Oct 202017
 
 October 20, 2017  Posted by at 7:54 am Finance Tagged with: , , , , , , , , ,  


René Magritte Youth 1924

 

Fed Flunks Econ 101: Understanding Inflation (MW)
Meet The Bears Predicting Stock Market Doom (CNN)
Catalan Groups Call For Mass Withdrawal Of Money From Bank ATMs (CN)
The World’s Largest ICO Is Imploding After Just 3 Months (ZH)
Scandal-Hit Nissan Suspends All Production For Japan Market (AFP)
End Of Australia Auto-Making Sector As Holden Closes Doors (AFP)
Top Startup Investors See Mounting ‘Backlash’ Against Tech (R.)
Native American Tribe Holding Patents Sues Amazon And Microsoft (R.)
Putin Slams West for Lack of Respect and Broken Trust (BBG)
Ditch Neoliberalism To Win Again, Jeremy Corbyn Tells EU’s Center-Left (Ind.)
Merkel Comes to May’s Aid on Brexit (BBG)
Italian Regions To Vote In Europe’s Latest Referendums On Autonomy (G.)
Greece Plans Billion Euro Handout For The Poor (R.)
Tensions Rise On Aegean Islands As Migrants Continue To Arrive (K.)
Global Pollution Kills Millions, Threatens ‘Survival Of Human Societies’ (G.)

 

 

As I’ve said 1000 times.

Fed Flunks Econ 101: Understanding Inflation (MW)

The Federal Reserve’s illusive quest to achieve 2% inflation over the medium term is becoming a long-term problem. The institutional anxiety over the chronic inflation undershoot is evident in daily news stories, Fed speeches and the increased focus in internal discussions, as reflected in the minutes of the Sept. 19-20 meeting of the Federal Open Market Committee (FOMC). One doesn’t have to read between the lines to appreciate the degree to which policy makers fear the onset of the next recession without adequate “room” to lower interest rates. Hence, normalizing interest rates is “on track,” as the headline above noted, even though the relationship — between unemployment and inflation — is decidedly off track.

So what gives? The persistence of sub-2% inflation in the face of nine years of near-zero interest rates and an economy at what is perceived to be full employment has led to an array of silly explanations, embarrassing excuses and a host of pseudo-theories. Just maybe the Fed’s internal guidance system is flawed. The inverse correlation between unemployment and wages in the U.K. from 1861 to 1957 initially observed by New Zealand economist A.W. Phillips has morphed into a model of causation for Fed chief Janet Yellen and the current crop of U.S. policy makers. It’s not clear why. Just eyeballing the graph of the Fed’s preferred inflation measure and the civilian unemployment rate, one might conclude that the relationship broke down in the 1970s and has yet to reassert itself. Is a half-century malfunction enough to declare a theory null and void?

One would think so. Yet the notion of cost-push inflation as (supposedly) expressed by Phillips Curve lives, although faith in it has started to wane, even among ardent devotees like labor-economist Yellen. Instead, we are confronted with headlines such as, “Nobody seems to know why there is no inflation.” Really? Have they all forgotten Milton Friedman’s axiom that inflation is always and everywhere a monetary phenomenon? When the central bank creates more money than the public wants to hold, people spend it. The increased demand for goods and services eventually exceeds the economy’s ability to produce or provide them. The result is higher economy-wide prices, or inflation.

That isn’t happening, not just in the U.S. but across the globe. For all the sturm und drang about the Fed debasing the dollar and sowing the seeds of the next great inflation, the public’s demand for money has increased. The increased desire to hold cash and checkable deposits has risen to meet the increased supply. Velocity, or the rate at which money turns over, has plummeted.

Read more …

“.. it’s central banks that typically end the party. And central banks are telling you it’s last call.”

Meet The Bears Predicting Stock Market Doom (CNN)

The red-hot stock market may continue its rapid ascent, especially if Trump delivers his promise for “massive” corporate tax cuts. And even if not, healthy economic fundamentals and corporate profits should continue to support stocks. Nonetheless, some bears are fighting the herd mentality on Wall Street by warning of serious trouble brewing just beneath the surface of the stock market. These market skeptics are reassured by the fact that betting against stocks wasn’t popular in 2007, either. “The best time to be a bear is the loneliest time,” Jesse Felder, a money manager and founder of The Felder Report, told CNNMoney. Here are some of the red flags these bears are warning about, including similarities between now and 30 years ago:

In 2007 and 2008, Chris Cole presciently bet that market volatility would skyrocket to levels no one had seen before. He took those crisis-era winnings and started Artemis Capital, a hedge fund that has amassed $210 million. Today, the stock market is unusually quiet. The VIX, a popular barometer of market fear, recently hit a record low. Cole thinks it’s a mirage, partly because popular trading strategies allow investors to bet on the low volatility itself. All those bets lead to even lower volatility – until something unexpected happens, like suddenly higher interest rates. “Any shock to the system could cause this to unravel in the opposite direction, where higher volatility drives higher volatility,” Cole told CNNMoney. “This is a massive risk to the system. The only thing we’re missing is a fire.” [..] “This is a disaster waiting to happen,” said Cole. “In the event there is a fire, this can cause a massive explosion.”

Kyle Bass, founder of Hayman Capital Management, is also having a flashback to 30 years ago. “If you look at the all of the different constituencies of the market today, it resembles the portfolio insurance debacle of 1987 on steroids,” Bass told Real Vision TV in an interview released on Wednesday. Bass fears that, once stock prices decline 4% to 5%, that will quickly morph into a 10% to 15% plunge. He isn’t sure about timing, but pointed to geopolitical trouble and central banks as potential triggers. “Buckle up, because I think you’re going to see a pretty interesting air pocket. And I don’t think investors are ready for that,” he said.

Peter Boockvar, chief market analyst at The Lindsey Group, predicts the “overvalued” stock market will run into serious trouble as central banks hit the brakes on the stimulus measures they used to prop up economies after the crisis. He pointed to the Federal Reserve shrinking its balance sheet and the European Central Bank slowing its bond purchases. “Historically speaking, central banks put us into recessions and bear markets. The same will happen this time,” Boockvar said. He estimates that central banks will be pumping $1 trillion less money into markets. “The liquidity spigot is going to be dripping instead of flowing. That’s a really big deal,” said Boockvar. He conceded that stocks could run higher before eventually reversing. “When it happens, I’m not sure,” Boockvar said. “But it’s central banks that typically end the party. And central banks are telling you it’s last call.”

Read more …

Chaos.

Catalan Groups Call For Mass Withdrawal Of Money From Bank ATMs (CN)

Civil society organizations in Catalonia call for a mass withdrawal of money from bank ATMs on Friday at 8am in order to pressure the Spanish government. Organizers don’t especify how much money should be taken out nor what to do with it. The action targets the five main banks in Catalonia: Caixa Bank, Sabadell, Bankia, BBVA and Santander. Organizers call on clients of Caixa Bank and Sabadell to show their disagreement with the banks’ recent decision to move their headquarters out of Catalonia due to the escalating political crisis between governments in Barcelona and Madrid.

This is the first “direct and peaceful” action organized by Crida per la Democràcia (Call for Democracy). This is an umbrella group which includes among others the two main pro-independence organizations in Catalonia: the Catalan National Assembly (ANC) and Òmnium Cultural. The mass withdrawal is also aimed at condemning the imprisonment of ANC and Òmnium presidents, Jordi Sánchez and Jordi Cuixart, held in custody on sedition charges since Monday.

Read more …

All’s not well in crypto land.

The World’s Largest ICO Is Imploding After Just 3 Months (ZH)

Earlier this summer, Tezos smashed existing sales records in the white-hot IPO market after the company’s pitch to build a better blockchain for cryptocurrencies made it one of the buzziest ICOs in the world. As we noted at the time, the company capitalized on that buzz by courting VC firms and other institutional investors with a $50 million token pre-sale. After the company opened up selling to the broader public, demand soared as investors greedily bought up tokens in spite of glitches that threatened to derail the sale early on. By the end of its weeks-long token sale in July, Tezos had sold more than $230 million. Now, Tezos is proving that authorities in the US and China were on to something when they decided to crack down on the ICO market, which has become a cesspool of fraud and abuse.

To wit, the company’s management revealed this week that progress on its vaunted product has stalled as it has struggled to recruit engineering talent, and an acrimonious dispute between several of the company’s leading figures has spilled out into the open. As WSJ’s Paul Vigna reports, “a battle between the founders of the company and the head of the Swiss foundation they installed to give it more independence has put most trading of Tezos coins on ice, possibly until early next year.” The shakeup started after Tezos founders Arthur and Kathleen Breitman reported the delays in a blog post published Wednesday. But even more alarming, the pair accused Johann Gevers, the head of a Swiss foundation which oversees their funds, of attempting to overpay himself using the massive pot of investor capital – despite the fact that the company will likely blow through its promised deadline of allocating tokens to buyers by December (the tokens have yet to be created).

In early September we became aware that the president of the Tezos Foundation, Johann Gevers, engaged in an attempt at self-dealing, misrepresenting to the council the value of a bonus he attempted to grant himself. We have been working with the Tezos foundation to resolve the matter and have advocated for his removal from the foundation council. We are confident in the council’s ability to handle this sensitive matter with care and diligence. In the meantime, Johann’s operational role in the foundation has been suspended, pending an investigation by the council’s auditor. The news sent Tezos futures contracts trading on BitMex, an exchange known for its cryptocurrency futures products, tumbling more than 50% as traders unwound bets the project would be launched before the end of the year, as Bloomberg pointed out.

Read more …

The final nail in the Made in Japan coffin.

Scandal-Hit Nissan Suspends All Production For Japan Market (AFP)

Nissan said Thursday it was suspending all production destined for the local market, as Japan’s number-two automaker grapples with a mounting inspection scandal that has already seen it recall some 1.2 million vehicles. “Nissan decided today to suspend vehicle production for the Japan market at all Nissan and Nissan Shatai plants in Japan,” it said in a statement, referring to an affiliate. The announcement comes weeks after the company announced the major recall as it admitted that staff without proper authorisation had conducted final inspections on some vehicles intended for the domestic market before they were shipped to dealers. On Thursday, it said a third-party investigator found the misconduct had continued at three of its six Japanese plants even after it took steps to end the crisis.

“Nissan regards the recurrence of this issue at domestic plants – despite the corrective measures taken – as critical,” it said. “The investigation team will continue to thoroughly investigate the issue and determine measures to prevent a recurrence.” Nissan president Hiroto Saikawa offered a blunt assessment, saying that “old habits” were to blame. “You might say it would be easy to stop people who are not supposed to inspect from inspecting,” he told reporters Thursday. “But we are having to take (new measures) in order to stop old habits that had been part of our routine operations at the factories.”

Read more …

Lost skills.

End Of Australia Auto-Making Sector As Holden Closes Doors (AFP)

The last car rolled off the production line of Australian automaker Holden on Friday, marking the demise of a national industry unable to stand up to global competition. The closure of the Elizabeth plant in South Australia is the end of an era for Holden, which first started in the state as a saddlery business in 1856 and made the nation’s first mass-produced car in 1948. The brand has long been an Australian household name, with 1970s commercials singing that “football, meat pies, kangaroos and Holden cars” were part of the nation’s identity. “I feel very sad, as we all do, for it’s the end of an era, and you can’t get away from the emotional response to the closure,” Prime Minister Malcolm Turnbull told Melbourne radio station 3AW on Friday.

Holden was marketed as “Australia’s Own Car” and became a symbol of post-war prosperity Down Under despite being a subsidiary of US giant General Motors. At its peak in 1964, Holden employed almost 24,000 staff. But just 950 were able to watch the final car leave the factory floor Friday. “There are a number of people who have been here since the seventies and today will be a very emotional day for some people and a very sad day,” Australian Manufacturing Workers Union state secretary John Camillo told reporters. The union blamed the federal government for causing the closure by withdrawing support to the auto sector. The death of the industry was always on the cards after subsidies were cut off in 2014. Some Aus$30 billion (US$24 billion) in assistance was handed out between 1997 and 2012, according to the government’s Productivity Commission.

Read more …

The rich get scared. It’s about power as much as money.

Top Startup Investors See Mounting ‘Backlash’ Against Tech (R.)

Two of the technology industry’s top startup investors took to the stage at a conference on Wednesday to decry the power that companies such as Facebook had amassed and call for a redistribution of wealth. Bill Maris, who founded Alphabet’s venture capital arm and now runs venture fund Section 32, and Sam Altman, president of startup accelerator Y Combinator, said widespread discontent over income inequality helped elect U.S. President Donald Trump and had put wealthy technology companies in the crosshairs. “I do know that the tech backlash is going to be strong,” said Altman. “We have more and more concentrated power and wealth.” The market capitalization of the so-called Big Five technology companies – Alphabet, Apple, Amazon, Microsoft and Facebook – has doubled in the last three years to more than $3 trillion.

Silicon Valley broadly has amassed significant wealth during the latest tech boom. Altman and Maris spoke on the final day of The Wall Street Journal DLive technology conference in Southern California. Facebook’s role in facilitating what U.S. intelligence agencies have identified as Russian interference in last year’s U.S. presidential election is an example of the immense power the social media company has amassed, the investors said. “The companies that used to be fun and disruptive and interesting and benevolent are now disrupting our elections,” Maris said.

Altman said people “are understandably uncomfortable with that.” Altman, who unequivocally rebuffed rumors that he would run for governor of California next year, said he expects more demands from both the public and policy makers on data privacy, limiting what personal information Facebook and others can collect. Maris said regulators would have good cause to break up the big technology companies. “These companies are more powerful than AT&T ever was,” he said. [..] Altman and Maris offered few details of how to accomplish a redistribution of wealth. Maris proposed shorter term limits for elected officials and simplifying the tax code. Altman has advocated basic income, a poverty-fighting proposal in which all residents would receive a regular, unconditional sum of money from the government.

Read more …

Curious legal battle.

Native American Tribe Holding Patents Sues Amazon And Microsoft (R.)

A Native American tribe sued Amazon.com and Microsoft in federal court in Virginia on Wednesday for infringing supercomputer patents it is holding for a technology firm. The Saint Regis Mohawk Tribe was assigned the patents by SRC Labs LLC in August, in a deal intended to use the tribe’s sovereign status to shield them from administrative review. SRC is also a plaintiff in the case. The tribe, which would receive a share of any award, made a similar deal in September to hold patents for Allergan on its dry eye medicine Restasis. SRC and Allergan made the deals to shield their patents from review by the Patent Trial and Appeal Board, an administrative court run by the U.S. patent office that frequently revokes patents.

The tribe would get revenue to address environmental damage and rising healthcare costs. Companies sued for patent infringement in federal court often respond by asking the patent board to invalidate the asserted patents. Both Microsoft and Amazon have used this strategy to prevail in previous disputes. A federal court in Texas separately invalidated Allergan’s Restasis patents on Monday. The company responded that it would appeal that ruling.Allergan’s deal with the tribe has drawn criticism from a bipartisan group of U.S. lawmakers, some of whom have called it a “sham.” Missouri Senator Claire McCaskill on Oct. 5 introduced a bill to ban attempts to take advantage of tribal sovereignty.

Read more …

“The biggest mistake our country made was that we put too much trust in you; and your mistake was that you saw this trust as a lack of power and you abused it..”

Putin Slams West for Lack of Respect and Broken Trust (BBG)

President Vladimir Putin has yet to declare his candidacy for re-election next year, but on Thursday the outlines of his campaign were clear, beginning from his strongest suit as the man who restored power and respect to Russia. Putin spent much of his address to an annual gathering of foreign-policy specialists from Russia and abroad recounting his country’s perceived humiliation following the collapse of the Soviet Union, singling out the West and the U.S. for special criticism. “The biggest mistake our country made was that we put too much trust in you; and your mistake was that you saw this trust as a lack of power and you abused it,’’ he said during a question-and-answer session that was carried on national television. What was needed, he said, was “respect.’’

In its portrayal of the U.S., “it was the most negative speech Putin has given’’ at the annual Valdai Club meeting, said Toby Gati, a former U.S. National Security Council and State Department official who is a regular at the event. At the same time, the Russian leader appeared to leave a door open to a rapprochement with U.S. President Donald Trump, saying that he, too, deserved respect as the elected choice of the American people. [..] Even during the Cold War, the U.S. and the Soviet Union had always treated each other with respect, said Putin, lamenting how the Russian flag was recently torn from the country’s consulate in California. “Respect has been the underbelly of the whole conference,’’ said Wendell Wallach, chairman of technology and ethics studies at Yale University.

Read more …

The only leftist in Europe left standing. Oh irony.

Ditch Neoliberalism To Win Again, Jeremy Corbyn Tells EU’s Center-Left (Ind.)

Jeremy Corbyn has warned centre-left parties across Europe that they must follow his lead and abandon the neoliberal economics of the imagined “centre ground” if they want to start winning elections again. The Labour leader was given a hero’s welcome at the Europe Together conference of centre-left parties in Brussels, where he was introduced as “the new Prime Minister of Britain” and received two standing ovations from a packed auditorium. Continental centre-left leaders are looking to Mr Corbyn’s Labour as a model to reinvigorate their movement. Across Europe from France to Germany, Austria to Netherlands, and Spain to Greece, once powerful social-democratic parties have been reduced to a shadow of their former selves – with Labour a notable exception.

Mr Corbyn said low taxes, deregulation, and privatisation had not brought prosperity for Europe’s populations and that if social democratic parties continued to endorse them they would continue to lose elections. He berated the longstanding leadership of the centre-left, telling delegates from across the EU: “For too long the most prominent voices in our movement have looked out of touch, too willing to defend the status quo and the established order. “In a desperate attempt to protect what is seen as the centre-ground of politics: only to find the centre ground has shifted or was never where the elites thought it was in the first place.” Citing the rise of the far-right in countries like Austria and France, Mr Corbyn said the abdication of the radical end of politics by the left had created space for reactionary parties.

“Our broken system has provided fertile ground for the growth of nationalist and xenophobic politics,” he said. “We all know their politics of hate, blame and division and not the answer, but unless we offer a clear and radical alternative of credible solutions for the problem we face, unless we offer a chance to change the broken system, and hope for a more prosper future we are clearing the path for the extreme right to make even more far-reaching inroads into our communities. Their message of fear and division would become the political mainstream of our discourse. But we can offer a radical alternative, we have the ideas to make progressive politics the dominant force of this century. But if we don’t get our message right, don’t stand up for our core beliefs, and if we don’t stand for change we will founder and stagnate.”

Read more …

Does Angela not like what Corbyn has to say?

Merkel Comes to May’s Aid on Brexit (BBG)

German Chancellor Angela Merkel offered Theresa May the political cover she’s been asking for to take further steps in Brexit talks, calling on both sides to move so that a deal can be reached by year-end. The U.K. prime minister signaled she’s willing to offer more on the divorce bill, according to a U.K. official. May urged leaders at a European summit to help her find a deal she could sell to skeptics at home, and her counterparts responded with words of encouragement – though no concrete concessions. Merkel said there’s “zero indication” that Brexit talks won’t succeed and she “truly” wants an agreement rather than an “unpredictable resolution.” She welcomed the concessions May made in a landmark speech in Florence last month and said she’s “very motivated” to get talks moved on from the divorce settlement to trade by December.

“Now both sides need to move,” she told reporters after hearing May speak at dinner, in a shift of rhetoric for the EU side, which has previously insisted that it’s up to the U.K. alone to make the next move. [..] he chancellor’s upbeat tone on Brexit was in marked contrast to Germany’s portrayal in the U.K. media as the principle obstacle to Britain’s attempts to shift negotiations onto trade and a transition period. In reality, Merkel has rarely commented on Brexit in the past two months or more as she fought for re-election to a fourth term. Even when she has weighed in, the chancellor tended to adopt a matter-of-fact approach that stuck to the facts. “So what I heard today was a confirmation of the fact that, in contrast to what you hear in the British press, the process is moving forward step by step,” Merkel said. “You get the impression that after a few weeks you already have to announce the final product, and I found that – to be very clear – absurd.”

Read more …

it’s not about borders, but about decentralizing power. Unstoppable.

Italian Regions To Vote In Europe’s Latest Referendums On Autonomy (G.)

Two of Italy’s richest regions are holding referendums on greater autonomy on Sunday, in the latest push by European regions to wrest more power from the centre. Lombardy and Veneto, between them home to a quarter of Italy’s population, are seeking semi-autonomy, giving them more control over their finances and administration. Although legally non-binding, the exercise is the latest ripple in a wave of votes on greater autonomy across Europe in recent years, from Scotland in 2014 to Brexit last year and Catalonia in September. Although both regions have in the past campaigned for complete independence from Rome, their leaders have made it clear the ballots are about autonomy and not secession.

Some insight into the dynamics can be gleaned from the example of Sappada, a mountainous town in Veneto that straddles the regional border with Friuli-Venezia Giulia. A skiing and hiking paradise, the town is on the verge of becoming the first in Italy to switch regions to become part of Friuli-Venezia Giulia, one of Italy’s five semi-autonomous regions. The plan was approved by the Italian government in September after a lengthy bureaucratic process. “The reasons for people wanting to be part of Friuli are varied: we have our own dialect, which originates from German, and culturally we feel closer to Friuli,” Manuel Piller Hoffer, the mayor of Sappada, told the Guardian. “But the main one is economic: living next door to a semi-autonomous region, people see advantages that they don’t have. They see finances being controlled better, a better health service and sustainable investments being made – they see a better standard of living.”

Read more …

Do you need to call it a ‘handout’, Reuters?

Greece Plans Billion Euro Handout For The Poor (R.)

Greece plans to offer handouts worth 1 billion euros to poor Greeks who have suffered during the seven-year debt crisis after beating its budget targets this year, the government said on Thursday. Greece expects to return to nearly 2% growth this year and achieve a primary surplus – which excludes debt servicing costs – of 2.2% of GDP, outperforming the 1.75% bailout target. “The surplus outperformance which will be distributed to social groups that have suffered the biggest pressure during the financial crisis, will be close to 1 billion euros,” government spokesman Dimitris Tzanakopoulos told reporters. It is not yet clear who would be eligible for what the leftist-led government calls a “social dividend.” Hundreds of thousands of Greeks have lost their jobs during a six-year recession that cut more than a quarter of the country’s GDP.

With unemployment 21.3% and youth unemployment at 42.8% many households rely on the income of grandparents – although they have lost more than a third of the value of their pensions since 2010, when Athens signed up to its first international bailout. The government will make final decisions in late November, once it gets full-year budget data, Tzanakopoulos said. Greece’s fiscal performance this year and its 2018 budget is expected to be discussed with representatives from its European Union lenders and the International Monetary Fund next week when a crucial review of its bailout progress starts. Tzanakopoulos reiterated that Athens aims to wrap up the review as soon as possible, ruling out new austerity measures.

Read more …

We’re really going to see this play out all over again?

Tensions Rise On Aegean Islands As Migrants Continue To Arrive (K.)

As dozens of migrants continue to land daily on the shores of eastern Aegean islands, and tensions rise in reception centers, local communities are becoming increasingly divided over growing migrant populations. A total of 438 people arrived on the islands aboard smuggling boats from Turkey in the first three days of the week, with another 175 people arriving on the islet of Oinousses yesterday morning. The latter were transferred to a center on nearby Chios which is very cramped with 1,600 people living in facilities designed to host 850. The situation is worse on Samos, where a reception center designed to host 700 people is accommodating 2,850.

The Migration Ministry said around 1,000 migrants will be relocated to the mainland next week. But island authorities said that this will not adequately ease conditions at the overcrowded facilities. Samos Mayor Michalis Angelopoulos on Thursday appealed for European Union support during a meeting of regional authority officials in Strasbourg. He said the Aegean islands “cannot bear the burden of the refugee problem which is threatening to divide Europe.” There are divisions on the islands too. On Sunday rival groups are planning demonstrations on Samos – far-right extremists to protest the growing migrant population and leftists to protest the EU’s “anti-migrant” policy.

Read more …

When you think money is more valuable than life.

Global Pollution Kills Millions, Threatens ‘Survival Of Human Societies’ (G.)

Pollution kills at least nine million people and costs trillions of dollars every year, according to the most comprehensive global analysis to date, which warns the crisis “threatens the continuing survival of human societies”. Toxic air, water, soils and workplaces are responsible for the diseases that kill one in every six people around the world, the landmark report found, and the true total could be millions higher because the impact of many pollutants are poorly understood. The deaths attributed to pollution are triple those from Aids, malaria and tuberculosis combined. The vast majority of the pollution deaths occur in poorer nations and in some, such as India, Chad and Madagascar, pollution causes a quarter of all deaths. The international researchers said this burden is a hugely expensive drag on developing economies.

Rich nations still have work to do to tackle pollution: the US and Japan are in the top 10 for deaths from “modern” forms of pollution, ie fossil fuel-related air pollution and chemical pollution. But the scientists said that the big improvements that have been made in developed nations in recent decades show that beating pollution is a winnable battle if there is the political will. “Pollution is one of the great existential challenges of the [human-dominated] Anthropocene era,” concluded the authors of the Commission on Pollution and Health, published in the Lancet on Friday. “Pollution endangers the stability of the Earth’s support systems and threatens the continuing survival of human societies.”

Prof Philip Landrigan, at the Icahn School of Medicine at Mount Sinai, US, who co-led the commission, said: “We fear that with nine million deaths a year, we are pushing the envelope on the amount of pollution the Earth can carry.” For example, he said, air pollution deaths in south-east Asia are on track to double by 2050. Landrigan said the scale of deaths from pollution had surprised the researchers and that two other “real shockers” stood out. First was how quickly modern pollution deaths were rising, while “traditional” pollution deaths – from contaminated water and wood cooking fires – were falling as development work bears fruit. “Secondly, we hadn’t really got our minds around how much pollution is not counted in the present tally,” he said. “The current figure of nine million is almost certainly an underestimate, probably by several million.”

Read more …

Mar 062017
 
 March 6, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Negro woman who has never been out of Mississippi July 1936

 

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)
In Praise Of Cash (Aeon)
Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)
Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)
China’s Credit Target Implies Adding Entire German GDP This Year (BBG)
Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)
Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)
Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)
Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)
The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)
Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)
Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)
US Asks Ankara For Steps To Ease Aegean Tension (K.)
Greece Desperate For Growth Strategy As Public Mood Darkens (G.)
Polluted Environments Kill 1.7 Million Children A Year (R.)

 

 

From Australia, but applicable worldwide. Mortgages in housing bubbles are the main engine of money (credit) creation in our economies. Boith governments and banks depend on them for profit, taxes and ultimately survival. Imagine if housing prices halved, the entire construct would collapse. They’ll do anything to keep the game going. And then they will fail.

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)

The federal government’s problem with making housing more affordable is that it becomes, by definition, cheaper. And that’s not something that the federal government wants to see happen for some very understandable reasons. Back in the Howard era Australians were encouraged to invest in housing as a form of wealth creation, partially as a way of addressing rental strain and mainly as a way to ensure people had assets and therefore didn’t go selfishly claiming pensions later on. That’s when the negative gearing and capital gains exemptions were introduced that made buying property such a sweet deal. So now there are a lot of Australians who have put their retirement eggs in the basket marked “leveraging the hell out of my mortgage to buy more investment properties” for the last couple of decades and who will be therefore disadvantaged if the value of housing drops.

And then there’s pure self interest at work too, since between a third and half of all our representatives have investment properties – the PM himself owns seven properties, for example. How keen would you say that our parliamentary representatives are to make their portfolios drop in value, especially for something as stupid as the greater good? Also, as well we know thanks to the efforts of the NSW Independent Commission Against Corruption, the NSW Liberals are so beloved by property developers that the party went to some effort to find a way of accepting donations from them despite those donations being completely illegal. If they suddenly become the party that makes property less lucrative, there’d be no donations to justify the creation of opaque entities like the Free Enterprise Foundation.

[..] Will housing become more affordable in Australia? Absolutely! And it could happen one of two ways. This complex web of legislation can be gently and strategically unpicked via careful bipartisan cooperation across our different spheres of government in concert with the private sector in an effort to create a sane, universally beneficial housing system at all levels. Alternatively, we can choose to leave things be until the housing bubble bursts and plunges Australia into a crippling recession. And since this is politics in 2017, we can assume that Plan A is already off the table.

Read more …

Using cash is fast becoming a revilutionary act.

In Praise Of Cash (Aeon)

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge. The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.

The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off. The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen.

This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending. Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.

Read more …

From Thomas Paine to Henry George, the reason for UBI has long been known. Call it ‘ground rent’ or ‘land value tax’. Tax the ownership class, not the workers. ‘Birthright’ may sound strange today, but is it really?

Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)

Every student learns about Magna Carta, the ancient scroll that enshrined the rights of barons against the arbitrary authority of England’s monarchs. But most have never heard of its arguably more important twin, the Charter of the Forest, issued two years later in 1217. This short but powerful document guaranteed the rights of commoners to common lands, which they could use for farming, grazing, water and wood. It gave official recognition to a right that humans nearly everywhere had long just presupposed: that no one should be debarred from the resources necessary for livelihood. But this right – the right of habitation – came under brutal attack beginning in the 15th century, when wealthy nobles began fencing off common lands for their own profit.

[..] the success of basic income – in both the north and south – all depends on how we frame it. Will it be cast as a form of charity by the rich? Or will it be cast as a right for all? Thomas Paine was among the first to argue that a basic income should be introduced as a kind of compensation for dispossession. In his brilliant 1797 pamphlet Agrarian Justice, he pointed out that “the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race”. It was unfair that a few should enclose it for their own benefit, leaving the vast majority without their rightful inheritance. As far as Paine was concerned, this violated the most basic principles of justice.

Knowing that land reform would be politically impossible (for it would “derange any present possessors”), Paine proposed that those with property should pay a “ground rent” – a small tax on the yields of their land – into a fund that would then be distributed to everyone as an unconditional basic income. For Paine, this would be a right: “justice, not charity”. It was a powerful idea, and it gained traction in the 19th century when American philosopher Henry George proposed a “land value tax” that would fund an annual dividend for every citizen. The beauty of this approach is that it functions as a kind of de-enclosure. It’s like bringing back the ancient Charter of the Forest and the right of access to the commons. It restores the right to livelihood – the right of habitation.

Read more …

Yeah, output cuts. Sure.

Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)

Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia’s compliance with a global deal to cut oil output. But worries over escalating violence in the Middle East put a floor under prices. Brent crude futures dropped 29 cents, or 0.5%, to $55.61 a barrel as of 0638 GMT after settling 1.5% higher in the previous session. U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.6%, to $53.03 a barrel after closing the previous session up 1.4%. “The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley at Oanda brokerage in Singapore.

China aims to expand its economy by around 6.5% this year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. That is lower than the 6.7% growth achieved last year. China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner said on Sunday, while China’s newly appointed banking regulator vowed on to strengthen supervision of the lending sector. Meanwhile, figures by Russia’s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on Russia’s moves to rein in output as part of a pact with oil producers last year. That came as oil prices rose on Friday as the dollar weakened modestly after a speech by Fed Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15.

Read more …

“China’s great ball of money.”

China’s Credit Target Implies Adding Entire German GDP This Year (BBG)

China’s credit engine will keep humming this year, adding the rough equivalent of Germany’s annual economic output to its already massive stock of total social financing (TSF), according to estimates derived from the nation’s 2017 targets. Adding higher equity market financing and about 5 trillion yuan ($725 billion) worth of local government bond swaps to the official credit growth target of 12%, analysts at UBS see TSF expansion of 14.8% this year. They calculate that’s equal to a whopping 23 trillion yuan, or $3.3 trillion, addition to the amount of total credit already swishing around the world’s second-largest economy. “China’s pace of leverage increase will be slowing, albeit not by that much,” economists led by Hong Kong-based Wang Tao wrote in a report.

“The government’s intention for a still strong pace of credit growth and recent notable tightening in China’s money market and bond market attest to the difficulties facing the PBC in balancing monetary policy.” China’s great ball of money creates a constant headache for policy makers as money flows from asset class to asset class, creating bubbles along the way. It’s a particular dilemma for the People’s Bank of China because it needs new credit to generate the kind of growth its leaders desire – around 6.5% or higher if possible this year. The M2 money supply target was cut to 12% this year from 13% in 2016, while still higher than the 11.3% actual expansion last year.

Read more …

So wrong so many times, and still taken serious. You’d almost admire them for it.

Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)

Federal Reserve officials say their decisions on interest rate policy hinge on the ebb and flow of economic data, not the whims of financial markets. They have repeatedly downplayed the effect of short-term market fluctuations in their policy moves, aimed at maintaining a strong labor market and 2% inflation over the medium term. But the thing about markets is, they don’t really matter until they suddenly do. That may be the case at the moment, with Fed officials suddenly signaling in unison, without major changes in the economic data, that an increase in interest rates is coming this month. Investors accordingly shifted from considering a March hike as rather a long shot to seeing it as a near sure possibility in just two weeks. What changed? The stock market continued to set new records without much underlying economic impetus.

When the Fed released minutes from its end of January meeting, they showed members “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook.” The Fed comments on the broad health of the financial markets all the time, but that kind of focus on stock volatility is less common. Fed Chair Janet Yellen and her Vice Chair Stanley Fischer, both speaking on March 3, appeared to seal the deal for a rate increase at the Fed’s upcoming March 14-15 meeting — with Yellen indicating that a hike is coming barring a drastic disappointment in next week’s February jobs report. Fischer was also was fairly unequivocal. “If there has been a conscious effort to move up our hike expectations I am going to join it,” he told a monetary policy conference in New York, sponsored by the University of Chicago’s Booth School of Business.

Read more …

Carswell is the only MP for Ukip. Farage hates him now. But he has some points: “Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve. “

Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)

What is Nigel Farage so cross about? We won the EU referendum, for goodness sake. Since 23 June, I’ve been walking on sunshine. My mood has been a state of Zen-like bliss. Alongside Boris Johnson, David Owen, Gisela Stuart and all of those involved in the official Vote Leave campaign, I spent the referendum arguing that leaving the EU would be an opportunity to make Britain more open, outward-looking and globally competitive. It is becoming increasingly clear to me that this is where Brexit is going to take us. [..] Brexit is often bracketed alongside the election of Donald Trump and the rise of the new radical populist movements in many western countries. But to me the EU referendum result was a safety valve. Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve.

Throughout history oligarchy has emerged in societies in which power was previously dispersed: in the late Roman republic, and in early modern times in the Venetian and then the Dutch republics. Each time, the emergence of oligarchy was always accompanied by an anti-oligarch insurgent reaction.Many of today’s new radical movements aren’t oligarchs, but an anti-oligarchy insurgency. Trump is no American Caesar about to cross some constitutional Rubicon. Yet such insurgents often ended up unwittingly assisting the oligarchs. In Rome the Gracchi brothers, with their Trump-like concern about cheap migrant labour, caused so much civil strife that an all-powerful emperor seemed a better bet. In Venice, the anti-oligarch rebel Bajamonte launched an unsuccessful coup – and in doing so gave the elite a pretext to create a new, superpowerful executive arm of government, the Council of Ten.

Created to respond to the crisis for six weeks, it ran the republic for the next 600 years. The Dutch anti-oligarch De Witt was so inept, he paved the way for the return of a strong stadtholder, or king. So, too, today. If chaotic, angry insurgents such as France’s Marine Le Pen and the rightwing populist Alternative for Germany party are the alternative, then being governed by remote, unaccountable elites sitting in central banks and Brussels doesn’t seem so unattractive after all. But Brexit isn’t anything like that. It is the beginning of a liberal insurgency. Brexit means that we take back control from the supranational elite. Power can be dispersed outward and downwards. Those who make public policy might once more answer to the public. Cheer up – it might even mean that there is less space for anger in our politics too.

Read more …

“Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015…”

Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)

Deutsche Bank CEO John Cryan tore up his own turnaround plan in an admission that the 17-month-old effort flopped. Germany’s largest bank late Sunday approved measures – most crucially, plans to raise about $8.5 billion in a share sale – that effectively restart what has already been the most turbulent transformation in its recent history. Among the moves: naming two deputy CEOs who may now be positioned to succeed Cryan; selling a piece of the asset-management business and abandoning the sale of the consumer-banking unit, which was the linchpin of the blueprint he scrapped. Speaking on Monday, Cryan said the deputies were installed at his request as the company will focus more on the German market with the reintegration of Postbank, which he said reflects a strong performance by the unit and a changed environment for banks.

Yet the developments underscore how, almost two years after he took over, Deutsche Bank has been unable to plot a course to a more profitable future while seeking to eliminate 9,000 jobs. “We want to move back into modest growth mode, controlled growth,” Cryan said in the interview. “The operating environment in the U.S. but also increasingly in the euro zone and especially in Germany looks strong. And so I’m reasonably confident about the future.” Deutsche Bank fell 5.4% at 9:16 a.m. in Frankfurt trading, the biggest drop more than four weeks. Before today, the shares had rallied 44% in the past six months. Even though they’re being tapped for a capital infusion for the fourth time since 2010, some investors welcomed the developments as a way to end questions about the firm’s financial strength. S

elling a minority stake in the asset-management unit within the next two years and unloading some assets at the investment bank will help raise another 2 billion euros ($2.1 billion) of capital. Deutsche Bank’s last three capital increases raised about €21.7 billion – compared to the current market value of €26.4 billion. Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015. “The shareholder dilution is enormous,” said Michael Huenseler, an investor at Assenagon Asset Management, which holds a stake in Deutsche Bank. “But at the same time, this package should end what has been hurting Deutsche Bank for so long: the discussion about the capital situation. Now the bank has to prove that it can be profitable.”

Read more …

A boiling cauldron that will keep festering a for a while longer. Italy has a long-standing ownership class that won’t give up easily. Corruption, the mob, the church, secret lodges.

Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)

Matteo Renzi’s comeback risks being undermined by a judicial investigation into the father of the Italian former prime minister and a government minister. Rome prosecutors on Friday were due to question Tiziano Renzi, 65, over an accusation of influence-peddling, his lawyer said. The elder Renzi is alleged to have obtained promises of monthly sums of money from Alfredo Romeo, a Naples entrepreneur, in return for mediating on his behalf for public works contracts, Italian news agency Ansa reported. The ex-premier’s father has denied any wrongdoing. [..] “If the investigation goes ahead, it will surely hurt Matteo Renzi’s prospects even if he has nothing to do with it,” said Sergio Fabbrini, director of the school of government at Luiss University in Rome. “This is the most critical moment of his political career, he has to find a new strategy.”

Tiziano Renzi’s lawyer Federico Bagattini said in a telephone interview that his client had done nothing illicit. “We deny that he ever asked for anything, that he ever promised he would intervene, and that he ever received any money or any other benefit,” Bagattini said. Tiziano Renzi said Thursday he had nothing to hide. “I have never asked for money. I never took any. Never,” he said in a statement reported by Ansa. [..] The anti-establishment Five Star Movement, which has made denunciations of political corruption one of its main platforms, has seized on the case. It submitted on Thursday a parliamentary vote of no confidence against Sports Minister Luca Lotti, a close ally of Matteo Renzi, which will test the government’s majority.

Lotti is also under investigation in the case for allegedly revealing confidential information, according to Italian news media, a charge he denied in a post on Facebook on Thursday. Five Star “talks of kick-backs, arrests, contracts – all things which I have nothing to do with,” Lotti wrote. The office of Franco Coppi, Lotti’s lawyer, did not respond to an emailed request for comment on Friday. The case is “an atomic bomb on Italian politics,” Five Star co-founder Beppe Grillo, who wants a referendum on Italy’s membership of the euro, wrote on his blog. “When it explodes, no one will be able to find shelter. Today more than ever we need honesty in institutions.”

Read more …

It didn’t start yesterday. Western media have been killing off their own credibility for propaganda reasons, for many years.

The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)

[..] with trust in the establishment at an all time low, the institutional heft of traditional media companies becomes a liability rather than an asset, enabling Trump to successfully turn the “fake news” label onto his opponents. Much of that goes back to Iraq. “The period of time between 9/11 and the invasion of Iraq represents one of the greatest collapses in the history of the American media,” says Gary Kamiya. “Every branch of the media failed, from daily newspapers, magazines and websites to television networks, cable channels and radio. “Bush administration lies and distortions went unchallenged, or were actively promoted. Fundamental and problematic assumptions about terrorism and the ‘war on terror’ were rarely debated or even discussed. Vital historical context was almost never provided. And it wasn’t just a failure of analysis. With some honourable exceptions, good old-fashioned reporting was also absent.”

Let’s look at the most famous example of how the media was used to make the Iraq war happen. On September 8 2002, the New York Times published a major story by Michael R Gordon and Judith Miller asserting that Iraq had “stepped up its quest for nuclear weapons and … embarked on a worldwide hunt for materials to make an atomic bomb”. The piece cited no named sources whatsoever. Rather, it attributed all its significant claims simply to anonymous US officials – and, by so doing, it helped launder the Bush administration’s talking points, lending a liberal imprimatur to unverified (and totally untrue) claims. When the key members of the Bush administration launched a publicity blitz to make the war happen, they were able to quote the New York Times as evidence: in effect, reacting to newspaper revelations for which they themselves were responsible.

For instance, during a CNN appearance, Condoleeza Rice urged the public to support an invasion on the basis that “we don’t want the smoking gun to be a mushroom cloud”. She’d lifted the phrase directly from Gordon and Miller – who’d taken it from the administration. Elsewhere, Gordon and Miller referred to Iraq’s supposed interest in acquiring high-strength aluminium tubes as an illustration of its nuclear ambitions. Again, the claims came from Bush officials. But when, at the UN General Assembly, Bush told the story, he sounded as if he were repeating a New York Times scoop. A similar circularity defined the propaganda campaign conducted in other countries.

Read more …

In case you were still wondering why an entire country and its people are being obliterated.

Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)

“63% of Yemen’s crude production is being stolen by Saudi Arabia in cooperation with Mansour Hadi, the fugitive Yemeni president, and his mercenaries,” Mohammad Abdolrahman Sharafeddin told FNA on Tuesday. “Saudi Arabia has set up an oil base in collaboration with the French Total company in the Southern parts of Kharkhir region near the Saudi border province of Najran and is exploiting oil from the wells in the region,” he added. Sharafeddin said that Riyadh is purchasing arms and weapons with the petro dollars stolen from the Yemeni people and supplies them to its mercenaries to kill the Yemenis. Late in last year, another economic expert said Washington and Riyadh had bribed the former Yemeni government to refrain from oil drilling and exploration activities, adding that Yemen has more oil reserves than the entire Persian Gulf region.

“Saudi Arabia has signed a secret agreement with the US to prevent Yemen from utilizing its oil reserves over the past 30 years,” Hassan Ali al-Sanaeri told FNA. “The scientific research and assessments conducted by international drilling companies show that Yemen’s oil reserves are more than the combined reserves of all the Persian Gulf states,” he added. Al-Sanaeri added that Yemen has abundant oil reserves in Ma’rib, al-Jawf, Shabwah and Hadhramaut regions. He noted that a series of secret documents by Wikileaks disclosed that the Riyadh government had set up a committee presided by former Saudi Defense Minister Crown Prince Sultan bin Abdel Aziz. “Former Saudi Foreign Minister Saud al-Faisal and the kingdom’s intelligence chief were also the committee’s members.”

Read more …

“If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet..”

Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)

Turkish President Tayyip Erdogan accused Germany on Sunday of “fascist actions” reminiscent of Nazi times in a growing row over the cancellation of political rallies aimed at drumming up support for him among 1.5 million Turkish citizens in Germany. German politicians reacted with shock and anger. German Justice Minister Heiko Maas told broadcaster ARD that Erdogan’s comments were “absurd, disgraceful and outlandish” and designed to provoke a reaction from Berlin. But he cautioned against banning Erdogan from visiting Germany or breaking off diplomatic ties, saying that such moves would push Ankara “straight into the arms of (Russian President Vladmir) Putin, which no one wants”.

The deputy leader of Chancellor Angela Merkel’s Christian Democratic Union (CDU) party said the Turkish president was “reacting like a wilful child that cannot have his way”, while a top leader of the CDU’s Bavarian sister party described Erdogan as the “despot of the Bosphorus” and demanded an apology. German authorities withdrew permission last week for two rallies by Turkish citizens in German cities at which Turkish ministers were to urge a “Yes” vote in a referendum next month on granting Erdogan sweeping new presidential powers. Berlin says the rallies were canceled on security grounds. However, Turkish Economy Minister Nihat Zeybekci spoke at large events in Leverkusen and Cologne on Sunday while protesters stood outside.

The row has further soured relations between the two NATO members amid mounting public outrage in Germany over the arrest in Turkey of a Turkish-German journalist. It has also spurred growing demands for Merkel to produce a more forceful response to Erdogan’s words and actions. A poll conducted for the Bild am Sonntag newspaper showed that 81% of Germans believe that Merkel’s government has been too accommodating with Ankara. Germany, under an agreement signed last year, relies on Turkey to prevent a further flood of migrants from pouring into Europe. The lead article in German news magazine Der Spiegel on Sunday urged Merkel to free herself from the “handcuffs of the migrant deal”.

[..] A defiant Erdogan said he could travel to Germany himself to rally support for the constitutional changes to grant him greater power. “Germany, you have no relation whatsoever to democracy and you should know that your current actions are no different to those of the Nazi period,” Erdogan said at a rally in Istanbul. “If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet,” he told a separate event.

Read more …

And Erdogan will want something in return.

US Asks Ankara For Steps To Ease Aegean Tension (K.)

American officials have urged Ankara to refrain from action that would further escalate tension with fellow NATO member Greece in the Aegean Sea, Kathimerini understands, adding that the issue was raised during the Munich Security Conference last month, as well as during private contacts in Ankara. Sources told Kathimerini that US Secretary of State Rex Tillerson raised the topic with Turkish Foreign Minister Mevlut Cavusoglu on the sidelines of the Munich gathering last month. Assistant Secretary of State John Heffern reportedly asked Turkish officials for steps that will help reduce the recent spike in tensions with Greece.

A few days later, the same sources said, US Ambassador to Ankara John Bass met with Turkey’s Foreign Ministry Undersecretary Umit Yalcin to put pressure in the same direction. Yalcin is said to have attributed the standoffish behavior of the Turkish military to the army’s damaged morale by developments following July’s failed coup attempt. Analysts however say that any autonomy of the Turkish armed forces has been heavily compromised in the wake of the coup. Greek Foreign Minister Nikos Kotzias is expected to travel to Washington for a meeting with Tillerson in the coming days. Talks are to be followed by a telephone conversation between Prime Minister Alexis Tsipras and US President Donald Trump.

Read more …

Growth is not possible in Greece today. The entire austerity edifice would have to be reversed.

Greece Desperate For Growth Strategy As Public Mood Darkens (G.)

In navigating the country’s economic collapse, every one of Athens’ post-crisis governments has at some point attempted to change the narrative by diverting attention to development and growth. But the latest shift comes amid evidence that prime minister Alexis Tsipras’s two-party administration has gone a step further, approaching the World Bank for a €3bn loan to finance employment policies and programmes.

The move would highlight the desperation of a government tackling ever-growing poverty rates. Last week, the Cologne Institute for Economic Research said poverty in thrice-bailed out Greece had jumped 40% between 2008 and 2015, by far the biggest leap of any European country. Tsipras has been told he will have to enforce labour market reforms and further pension and income tax cuts if Greece is to realistically achieve a primary surplus of 3.5% – before interest payments are taken into account – once its current rescue programme expires in August 2018. The country faces debt repayments of over €7bn in July and with its coffers near empty would be unable to avert default – and inevitable euro exit – if additional loans weren’t forthcoming.

The prospect of more cuts, when pensions have already been slashed 12 times and some retirees are surviving on little more than €300 a month, has exacerbated the sense of gloom in the eurozone’s weakest member state. “We will have to compromise,” Dragasakis admitted. “Even if such demands are totally irrational,” he said, adding that Greece’s real problem was that it was primarily caught up in an ugly dispute between its lenders over what to do with a debt load close to 180% of GDP. The IMF has projected the pile will reach an “explosive” 275% of output if not relieved – a move that Germany, the biggest provider of bailout funds, refuses steadfastly to agree to. “It is why we have not completed the review,” said Dragasakis of the progress report Athens must conclude to secure further assistance.

The Greek government has been accused of deliberately delaying implementation of reforms. “This government won’t deliver reforms because it doesn’t believe in them,” said the centre-right main opposition leader Kyriakos Mitsotakis at the Delphi forum. As in antiquity, when kings, warriors and philosophers descended on Delphi at times of uncertainty to consult the Pythia, or prophetess, about their future, politicians, policy gurus, economists and academics gather annually at the place once regarded as the centre of the world to debate Greece’s plight. “What we need is a masterplan and a vision to get out of this crisis,” said Nikos Xydakis, the former European affairs minister who is now parliamentary spokesman for the ruling Syriza party. “A masterplan in financial terms but also a vision for a new identity of Greeks once this crisis ends.”

Read more …

How mankind gets rid of itself, and can’t help doing it.

Polluted Environments Kill 1.7 Million Children A Year (R.)

A quarter of all global deaths of children under five are due to unhealthy or polluted environments including dirty water and air, second-hand smoke and a lack or adequate hygiene, the World Health Organization (WHO) said on Monday. Such unsanitary and polluted environments can lead to fatal cases of diarrhea, malaria and pneumonia, the WHO said in a report, and kill 1.7 million children a year. “A polluted environment is a deadly one – particularly for young children,” WHO Director-General Margaret Chan said in a statement. “Their developing organs and immune systems, and smaller bodies and airways, make them especially vulnerable to dirty air and water.” In the report – “Inheriting a sustainable world: Atlas on children’s health and the environment” – the WHO said harmful exposure can start in the womb, and then continue if infants and toddlers are exposed to indoor and outdoor air pollution and second-hand smoke.

This increases their childhood risk of pneumonia as well as their lifelong risk of chronic respiratory diseases such as asthma. Air pollution also increases the lifelong risk of heart disease, stroke and cancer, the report said. The report also noted that in households without access to safe water and sanitation, or that are polluted with smoke from unclean fuels such as coal or dung for cooking and heating, children are at higher risk of diarrhea and pneumonia. Children are also exposed to harmful chemicals through food, water, air and products around them, it said. Maria Neira, a WHO expert on public health, said this was a heavy toll, both in terms of deaths and long-term illness and disease rates. She urged governments to do more to make all places safe for children. “Investing in the removal of environmental risks to health, such as improving water quality or using cleaner fuels, will result in massive health benefits,” she said.

Read more …

Sep 272016
 
 September 27, 2016  Posted by at 8:32 am Finance Tagged with: , , , , , , , , , ,  


Arnold Genthe “Chinatown, San Francisco. The street of the gamblers at night” 1900

Why I Switched My Endorsement from Clinton to Trump (Scott Adams)
When America Was Great, Taxes Were High, Unions Strong, and Government Big (A.)
Global Debt Reaches Fresh High As Companies And Countries Keep Borrowing (Tel.)
When Small Is Evil (DQ)
Structural Growth and Dope Dealers on Speed-Dial (Hussman)
Treasury Market’s Biggest Buyers Are Selling as Never Before (BBG)
Deutsche Bank Crisis Could Take Angela Merkel Down – And The Euro (Tel.)
China’s Runaway Housing Market Poses Latest Challenge for Yuan (BBG)
Sydney Home Prices Need To Drop 25% To Help First Time Buyers (Abc)
Don’t Blame “Baby Boomers” For Not Retiring – They Can’t Afford To (Roberts)
Saudi Lobbyists Plot New Push Against 9/11 Bill As Veto Override Looms (Pol.)
Over 90% Of World Breathing Bad Air-WHO (AFP)
Canadians Are Embracing Syrian Refugees. Why Can’t We? (G.)

 

 

The most interesting and thought-provoking thing I’ve read about the election amidst a river of blubber.

Why I Switched My Endorsement from Clinton to Trump (Scott Adams)

5. Pacing and Leading: Trump always takes the extreme position on matters of safety and security for the country, even if those positions are unconstitutional, impractical, evil, or something that the military would refuse to do. Normal people see this as a dangerous situation. Trained persuaders like me see this as something called pacing and leading. Trump “paces” the public – meaning he matches them in their emotional state, and then some. He does that with his extreme responses on immigration, fighting ISIS, stop-and-frisk, etc. Once Trump has established himself as the biggest bad-ass on the topic, he is free to “lead,” which we see him do by softening his deportation stand, limiting his stop-and-frisk comment to Chicago, reversing his first answer on penalties for abortion, and so on.

If you are not trained in persuasion, Trump looks scary. If you understand pacing and leading, you might see him as the safest candidate who has ever gotten this close to the presidency. That’s how I see him. So when Clinton supporters ask me how I could support a “fascist,” the answer is that he isn’t one. Clinton’s team, with the help of Godzilla, have effectively persuaded the public to see Trump as scary. The persuasion works because Trump’s “pacing” system is not obvious to the public. They see his “first offers” as evidence of evil. They are not. They are technique. And being chummy with Putin is more likely to keep us safe, whether you find that distasteful or not. Clinton wants to insult Putin into doing what we want. That approach seems dangerous as hell to me.

6. Persuasion: Economies are driven by psychology. If you expect things to go well tomorrow, you invest today, which causes things to go well tomorrow, as long as others are doing the same. The best kind of president for managing the psychology of citizens – and therefore the economy – is a trained persuader. You can call that persuader a con man, a snake oil salesman, a carnival barker, or full of shit. It’s all persuasion. And Trump simply does it better than I have ever seen anyone do it. The battle with ISIS is also a persuasion problem. The entire purpose of military action against ISIS is to persuade them to stop, not to kill every single one of them. We need military-grade persuasion to get at the root of the problem. Trump understands persuasion, so he is likely to put more emphasis in that area.

Most of the job of president is persuasion. Presidents don’t need to understand policy minutia. They need to listen to experts and then help sell the best expert solutions to the public. Trump sells better than anyone you have ever seen, even if you haven’t personally bought into him yet. You can’t deny his persuasion talents that have gotten him this far. In summary, I don’t understand the policy details and implications of most of either Trump’s or Clinton’s proposed ideas. Neither do you. But I do understand persuasion. I also understand when the government is planning to confiscate the majority of my assets. And I can also distinguish between a deeply unhealthy person and a healthy person, even though I have no medical training. (So can you.)

Read more …

The Dream ended decades ago, it’s just a matter of picking which decade.

When America Was Great, Taxes Were High, Unions Strong, and Government Big (A.)

There is plenty about GOP hopeful Donald Trump to which potential primary voters respond. He’s successful. He’s plainspoken. At a time when politicians are historically unpopular, he’s not a politician. And he has a great slogan. That slogan resonates with his supporters, according to Republican pollster Frank Luntz, who ran a recent focus group, the results of which were written about in Time. “I used to sleep on my front porch with the door wide open, and now everyone has deadbolts,” one man told Luntz. “I believe the best days of the country are behind us.” Luntz concluded that people see Trump as a “real-deal fixer-upper,” able to make repairs that others have bungled. “We know his goal is to make America great again,” one woman astutely observed. “It’s on his hat.”

It could be on your hat too—Trump has begun selling “Make America Great Again” merchandise—if you can find one, that is. They have a tendency to sell out. As Russell Berman pointed out in The Atlantic earlier this month, many white Americans these days are pessimistic to the point of despair: “White Americans—and in particular those under 30 or nearing retirement age—have all but given up on the American Dream. More than four out of five younger whites, and more than four out of five respondents between the ages of 51 and 64 said The Dream is suffering.” No wonder Trump’s message is so powerful—it’s a sugar pill coated with nostalgia. He is not promising to make America great, he’s promising to make it great again. But to what era does he intend to take the nation back?

And what would that look like, practically speaking? The boundaries of America’s “golden age” are clear on one end and fuzzy on the other. Everyone agrees that the midcentury boom times began after Allied soldiers returned in triumph from World War II. But when did they wane? The economist Joe Stiglitz, in an article in Politico Magazine titled “The Myth Of The American Golden Age,” sets the endpoint at 1980, a year until which “the fortunes of the wealthy and the middle class rose together.” Others put the cut-off earlier, at the economic collapse of 1971 and the ensuring malaise. Regardless of when it ended, it would not be unfair to use the ’50s as shorthand for this now glamorized period of plenty, peace, and the kind of optimism only plenty and peace can produce.

Read more …

Ever more debt is the only way to keep the facade upright enough that people believe in it.

Global Debt Reaches Fresh High As Companies And Countries Keep Borrowing (Tel.)

Global debt issuance is on course to hit a record high in 2016 as figures showed sales this year topped $5 trillion (£3.9 trillion) at the end of September. Debt issuance rose to $5.02 trillion in the nine months to September 22, according to Dealogic, putting 2016 on course to beat the all-time high of $6.6 trillion recorded in 2006. Record low interest rates have encouraged countries and companies to issue debt as central banks around the world try to stimulate growth. The data also showed corporate issuance of investment-grade debt reached a record high of $1.54 trillion since the start of the year, up from $1.41 trillion in the same period a year earlier. Dealogic’s figures also highlighted the impact of the Brexit vote.

Sterling-denominated investment grade debt rose to $21.3bn in the first nine months of the year, up slightly from $20.9bn raised in the same period of 2015. Volumes in July fell to their lowest since 2000 as the referendum result slowed issuance, with just $564m issued, according to Dealogic. However, issuance is expected to pick up later this year following the Bank of England’s decision to buy £10bn of corporate debt as part of its revamped bond-buying programme. Sterling issuance in August jumped to six times the average following the Bank’s announcement. Green bonds – which raise money for environmentally friendly projects and often carry tax exemptions – are also rising in popularity.

Activity surpassed full-year 2015 levels in September as volumes reached a record high, worth $48.2bn. Mark Carney, the Governor of the Bank of England, has spoken out in favour of green finance, describing it as a “major opportunity” for investors. In a speech last week, he said long-term financing of green projects in emerging markets could help to promote financial stability. “By ensuring that capital flows finance long-term projects in countries where growth is most carbon intensive, financial stability can be promoted,” he said. More than $13 trillion of global sovereign and corporate debt trades at negative yields, highlighting the influence of central banks.

Read more …

Draghi’s comments on small banks remind me of Ken Rogoff’s war on cash.

When Small Is Evil (DQ)

There are plenty of reasons to be worried about the state of Europe these days, but if one had to choose one thing above all others, it would be the gaping disconnect between reality and senior European policy makers’ willful misperception of reality. A perfect case in point was a speech given in Frankfurt by ECB president Mario Draghi. He was addressing a conference of the European Systemic Risk Board (ERSB), an organization created in 2010 by the European Commission to warn about and mitigate systemic financial risks in Europe. During his address Draghi discussed what he saw as the biggest threats to Europe’s financial system.

Just as you’d expect from any senior central banker worth his or her salt, he did not point to the most obvious risk: the zombifying banks at the very top of the financial food chain — the same banks that coincidentally constitute the ECB’s number-one constituency and whose balance sheets are still filled to the rafters with toxic assets dating back to even before the last major crisis, in 2008. By now, virtually all of these banks are fully dependent on the never-ending and ever-growing welfare assistance provided by the ECB. Nor did Draghi mention the excessive complexity and interconnectedness of the banking system, routinely fingered as potential causes of the next global financial crisis.

Nor for that matter did he mention the destructive side effects of the ECB’s negative interest rate policy (NIRP), which – besides sacrificing millions of savers and retirees via their pension funds on the altar of rampant debt creation and completely undermining the crucial micro-economic role played by capital formation – is making it difficult for Europe’s largest banks to turn a meaningful profit. No, for Draghi, the biggest financial problem in Europe these days is that it is over-banked. “Over-capacity in some national banking sectors, and the ensuing intensity of competition, exacerbates this squeeze on margins,” he said. Put simply, there’s just too much competition from the thousands of smaller banks that are crowding out the profits for the big banks.

Read more …

“The weakness in real GDP growth is of greatest concern, because it’s largely the consequence of policies that encourage repeated cycles of bubbles and collapses..”

Structural Growth and Dope Dealers on Speed-Dial (Hussman)

In recent years, the U.S. equity market has scaled the third steepest cliff in history, eclipsed only by the 1929 and 2000 peaks, as investors rest their full confidence and weight on the protrusions of a structurally deteriorating economy, imagining that they are instead the footholds of a robust investment environment. The first of these is the current environment of low interest rates. While investors take this as quite a positive factor, it’s largely a reflection of a steep downturn in U.S. structural economic growth, magnified by reckless monetary policy. Over the past decade, the average annual nominal growth rate of GDP has dropped to just 2.9%, while real GDP growth has plunged to just 1.3%; both the lowest growth rates in history, outside of the Depression (see the chart below).

Indeed, probably the most interesting piece of information from last week’s FOMC meeting was that the Federal Reserve downgraded its estimate for the central tendency of long-run GDP growth to less than 2% annually. The weakness in real GDP growth is of greatest concern, because it’s largely the consequence of policies that encourage repeated cycles of bubbles and collapses, and chase debt-financed consumption instead of encouraging productive real investment. Indeed, growth in real U.S. gross domestic investment has collapsed since 2000 to just one-fifth of the rate it enjoyed in the preceding half-century, and has averaged zero growth over the past decade. While labor force growth has slowed, it’s really the self-inflicted collapse of U.S. productivity growth, enabled by misguided policy, that’s at the root of the problem.

Read more …

This is some investing tactic anymore. It’s about parties needing cash.

Treasury Market’s Biggest Buyers Are Selling as Never Before (BBG)

They’ve long been one of the most reliable sources of demand for U.S. government debt. But these days, foreign central banks have become yet another worry for investors in the world’s most important bond market. Holders like China and Japan have culled their stakes in Treasuries for three consecutive quarters, the most sustained pullback on record, based on the Federal Reserve’s official custodial holdings. The decline has accelerated in the past three months, coinciding with the recent backup in U.S. bond yields. For Jim Leaviss at M&G Investments in London, that’s cause for concern. A continued retreat could lead to painful losses in a market that some say is already too expensive.

But perhaps more important are the consequences for America’s finances. With the U.S. facing deficits that are poised to swell the public debt burden by $10 trillion over the next decade, foreign demand will be crucial in keeping a lid on borrowing costs, especially as the Fed continues to suggest higher interest rates are on the horizon. The selling pressure from central banks is “something you have to bear in mind,” said Leaviss, whose firm oversees about $374 billion. “This, as well as the Fed, all means we are nearer to the end of the low-yield environment.” Overseas creditors have played a key role in financing America’s debt as the U.S. borrowed heavily in the aftermath of the financial crisis to revive the economy.

Since 2008, foreigners have more than doubled their investments in Treasuries and now own about $6.25 trillion. Central banks have led the way. China, the biggest foreign holder of Treasuries, funneled hundreds of billions of dollars back into the U.S. as its export-based economy boomed. Now, that’s all starting to change. The amount of U.S. government debt held in custody at the Fed has decreased by $78 billion this quarter, following a decline of almost $100 billion over the first six months of the year. The drop is the biggest on a year-to-date basis since at least 2002 and quadruple the amount of any full year on record, Fed data show.

Read more …

“No one really knows where the losses would end up, or what the knock-on impact would be. It would almost certainly land a fatal blow to the Italian banking system, and the French and Spanish banks would be next.”

Deutsche Bank Crisis Could Take Angela Merkel Down – And The Euro (Tel.)

True, Merkel’s position is understandable. The politics of a Deutsche rescue are terrible. Germany, with is Chancellor taking the lead, has set itself up as the guardian of financial responsibility within the euro-zone. Two years ago, it casually let the Greek bank system go to the wall, allowing the cash machines to be closed down as a way of whipping the rebellious Syriza government back into line. This year, there has been an unfolding Italian crisis, as bad debts mount, and yet Germany has insisted on enforcing euro-zone rules that say depositors – that is, ordinary people – have to shoulder some of the losses when a bank is in trouble. For Germany to then turn around and say, actually we are bailing out our own bank, while letting everyone else’s fail, looks, to put it mildly, just a little inconsistent.

Heck, a few people might even start to wonder if there was one rule for Germany, and another one for the rest. In truth, it would become impossible to maintain a hard-line in Italy, and probably in Greece as well. And yet, if Deutsche Bank went down, and the German Government didn’t step in with a rescue, that would be a huge blow to Europe’s largest economy – and the global financial system. No one really knows where the losses would end up, or what the knock-on impact would be. It would almost certainly land a fatal blow to the Italian banking system, and the French and Spanish banks would be next. Even worse, the euro-zone economy, with France and Italy already back at zero growth, and still struggling with the impact of Brexit, is hardly in any shape to withstand a shock of that magnitude.

A rock and a hard place are hardly adequate to describe the options Merkel may soon find herself facing. The politics of a rescue are terrible, but the economics of a collapse are even worse. By ruling out a rescue, she may well have solved the immediate political problem. Yet when the crisis gets worse, as it may do at any moment, it is impossible to believe she will stick to that line. A bailout of some sort will be cobbled together – even if the damage to Merkel’s already fraying reputation for competence will be catastrophic. In fact, Merkel is playing a very dangerous game with Deutsche – and one that could easily go badly wrong. If her refusal to sanction a bail-out is responsible for a Deutsche collapse that could easily end her Chancellorship. But if she rescues it, the euro might start to unravel.

Read more …

Beijing purposely blows a giant bubble with money people don’t have.

China’s Runaway Housing Market Poses Latest Challenge for Yuan (BBG)

Here’s the latest uncertainty facing China’s currency: sky high house prices. A runaway boom in the largest cities will push investors to look for cheaper alternatives overseas, draining money out of China and putting downward pressure on the yuan in the process, according to analysis by Harrison Hu at Royal Bank of Scotland in Singapore. An “enlarged differential between domestic and foreign asset prices will lead to capital outflows and depreciation, until parity is restored,” Hu wrote in a note. He said that the 30% year-on-year price gain in Tier 1 and leading Tier 2 cities implies a 25% rise in dollar terms, which far outpaces the 5% gain in major U.S. cities. That ratio is here in red:

“It’s commonly believed that China’s policymakers will sacrifice the yuan exchange rate to avoid a sharp correction in domestic property prices, as the latter will more significantly derail China’s economy and the financial system,” Hu wrote. That’s because the importance of the property market in the world’s second largest economy far outweighs many sectors, including the stock market. Hu compares property as a percentage of economic output to the far lighter footprint of stocks. A real estate crash in China could have far reaching consequences and it would be a long time before investors regained their confidence, according to Hu.

That will put policy makers in a very difficult position. While the government has some cards in its hand, such as an ability to control land supply and enforce curbs on new home-buying, history shows that some tightening measures risk backfiring and only stoking speculative behavior such as “panic buying” like that seen in Shanghai earlier this year. Besides, the regulator’s handling of last year’s stock market turmoil did little to inspire confidence in the government’s ability to oversee the bubbly housing market. “No bubble has a happy ending,” Hu wrote.

Read more …

Someone should calculate the losses at a 25% price drop. And do 50% too. Losses for ‘owners’ and for lenders.

Sydney Home Prices Need To Drop 25% To Help First Time Buyers (Abc)

First home buyers are facing the biggest barrier in recent history to entering the housing market, with deposits at record high levels relative to incomes in the Sydney market. Research by Deutsche Bank’s chief Australian economist Adam Boyton shows it would take a 25% drop in Sydney home prices to bring the size of deposit required back to average levels over the past 20 years. Mr Boyton studied the Sydney market because it is the biggest, has seen rapid recent price growth and has the highest housing costs in the nation. In contrast to the record deposit needed – now estimated to be almost twice the typical annual earnings of a Sydney household – rising incomes over the early 2000s and falling interest rates since the global financial crisis have seen the burden of mortgage repayments remain comparatively stable relative to income.

Mr Boyton expresses this as “borrowing power”, which has broadly increased in line with Sydney home prices, albeit with prices jumping ahead somewhat during the most recent boom. At the low point in 2003, a Sydney household with a typical income could only borrow half what a typical house cost if their repayments were to be 30% of their gross incomes. At the best points for affordability, households could comfortably afford to borrow between 60-68% of the typical Sydney house price. Currently that figure is just over 50%.

Read more …

An epic clash unfolds before our eyes.

Don’t Blame “Baby Boomers” For Not Retiring – They Can’t Afford To (Roberts)

In business, the 80/20 rule states that 80% of your business will come from 20% of your customers. In an economy where more than 2/3rds of the growth rate is driven by consumption, an even bigger imbalance of the “have” and “have not’s” presents a major headwind. I have often written about the disconnect between Wall Street and Main Street. As shown in the chart below, while asset prices were inflated by continued interventions of monetary policy from the Federal Reserve, it only benefited the small portion of the population with assets invested in the market.

Cheap debt, excess liquidity and a buyback spree, led to soaring Wall Street and corporate profits, surging executive compensation and rising incomes for those in the top 10%. Unfortunately, the other 90% known as “Main Street” did not receive many benefits. This divide is clearly seen in various data and survey statistics such as the recent survey from National Institute On Retirement Security which showed the typical working-age household has only $2500 in retirement account assets. Importantly, “baby boomers” who are nearing retirement had an average of just $14,500 saved for their “golden years.”

[..] The gap between the young and elderly population has shrunk dramatically in recent years as the demographic trends have shifted. Old people are living longer and young people are delaying marriage and children. This means fewer people paying into a social welfare system, while more or taking out. Of course, the burden on the social safety net remains the 800-lb gorilla in the room no one wants to talk about. But with the insolvency of the welfare system looming in less than a decade, I am sure it will become a priority soon enough.

Of course, as we will discuss in a moment, the problem is that while the “baby boom” generation may be heading towards retirement years, there is little indication a large majority of them will be actually retiring. With a large majority of individuals being dependent on the welfare system in retirement, the burden will fall on those next in line. Welcome to the “sandwich generation” when more individuals will be “sandwiched” between supporting both parents and children in the same household. It should be no surprise multi-generational households in the U.S. are at their highest levels since the “Great Depression.”

Read more …

Obama’s fist veto override?

Saudi Lobbyists Plot New Push Against 9/11 Bill As Veto Override Looms (Pol.)

Saudi Arabia is mounting a last-ditch campaign to scuttle legislation allowing families of victims of the Sept. 11, 2001 attacks to sue the kingdom — and they’re enlisting major American companies to make an economic case against the bill. General Electric, Dow Chemical, Boeing and Chevron are among the corporate titans that have weighed in against the Justice Against Sponsors of Terrorism Act, or JASTA, which passed both chambers unanimously and was vetoed on Friday, according to people familiar with the effort. The companies are acting quietly to avoid the perception of opposing victims of terrorism, but they’re responding to Saudi arguments that their own corporate assets in the kingdom could be at risk if the law takes effect.

Meanwhile, Trent Lott, the former Senate majority leader who now co-leads Squire Patton Boggs’ lobbying group, e-mailed Senate legislative directors on Monday warning that the bill could lead other countries to withdraw their assets from the United States and retaliate with laws allowing claims against American government actions. “Many foreign entities have long-standing, intimate relations with U.S. financial institutions that they would undoubtedly unwind, to the further detriment of the U.S. economy,” reads one of the attachments, obtained by POLITICO. “American corporations with interests abroad may be at risk of retaliation, a possibility recently expressed by GE and Dow.” Still, the Saudis and their agents face a significant uphill battle, with lawmakers loath to take a vote against victims of the 9/11 attacks right before an election.

There was little public opposition to the bill as it made its way through the Capitol, and even now, efforts to tweak the bill haven’t caught much traction. Senate Majority Leader Mitch McConnell (R-Ky.) announced Monday that the Senate will vote Wednesday on a motion to override President Barack Obama’s veto, and if override advocates are successful there, the House will take the same vote Thursday or Friday, a House Republican leadership aide said. But even if Obama receives the first veto override of his presidency, the story won’t end there: the Saudis will seek a new bill to scale back the law in the lame-duck session or in the next session, after lawmakers are relieved from the heat of the campaign, people familiar with the plans said. “It’s Washington at its finest,” one of the people said.

Read more …

How to kill off your own species.

Over 90% Of World Breathing Bad Air-WHO (AFP)

Nine out of 10 people globally are breathing poor quality air, the World Health Organization said Tuesday, calling for dramatic action against pollution that is blamed for more than six million deaths a year. New data in a report from the UN’s global health body “is enough to make all of us extremely concerned,” Maria Neira, the head of the WHO’s department of public health and environment, told reporters. The problem is most acute in cities, but air in rural areas is worse than many think, WHO experts said. Poorer countries have much dirtier air than the developed world, according to the report, but pollution “affects practically all countries in the world and all parts of society”, Neira said in a statement. “It is a public health emergency,” she said.

“Fast action to tackle air pollution can’t come soon enough,” she added, urging governments to cut the number of vehicles on the road, improve waste management and promote clean cooking fuel. Tuesday’s report was based on data collected from more than 3,000 sites across the globe. It found that “92% of the world’s population lives in places where air quality levels exceed WHO limits”. The data focuses on dangerous particulate matter with a diameter of less than 2.5 micrometres, or PM2.5. PM2.5 includes toxins like sulfate and black carbon, which can penetrate deep into the lungs or cardiovascular system. Air with more than 10 microgrammes per cubic metre of PM2.5 on an annual average basis is considered substandard.

Read more …

Funny little story against a very serious backdrop.

Canadians Are Embracing Syrian Refugees. Why Can’t We? (G.)

Nobody warned the Hendawis about Canadian girls. Wadah and Raghdaa Hendawi survived the civil war in Syria, fleeing the devastation of Aleppo with their children for the relative safety of Lebanon. For three years their teenage sons missed out on an education while they worked to support the family. Then they hit the immigration jackpot – Canada. They were greeted at Halifax airport not by immigration officials or social workers, but by their sponsors – a bunch of well-meaning locals whose fundraising efforts would support the family for the next 12 months. And so the Hendawis arrived in the small fishing town of Shelburne, Nova Scotia, swaddled in new ski jackets, blinded by the winter sunshine bouncing off fresh February snow.

They were the only Syrians in the village, and had no idea what was in store for them. The Rev. Joanne McFadden knew the names and ages of the family she was helping to sponsor, but apart from that she too didn’t know what to expect. She certainly wasn’t prepared for the phone call that came three days after Saed (18), Mohamad (16) and Ahmed (15) started attending Shelburne Regional High School. I get a phone call from the principal. ‘Uhhh, Joanne, we have a problem.’ ‘What’s the problem, Mary?’ ‘Well, all the girls in the school are chasing the boys.’ This hadn’t even crossed our mind, right, that this was even a possibility. It was like, pardon me, we’ve got some things to figure out.

Read more …

Jan 182016
 
 January 18, 2016  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , ,  


DPC Chicago & Alton Railroad, Joliet, Illinois 1901

Asian Shares Drop To 2011 Levels As Oil Slump Intensifies (Reuters)
Oil Slides To Lowest Since 2003 As Iran Sanctions Are Lifted (Reuters)
Hedge Funds Are Betting The Commodities Collapse Isn’t Over Yet (BBG)
Gulf Stock Crash Wipes $38.5 Billion Off Markets As Iran Enters Oil War (Tel.)
Richest 1% Now Wealthier Than The Rest Of Humanity Combined (BBG)
Stock Market Crash Could Burst UK Property Bubble (Express)
It’s Not Time For Britain To Be ‘Intensely Relaxed’ Over Household Debt (Ind.)
China’s Securities Czar Casts Wide Blame for Market Turmoil (WSJ)
China To Clean-up ‘Zombie’ Companies By 2020 (Reuters)
The Problem With Getting Money Out Of China (China Law Blog)
Gloom Gathers Over The Challenges That Germany Faces (FT)
“Everything Has Come to a Standstill”: Politics Hits Business in Spain (WS)
Canadian Officials Under Pressure to Stimulate Economy (WSJ)
Shock Figures To Reveal Deadly Toll Of Global Air Pollution (Observer)
False Emissions Reporting Undermines China’s Pollution Fight (Reuters)
Weak EU Tests For Diesel Emissions Are ‘Illegal’ (Guardian)
66 Institutional Investors To Sue Volkswagen In Germany (FT)
Obama Declares Emergency In Flint, But Not Disaster (DFP)
When Peace Breaks Out With Iran… (Ron Paul)
Syria 4 Years On: Shocking Images Of A Post-US-Intervention Nation (ZH)
The Economics Of The Refugee Crisis Lay Bare Our Moral Bankruptcy (Guardian)

China contagion spreads.

Asian Shares Drop To 2011 Levels As Oil Slump Intensifies (Reuters)

Asian shares slid to their lowest levels since 2011 on Monday after weak U.S. economic data and a massive fall in oil prices stoked further worries about a global economic downturn. Spreadbetters expected a subdued open for European shares, forecasting London’s FTSE to open modestly higher while seeing Germany’s DAX and France’s CAC to start flat-to-slightly-weaker. Crude prices faced fresh pressure after international sanctions against Iran were lifted over the weekend, allowing Tehran to return to an already over-supplied oil market. Brent oil futures fell below $28 per barrel touching their lowest level since 2003. “Iran is now free to sell as much oil as it wants to whomever it likes at whatever price it can get,” said Richard Nephew at Columbia University’s Center on Global Energy Policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell to its lowest since October 2011 and was last down 0.5%. Japan’s Nikkei tumbled as much as 2.8% to a one-year low. It has lost 20% from its peak hit in June, meeting a common definition of a bear market. The volatile Shanghai Composite index initially pierced through intraday lows last seen in August before paring the losses and was last up 1%. It was still down 17% this month. On Wall Street, S&P 500 hit a 15-month low on Friday, ahead of Monday’s market holiday. “The fact that U.S. and European shares fell below their August lows, failing to sustain their rebound, is significant,” said Chotaro Morita at SMBC Nikko Securities.

Read more …

They knew Iran was coming, so that’s not the main driver.

Oil Slides To Lowest Since 2003 As Iran Sanctions Are Lifted (Reuters)

Oil prices hit their lowest since 2003 in early trading on Monday, as the market braced for a jump in Iranian exports after the lifting of sanctions against the country at the weekend. On Saturday, the U.N. nuclear watchdog said Tehran had met its commitments to curtail its nuclear program, and the United States immediately revoked sanctions that had slashed the OPEC member’s oil exports by around 2 million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd. “Iran is now free to sell as much oil as it wants to whomever it likes at whatever price it can get,” said Richard Nephew, program director for Economic Statecraft, Sanctions and Energy Markets at Columbia University’s Center on Global Energy Policy.

Iran is ready to increase its crude exports by 500,000 bpd, its deputy oil minister said on Sunday. International Brent crude fell to $27.67 a barrel early on Monday, its lowest since 2003, before recovering to $28.25, still down more than 2% from their settlement on Friday. U.S. crude was down 58 cents at $28.84 a barrel after hitting a 2003 low of $28.36 earlier in the session. “The lifting of sanctions on Iran should see further downward pressure on oil and commodities more broadly in the short term,” ANZ said on Monday. “Iran’s likely strategy in offering discounts to entice customers could see further downward pressure on prices in the near term,” it added. Iran’s potential new exports come at a time when global markets are already reeling from a chronic oversupply as producers pump a million barrels or more of crude every day in excess of demand, pulling down crude prices by over 75% since mid-2014 and by over a quarter since the start of 2016.

And although analysts expect Iran to take some time before being able to fully revive its export infrastructure, suffering from years of underinvestment during the sanctions, it does have at least a dozen Very Large Crude Carrier super-tankers filled and in place to sell into the market. The oil price rout is also hurting stock markets, with Asian shares set to slide to near their 2011 troughs on Monday, stoking further worries about a global economic downturn. “Growth keeps slowing … Lower commodity prices, including oil, partly reflect weakening demand itself. In addition, the downturn in mining capex and the declining income of commodity producers is weighing on exports from Asia,” said Frederic Neumann at HSBC, Hong Kong.

Read more …

Must be a crowded trade.

Hedge Funds Are Betting The Commodities Collapse Isn’t Over Yet (BBG)

The commodity meltdown that pushed oil to a 12-year low and copper to the cheapest since 2009 isn’t over yet. At least, that’s how hedge funds see it. Money managers increased their combined net-bearish position across 18 raw materials to the biggest ever, doubling the negative bets in just two weeks. A measure of returns on commodities last week slid to the lowest in at least 25 years. Metals, crops and energy futures all slumped amid supply gluts and an anemic outlook for the global economy. Market turmoil in China, the biggest commodity buyer, is adding to worries over consumption. A stronger dollar is also eroding the appeal of raw materials as alternative investments. While Goldman Sachs predicts that the prolonged slump will start to spur more supply cuts, the bank doesn’t expect prices to rebound until later this year.

“There’s fear in the marketplace,” said Lara Magnusen at Altegris Investments. People are “very concerned about slower economic growth and what’s going on with China and the contagion effect,” she said. With a strong U.S. dollar and the Federal Reserve considering more interest-rate increases, “there’s not a lot of places where you can put your money right now,” she said. “Short commodities is a pretty good place.” The net-short position across 18 U.S.-traded commodities expanded to 202,534 futures and options as of Jan. 12, according to U.S. Commodity Futures Trading Commission figures published three days later. That’s the largest since the government data begins in 2006 and compares with 164,203 contracts a week earlier.

Read more …

Add that to the low oil price losses.

Gulf Stock Crash Wipes $38.5 Billion Off Markets As Iran Enters Oil War (Tel.)

Stock markets across the Middle East saw more than £27bn ($38.5 billion) wiped off their value as the lifting of economic sanctions against Iran threatened to unleash a fresh wave of oil onto global markets that are already drowning in excess supply. All seven stock markets in Gulf states tumbled as panic gripped traders. Dubai’s DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia’s Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering marginally to end down 5.44pc at 5,520.41, its lowest level in almost five years. The Qatar stock exchange, fell 7.2pc to close at 8,527.75, and the Abu Dhabi Securities Exchange shed 4.24pc to finish at 3,787.4. The Kuwait market returned to levels not seen since May 2004 as it slid 3.2pc lower, while smaller markets in Oman and Bahrain dropped 3.2pc and 0.4pc respectively.

The Iranian stock index gained 1pc, making it one of the best performing markets in the world with gains of 6pc since the start of the year. The dramatic moves came following the historic report from the UN nuclear watchdog, which showed that Iran has met its obligations under the nuclear deal, clearing the way for the lifting of sanctions. The Vienna-based International Atomic Energy Agency issued the landmark document late on Saturday evening, sparking mayhem as markets opened on Sunday, the first day of trading in the Middle East. The stock markets in Dubai and Saudi Arabia have been plunged into a painful bear market, losing 42pc and 38pc respectively, ever since Saudi Arabia decided to ramp up oil production in November 2014.

Oil prices fell below $30 for the third time last week as traders prepared for the prospect of Iranian oil flooding global markets. The Islamic Republic has vowed to return its oil production to pre-sanction levels, with estimates suggesting Tehran will add a further 500,000 barrels a day (b/pd) to the world’s bloated stockpiles within weeks. Fears that the Islamic Republic could quickly ramp up production sent Brent crude falling by 3.3pc to $29.43 on Friday – matching lows last seen in 2004. West Texas Intermediate also slipped back to $29.60, a decline of 4.5pc.

Read more …

“..the wealth of the poorest 50% dropped by 41% between 2010 and 2015..”

Richest 1% Now Wealthier Than The Rest Of Humanity Combined (BBG)

The richest 1% is now wealthier than the rest of humanity combined, according to Oxfam, which called on governments to intensify efforts to reduce such inequality. In a report published on the eve of the World Economic Forum’s annual meeting in Davos, Switzerland, the anti-poverty charity cited data from Credit Suisse in declaring the most affluent controlled most of the world’s wealth in 2015. That’s a year earlier than it had anticipated. Oxfam also calculated that 62 individuals had the same wealth as 3.5 billion people, the bottom half of the global population, compared with 388 individuals five years earlier. The wealth of the most affluent rose 44% since 2010 to $1.76 trillion, while the wealth of the bottom half fell 41% or just over $1 trillion.

The charity used the statistics to argue that growing inequality poses a threat to economic expansion and social cohesion. Those risks have already been noted in countries from the U.S. to Spain, where voters are increasingly backing populist political candidates, while it’s sown tensions on the streets of Latin America and the Middle East. “It is simply unacceptable that the poorest half of the world’s population owns no more than a few dozen super-rich people who could fit onto one bus,” said Winnie Byanima, executive director of Oxfam International. “World leaders’ concern about the escalating inequality crisis has so far not translated into concrete action.” Oxfam said governments should take steps to reduce the polarization, estimating tax havens help the rich to hide $7.6 trillion. Politicians should agree on a global approach to ending the practice of using offshore accounts, it said.

Read more …

Or the other way around?

Stock Market Crash Could Burst UK Property Bubble (Express)

Property seems to be immune from the fear now gripping the global economy, but that may not always be the case. If the share price meltdown continues and the global economy slows, eventually the UK’s house of cards may collapse as well. Chinese stock markets have plunged since the start of the year, with the FTSE 100 falling 6.5% so far. There seems no end in sight to the share sell-off, but still property powers on. The latest figures from Halifax show that property prices in the final quarter of 2015 were almost 10% higher than one year earlier. The growth seems unstoppable, with new figures from estate agency Your Move showing the average property in England and Wales has leapt £18,000 in the last year to £292,077, a growth rate of an incredible £1,500 a month.

Many Britons suspect the property market is overvalued, with the average UK home now costing more than 10 times earnings. Given that most lenders will not grant mortgages worth more than three or four times your income, this looks unsustainable. Yet few property experts are willing to say openly that the market is in peril. Most remain deaf to warnings of contagion from the share price rout, even though it has scared the life out of some investment experts. Last week, Andrew Roberts, research chief at Royal Bank of Scotland, warned investors to “sell everything except high-quality bonds” because the stock market and oil price crash has only just begun. He is worried about the growing public and company debt burden, and British households have plenty to worry about on that score.

All-time low interest rates have fuelled a borrowing spree that has seen Britons rack up a mind-boggling debt of £40billion. The latest figures show family that household debt rose by 42% in the last six months alone, according to research from Aviva. The average family now owes £13,520 on credit cards, personal loans and overdrafts, up from £9,520 last summer. Throw in a 20% increase in average mortgage debt to £62,739 over five years and households are more vulnerable than ever. Worse, family incomes are falling and many have lost the savings habit as their finances are stretched.

Read more …

The entire issue is hugely distorted by insanely elevated home prices. Take those out, and you see how bad things truly are.

It’s Not Time For Britain To Be ‘Intensely Relaxed’ Over Household Debt (Ind.)

There seem to be three main arguments against the idea we should be concerned about household leverage. The first is that the official statistics belie the claim that the aggregate debt burden of UK households is rising and the recovery has been fuelled by borrowing. Second, we’re told UK household debt is mainly mortgage debt and reflects high domestic house prices. For each of these liabilities there is an asset, so we must look at the overall balance sheets of households, which are healthy. Plus, with interest rates still on the floor, aggregate debt-servicing costs are comfortable. Finally, we’re assured that as long as the supply of new homes remains severely restricted, high debt presents no serious financial threat because house prices are pretty unlikely to collapse.

To illustrate this final point, it is pointed out that the banks failed in 2008 because of their dodgy overseas lending, not because of their dodgy UK mortgage books. There are problems with all three arguments. Let’s take them in turn. Measured as a share of household incomes, it is true that household debt has not actually been growing. Since 2008, when the debt to income ratio peaked at 170%, households have been deleveraging. Yet at 140% of gross income, debt levels are still very high, both by historic and international standards. In the G7 only Canada has a higher household leverage ratio today. There is potential fragility here if another economic shock were to hit, as the Bank of England itself admits. To point to the UK’s deleveraging in recent years as a reason for relief is akin to a mountaineer getting halfway down Everest in a vicious storm and saying “job done”.

Debt has not been rising as a share of income but the aggregate household savings ratio, excluding pension rights, has fallen from a peak of 6% in 2010 to less than zero today. That change in household behaviour has certainly helped the economy recover. So not a recovery fuelled by debt, but a recovery fuelled by a lower savings ratio. Incidentally, there was no such savings collapse envisaged by the Office for Budget Responsibility (OBR) in 2010, reflecting how unbalanced the recovery has been relative to hopes six years ago. Moreover, the OBR today predicts that the debt to income ratio is going to race back close to pre-crisis levels over the coming five years. Why? Because the Treasury’s official forecaster expects house prices to rise faster than incomes and for people to keep buying houses. The OBR is very far from being omniscient. But that is surely one of the more plausible assumptions from Robert Chote and his team, given the dismal evolution of the housing market in recent years and decades.

Read more …

Lemme guess: anyone but Xi?!

China’s Securities Czar Casts Wide Blame for Market Turmoil (WSJ)

What’s wrong with China’s stock market? Just about everything, according to a statement from Xiao Gang, the country’s chief securities regulator, delivered at a national meeting of Chinese securities officials and posted on his agency’s website Saturday. In the statement, Mr. Xiao defended his handling of successive market meltdowns, blaming the “abnormal volatility” on “an immature market, inexperienced investors, imperfect trading system, flawed market mechanisms and inappropriate supervision systems.” The turmoil in China’s stock market—which on Friday entered “bear” territory of 20% below its recent peak—has cast a harsh light on the performance of Mr. Xiao, 57, a former central banker and chairman of the Bank of China before he was appointed chairman of the China Securities Regulatory Commission in 2013.

During the summer, when Chinese stocks tumbled more than 40%, Mr. Xiao oversaw a slew of measures to prop up the market that many investors criticized as heavy-handed and interventionist. Those ranged from banning certain kinds of short selling and share sales to approving the purchase of hundreds of billions of yuan in equities by government-affiliated funds. Two weeks ago, Mr. Xiao was forced to abandon a circuit-breaker mechanism he’d championed as a way to halt big trading swings, when it instead ended up fanning panic selling. In his Saturday statement, Mr. Xiao defended his efforts, saying they were a successful attempt to stave off a bigger crisis.

“The response to the abnormal volatility in the stock market was essentially crisis management,” Mr. Xiao said. Various departments “addressed market dysfunctions and prevented a potential systemic risk through joint efforts.” Mr. Xiao did admit there had been “supervision and management loopholes” and he promised to crack down on illegal activities, increase market transparency and better educate investors, although he didn’t outline specific proposals. He briefly touched on the detention of some top-ranking officials in the securities industry in relation to a police investigation on alleged violation of rules, but without naming his own agency. Mr. Xiao chastised listed companies for “exaggerated storytelling” to hype up stock prices, and urged market participants to cultivate a stronger sense of social responsibility and to “huddle together for warmth”—or cooperate in the greater interest—when times are bad.

Read more …

They want to take five years to do what should have been done already. Dangerous.

China To Clean-up ‘Zombie’ Companies By 2020 (Reuters)

China’s top state-owned asset administrator has vowed to clean-up the country’s so-called “zombie” industrial companies by 2020, the official Xinhua News Agency has reported. Zhang Yi, Chairman of the State-owned Assets Supervision and Administration Commission (SASAC), told a central and local enterprise work conference convened at the weekend that the agency will “basically” resolve the problem of unproductive “zombie” firms over the next three years. Dealing with “zombie companies” is very difficult, Zhang said, according to the report, but “officials need to… use today’s ‘small tremors’ to prevent a future earthquake.” The central government last September rolled out the most ambitious reform program in two decades to resolve the problems at its hugely inefficient public sector companies, encouraging the greater use of “mixed ownership” while promoting more mergers to create globally-competitive conglomerates.

Zhang Xiwu, deputy head of SASAC, told a news briefing at the time that China would work to reorganize state firms to centralize state-owned capital in key industries, while restricting investment in industries not in line with national policies. Zhang said that China would use stock exchanges, property exchanges and other capital markets to sell the assets of low performing state owned enterprises. Profits at China’s state firms dipped 9.5% in the first 11 months of 2015 from a year earlier, led by profits at SASAC-controlled firms, which fell 10.4%, the Ministry of Finance said in December. On Friday, SASAC told state media that the steep decline in profits for the sector had been curtailed, and that 99 of the 106 SASAC-controlled enterprise groups achieved profitability in 2015.

Read more …

Interesting angle via ZH.

The Problem With Getting Money Out Of China (China Law Blog)

Regular readers of our blog probably know that our basic mantra about getting money out of China is that if you have consistently follow all of China’s laws, it ought to be no problem. Not true lately. In the last week or so, our China lawyers have probably received more “money problem” calls than in the year before that. And unlike most of these sorts of calls, the problems are brand new to us. It has reached the point that yesterday I told an American company (waiting for a large sum in investment funds to arrive from China) that two weeks ago I would have quickly told him that the Chinese company’s excuse for being unable to send the money was a ruse, but with all that has been going on lately, I have no idea whether that is the case or not. So what has been going on lately? Well if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following:

1. Chinese investors that have secured all necessary approvals to invest in American companies are not being allowed to actually make that investment. I mentioned this to a China attorney friend who says he has been hearing the same thing. Never heard this one until this month.

2. Chinese citizens who are supposed to be allowed to send up to $50,000 a year out of China, pretty much no questions asked, are not getting that money sent. I feel like every realtor in the United States has called us on this one. The Wall Street Journal wrote on this yesterday. Never heard this one until this month.

3. Money will not be sent to certain countries deemed at high risk for fake transactions unless there is conclusive proof that the transaction is real — in other words a lot more proof than required months ago. We heard this one last week regarding transactions with Indonesia, from a client with a subsidiary there. Never heard this one until this month.

4. Money will not be sent for certain types of transactions, especially services, which are often used to disguise moving money out of China illegally. This is not exactly new, but it appears China is cracking down on this.

5. Get this one: Money will not be sent to any company on a services transaction unless that company can show that it does not have any Chinese owners. The alleged purpose behind this “rule” is again to prevent the sort of transactions ordinarily used to illegally move money out of China. Never heard this one until this month.

What are you seeing out there? No really, what are you seeing out there?

Read more …

You just wait till the German economy starts stumbling.

Gloom Gathers Over The Challenges That Germany Faces (FT)

This is going to be a difficult year for Germany, one in which the policies of the past may turn out to be unsustainable. The most unsustainable of all was Angela Merkel’s invitation to open the doors to Syrian refugees without limitation. The German chancellor must either have misjudged the effect or acted recklessly — or both. A few months and 1m refugees later, the discontent is growing inside the Christian Democratic Union, her party, and in the country at large. Gerhard Schröder, her Social Democratic predecessor, last week came out against the policy with exactly the same arguments as the right-wingers in Ms Merkel’s own party: Germany cannot absorb such a large number. More than 1m refugees arrived in the country in 2015. It could be twice as many this year and the same again next — more if you include family members who will eventually follow.

It is tempting to think of refugees and migrants as a new source of labour. But in this case this just is not true, at least not for now. The majority of those who arrive in Germany lack the skills needed in the local labour market. They will enter the low wage sector of the economy, and drive down wages, producing another deflationary shock. This is the last thing Germany and the eurozone need right now. I expect that this policy will change at some point this year. What I do not see, however, is a successful political coup against Ms Merkel from inside her own party. What protects her is the grand coalition with the Christian Social Union and the SPD. There is no majority to the right of her, or to the left for that matter.

The second challenge is the economic downturn in emerging markets. There are few large countries as dependent on the global economy as Germany, and few where there is so little awareness of that fact, at least in public debate. Germany has a current account surplus of 8% of gross domestic product. A global downturn tends to affect German industrial companies with a delay of one or two years because many operate in sectors like plant and machinery where multiyear contracts are customary. But eventually, the German and the global business cycles begin to synchronise once more. This will be the year when that starts to happen.

The third challenge for Germany in 2016 is the fallout from the Volkswagen emissions scandal. This could be the single biggest shock of all because Germany has been over-reliant on the car industry for far too long. Last week, suspicion fell on Renault, when the offices of the French carmaker were raided by the authorities. This is not the crisis of a single company, therefore, but of a whole industry. Nor is it just a German problem; it is a pan-European one. It appears that VW behaved more recklessly than the others, and it will pay a heavy price for its behaviour. Whether legal action in the US and in Germany will weaken VW or force it into outright bankruptcy is almost irrelevant, given the bigger picture.

Read more …

Political capital rules the EU.

“Everything Has Come to a Standstill”: Politics Hits Business in Spain (WS)

On Friday, Spain’s benchmark stock index, the Ibex 35, plumbed depths it had not seen since the worst days of 2013, the year that the country’s economy began its “miraculous” recovery. Of the 35 companies listed on the index, 15 (or 40%) are – to quote El Economista – “against the ropes,” having lost over a third of their stock value in the last 9 months. Only one of the 35 companies — the technology firm Indra — is still green for 2016. This doesn’t make Spain much different from other countries right now, what with financial markets sinking in synchronized fashion all over the world. What does make Spain different is that it has no elected government to try to navigate the country though these testing times, or at least take the blame for the pain.

Inevitable comparisons have been drawn with Belgium, which between 2011 and 2012 endured 541 days of government-free living. However, Spain is not Belgium: its democratic system of governance is younger, less firmly rooted, and more fragile, and its civil service is more politically compromised. To make matters worse, Spain’s richest region, Catalonia, which accounts for 20% of the country’s economy, bucked expectations last week by cobbling together a last-minute coalition government that seems intent on declaring independence within the next 15 months. Meanwhile, business confidence, the cornerstone of any economic recovery, is beginning to crumble. Spain’s leading index of business confidence, ICEA, just registered a drop of 1.3%, breaking a straight eleven-quarter run of positive results.

For the first time in almost three years more business leaders are pessimistic than optimistic about the economy’s outlook. This should come as little surprise in a country where unemployment is still firmly on the wrong side of the 20% mark, over a quarter of the new jobs created last year had a contract lasting less than one week, and public debt is higher than it’s ever been. And now that there’s no elected government in office, businesses that depend on public sector contracts, including the country’s heavily indebted construction and infrastructure giants, face weeks or perhaps even months of inertia. “Everything has come to a standstill,” a contact in a Madrid-based research consultancy told me. “No decisions are being made, no funds are being released. It’s a vacuum.”

For the moment, the political backdrop has had limited impact on the price of Spanish government debt. The 10-year yield is at 1.75%, below the 10-year US Treasury yield, though it’s up a smidgen since the general elections on December 20. In its latest update, S&P left Spain’s rating unchanged, predicting 2.7% growth for 2016, despite the prevailing mood of political and economic uncertainty. In a similar vein, Deutsche Bank has forecast growth of 2.5%, regardless of what happens within or beyond Spanish borders. In other words, every effort will be made to safeguard the economic order in Spain, including putting a ridiculously positive spin on a desperate situation. To paraphrase Europe’s chief financial alchemist, Mario Draghi: do not underestimate the amount of political capital that has been invested in the European project, in particular in the Eurozone’s fourth largest economy.

Read more …

“General sentiment is downright toxic in Canada..”

Canadian Officials Under Pressure to Stimulate Economy (WSJ)

Canadian policy makers are heading into a tough week as pressure mounts on them to revive an economy that has been among the hardest hit by the commodity rout. Prime Minister Justin Trudeau and his cabinet colleagues will convene in a seaside resort town on Canada’s east coast Monday amid more evidence growth may have stalled again after sputtering to life in last year’s third quarter. A recent string of dismal economic news—and a free-falling Canadian dollar—has led to calls for Mr. Trudeau’s government to move sooner rather than later on major infrastructure investments to stimulate growth.

On Wednesday, Bank of Canada Gov. Stephen Poloz will deliver his latest interest-rate decision, and economists are split not only on whether he will opt to cut rates, but whether such a move would do much to help the economy at this time. Analysts say the onus has shifted to Mr. Trudeau’s government to help mitigate the negative fallout from the oil-price rout. Last week the Canadian dollar hit near-13-year lows as prices for oil, a major Canadian export, continued to weaken. As of Friday, the currency has fallen 4.8% against the U.S. dollar since the start of the year and was down 17.8% year-to-year. The drop came as Canada’s stock market lost ground—it is now off 22.2% from its 2015 peak—and the central bank said Canadian companies’ investment and hiring intentions had recently weakened.

“General sentiment is downright toxic in Canada,” said Jimmy Jean, economist at Desjardins Capital Markets. Talk around Mr. Trudeau’s cabinet table likely will revolve around the appropriate response to an economic tailspin fueled by a fresh downturn in the price of crude. While the prime minister last week voiced optimism about Canada’s prospects despite disappointing growth, government officials have privately said they are very worried about the economy. Meanwhile, economists have told the government it should boost the amount of infrastructure spending planned for this year to help offset weak conditions.

Read more …

But we’ll keep driving along. Soon, in our new clean cars powered by coal plants.

Shock Figures To Reveal Deadly Toll Of Global Air Pollution (Observer)

The World Health Organisation has issued a stark new warning about deadly levels of pollution in many of the world’s biggest cities, claiming poor air quality is killing millions and threatening to overwhelm health services across the globe. Before the release next month of figures that will show air pollution has worsened since 2014 in hundreds of already blighted urban areas, the WHO says there is now a global “public health emergency” that will have untold financial implications for governments. The latest data, taken from 2,000 cities, will show further deterioration in many places as populations have grown, leaving large areas under clouds of smog created by a mix of transport fumes, construction dust, toxic gases from power generation and wood burning in homes. The toxic haze blanketing cities could be clearly seen last week from the international space station.

Last week it was also revealed that several streets in London had exceeded their annual limits for nitrogen dioxide emissions just a few days into 2016. “We have a public health emergency in many countries from pollution. It’s dramatic, one of the biggest problems we are facing globally, with horrible future costs to society,” said Maria Neira, head of public health at the WHO, which is a specialist agency of the United Nations. “Air pollution leads to chronic diseases which require hospital space. Before, we knew that pollution was responsible for diseases like pneumonia and asthma. Now we know that it leads to bloodstream, heart and cardiovascular diseases, too – even dementia. We are storing up problems. These are chronic diseases that require hospital beds. The cost will be enormous,” said Neira.

[..] According to the UN, there are now 3.3 million premature deaths every year from air pollution, about three-quarters of which are from strokes and heart attacks. With nearly 1.4 million deaths a year, China has the most air pollution fatalities, followed by India with 645,000 and Pakistan with 110,000. In Britain, where latest figures suggest that around 29,000 people a year die prematurely from particulate pollution and thousands more from long-term exposure to nitrogen dioxide gas, emitted largely by diesel engines, the government is being taken to court over its intention to delay addressing pollution for at least 10 years.

Read more …

Follow the money, that’s all there’s to it. All the rest is window dressing and lip service, for Beijing as much as for Volkswagen.

False Emissions Reporting Undermines China’s Pollution Fight (Reuters)

Widespread misreporting of harmful gas emissions by Chinese electricity firms is threatening the country’s attempts to rein in pollution, with government policies aimed at generating cleaner power struggling to halt the practice. Coal-fired power accounts for three-quarters of China’s total generation capacity and is a major source of the toxic smog that shrouded much of the country’s north last month, prompting “red alerts” in dozens of cities, including the capital Beijing. But the government has found it hard to impose a tougher anti-pollution regime on the power sector, with China’s energy administration describing it as a “weak link” in efforts to tackle smog caused by gases such as sulfur dioxide. No official data on the extent of the problem has been released since a government audit in 2013 found hundreds of power firms had falsified emissions data, although authorities have continued to name and shame individual operators.

“There is no guarantee of avoiding under-reporting (of emissions) at local plants located far away from supervisory bodies. Coal data is very fuzzy,” said a manager with a state-owned power company, who did not want to be named because he is not authorized to speak to the media. The manager said firms could easily exaggerate coal efficiency by manipulating their numbers. For example, power companies that also provided heating for local communities could overstate the amount of coal used for heat generation, which is not subject to direct monitoring, and understate the amount used for power. “Data falsification is a long-standing problem: China will not get its environmental house in order if it does not deal with this first,” said Alex Wang, an expert in Chinese environmental law at UCLA.

Read more …

Money trumps laws.

Weak EU Tests For Diesel Emissions Are ‘Illegal’ (Guardian)

Planned new ‘real driving emissions’ (RDE) test limits that would let cars substantially breach nitrogen oxide (NOx) standards are illegal under EU law, according to new legal analysis seen by the Guardian. The proposed ‘Euro 6’ tests would allow diesel cars to emit more than double the bloc’s ‘80 mg per km’ standard for NOx emissions from 2019, and more than 50% above it indefinitely from 2021. The UK supported these exemptions. But they contradict the regulation’s core objective of progressively scaling down emissions and improving air quality, according to an opinion by the European Parliament’s legal services, which the Guardian has seen. In principle, the exemptions and loopholes “run counter [to] the aims and content of the basic regulation as expressed by the Euro 6 limit values,” says the informal paper prepared for MEPs on the parliament’s environment committee.

“The commission has taken a political decision to favour the commercial interests of car manufacturers over the protection of the health of European citizens,” adds a second analysis by the environmental law firm ClientEarth, also seen by the Guardian. “The decision is therefore illegal and should be vetoed by the European Parliament,” the ClientEarth advice says. Catherine Bearder, a Liberal Democrat MEP on the environment committee, told the Guardian that as well as being morally unjustifiable, the agreement to water down the emissions limits was now “legally indefensible”. “This was a political decision, not a technical one, and so it should have been subject to proper democratic accountability,” she told the Guardian. “MEPs must veto this shameful stitch-up and demand a stronger proposal, based on the evidence and not on pressure from the car industry.”

Read more …

Might as well close it down.

66 Institutional Investors To Sue Volkswagen In Germany (FT)

Sixty-six institutional investors are to take legal action against Volkswagen in its German home market after the carmaker cheated emissions tests in the US. The first claim will be made within the next seven days. The legal action will heap further pressure on Volkswagen, which earlier this month said its annual sales fell last year for the first time in more than a decade. Klaus Nieding, a lawyer at Nieding and Barth, the German law firm, said a capital market model claim, which is similar to a collective lawsuit in the US, will be filed “within the next week” in Germany on behalf of a US institutional investor that has suffered a “big loss”. The other 65 institutional investors are expected to join that claim.

Investors have been nursing heavy losses after the US’s Environmental Protection Agency revealed last September that the world’s second-largest carmaker had cheated US emissions tests by fitting vehicles with “defeat devices” designed to bypass environmental standards. Billions of euros have been wiped off the value of Volkswagen as a result. Nieding and Barth is working with MüllerSeidelVos, a fellow German firm, and Robbins Geller Rudman and Dowd, a US law firm, to represent investors that have contacted DSW, a German shareholder protection association. Mr Nieding said the law firms collectively represent “many foreign institutional investors, primarily from the US, with claims of several hundred million euros”. He added: “We are representing, as far as we know, the largest number of claims and of shareholders [in Germany].”

Bentham Europe, a litigation finance group backed by Elliott Management, the US hedge fund, and Australian-listed IMF Bentham, is also expected to file a damages claim in Germany. Volkswagen is facing additional legal action outside its home market. Class actions against the carmaker, which allow one person to sue on behalf of a group of individuals or companies, have already been filed in the US and Australia. Last week, the Arkansas State Highway Employees Retirement System, a $1.4bn pension fund, was named the lead plaintiff in a class action against VW in the US. “We will be prosecuting the claims on behalf of the class vigorously,” said Jeroen van Kwawegen, a lawyer at Bernstein Litowitz Berger and Grossmann. The law firm is acting on behalf of investors who put money in Volkswagen’s American depositary receipts, a type of stock that represents shares in a foreign corporation.

Read more …

Snyder should be taken to court over his decisions that led to the mayhem. Instead, Wshington sends HIM the money to solve the issue.

Obama Declares Emergency In Flint, But Not Disaster (DFP)

President Barack Obama on Saturday declared a federal emergency in Flint, freeing up to $5 million in federal aid to immediately assist with the public health crisis, but he denied Gov. Rick Snyder’s request for a disaster declaration. A disaster declaration would have made larger amounts of federal funding available more quickly to help Flint residents whose drinking water is contaminated with lead. But under federal law, only natural disasters such as hurricanes and floods are eligible for disaster declarations, federal and state officials said. The lead contamination of Flint’s drinking water is a manmade catastrophe. The president’s actions authorize the FEMA to coordinate responses and cover 75% of the costs for much-needed water, filters, filter cartridges and other items for residents, capped initially at $5 million.

The president also offered assistance in finding other available federal assistance, a news release Saturday from the White House said. Snyder, who on Thursday night asked Obama for federal financial aid in the crisis through declarations of both a federal emergency and a federal disaster, said in a news release Saturday he appreciates Obama granting the emergency request “and supporting Flint during this critical situation.” “I have pledged to use all state resources possible to help heal Flint, and these additional resources will greatly assist in efforts under way to ensure every resident has access to clean water resources,” he said. U.S. Rep. Dan Kildee, D-Flint, welcomed the emergency declaration and issued a statement: “I welcome the president’s quick action in support of the people of Flint after months of inaction by the governor,” Kildee said.

“The residents and children of Flint deserve every resource available to make sure that they have safe water and are able to recover from this terrible manmade disaster created by the state.” On Friday, Kildee led a bipartisan effort in support of the request for federal assistance. Kildee had long called for Snyder to request federal aid. Typically, federal aid for an emergency is capped at $5 million, though the president can commit more if he goes through Congress. Snyder’s application said as much as $55 million is needed in the near term to repair damaged lead service lines and as much as $41 million to pay for several months of water distribution and providing residents with testing, water filters and cartridges.

In what’s become a huge government scandal, garnering headlines across the country and around the world, Flint’s drinking water became contaminated with lead after the city temporarily switched its supply source in 2014 from Lake Huron water treated by the Detroit Water and Sewerage Department to more corrosive and polluted Flint River water, treated at the Flint water treatment plant. The switch was made as a cost-cutting move while the city was under the control of a state-appointed emergency manager.

Read more …

Dr. Paul has been consistently on the case for years.

When Peace Breaks Out With Iran… (Ron Paul)

This has been the most dramatic week in US/Iranian relations since 1979. Last weekend ten US Navy personnel were caught in Iranian waters, as the Pentagon kept changing its story on how they got there. It could have been a disaster for President Obama’s big gamble on diplomacy over conflict with Iran. But after several rounds of telephone diplomacy between Secretary of State John Kerry and his Iranian counterpart Javad Zarif, the Iranian leadership – which we are told by the neocons is too irrational to even talk to – did a most rational thing: weighing the costs and benefits they decided it made more sense not to belabor the question of what an armed US Naval vessel was doing just miles from an Iranian military base. Instead of escalating, the Iranian government fed the sailors and sent them back to their base in Bahrain.

Then on Saturday, the Iranians released four Iranian-Americans from prison, including Washington Post reporter Jason Rezaian. On the US side, seven Iranians held in US prisons, including six who were dual citizens, were granted clemency. The seven were in prison for seeking to trade with Iran in violation of the decades-old US economic sanctions. This mutual release came just hours before the United Nations certified that Iran had met its obligations under the nuclear treaty signed last summer and that, accordingly, US and international sanctions would be lifted against the country. How did the “irrational” Iranians celebrate being allowed back into the international community?

They immediately announced a massive purchase of more than 100 passenger planes from the European Airbus company, and that they would also purchase spare parts from Seattle-based Boeing. Additionally, US oil executives have been in Tehran negotiating trade deals to be finalized as soon as it is legal to do so. The jobs created by this peaceful trade will be beneficial to all parties concerned. The only jobs that should be lost are the Washington advocates of re-introducing sanctions on Iran. Events this week have dealt a harsh blow to Washington’s neocons, who for decades have been warning against any engagement with Iran. These true isolationists were determined that only regime change and a puppet government in Tehran could produce peaceful relations between the US and Iran.

Instead, engagement has worked to the benefit of the US and Iran. Proven wrong, however, we should not expect the neocons to apologize or even pause to reflect on their failed ideology. Instead, they will continue to call for new sanctions on any pretext. They even found a way to complain about the release of the US sailors – they should have never been confronted in the first place even if they were in Iranian waters. And they even found a way to complain about the return of the four Iranian-Americans to their families and loved ones – the US should have never negotiated with the Iranians to coordinate the release of prisoners, they grumbled. It was a show of weakness to negotiate! Tell that to the families on both sides who can now enjoy the company of their loved ones once again!

Read more …

What they flee.

Syria 4 Years On: Shocking Images Of A Post-US-Intervention Nation (ZH)

While US intervention in its various forms has likely been ongoing for decades, March 2011 is often cited as the start of foreign involvement in the Syrian Civil War (refering to political, military and operational support to parties involved in the ongoing conflict in Syria, as well as active foreign involvement). Since then the nation has collapsed into chaos with an endless array of superlatives possible to describe the economic and civilian carnage that has ensued. However, while a picture can paint a thousand words, these four shocking images describe a canvas of US foreign policy “success” that few in the mainstream media would be willing to expose… Mission un-accomplished?

Read more …

I’m getting a bit antsy seeing people presenting arguments as new that I’ve made umpteen times in the past. We move far too slow.

The Economics Of The Refugee Crisis Lay Bare Our Moral Bankruptcy (Guardian)

The Germans want to introduce a pan-European tax to pay for the refugee crisis. The Danish want to pass a law to seize any jewellery worth more than £1,000 as refugees arrive – apart from wedding rings. That’s what marks you out as a civilised people, apparently, that you can see the romance in a stranger’s life and set that aside before you bag them up as a profit or a loss. In Turkey people smugglers are charging a thousand dollars for a place in a dinghy, $2,500 in a wooden boat, with more than 350,000 refugees passing through one Greek island – Lesbos – alone in 2015. The profit runs into hundreds and millions of dollars, and the best EU response so far has been to offer the Turkish government more money to either hold refugees in their own country or – against the letter and the spirit of every pledge modern society has made on refugees – send them back whence they came.

Turkey is a country of 75 million that has already taken a million refugees, accepting impossible and cruel demands from a continent of more than 500 million people that, apparently, can’t really help because of the threat to its “social cohesion”. Our own government has pledged to take 20,000 refugees but only the respectable ones, from faraway camps: the subtext being that the act of fleeing to Europe puts refugees outside the purview of human sympathy, being itinerant, a vagrant, on the take. Institutions and governments represent an ever narrower strain of harsh opinion. The thousands of volunteers in Greece, the Guardian readers who gave more at Christmas to refugee charities than to any appeal before, the grassroots organisations springing up everywhere to try and show some human warmth on this savage journey to imagined safety – none of these are represented, politically, in a discourse that takes as its starting point the need to make the swarms disappear, to trick them into going somewhere else.

It’s those neutral-sounding, just-good-economics ideas that give the game away: if a million people in any given European nation suffered a natural disaster, nobody would be talking about how to raise a tax so that help could be sent. We would help first and worry about the money second. When the EU wants to rescue a government, or the banks of a member state (granted, at swingeing cost for the rescued), it doesn’t first float a “rescue tax”. The suggestion that the current crisis needs its own special tax may well be an attempt to force individual governments to confront the reality of their current strategy, which is to have no strategy. Yet it sullies the underlying principle of the refugee convention: that anyone fleeing in fear for their life be taken in on that basis, not pending a whip-round.

To repudiate that is essentially to say that human rights are no longer our core business. But without that as an organising principle, the ties that bind one nation to another begin to fray: alliances must at the very least be founded on ideas you’re not ashamed to say out loud.

Read more …

Dec 122015
 
 December 12, 2015  Posted by at 4:23 pm Finance Tagged with: , , , , , , ,  


Nickolay Lamm Jefferson Memorial under 25 feet of water

French Foreign Minister Laurent Fabius just announced, in Paris, a “legally binding agreement” that no-one has agreed the financing for. We can hear a couple thousand lawyers across the globe snicker. But it’s all the COP21 ‘oh-so-important’ climate conference managed to come up with. No surprises there. They couldn’t make the 2ºC former goal stick, so they go for 1.5ºC this time. All on red, double or nothing. Because who really cares among the leadership, just as long as the ‘targets’ are far enough away that they can’t be held accountable.

I’ve been writing the following through the past days, and wondering if I should post it, because I know so many readers of the Automatic Earth have so much emotion invested in these things, and they’re good and fine emotions. But some things must still be said regardless of consequences. Precisely because of that kind of reaction. No contract is legally binding if there’s no agreement on payment. Nobody has a legal claim on your home without it being specified that, if, when and how they’re going to pay for it.

I understand some people may get offended by some of the things I have to say about this – though not all for the same reasons either-, but please try and understand that and why the entire CON21 conference has offended me. After watching the horse and pony show just now, I thought I’d let ‘er rip:

I don’t know what makes me lose faith in mankind faster, the way we destroy our habitat through wanton random killing of everything alive, plants, animals and people, through pollution and climate change and blood-thirsty sheer stupidity, or if it is the way these things are being ‘protested’.

I’m certainly not a climate denier or anything like that, though I do think there are questions people gloss over very easily. And one of those questions has to be that of priorities. Is there anyone who has thought over whether the COP21 stage in Paris is the right one to target in protest, whatever shape it takes? Is there anyone who doesn’t think the ‘leaders’ are laughing out loud in -plush, fine wine and gourmet filled- private about the protests?

Protesters and other well-intended folk, from what I can see, are falling into the trap set for them: they are the frame to the picture in a political photo-op. They allow the ‘leaders’ to emanate the image that yes, there are protests and disagreements as everyone would expect, but that’s just a sign that people’s interests are properly presented, so all’s well.

COP21 is not a major event, that’s only what politicians and media make of it. In reality, it’s a mere showcase in which the protesters have been co-opted. They’re not in the director’s chair, they’re not even actors, they’re just extras.

I fully agree, and more than fully sympathize, with the notion of saving this planet before it’s too late. But I wouldn’t want to rely on a bunch of sociopaths to make it happen. There are children drowning every single day in the sea between Turkey and Greece, and the very same world leaders who are gathered in Paris are letting that happen. They have for a long time, without lifting a finger. And they’ve done worse -if that is possible-.

The only thing standing between the refugees and even greater and more lethal carnage are a wide, even confusingly so, array of volunteers, and the people of the Greek coastguard, who by now must be so traumatized from picking up little wide-eyed lifeless bodies from the water and the beaches, they’ll live the rest of their lives through sleepless nightmares.

Neither Obama nor Merkel nor Hollande will have those same nightmares. And let’s be honest, will you? You weren’t even there. And still, you guys are targeting a conference in Paris on climate change that features the exact same leaders that let babies drown with impunity. Drowned babies, climate change and warfare, these things all come from the same source. And you’re appealing to that very same source to stop climate change.

What on earth makes you think the leaders you appeal to would care about the climate when they can’t be bothered for a minute with people, and the conditions they live in, if they’re lucky enough to live at all? Why are you not instead protesting the preventable drownings of innocent children? Or is it that you think the climate is more important than human life? That perhaps one is a bigger issue than the other?

Moreover, the very same leaders that you for some reason expect to save the planet -which they won’t- don’t just let babies drown, they also, in the lands the refugees are fleeing, kill children and their parents on a daily basis with bombs and drones. Dozens, hundreds, if not thousands, every single day. That’s how much they care for a ‘healthy’ planet (how about we discuss what that actually is?).

And in the hallways of the CON21 conference they’ve been actively discussing plans to do more of the same, more killing, more war. Save the world, bombs away! That’s their view of the planet. And they’re supposed to save ‘the climate’?

There are a number of reasons why the CON21 conference will not move us one inch towards saving this planet. One of the biggest is outlined in just a few quoted words from a senior member of India’s delegation -nothing new, but a useful reminder.

India Opposes Deal To Phase Out Fossil Fuels By 2100

India would reject a deal to combat climate change that includes a pledge for the world to wean itself off fossil fuels this century, a senior official said, underlying the difficulties countries face in agreeing how to slow global warming.

India, the world’s third largest carbon emitter, is dependent on coal for most of its energy needs, and despite a pledge to expand solar and wind power has said its economy is too small and its people too poor to end use of the fossil fuel anytime soon. “It’s problematic for us to make that commitment at this point in time. It’s certainly a stumbling block (to a deal),” Ajay Mathur, a senior member of India’s negotiating team for Paris, told Reuters in an interview this week.

“The entire prosperity of the world has been built on cheap energy. And suddenly we are being forced into higher cost energy. That’s grossly unfair,” he said.

This means the ‘poorer’ countries, -by no means just India; China has 155 more coal plants in the pipeline despite their pollution levels moving ‘beyond index’-, the poorer counties won’t volunteer to lower their emissions unless richer nations lower theirs even a lot more. US per capita emissions are over 10 times higher than India’s, those of the EU six times. Ergo: Step 1: lower US emissions by 90%. It also means that richer nations won’t do this, because it would kill their economies.

Which, in case you haven’t noticed, are already doing very poorly, much worse than the media -let alone politicians- will tell you. In fact, the chances that the richer countries will ‘recover’ from the effects of their debt binge are about on par with those of renewable energy sources becoming cheaper than fossil fuels -barring subsidies. If only because producing them depends entirely on those same fossil fuels. All the rest of what you hear is just con.

The people of India obviously know it, and you might as well. It’s going to cost many trillions of dollars to replace even a halfway substantial part of our fossil energy use with renewables, and we already don’t have that kind of money today. We will have much less tomorrow.

Besides, despite all the talk of Big Oil turning into Big Energy, Shell et al are not energy companies, they’re oil -and gas- companies, and they’ll defend their (near) monopolies tooth and claw. Especially now that their market caps are sinking like so many stones. They have no money left to invest in anything, let alone an industry that’s not theirs. They lost some $250 billion in ‘value’ this week alone. They’re getting killed.

In the same vein, China can’t close more than a token few of its most polluting plants. China’s getting killed economically. And for all nations and corporations there’s one principle that trumps all: competitive advantage. If going ‘green’ means losing that, or even some of it, forget it. We won’t volunteer to go green if it makes us less rich.

And who do you think represents big oil -and the bankers that finance them- more than anyone else? Right, your same leaders again, who make you pay for the by now very extensive and expensive security details that keep them from having to face you. Just like they’re planning to make you pay dearly for the illusion of a world running on renewables.

Because that’s where the profit is: in the illusion.

Whatever makes most money is what will drive people’s, corporations’, and nations’ actions going forward. Saving energy and/or substituting energy sources is not what makes most money, and it will therefore not happen. Not on any meaningful scale, that is.

There will be attempts to force people to pay through the nose to soothe their consciences -which will be very profitable for those on the receiving end-, but people’s ability to pay for this is shrinking fast, so that won’t go anywhere.

The only thing that could help save this planet is for all westerners to reduce their energy use by 90%+, but, though it is theoretically and technically feasible, it won’t happen because the majority of us won’t give up even a part of our wealth, and the powers that be in today’s economies refuse to see their profits (re: power) and those of their backers go up in -ever hotter- air.

The current economic model depends on our profligate use of energy. A new economic model, then, you say? Good luck with that. The current one has left all political power with those who profit most from it. And besides, that’s a whole other problem, and a whole other issue to protest.

If you’re serious about wanting to save the planet, and I have no doubt you are, then I think you need to refocus. COP21 is not your thing, it’s not your stage. It’s your leaders’ stage, and your leaders are not your friends. They don’t even represent you either. The decisions that you want made will not be made there.

There will be lofty declarations loaded with targets for 2030, 2050 and 2100, and none of it will have any real value. Because none of the ‘leaders’ will be around to be held accountable when any of those dates will come to pass.

An imploding global economy may be your best shot at lowering emissions. But then again, it will lead to people burning anything they can get their hands on just to keep warm. Not a pretty prospect either. To be successful, we would need to abandon our current political and economic organizational structures, national governments and ‘up’, which select for the sociopaths that gather behind their heavy security details to decide on your future while gloating with glee in their power positions.

Better still, we should make it impossible for any single one of them to ever be elected to any important position ever again. For now, though, our political systems don’t select for those who care most for the world, or its children. We select for those who promise us the most wealth. And we’re willing to turn a blind eye to very many things to acquire that wealth and hold on to it.

The entire conference is just an exercise in “feel good”, on all sides. Is there anyone out there who really thinks the likes of Bill Gates and Richard Branson will do anything at all to stop this world from burning to the ground? You have any idea what their ecological footprints are?

Sometimes I think it’s the very ignorance of the protesting side that dooms this planet. There’s a huge profit-seeking sociopathic part of the equation, which has caused the problems in the first place, and there’s no serious counterweight in sight.

Having these oversized walking talking ego’s sign petitions and declarations they know they will never have to live up to is completely useless. Branson will still fly his planes, Gates will keep running his ultra-cooled server parks, and Obama and Merkel will make sure their economies churn out growth ahead of anything else. Every single country still demands growth. Whatever gains you make in terms of lower emissions will be nullified by that growth.

And in the hallways, ‘smart’ entrepreneurs stand ready to pocket a ‘smart’ profit from the alleged switch to clean energy. At the cost of you, the taxpayer. And you believe them, because you want to, and because it makes you feel good. And you don’t have the knowledge available to dispute their claims (hint: try thermodynamics).

You’re seeking the cooperation of people who let babies drown and who incessantly bomb the countries these babies and their families were seeking to escape.

I’m sorry, I know a lot of you have a lot of emotion invested in this, and it’s a good emotion, and you’re thinking this conference is really important and all, and our ‘last chance’ to save the planet. But you’ve been had, it’s as simple as that. And co-opted. And conned.

And it’s not the first time, either. All these conferences go the same way. To halt the demise of the planet, you can’t rely on the same people who cause it. Never works.

Mar 022015
 
 March 2, 2015  Posted by at 10:01 am Finance Tagged with: , , , , , , , , , ,  


Christopher Helin Flint auto, Ghirardelli Square, San Francisco 1924

Austria On Track to Bail in Heta Creditors After Aid Stop (Bloomberg)
‘What Is Desirable For The Eurozone May Not Be Feasible’ (Reuters)
David Stockman Warns ‘It’s One Of The Scariest Moments In History’ (Zero Hedge)
Are Central Banks Creating Deflation? (Zero Hedge)
Negative Yields: What Could Go Wrong? (CNBC)
Greek Debt Becoming Less Sustainable (Kathimerini)
German Finance Chief Schaeuble Softens Tough Tone Against Greece (Telegraph)
Greece Is Being Forced Into Purgatory To Save The Euro (Telegraph)
How Jeroen Dijsselbloem Did The Deal To Extend The Greece Bailout (FT)
Alexis Tsipras Comes Under Fire From Spanish Prime Minister (Guardian)
Catalonia Prepares To Set Up Own Foreign Missions, Tax System (RT)
ECB Braces For QE As Others Shift Rates (Reuters)
Merkel’s Bavarian Allies Criticise EU Exception For French Deficit (Reuters)
Bells Toll For Europe’s Largest Gas Field (Reuters)
Ukrainian Economy Starts to Buckle Behind Cloak of Calm in Kiev (Bloomberg)
Ex-Guerrilla, Champion Of The Poor: Uruguay President Steps Down (RT)
Documentary on Air Pollution Grips Over 30 Million Chinese in 1 Day (NY Times)

Once this gets started, it’ll be hard to stop it from spreading.

Austria On Track to Bail in Heta Creditors After Aid Stop (Bloomberg)

Austria won’t give fresh capital to Heta Asset Resolution making the “bad bank” of failed Hypo Alpe-Adria-Bank the first case under new European Union rules imposing losses on bank bondholders. Austria cut off support for Heta, which has already cost Austrian taxpayers about €5.5 billion in aid, after Heta notified the government it may need as much as €7.6 billion euros on top of that, the Finance Ministry said in a statement on Sunday. The Finanzmarktaufsicht regulator put Heta into resolution and ordered an immediate debt moratorium. “The decision was triggered by information from Heta’s management about the first results of an asset review,” the ministry said.

“Because of that dramatic change of the asset evaluation, the ministry together with the entire government decided not to invest any more tax money into Heta.” Heta’s predecessor Hypo Alpe was nationalized in 2009 after it was close to collapse because of bad loans in the western Balkans and shareholders led by Bayerische Landesbank walked away from the bank. Its rescue and wind-down has been complicated by a string of court cases and by the fact that a large part of its debt is guaranteed by the Carinthia province, a former owner of the bank. The FMA is taking over the wind-down of Heta, which kept around €18 billion of Hypo’s assets when it was set up last year.

While it works out a resolution plan it won’t repay Heta’s liabilities under an Austrian law that came into force Jan. 1 to implement the EU Bank Recovery and Resolution Directive, the authority said in a statement. The immediate debt moratorium means €950 million of bonds due March 6 and March 20 won’t be repaid. It affects €9.8 billion in outstanding bonds, supplementary capital and Schuldschein loans, €1.24 billion debt to Pfandbriefbank, a bank that handles bond issues for Austrian provinvial banks, as well as loans from BayernLB, according to the FMA’s decree published on its website.

Read more …

“Austerity has fueled radical forces of political protest and may be running out of democratic road..”

‘What Is Desirable For The Eurozone May Not Be Feasible’ (Reuters)

The latest episode of Greece’s debt crisis has revived doubts about the long-term survival of the euro, nowhere more so than in London, Europe’s main financial center and a hotbed of Euroskepticism. The heightened risk of a Greek default and/or exit comes just as there are signs that the euro zone is turning the corner after seven years of financial and economic crisis and that its perilous internal imbalances may be starting to diminish. To skeptics, the election of a radical leftist-led government in Athens committed to tearing up Greece’s bailout looks like the start of an unraveling of the 19-nation currency area, with southern countries rebelling against austerity while EU paymaster Germany rebels against further aid.

A last-ditch deal to extend Greece’s bailout for four months after much kicking and screaming between Athens and Berlin did little to ease fears that the euro zone’s weakest link may end up defaulting on its official European creditors. U.S. economist Milton Friedman’s aphorism – “What is unsustainable will not be sustained” – is cited frequently by those who believe market forces will eventually overwhelm the political will that holds the euro together. Countries that share a single currency cannot devalue when their economies lose competitiveness, as occurred in southern Europe in the first decade of the euro’s existence. There is no mechanism for large fiscal transfers between member states.

So the only option has been a wrenching “internal devaluation” by countries on the periphery of the euro area, involving real wage, pension and public spending cuts and mass unemployment that has caused deep social distress. Austerity has fueled radical forces of political protest and may be running out of democratic road – not just in Greece – but none of the alternative ways out of the euro zone’s economic divergence dilemma looks remotely plausible. “The history of the gold standard tells us that an asymmetric adjustment process involving internal devaluation in debtor countries, with no corresponding inflation in the core, is unlikely to be economically or politically sustainable,” economic historians Kevin O’Rourke and Alan Taylor wrote in the Journal of Economic Perspectives in 2013. “What is desirable for the euro zone may not be feasible.”

Read more …

Can’t say it enough: “Zero interest rates for 70 months have basically destroyed the pricing function in the financial markets.”

David Stockman Warns ‘It’s One Of The Scariest Moments In History’ (Zero Hedge)

“The Fed is out of control,” exclaims David Stockman – perhaps best known for architecting Reagan’s economic turnaround known as ‘Morning in America’ – adding that “people don’t want to hear the reality and the truth that we’re facing.” The following discussion, with Harry Dent, outlines their perspectives on the looming collapse of free market prosperity and the desctruction of American wealth as policymakers “take our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that’s been built up and created by the American people over decades and decades.” The Fed, Stockman concludes, “is a rogue institution,” and their actions have led us to “one of the scariest moments in our history… it’s a festering time-bomb and we’re not sure when it will explode.”[..]

David Stockman: People don’t want to hear the reality and the truth that we’re facing. But I think there is an enormous appetite out in the country to get a different perspective than what you have from the media day in and day out, so I say the fed is out of control. Its balance sheet is exploded. It’s printing money like never before. Zero interest rates for 70 months have basically destroyed the pricing function in the financial markets. I said that as a result of this, Wall Street has become a huge casino which basically rewards gamblers, but it is not functioning as a capital raising, capital allocating instrument, which really is what the financial markets should do in a free market system. I warned about the size of the federal debt.

I’m an old budget director from the Reagan days. We had a trillion dollar national debt, a 3 trillion economy when I started. Today, it’s 18 trillion. Eighteen fold gain in the last 35 years versus maybe a fourfold gain in the economy. So all of these trends are taking our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that’s been built up and created by the American people over decades and decades. So people don’t want to hear the warning. They don’t want to hear the truth in the establishment, in Wall Street, in Washington, but I think out in the country they must.

(Click link for video)

Read more …

That would be a yes: “David Stockman: … massive money printing by central banks on a worldwide basis is inherently deflationary..”

Are Central Banks Creating Deflation? (Zero Hedge)

Last week we noted that with the start of Q€ just around the corner, the ECB finds itself in a rather absurd situation. In what we called the ultimate easy money paradox (or the ultimate Keynesian boondoggle), Mario Draghi and crew are doomed to trip over their own policies as they (literally) attempt to monetize twice the net supply of eurozone fixed income this year. The problem is two-fold: 1) the central bank’s adventures in NIRP-dom mean anyone willing to sell their EGBs would face the truly silly prospect of sending the proceeds right back where they came from, except at a cost of 20 bps (negative deposit facility rate), and 2) because the central bank’s easy money policies have compressed credit spreads, sellers who wanted to reinvest the cash they would theoretically receive for their EGBs would have to do so at ridiculously low rates, a scenario that would compound QE’s already negative effect on NIM for banks and would be absolutely untenable for insurers.

So what we have “is one deflation-fighting policy stymying another [and] the central bank’s previous efforts to drive down rates thwarting its current plans to … drive down rates.” Now, courtesy of Citi’s Matt King, it’s our distinct pleasure to present yet another wonderfully ridiculous paradox inadvertently created by central banks who apparently aren’t capable of understanding when they’re just pushing on a string: manufactured deflation or, more poignantly, just what the doctor did not order. Here’s Citi:

It’s that linkage between investment (or the lack of it) and all the stimulus which we find so disturbing. If the first $5tn of global QE, which saw corporate bond yields in both $ and € fall to all-time lows, didn’t prompt a wave of investment, what do we think a sixth trillion is going to do? Another client put it more strongly still. “By lowering the cost of borrowing, QE has lowered the risk of default. This has led to overcapacity (see highly leveraged shale companies). Overcapacity leads to deflation. With QE, are central banks manufacturing what they are trying to defeat?”

Ultimately, the question is whether the ceaseless printing of money is actually creating any demand, and for King, the answer is pretty clearly “no”: “QE, and stimulus generally, is supposed to create new demand, improving capacity utilization, not reducing it. But … it feels ever more as though central bank easing is just shifting demand from one place to another, not augmenting it.”

Read more …

A lot.

Negative Yields: What Could Go Wrong? (CNBC)

Some central banks have cut interest rates into negative territory in an effort to eke out some economic growth, but the step could spur unintended, counterproductive outcomes. “Negative rates could backfire,” Francesco Garzarelli, co-head of macro markets research at Goldman Sachs, said in a note Friday. “At least some segments of the population could feel poorer, and less secure,” he said. “Rather than lifting consumption and borrowing, ultra-loose monetary policy could perversely lead to an increase in precautionary savings and a slower economic recovery.” In an effort to ward off potential deflation and bolster nearly flat-lined economic growth, some central banks – including the ECB, the Swiss National Bank and central banks in Sweden and Denmark – have cut rates into negative territory.

A big chunk of the government bond market has gone negative: JPMorgan estimated that in January, around $3.6 trillion worth of developed market government bonds—or 16% of its Global Bond Index—was at a negative yield. That’s something that can spur new problems, Goldman said, noting concerns that pension funds and insurance companies may struggle to meet guaranteed payouts. “Today’s very low or even negative fixed income yields often are not large enough to match future liabilities,” Goldman said, noting insurance companies are generally assuming forward rates will be positive and above current rates. If low or negative yields persist, making guaranteed products work will become increasingly difficult, it said. In addition, if banks’ profitability takes a hit from negative rates, it could actually discourage bank lending, hurting efforts to revive economic activity, Goldman said.

There’s also the risk of asset bubbles forming, Garzarelli said, adding the risk is especially high for “high duration” assets such as technology stocks and high-dividend-paying stocks, which already have “eye-watering” valuations. Others also believe ZYNY, or zero-yield to negative-yield, may not follow the theoretical playbook in the real economy. “Traditional economic theory suggests that low interest rates will encourage households to borrow more, both to acquire housing and also to favor present consumption over future consumption,” Michala Marcussen at SocGen said in a note dated Sunday. But in practice, it may not work as households are already relatively highly indebted, labor markets remain fragile and regulations have become more demanding, she said. “Indeed, households may even opt to save more to compensate for low yields, and all the more so in ageing populations,” Marcussen said.

Read more …

Ironically, Ukrainians are spending like crazy just so they have things, and not a rapidly falling currency, in their hands. The Greeks do the opposite: they spend even less.

Greek Debt Becoming Less Sustainable (Kathimerini)

The agreement between the Greek government and its lenders, which was sanctioned by the Eurogroup last Tuesday, appears to be more of a respite and less of a sea change in the relationship between the two sides. The apparent confidence gap is bound to aggravate economic conditions and undermine talks on debt relief unless it is bridged fast. Refraining from adversarial statements is the least they can do at this point, especially some ministers. According to the latest revision of gross domestic product data, based on seasonally adjusted figures, the Greek economy shrank by a revised 0.4% in the last quarter of 2014 compared to the previous quarter as opposed to a 0.2% drop in the flash estimate. This brought the real GDP growth rate to 0.75% for the whole year, still better than earlier forecasts, ranging between 0.4 and 0.6%.

Political uncertainty appears to have taken its toll as households and businesses cut back on spending. Unfortunately, businessmen and others think this trend has continued in the first months of 2015. If they are right, real GDP will dip again in the first quarter of this year, compared to the last one in 2014. This will make it unlikely to reach the budget goal of 2.9% annual growth in 2015. Moreover, international investment banks and others are downgrading this year’s economic growth forecasts, ranging between 0.6 and 2%. With the consumer price index continuing to decline, the prospects for an end to deflation do not look promising at this point. In the 12-month period from February 2014 to January 2015, average prices as measured by the CPI decreased by 1.4% year-on-year.

Even if deflation settles closer to a 1% average decline, nominal GDP is likely to be little changed and may even shrink, assuming real economic activity disappoints. This is not a good omen for the sustainability of the Greek public debt, bankers and others point out. This is even more the case if one thinks the country’s official creditors will accept the government’s arguments and economic reality, lowering the target of the primary budget surplus to 1.5% of GDP for 2015. Readers are reminded that the surplus target has been set at 3% of GDP in the program for this year and 4.5% next year. The country is projected to pay about 6 billion euros, or more than 3% of GDP, in interest payments to its creditors in 2015. In other words, interest payments will exceed the likely primary budget surplus, adding to the public debt stock.

Read more …

Merkel told him to.

German Finance Chief Schaeuble Softens Tough Tone Against Greece (Telegraph)

German finance minister Wolfgang Schaeuble has softened his hard-line attitude towards Greece, saying its new Left-wing Syriza government needs “a bit of time” but appears to be able to work towards resolving its debt crisis. “The new Greek government has strong public support,” Mr Schaeuble told German newspaper Bild am Sonntag. “I am confident that it will put in place the necessary measures, set up a more efficient tax system and in the end honour its commitments. You have to give a little bit of time to a newly elected government,” he told the Sunday paper. “To govern is to face reality.” Mr Schaeuble added that his Greek counterpart, Yanis Varoufakis, despite their policy clashes, had “behaved most properly with me” and had “the right to as much respect as everyone else”.

It was an abrupt change in tone for Mr Schaeuble, who has repeatedly exchanged jibes with Mr Varoufakis since the Greek election in January brought in an anti-austerity government. Ahead of Friday’s crucial parliamentary vote in Germany, where MPs voted overwhelmingly to extend Greece’s existing financial aid programme until June, Mr Schaeuble had warned that Greece would not receive “a single euro” until it meets the pledges of its existing €240bn bail-out programme. “If the Greeks violate the agreements, then they have become obsolete,” a visibly angry Mr Schaeuble said at a meeting on Friday to persuade German MPs to support the deal ahead of the parliamentary vote. “Mr Varoufakis had not done anything to make our lives easier,” he added. After German MPs voted for the four-month bail-out extension, which Mr Schaeuble insisted was not a new finance deal for the troubled country, Greece pledged to implement reforms and savings.

Read more …

Nothing can save the euro.

Greece Is Being Forced Into Purgatory To Save The Euro (Telegraph)

The nickname for the IMF in the markets is “It’s mostly fiscal”, reflecting the IMF’s view that when a country gets into trouble, the manifestation is a huge government budget deficit. And the cure involves spending cuts and higher taxes. That is exactly what happened in Greece. But there was a difference. In most cases, the traditional IMF medicine counter-balances fiscal tightening with a devaluation of the exchange rate. The idea is that as the fiscal tightening squeezes domestic demand and threatens to cause higher unemployment, then a more competitive currency encourages net exports. Essentially, exports fill the hole left by the retreating government But this was not possible in the Greek case because the country does not have its own currency – because it joined the euro.

The only way of compensating for this absence was to allow domestic deflation of prices to produce an “internal devaluation”. What a laugh! We learned in the 1930s that this does not work. Deflation is extremely slow and painful and, even if it succeeded in improving competitiveness, it would worsen the debt ratio because it reduces the money value of GDP (the denominator of the ratio). The result is that Greece is on the road to misery, with no obvious escape. Why don’t the Germans understand the logic of this argument? They tend to look at matters with regard to debt – and economic policy more generally – moralistically. The Greek public sector has been wasteful in the extreme and Greek taxpayers have treated paying tax as near-voluntary. Accordingly, they have had it coming to them.

When they reform themselves, then the economy will bounce back. I am speechless at this attitude. Yes, the Greek public sector has been appallingly wasteful and making it less so is an important part of boosting Greece’s sustainable growth rate. But the current priority is not that, but boosting Greece’s actual growth rate now – and that is all about demand. There is no such thing as a free spending cut. Even tax evaders and under-employed public servants go shopping. Why do the IMF and the other lenders persevere with this destructive path? The answer is IMP: “It’s mostly political.” That is to say, it is driven by the overriding will to keep the euro on the road. By now you should know my answer. Greece should come out of the euro and allow its new currency to depreciate sharply, perhaps by 30pc to 40pc.

Read more …

Curious how several parts of the ‘EU’ act independently from each other.

How Jeroen Dijsselbloem Did The Deal To Extend The Greece Bailout (FT)

A first eurogroup meeting to start the process broke up in acrimony. Mr Dijsselbloem tried again five days later but the ensuing bust-up proved even more spectacular: Mr Varoufakis marched out of the session accusing the Dutchman of reneging on a deal Athens had struck with Pierre Moscovici, the European Commission s economic chief. Mr Dijsselbloem blames the commission, which has typically been more lenient towards Greece than its other creditors, saying its intervention had short-circuited proper procedure and that he had been kept in the dark. The Greeks then thought they had an agreement, Mr Dijsselbloem said. I was not involved in that, and that s not very smart.

If you want to get an agreement with the eurogoup, it would help to inform me of what you re trying to do. Instead, Mr Dijsselbloem issued his own, far tougher proposal, which quickly leaked to the press. He put his head in his hands to mimic his reaction upon learning of the leak, presumably orchestrated by Mr Varoufakis. I know in politics it’s all about the frame and who gets to frame first, he said. But if you’re in such a delicate process, trying to rebuild trust, trying to get a process going, to then .. walk into the press room and say: Oh, these guys can’t be trusted, look what they re trying to push down our throats. That was just not very helpful.

A third and final eurogroup session was held the day after Athens finally sent its request for an extension, and Mr Dijsselbloem changed strategy. The key players in the debate were all present: the three institutions that monitor Greece s bailout (the commission, the European Central Bank and the International Monetary Fund) along with the Greeks and the Germans, to put it quite bluntly , Mr Dijsselbloem said. Each was brought in for pre-meeting negotiations. But instead of dealing with Mr Varoufakis, Mr Dijsselbloem spoke only to Mr Tsipras over the phone. I didn’t see Varoufakis at all that morning, he said. I didn’t speak to him. I said to Tsipras, this had to be it. And I think after 15 minutes he called me back, and there was one more word we managed to change. And that was it.

Read more …

Nice scuffle…

Alexis Tsipras Comes Under Fire From Spanish Prime Minister (Guardian)

Greece’s anti-austerity government has denied that it sees Europe through the prism of “hostile and friendly countries” as the Spanish prime minister Mariano Rajoy hit back at accusations that Spain and Portugal had deliberately tried to topple the new leftist-led administration. The war of words erupted when Greek premier Alexis Tsipras attacked the sabotage tactics that had, he said, been employed by Lisbon and Madrid in an effort to scupper the chances of a successful end to the negotiations over the eurozone’s extension of the Greek bailout programme. He accused the Iberian partners of deliberately taking a hard line in the talks because they feared the rise of radical forces in their own countries.

“We found opposing us an axis of powers … led by the governments of Spain and Portugal which, for obvious political reasons, attempted to lead the entire negotiations to the brink,” Tsipras told party members on Saturday. “Their plan was, and is, to wear down, topple or bring our government to unconditional surrender before our work begins to bear fruit and before the Greek example affects other countries… And mainly before the elections in Spain.” Rajoy responded angrily on Sunday, saying that Spain had stood by Greece in solidarity by contributing to the debt-stricken country’s €240bn bailout. “We are not responsible for the frustration generated by the radical Greek left that promised the Greeks something it couldn’t deliver on,” he said.

Aides close to Tsipras insisted that Athens had little desire to “seek enemies abroad,” but the leftist leader had a duty to disclose the details of last month’s dramatic negotiations with creditors to keep the bankrupt country afloat. “Prime minister Alexis Tsipras was obliged to relate in detail to the Greek people the hard negotiations at the crucial eurogroup that led to the agreement,” said the insiders. “The attitude [shown by] governments towards the deal isn’t a secret – after all such views had become publicly known from the first moment, which is only right.”

Read more …

More threats for Rajoy. Beware, the Spanish army stands ready to occupy Barcelona.

Catalonia Prepares To Set Up Own Foreign Missions, Tax System (RT)

Catalonia is preparing its own tax system, and creating a network of foreign missions as it prepares for a snap regional vote on independence. Recently Spain’s top court ruled that the region’s symbolic referendum vote in November was unconstitutional. Nationalist leaders in the northeastern region have urged a snap local vote on the issue of independence on September 27, AFP reported. Catalan president Artur Mas and his government are reportedly working on tax, diplomacy, and social security restructuring in case Catalonia becomes an independent state. The focus is on taxation as the Catalan authorities now collect only 5% of the taxes raised in the region.

Last November, Catalan president Artur Mas organized a symbolic vote on independence, with 80% voting in favor. However, the turnout was only 40%. Catalonia has 7.5 million residents (16% of Spain’s population), and represents some 20% of the country’s GDP. Alone, the region could collect €100 billion in taxes yearly, much more than Catalonia would need if it becomes independent, said Joan Iglesias, a former Spanish tax inspector, who is now behind the Catalan tax reform. “Everyone knows that Catalonia would be viable economically. It is the most economically productive territory in Spain,” Iglesias told AFP. Apart from the tax reform, Catalonia would need to establish its own central bank, upgrade computer systems and employ more civil servants.

Also, the region says it needs to open more foreign offices. Currently, Catalonia is represented in the UK, France, Germany, the US, Belgium and has recently set up missions in Austria and Italy. In February, Mas set up a commission responsible for carrying out the tasks essential for an independent state. Plus, he ordered a study into the steps Catalonia needs to take to make sure the services like telecommunications would function in case of secession. However, “work is advancing too slowly,” Catalan lawmaker with the separatist Esquerra Republicana de Catalunya (ERC) party, Lluis Salvador, told AFP. “We need to streamline our efforts so we arrive at the elections in September at a much more advanced state.”

Read more …

The ECB QE will be the worst central bank failure in a long time.

ECB Braces For QE As Others Shift Rates (Reuters)

Greek funding and quantitative easing in Europe, an expected rate cut in Australia and the buoyant U.S. labor market are set to be the focus of an economic week dominated by a host of central bank meetings. Greece may have secured an extension of its bailout last week, but it remains reliant on emergency funding.The European Central Bank’s Governing Council convenes in Cyprus on Thursday and may take a decision on whether to accept Greek government bonds as collateral for its direct ECB funding, which it stopped doing at the start of February.If the ECB does not – and it most likely will not – it could be forced to prolong the provision of Emergency Liquidity Assistance (ELA) to the Greek central bank.

“The Greek question will be a hot topic,” said ING Chief Eurozone Economist Peter Vanden Houte. “(Greek Finance Minister Yanis) Varoufakis has been saying the country is counting on the ECB for finances over the next few months.”ECB President Mario Draghi is also expected to provide further details on the bank’s €1 trillion government bond buying program, which begins in March. He may face questions about the program’s ability to reach its target, such as how the ECB intends to convince domestic banks to sell their government debt, with the prospect of then parking the money with the ECB at a negative interest rate. The ECB will also release new economic forecasts. Chief Economist Peter Praet said last week that it was likely to revise upward its expectations for growth in the euro zone, with low oil prices and a weak euro helping.

Read more …

Yeah! Let’s go after France.

Merkel’s Bavarian Allies Criticise EU Exception For French Deficit (Reuters)

A leading member of German Chancellor Angela Merkel’s conservative allies in Bavaria has criticised the European Commission’s decision to give France two extra years to cut its deficit, a letter seen by Reuters shows. On Wednesday Brussels said it would give France until 2017 to bring its deficit below the EU limit of 3% of GDP, sparing Paris a fine and giving it a new grace period after it missed a second deadline to put its finances in order. The decision has been condemned by some euro zone policymakers, who said it undermines the credibility of EU budget rules which were tightened in recent years to prevent overspending and a future sovereign debt crisis. Gerda Hasselfeldt, head of the Christian Social Union (CSU) parliamentary group, wrote to European Commission President Jean-Claude Juncker in a letter dated Feb. 27 to say that the timing of Brussels’ decision left a “bad aftertaste”.

Hasselfeldt wrote: “Right now, at a time when we’re facing big challenges in our responsibility for the European Union and the euro zone and when we’re working on the principle of solidarity in return for solidity, it’s extremely important not to allow any exceptions.” She said the euro zone was vehemently urging Athens to stick to rules set by the Eurogroup of euro zone finance ministers despite significant domestic resistance, and that while she did not want to compare Greece with France, “stringent action” was the only way to ensure Europe and the euro zone remain credible. “We should not create the dangerous impression that we want to apply double standards,” Hasselfeldt said, adding that the same rules needed to apply to all countries whatever their size.

Read more …

Scary story. Since I spent the better part of the past two years in Holland, I’ve heard a lot about it.

Bells Toll For Europe’s Largest Gas Field (Reuters)

Dutch church bells that for centuries have tolled to warn of floods across the low-lying countryside are sounding the alarm for a new threat: earthquakes linked to Europe’s largest natural gas field. “Money can buy a lot of things, but a building like this cannot be replaced,” said Jur Bekooy, a civil engineer with the Groningen Old Churches Association, pointing to cracks in the ceiling and walls of the 13th-century Maria Church in the village of Westerwijtwerd. Long ignored, voices like Bekooy’s are being heard as elections loom this month and following a damning report from the independent Dutch Safety Board. It accused the government and the field’s operators, Shell and Exxon Mobil, of ignoring the threat of earthquakes linked to the massive Groningen gas field for years.

There are now questions about the future exploitation of the field that lies under the northern province of Groningen, with implications that reach well beyond its significance for Dutch state coffers. Lessons from Groningen, which lies far from any natural fault line, feed into a debate over the threat posed by hydraulic fracturing in the United States, China, Britain and elsewhere. The world’s 10th largest gas field, Groningen is expected to supply the bulk of the Netherlands’ annual gas needs of 20-30 billion cubic meters (bcm) until the mid-2020s. The Dutch also have contracts to sell 40-60 bcm annually to buyers in Germany, Britain, Italy, Belgium and France. In all, Groningen and a few smaller Dutch fields supply 15% of Europe’s gas consumption, providing one alternative to Russian supply. When Economic Affairs Minister Henk Kamp recently ordered production at Groningen cut by 16%, gas prices jumped across Western Europe.

Groningen has been in continuous production since 1963. As far back as 1993 small quakes were definitively linked to its output. But in the late 2000s, they suddenly became more frequent and stronger. With government finances under pressure from the 2008 financial crisis, production at Groningen had been ramped up from around 30 bcm in 2007 to more than 50 bcm by 2010. The money generated helped the Dutch cushion the blow of austerity policies championed by the Cabinet. As Prime Minister Mark Rutte publicly pressed southern European governments to bring their spending under control, Dutch government gas revenues of €15 billion by 2013 were about the size of the national deficit.

Without gas, the deficit that year would have doubled from 2.5% to 5%, violating eurozone budget rules. But on Aug. 16, 2012, an earthquake with its epicenter under the town of Huizinge marked the beginning of the end for aggressive output from Groningen. It registered 3.6 on the Richter scale, larger than any predicted by engineers at NAM, the joint venture field operator between Shell and Exxon. “Until the Huizinge earthquake, we had 1,100 damage claims in 20 years,” said NAM spokesman Sander van Rootselaar. “After the quake we had more than 30,000.” Earthquakes caused by gas production are usually small, unless they happen near a fault line and can trigger a larger natural quake. But in Groningen they occur close to the surface, damaging stone and brick buildings never designed to withstand shaking. Of the 50 churches located above the field, some 40 have been affected, said Bekooy.

Read more …

Getting worse fast.

Ukrainian Economy Starts to Buckle Behind Cloak of Calm in Kiev (Bloomberg)

Ukrainians are seeing signs the economy is cracking under the weight of war and the risk of default. While restaurants and cafes are bustling and shelves are full in Kiev, a city of 3 million, a recession stretching into a second year is igniting angst about the return of the disarray unleashed by the Soviet Union’s collapse in 1991. Especially outside the capital, that era of food shortages, hyperinflation and mass unemployment doesn’t seem so far away.= “My business is about to close and there are many more like it,” said Valentyna Lozova, a 65-year-old accountant in Kiev. “Salaries aren’t rising, inflation is galloping and the hryvnia’s in freefall. I’m afraid of the future.”

It’s becoming harder for Ukrainians, mindful of the thousands who’ve died in a 11-month insurgency near the nation’s border with Russia, to put a brave face on their economic woes. With much of the country’s industrial base in ruins and a looming debt restructuring, the effect may be felt for years. The economy is set to plunge 12% in 2014-15 and the inflation rate jumped to 28.5% in January, the world’s second-highest behind Venezuela. As the economy deteriorated, the hryvnia has sunk 70% in the past year, the most in the world, sparking panic in some towns. “I see people every day in supermarkets buying sacks of flour and cereals as prices grow,” said Iryna Lebiga, a 31-year-old mother of three who’s struggling to find a buyer for her unprofitable sheep farm in Poltava, a 350-kilometer (220-mile) drive east of Kiev. “People don’t have money. Someone approached us last year but my husband thought he offered too little. Now, nobody offers even half of that.”

Even in Kiev, some people were spooked into stocking up on staples after the central bank banned foreign-currency trading for one day last week and the hryvnia’s street price plunged. The Silpo supermarket chain rearranged delivery to its outlets to keep up with growing demand, its press office said in an e-mail. While the recession isn’t yet as deep as the last one in 2009, this contraction is longer-lasting and Ukraine entered it after two years of almost zero-growth. The scale of the malaise risks triggering disquiet among some Ukrainians who helped unseat their Russian-backed leader last year with the hope of rebuilding the nation, according to Citibank in Moscow.

Read more …

More on this great man.

Ex-Guerrilla, Champion Of The Poor: Uruguay President Steps Down (RT)

Uruguay’s president, Jose “Pepe” Mujica, a former guerrilla who lives on a farm and gives most of his salary to charity, is stepping down after five years in office, ending his term as one of the world’s most popular leaders ever. Mujica, 79, is leaving office with a 65% approval rating. He is constitutionally prohibited from serving consecutive terms. “I became president filled with idealism, but then reality hit,” Mujica said in an interview with a local newspaper earlier this week, according to AFP. Some call him “the world’s poorest president.” Others the “president every other country would like to have.” But Mujica says “there’s still so much to do” and hopes that the next government, led by Tabare Vazquez (who was elected president for a second time last November) will be “better than mine and will have greater success.”

Mujica said he succeeded in putting Uruguay on the world map. He managed to turn the cattle-ranching country, home to 3,4 million people, into an energy-exporting nation, Brazil being Uruguay’s top export market (followed by China, Argentina, Venezuela and the US.) Uruguay’s $55 billion economy has grown an average 5.7% annually since 2005, according to the World Bank. Uruguay has maintained its decreasing trend in public debt-to-GDP ratio – from 100% in 2003 to 60% by 2014. It has also managed to decrease the cost of its debt, and reduce dollarization – from 80% in 2002 to 50% in 2014. “We’ve had positive years for equality. Ten years ago, about 39% of Uruguayans lived below the poverty line; we’ve brought that down to under 11% and we’ve reduced extreme poverty from 5% to only 0.5%,” Mujica told the Guardian in November.

After Latin America’s anti-drug war proved a failure, the South American country became the first in the world to fully legalize marijuana, with Mujica arguing that drug trafficking is in fact more dangerous than marijuana itself. One of the most progressive leaders in Latin America. Muijica also legalized abortion and same-sex marriage and agreed to take in detainees once held at the notorious Guantanamo Bay. Six former US detainees, who were never charged with a crime, came to Uruguay in December as refugees. The six included four Syrians, a Palestinian and a Tunisian. Although they were cleared for release back in 2009, the US was not able to discharge them until the Uruguayan President offered to receive them. Mujica, a former leftist Tupamaro guerrilla leader, spent 13 years in jail during the years of Uruguay’s military dictatorship. He survived torture and endless months of solitary confinement. Majica said he never regretted his time in jail, which he believes helped shape his character.

Read more …

“But when you carry a life in you, what she breathes, eats and drinks are all your responsibility, and then you feel the fear.”

Documentary on Air Pollution Grips Over 30 Million Chinese in 1 Day (NY Times)

Millions of Chinese, riveted and outraged, watched a 104-minute documentary video over the weekend that begins with a slight woman in jeans and a white blouse walking on to a stage dimly lit in blue. As an audience looks on somberly, the woman, Chai Jing, displays a graph of brown-red peaks with occasional troughs. “This was the PM 2.5 curve for Beijing in January 2013, when there were 25 days of smog in that one month,” explains Ms. Chai, a former Chinese television reporter, referring to a widely used gauge of air pollution. Back then, she says, she paid little attention to the smog engulfing much of China and affecting 600 million people, even as her work took her to places where the air was acrid with fumes and dust.

“But,” Ms. Chai says with a pause, “when I returned to Beijing, I learned that I was pregnant.” She has said her concerns about what the filthy air would mean for her infant daughter’s health prompted her to produce the documentary, “Under the Dome.” It was published online Saturday, and swiftly inspired an unusually passionate eruption of public and mass media discussion. The newly appointed minister of environmental protection even likened the documentary to “Silent Spring,” Rachel Carson’s landmark exposé of chemical pollution. “I’d never felt afraid of pollution before, and never wore a mask no matter where,” Ms. Chai, 39, says in the video. “But when you carry a life in you, what she breathes, eats and drinks are all your responsibility, and then you feel the fear.”

By early Monday morning, “Under the Dome” had been played more than 20 million times on Youku, a popular video-sharing site, and it was also being viewed widely on other sites. Tens of thousands of viewers posted comments about the video, many of them parents who identified with Ms. Chai’s concern for her daughter. Some praised her for forthrightly condemning the industrial interests, energy conglomerates and bureaucratic hurdles that she says have obstructed stronger action against pollution. Others lamented that she was able to do so only after leaving her job with the state-run China Central Television.

Read more …