” “Scotland voted overwhelmingly for change and I think that has to be heeded,” she said, repeating calls for “priority devolution of powers over business taxes, employment, the minimum wage, welfare.” Another independence referendum is not “on the immediate horizon,” Sturgeon said. “What we have to do now is make sure we get the best deal for Scotland within the Westminster system.”

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The Guardian conveniently focuses on ‘disorder’.

Anti-Austerity Group Plans Major Protest Outside Bank Of England (Guardian)

The anti-austerity group behind a protest that escalated into violent clashes with riot police outside Downing Street on Saturday is planning another demonstration outside the Bank of England next month. The People’s Assembly has told campaigners to assemble “right on the doorstep of the very people who created the crisis in the first place” in central London on 20 June, sparking what could become a summer of anti-austerity protests across the UK. Hundreds of people attended the group’s impromptu demonstration outside Downing Street on Saturday after David Cameron was returned to No 10 with a Conservative majority. The protest quickly turned ugly, with green smoke bombs and tomato ketchup thrown at riot police officers in clashes that led to 15 arrests for violent disorder or assaulting police.[..]

In a Facebook post announcing its 20 June march, the People’s Assembly said it was arranging travel for supporters from across the country to the Bank of England for a demonstration that would be “bigger and bolder than ever we have done before”. More than 32,000 people on Facebook have said they will attend the rally, which would draw significant resources from both City of London police and the Metropolitan police if it is on the same scale as a 50,000-strong protest organised by the group last summer. The group says in its invitation to supporters: “With the Tories going it alone in government we know exactly what to expect. More nasty, destructive cuts to the things ordinary people care about – the NHS, the welfare state, education and public services.

“We’ll be assembling the demonstration in the heart of the City of London right on the doorstep of the very people who created the crisis in the first place, the banks and their friends in Westminster. We demand that the bankers and elite should pay for the crisis and not the vast majority who had nothing to do with it. “Now is the time to get organizing, to mobilize our communities, to prepare transport and spread the word. We need to do all that we can to make this demonstration bigger and bolder than ever we have done before.”

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English media exposed as bigots.

The Economist’s Racist Headline Must be Retracted Immediately (Bill Black)

It took exactly one day for the Tory election victory in the UK to produce the confidence among the Conservatives only remaining media organ with even a semblance of journalistic professionalism to reveal its true racism against the Scots. The Economist felt empowered to headline its article about the other electoral triumph, by the Scots, as “Ajockalypse now.” Wow, that is such a clever title. One can only imagine the back-slapping among the staff in the magazine’s halls at the ability to go full-racist given the election results. (The English have historically treated the Celts as separate “races.”) Here is a translation of the headline for a non-UK audience. “Jock” is defined in the Urban Dictionary (with a helpful example of usage after the definition):

A term used by English people to generally describe Scottish people in a derogatory fashion (was once a common male nickname within Scotland). It is now considered to verge on racism when used by a non-Scot. The Scottish equivalent for the Irish “Paddy” or “Bog-trotter”. “Those bloody Jocks are at it again with their whinging over the Barnett Formula and North Sea oil revenues.” Another major dictionary’s definition is similar. British Informal: a Scottish soldier or a soldier in a Scottish regiment. Usually Offensive. a term used to refer to or address a Scot”. The Oxford Dictionary agrees. “noun, informal , chiefly derogatory A Scotsman (often as a form of address).”

So the “cleverness” is that the once-respected magazine managed to use an ethnic slur and add an ending to it suggesting that the rise of the Scots as a political power in the House of Commons represents an “apocalypse” – a catastrophe of biblical proportions. Such fun! Let’s see what analogous fun we can have using slurs about other ethnic groups that the English have long despised. Jews, blacks, Catholics, Muslims, and Asians all have such endearing slurs that rhyme with so many words and allow “clever” word play in headlines. Oh, except if the Economist chose any of those groups it would result within the day in a retraction and apology. Celts, however, are fair game and the Scots are the Celtic target of choice today for the Tories. Indeed, Prime Minister Cameron’s paramount election strategy was demonizing the Scots as a “threat” to the English – a fact that the Economist chose to omit in favor of the myth that the Scots were on the “warpath” against the English.

The English papers were littered with other forms of “clever” ethnic slurs in the run-up to the election. “Sweaty sock” rhymes with “jock” and insults Scots as “sweaty” because they are more likely to be industrial laborers. The deliberately doubly offensive “Jockestan” – insulting the Scots and Muslims simultaneously – is a favorite of one of the UK’s prominent “journalists.” A Tory media troll whose claim to “fame” was not being chosen by the Donald as his “Apprentice” uses these slurs. She attacks the SNP leader as a “terrorist” and denounces her because she has red hair. Yes, red hair. Calling someone with red hair “ginger” is a common ad hominem insult in the UK. [..] I confess to a wicked wish that the Donald had picked her as his “Apprentice” – they richly deserve each other.

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“We now have the lowest participation rate since 1977 [..] I will tell you this: one of the words never bandied about during that period when it came to describe any jobs or employment report was “Goldilocks.”

Goldilocks Unemployment: A Disgusting Bowl Of Porridge (Mark St.Cyr)

It’s no wonder we find ourselves in this collective business environment of malaise and atrophy when people who are supposed to be informed, or anything else relating to business, use terms to describe the most recent jobs report as a “Goldilocks” print: i.e., “Not too bad – Not too good.” This term was the moniker de jure of Friday’s cadre of financial media economists, analysts, and next in rotation fund manager. Nothing more than cheerleaders to stagflation is what they’ve all proven themselves to be in my opinion than anything else. The actual print was that the economy created 223K new jobs vs expectations of 228K. Where the overall jobless rate now stands at 5.4 vs 5.5. The kicker? Not in the labor force: 93,194,000 up from 93,175,000. Let that last number sink in a moment.

We currently have over 93 Million able-bodied people without jobs – and growing. This is why it’s near incomprehensible, as well as outright disgusting to me that such a dismal showing in both the headline number as well as the onerous implications of such a downward revision to the month prior, coupled with the outright fallacy of suggesting the rate of unemployment has moved closer still to statistical “full employment” came with near giddiness and if not outright back slapping. i.e., “This is a Goldilocks print. Not too hot – not too cold. With a report like this – The Federal Reserve won’t dare raise rates and might actually have to contemplate instituting another round of QE if not outright QE4ever!” And yes; that was the reaction paraphrased across the financial media outlets. Again, personally – I found it all repulsive.

We now have the lowest participation rate since 1977 when Jimmy Carter was president. Although I was young during that period, I was around and working. (and when I wasn’t working, I was out looking daily) I will tell you this: one of the words never bandied about during that period when it came to describe any jobs or employment report was “Goldilocks.” As a matter of fact it was during that period of time the term “stagflation” came into prominence. The difference? It was used to describe an abysmal economy while hoping at some point the winds would change and we could regain our bearings to move out from under such stifling economic conditions. Today?

As these conditions have once again reared their ugly head the difference is today: these conditions are celebrated by the so-called “smart crowd” as reason to JBTFD! (just buy the dip) For this malaise sends the “right” signals to the Federal Reserve they should dare not raise interest rates off the zero bound anytime soon, and instead prolong this economic atrophy with the possible infusion of yet another round of QE. After all with economic malaise like this – NASDAQ™ 10K here we come!

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All EU countries except Italy, Greece and Hungary have one.

Italy Must Become A Civilised Country With A Citizen’s Income (Grillo)

“There are those that have said that it cannot be done, that the money’s not there, that it’s a gift to lazy people. And yet it’s enough to go round all the European capital cities to see that that’s not true. The Citizen’s Income exists in 25 of the 28 European countries (everywhere except in Italy, Greece and Hungary), even in countries with a GDP that’s just a tenth of what we have in Italy. In Spain the citizen’s income came into existence in 2008, right in the middle of the economic crisis, and it provides €532 a month to anyone with an income less than €5,000 a year. In the Netherlands people get €1,400 a month. In Ireland and Romania there’s no time limit and it keeps going until the person finds a job. In Estonia the law says that the national parliament must adjust the sum each year to allow for alterations in the cost of living.

In Finland the amount is doubled for families. In Lithuania as well as the Citizen’s Income people get their heating costs paid back by the State. In France anyone getting the Citizen’s Income has to sign an agreement that they will cooperate with the social services. In Denmark the citizen’s income is also given to those people under the age of 30 who are living with their parents. In all these countries, anyone who is underhand or who is working without declaring it, is severely punished. In Europe, the laws differ in their content. The requirements and the duration vary from country to country, but the lowest common denominator is there and it’s called the Citizen’s Income. The economic crisis has created a sea of desperation. In Italy, with the bonds brought in by Tremonti and Monti, the world of politics saved the banks, and they gave the financiers shields to protect them against the weapons that they themselves had created. The citizens were abandoned and left to their own devices.

In Europe there’s no such thing as “exited” people because they would have the Citizen’s Income. In Europe, fathers separated from their wives are not sleeping in their cars because they would have the Citizen’s Income. In Europe there are no “bamboccioni” {adult men living off their parents} because, thanks to the Citizen’s Income, they can shop for themselves without waiting for pocket money from mother. In Europe, unemployed people are not committing suicide, because after unemployment benefit ends, they get the Citizen’s Income. Are graduates sending off thousands of CVs to get their first job? While waiting for a response, those in Europe have the Citizen’s Income.

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Great, as Hersh always is.

The Killing of Osama bin Laden (Seymour Hersh)

It’s been four years since a group of US Navy Seals assassinated Osama bin Laden in a night raid on a high-walled compound in Abbottabad, Pakistan. The killing was the high point of Obama’s first term, and a major factor in his re-election. The White House still maintains that the mission was an all-American affair, and that the senior generals of Pakistan’s army and Inter-Services Intelligence agency (ISI) were not told of the raid in advance. This is false, as are many other elements of the Obama administration’s account. The White House’s story might have been written by Lewis Carroll: would bin Laden, target of a massive international manhunt, really decide that a resort town forty miles from Islamabad would be the safest place to live and command al-Qaida’s operations? He was hiding in the open. So America said. [..]

This spring I contacted Durrani and told him in detail what I had learned about the bin Laden assault from American sources: that bin Laden had been a prisoner of the ISI at the Abbottabad compound since 2006; that Kayani and Pasha knew of the raid in advance and had made sure that the two helicopters delivering the Seals to Abbottabad could cross Pakistani airspace without triggering any alarms; that the CIA did not learn of bin Laden’s whereabouts by tracking his couriers, as the White House has claimed since May 2011, but from a former senior Pakistani intelligence officer who betrayed the secret in return for much of the $25 million reward offered by the US, and that, while Obama did order the raid and the Seal team did carry it out, many other aspects of the administration’s account were false.

‘When your version comes out – if you do it – people in Pakistan will be tremendously grateful,’ Durrani told me. ‘For a long time people have stopped trusting what comes out about bin Laden from the official mouths. There will be some negative political comment and some anger, but people like to be told the truth, and what you’ve told me is essentially what I have heard from former colleagues who have been on a fact-finding mission since this episode.’ As a former ISI head, he said, he had been told shortly after the raid by ‘people in the “strategic community” who would know’ that there had been an informant who had alerted the US to bin Laden’s presence in Abbottabad, and that after his killing the US’s betrayed promises left Kayani and Pasha exposed.

The major US source for the account that follows is a retired senior intelligence official who was knowledgeable about the initial intelligence about bin Laden’s presence in Abbottabad. He also was privy to many aspects of the Seals’ training for the raid, and to the various after-action reports. Two other US sources, who had access to corroborating information, have been longtime consultants to the Special Operations Command. I also received information from inside Pakistan about widespread dismay among the senior ISI and military leadership – echoed later by Durrani – over Obama’s decision to go public immediately with news of bin Laden’s death.

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Rogoff sounds confused here.

Inequality: How Rich Countries Can Make A Difference (Ken Rogoff)

Europe’s migration crisis exposes a fundamental flaw, if not towering hypocrisy, in the ongoing debate about economic inequality. Wouldn’t a true progressive support equal opportunity for all people on the planet, rather than just for those of us lucky enough to have been born and raised in rich countries? Many thought leaders in advanced economies advocate an entitlement mentality. But the entitlement stops at the border: though they regard greater redistribution within individual countries as an absolute imperative, people who live in emerging markets or developing countries are left out. If current concerns about inequality were cast entirely in political terms, this inward-looking focus would be understandable; after all, citizens of poor countries cannot vote in rich ones.

But the rhetoric of the inequality debate in rich countries betrays a moral certitude that conveniently ignores the billions of people elsewhere who are far worse off. One must not forget that even after a period of stagnation, the middle class in rich countries remains an upper class from a global perspective. Only about 15% of the world’s population lives in developed economies. Yet advanced countries still account for more than 40% of global consumption and resource depletion. Yes, higher taxes on the wealthy make sense as a way to alleviate inequality within a country. But that will not solve the problem of deep poverty in the developing world. Nor will it do to appeal to moral superiority to justify why someone born in the west enjoys so many advantages.

Yes, sound political and social institutions are the bedrock of sustained economic growth; indeed, they are the sine qua non of all cases of successful development. But Europe’s long history of exploitative colonialism makes it hard to guess how Asian and African institutions would have evolved in a parallel universe where Europeans came only to trade, not to conquer. Many broad policy issues are distorted when viewed through a lens that focuses only on domestic inequality and ignores global inequality. Thomas Piketty’s Marxian claim that capitalism is failing because domestic inequality is rising has it exactly backwards. When one weights all of the world’s citizens equally, things look very different. In particular, the same forces of globalization that have contributed to stagnant middle-class wages in rich countries have lifted hundreds of millions of people out of poverty elsewhere.

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The media still talk about migrants, whereas Brussels says: “The EU needs a permanent system for sharing the responsibility for large numbers of refugees and asylum seekers among member states.”

EU Plans Refugee Quotas Forcing States To ‘Share’ Burden (Guardian)

The EU’s executive body is to unveil radical new proposals on immigration, imposing migrant quotas on the 28 countries of the union under a distribution “key” system set by Brussels. The plan, which is supported by Germany and will be fiercely resisted by the new Conservative government, will be launched by the European commission on Wednesday in response to migrant boat crisis in the Mediterranean. The bold move by Brussels comes as the EU draws up plans for military attacks in Libya to try to curb the flow of people across the Mediterranean by targeting the trafficking networks. The EU’s top diplomat is to unveil an attempt on Monday to secure a UN mandate for armed action in Libya’s territorial waters.

Britain is drafting the UN security council resolution that would authorise the mission, senior officials in Brussels said. It would come under Italian command, have the participation of about 10 EU countries – including Britain, France, Spain and Italy – and could also drag in Nato, although there are no plans for the initial involvement of the alliance. While there is broad support within the EU for the military plans, the proposals for sharing the immigration burden are highly controversial and divisive. On Sunday night the Home Office said the plans were unacceptable to the UK, putting Cameron on a collision course with German chancellor Angela Merkel and other EU leaders as he begins attempts to renegotiate Britain’s relationship with Brussels ahead of a promised in/out referendum in 2017.

“The UK has a proud history of offering asylum to those who need it most, but we do not believe that a mandatory system of resettlement is the answer. We will oppose any EU commission proposals to introduce a non-voluntary quota,” a spokesman said. The policy document, obtained by the Guardian, demands new and binding rules establishing a quota system of sharing refugees among the member states. The migration agenda declares: “The EU needs a permanent system for sharing the responsibility for large numbers of refugees and asylum seekers among member states.” By the end of the year, Brussels is to table new legislation “for a mandatory and automatically triggered relocation system to distribute those in clear need of international protection within the EU when a mass influx emerges”.

The proposals will lay bare deep divisions between national governments over immigration, with the German chancellor, Angela Merkel, backing the scheme and Britain leading the resistance. Germany and Sweden between them take almost half the asylum seekers in the EU, and Berlin is predicting that the numbers this year could almost double to about 400,000 in Germany, two-thirds of the total number in the EU last year.

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Jan 112015
 
 January 11, 2015  Posted by at 9:22 pm Finance Tagged with: , , , , , ,  


Ann Rosener Reconditioning spark plugs, Melrose Park Buick plant, Chicago 1942

We need to do a lot more thinking, and take a far more critical look at ourselves, than we do at present. We’re not even playing it safe, we’re only playing it easy. And that’s just not enough. The marches in Paris and numerous other cities today were attended by people who mean well, but who should ask themselves if they want to be part of what was predictably turned into a propaganda event by ‘world leaders’. One thing is for sure; the murdered Charlie Hebdo staff would not have approved of it.

The leaders hark back to usual suspect slogans like we defend ‘Liberty’, ‘Freedom of Expression’ and ‘Our Values’. But we can’t turn our backs on the fact that ‘our values’ these days include torture and other fine ‘tactics’ that make people in other parts of the world turn their backs on us. We might want – need – to march to express our feelings about torture executed in our name, as much as to express our horror at cartoonists we never heard of being the target of automatic weapons.

There are major armed conflicts going on in 6 different Arab countries, and ‘we’ play a part in all of them. We get up in the morning and prepare to march against violence in our own streets, but we should perhaps – also – protest the violence committed in our name on other people’s streets just as much. We may feel innocent as we’re marching, but that’s simply because we refuse to look at ourselves in the mirror. And we must be able to do better than that. Both to be the best we can be (which is still a valid goal), and to prevent future attacks.

And that’s not nearly the entire story. Our governments play ‘divide and rule’ both domestically and abroad. They play nations against each other in far away parts of the globe, and poor vs rich and generation vs generation at home. If you want a better world, don’t look at your leaders to make that happen. They like the world the way it is; it got them where they are. Moreover, they’re all beholden to numerous supra-national organizations that are the real power behind the throne across the globe; NATO, IMF, EU, World Bank et al.

If you want a better world, and one in which the risk of attacks like the one this week goes down, you’ll have to look at yourself first, and take it from there. Marching in a mostly self-righteous parade in which the wrong people form the first line is not going to do it. You’re not going to solve this sitting on your couch. Our world is not just financially bankrupt, and in deep debt to boot, it’s also about as morally broke as can be.

We therefore have to rethink our world just about from scratch. Or else. We’ve lived chasing the recovery carrot for years now, but the economy won’t recover; it can’t. There hasn’t been any real growth since at least the 1980s, the only thing there’s been is increasing debt levels that we mistook for growth.

A great first example of how to do this rethinking was provided late last year, and I referred to it before, by UofM Amherst economics professor James K. Boyce:

Protecting Money or People?

Imagine that without major new investments in adaptation, climate change will cause world incomes to fall in the next two decades by 25% across the board, with everyone’s income going down, from the poorest farmworker in Bangladesh to the wealthiest real estate baron in Manhattan. Adaptation can cushion some but not all of these losses. What should be our priority: reduce losses for the farmworker or the baron? For the farmworker, and a billion others in the world who live on about $1 a day, this 25% income loss will be a disaster, perhaps the difference between life and death.

Yet in dollars, the loss is just 25 cents a day. For the land baron and other “one-percenters” in the U.S. with average incomes of about $2,000 a day, the 25% income loss would be a matter of regret, not survival. He’ll find a way to get by on $1,500 a day. In human terms, the baron’s loss pales compared with that of the farmworker. But in dollar terms, it’s 2,000 times larger. Conventional economic models would prescribe spending more to protect the barons than the farmworkers of the world.

It’s how we think. Boyce describes it perfectly. We chase money, no questions asked, and even call it no. 1. And unless we change the way we think, one Manhattan land baron will be saved, and 1000 Bangla Deshi farmers and their entire families will either drown or be forced higher inland, where there are already too many people just like them. A dollar or a person. Our present economic models know which one to choose. But we should have more than mere economic models guide us.

Michael Lewis – yes, him – provides another wonderful example in the New Republic. I tried to make the quote as short as I could, but, hey, Lewis is .. Lewis. The original title was ‘Extreme Wealth Is Bad for Everyone – Especially the Wealthy’ (Getting rich won’t make you happy. But it will make you more selfish and dishonest). The Week turned in into this:

What Wealth Does To Your Soul

When I was 14, I met a man with a talent for restoring a sense of fairness to a society with vast and growing inequalities in wealth. His name was Jack Kenney, and he’d created a tennis camp, called Tamarack, in the mountains of northern New Hampshire. The kids who went to the Tamarack Tennis Camp mostly came from well-to-do East Coast families, but the camp itself didn’t feel like a rich person’s place: It wasn’t unusual for the local health inspectors to warn the camp about its conditions, or for the mother of some Boston Brahmin dropping her child off, and seeing where he would sleep and eat for the next month, to burst into tears.

Kenney himself had enjoyed a brief, exotic career as a professional tennis player — he’d even played a doubles match on ice with Fred Perry – but he was pushing 60 and had long since abandoned whatever interest he’d had in fame and fortune. He ran his tennis camp less as a factory for future champions than as an antidote to American materialism – and also to the idea that a person could be at once successful and selfish.

Jack Kenney’s assault on teenaged American inequality began at breakfast the first morning. The bell clanged early, and the kids all rolled out of their old stained bunk beds, scratched their fresh mosquito bites, and crawled to the dining hall. On each table were small boxes of cereal, enough for each kid to have one box, but not enough that everyone could have the brand of cereal he wanted. There were Froot Loops and Cheerios, but also more than a few boxes of the deadly dark bran stuff consumed willingly only by old people suffering from constipation.

On the second morning, when the breakfast bell clanged, a mad footrace ensued. Kids sprung from their bunks and shot from cabins in the New Hampshire woods to the dining hall. The winners got the Froot Loops, the losers a laxative. By the third morning, it was clear that, in the race to the Froot Loops, some kids had a natural advantage. They were bigger and faster; or their cabins were closer to the dining hall; or they just had that special knack some people have for getting whatever they want. Some kids would always get the Froot Loops, and others would always get the laxative. Life was now officially unfair.

After that third breakfast, Kenney called an assembly on a hill overlooking a tennis court. He was unkempt and a bit odd; wisps of gray hair crossed his forehead, and he looked as if he hadn’t bathed in a week. He was also kind and gentle and funny, and kids instantly sensed that he was worth listening to and wanted to hear what he had to say.

“You all live in important places surrounded by important people,” he’d begin. “When I’m in the big city, I never understand the faces of the people, especially the people who want to be successful. They look so worried! So unsatisfied!” Here his eyes closed shut and his hands became lobster claws, pinching and grasping the air in front of him. “In the city you see people grasping, grasping, grasping. Taking, taking, taking. And it must be so hard! To be always grasping-grasping, and taking-taking. But no matter how much they have, they never have enough. They’re still worried. About what they don’t have. They’re always empty.”

“You have a choice. You don’t realize it, but you have a choice. You can be a giver or you can be a taker. You can get filled up or empty. You make that choice every day. You make that choice at breakfast when you rush to grab the cereal you want so others can’t have what they want.”

On the fourth morning, no one ate the Froot Loops. Kids were thrusting the colorful boxes at each other and leaping on the constipation cereal like war heroes jumping on hand grenades. In a stroke, the texture of life in this tennis camp had changed, from a chapter out of Lord of the Flies to the feeling between the lines of Walden. Even the most fantastically selfish kids did what they could to contribute to the general welfare of the place, and there was not a shred of doubt that everyone felt happier for it. The distinction between haves and have-nots, winners and losers, wasn’t entirely gone, of course. But it became less important than this other distinction, between the givers and the takers.

So far for the Jack Kenney story. Michael Lewis continues:

What is clear about rich people and their money — and becoming ever clearer — is how it changes them. A body of quirky but persuasive research has sought to understand the effects of wealth and privilege on human behavior — and any future book about the nature of billionaires would do well to consult it.

One especially fertile source is the University of California at Berkeley psychology department lab overseen by a professor named Dacher Keltner. In one study, Keltner and his colleague Paul Piff installed note takers and cameras at city street intersections with four-way Stop signs. The people driving expensive cars were four times more likely to cut in front of other drivers than drivers of cheap cars.

The researchers then followed the drivers to the city’s crosswalks and positioned themselves as pedestrians, waiting to cross the street. The drivers in the cheap cars all respected the pedestrians’ right of way. The drivers in the expensive cars ignored the pedestrians 46.2% of the time – a finding that was replicated in spirit by another team of researchers in Manhattan, who found drivers of expensive cars were far more likely to double-park.

In yet another study, the Berkeley researchers invited a cross section of the population into their lab and marched them through a series of tasks. Upon leaving the laboratory testing room, the subjects passed a big jar of candy. The richer the person, the more likely he was to reach in and take candy from the jar — and ignore the big sign on the jar that said the candy was for the children who passed through the department.

Maybe my favorite study done by the Berkeley team rigged a game with cash prizes in favor of one of the players, and then showed how that person, as he grows richer, becomes more likely to cheat. In his forthcoming book on power, Keltner contemplates his findings:

If I have $100,000 in my bank account, winning $50 alters my personal wealth in trivial fashion. It just isn’t that big of a deal. If I have $84 in my bank account, winning $50 not only changes my personal wealth significantly, it matters in terms of the quality of my life — the extra $50 changes what bill I might be able to pay, what I might put in my refrigerator at the end of the month, the kind of date I would go out on, or whether or not I could buy a beer for a friend. The value of winning $50 is greater for the poor, and, by implication, the incentive for lying in our study greater. Yet it was our wealthy participants who were far more likely to lie for the chance of winning fifty bucks.

There is plenty more like this to be found, if you look for it. A team of researchers at the New York State Psychiatric Institute surveyed 43,000 Americans and found that, by some wide margin, the rich were more likely to shoplift than the poor. Another study, by a coalition of nonprofits called the Independent Sector, revealed that people with incomes below 25 grand give away, on average, 4.2% of their income, while those earning more than 150 grand a year give away only 2.7%. A UCLA neuroscientist named Keely Muscatell has published an interesting paper showing that wealth quiets the nerves in the brain associated with empathy.

If you show rich people and poor people pictures of kids with cancer, the poor people’s brains exhibit a great deal more activity than the rich people’s. “As you move up the class ladder,” says Keltner, “you are more likely to violate the rules of the road, to lie, to cheat, to take candy from kids, to shoplift, and to be tightfisted in giving to others. Straightforward economic analyses have trouble making sense of this pattern of results.”

But that wouldn’t work, you think? Not for you, not in today’s world, and certainly not for the political class? Well, we happen to have the example of a real life president of a nation who questions all we tend to think is ‘normal’. Back in October, HuffPo had this portrait of Uruguayan President José Mujica. And please see this against the backdrop of US presidential candidates raising hundreds of millions of dollars even just for their preliminary campaigns.

Mujica says what I often have, that money should be kept out of a political system, because if it isn’t it will end up buying and eating that system whole. Too late for the US and Europe, but perhaps not for Uruguay.

‘World’s Poorest President’ Explains Why We Should Kick Rich People Out Of Politics

People who like money too much ought to be kicked out of politics, Uruguayan President José Mujica told CNN en Español [..] “We invented this thing called representative democracy, where we say the majority is who decides,” Mujica said in the interview. “So it seems to me that we [heads of state] should live like the majority and not like the minority.” Dubbed the “World’s Poorest President” in a widely circulated BBC piece from 2012, Mujica reportedly donates 90% of his salary to charity.

Mujica’s example offers a strong contrast to the United States, where in politics the median member of Congress is worth more than $1 million and corporations have many of the same rights as individuals when it comes to donating to political campaigns. “The red carpet, people who play – those things,” Mujica said, mimicking a person playing a cornet. “All those things are feudal leftovers. And the staff that surrounds the president are like the old court.”

“I’m not against people who have money, who like money, who go crazy for money,” Mujica said. “But in politics we have to separate them. We have to run people who love money too much out of politics, they’re a danger in politics… People who love money should dedicate themselves to industry, to commerce, to multiply wealth. But politics is the struggle for the happiness of all.”

Asked why rich people make bad representatives of poor people, Mujica said: “They tend to view the world through their perspective, which is the perspective of money. Even when operating with good intentions, the perspective they have of the world, of life, of their decisions, is informed by wealth. If we live in a world where the majority is supposed to govern, we have to try to root our perspective in that of the majority, not the minority.”

“I’m an enemy of consumerism. Because of this hyperconsumerism, we’re forgetting about fundamental things and wasting human strength on frivolities that have little to do with human happiness.”

He lives on a small farm on the outskirts of the capital of Montevideo with his wife, Uruguayan Sen. Lucia Topolansky and their three-legged dog Manuela. He says he rejects materialism because it would rob him of the time he uses to enjoy his passions, like tending to his flower farm and working outside. “I don’t have the hands of a president,” Mujica told CNN. “They’re kind of mangled.”

Mujica is the kind of man, make that human being, who should be in charge of all countries. Money and politics don’t mix, or at least not in a democracy. And I don’t see any exceptions to that rule. Mujica is right: if and when the majority of people in a country are poor, which is true just about everywhere, and certainly in the Anglo world and most EU countries, then their president should be poor too.

And inevitably, if you would follow the example of your president, so should his people. Not dirt poor, not starving, just being content with basic necessities for you and your family. And then tend to your flower farm, or your vegetable farm, your kids.

Sounds stupid. I know. But we haven’t had any real growth in decades, and the wizard’s curtain is being lifted on the fake growth we did have since too. So maybe the economy’s not all that cyclical after all, or maybe the cycles are longer than we would like, Kondratieff 70 year like. Or even longer.

Ask anyone if they would like to have $1000, or $10,000 or $1 million or more, and you know that the answer would be. But Michael Lewis shows that none of it would make you any happier, if you already have – or make – enough to survive on. Still, it’s generally accepted that more is always good.

And then you have the president of Uruguay, admittedly a small country and in South America to boot, who says that only poor people can truly represent poor people, who will always be in the majority in whichever country you may live in, and that that is the core of democracy.

Here’s thinking we are absolutely clueless when it comes to the value of wealth, and that we keep chasing more of it because we’re not smart enough to recognize that value. And that that’s why we have torture and wars and all the other things that make us so ugly. We have absolutely no clue what the value of wealth is. And as long as we don’t, we shouldn’t have any.

Aug 152014
 
 August 15, 2014  Posted by at 6:48 pm Finance Tagged with: , , , ,  


DPC The shores of Biscayne Bay, Miami, Florida 1910

That’s not a bad metaphor to work with. “Conditioned to catch the falling knife”. The expression comes from the investment world, but it describes a much larger world today pretty accurately.

Investors use it to describe people who see a stock fall, rapidly, from for instance $50 to $20, call the low, and decide it’s a good buy, only to be stuck with huge losses (the knife that cuts their hand) as it goes down all the way to 25 cents.

Tyler Durden quotes Bloomberg’s Richard Breslow as saying this about financial markets:

Conditioned To Catch The Falling Knife

… there is this enormous consensus in all ideas and positions, everyone knows that central banks are there and driving everyone’s positioning“; my friend Bob Savage said yesterday:

“We’ve been trained to catch the falling knife by the central banks, one of those trading strategies that will work until it doesn’t and when the knife slips you will really have a taper tantrum.

It’s becoming harder and harder to look at the news and then guess what markets did in response [..] the expectation tends to be much more logical than the reaction.

If you look at how markets are trading, they move ahead of a central bank meeting, or a strong or weak number, then everyone is caught with the same position and you end up being right but proven wrong.”

Just like most of today’s investors are Pavlovians potty trained by central banks, most people don’t have opinions of their own on most other issues either; some never did, some recently lost them, but all of them are shaped by media and politics, not innate critical thinking.

It may seem that this is something of all times, but there is a difference, since as one’s exposure to media rapidly increases, so does the influence they have, or the way in which they have it.

In earlier days, most people’s opinions were formed by the communities they lived in, the churches they visited, the schools they attended – if any -, albeit admittedly in ways no less nefarious than the present ones.

But in those days far fewer people were even under the impression that they indeed did form their own opinions – who could read and write? – and were capable of critical thinking.

Now, just about everyone does, and that makes for a different view of the world of the individual. And a different approach to manipulation for opinion makers, of both the individual and the masses.

I’ve often talked with friends about how and why 100 years ago people went into World War 1 in Europe’s battlefields from all over the world. How all those Canadian boys got to be killed over in Belgium and France. And how none of us could imagine doing anything like that in this day and age.

But people then did, partly because the risk of dying wasn’t perceived as being as high as it turned out to be, but certainly also because of community pressure, shaped by schools and churches. If all boys in town go, who are you to stay behind?

Things have changed. We are to a much larger extent individuals now. We live in smaller family units, with much more space per capita and therefore much less direct interaction with others.

We also have had a lot more education, and feel that entitles us to pass judgments. We think school has provided us with objective ideas about the world.

But that’s where the pinch is. We are being fed preconceived ideas from day one – though that’s never what they’re called – and few of us can shake them.

To name an example, there are very few people who will tell you a particular TV ad for a detergent makes them buy the product, but that ad wouldn’t be there if it didn’t work, ergo: who buys the stuff? We have Freud and Jung and their findings of the sub- and unconscious to thank for that.

So how does a government today go about justifying going to war? How does it create an “enormous consensus in all ideas and positions”? It’s not that hard, when you think about it.

Political ideas and ideologies, and politicians themselves, can all be sold to the individual, and the masses, the same way detergent is. By appealing to the unconscious. The means through which ideas are transferred may have changed, but the “pillars” they are based on have not. Jung spent a lot of time working on archetypes, and the bogeyman stands out as a prime example of that. If you give the enemy a name and a face, the job’s half done.

Add to that that the enemy and his people do terrible things to babies, eat them, bury them alive, the image has always worked wonders, and still does. Throw in horrid abuse of women and it’s clear sailing. Rinse and repeat. Lots of rapid repetition, something our present media are ideally suited for. Repetition works miracles, in politics as it does in advertizing. It’s not a huge stretch to say that repetition outweighs evidence.

That’s how Saddam Hussein, Gadaffi and Osama Bin Laden, and today Vladimir V. Putin, have become household names in the US and Europe. And everyone recognizes their portraits too. Though Saddam was never proven to have had WMD, there’s no evidence for Bin Laden’s involvement in 9/11, and Putin so far is merely an unsubstantiated evil media figurehead as well.

People at a certain point simply feel sure that they “know”. Because they’ve seen the names and faces so many times a day, confirming their earlier preconceptions. It has precious little to do with critical thinking. It has to do with what everyone around them says.

To get back to the falling knife, investors – potty trained as they are – all think they’re going to come out winners, even though they know they can’t all win, and even though they know all of their friends and competitors think the exact same way they do, and make the same decisions.

That is the herd mentality. Perhaps not an archetype as such, but, if anything, something even older and more deeply engrained in our brains. What Richard Breslow says is that the vast majority of investors will end up catching the knife in their bare hands, and it’s going to hurt something bad. ” … everyone is caught with the same position and you end up being right but proven wrong”

That is, but of course, exactly what will happen to all of us who blindly follow our politicians and their cleverly disguised media messages on our bogeyman enemies and the wars we have to wage against them.

All we want is to be right in the end, that is to say, we want to conform to the meme common to our herd, and whether or not that will prove us wrong is not on our radar.

Still, just as investors will get burned by blindly following every single move and every single word that comes out of the Fed, we will all get burned and cut and hurt by following every word our politicians and media rinse and repeat. We risk doing quasi irreparable damage to our relations with various people in Russia and Iraq and many other places around the world, who don’t want us as their enemies anymore than we want them, just because our “leaders” seek to advance their agenda’s by demonizing these people.

It’s a dangerous sort of deceit, which doesn’t start when war, be it physical or trade or any other kind, is declared, it starts with how and why we elect the people who have the power to declare it in our name.

And then “when the knife slips you will really have a taper tantrum.”, or in other words, when you find out your Pavlovian preconceptions (yes, you!) have been awfully off the mark, you still have to deal with the consequences, and they may hurt. Whether it’s oil that’s no longer delivered, so you’re cold and miserable and stuck where you are and everything runs to a standstill, or it’s someone attacking your communities because the leaders you elected chose to attack theirs halfway around the world, you may find you’re the one who ends up catching that knife.

And then, inevitably, maybe someday you’ll realize that what you’ve caught, and got cut by, and have fallen into, is your own knife. You threw it up into the air. And you were conditioned to catch it.

Conditioned To Catch The Falling Knife (Zero Hedge)

The numbers out last night were once again largely on the weak side of disappointing, with very little reaction and even less of an intuitive reaction. As Bloomberg’s Richard Breslow writes, this is the downside of everyone having the same positions. Simply put, we’ve been trained to catch the falling knife by the CBs, one of those trading strategies that will work until it doesn’t and when the knife slips you will really have a taper tantrum. Via Bloomberg’s Trader’s Notes…

Some strategists are even finding good news in the euro area growth data, noting that it is impressive there is any growth at all when none was expected, unlike U.S. where 1H numbers disappointed — some people just don’t like black and white analysis. As we have mentioned before, it seems there is this enormous consensus in all ideas and positions, everyone knows that central banks are there and driving everyone’s positioning, my friend Bob Savage said yesterday: “we’ve been trained to catch the falling knife by the central banks, one of those trading strategies that will work until it doesn’t and when the knife slips you will really have a taper tantrum.”

It’s becoming harder and harder to look at the news and then guess what market did in response – although it’s a fun game to play at 3 in the morning when you can’t sleep. May perhaps be better to consider not so much trading the reaction to events, instead trade movements in anticipation thereof, trade the expectation, then go into the number flat, the expectation tends to be much more logical than the reaction. If you look at how markets are trading, they move ahead of a central bank meeting, or a strong or weak number, then everyone is caught with same position and you end up being right but proven wrong.

Welcome to the new normal.

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Two articles about a serious hiccup in the oil that keeps the engine sputtering along.

Banks Retreat From Repo Market That Keeps Cash Flowing (WSJ)

A critical part of the plumbing that keeps money flowing through the financial system is experiencing turmoil as new regulations prompt banks to step back from the multitrillion-dollar “repo” market. The large and opaque market for repurchase agreements helps keep finance and trading moving, allowing hedge funds, investment banks and other financial firms to borrow and lend short-term funds, often overnight. But there have been increasing signs of trouble. Big banks, which act as middlemen between borrowers and lenders, have been pulling back. In recent weeks, senior bankers have said they are reluctant to participate in the market because of regulatory requirements that make repo trading more expensive. Goldman Sachs reduced its repo activity by about $42 billion in the first six months of this year, citing capital requirements. Barclays cut back lending through repos and similar agreements by roughly $25 billion, to $289 billion in the first half of the year.

Bank of America and Citigroup made first-half reductions in repo lending of about $11.4 billion and about $8 billion, respectively. J.P. Morgan’s repo lending stayed roughly flat. Repos function as short-term loans, which are backed by collateral, such as a U.S. government bond. Borrowers agree to sell the bonds to another party for cash, with the promise to repurchase the bond at a slightly higher price some time in the future. Borrowers are often hedge funds and lenders are typically money-market funds. The banks’ pullback could make it harder for hedge funds to borrow, and money-market funds may have fewer places to invest. Investors generally may find it harder to find a trading partner for hedges or short sales. Risks posed by the repo market are the focus of a conference on Wednesday sponsored by the Federal Reserve Bank of New York. The diminishing role of banks in repos “could exacerbate swings in markets when interest rates rise” or other financial turbulence emerges, said Barclays analyst Joseph Abate.

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From A Flood Of Treasury Debt To A Scarcity Of Repo Collateral (Stockman)

Here’s a shocking tidbit. The Fed’s financial repression policies have so contorted the government bond market that repo on 5-year treasuries has recently been trading at a negative 25 basis points. That’s right. The hunger for good collateral is so great on Wall Street that some players are willing to lend short-term cash at a negative rate in order to get their hands on Uncle Sam’s debt paper. Now that’s some kind of financial deformation. For the past 14 years, in fact, Washington has been spewing red ink at unprecedented rates. Since the year 2000, publicly held treasury debt has soared from $3.5 trillion to about $12.6 trillion at present. And its first cousin—–defacto government debt issued by GSE’s such as Fannie and Freddie—-has exploded from $2 trillion to more than $6 trillion. So in theory, the markets should be floating on a sea of “good” collateral.

But that’s where this century’s massive outbreak of central bank money printing comes in. In their lunatic quest to stimulate jobs and growth through ultra-low interest rates, the central banks have absorbed massive amounts on government debt through their QE operations. The US central bank alone has expanded its balance sheet from $500 billion to nearly $4.5 trillion since the time of the dotcom bust in 2000. That means that enormous amounts of otherwise available collateral has been stuffed in the vaults of the state’s monetary central planning agency. During the final phase of QE, in fact, the Fed has focused its purchases on the so-called “belly” of the curve, scarfing up huge amounts of treasury paper in the 3-7 year maturity range. Accordingly, it has created an enormous and insensible scarcity which, in turn, has driven the yield on the 5-year treasury note to the absurd level of 1.6%.

Now the fact of the matter is that US treasuries are taxable; the current CPI rate is running at 2%; and it has averaged 2.4% over the last decade and one-half. So the real after-tax return on the 5-year note is deeply negative. Needless to say, nothing like that could happen in an honest free market for debt that was not pegged and administered by the Fed. Moreover, the Fed has had a lot of central bank help in creating this destructive artificial scarcity in the government debt market. Altogether, the central banks of the world and their sovereign investment fund affiliates own about $6 trillion or nearly half of the publicly held US treasury debt. It has simply been stuffed in the central bank vaults which function as a convoy of monetary roach motels: The bonds go in, but they never come out!

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Yeah, let’s start complaining about the meth running out.

More Money Down Adds to U.S. First-Time Buyer Blues (Bloomberg)

The challenges facing prospective buyers of the least expensive homes in the U.S. are getting harder to overcome. Already beset by stagnant wages, growing student debt and competition from investors who are snapping up listings, those looking to purchase moderately priced houses must also provide more cash up front. The median down payment for the cheapest 25% of properties sold in 2013 was $9,480 compared with $6,037 in 2007, the last year of the previous economic expansion, according to data from 25 of the largest metro areas compiled by brokerage firm Redfin Corp. The higher bar is a symptom of still-tight credit that is crowding out first-time buyers even as interest rates remain near historical lows. Younger adults, who would normally be making initial forays into real estate, are among those most affected, weakening the foundations of the housing market and limiting its contribution to economic growth.

“The numbers tell the story of why we have millions of potential homeowners who are renters or living with their parents,” said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School. “What has changed is the ability to become an owner. And that’s changed through a down payment that’s more than doubled.” [..] Mortgage originations dropped last quarter to the lowest level in 14 years, contributing to a decline in total consumer debt, the Fed of New York reported today. Mortgage originations decreased by $46 billion in the second quarter to $286 billion, marking the lowest level of new mortgage activity since 2000, the data show. Banks don’t want to make loans to borrowers they consider to be riskier because they’re worried about having to buy back the loans, said Mike Calhoun, president of the Center for Responsible Lending. And if they do give mortgages to borrowers who have lower credit scores, they’ll require a larger down payment to offset that risk, he said.

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Germany should get out of the eurozone just as much as Italy should. Much better for both.

End of the Wirtschaftswunder? Germany’s Sudden Slowdown (Reuters)

The German soccer team’s romp to victory in last month’s World Cup was hailed at home as a symbol of the country’s emergence as a confident global economic power. But in an ironic twist, the feel-good triumph in Brazil may have come at a time when Germany’s new “Wirtschaftswunder”, or economic miracle, is coming to an end. In recent weeks, the economy that proud German politicians have taken to describing as a “growth locomotive” and “stability anchor” for Europe, has been hit by a barrage of bad news that has surprised even the most ardent Germany skeptics. The big shocker came on Thursday, when the Federal Statistics Office revealed that GDP had contracted by 0.2% in the second quarter. The euphoria that we’ve seen, the perception that the German economy is booming is simply misplaced,” said Marcel Fratzscher, director of the DIW economic institute in Berlin. So why is Germany suddenly ailing? The standoff with Russia over Ukraine has received its fair share of blame in the German media.

But that conflict may not hit the economy with full force until the third quarter. It was only last month that Europe stung Moscow with economic sanctions, prompting a tit-for-tat response from Russian President Putin. In reality, economists and some government officials acknowledge, there are deeper reasons for the recent downturn. And they have little to do with the spike in geopolitical tensions in eastern Europe or the Middle East. They start at home, where Chancellor Angela Merkel’s abrupt exit from nuclear energy after the Fukushima disaster in Japan and aggressive push into renewables has unnerved German industry. A recent overhaul of the country’s complex renewable energy law has done little to alleviate uncertainty over future policy or assuage fears about German energy competitiveness. “Energy intensive industries in particular have lost confidence in the future of Germany as a business location,” said Thomas Mayer, a former chief economist at Deutsche Bank. “I think this is a major issue that will burden German industry for years to come.”

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Would QE have been good for Europe? Put it this way: has the US really reached escape velocity, or is that just an illusion brought about by debt, an illusion that will crack as soon as interest rates go up?

Germany Is Itself A Victim Of EMU Austerity Fanatics (AEP)

So now we learn. Germany had a double-dip recession last year without telling us. This could soon turn into triple-dip after contraction of 0.2% in the second quarter. German bond yields are pricing in stagnation as far as the eye can see. 10-year Bunds fell below 1% this morning for the first time in history, and far below levels seen during the deflationary episodes of the Second Reich in the late 19th Century. The bond markets are flashing deflation warnings, but they are also indicting the European authorities for gross incompetence. Professor Paul De Grauwe from the London School of Economics says policy elites have misdiagnosed the fundamental cause of Europe’s chronic slump and its failure to recover. They are treating a demand crisis as if it were a supply crisis, imposing “reforms” – an Orwellian touch – that can only exacerbate EMU-wide distress in the short-run. “They are doing everything they can to stop recovery taking off, so they should not be surprised if there is in fact no take-off,” he said.

“It is balanced-budget fundamentalism, and it has become religious. We know from the 1930s that if everybody is trying to pay off debt and the government then deleverages at the same time, the result is a downward spiral,” he said. “The rigidities in the European economy have been there for ages. They have absolutely nothing to do with the problem we face today.” The claim that Spain’s recovery validates the EMU strategy of retrenchment and reform makes you want to weep. To the extent that Spain has reached self-sustaining take-off – questionable given the collapse of investment and the damage from labour hysteresis – it is largely because Spain is pursuing a beggar-thy-neighbour wage squeeze policy, just as Germany did nine years ago with such malign effects for the eurozone as a whole. This displaces the contractionary pressures into France and Italy. “You can do this in one country but it can’t possibly be a model for the whole eurozone. If everybody does this it leads to generalised deflation, and that is what we are seeing,” he said.

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Too late.

France Calls On ECB To Act As Eurozone Growth Grinds To A Halt (Guardian)

France piled pressure on the European Central Bank to do more to boost growth on Thursday after news that economic activity across the 18-nation single currency area came to a halt in the second quarter. With France registering zero growth for a second successive quarter, Michel Sapin, the country’s finance minister, halved his growth forecast for this year, abandoned the deficit reduction target and said it was up to the Frankfurt-based ECB to respond to an “exceptional situation of weak growth and weak inflation across the eurozone”. Sapin’s demand came as the latest figures from Eurostat, the European Union’s statistical agency, showed that problems in the single currency’s Big Three economies – Germany, France and Italy – resulted in no increase in eurozone gross domestic product in the three months to June. That compares with an increase of 0.2% in the first quarter.

But financial markets saw no immediate prospect of the ECB launching its own money creation (quantitative easing) programme until next year at the earliest, amid concerns that countries such as France and Italy would row back on structural reform if fresh growth-boosting stimulus policies were introduced. The interest rate – or yield – on 10-year German bonds briefly fell below 1% for the first time as dealers anticipated a protracted period of low growth, low inflation and low interest rates. Markets already knew that Italian output had contracted by 0.2% in the second quarter but were surprised by a similar-sized fall in Germany, which was hurt by a more challenging climate for its key export sector.

France made it clear it blamed foot-dragging on the part of the ECB for the failure of the eurozone’s second-biggest economy as it reduced its growth forecast for 2014 from 1% to 0.5% and ditched the 1.7% forecast for 2015, saying it would not expand by much more than 1%. Francois Hollande’s government had negotiated special dispensation from Brussels to run a budget deficit of 3.8% of GDP this year rather than 3%, but Sapin said it was the ECB’s fault that this would not be hit. “We must adapt the pace of deficit reduction to the exceptional situation … of growth that is too weak everywhere in Europe and the exceptional situation of inflation that is too weak across Europe,” Sapin told Europe 1 radio. He also used an article in Le Monde to urge the ECB to do more to combat the threat of deflation and to reduce the level of the euro. “The truth is that, as a direct consequence of sluggish growth and insufficient inflation, France will not meet its public deficit target this year despite a complete control of spending.”

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What else could they possible do?

France Risks EU Deficit Clash After Scrapping Targets (Bloomberg)

The French government abandoned its 2014 deficit targets after the economy unexpectedly failed to grow for a second straight quarter, risking a clash with European partners striving to meet their own fiscal goals. Finance Minister Michel Sapin said that European policy is partly to blame for the lack of expansion in the region’s second-biggest economy. French gross domestic product stagnated in the three months through June, national statistics office Insee said today in Paris. Economists forecast a 0.1% gain, a Bloomberg survey showed. Sapin’s comments will fan a debate about France’s repeated inability to meet European Union fiscal rules it helped write, with Germany advocating reforms and prudent spending to help meet deficit targets and other EU members led by Italy seeking more budgetary leeway. The European Commission has already allowed France to delay deficit targets twice in the wake of the region’s sovereign debt crisis. “There are European causes and there are French causes for the lack of growth,” Sapin said on Europe 1 radio. “The rules allow flexibility for the situation we are facing.”

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Wait a minute: if not consumer spending or exports, where did the UK get its (was it 5.1%?! UPDATE: it was 3.1%, just raised to 3.2%) growth number from?

UK Exports To EU Are ‘Dead In The Water’ (BBC)

The UK’s economic recovery is unlikely to be export driven as its biggest trading partner is “dead in the water”, a Bank of England policymaker has said. In a rare interview by a Monetary Policy Committee member, David Miles told the BBC it was “pretty difficult” to see UK exports growing because of economic problems in the eurozone. But he said the UK’s recovery was no longer being led by consumer spending. Earlier official figures showed eurozone GDP was flat. Professor Miles told Radio 5 Live’s Wake up to Money, UK export growth had been “pretty disappointing” over the last two or three years. He said the “single biggest factor” behind the lack of export growth had been that demand in the eurozone had been close to zero during that time. Professor Miles added: “So our single biggest export market has been, I’m tempted to say, dead in the water. It hasn’t been growing at all. And it’s pretty difficult in that environment to see exports growing very strongly. So the recovery, very welcome as it is, has been a bit dependant on consumer spending.”

The Bank policymaker’s comments highlight the difficulties the government faces in its attempts to re-balance the economy and boost exports. The government wants UK exports to reach £1trn in value a year by 2020 and for 100,000 more UK companies to be exporting by the end of the decade. In his March Budget statement, the chancellor announced help for firms to encourage more investment and exports. The annual 100% tax allowance for business investment was doubled to £500,000 and will run to the end of 2015. The amount of government credit available to support overseas sales was also doubled, to £3bn. “We’re not going to have a secure economic future if Britain doesn’t earn its way in the world,” Mr Osborne said at the time. “We need our businesses to export more, build more, invest more and manufacture more.” Professor Miles’ remarks followed official figures released on Wednesday showing average wages grew at their slowest annual pace since records began in 2001.

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Germany, France and Italy are 2/3 of the Eurozone economy. That 2/3 contracted.

Europe’s Economy Is Broken (Bloomberg)

Investors were expecting bad numbers, but not this bad: Europe’s economies stalled in the second quarter, new figures show. How much longer will Europe’s policy makers just stand there? Since the global financial crisis of 2008, the U.S. and the U.K. have seen output grow more slowly than in previous recoveries. That’s nothing to boast about. Still, six years on, gross domestic product is higher in both countries than it was at the pre-crisis peak. Europe’s output remains 2.4% below that benchmark. And the gap isn’t closing. All three of the euro area’s biggest economies — Germany, France and Italy — are failing. Germany’s output actually fell in the second quarter. So did Italy’s, for the second consecutive quarter. (Whether this is a new recession for Italy or a continuation of the old one is debatable.) The European Central Bank currently forecasts a rise in euro-area output of 1% this year. Expect that to be revised down next month.

With inflation in the euro area running at 0.4% — way below the ECB’s target of less than but close to 2%, and far too close to outright deflation — why isn’t the ECB trying harder to ease monetary policy? Its official answer is that it adopted new measures in June, including an expanded program of support for bank lending. These, it says, should be given time to work. Patience is often a virtue in central banking, but not in this case. The ECB’s measures in June were timid, and the risks are increasingly skewed toward deflation and further prolonged stagnation or worse. The euro area needs quantitative easing of the kind applied by the U.S. Federal Reserve and the Bank of England. The case for this has been strong for months; now it’s overwhelming. The ECB is nervous because outright QE faces political and legal obstacles. One way or another, those issues will have to be resolved — and that’s what ECB President Mario Draghi needs to start saying. Whatever it takes, Mr. Draghi.

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Nothing blip about it.

Japan’s Sudden, Sharp Contraction May Be More Than A Blip (Economist)

The government of Shinzo Abe, Japan’s prime minister, has put a brave face on the news that GDP shrank by 1.7% in the second quarter of this year. Akira Amari, the economy minister, blamed the fall, of an annualised 6.8%—the steepest since the earthquake and tsunami that pummelled Japan in 2011—on the decision to raise the consumption tax from 5% to 8% in April and said the economy will rebound. Not everyone is so sanguine. Worryingly, private consumption plunged by 5% from the previous quarter. Besides having stocked up ahead of the tax rise, households are feeling squeezed by higher prices in the shops. Mr Abe’s most vaunted achievement has been to reverse years of stubborn deflation, a strategy that depends on wages rising. Yet in real terms they fell by 3.2% year-on-year in the second quarter, the steepest drop in 18 quarters, according to Barclays Research in Tokyo.

Most analysts expect Japan’s increasingly tight labour market to push wages up in the coming months, but many of the jobs created under Mr Abe are “non-regular”, with lower pay and benefits. That will embolden critics of Abenomics, who claim that it is enriching corporations and investors and leaving the rest behind. The signs for Mr Abe are ominous: his popularity has fallen below 50% for the first time since he took office in December 2012. The Bank of Japan has pumped billions of dollars into the economy to buy up government debt, which has driven the yen down against the dollar. Yet exports have been sluggish; the main impact of the cheaper yen seems to have been to push up the price of Japan’s imported-fuel bill. The new data also complicate Mr Abe’s pledge to raise the consumption tax by a further two%age points next year. Everyone remembers the effect of a previous tax hike, from 3% to 5%, in 1997. Then, a recovering economy tumbled back into recession.

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But as income sources for the shadow banks are repleted through government policies, the highly leveraged products they hold risk blowing up in domino fashion.

China’s Savers Put Record $2.1 Trillion in Wealth Products (Bloomberg)

Chinese households increased the amount of savings diverted into wealth-management products to a record 12.7 trillion yuan ($2.1 trillion) as the government tries to manage risks from an explosion in shadow banking. The outstanding value rose 24% in the first half from the end of last year, the China Banking Wealth Management Registration System said on its website today. The average annualized return was 5.2%, compared with 3% for benchmark one-year deposits. As signs emerge of weakening demand and rising default risks for higher-yield trust products, sales of the wealth products may keep surging. For banks, a more than 12-fold increase in the value of the products since 2009 is pushing up funding costs, threatening to weigh on profits. “Compared with trust products, wealth-management products are less risky,” Cao Yang, an analyst at Shanghai Pudong Development Bank Co., said by phone.

China’s government is trying to contain risks outside the formal banking system while sustaining growth as the property market slumps and the economy heads for the slowest expansion since 1990. Trust companies’ assets under management fell in June, the China Trustee Association said Aug. 11. Investors have protested outside some banks this year after delays in trust-product payments. Wealth-management products typically require a minimum investment of 50,000 yuan, while trusts target wealthy clients with a minimum investment of 1 million yuan. Today’s number compares with a 44% gain in the value of the wealth products in 2013, according to the China Banking Regulatory Commission. Almost 70% of the outstanding value of the wealth funds was invested in bonds, the money market and bank deposits as of the end of June, according to today’s report. About 23% were in so-called non-standard credit assets, such as loans.

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From a 1.4% increase in January to 1.2% in July to 0.4% now. Pretty fast. What’s next?

Bank of Japan Mulls Cutting 2014 Growth Forecast – Again (Bloomberg)

The Bank of Japan may cut its growth forecast for this fiscal year for a fourth time, as exports fail to bolster an economy weakened by April’s sales-tax increase, according to people familiar with the central bank’s discussions. The expansion for the 12 months through March 2015 is likely to be lower than the 1% median forecast of BOJ board members, said the people, who asked not to be named because the talks are private. Growth is likely to be 0.4%, according to the median estimate in a survey of 24 economists by Bloomberg News on Aug. 13-14.

Another downward revision when the board reviews its outlook in October would underscore waning momentum in the world’s third-biggest economy. Governor Haruhiko Kuroda faces increased pressure to boost his unprecedented stimulus after Japan’s deepest contraction in more than three years in the second quarter, according to economists at Citigroup Inc. and Morgan Stanley MUFG Securities Co. “We think the BOJ will have no option but to revise down its projections again,” said Takeshi Yamaguchi, an economist at Morgan Stanley MUFG Securities Co. The weaker outlook contrasts with the government’s decision last month to raise its assessment of the economy for the first time in six months. The downturn in demand that followed the sales-tax increase was easing, the Cabinet Office said in a report on July 17.

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The Flame-Out Of Abenomics, in One Crucial Chart (WolfStreet)

Abenomics had its moments. At first, given the soaring stock market and the feel-good atmosphere, the economy perked up, growing in the first half of calendar year 2013 at a nice clip. Then stocks tanked, optimism faded. Promise, hype, and hope were replaced by reality and by “inflation without compensation.” Hence near stagnation in the second half of 2013. Then a miracle happened: The effective date of the consumption tax hike, April 1, the beginning of Japan’s fiscal year, moved closer and triggered a historic bout of frontloading by consumers and businesses alike. In an environment where money in low-risk investments earned nothing, and where inflation was rising, the government had handed consumers and businesses a way to save 3% at every major purchase. It’s like 3% risk-free income. For households, it was tax-free! Frontloading turned into a frenzy. And GDP jumped 1.6% in the January-March quarter. It was the finest moment of Prime Minister Shinzo Abe’s regime, and Abenomics apologists scattered across the globe, praising his endless wisdom.

Then in the April-June quarter (Q1 in Japan), a terrific hangover set in. More than a hangover.GDP plunged 1.7% from prior quarter, an annual rate of -6.8%, the Cabinet Office reported. It was the worst decline since January-March 2011 when the earthquake and tsunami on March 11, and the subsequent triple meltdowns at the Fukushima nuclear plant, nearly brought the Japanese economy to a halt, freezing up supply chains and transportation systems. Thousands of aftershocks, some of them serious earthquakes in their own right, continued to wreak havoc for months. Electricity was in short supply…. Those were terrible months. During that tragic quarter, GDP plummeted 1.9%.That GDP in the April-June quarter this year was just two notches less terrible (-1.7%) is a sign that it wasn’t just a hangover from a bout of frontloading. It ate up not only the entire growth of the January-March quarter (+1.6%) but also half of the growth of the September-December quarter (+0.2%). It’s not a pretty picture:

Note the sudden impact of the stimulus after the earthquake in 2011, followed by its big fade that lasted four quarters. That’s how stimulus works. Then, in the first half of 2013, the beginning of the Abenomics era, the economy got high on promise, hype, and hope and on money-printing. In the second half, reality set in, and the economy languished. And so far in 2014, the net effect of frontloading and hangover is that GDP has actually declined. The last quarter was ugly throughout. Consumption by households dropped 5.2%, and excluding “imputed rent,” 6.2%. Consumers drastically cut back on buying big-ticket items and confronted steep price increases while their incomes stagnated. Private residential investment plunged 10.3%. Only government consumption ticked up. But that’s not the whole story to the GDP fiasco: Imports had soared during the quarter, compared to the same period a year earlier, while exports limped along. So the trade deficit for the quarter ballooned by 23.6% year over year.

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“The more interesting mystery is how the ISIS fighters learned how to use Uncle Sam’s advanced weaponry so quickly. Perhaps the CIA knows.”

Washington’s Iraq Puzzle Palace Keeps Getting Curiouser (Stockman)

Not surprisingly, after the US had “liberated” Iraq from 90 years of dictatorship—democracy took hold with lightening speed subsequent to the 2011 departure of American GIs. The “rule of the majority”—that is, the Shiite majority—-soon ripped through most governmental institutions, but especially the military. In short order the “Iraqi” army became a Shiite army. Hence the precipitous surrender and flight from the battles of Mosul and other northern cities. That was Sunni and Kurd territory—–not a place where Shiite soldiers wanted to be shot dead or caught alive. The more interesting mystery is how the ISIS fighters learned how to use Uncle Sam’s advanced weaponry so quickly. Perhaps the CIA knows. It did train several thousand anti-Assad fighters in its secret camps in Jordan in preparation for Washington’s “regime change” campaign in Syria. Undoubtedly, in the fog of war—-especially the sectarian wars in the Islamic heartland that have been raging for 13 centuries—it is difficult to have friend and foe vetted effectively.

But effective vetting or no, the purpose of training Sunni fighters in Syria was to achieve a key Washington strategic objective. Namely, to breakup and disable the fearsome “Shiite Crescent”, ranging from Hezbollah in Lebanon through Assad’s Alawite-Shiite regime in Syria to the seat of the Axis-Of-Evil itself—-the purportedly nuke seeking Shiite theocracy of Iran. To be sure, the CIA had re-certified as recently as 2008 that the Iranians had disbanded a few incipient nuclear weapons experiments years earlier. Likewise, the medieval mullahs who rule Iran had issued fatwas against a nuclear weapons program in any form. But so great was the Shiite threat deemed to be by Washington that both Secretary of State Hillary Clinton and the peace president himself announced the Assad “must go” peacefully or Washington would wage war against him. And this was all part of the grand scheme of disabling the fearsome Shiite Crescent.

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“It’s very difficult for the EU to squeeze Islamic State through sanctions because the group is selling oil in a global market through Turkey, and is doing so at a 75% discount of about $25 a barrel …”

EU Weighs Oil Steps Against Islamists While Arming Kurds (Bloomberg)

European Union governments are set to explore ways to squeeze the finances of Islamist militants bolstered by oil fields captured during their advance through Iraq. EU foreign ministers due to attend an emergency meeting in Brussels today plan to consider options on oil-market measures and the direct supply of arms to Kurdish forces fighting Islamic State in northern Iraq, an EU official told reporters, asking not be named because the discussions are private. Representatives of the 28 EU governments are stepping up their collective response with the U.S. to the cross-border threat posed by Islamic State that has prompted thousands of Yezidis and Christians to flee their advance. Iraq and Ukraine are on the agenda for the talks called by EU foreign-policy chief Catherine Ashton, scheduled to start at noon.

The EU will have an uphill struggle to curb the militants’ revenue from oil, Philipp Chladek, a London-based energy analyst at Bloomberg Intelligence, said by phone. “It’s very difficult for the EU to squeeze Islamic State through sanctions because the group is selling oil in a global market through Turkey, and is doing so at a 75% discount of about $25 a barrel,” he said. On Ukraine, the foreign ministers will discuss the outlook for international humanitarian aid for eastern areas of the country, where government forces are fighting pro-Russian rebels, and the impact of Russia’s recent ban on imports of some EU foods. The ministers will probably stop short of expanding sanctions against Russia imposed as a result of its encroachment in Ukraine, the EU official said yesterday.

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Key line: “European energy companies will have to agree major contract revisions when purchasing Russian natural gas”…

Ukraine Approves Law On Sanctions Against Russia (Reuters)

The Ukrainian parliament approved a law on Thursday to impose sanctions on Russian companies and individuals supporting and financing separatist rebels in eastern Ukraine. The government has already prepared a list of 172 citizens of Russia and other countries, and of 65 Russian companies, including gas export giant Gazprom, on whom they could impose sanctions “for financing terrorism”. After Thursday’s vote, Prime Minister Arseny Yatseniuk told parliament that Ukraine had taken a historic step. “By approving the law on sanctions, we showed that the country is able to protect itself,” he said. “The law should give a clear answer to any aggressor or terrorist who threatens our national security, our government and our citizens.” Ukraine said on Monday that European energy companies will have to agree major contract revisions when purchasing Russian natural gas if parliament approved sanctions on Gazprom.

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So who’s paying and arming them? Or should we say: who’s actually doing the fighting?

Ukraine’s Broke Military Is Underpaid and Undertrained (BW)

A group of men and a few women clad in neat, matching camouflage uniforms and combat boots walk through an airport, presumably on their way to the front. As the soldiers make their way toward their gate, people around them rise in applause. A message appears on the screen: “Come back alive,” along with directions for contacting Ukraine’s volunteer brigades and donating to the military. The video commercial shows the army Ukraine would like to have: a streamlined, battle-ready group that’s a source of pride for the country. But it also hints at the fighting force that Ukraine has today: one with a heavy reliance on support from volunteer soldiers and donations from across the country to help keep it properly outfitted. “At the beginning of March, there was nothing,” says Oleksiy Melnyk, an analyst with Razmykov Center, an independent think tank in Kiev. When Russia annexed Crimea about a month after the EuroMaidan uprising, the interim government had limited options.

To prevent the loss of Ukraine’s eastern Donetsk and Lugansk regions to pro-Russia separatists, the government has reinstated the military draft and launched a national campaign asking for donations to replenish the military’s depleted coffers. Thus far the donation campaign has raised more than $11.7 million, according to the BBC. Volunteers, many spurred on by a rise in patriotism in the wake of the Maidan protests, have also helped to boost the armed forces’ numbers. The National Guard has integrated former members from Maidan’s self-defense forces into its ranks. Other informal fighting battalions have emerged in recent months that are sometimes very loosely affiliated with, or entirely independent from, official government forces. The emergence of such battalions is a reflection of how weak Ukraine’s military was at the beginning of the eastern conflict. “I think the only reason that these battalions get a chance is because at this time, three months ago, the Ukrainian government was ready to accept probably any help it could get,” says Melnyk.

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And he’ll keep on making the deals, one by one.

Putin Says Russia Should Aim To Sell Energy In Roubles (Reuters)

President Vladimir Putin said on Thursday Russia should aim to sell its oil and gas for roubles globally because the dollar monopoly in energy trade was damaging Russia’s economy. “We should act carefully. At the moment we are trying to agree with some countries to trade in national currencies,” Putin said during a visit to the Crimea region, which Moscow annexed from Ukraine earlier this year.

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Hungary is in an interesting location.

Europe “Shot Itself In The Foot” With Russia Sanctions: Hungary PM (Reuters)

The European Union has shot itself in the foot economically with the sanctions its has imposed on Russia over Ukraine, Hungarian Prime Minister Viktor Orban said on Friday, calling for a rethink of policy. “The sanctions policy pursued by the West, that is, ourselves, a necessary consequence of which has been what the Russians are doing, causes more harm to us than to Russia,” Orban said in a radio interview. “In politics, this is called shooting oneself in the foot.”

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Scarier by the day.

Evidence Suggests Ebola Toll Vastly Underestimated (Reuters)

Staff with the World Health Organization battling an Ebola outbreak in West Africa see evidence the numbers of reported cases and deaths vastly underestimates the scale of the outbreak, the U.N. agency said on its website on Thursday. The death toll from the world’s worst outbreak of Ebola stood on Wednesday at 1,069 from 1,975 confirmed, probable and suspected cases, the agency said. The majority were in Guinea, Sierra Leone and Liberia, while four people have died in Nigeria. The agency’s apparent acknowledgement the situation is worse than previously thought could spur governments and aid organizations to take stronger measures against the virus. “Staff at the outbreak sites see evidence that the numbers of reported cases and deaths vastly underestimate the magnitude of the outbreak,” the organization said on its website. “WHO is coordinating a massive scaling up of the international response, marshaling support from individual countries, disease control agencies, agencies within the United Nations system, and others.”

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Misleading numbers: you can’t maintain a stable grid with more than 15% intermittent energy. So Germany can only be this “green” because its neighbors, on the same grid, are not.

Germany Gets 31% of Its Electricity From Renewables (BW)

As Europe struggles to ease its dependency on Russian gas, Germany is getting ever greener: During the first half of 2014, the nation generated 31% of its electricity from renewable energy sources, according to a recent report by the Fraunhofer Institute. Excluding hydro, renewables accounted for 27% of electricity production, up from 24% last year. “Solar and wind alone made up a whopping 17% of power generation, up from around 12% to 13% in the past few years,” according to Renewables International, which provides a helpful rundown of the Fraunhofer report. The country’s solar power plants increased total production by 28% compared with the first half of 2013, while wind power grew about 19%. Germany still derives most of its energy from coal, though consumption of brown coal dropped 4%. Power from natural gas fell 25%, while nuclear power decreased by only about 2%.

The U.S. produces far more renewable energy than Germany in terms of quantity. But as a % of total energy production, America falls short. In 2013 wind accounted for 4% of total electricity generation, and solar made up 0.23%, according to the U.S. Energy Information Administration. Geothermal was at 0.41%; biomass, 1.48%. Germany’s government and population are famous for their environmental zeal. “Green, do-gooding Germans have long been at the sharp end of jokes, often for good reason,” writes Rose Jacobs in her Newsweek piece, “Doing It the German Way.” “Their water conservation efforts were so enthusiastic in the 1990s and early 2000s that by 2009 sewage systems were suffering from too little water running through them.”

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Jul 232014
 
 July 23, 2014  Posted by at 8:28 pm Finance Tagged with: , , ,  


Arthur Rothstein Home of worker in strip coal mine, Cherokee County, Kansas May 1936

A very impressive procession of hearses, containing the first 40 of the 298 caskets that will have to be ‘processed’, is going on as I speak in Holland, and has been for hours of slow driving, broadcast on live national TV. It’s a 100 mile or so distance, with thousands upon thousands of people along the route paying respect, from the airport where they landed form Ukraine to the facilities where they’ll be identified.

Which in the most ‘fortunate’ cases can be done in hours, in others may take weeks, and in yet others may never be conclusive. At least on the surface, the Dutch are doing everything right when it comes to honoring and respecting the people who died on MH17, and those who mourn them.

Still, when the bodies left Charkov earlier today, there were speeches by the Dutch and Australian ambassadors and other officials, all entirely in the spirit of what the moment and the victims deserve and are entitled to, but there was one noteworthy dissonant, which was even picked up by a Dutch reporter who wasn’t there to give his own opinion, but nevertheless opined that he thought it was very out of line for Ukraine Vice PM Groysman to use the occasion, which was intended to honor the victims only, to once again start off on a bitter, and frankly shameless, rant against Russia and Putin.

Ugly. But not unexpected. It goes to show that we really no longer know who our friends are. And as I said the other day, that goes for the whole Russia and Ukraine situation as much as it goes for the economy and the crisis it’s in. There are far too many Americans and Europeans who still think their governments are their friends. Which in Holland today is very tempting, because there’s this whole display of ‘correct mourning’ going on that draws in just about everyone simply on the fact that emotions must go somewhere, and they are easily guided into a shared platform, because people are drawn to that.

But they are, in the slipstream of those shared emotions, just as easily drawn towards venting anger at a perceived common enemy; it is easy to manipulate – emotionally vulnerable – people’s genuine grief into a blame game directed at a common enemy, even if you have no evidence that enemy did anything wrong, or even had anything to do with the acts that made them your enemy in the first place.

This is not something we had to wait for Sigmund Freud to discover for us; people have known since they were much more primitive primates how this works. Group – or mass- psychology works like a charm if you press the right buttons in a group. And it may have had benefits in the days of David vs Goliath, where a seemingly weaker party won the day against a stronger one. But it also has a dark side. When people are vulnerable, you can make them believe just about anything.

“We” follow the side that’s been pre-chosen for us in the ongoing Ukraine battle by our governments, i.e. US and EU. Who started getting heavily involved in Ukraine a number of years ago, and began to put the pedal to the metal when then-President Yakunovych declined to sign a deal that would have delivered Ukraine into a perhaps not all that advantageous partnership with the EU.

That’s when the West joined the Maidan protest in an aggressive way. By then, though, it had already spent a princely sum of $5 billion supporting all sorts of movements that had one thing in common: they were against Russia. Or more specifically: against Putin. Who refused to kowtow to Brussels and Washington.

With the help of a number of not-so-squeaky-clean groups in Ukraine, the Maidan side won: the elected president fled. US-handpicked guys – dare we say puppets – took over, and launched ferocious attacks against those amongst their own compatriots in the east of the country who didn’t want to bow to American and European rule, if only because it was announced very transparently by the new rulers in Kiev that they would be considered second hand citizens, if they would be allowed to live.

The eastern, Russian-speaking population, chose to align with Russia. A choice that so far cost many thousands of them their lives. Killed by their own government’s army, aided by US secret service agents and mercenaries, on their very own land they, and their ancestors, grew up on.

Blaming Putin for what has happened, not just to MH17 but to anything and everything in Ukraine over the past year and change, is way too easy. Putin, or let’s say Russia, has not been the aggressor, the west, i.e. have. Putin was fine with the way things were before. He thought Yanukovych was a stupid clown, but at least his oil interests were safe with that clown.

He acted just like the US and EU did and do to this day in 100+ different countries: as long as the prevailing government do what you want, you leave them in place. In Yanukovych’s case, it was gathering insane riches and bankrupting his nation, but at least never renditioning or mass murder. In many countries “we” support, wholesale slaughter is the order of the day, and has been for many decades. Whether it’s Saudi Arabia or Iraq or Chili or the Congo, we have built our wealth of supporting regimes that are willing to kill their neighbors so our interests are served.

It’s completely senseless to even try and deny that. But we are still led, in our justified grief and anger, towards hate for the very people we have set up to being killed by armies we ourselves finance. Call them devils, call them terrorists, proclaim they have no souls or they eat firstborn children. It’s as old as the first primates. It’s politics.

But it’s also the epitomy of disrespect. For those of you who have died, and who deserve for you to put in your best effort to find out who killed them. Not point fingers and not deliver any evidence. And disrespect for those who are being killed on your name – yes, that would be you -, so a political power game can be played over your heads and theirs. And down the line, your kids can be sent to go and murder the kids of those who were never your enemy other than in your politicians’ chants and games.

Your politicians are not your friends. But they are very good at pretending they are, especially in circumstances where you are – and they always know when that is – most vulnerable. The fact that all you’ve heard and read so far, a week after MH17 came down, is insinuations, and not a single shred of proof, should tell you all you need to know as far as your leaders’ credibility is concerned. They have nothing.

The most damning, or should I really say most entertaining, showcase is that is this conversation between Associated Press reporter Matt Lee and US State Department Deputy Spokesperson Marie Harf. What Harf is saying, for the good listener, is that the entire State Department assessment of the MH17 situation is based on social media posts from the Ukraine government.

Which just happens to have issued more lies and fabricated videos and and and than anyone else involved. BUK rocket movements Kiev said were ‘rebel rockets’, but which proved to be on Kiev controlled territory, black boxes they said were tampered with that were not, etc etc. Not one thing I can think of Kiev said has proven to be true. But they’re our governments’ installed puppets, so we listen to them.

If there’s no other way to find out who your friends are, at least this conversation should make it abundantly obvious to you who is not. Marie Harf may have lost her job on this, but she still said it. This is the kind of thing I find hard to believe when I see it, but I think maybe most people fail to see what’s actually being said. Then again, in an emotionally laden environment, it’s perhaps easy to miss out on essentials.

My uncle’s at the evenin’ table, makes his living runnin’ hot cars
Slips me a hundred dollar bill, says
“Charlie you best remember who your friends are.”

Straight Time, Springsteen

Yeah, that’s it, keep Russia alive …

Economic Meltdown Scenario Piles Pressure On Russia And The West (Guardian)

Oil prices above $200 a barrel. Energy shortages in western Europe. The return of recession to the still-fragile global economy. A slump in Russia. That’s the fear haunting policymakers as they contemplate how to respond to the shooting down of MH17 over eastern Ukraine last week. The meltdown scenario can be easily sketched out. Every global downturn since 1973 has been associated with a sharp rise in the price of energy. Russia is one of the world’s biggest energy suppliers and is responsible for about one-third of Europe’s gas. America’s economic recovery from the deep recession of 2008-09 has been weak by historic standards, while the European Union’s has barely got going. [..]

Given the public outrage at the loss of life on MH17 some increase in the severity of the sanctions looks inevitable. In Brusselson Tuesday, there was talk of imposing restrictions on capital movements from Russia and of curbs on exports of defence and energy technology. These measures would certainly increase the pain for Russia, and would run the risk that Putin would retaliate by choking off oil and gas exports to the west, looking instead to energy-hungry China as an alternative market. Slater estimates that UK growth next year would be 1% lower than expected were Russia to halt gas supplies through Ukraine, with the impact felt through higher energy prices, higher inflation, falling share prices and weaker consumer confidence. Closing the gas taps could then trigger the “phase three sanctions” being resisted by many EU countries, including Germany, France and Italy.

These would target entire sectors of the Russian economy, blocking their exports to the west and preventing them doing business with companies in the European Union and North America. It is this prospect that has prompted fears of rapidly rising oil prices. Slater calculates that Russian energy exports to the rest of the world could be cut by as much as 80%, with less than half the shortfall made up by the Opec oil cartel. “In such a scenario, world oil prices could soar above $200 per barrel and gas prices would also rise steeply.” Julian Jessop at Capital Economics notes that the biggest losers from this would be Russia, already in recession. Other suppliers would have an incentive to keep prices low in order to grab Russia’s energy customers. The west could draw down on strategic oil supplies to limit the impact of the loss of Russian supply.

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There are no markets left, just an artificial look-alike.

Why The Markets Don’t Care What Happens In The World (MarketWatch)

A plane carrying close on 300 innocent people gets shot down along one of the most sensitive borders in the world. Israel invades Gaza, reigniting the deepest wounds in the Middle East, and potentially sparking another regional conflict. A few hundred miles away, a militant insurgency threatens to turn Iraq into a full-blown terrorist state. The world has not been short of things to worry about in the last week, or the news bulletins short on drama and conflict. But how did the financial markets react? A few stocks got marked down, and gold made one of its reflex moves upwards. Yet on the whole, they barely registered any reaction. It was as if nothing of significance had happened. There is a message in that, and an interesting one. The markets are no longer interested in what happens in the rest of the world. The days when geopolitics could impact the prices of stocks, bonds, commodities or currencies in any significant way have been consigned to the past.

There are two possible explanations for that: firstly that there are not any wars or revolutions any more that can dramatically change the outlook for the global economy; and secondly, that the markets are so pumped up by quantitative easing, and easy money from the central banks, that anything else that happens pales into triviality by comparison. The truth is probably somewhere in between. Either way, investors can safely ignore war and politics from now on when they are structuring their portfolio. The declining interest of the financial markets in what is happening around the world has been evident for some time. The Arab Spring that saw governments fall across the Middle East was probably the last set of uprisings to make any real impact, but even that was largely restricted to frontier indexes such as Egypt, and they don’t count for a great deal in the greater scheme of things. But it has been most noticeable this year. It is not as if the past few months have been short on drama.

The Russian annexation of Crimea, and possible capture of eastern Ukraine, marks the first major re-drawing of national orders within Europe in many years. It could easily turn into the beginning of a new period of conflict between Russia and Western Europe — the opening salvos of a new Cold War. Likewise the militant uprising in Iraq could easily result in the creation of a terrorist Islamic state in a country with some of the largest oil reserves in the world, and which only 10 years ago the U.S. considered so strategically important it invaded to bring down what it regarded as a rogue regime.

Tension between the Israelis and the Palestinians is hardly anything new: the invasion of Gaza is merely the latest in a long and bitter history of conflict. Even so, it remains one of the most disputed regions in the world, and one where any military action threatens a wider conflagration. Not so long ago, geopolitical events such as those would have provoked wild swings in the financial markets. After the 9/11 attacks on Washington and New York, the stock market fell dramatically. The Iraqi invasion of Kuwait sparked a wave of selling, and the Middle Eastern conflicts of the 1970s sent the oil price soaring and the stock market crashing.

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State Dept. MH17 Assessment Based on Kiev Social Media Propaganda (RT)

State Department Deputy Spokesperson Marie Harf described Russia’s statements on MH17 plane crash as “misinformation” – but when reporters asked her whether Washington would be releasing their intelligence and satellite data, Harf only replied “may be.” So far the US has been backing its statements by social media and “common sense.”

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Yeah, Putin really fears US courts ….

Putin’s Ukraine Woes Compounded by $103 Billion Yukos Claim (Bloomberg)

Russia will discover next week how much it may be asked to pay for the confiscation a decade ago of Mikhail Khodorkovsky’s Yukos Oil Co., then the country’s biggest oil producer. The Permanent Court of Arbitration in The Hague will rule on July 28 on a $103 billion damages claim the company’s former owners filed against Russia in 2007, Tim Osborne, head of GML Ltd., former holding company of Yukos, said by e-mail. Court official Willemijn van Banning said by phone she couldn’t comment on the date for the ruling. The potential multibillion-dollar punitive award comes as Russian President Vladimir Putin risks further U.S. and European sanctions after the downing of a Malaysian passenger jet in eastern Ukraine that killed 298 passengers and crew. The Obama administration has blamed the plane’s downing on pro-Russian rebels, who deny any involvement.

A substantial award of damages “would add to Putin’s sense of being backed into a corner and that the West is out to get Russia,” Masha Lipman, an independent political analyst based in Moscow, said by phone. “Whether a coincidence or not, it will be seen as more than a coincidence.” GML has a good chance of winning partial damages, according to Gus Van Harten, a professor specializing in arbitration at York University’s Osgoode Hall Law School in Canada. There’s “very limited room” for appeal and Russia will resist paying, so any amount awarded would trigger a global legal battle to seize state property, including assets of OAO Rosneft, which acquired most of Yukos in a series of forced auctions, Van Harten said. Putin has said his opponents are using the crash for “selfish political gains.” The EU warned yesterday that it may restrict the country’s access to capital markets and sensitive energy and defense technologies.

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Super dollar.

Jobs Hold Sway Over Yellen-Carney as Central Banks Set To Split (Bloomberg)

Before the Federal Reserve and fellow central banks go to work raising interest rates, they first need others to go to work. That’s the signal from policy makers worldwide, as even those whose mandates focus on inflation put the health of labor markets at the heart of their decision making. The approach leaves investors bracing for global monetary policies to diverge after the post-crisis embrace of easy money. Accelerating job creation — and the hope this will spur wages — leaves the U.S. central bank and the Bank of England preparing for higher rates by the end of 2015. At the other end of the spectrum, double-digit unemployment in the euro area and stagnant pay in Japan mean stimulus remains the only option.

“Strength in the labor market is a key factor in the change in thinking about when the first rate hikes may occur,” said Nariman Behravesh, chief economist in Lexington, Massachusetts, for IHS Inc. “There’s a huge differentiation in performance now. The frontrunners are speeding up.” Investors are starting to tune in to the end of synchronized monetary policy, with economists at Goldman Sachs Group Inc. saying shifts in hiring during the past eight months worked well as a simple predictor of rate expectations. The forward curves for the U.S. and U.K., which gauge investor expectations for rates, show the most-pronounced steepening as unemployment in both countries has fallen to the lowest levels in more than five years. By contrast, the euro-area’s 11.6% jobless rate remains close to a record 12% as investors bet its benchmark will stay low until at least 2016.

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Oh, exciting!

Draghi Faces German Hard Line on Avoiding Deflation (Bloomberg)

The deutsche mark is dead. Long live the deutsche mark. That’s the view from Germany’s central bank, which is resisting a weaker euro, introduced in 1999, and opposing the most aggressive strategies Mario Draghi could deploy to ignite growth in Europe, says Simon Derrick, chief market strategist at Bank of New York Mellon Corp. Derrick sees parallels with the early 1990s when Germany refused to surrender its hard money dogma even as it transmitted pain elsewhere. The 18-member euro area’s emergence from a two-year recession is proving sluggish, with inflation about a quarter of the ECB target and unemployment above 20% in Spain and Greece. Back in 1992, the U.K. was under German pressure to live with the high interest rates demanded by the Exchange Rate Mechanism, a slipway to the single currency, even if it punished the British economy.

In the end – and under fire from billionaire investor George Soros – the U.K. buckled. It allowed sterling to slump and interest rates to decline, paving the way for a 15-year expansion. In 1993, with France in recession, the Bundesbank was unwilling to accelerate rate cuts for fear that would harm the deutsche mark. By July, the need for a weaker franc persuaded meant Europe’s leaders to allow their currencies to trade more flexibly as they sought to keep the euro project alive. Fast forward to today: Germany’s intransigence is again in play as Draghi, the Italian president of the European Central Bank, mulls whether to enact quantitative easing to prevent deflation. He has cut interest rates to record lows and pledged fresh loans for banks last month to little effect so far.

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Super dollar!

China’s Terrifying Debt Ratios Poised To Breeze Past US Levels (AEP)

The China-US sorpasso is looming. I do not mean the much-exaggerated moment when China’s GDP will overtake America’s GDP – which may not happen in the lifetime of anybody reading this blog post – as China slows to more pedestrian growth rates (an objective of premier Li Keqiang.) The sorpasso may instead be the ominous moment when China’s debt ratios overtake the arch-debtor itself. I had presumed that this inflection point was still a very long way off, but a new report from Stephen Green at Standard Chartered argues that China’s aggregate debt level has reached 251% of GDP, as of June. This is up 20%age points of GDP since late 2013. The total is much higher than normal estimates, though it tallies with what I have heard privately from officials at the IMF and the BIS.

Mr Green – a highly-respected China veteran – includes total social financing (TSF), offshore cross-border bank borrowing (a story that we are going to hear a lot about), bond issuance, shadow banking of various kinds, and government debt. The ratio has risen by 100%age points of GDP over the last five years. As Fitch has argued out in the past, this is more than double the rise seen in Japan over the five years before the Nikkei bubble burst in 1990, or in the US before subprime blew up in 2007, or in Korea before the Asian financial crisis. It is the speed of the rise that worries credit rating agencies and regulators – including many at the Chinese central bank – as much as the volume itself. Though China is scary on both fronts. It has pushed debt to $26 trillion, more than the entire commercial banking systems of the US and Japan combined. The scale obviously has global ramifications. The FT’s Jamil Anderlini points out here that the figure is very high for an emerging economy.

Mature economies can handle a higher debt ratio for all kinds of reasons, not least because they have large assets to offset their liabilities. British figures of household debt look much more threatening than they really are because the debt is mostly for mortgages, and is balanced by high levels of equity and wealth. Total debt levels in the US are 260pc (if you assume that the Fed will never unwind QE, which I do). So unless the Politburo gets a grip very fast, and this too would be dangerous, it may catch the US by next year. This does not mean that China is about to crash. It has a state-controlled banking system. Therefore any bust scenario will play out in a different way, probably through much lower growth and two decades of Japanese-style extend and pretend. As the BIS implied in its annual report: almost the entire world has now been drawn into the Ponzi scheme of unsustainable debt. We can inflate some of it away, or we can deflate into defaults and creditor haircuts. Pick your poison.

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This is going so wrong…

China May Avoid Second Bond Default, Thanks To Bailout (MarketWatch)

China may avoid its second-ever corporate bond default due to a bailout by a local government, Chinese media said Tuesday. Huatong Road & Bridge Group, a privately held construction firm, said in a statement last week that it was uncertain whether it could pay the principal and interest on a 400-million-yuan ($64 million), 1-year bond when it reaches maturity on Wednesday. According to a 21st Century Business Herald report, the company had sent several tranches of funds “one after another” to the Shanghai Clearing House in order to cover the bond payment, but it was still short of the amount needed. However, the newspaper quoted an unamed source as saying that there was “no big problem” of a possible default, as the Shanxi provincial government appeared to have stepped in to coordinate the collection of company’s accounts receivable from local governments.

A possible default could harm concurrent efforts by the Shanxi government to convince the central bank to allow state-owned banks more lines of credit for investment projects in the province, the report quoted an expert as saying. Huatong Road & Bridge had cited the fact that its chairman, Wang Guorui, was under investigation in disclosing its financial troubles, according to the 21st Century Business Herald report. And while the company didn’t elaborate, the newspaper said Wang had been accused of illegal coal-mining activities. In March, Shanghai Chaori Solar Energy Science & Technology said it failed to make a full interest payment on a corporate bond it had issued, becoming the first onshore bond to default in China’s history.

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Well, that’s surprise.

China’s Net Forex Sales Suggests Capital Outflows (MarketWatch)

China’s central bank and financial institutions sold a net 88.28 billion yuan ($14.2 billion) of foreign currency in June, compared with a net purchase of 38.657 billion yuan in May, according to calculations by Dow Jones from central bank data. June is the first month of net sales after ten months of net purchases, suggesting capital started to flow out of China. The banking system’s foreign-currency purchase position totaled 29.45 trillion yuan at the end of June–lower than 29.54 trillion yuan at the end of May, People’s Bank of China data showed. The data include purchases and sales by commercial banks and other financial institutions but mostly reflect transactions by the central bank. Most analysts view the figures as a proxy for inflows and outflows of foreign capital as most foreign currency entering the country is generally sold to the central bank.

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Did you notice?

Everything In Your House Is Getting Cheaper To Buy (MarketWatch)

Maybe you haven’t noticed, but it’s a great time to buy all the things you need to fill up your house: Furniture, appliances, electronics, dishes and pots and pans. People tend to pay attention to the prices of things they buy all the time, like gasoline, milk and meat. But who can remember what it cost them the last time they bought a washing machine? Fortunately, the Bureau of Labor Statistics does keep track. The BLS reported Tuesday that prices of consumer durable goods have fallen 1.5% in the past year, the steepest decline since the depths of the recession in 2009. This isn’t a new trend: The prices of durable goods have been falling pretty steadily since peaking in 1997, and now they are as cheap as they were in 1988, after adjusting for the constant improvements manufacturers have been making to their products. What’s striking is how pervasive the price declines are. It’s not just a few items that are pulling down the average; prices are falling for almost every sort of durable good that consumers buy.

Here are the latest numbers from the BLS: Prices of major appliances are down 7.9% in the past year, the largest decline on record. Laundry-equipment prices are down 8.6%. Furniture and bedding prices are down 2.5% in the past year. Window coverings, rugs and other linens are down 2.1%. Clocks and lamps are down 6.9%. TVs are down 15%. Audio-equipment prices are down 2.4%. Telephone-equipment prices are down 7.7%. Camera prices are down 6.7%. Dishes and flatware are down 6.3%. Cookware prices are down 4.7%. Computers are down 6.3%. Tools and other hardware prices are down 1.5%. Toys are down 6.5%. Sporting goods are down 1.3%. Jewelry prices are down 4.5%. Medical equipment prices are down 1.1%. New car prices are down 0.4%. Auto parts are down 1.2%.

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Yeah, but far too big to fail. $55 trillion in derivatives?!

Deutsche Bank Suffers From Litany of Reporting Problems (WSJ)

An examination by the Federal Reserve Bank of New York found that Deutsche Bank’s giant U.S. operations suffer from a litany of serious financial-reporting problems that the lender has known about for years but not fixed, according to documents reviewed by The Wall Street Journal. In a letter to Deutsche Bank executives in December, a senior official with the New York Fed wrote that reports produced by some of the bank’s U.S. arms “are of low quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action.”

The criticism from the New York Fed represents a rebuke to one of the world’s biggest banks, and it comes at a time when federal regulators say they are increasingly focused on the health of overseas lenders with substantial U.S. operations. The Dec. 11 letter, excerpts of which were reviewed by the Journal, said Deutsche Bank had made “no progress” at fixing previously identified problems. It said examiners found “material errors and poor data integrity” in its U.S. entities’ public filings, which are used by regulators, economists and investors to evaluate its operations. The problems ranged from data-entry errors to not taking into account the value of collateral when assessing the riskiness of loans.

The shortcomings amount to a “systemic breakdown” and “expose the firm to significant operational risk and misstated regulatory reports,” said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank. The New York Fed has various tools at its disposal to address shortcomings by banks it regulates. It can issue private letters demanding action, as it did with Deutsche Bank, or, in more severe cases, impose restrictions on banks’ activities. The letter, which hasn’t been previously reported, ordered senior Deutsche Bank executives to ensure steps were taken to fix the problems. It also said the bank might have to restate some of the financial data it has submitted to regulators.

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Krugman? Still have to talk about him?

Krugman’s Latest Debt Denial: His Magic Numbers Don’t Cut It (Stockman)

Professor Krugman is at it again—–conjuring fairy tales about a benign long-term fiscal outlook. Notwithstanding that the public debt has surged from 40% to 75% of GDP during the six short years since 2008, he claims there is no reason to fret and that there is no debt spiral anywhere in the future. In part that’s because the Keynesian priesthood has declared that interest rates have down-shifted on a permanent basis. CBO has therefore dutifully incorporated this assumption into its long-term projections:

This (interest rate) markdown has the effect of making the budget outlook — which was already a lot less dire than conventional wisdom has it — look even less dire. But there’s a further point worth emphasizing: the CBO has just declared an end to the debt spiral.

Even accepting CBO’s “rosy scenario” outlook (see below), it’s not evident that it has declared an end to the debt spiral. In fact, it projects publicly-held treasury debt to soar from $12 trillion today to about $52 trillion by 2039. Most people would judge that a spiral. Indeed, as shown in the CBO graph below based on “current policy”, the public debt ratio is heading sharply upwards to more than 100% of GDP.

So how does professor Krugman turn this dismal chart into an “all clear” reassurance–when it actually shows public debt heading to above WWII levels at a time when the baby boom is at peak retirement? Well, it seems that Krugman unearthed two numbers in a 182 page report that purportedly render harmless the $52 trillion of bonds, notes and bills that CBO projects will need to find a home at the historically low interest rates it forecasts for the next 25 years.

So we turn to Table A-1 on page 104 of the CBO report, and we learn that for the next 25 years CBO projects an average interest rate on federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent. And this means no debt spiral at all.

A GDP growth rate higher than the average carry cost of the public debt sounds all good, but here’s the thing. Given outcomes during the 21st century to date, there is simply no plausible reason to believe that nominal GDP can grow at a 4.3% CAGR for the next 25 years. In fact, since the pre-crisis peak in early 2008, nominal GDP has grown at only a 2.5% CAGR, and even during the last two years when “escape velocity” was expected any day, the compound growth rate has been only 3.0%. Indeed, during the entire 14 years of this century—encompassing nearly two complete business cycles – nominal GDP has expanded at just 3.8% per annum. Needless to say, when you are crystal balling a quarter century ahead, CAGRs make a big difference, and that’s profoundly true of the Federal budget. Specifically, revenue is highly sensitive to nominal GDP growth because it is always money income, not real GDP, that is on the radar screen of the tax-man.

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Oh well, at least Québec doesn’t look like the moon yet.

Alberta Oil Clout Dominating Canada’s Unbalanced Economy (Bloomberg)

In Canada’s economy there’s Alberta, and there’s everywhere else. The oil- and gas-rich western province was responsible for all of the country’s net employment growth over the past 12 months, adding 81,800 jobs while the rest of Canada lost 9,500. Alberta’s trade surplus, C$7.4 billion ($6.9 billion) in May, almost matched the deficit rung up everywhere else. If growth trends over the past decade continue, Alberta would pass Quebec to become the country’s second-largest provincial economy in three years, according to data compiled by Bloomberg. “Alberta is already by far the strongest province economically, and higher oil prices will only exacerbate the regional split,” Benjamin Reitzes, a senior economist at BMO Capital Markets in Toronto, said in a telephone interview.

Alberta’s growing power is doing more than putting energy ahead of manufacturing exports such as Ontario’s cars and Quebec’s aircraft. It’s drawing tens of thousands of young people to the province, seeking energy jobs with some of the country’s highest salaries. It’s also posing a challenge to policy makers: Oil wealth has led to a stronger Canadian dollar, squeezing Ontario and Quebec manufacturers. Canada’s central bank is keeping interest rates near historic lows, looking for a weaker currency to boost exports. “We see a two-track economy,” Bank of Canada Governor Stephen Poloz said at a July 16 press conference after his decision to extend the longest interest-rate pause since the 1950s. Canada’s non-energy exports have disappointed, he said, holding back growth. At the same time, “energy exports have indeed been quite strong and we expect that to be a continuing trend.”

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Export Land.

OPEC’s Two-Decade Ride on Global Growth Stalls (Bloomberg)

For the past two decades, growth in the global economy spelled higher revenues for the Organization of Petroleum Exporting Countries. Not any more. The CHART OF THE DAY shows how last year was the first since 1993 that the value of OPEC’s total crude exports didn’t track the direction of global gross domestic product. The bottom panel shows how the group supplying about 40% of the world’s oil fetched lower average prices and also shipped fewer barrels year on year.

Production among OPEC’s 12 members fell 2.5% to average 31.6 million barrels a day last year, data from OPEC’s Annual Statistic Bulletin showed on July 18. Libya’s output slumped 31% amid political protests at oilfields and export terminals. Output from Iran, whose exports are subject to international sanctions, fell by 4.4%. The group’s members also consumed about 1% a day more domestically. “It’s three factors that have combined to give them, as they say, $100 billion less,” said Leo Drollas, an independent oil consultant in Athens and former chief economist at the Centre for Global Energy Studies. “The increase in the internal consumption, the slight fall in the price, and the fall in production in some members.”

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