Henry Bacon Fisherfolk returning with their nets, Étretat 1890
Let’s try a different angle. How about the world through the eyes of children’s? I don’t want to dwell on John McCain, too many people already do today, but I would suggest that your thoughts and prayers are with the souls of the hundreds of thousands of children that died because McCain advocated bombing them. Or, indeed, 50-odd years ago, were bombed by him personally. I wanted to leave him be altogether, don’t kick a man when he’s down, but I can’t get the image out of my head of him singing “Bomb, bomb, bomb, bomb, bomb Iran”.
To remember that, perhaps the most vile and infamous thing he’s ever done (it’s in the top ten), and then see someone like Ocasio-Cortez say he was an “unparalleled example of human decency”, it’s almost comedy. But not as funny as when in the 2008 campaign the woman in the red dress asked him if Obama was an Arab, and he responded: “No, ma’am. No, ma’am. He’s a decent, family man, citizen that I just happen to have disagreements with on fundamental issues and that’s what this campaign is all about”.
That is full-blown hilarious. And hardly a soul caught it, which makes it many times worse. It made him a decent man in the eyes of Americans to defend Obama by declaring that Arabs are per definition neither decent nor family men. Yeah, well, you might as well bomb them all then. But enough about McCain: it’s about the children, and their souls, not his.
The Pope is visiting Ireland this weekend. There is really just one subject on people’s minds, even though the ‘leaders’ say this is one of Ireland’s biggest events in 40 years. What’s on their minds is -child- sex abuse by Catholic clergy. And it’s been -and probably still is- rampant in the country. Like it’s been everywhere the Catholic church is an important force. Which is in many countries, there are 1.2 billion Catholics worldwide. The man claimed he was begging for God’s forgiveness. Not sure that will do it, there, Francis.
The Roman Catholic religion, and the Church, are fronts for the world’s biggest business empire, a multinational at least 1500 years older than the next one, Holland’s VOC -which existed maybe 100 years-. It has played power politics for longer than anyone else, all over the world. Its real estate portfolio alone is worth more than many a country. For that matter, it effectively owns many a country.
There would have to be a huge outcry over the child abuse before there could ever be an investigation. Multiple popes have promised exactly such investigations, and nothing has happened. It would upset the business model too much. And most faithful still believe their priests are decent men, anyway. Yes, there’s that word again, ‘decent’.
If a priest can no longer be maintained in a specific church because he’s been too obvious, too perverted and too greedy, he simply gets transferred to another parish. They’ve been doing this for 1,500 years, they got it down. And when things heat up, they beg god for forgiveness. While the Church gets ever richer.
At a 2% annual growth rate, wealth doubles every 34-35 years. The Catholic Church has been at it for 1,500. Do your math. Or look at it this way: real estate prices have been surging over the past few decades. And that’s the Vatican’s main industry. Anyone want to venture a guess at how much money they have made?
The Vatican is a facade hiding behind a facade hiding behind… Francis Ford Coppola tried tackling the topic in The Godfather III, but he was only mildly successful and not many people believed his portrayal. But, again, this is not about the Pope playing Kabuki theater like all his predecessors, it’s about the children.
In the US, some 500 children are still separated from their parents, if they’re still in the country. Haven’t heard much from Judge Dana Sabraw, according to whose ruling they should have been reunited weeks ago. Where is the Judge? Where are the children?
At the same time, we learn that about 52% of Americans under 18 -i.e. children, some 40 million of them- live in households that depend on some form of welfare. And Americans want to chide European nations for being ‘socialist’. That’s humor too.
But again, it’s about the children. How can they ever reach their potential if there’s a constant cloud of financial worry hanging over their heads, if many of them still don’t enough to eat, if much of what they eat is junk food, which is full of glyphosate to boot, and if it takes $100,000 or so in debt just to get a degree?
And that’s just the kids at home. Abroad, Americans treat children even a lot worse than they do their own. With the shining example of John McCain in mind, they have supplied the Saudi’s with much of the weaponry needed to murder many thousands more children in Yemen. 1.2 million human beings are estimated to have died in Iraq alone. Thanks John. That’s what, half a million children there alone?
In Greece, numbers came out this week that said the number of refugees on the islands is presently 16,000, vs 10,000 a year ago. And yes, many of them are children. Still in overcrowded camps, nothing has changed. It’s like the Catholic Church’s promising investigations. Nothing ever happens. Nobody cares. Well, nobody who has the power to make things happen.
The politicians all think about their careers. If it helps them in the next election to help refugees, children, countries, they will. If not, not. In the case of Greece, people are waking up to what actually happened to this country. Just too late. Matthew Klein wrote in Barron’s:
There was no political will in 2010 to spend hundreds of billions of euros to bail out Dutch, French, and German banks. To Greece’s eternal misfortune, however, there was enough “solidarity” to launder that Northern European bank bailout through the Greek government.
What does that have to do with children? Apart from the thousands of refugee children stranded on Greek islands and the mainland, Greek children themselves often no longer have access to sufficient food, healthcare, education, no matter how hard parents and others try. But at least Germany and Holland et al can boast about their growing economies.
We’re getting this wrong, we’re getting it all upside down. Children are not objects to treat and use to further political and corporate agendas. They are the future. Abuse them, maim them, kill them, under-feed them, under-educate them, and you end up with a screwed-up, abusive, underfed and under-educated world.
In that report about US children living in welfare dependent households there’s an interesting number: while 52.1% of under-18’s live in such a household, only 18.8% of over 75’s do. In other words, wealth is heavily skewed towards baby boomers and older. And that is somewhat defensible, since people need money for retirement, but it’s not if it means condemning others to food stamps.
This paints the portrait of a broken society, and -predictably- the weakest are the victims. Children. But the most heartbreaking, even if that is a hard point to make when we’ve already seen how many have been bombed, comes from Nauru, Australia’s ‘private’ prison island for refugees. As Australians think about how much their property has surged in price this week, their government(s) are responsible -in their name- for this:
A girl suffering “resignation syndrome” and who is refusing all food and water has been ordered off Nauru by an Australian court, as a succession of critically ill children are brought from the island. At least three children have left the island since Thursday, and reports from island sources say at least three more children, as young as 12, are “on FFR” – food and fluid refusal.
The current crisis on the island is overwhelming medical staff, who are referring dozens of children for transfer off the island, only to have their decisions rebuffed by Australian Border Force officials on the island or department of home affairs bureaucrats in Canberra. Two children were moved off the island with their families on Thursday.
Early on Friday morning, a 14-year-old refugee boy suffering a major depressive disorder and severe muscle wastage after not getting out of bed for four months, was flown directly from Nauru to Brisbane with his family. There are concerns, doctors say, he may never be able to walk normally again.
Later on Friday, in the federal court, Justice Tom Thawley ordered another girl – given the designation EIV18 by the court – to be moved to Australia for urgent medical treatment. Court orders prevent publication of the girl’s age – other than the fact she is a child – her name or country of origin. [..] The girl has been inside the supported accommodation area of the regional processing centre for three weeks, and has been refusing food and water for much of that time.
Before she, too, fell into acute depression and “resignation syndrome”, and refused to eat or drink anything, she had been one of the brightest and most articulate of the refugee children on Nauru. “Before she got sick, she was the best-performing student,” a source familiar with the girl and her condition told the Guardian. “She had a dream to be a doctor in Australia and to help others. Now, she is on food-and-fluid refusal and begging to die as death is better than Nauru.”
Can you be a worse human being than John McCain was? It’s not easy. But some people are still trying. Hard to fathom how Australians can be so silent about this. Where are the protests in the streets of Melbourne and Sydney?
Caring only about your own children while throwing the rest away with the bathwater is neither feasible nor viable. You’re bringing up children destined to fight and hate each other. For no reason that I can see at all. Do you enjoy the world of John McCain, where children were bombed for 50 years in two dozen or so countries? Or do you think that’s not such a good idea?
McCain could succeed only because his country, and the world around him, failed. Don’t set up your children, and all children, to fail in the same way he did.
I was going to leave McCain in peace. I strongly believe in not kicking a man when he’s down, and besides there’s already so much anger out there. I’ve always thought that perhaps as a POW he suffered some kind of brain damage. But I still can’t get the image out of my head of him singing “Bomb, bomb, bomb, bomb, bomb Iran” And then seeing people refer to him as an “unparalleled example of human decency”. It’s too much.
McCain is not alone in having their blood on his hands. Yet in a Regime, a Government-Media-Complex, comprised of warmongers, McCain enjoys the dubious distinction of being the warmonger par excellence. On the false pretense that Saddam Hussein posed an imminent threat against the United States via the “weapons of mass destruction” (WMDs) that he never possessed, McCain urged as loudly and tirelessly as anyone for war. Those libertarians and old right conservative sorts who exposed holes in the WMD narrative and forecasted the disaster to which such a war would lead were dismissed, ignored, or mocked. Estimates of casualties vary, but today, some 14 years after McCain got his way, anywhere between 195,000 and possibly one million Iraqis are dead.
The Iraq Body Count project found that during the decade following the invasion, 174,000 Iraqis were killed. Of this number, 112,000-123,000 were civilian noncombatants. At present, the number is closer to 200,000 civilian noncombatant deaths. Between 2003 and 2014, nearly 5,000 American service members lost their lives in this war that McCain and his ilk cooked on the basis of a lie. Yet contractors, aid relief workers, and journalists are also among those who lost their lives. While we can tabulate numbers, the pain, suffering, and trauma endured by the loved ones of those killed is incalculable. In addition to the hundreds of thousands of Iraqi and American corpses that McCain and his comrades left in the wake of their rush to war, there are that many more who have lived but who suffer daily.
Steele has won a legal case in the USA, where he had been sued by three Russian oligarchs who claimed that the ‘Dirty Dossier’ traduced their reputations. And he won on the basis that his report was protected by First Amendment rights under the constitution of the USA, which guarantees US citizens the right to freedom of expression. Despite the fact that Steele is British. “But Judge Anthony Epstein disagreed, writing in his judgment that “advocacy on issues of public interest has the capacity to inform public debate, and thereby furthers the purposes of the First Amendment, regardless of the citizenship or residency of the speakers.”
This is the nub of the issue: Steele, a former official UK intelligence officer and current mercenary spy-for-hire, is granted legal protection by the American courts for digging up and subsequently leaking what appears to be controversial and defamatory information about the current US president as well as various Russians, all paid for by Trump’s political opponents. And Steele is given the full protection of the US legal system. On the other hand, we have an award-winning journalist and publisher, Assange, whose organization WikiLeaks has never been found to report anything factually incorrect in more than 10 years, being told that if he were to be extradited from his current political asylum in the Ecuadorian embassy in London to face the full wrath of a vengeful American establishment, he is not entitled to claim the protection of the First Amendment because he is an Australian citizen, not an American.
[..] On a slightly tangential note, there has been some speculation, suppressed in the UK at least via the D Notice censorship system, that MI6 informant and Russian traitor Sergei Skripal, the victim of the alleged Novichok poisoning in the UK earlier this year, remained in contact with his alleged handler Pablo Miller, who also is reported to work for Orbis Business Intelligence. If this were indeed the case, then it would be a logical assumption that Orbis, via Miller, might well have used Skripal as one of its “reliable sources” for the Dossier.
President Donald Trump said NSA whistleblower Reality Winner‘s five-year prison sentence for leaking a classified document to the media was “unfair” – and he used the assertion to again attack Attorney General Jeff Sessions. In a Friday morning tweet, Trump called Winner’s leaks “‘small potatoes’ compared to what Hillary Clinton did,” referring to his repeated accusations that his rival in the 2016 election had broken the law in her use of a private email server while Secretary of State. The tweet also marks the second time in two days that Trump has lashed out at Sessions, following remarks he made Wednesday saying his Attorney General “never took control of the Justice Department.”
“So unfair Jeff, Double Standard,” Trump wrote Friday. The attacks on Sessions come directly after Trump’s lawyer Michael Cohen pleaded guilty and implicated the President in campaign financing crimes.Winner, an ex-NSA contractor, leaked classified government information to a news organization in 2017. That news organization was never officially identified in court proceedings, however on the same day Winner was arrested the investigative site The Intercept released a report detailing a Russian attempt to influence voting in the 2016 election. Trump’s apparent support for Winner is contrary to his insistence that Edward Snowden, another former NSA employee who leaked secret information to the media, is a “traitor.”
Why was Michael Cohen investigated? Because the “Steele dossier” had him making secret trips to meet with Russians that never happened, so his business dealings got a thorough scrubbing and, in the process, he fell into the Paul Manafort bin reserved by the special counsel for squeezing until the juice comes out. We are back to 1998 all over again, with presidents and candidates covering up their alleged marital misdeeds and prosecutors trying to turn legal acts into illegal ones by inventing new crimes.
The plot to get President Trump out of office thickens, as Cohen obviously was his own mini crime syndicate and decided that his betrayals meant he would be better served turning on his old boss to cut the best deal with prosecutors he could rather than holding out and getting the full Manafort treatment. That was clear the minute he hired attorney Lanny Davis, who does not try cases and did past work for Hillary Clinton. Cohen had recorded his client, trying to entrap him, sold information about Trump to corporations for millions of dollars while acting as his lawyer, and did not pay taxes on millions.
The sweetener for the prosecutors, of course, was getting Cohen to plead guilty to campaign violations that were not campaign violations. Money paid to people who come out of the woodwork and shake down people under threat of revealing bad sexual stories are not legitimate campaign expenditures. They are personal expenditures. That is true for both candidates we like and candidates we do not. Just imagine if candidates used campaign funds instead of their own money to pay folks like Stormy Daniels to keep quiet about affairs. They would get indicted for misuse of campaign funds for personal purposes and for tax evasion.
[Keynes in 1919 on the Treaty of Versailles] : “The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable – abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe.”
[..] Just as British civil servants, especially in the treasury and foreign office, never thought for a second that Germany would meet the demands of Versailles, I can’t believe anybody at the ECB or IMF thinks there is a chance that they will get back what Greece apparently owes them. According to some experts, Germany ended up paying back less then one-sixth of what was demanded in 1919. The withdrawal agreement that the United Kingdom may or may not negotiate over the next few weeks will not bear such close resemblance to those postwar reparations. At least Germany – and, more recently, Greece – tried to limit the damage being inflicted by the other side of the table.
Today the UK negotiators turn up for talks goaded by the Brexiteers to do as bad a deal as possible, to inflict as much damage as they can on themselves. If Keynes were alive today he would write another scathing polemic. The EU has a big call to make. Having crushed the Greeks, does it now do the same to the British? Does it accede to their weird demands for a dreadful deal? How much should it punish the Brexiteers for their idiocy?
Brussels is looking at opponents squabbling over whether to shoot themselves in the foot or the head. Are EU leaders, unlike their 1919 counterparts, able to see that the time for (limited) generosity has arrived? They have the opportunity to save the British from themselves. Why would they do this? The Versailles negotiators couldn’t see that it was in their own interests not to overly punish the Germans. Europe today runs too many risks from an enfeebled and resentful UK. Europe needs to remind itself of the civilising zeal of the EU’s founders and the values of the Enlightenment. Or, at the very least, the value of enlightened self-interest.
For some time now our two most influential economic institutions -the Bank of England and the Treasury – have been pulling in opposite directions. The Bank has tried to do its job of boosting aggregate demand (spending), but the Treasury has been running fiscal austerity, which has the opposite effect. The great irony is that through its monetary policy stimulus the Bank of England has opened up significant ‘fiscal space’. ‘Fiscal space’is a term used by the IMF to describe the extent to which national governments can take on more public borrowing without harming their economy. This begs the question whether the Treasury has acted irresponsibly by not taking full advantage of the fiscal potential the Bank affords it?
Without fiscal cooperation, the Bank is left trying to stimulate the economy on its own by indirectly influencing the borrowing and spending behaviour of the private sector. To this end, the Bank has lowered interest rates to historic lows, and has injected £445 billion and £125 billion of new money through so called Quantitative Easing (QE) and the Term Funding Scheme (TFS), respectively. In doing so, the Bank has helped keep the economy afloat – but at what cost? Standalone monetary policy has reduced the number of safe assets in the market, supported more risk taking, encouraged households to take on more debt (to record levels), fuelled asset price bubbles, and promoted inequality. To boot, very little of the new money created by the Bank has trickled down into productive investments and household incomes.
Had Greece been a country with its own currency, such as the Czech Republic or New Zealand, the central bank could have plugged the funding gap and prevented an abrupt collapse in spending. Membership in the euro area removed that option. The government and the banks owed debt in a currency the Bank of Greece could not print, and the ECB was not keen on helping. The textbook response would have been for the government to default on its debt and get a loan from the International Monetary Fund to help smooth out the adjustment. The amount of money required to buy time after a restructuring would not have been large compared with the nearly €300 billion that ended up being lent.
That option was blocked, however, by a coalition of Greece’s “European partners” and the U.S. They were still traumatized by the bankruptcy of Lehman Brothers and had come to believe that its default had made the financial crisis far worse than it otherwise would have been. The result was a firm commitment to avoid any reduction in what the Greek government owed. Their concern was not about what a default would do to Greece, but about what it would do to them. In addition to the €230 billion in potential losses on government debt, which by itself might have been enough to wipe out the capital of many large European banks, foreigners had another €120 billion in exposure to Greek banks. Greek banks did not have much exposure to Greek government debt—only about 8% of total assets in 2009—but it was still more than their total capital and loan-loss reserves.
Restructuring the government’s debt would therefore have required either the partial liquidation of the Greek banking system or an explicit bailout of Greece’s banks paid by someone else. Again, this should have been doable, but U.S. Treasury Secretary Timothy Geithner and ECB President Jean-Claude Trichet were terrified about how it might affect the still-fragile Euro-American financial system. [..] There was no political will in 2010 to spend hundreds of billions of euros to bail out Dutch, French, and German banks. To Greece’s eternal misfortune, however, there was enough “solidarity” to launder that Northern European bank bailout through the Greek government.
On the European continent, a far worse drama was unfolding due to the EU’s odd decision, back in 1998, to create monetary union featuring a European Central Bank without a state to support it politically and 19 governments responsible for salvaging their banks in times of financial tumult, but without a central bank to aid them. Why this anomalous arrangement? Because the German condition for swapping the deutschmark for the euro was a total ban on any central bank financing of banks or governments – Italian or Greek, say. So, when in 2009 the French and German banks proved even more insolvent than those of Wall Street or the City, there was no central bank with the legal authority, or backed by the political will, to save them.
Thus, in 2009, even Germany’s Chancellor Merkel panicked when told that her government had to inject, overnight, €406bn of taxpayers’ money into the German banks. Alas, it was not enough. A few months later, Mrs Merkel’s aides informed her that, just like the German banks, the over-indebted Greek state was finding it impossible to roll over its debt. Had it declared its bankruptcy, Italy, Ireland, Spain and Portugal would follow suit, with the result that Berlin and Paris would have faced a fresh bailout of their banks greater than €1tn. At that point, it was decided that the Greek government could not be allowed to tell the truth, that is, confess to its bankruptcy.
To maintain the lie, insolvent Athens was given, under the smokescreen of “solidarity with the Greeks”, the largest loan in human history, to be passed on immediately to the German and French banks. To pacify angry German parliamentarians, that gargantuan loan was given on condition of brutal austerity for the Greek people, placing them in a permanent great depression. To get a feel for the devastation that ensued, imagine what would have happened in the UK if RBS, Lloyds and the other City banks had been rescued without the help of the Bank of England and solely via foreign loans to the exchequer. All granted on the condition that UK wages would be reduced by 40%, pensions by 45%, the minimum wage by 30%, NHS spending by 32%. The UK would now be the wasteland of Europe, just as Greece is today.
A new study by a School of Dentistry faculty member and dozens of other researchers from the University of Washington and around the world has found that Greece’s population health declined markedly and death rates rose sharply after harsh austerity measures were imposed on Greece by the European Union and the International Money Fund in 2010. “This study is important because it provides a framework for health surveillance on a national level following major socioeconomic changes,” said Dr. Georgios Kotsakis of the School of Dentistry’s Department of Periodontics, one of the study’s authors. The study, which was published this week in the British journal The Lancet Public Health, reported that government health spending fell sharply and that the causes of death that increased the most were largely those that could have been addressed by health care.
The researchers noted that Greece’s reduced health spending, required as part of the austerity measures, had been criticized for omitting measures to protect the country’s National Health System. They said that health policymakers should place a special focus on ensuring that Greece’s health-care system is equipped to meet the needs of the country’s citizens. The researchers identified an increase in the pace at which Greece’s population was aging as another important concern and wrote: “The increase in total deaths in children younger than 5 years and older adults with increase in causes sensitive to resource availability (e.g., access to screening and urgent care) suggest that the health system requires substantial restructuring to cope with the effects that the financial crisis has had on resource availability, resource allocation, and population structure.”
They reported that while the country’s overall death rate rose by about 5.6 percent from 2000 to 2010, it jumped by about 17.7 percent in the six years that followed, after austerity measures were imposed. The rate rose three times faster than the rate in Western Europe overall, and came at a time when mortality rates were actually declining worldwide. The largest increase came among people 70 and older, while the very young also saw a disproportionate increase.
Italy on Sunday disembarked all 150 migrants from a rescue ship that had been docked for five days in a Sicilian port, ending the migrants’ ordeal and a bitter stand-off between Rome’s anti-establishment government and its European Union partners. The migrants, mainly from Eritrea, had been stranded in the port of Catania since Monday because the government refused to let them off the boat until other EU states agreed to take some of them in. Interior Minister Matteo Salvini said Albania had offered to accept 20 of the migrants and Ireland 20-25, while the rest would be housed by Italy’s Catholic Church “at zero cost” to the Italian taxpayer.
“The church has opened its heart and opened its wallet,” Salvini, from the right-wing League party, told supporters at a rally in Pinzolo in northern Italy on Saturday evening. Salvini, who has led a popular crackdown against immigration since the government took office in June, also announced that he had been placed under investigation by a Sicilian prosecutor for abuse of office, kidnapping and illegal arrest. “Being investigated for defending the rights of Italians is a disgrace,” he said. On Saturday, the United Nations called for reason from all sides after a meeting of envoys from 10 EU states in Brussels a day earlier failed to break the deadlock. “Frightened people who may be in need of international protection should not be caught in the maelstrom of politics,” the U.N. refugee agency UNHCR said in a statement.
Wave after wave of scandal concerning decades of abuse by priests and cover-up by bishops has crashed at the doors of the Vatican this year. The issue threatens to derail Francis’s papacy unless he can belatedly show that he does not just understand the scale and systemic nature of the problem but is willing to take concrete action to deal with it. The past few weeks alone have seen the publication of a shocking grand jury report into clerical abuse and its concealment in Pennsylvania, the resignation as a cardinal of a former archbishop of Washington over alleged sexual assaults, a police raid on the Catholic church’s HQ in Chile, the sentencing of an Australian archbishop convicted of covering up child abuse, and a growing clamour from Irish survivors for the pope to take responsibility for these failings.
More scandals and revelations may be looming. Cardinal George Pell, the third-ranking official in the Vatican and an ally of Pope Francis, is facing legal proceedings in Australia relating to allegations of historic sexual offences. Early next year, the trial will begin in France of two cardinals on charges of concealing sexual abuse. “This is a potential tipping point, not just for Francis’s papacy, but in the Catholic church writ large,” said John Allen, editor of the Catholic magazine Crux and a Vatican expert. “Ordinary Mass-going Catholics are saying that when this first blew up, and for a long time afterwards, they stuck with the church, because people in power were saying, ‘we understand how awful this is, it has to be fixed and we’re going to fix it’. What is punching Catholics in the gut right now is the thought that what they were told about the determination to get this sorted simply wasn’t real.”
Apple Inc said on Tuesday it handed its shareholders $20 billion through share buybacks in the June quarter, bringing its tally this year to a record $43 billion and helping push its stock price to an all-time high. With a mountain of overseas cash freed up by last year’s sweeping U.S. corporate tax cuts, Apple’s share repurchases in the first half of calendar 2018 exceed the stock market value of almost three quarters of the companies in the S&P 500, including Ford, Delta Air Lines and Twitter Inc. Apple’s share repurchases in the June quarter were only eclipsed in the history of the S&P 500 by Apple repurchasing $22.8 billion of its shares in the prior quarter, according to S&P Dow Jones Indices analyst Howard Silverblatt.
The recent pace of Apple’s buybacks, disclosed in a quarterly report that beat Wall Street’s expectations, could help support the iPhone maker’s stock as investors worry that some high-flying technology companies have become too expensive. Confidence in top-shelf technology and consumer stocks has been shaken in recent days following poor results from Facebook and Netflix. Apple said in May it was adding $100 billion to its budget for buybacks. Its stock is up 16% in 2018, compared with the S&P 500’s 5% rise. “I see the buybacks as a major determinant of near-term price appreciation,” said D.A. Davidson & Co analyst Thomas Forte.
Think China’s new “proactive” fiscal policy shigt will be sufficient to kick start the local economy, and boost global GDP? Think again. In the latest analysis from Vertical Group’s Gordon Johnson, the strategist writes “that China’s proactive fiscal policy pledge could fall short as servicing its existing credit stock absorbs an increasing share of GDP.” As a reminder, last week, China’s State Council said it will adopt a proactive fiscal policy, outlining ways to fund ¥1.4tn in bonds to local government for infrastructure & provide ¥1.1tn in tax cuts, among other actions (e.g., R&D tax credits), all while urging no broad-based stimulus.
In Johnson’s view, this is a narrative that is rather reminiscent of ‘14, when the gov’t unleashed a wave of “micro-stimulus” measures after a string of weak data points (i.e., 5 mos. of contracting real estate investment). Yet, as he notes, the most recent PBoC mini-stimulus is much smaller than ‘14, while key restrictions remain in place for real estate/shadow loans (historically growth-driving conduits), compounded by the law of diminishing returns, suggesting a smaller boost from a much larger base this time around.
Moreover, China’s total credit stock is markedly higher now than in ’14, implying more of every yuan in stimulus is going to service outstanding debt. How much? That may well be the critical question to gauge the flow through from any new fiscal policy. Here is Vertical Group’s answer: While China exited ’17 with an est. 266% of total credit to GDP, some economists put that ratio at >300% today. On trailing 12-mo. nominal GDP of ¥86.5tn, as of 2Q, this equates to >¥259.5tn in credit, which, assuming an avg. borrowing cost of 6%, means China’s annual debt service is ~¥14.3tn, or 18.0% of GDP – sensitizing interest & credit-to-GDP, to a respective range of 4-7% & 285-320%, puts China’s debt service at 14-22% of GDP.
As Greeks attempt to recover from the devastating and deadly wildfires, The IMF has decided to pile on the pain with a new report that raises questions about Greece’s debt sustainability, warning that the nation’s cash buffer is set to drop by half by end of 2022. IMF Mission Chief for Greece Peter Dohlman told reporters on conference call this morning that Greece’s cash buffer will rise to EU24b as a result of debt relief measures agreed by euro-area finance ministers in June, but that amount is set to drop by half to EU12b by end of 2022. Translating The IMF’s newspeak, it is explaining that without more generous debt relief measures, Greece “could struggle to maintain market access over the long run”, the fund said in its last economic assessment of the country before the end of its bailout on August 20.
The fund’s calculations find Greece’s debt costs will “begin an uninterrupted rise” after 2038 — costing around 20% of the country’s GDP every year. It is at this point that “additional relief would be needed to secure debt sustainability”, said the report. [..] Additionally, the fund suggests that Greek banks raise capital: “Stress tests results published by the ECB in May point to the resilience of the Greek banks in the baseline scenario but significant capital depletions in the adverse scenario,” IMF says in Art. IV report on the state of the Greek economy. IMF “staff estimates that if the three banks with lower CET1 were asked to maintain capital ratios under adverse conditions in line with a capital requirement of 7.5–8.0%, the related capital shortfall could be in the range of €1.3–1.9 billion”.
The IMF has just released its latest review of the Greek economy. “Following a deep and protracted contraction,” it says in its press release, “growth has finally returned to Greece.” The green light has been given for Greece’s exit from its bailout program in August 2018. For many, this is welcome news. Greece has turned a corner. The dark days are behind it, and the future will be bright. But is this really the end of Greece’s troubles – or will there be more pain to come? The magnitude of Greece’s collapse over the last decade is extraordinary. Right at the start of the IMF’s review is this chart, which compares the fall in Greek output over the last 10 years with other major historical contractions, including the U.S.’s Great Depression:
The Greek people have just lived through a Depression as deep as the Great Depression and considerably longer. It is now the greatest recorded peacetime Depression. Fortunately, the Greatest Depression may now have run its course. The Greek economy grew by 1.4% in 2017, and the IMF projects that GDP growth will rise to 2% in 2018 and 2.4% in 2019. Of course, IMF growth forecasts for Greece need to be treated with considerable caution. As the Greek economy sank ever deeper into depression, the IMF continued to predict that growth would rebound “any day now.” The satirical blog ZeroHedge lampooned the IMF’s dire forecasting record as “hockey stick comedy.” But Greece did emerge from its long-running depression in 2017, and indications so far are that growth will be maintained this year.
[..] The legacy of the Greatest Depression, even with the doubtful benefit of those structural reforms, is a terribly weak and deeply damaged economy. Adult unemployment, which peaked at over 25% at the height of the Greatest Depression, is still over 20%, while youth unemployment is twice as high. In a footnote to its review, the IMF comments that structural unemployment (the average excess of people over jobs across the business cycle) was 15% in 2016 and is expected to fall only gradually “over the next two decades.” Many of Greece’s young people will be middle-aged by the time there is any work for them. Some may never work at all. An entire generation thrown on the scrap heap.
Despite all the pain the Greeks have endured to fix their country’s finances, Greece’s fiscal situation remains extremely precarious. The IMF staff predictions show absolutely no room for fiscal expansion, even though it is desperately needed, not least to relieve extremely high poverty levels. One in four people in Greece is living below the poverty line.
The EU’s declaration on the trade and security relationship with the UK after Brexit will be just five to 30 pages long, reflecting a lack of time to have an internal debate and scepticism that Theresa May will remain in Downing Street to deliver it, officials in Brussels have disclosed. While the UK is seeking a “precise and substantive” document, to match the recently published 100-page white paper, officials in Brussels say the EU’s political declaration on the “future framework” has diminishing importance for them. Brussels is aware that the prime minister needs the document, due in the autumn, to be a “sweetener” to the main withdrawal agreement, which will commit the UK to pay a £39bn divorce bill and spell out whatever difficult deal is sealed on the issue of the Irish border.
The declaration will not be legally binding on either party but is designed to offer major economic actors some reassurance through a vision of the future trading and security relationship, and it will form part of the package on which the UK parliament and MEPs will ultimately vote in the new year. Given doubts in Brussels that May will get a deal through parliament, or remain in Downing Street for long if she manages it with the help of Labour votes, there will not be the high level of detail that the British government has been seeking, sources said.
A senior EU official told The Guardian that the paper could even be as short as “four or five pages”, the same length as the European council guidelines setting out the bloc’s headline objectives. “It can either be four five pages, or it could be a bit more elaborate but I think we are in the league of five to 25 to 35 pages. We have not time to thrash out the details,” the official said. “The more details you want the more advanced you should be in these negotiations.” The official added: “The reality is that, imagine after March next year the UK gets rid of May, the hard Brexiters take over and Boris says: ‘Too bad. I am not interested in all this. I want a basic free trade agreement, I want all my freedom.’ We have to adjust.
Ministers have been accused of misleading the public after denying that plans to “turn most of Kent into a giant lorry park” are because of Brexit. Work is underway to convert four lanes of a 13-mile stretch of the M20 motorway to allow hundreds of articulated lorries to park up if they are delayed in reaching the Port of Dover. The Department for Transport (DfT) claimed the work was simply an improvement on the existing Operation Stack, a way of managing traffic used many times to cope with “serious disruption to cross-channel transport”. But it has now emerged that the project has been renamed Operation Brock – which Kent County Council says stands for “Brexit Operations Across Kent”.
Vast extra space for lorries will be needed if the Brexit talks fail and, as Theresa May has threatened, the UK crashes out of the EU without a deal next year. There will be massive disruption if any extra checks are required in future – with one study warning of immediate 20-mile tailbacks at Dover if the time taken to clear customs merely doubles from the current two minutes. Virendra Sharma, a Labour MP and supporter of the anti-Brexit Best for Britain group, said: “The government is trying to hide the devastating impact of their Brexit policy. “Food will rot on the motorway and jobs are at risk as manufacturing supply chains are muddled and slowed by Brexit. We cannot let ministers use secrecy to railroad the concerns of councils about Brexit.”
The British motor industry has warned that “no one would confess to being Brexit ready” in their trade. Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), argues that his members are “increasingly concerned” about the prospects for the UK leaving the EU on World Trade Organisation (WTO) terms, in the light of developments since Theresa May published the government’s latest Brexit white paper, which he and the SMMT welcomed. Michel Barnier, the EU’s chief negotiator, has since expressed scepticism about the proposed Facilitated Customs Arrangement (FCA), which would have been of particular value to manufacturing and the automotive sector.
In the light of EU resistance, and growing UK political volatility, the chances of the UK going to a “no deal” exit are increasing, meaning that Britain would move to WTO terms, as opposed to staying in the Single Market, the customs union or the FCA. This would imply tariffs of up to 10% in UK-EU trade in cars and parts, and greater bureaucracy in both directions, which would only be partly mitigated by “stockpiling” in the short run, given the demands of “just in time” manufacturing techniques and integrated cross-border supply chains. There is a tail risk that factory production of models such as the Mini at BMW’s plant in Oxford could be disrupted if crucial car components become unavailable.
Mr Hawes added that the prospect of a “no deal” Brexit was something no-one wished to see and that industry leaders wished to see “all options open as long as possible”. Reflecting on the 1,100 trucks that enter the UK from Europe every day to feed its factories, he said that the eight months remaining until formal Brexit on 29 March 2019 were “a real challenge”. British car production for the home market almost halved in June, compared to the same month a year ago, due to what the industry calls “a perfect storm” of factors that resulted in a freakish result.
Hersh is honest enough to admit that today he might not have made it. He worked during the heyday of American journalism – when he was paid handsomely for exposes and when media outlets had the financial muscle to fund serious writing. When he covered the Paris Peace Accords for The Times, he was put up at the world famous five-star deluxe Hotel de Crillon. It is not long before we discuss contemporaneous events including the alleged Russian hacking of the US presidential election. Hersh has vociferously strong opinions on the subject and smells a rat. He states that there is “a great deal of animosity towards Russia. All of that stuff about Russia hacking the election appears to be preposterous.” He has been researching the subject but is not ready to go public… yet.
Hersh quips that the last time he heard the US defence establishment have high confidence, it was regarding weapons of mass destruction in Iraq. He points out that the NSA only has moderate confidence in Russian hacking. It is a point that has been made before; there has been no national intelligence estimate in which all 17 US intelligence agencies would have to sign off. “When the intel community wants to say something they say it… High confidence effectively means that they don’t know.” Hersh is also on the record as stating that the official version of the Skripal poisoning does not stand up to scrutiny. He tells me: “The story of novichok poisoning has not held up very well. He [Skripal] was most likely talking to British intelligence services about Russian organised crime.”
The unfortunate turn of events with the contamination of other victims is suggestive, according to Hersh, of organised crime elements rather than state-sponsored actions – though this flies in the face of the UK government’s position. [..] He ends the Goldsmiths talk with an anecdote about having lunch with his sources in the wake of 9/11. He vents his anger at the agencies for not sharing information. One of his CIA sources fires back: “Sy you still don’t get it after all these years – the FBI catches bank robbers, the CIA robs banks.” It is a delicious, if cryptic aphorism.
In your first Papal visit outside of Rome only months after your election as Supreme Pontiff, you choose the Italian island of Lampedusa, a refuge for migrants and asylum seekers fleeing the prospect of death. You did so to express your closeness and love to suffering people, to promote their dignity, which was under threat at home and in jeopardy in the countries where they seek refuge. Your first act upon arrival was to lay a wreath in the sea in memory of all those who had lost their lives seeking refuge. We, the undersigned, write to you, Your Holiness, as a loving Father to those who lives are in imminent danger, begging and beseeching you to speak up for someone whose life is in imminent danger.
A life that can only be saved by your intervention. In order to lessen the possibility of us laying a wreath in the coming days, in memory of the stateless asylum seeker Julian Assange, we ask that you speak out on his behalf. Julian is possible moments or hours away but certainly days away from being abducted by a SAS squad from the Ecuadorian Embassy in London, where his asylum status is about to be revoked. Based on the precedent the risk of death is very high. Last time the SAS entered an Embassy in London they assassinated their targets after they had surrendered and were unarmed lying on the ground.
With all legal avenues exhausted and the British, American, Ecuadorian and Australian governments all arranging the imminent raid on Julian, we cry out to you, Holy Father and ask that you encourage nations to respect the life of Julian Assange and to cease his arbitrary detention (as cited by the United Nations) and grant him asylum status where he can continue his work as a journalist, telling the truth, that is the truth that respects the dignity of persons. Please, Holy Father speak up and defend this life which so many powerful nations want to end and whose life only you can plead for leniency in a manner which may be heeded by the powerful who seek to end him.
[..] new British Foreign Secretary Jeremy Hunt claimed Assange was facing “serious charges” from local police. But there is confusion about what they are, as he is only facing a minor charge for breaching bail. Jennifer Robinson, Assange’s lawyer in London, told news.com.au she was “obviously very concerned” about the speculation he could be forced from the embassy. “We are monitoring that really closely. From our point of view he requires ongoing protection (because) the risk of prosecution is as high as it has ever been.” The Times quoted a source familiar with the case who expected Assange would “lose his asylum status imminently. This means he will be expelled from the embassy. When this will happen is impossible to say.”
It was Ms Robinson’s view, and Assange’s, that Australia could help break the stalemate. “Julian is still an Australian citizen and they have an obligation — and I think a duty — to exercise rights of protection over an Australian citizen,” she said. “They could usefully engage in this to help solve the impasse.” Ms Robinson said Canberra had good relationships with both the UK and US, so it shouldn’t be a difficult matter. “For me as a fellow Australian citizen, it is disappointing the government has not done more — but that doesn’t preclude them from doing it now and I very much hope that they will.” She said it raised concerns about the Federal Government’s willingness to “stand up for Australians” when the US Government was involved.
[..] Ms Robinson was mystified as to what charges Mr Hunt was referring to. “Jeremy Hunt’s statement is curious in the sense that Mr Assange doesn’t face any charges whatsoever … A magistrate will have to decide whether to bring bail proceedings against him when he leaves the embassy.” [..] “So is Mr Hunt talking about an extradition request from the US where he would face serious charges?” asked Ms Robinson. “Has he misspoken and disclosed that?” She told news.com.au that would be a serious matter. Assange’s legal team had sought assurances from the UK there was no extradition request and had been met with a “standard, blanket will not confirm or deny”. “So if Mr Hunt is talking about serious charges … there are none on the public record, so of course, we are concerned about what that might be from the US.”
As attempts to evict Julian Assange from the Ecuadorian embassy in London get more and more aggressive, we are seeing a proportionate increase in the establishment smear campaign against him and against WikiLeaks. This is not a coincidence. The planned campaign to remove Assange from political asylum and the greatly escalated smear campaign to destroy public support for Assange are both occurring at the same time that Assange has been cut off from the world without internet, phone calls or visitors, completely unable to defend himself from the smear campaign. This, also, is not a coincidence.
The ability to control the narrative about what is going on in the world is of unparalleled importance to the plutocrats who use governments as tools to advance their agendas. The agenda to make an example of a leak publisher with a massive platform who has repeatedly exposed the corruption of the establishment upon which western plutocrats have built their empires will require continuous narrative spin, since the precedent set by prosecuting a journalist for publishing authentic documents would arguably constitute a greater leap in the direction of Orwellian dystopia than the Patriot Act.
Among the latest components of this campaign has been a viral dump of Twitter DMs being promoted as a hot news item by outlets like Motherboard, The Hill, Forbes and Think Progress and across #Resistance Twitter. The fact that the juicy bits from those DMs had already been published months ago by The Intercept, and the fact that the smears and spin we’re seeing reruns of today were long ago ripped to shreds in journalist Suzie Dawson’s epic essay “Being Julian Assange” after the Intercept publication, has not dampened the orgiastic frenzy with which this non-story is being bandied about by establishment loyalists and defenders of power as evidence of Assange’s nefariousness.
A search and rescue charity has alleged that an Italian ship returned scores of people rescued from the Mediterranean to Libya, even though Libya is not regarded by Europe as a safe place under international law. In what would be an unprecedented case if confirmed, the Asso 28, an oil rig support vessel, allegedly saved 108 people from a dinghy and then took them to Tripoli. The allegation was made by Òscar Camps, the founder of Proactiva Open Arms, a Spanish sea search and rescue NGO. It is unclear whether the ship had received instructions from the Italian coastguard. “The Asso 28, with an Italian flag, rescued 108 people in international waters and is now deporting them to Libya, a country where human rights are not respected. No chance [for them] to get asylum or shelter,” Camps wrote on Twitter.
Camps’ allegation was supported by Nicola Fratoianni, an Italian politician with Free and Equal, a small leftwing party, who was on board the Proactiva rescue ship. “We don’t know yet if this operation was instructed by the Italian coastguard, but if so it would be a very serious precedent, a real collective rejection, which Italy and the captain of the ship would have to respond to in court,” Fratoianni said. Two weeks ago Italy assured Germany that it would continue to accept migrants rescued at sea until an EU-wide plan on redistributing people across the continent was established. The pledge came after high-profile moves by Matteo Salvini, the interior minister and leader of the far-right League, to block rescue ships from docking at Italian ports.
In a response to Camps’ allegation on Tuesday, Salvini made no mention of the alleged involvement of an Italian ship in the incident. He wrote on Twitter: “The Libyan coastguard has rescued and brought back 611 immigrants in recent hours. The NGOs protest and the traffickers lose business? Fine, we’ll continue in this direction!” In another post, on Facebook, he wrote: “The Italian Coast Guard has not coordinated and participated in any of these operations, as falsely declared by a foreign NGO and a poorly informed leftist MP.”
In the minutes of the FOMC meeting on June 12 and 13, released this afternoon, there was a doozie, obscured somewhat by the dynamics of the rate hike plus the indication that there would be two more rate hikes this year, for a total of four, up from three at the prior meeting, with more hikes to come in 2019, along with other changes [..] But the doozie in the minutes was about the flattening “yield curve.” The yield curve is formed by Treasury yields of different maturities: normally, the two-year yield is quite a bit lower than the 10-year yield. Over the last several decades, each time the yield curve “inverted” – when the two-year yield ended up higher than the 10-year yield – a recession followed. The last time, the Financial Crisis followed.
So this has become a popular recession indicator that has cropped up a lot in the discussions of various Fed governors since last year. Today, the two-year yield closed at 2.55% and the 10-year yield at 2.84%. The spread between them was just 29 basis points, the lowest since before the Financial Crisis. The chart below shows the yield curves on December 14, 2016, when the Fed got serious about raising rates (black line); and today (red line). Note how the red line has “flattened” between the two-year and the 10-year markers, and how the spread has narrowed to just 29 basis points:
The chart below shows the two-year yield (black) and the 10-year yield (red) going back to 1992. Note how the spread has been narrowing in recent months.
The chart below tracks this spread for every day back to 2008. Today, the spread, at just 29 basis points, is the lowest since before the Financial Crisis:
There has been a lot of handwringing about this being an indicator that the next recession is nearing and that the Fed should back off with its rate hikes. But this Fed is getting seriously hawkish: In the minutes today, it revealed that instead of thinking about backing off with its rate hikes, it’s throwing out the flattening yield curve.
Theresa May has secured approval to negotiate a soft Brexit deal with the European Union, signing up her fractious cabinet at a Chequers awayday to a controversial plan to match EU standards on food and goods. The prime minister released a statement following the critical afternoon session of the long-awaited summit that alarmed Tory hard Brexiters, in which she confirmed she had won over the cabinet to new customs arrangements ending political deadlock on the issue. May said the cabinet had “agreed our collective position for the future of our negotiations with the EU”. That included a proposal to “create a UK-EU free trade area which establishes a common rule book for industrial goods and agricultural products” after Brexit.
Tory Brexiters voiced concern at the agreement, while soft Brexiters expressed relief. Andrea Jenkyns, a hardline MP, complained that “British businesses will continue to be a rule taker from the EU” and said she would “pray” that the detail was not as bad as she feared. Heidi Allen, a moderate, said she was “pleased to report Theresa May has secured cabinet agreement for a sensible, soft Brexit”. On Thursday, when the common rule book proposal was first leaked, hardline Brexiter cabinet ministers and Conservative MPs voiced alarm that it could prevent the UK striking a trade deal with the US, which has different standards in goods and foods, such as allowing chickens to be washed in chlorine.
But May was able to release the text of a three-page agreed statement before cabinet, following a relatively undramatic day of discussions, sat down for dinner to listen to No 10 communications chiefs make a presentation on how to sell the new proposals. Michel Barnier, the EU’s chief Brexit negotiator, appeared to react warmly to the proposals, noting in a tweet that the “Chequers discussion on future to be welcomed. I look forward to white paper. We will assess proposals to see if they are workable and realistic”. The prime minister made clear that she expected ministers would be sacked if they did not remain in line with her soft Brexit blueprint.
She wrote to Tory MPs to explain her plans and included a clear warning about discipline: “As we developed our policy on Brexit, I have allowed cabinet colleagues to express their individual views. Agreement on this proposal marks the point where that is no longer the case and collective responsibility is now fully restored.”
Theresa May has won the battle with her Brexiter rebels in the cabinet, but the war will be a long one. She gambled that the Brexit purists – those who gathered on the eve of the Chequers summit at the Foreign Office with Boris Johnson – would be outgunned at Chequers when the full cabinet was assembled. The choreography was impressive – May locked her ministers inside the Buckinghamshire retreat without their phones or special advisers. The final agreement – sent out on behalf of “HM government” came to journalists an hour before advisers had even seen it – and before they could get in contact with their ministers to know what concessions had been made. Within the hour, out came a letter to Conservative MPs warning the days of debate over the government’s Brexit position were over.
“Collective responsibility is now fully restored,” May warned. The deal clinched with her most difficult members of her cabinet, architects of the leave campaign such as Johnson and Michael Gove, gave May the leverage to demand similarly hardline MPs get in line. Downing Street has been briefing in a strident tone, practically daring hard Brexiter ministers to give it all up to walk down the Chequers drive. The numbers that will matter now are those in her parliamentary party. Some will express predictable fury, though in the hours since the deal was reached, Jacob Rees-Mogg was telling MPs to keep their powder dry. Key will be whether this is a deal that can win over mainstream backbenchers.
In recent weeks, a number of Conservative MPs had begun to express frustration that the prime minister was not prepared to face down one side of her party and lead. [..] On Monday, the prime minister will address the 1922 committee of backbenchers, though the timing of the summit means angry MPs will have the weekend to either cool off or come to the boil. “I’ll wait to see if this collective responsibility lasts the weekend,” another MP said. Perhaps just as crucially there are still some concerns about the future deal for UK services, around 80% of the UK economy. The agreement states the UK would “strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognising the UK and the EU will not have current levels of access to each other’s markets”.
The chief executive of Airbus has accused the government of having “no clue” on how to leave the EU without harming the economy, as the prime minister aimed at uniting the cabinet behind a Brexit plan. The criticism from the aerospace firm, which employs 14,000 people in the UK, is the strongest intervention yet from the business community on the risk of a hard Brexit and came in the same week that Jaguar Land Rover, Britain’s largest carmaker, warned its were under threat. Speaking at a briefing in London before the Farnborough air show later this month, the Airbus chief executive, Tom Enders, said: “The sun is shining brightly on the UK, the English team is progressing towards the [World Cup] final, the RAF is preparing to celebrate its centenary and Her Majesty’s government still has no clue, no consensus on how to execute Brexit without severe harm.”
Enders said Airbus, a Franco-German group that supports a further 100,000 UK jobs in its supply chain, was wary of all types of Brexit, including a worst-case no-deal scenario. “Rest assured that we are taking first preparations as we speak in order to mitigate consequences from whatever Brexit scenario may follow,” he said. “Brexit in whatever form, soft or hard, light or clean, whatever you call it, will be damaging for industry, for our industry and damaging for the UK, whatever the outcome will be.”
Today’s establishment survey shows jobs rose by 213,000. Revisions were positive. The unemployment rate rose from 3.8% to 4.0% as the labor force rose by 601,000. More people are starting to look for jobs but employment only rose by 102,000. Nonfarm wage growth was +0.2% vs an Econoday consensus of +0.3%. The Phillips’ curve is a joke, but it’s still widely believed. The change in total nonfarm payroll employment for April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000. With these revisions, employment gains in April and May combined were 37,000 more than previously reported
Russia said on Friday it was imposing additional import duties on some U.S. industrial goods after the United States slapped tariffs on steel and aluminum imports, and warned that more retaliatory steps could be in the pipeline. The economy ministry said Russia would impose extra tariffs on some goods from the United States for which there are Russian-made substitutes.The extra duties of 25 to 40 percent will apply to imports of fiber optics and equipment for road construction, the oil and gas industries and metal processing and mining.
The ministry said the measures, signed by Russian Prime Minister Dmitry Medvedev, were intended to compensate for $87.6 million of damage suffered by Russian export-focused companies as a result of the U.S. metals tariffs. The U.S. tariff hike will cost an overall $537.6 million and Russia has the right to impose more compensatory measures in the future, the economy ministry said.
Canada’s government is investigating reports that US border patrol officers have intercepted and questioned crew members on more than 20 Canadian vessels in disputed waters off the coast of Maine. The reports have thrust a longstanding territorial dispute between the two countries into the spotlight; since the late 1700s tensions have simmered over a pair of tiny, treeless islands that sit between Maine and the Canadian province of New Brunswick. Primarily inhabited by nesting puffins, the islands of North Rock and Machias Seal remain the only disputed lands between US and Canada, with both claiming sovereign jurisdiction over the islands and their surrounding waters.
As a result, the area has long hosted lobster fisherman from both sides of the border. The question of jurisdiction flared up recently after the Grand Manan Fishermen’s Association said a Canadian vessel had been stopped by US border patrol while fishing in the waters near Machias Seal Island in late June. “He informed them he was a Canadian vessel legally fishing in Canadian waters,” wrote Laurence Cook of the association on Facebook. He said he was “not surprised to see the Americans trying to push people around”, describing them as “typical American bullies.”
For years, conspiracy theories about smart phones listening to users without their permission to show them advertisements have abounded. While some researchers have shown this could happen, a first of its kind study just found something far more insidious. Academics at Northeastern University have just proven that your phone is recording your screen – as in taking video – and uploading it to third parties. For the last year, Elleen Pan, Jingjing Ren, Martina Lindorfer, Christo Wilson, and David Choffnes ran an experiment involving more than 17,000 of the most popular Android apps using ten different phones. Their findings were alarming, to say the least.
As Gizmodo points out, during the study, the researchers started to see that screenshots and video recordings of what people were doing in apps were being sent to third-party domains. For example, when one of the phones used an app from GoPuff, a delivery start-up for people who have sudden cravings for junk food, the interaction with the app was recorded and sent to a domain affiliated with Appsee, a mobile analytics company. The video included a screen where you could enter personal information – in this case, their zip code.
The blowup of the bond and stock markets later this year will put to a gloomy rest the ludicrous notion that America has been enjoying a great economic boom. It’s actually been an engineered hallucination, thanks to the global monetary authorities applying the magic of limitless credit to a bad habit of credulous speculation. The central banks have launched a program of so-called “quantitative tightening (QT)” — an idiotic phrase meant to counterpoise the equally fatuous “quantitative easing (QE),” PhD economist-speak for grotesque interference in the bond markets — that will choke down the credit supply at exactly the moment that governments and giant corporations need new loans to pay the interest on old loans. The trajectory there is obvious.
The big question, of course — hardly ever asked in the public arena — is what that will do to currencies, i.e., money. It can really only go two ways: either make money very scarce, in which case a lot of people and enterprises go broke, or, if the monetary authorities respond to the predicament by enabling a return to bottomless credit issuance, the money will become worthless — they’ll be plenty of it, but it won’t buy much. Such a turn of events will make an already-unhinged nation fly apart. [..] Oh, yes, there is also that Hieronymus Bosch Garden of Earthly Delights known as the Mueller Investigation, with its dreary outposts in the executive suite of the FBI, and all the tangled mysteries entailed there.
Mr. Mueller will come up with someone to indict on something, even if it’s ninety-seven ham sandwiches. I suspect Mr. Trump will manage to dump Attorney General Jeff Sessions and Deputy AG Rod Rosenstein. And then the pardons will fly, like so many winged demons flapping from the mouth of Hades. Constitutional crisis may be too mild a word for what ensues. By holiday time in early winter, much will clarified about the actual direction of the country. By then, the “Walk Away” movement may even include the obdurate shills at CNN and The New York Times, and the Intellectual-Yet-Idiots on the college campuses. And the Golden Golem of Greatness will lie upended in the swamp that he just didn’t try hard enough to drain.
Twitter Inc suspended more than one million accounts a day in recent months to reduce the flow of misinformation on the platform, the Washington Post reported. Twitter and other social media platforms such as Facebook Inc have been under scrutiny by U.S. lawmakers and international regulators for doing too little to prevent the spread of false content. The companies have been taking steps such as deleting user accounts, introducing updates and actively monitoring content to help users avoid being a victim to fake content. Twitter suspended more than 70 million accounts in May and June, and the pace has continued in July, the Post reported on Friday, citing data it obtained.
“It’s hard to believe that 70 million accounts were affected when Twitter has only 336 million monthly active users (MAU),” Wedbush analyst Michael Pachter said. Twitter’s MAU is expected to grow nearly 3 percent to 337.06 in the second quarter, according to Thomson Reuters I/B/E/S. “My guess is that a large number of these suspended accounts were dormant … it should have little impact on the company,” Pachter told Reuters. If the 70 million were mostly active accounts, the affected accounts would have been “screaming bloody murder”, added the analyst.
The impact of the U.S. tax reform on the U.S. trade balance was a hot item of debate last December. There was an argument that reducing the headline tax rate—and creating an even lower tax for the export of intangibles—would reduce the incentive for firms to book profits abroad in offshore tax centers. Booking those profits at home would raise U.S. services exports—while the service “exports” of countries like Ireland and Luxembourg (really re-exports of intellectual property created in the U.S) would fall. This would have no overall effect on the balance of payments. The rise in the recorded exports of intellectual property from the U.S. would be offset by a fall in the offshore income of U.S. firms.
For example, Google (U.S.) would show a bigger profit as offshore sales would be booked as exports of IP held in the U.S. (a service export) while Google (Bermuda) would show a smaller profit —and that would translate both into a smaller trade deficit and a smaller surplus on foreign direct investment income.* But shifting paper profits around would bring down the measured trade deficit—a potential win for Trump. It is obviously too soon to assess the full impact of the tax reform. But it isn’t too soon to start looking for some clues. The q1 balance of payments data doesn’t suggest that firms have lost their appetite for booking profits abroad, or their appetite for booking the bulk of their offshore profits in low tax jurisdictions. This shouldn’t be a surprise—the lowest rate in the new U.S. tax code is the new global minimum rate on intangibles.
Mainstream political parties have outlived their purpose as they cannot adapt to the changes in the political system and are out of step with the voters, Beppe Grillo, the founder of the Italian Five Star Movement (M5S), said. “The world of the old politics and old political parties,” which expect the people to trust them with defending the public interests, is “slowly dying out,” Grillo, a former Italian satirist and activist, told Ex-Ecuador President Rafael Correa during the “Conversations with Correa” show on RT Spanish. People are no more willing to just blindly follow some political forces, they are much more informed now, they seek for information in the internet and want to form their own opinions, he explained.
“The world is changing at a fantastic speed. However, the current generation of politicians does not feel these changes. They just do not see it,” Grillo said, adding that the politicians are oriented “on a short-term horizon.” Meanwhile, the society, particularly the young people, is no longer attracted by the ideas propagated by the mainstream parties. The existing “ideologies have outlived their usefulness,” Grillo said. “There are just good and bad ideas,” he added, explaining that “they are not divided into ‘right’ and ‘left’ anymore.” The self-described anti-establishment activist then criticized the mainstream politicians for hiding their own inability to adapt behind the warnings about the perceived threat of populism.
As for the populism, I am proud to be a populist, if the word ‘populus’ (the people) is still of some importance,” Grillo told Correa. “Our goal is to reach out to people, to encourage them to think for themselves, to give them instruments to fulfill their own ideas,” he added. He agreed with Correa’s statement that the so-called “anti-populism” is what really poses a threat to the modern society as it seeks to keep the system unchanged. He particularly agreed that “anti-populism” is in fact a “means of attack” as it sees everything that challenges the system as populism and seeks to clamp it down.
The number of aircraft in the skies will more than double by 2037, according to the latest Global Market Forecast by Airbus. The Toulouse-based plane maker says half the present 21,450 aircraft flying will still be aloft in 20 years. With 37,390 new planes predicted to take off, the world’s total will increase by 123 per cent to 47,990. The expected total number of aircraft is 11.3 per cent higher than it was in the last big forecast by Airbus, a year ago. The vast majority of the new planes will be smaller, narrow-bodied jets. More than three-quarters of deliveries will be from the Airbus A320 and Boeing 737 families, or aircraft of a similar scale from other manufacturers.
Assuming the 737 is still being made in 2037, it will be the most enduring aircraft in aviation history, having first flown 70-years earlier. Of the 28,550 predicted new narrow-bodied planes, one of Airbus’s leading hopes is the A321 NEO, a re-engined version of an aircraft that attracted little attention when it was launched as a stretched A320 in the early 1990s. The latest version can hold up to 244 passengers, and the long-range variant can fly 4,600 miles – the distance from Manchester to Seattle. The economics of the A321 are very tempting to 21st-century airlines, particularly for “long, thin” routes.
[..] Last month, Eamonn Brennan, director general of the air-traffic provider, Eurocontrol, warned: “On our most likely scenario, there won’t be enough capacity for approximately 1.5 million flights or 160 million passengers in 2040. “Many airports will become much busier, with higher delays. By 2040, 16 airports will be highly congested operating at close to capacity for much of the day, up from six airports today. “As a result of this congestion the number of passengers delayed by between one and two hours will grow from around 50,000 each day now to around 470,000 a day in 2040.”
Pope Francis urged governments on Friday to make good on their commitments to curb global warming, warning that climate change, continued unsustainable development and rampant consumption threatens to turn the Earth into a vast pile of “rubble, deserts and refuse”. Francis made the appeal at a Vatican conference marking the third anniversary of his landmark environmental encyclical “Praise Be.” The document, meant to spur action at the 2015 Paris climate conference, called for a paradigm shift in humanity’s relationship with Mother Nature. In his remarks, Francis urged governments to honor their Paris commitments and said institutions such as the IMF and World Bank had important roles to play in encouraging reforms promoting sustainable development.
“There is a real danger that we will leave future generations only rubble, deserts and refuse,” he warned. The Paris accord, reached by 195 countries, seeks to avoid some of the worst effects of climate change by curbing global greenhouse gas emissions via individual, non-binding national plans. President Donald Trump has said the US will pull out of the accord negotiated by his predecessor unless he can get a better deal. Friday’s conference was the latest in a series of Vatican initiatives meant to impress a sense of urgency about global warming and the threat it poses in particular to the world’s poorest and most marginalised people. Recently, Francis invited oil executives and investors to the Vatican for a closed-door conference where he urged them to find alternatives to fossil fuels. He warned climate change was a challenge of “epochal proportions”.
There is much we can learn from the ancient traditions of Winterval, each culture’s festive myths and rituals being equally valid, and equally instructive, irrespective of their veracity or worth. Upon the solstice night in Latveria, for example, Pappy Puffklap leaves a dried clump of donkey excrement on the breakfast table of each home. Is this so very different from the wise kings bringing the infant Christ sealed flagons of foul-smelling gas, the divine in harmony with the physical at its most pungent? There is only really one story this Christmas. The snow that decorates your cards will soon be a half-remembered folk myth. The arctic ice sheet is melting from underneath as well as above now. Did you notice, or were you grime-dancing to Man’s Not Hot at an office Christmas party, the annual arse-photocopier roped off with “police line do not cross” tape, management confused by the exact nature of their legal responsibilities to staff buttocks in the current social recalibrations?
My own Christmas sounds a note of doom. So far, I have escaped ownership of a smartphone or a tablet. With a deserved sense of superiority, I have watched the rest of you degenerate into being no-attention-span zombie scum, fixated on trivial fruit-based games and the capture of invisible Japanese imps, entirely unaware of the geography of your own surroundings, info-pigs gobbling bites of fake news headfirst from shiny troughs 24 hours a day, while our decaying planet performs its last few million fatal, and yet still beautiful, rotations before you. The screens of the iPhones of proud parents, their heads respectfully bowed, displayed pages from Facebook and Twitter. But now I must become one of you. Having abandoned paper letters, and now declaring even email obsolete, my nine-year-old daughter’s school has told me I need an iPhone to receive any administrative communication.
And so, with a heavy heart, I have asked for one for Christmas, a shire horse begging for harness, a hamster requesting its own torturous wheel, Robert Lindsay asking for another series of My Family. But perhaps, like Jesus renouncing his divinity to become a mortal, finally owning an iPhone will help me to understand Observer readers, and the trivial concerns and inundations of ignorance that drive you in your futile lives. Beneath a powerful enough microscope, even a cluster of wriggling threadworm can be beautiful. I accepted my iPhone destiny on the morning of last Wednesday, but by the afternoon I wanted to renounce it. I attended the carol service of my niece’s nursery school. Upon each carved pew, the screens of the iPhones of proud parents, their heads respectfully bowed, displayed pages from Facebook and Twitter, and twinkled throughout the ancient religious ritual like the stars that led the wise men to the very cradle of Christ.
As the lights dimmed and the candles flared up for a beautiful choral arrangement of the Coventry Carol, the assembled infant singers could look up and see that many of the grownups in the room, their lowered faces lit beatifically from below by the Caravaggio glow of their iPhone screens, were not the slightest fucking bit interested in them or their stupid fucking song.
The biggest cryptocurrencies resumed their decline on Sunday, failing to reverse a selloff that began when bitcoin’s unprecedented rally fell short of breaking above $20,000. A rebound on Saturday fizzled in the afternoon and traders turned pessimistic again, driving bitcoin down 13% in the past 24 hours. The drop among the 10 largest digital coins, ranging as much as 17% for iota, brings more end-of-year weakness to a market that just had its worst four-day tumble since 2015. “The West is what’s causing this selloff,” said Mati Greenspan, senior market analyst at Tel Aviv-based online broker eToro, pointing to increased trading in dollars and less in yen. The recent cryptocurrency rally was so steep that investors were prone to take money off the table going into the Christmas holiday season, he said.
The retrenchment isn’t typical for cryptos, which often snap back after a few losing sessions. The last time bitcoin dropped for five successive weekdays was September and, before that, July. While the market has been volatile for most of this year, the rapid run-up has made the recent selloff sting more for digital coin enthusiasts. Traders have knocked about $160 billion in market value off the biggest cryptocurrencies in about three days, according to CoinMarketCap data. The tumble coincided with several warnings in the past week from financial authorities about elevated risk in holding digital coins. “The crypto market went to astronomical highs, so it’s got to come back to reality,” Greenspan said. “Something that goes up 150% in less than a month is probably going to have double-digit retracement.”
Bitcoin was at $13,367 as of 5 p.m. New York time. That’s almost one-third off its record high of $19,511, based on prices compiled by Bloomberg. Ethereum, the No. 2 cryptocurrency by market value, dropped about 12% in the past 24 hours, to $663.77, CoinMarketCap data show. While “nascent blockchain-based cryptocurrencies are rapidly entering mainstream finance,” some of the second-generation digital coins have a better outlook than bitcoin, Bloomberg Intelligence analyst Mike McGlone wrote in comments published Sunday. The whole group is akin to internet-based companies a few decades ago and exchange-traded funds more recently, he said. “Bitcoin is the crypto benchmark, but not the best representation of the technology,” McGlone wrote. Altcoins “should continue to gain on bitcoin, which has flaws and where futures can be shorted,” he said.
The world of cryptocurrencies is one of the most divisive topics in finance right now. On the one hand, figures like J.P. Morgan CEO Jamie Dimon have called it a “fraud” and dubbed those trading it “stupid.” On the other hand, there are those who see cryptocurrencies as one of the most revolutionary forces in finance. But amid the debate, there are a lot of people asking how to value this stuff and why bitcoin has traded nearly as high as $20,000. The answer right now is simple: There are no fundamentals. Even Robert Shiller, who won the Nobel Prize in 2013 for assessing asset prices, recently remarked that the value of bitcoin is “exceptionally ambiguous.” There’s no doubt that there is immense amount of speculation in the cryptocurrency market.
But when the bubble bursts and the hype dies down, that is where we may find value and it all comes down to the use cases for the different coins on the market. When bitcoin was created in 2009, the aim was to be an electronic cross-border payments system. The problem now is that bitcoin transactions are at record highs with faster traditional payment systems actually proving a better means. It’s hard to say bitcoin has an inherent value beyond the belief of the people trading it. But as many have said, it could become “digital gold,” in which case the price is likely to go higher. But looking forward, it’s highly likely that other digital tokens could surpass bitcoin because of their utility. Take a look at Ethereum. The company bills itself as a blockchain platform for others to build apps on.
Blockchain is the underlying technology behind bitcoin and acts as a decentralized ledger of transactions. But its uses span far beyond bitcoin. Ethereum has its own blockchain which companies like Microsoft and J.P. Morgan are experimenting with. Ethereum is specifically designed for so-called “smart contracts” which are pieces of software that execute a contract once certain conditions are met by all parties involved. This removes the need for complex paperwork and errors. Ripple is another blockchain company that is working on cross-border payments across different currencies in seconds. The digital coin created by the company called XRP, acts as a bridging currency to help facilitate transactions. Both Ethereum and Ripple have seen stunning rallies this year, but both are in the early stages of their experiments. But in the future, valuing them could be easier. For example, if Ripple began to process a fraction of the trillions of dollars that is transacted across borders, we could start to put a price on one XRP.
China needs to let local governments take responsibility for their finances, including allowing bankruptcies, as part of an effort to defuse their debt risks, a central bank official wrote on Monday. Central government control of the scale of local government bonds should be eliminated, while responsibility to issue and repay bonds should be held by the city or county that will actually use the funds, Xu Zhong, head of the People’s Bank of China’s research bureau, wrote in a an editorial on the financial news website Yicai. “Eliminate central government control on the scale of local government bond issues, expand the scale of local government debt issues,” Xu wrote. “Whether (bonds) can be issued, and at what price, must be examined and screened by the financial markets. There does not need to be worry about local governments chaotically issuing debt.”
China’s top leadership decided at a meeting this week to take concrete measures to strengthen the regulation of local government debt next year as policymakers look to rein in a massive debt pile and reduce financial risks facing the economy. The government needs to clarify responsibility as it explores a bankruptcy system for local governments, Xu wrote, as there is still an expectation that the central government will bail out those that run into fiscal problems. “China must have an example like the bankruptcy in Detroit. Only if we allow local state-owned firms and governments to go bankrupt will investors believe the central government will break the implicit guarantee,” Xu wrote, adding that social services should be maintained.
The United States city of Detroit filed the largest-ever municipal bankruptcy in July 2013, with $18 billion of debt. Xu also said that China should dismantle the hukou system of internal migration control, as free movement of people promoted equal access to public services and helped resolve imbalances in finances. In a report published on Saturday, China’s National Audit Office said China should dispel the “illusion” that the central government will pick up the bill for local government debt. But China should also increase the limit for local government debt as general government debt is primarily used for poverty relief spending, while also controlling spending on new projects.
China has followed up earlier restrictions on outbound investment with new regulations on foreign investment by private firms. The 36-point code of conduct for private firms seeks to ensure that overseas deals are rational and legal. This is part of an effort to regulate outbound investment, which had been strongly encouraged between 2012 and 2016, in order to reduce risks. The National Development and Reform Commission, along with four other agencies, released rules that require private enterprises to invest in overseas deals that are genuine and not meant to be used for transferring assets abroad or for money laundering. Private firms are now required to report investment plans to the government, and to seek approval if the investments involve sensitive countries or industries.
Investment in projects that fit within the scope of the One Belt One Road endeavor is strongly encouraged. Outbound investment reached $170 billion in 2016, but was curtailed at the end of 2016 as yuan depreciation pressures mounted. At that time, authorities cracked down upon companies with fraudulent or “irrational” foreign investment. In addition, this past August, specific categories were created to specify banned, restricted, and encouraged overseas investment industries for mergers and acquisitions. As a result, this year saw a decline in the value of outbound direct investment, dropping 42% year-on-year in the first three quarters of this year. The new measures imposed on private firms will further reduce capital outflows and debt used to finance overseas deals.
A code of conduct for state owned enterprises investing abroad will soon be published, as China’s government attempts to make sure that capital leaving the country is being invested in sound assets. These regulations have become necessary due to China’s struggle to reduce its debt load and due to the threat of currency depreciation. While the former represents a clear and present threat to financial stability, the latter has largely disappeared from the picture but apparently remains on the radar of government officials. Debt-fueled overseas acquisitions impose a drag on the economy, which contains high levels of corporate debt already. Acquisitions that are funded by debt must ensure that overseas investments are productive, so that firms can repay the debt in a timely manner.
China is likely to set its 2018 money growth target at an all-time low of around 9% to curb debt risks and contain asset bubbles, the official China Daily reported on Monday, citing economists involved in high-level policy discussions. Financial risks have become the biggest threat to the country’s economic stability in the medium and long term, the China Daily said. In the past year, deleveraging efforts in the financial system have pushed broad M2 money supply growth to its lowest since records began in 1996. In November, M2 expanded 9.1% from a year earlier, below the government’s full-year target of around 12%. The central bank has said slowing M2 growth could be a “new normal” as the government cracks down on riskier banking activities. In the past decade, the government has set its annual M2 targets between 12% and 17%.
Walk down almost any major New York street – say Fifth Avenue near Trump Tower, or Madison Avenue from midtown to the Upper East Side. Perhaps venture down Canal Street, or into the West Village around Bleecker, and some of the most expensive retail areas in the world are blitzed with vacant storefronts. The famed Lincoln Plaza Cinemas on the Upper West Side announced earlier this week that it is closing next month. A blow to the city’s cinephiles, certainly, but also a sign of the effects that rapid gentrification, coupled with technological innovation, are having on the city. Over the past several years, thousands of small retailers have closed, replaced by national chains. When they, too, fail, the stores lie vacant, and landlords, often institutional investors, are unwilling to drop rents.
A recent survey by New York councilmember Helen Rosenthal found 12% of stores on one stretch of the Upper West Side is unoccupied and ‘for lease’. The picture is repeated nationally. In October, the US surpassed the previous record for store closings, set after the 2008 financial crisis. The common refrain is that the devastation is the product of a profound shift in consumption to online, with Amazon frequently identified as the leading culprit. But this is maybe an over-simplification. “It’s not Amazon, it’s rent,” says Jeremiah Moss, author of the website and book Vanishing New York. “Over the decades, small businesses weathered the New York of the 70s with it near-bankruptcy and high crime. Businesses could survive the internet, but they need a reasonable rent to do that.”
Part of the problem is the changing make-up of New York landlords. Many are no longer mom-and-pop operations, but institutional investors and hedge funds that are unwilling to drop rents to match retail conditions. “They are running small businesses out of the city and replacing them with chain stores and temporary luxury businesses,” says Moss. In addition, he says, banks will devalue a property if it’s occupied by a small business, and increase it for a chain store. “There’s benefit to waiting for chain stores. If you are a hedge fund manager running a portfolio you leave it empty and take a write-off.” New York is famously a city of what author EB White called “tiny neighborhood units” is his classic 1949 essay Here is New York. White observed “that many a New Yorker spends a lifetime within the confines of an area smaller than a country village”.
Last year, three of the world’s largest meat companies – JBS, Cargill, and Tyson Foods – emitted more greenhouse gases than France, and nearly as much as some big oil companies. And yet, while energy giants like Exxon and Shell have drawn fire for their role in fueling climate change, the corporate meat and dairy industries have largely avoided scrutiny. If we are to avert environmental disaster, this double standard must change. To bring attention to this issue, the Institute for Agriculture and Trade Policy, GRAIN, and Germany’s Heinrich Böll Foundation recently teamed up to study the “supersized climate footprint” of the global livestock trade. What we found was shocking. In 2016, the world’s 20 largest meat and dairy companies emitted more greenhouse gases than Germany. If these companies were a country, they would be the world’s seventh-largest emitter.
Obviously, mitigating climate change will require tackling emissions from the meat and dairy industries. The question is how. Around the world, meat and dairy companies have become politically powerful entities. The recent corruption-related arrests of two JBS executives, the brothers Joesley and Wesley Batista, pulled back the curtain on corruption in the industry. JBS is the largest meat processor in the world, earning nearly $20 billion more in 2016 than its closest rival, Tyson Foods. But JBS achieved its position with assistance from the Brazilian Development Bank, and apparently, by bribing more than 1,800 politicians. It is no wonder, then, that greenhouse-gas emissions are low on the company’s list of priorities. In 2016, JBS, Tyson and Cargill emitted 484 million tons of climate-changing gases, 46 million tons more than BP, the British energy giant.
Meat and dairy industry insiders push hard for pro-production policies, often at the expense of environmental and public health. From seeking to block reductions in nitrous oxide and methane emissions, to circumventing obligations to reduce air, water, and soil pollution, they have managed to increase profits while dumping pollution costs on the public. One consequence, among many, is that livestock production now accounts for nearly 15% of global greenhouse-gas emissions. That is a bigger share than the world’s entire transportation sector. Moreover, much of the growth in meat and dairy production in the coming decades is expected to come from the industrial model. If this growth conforms to the pace projected by the UN Food and Agriculture Organization, our ability to keep temperatures from rising to apocalyptic levels will be severely undermined.
Pope Francis has likened the journey of Mary and Joseph to Bethlehem to the migrations of millions of people today who are forced to leave homelands for a better life, or just for survival, and he expressed hope that no one will feel “there is no room for them on this Earth”. Francis celebrated Christmas vigil mass on Sunday in the splendour of St Peter’s Basilica, telling the faithful that the “simple story” of Jesus’ birth in a manger changed “our history forever. Everything that night became a source of hope.” Noting that Mary and Joseph arrived in a land “where there was no place for them”, Francis drew parallels with today. “So many other footsteps are hidden in the footsteps of Joseph and Mary,” he said in his homily.
“We see the tracks of entire families forced to set out in our own day. We see the tracks of millions of persons who do not choose to go away but, driven from their land, leave behind their dear ones.” Francis has made concern for economic migrants, war refugees and others on society’s margins a central plank of his papacy. He said God is present in “the unwelcomed visitor, often unrecognisable, who walks through our cities and our neighbourhoods, who travels on our buses and knocks on our door”. That perception of God should develop into “new forms of relationship, in which none have to feel that there is no room for them on this Earth”, he said.
Pressure on the leftist-led government from the migration crisis is growing as it is faced with mounting tension at island hot spots, criticism from inside the ruling SYRIZA party, and uncertainty over calls to readjust the EU deal with Turkey. Under the deal signed by the EU and Ankara in March 2016, all new irregular migrants crossing from Turkey to Greek islands are supposed to be returned to Turkey. However, during a meeting with German Chancellor Angela Merkel, European Commission President Jean-Claude Juncker and Bulgarian Prime Minister Boiko Borisov earlier in December, Prime Minister Alexis Tsipras requested that Turkey also accept migrant returns from the mainland in order to ease overcrowding at camps.
Sources said Merkel avoided endorsing the Greek proposal which essentially violates the core of the EU-Turkey deal. Rather, the same sources said, Merkel stressed the need to bolster the presence of EU border agency Frontex along the Greek-Bulgarian border to safeguard the so-called Balkan route. Although officials in Athens have suggested that Turkish President Recep Tayyip Erdogan acceded to the request during his recent visit to Greece, the issue has been deferred to ministerial-level deliberations. Migration Minister Yiannis Mouzalas visited Ankara on Thursday for talks, as Foreign Minister Nikos Kotzias appeared skeptical whether Erdogan had the political will to go the extra mile.
Meanwhile, as island reception centers are bursting at the seams and pressure from SYRIZA officials is intensifying, the government has already green-lighted transfers of asylum seekers who it claims are minors or disabled. Speaking to party officials, Tsipras vowed that asylum seekers past the first stage of their application process would be relocated to the mainland. Government officials, on the other hand, offered reassurances over a recent proposal by European Council President Donald Tusk for the abolition of mandatory quotas on relocating refugees across the EU. The proposal is set to be discussed at an EU summit in June but administration officials say too many states are opposed to it.
Do they vote for or against? Do they choose a candidate who represents their politics or one who, opinion polls suggest, is most likely to defeat the woman whose presence as one of two candidates in the second-round runoff in a fortnight seems a given, but whose name still provokes a frisson of fear for many: the far-right Front National leader Marine Le Pen, with her anti-Europe, anti-immigration, “French-first” programme? As election day has approached, and with the added complication of the terrorist threat following the shooting of a police officer on the Champs-Elysées in Paris, the dilemma has caused particular anguish for France’s mainstream leftwing voters, whose candidate is trailing in fifth place.
There are no certainties, but barring all other candidates “dropping from a nasty virus”, as one political analyst put it, Benoît Hamon is facing a crushing defeat in the first round, ending his leadership dreams and putting the future of the country’s Socialist party (PS) in question. In a decline that mirrors that of Britain’s Labour party, the PS is facing years in a political desert, if it survives. If Hamon finishes last among the leading candidates, as polls predict, the party’s only hope of salvaging a thread of power will lie in winning enough parliamentary seats in the legislative elections that follow to form an influential group in the national assembly. Even then it will most likely be part of a coalition rather than a fully functioning opposition.
Even worse, and even more unthinkable, if leftwing voters turn en masse to Jean-Luc Mélenchon as their best hope of a place in the second round against the frontrunners – independent centrist Emmanuel Macron, Le Pen or the conservative François Fillon – and Hamon polls less than 5%, none of Hamon’s campaign expenses will be reimbursed, bankrupting the PS. “Under 5% and the situation is really catastrophic,” Marc-Olivier Padis, of the Paris-based thinktank Terra Nova, told the Observer. “And it’s possible. We are hearing many socialists wondering if they should vote Mélenchon or Macron. The only thing that can save the party in this election is if enough socialists vote for Hamon out of loyalty.”
The 2017 French Presidential election marks a profound change in European political alignments. There is an ongoing shift from the traditional left-right rivalry to opposition between globalization, in the form of the European Union (EU), and national sovereignty. Standard media treatment sticks to a simple left-right dualism: “racist” rejection of immigrants is the main issue and that what matters most is to “stop Marine Le Pen!” Going from there to here is like walking through Alice’s looking glass. Almost everything is turned around. On this side of the glass, the left has turned into the right and part of the right is turning into the left. Fifty years ago, it was “the left” whose most ardent cause was passionate support for Third World national liberation struggles.
The left’s heroes were Ahmed Ben Bella, Sukarno, Amilcar Cabral, Patrice Lumumba, and above all Ho Chi Minh. What were these leaders fighting for? They were fighting to liberate their countries from Western imperialism. They were fighting for independence, for the right to determine their own way of life, preserve their own customs, decide their own future. They were fighting for national sovereignty, and the left supported that struggle. Today, it is all turned around. “Sovereignty” has become a bad word in the mainstream left. National sovereignty is an essentially defensive concept. It is about staying home and minding one’s own business. It is the opposite of the aggressive nationalism that inspired fascist Italy and Nazi Germany to conquer other countries, depriving them of their national sovereignty.
The confusion is due to the fact that most of what calls itself “the left” in the West has been totally won over to the current form of imperialism – aka “globalization”. It is an imperialism of a new type, centered on the use of military force and “soft” power to enable transnational finance to penetrate every corner of the earth and thus to reshape all societies in the endless quest for profitable return on capital investment. The left has been won over to this new imperialism because it advances under the banner of “human rights” and “antiracism” – abstractions which a whole generation has been indoctrinated to consider the central, if not the only, political issues of our times.
The fact that “sovereignism” is growing in Europe is interpreted by mainstream globalist media as proof that “Europe is moving to the right”– no doubt because Europeans are “racist”. This interpretation is biased and dangerous. People in more and more European nations are calling for national sovereignty precisely because they have lost it. They lost it to the European Union, and they want it back. That is why the British voted to leave the European Union. Not because they are “racist”, but primarily because they cherish their historic tradition of self-rule.
ECB officials signaled that their liquidity facilities remain available to counter any market tension that may arise in the aftermath of France’s presidential election, the first round of which takes place Sunday. “The central bank should be ready for any shocks that should materialize,” Governing Council member Ignazio Visco said at a press conference during the IMF spring meetings in Washington on Saturday. “And if there were to be such a shock, the instruments are the instruments that a central bank should use, which are liquidity provision, refinancing when needed. And intervening very quickly is really very easy now given the instruments we have.” Like the U.K.’s vote on whether to continue its membership of the EU in June, central bank readiness to support the banking system has been sought given the potential for such political events to create market turmoil.
In this case, a strong showing in the first round by anti-euro candidate Marine Le Pen could cast doubt over the future of the single currency. Visco argued that the presence of central bank facilities makes it less likely they’ll actually be needed. [..] The euro area has years of experience with banking freeze-ups and has multiple instruments to address liquidity shortages that strike otherwise solvent banks. In particular, in the event a sudden credit-rating downgrade made French government debt ineligible as collateral for normal ECB refinancing operations, so-called Emergency Liquidity Assistance may be available from the Bank of France. “If there should be problems for specific French banks, liquidity-wise, then the ECB has instruments to help solvent banks with liquidity problems,” Governing Council member Ewald Nowotny said on Saturday. “This is ELA, emergency liquidity assistance. That could be given of course. But we don’t expect any special movements.”
Donald Trump and the GOP need an easy, highly visible legislative victory. Breaking up the Fed meets this criteria. In the aftermath of the Great Financial Crisis, policymakers rushed out the Dodd-Frank Act. This Act increased the Fed’s responsibilities. However, policymakers did this without examining the Fed’s performance in the run-up to the financial crisis. Had they done so, they would have seen the Fed failed as a bank supervisor and regulator. This failure alone mandates breaking up the Fed. After all, why should the Fed be given a second chance given how much its failure hurt the global real economy and taxpayers? Furthermore, this failure strongly suggests policymakers shouldn’t have rewarded the Fed with additional responsibilities. After all, there is no reason to believe the Fed’s failure as a bank supervisor and regulator won’t be repeated with any new responsibilities.
To the extent these new responsibilities exist in the Dodd-Frank Act, they too should be stripped away. What the Fed should be left with is responsibility for monetary policy and the payment system. All of the Fed’s bank supervision and regulatory responsibility should be transferred to the FDIC. There are many significant benefits from doing this including it reinforces market discipline on the banks. Unlike the Fed, the FDIC is responsible for protecting the taxpayers and has the authority to close a bank. The FDIC’s primary responsibility is minimizing the risk of loss by the taxpayer backed deposit insurance fund. It achieves this initially through regulation and supervision, but more importantly by a willingness to step in and close a bank that threatens to cause a loss to the fund.
Shareholders and unsecured bank creditors are keenly aware they are likely to lose their entire investment should the FDIC step up and close the bank they are invested in. As a result, they have an incentive to exert discipline on bank management to limit its risk taking so the bank is never taken over by the FDIC. For those who would argue that it is important to keep bank supervision and regulation together with monetary policy, I would point out there is no evidence showing this produces a better outcome. In the run-up to the Great Financial Crisis, the Bank of England and the ECB did not have supervision and regulation responsibility. The Fed did. Talk about a perfect controlled experiment.
From a global macroeconomic perspective, we encourage readers to consider that the world is experiencing an extended, rolling process of deflating its credit excesses. It is now simply China’s turn. For context, Japan started deflating their credit bubble in the early 1990s, and has now experienced more than 20 years of deflation and very little growth since. The US began its process in 2008, and after eight years has only recently been showing signs of sustainable recovery. The euro zone entered this process in 2011 and is still struggling six years onward. We believe China is now entering the early stages of this process. Having said that, we believe that Chinese authorities have a viable plan for deflating their credit excess in an orderly fashion.
Please stay posted as we will review this multi-pronged, market-based approach in our next column. For now, let’s turn our attention to the size of the credit excess that China created and why we estimate it to be the largest in the world. A credit excess is created by the speed and magnitude of credit that is created – if too much is created in too short a time period, excesses inevitably occur and non-performing loans (NPLs) emerge. To illustrate the credit excess that has been created in China, let’s review several key indicators, including the: 1) flow of new credit; 2) stock of outstanding credit; 3) credit deviation ratio (i.e., excess credit); 4) incremental capital output ratio (efficiency of credit allocation).
The US created 58% of GDP between 2002-07, and the global financial crisis followed. Japan created credit equivalent to the entire size of its economy between 1985-90 and subsequently experienced more than 20 years of deflation (admittedly reflecting the lack of restructuring). Thailand created a significant real estate bubble between 1992-97 and ended up with about 45% NPL ratios. Spain created credit equivalent to 116% of GDP between 2002-07 and still is trying to address a 20% unemployment rate. China created 139% of GDP in new credit between the first quarter of 2009 and the third quarter of 2014 (when GDP growth peaked), far greater than what was created in other major credit bubbles globally.
[..] Another important measure to assess the amount of credit in the economy which is “excessive” is the credit-to-GDP gap, as reported by the Bank of International Settlements. This ratio measures the difference between the current credit-to-GDP ratio in an economy against its long-term trend of what is necessary to optimally support long-term GDP growth. It is akin to measuring the amount of credit that is productively deployed into an economy. This metric is used by the Basel III framework in determining countercyclical capital buffers for a country’s banking system when credit creation becomes too fast (i.e., high credit growth requires higher capital ratios for banks).
Finally, to show that the pace of credit creation will necessarily slow, thereby exposing misallocated credit and driving the emergence of new NPL formation, we turn to the deterioration in China’s incremental capital output ratio. This ratio is the measure of the number of units of input required to produce one unit of GDP. For the 15 years prior to the credit impulse in 2009-14, China’s incremental capital output ratio has been consistently between two and four. Meaning that two to four yuan in fixed asset investment created one yuan in GDP. But as a result of the credit-driven economic growth model, and the excessive credit that has been created (and the subsequent excess capacity in the industrial economy), China’s investment efficiency has deteriorated to the point that its incremental capital output ratio is now over 13. Said another way, every 1 yuan in new fixed asset investment is now creating only 7 fen in GDP.
The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures. While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:”Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008.”
According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.
As the WSJ calculates, at least 10 retailers, including Limited Stores, electronics chain hhgregg and sporting-goods chain Gander Mountain have filed for bankruptcy protection so far this year. That compares with nine retailers that declared bankruptcy, with at least $50 million liabilities, for all of 2016. On Friday, women’s apparel chain Bebe Stores said it would close its remaining 170 shops and sell only online, while teen retailer Rue21 Inc. announced plans to close about 400 of its 1,100 locations. Another striking fact: on a square footage basis, approximately 49 million square feet of retail space has closed YTD. Should this pace persist by the end of the year, total square footage reductions could reach 147M square feet, another all time high, and surpassing the historical peak of 115M in 2001.
There are several key drivers behind the avalanche of “liquidation” signs on store fronts. The first is the glut of residual excess retail space. As the WSJ writes, the seeds of the industry’s current turmoil date back nearly three decades, when retailers, in the throes of a consumer-buying spree and flush with easy money, rushed to open new stores. The land grab wasn’t unlike the housing boom that was also under way at that time. “Thousands of new doors opened and rents soared,” Richard Hayne, chief executive of Urban Outfitters Inc., told analysts last month. “This created a bubble, and like housing, that bubble has now burst.”
Retail sale volumes slumped in March, seeming to confirm doubts about the robustness of the consumer-led economy in the wake of last summer’s Brexit vote. According to the Office for National Statistics, sales were down 1.8% in the month, against City expectations of a 0.2% decline. The monthly data can be volatile and March’s decline follows a 1.7% spike in February, but the ONS itself highlighted the weakening trend this year and noted that over the three months to March there was the first quarterly decline in volumes since 2013. In the first quarter of 2017 sales were down 1.4%, the biggest decline since the first three months of 2010 when they fell 2%.
Retail sales performed much better than expected in the immediate wake of last June’s Brexit vote, helping to boost overall GDP growth and confounding widespread expectations that the economy would fall into recession. But economists said the latest data suggested gravity was now asserting itself as inflation, stemming from the sharp depreciation of the pound since last June, eats into incomes and wage growth remains chronically weak. “We should see these retail sales figures as the start of a period of much weaker consumer spending growth – which will act as a drag on the overall progress of the UK economy over this year and next,” said Andrew Sentance, senior economic adviser at PwC.
“This is the clearest indication yet that the expected slowdown in the UK economy has begun, and we should expect to see this confirmed in other economic data over the next few months.” James Knightley, an economist at ING described the figures as “dreadful”. “The story for the household sector isn’t great right now. Inflation is eating into household spending power with wages once again failing to keep pace with the rising cost of living. There is also a growing sense of job insecurity highlighted in some surveys, which may also be making households a little nervous,” he said. The household saving ratio, the gap between the sector’s aggregate income and spending, fell to just 3.3% in the final quarter of 2016, the weakest on record, prompting questions about the sustainability of the rate of consumer spending. Retail sales account for around 30% of household consumption, which in turn accounts for 60% of UK GDP.
The fact that Britain’s unemployment rate has fallen to its joint lowest level since 1975 belies the experience of thousands of BHS staff, who have struggled to find an equivalent job with a contract and regular hours. The jobless rate may be just 4.7% but official records show the number of people on zero-hours contracts hit a record high of 905,000 in the final three months of 2016. That was an increase of 101,000, or 13%, compared with the same period a year earlier. Last year, research by industry trade body the British Retail Consortium (BRC) identified a “lost generation” of predominantly female shop workers who – as thousands of BHS staff would find out – risk losing their jobs as structural change chews up the high street. It estimated there were nearly 500,000 retail workers, aged between 26 and 45, many of whom have children and need to work close to their family home, who would find it hard to find alternative jobs.
Using the benchmark of those earning less than £8.05 an hour, the BRC says 1.5 million people work in low-paid UK retail jobs. About 70% are female and one in five receive means-tested working age tax credits. Norman Pickavance, chair of the Fabian Society taskforce on the future of retail, says the majority of companies in the sector are trying to save money by moving towards less secure employment models. “There are more and more zero-hours-type contracts and self employment,” he says. “A year on from the demise of BHS, most retailers are continuing down that route of flexibility but there is a risk to them from Brexit. They have only been able to use these methods because of the abundance of labour and might have to rethink.”
[..] This trend is writ larger in the US, where analysts are talking about a “retail apocalypse”, as main street veterans like Macy’s and Sears line up to announce major store closure programmes. With American Apparel, Abercrombie & Fitch and JCPenney also axing stores, hundreds of American shopping mall outlets are closing for good. The cost in job terms has been stark, with more than 89,000 retail positions eliminated over the last six months. New York-based Global Data analyst Neil Saunders says the US and UK retail markets are not mirror images, with the American woes resulting from the fallout from a belated move by store chiefs to address the threat posed by the internet.
With more than five times more retail square footage per person than the UK, American store chiefs have also got a bigger problem on their hands than their British counterparts. “In terms of online penetration, the US is where the UK was five or so years ago,” continues Saunders. “What we are seeing is large US retailers scrabbling to adjust.” He adds: “Generally, UK retail is at a much later evolutionary stage than the US. There has already been quite a lot of adjustment in terms of the closure and adaptation of physical space.
Germany’s BND foreign intelligence agency spied on the Interpol international police agency for years and on the group’s country liaison offices in dozens of countries such as Austria, Greece and the United States, a German magazine said. Der Spiegel magazine, citing documents it had seen, said the BND had added the email addresses, phone numbers and fax numbers of the police investigators to its sector surveillance list. In addition, the German spy agency also monitored the Europol police agency Europol which is based in The Hague, the magazine said. Der Spiegel reported in February that the BND also spied on the phones, faxes and emails of several news organizations, including the New York Times and Reuters.
The BND’s activities have come under intense scrutiny during a German parliamentary investigation into allegations that the US National Security Agency conducted mass surveillance outside of the United States, including a cellphone used by Chancellor Angela Merkel. Konstantin von Notz, a Greens party member who serves on the investigative committee, described the latest report about the BND’s spying activities as “scandalous and unfathomable.” “We now know that parliaments, various companies and even journalists and publishers have been targeted, as well as allied countries,” von Notz said in a statement. He said the latest reports showed how ineffective parliamentary controls had been thus far, despite new legislation aimed at reforming the BND. “It represents a danger to our rule of law,” he said.
Pope Francis urged governments on Saturday to get migrants and refugees out of holding centers, saying many had become “concentration camps”. During a visit to a Rome basilica, where he met migrants, Francis told of his visit to a camp on the Greek island of Lesbos last year. There he met a Muslim refugee from the Middle East who told him how “terrorists came to our country”. Islamists had slit the throat of the man’s Christian wife because she refused to throw her crucifix the ground. “I don’t know if he managed to leave that concentration camp, because refugee camps, many of them, are of concentration (type) because of the great number of people left there inside them,” the pope said.
Francis praised countries helping refugees and thanked them for “bearing this extra burden, because it seems that international accords are more important than human rights”. He did not elaborate but appeared to be referring to agreements that keep migrants from crossing borders. In February, the European Union pledged to finance migrant camps in Libya as part of a wider European Union drive to stem immigration from Africa. Humanitarian groups have criticized efforts to stop migrants in Libya, where – according to a U.N. report last December – they suffer arbitrary detention, forced labor, rape and torture.
South Korea suffered a 15.7% fall in exports to China in the first quarter this year, data showed Sunday, deepening its overall trade woes. It marks the biggest drop in seven years in South Korea’s outbound shipments to China, its single biggest market. China accounts for about 25% of South Korea’s total exports. Exports to China stood at $28.5 billion in the year’s first three months, down 15.7% from a year earlier, according to the Korea International Trade Association (KITA). By item, exports of semiconductors, flat panel displays, petrochemical products, car parts and synthetic resins recorded notable declines. Experts cited a structural problem and suggested a shift in trade strategy. “Over 70% of South Korean goods exported to China are intermediate goods. China’s demand for those is diminishing,” said Park Jin-woo, head of KITA’s strategic market research office.
“In particular, China is making massive investments and expanding facilities in such sectors as semiconductors, while reducing imports.” He stressed the need for targeting the consumer goods market instead. South Korea’s exports to the United States also sank 3.3% on-year to $16.8 billion in the January-March period and imports were down 4.9% to $10.1 billion. Trade with Japan remains in trouble as well. Exports fell 13.1% to $5.5 billion, representing a double-digit drop for the sixth consecutive quarter, and imports dwindled 11.2% to $10.6 billion. In contrast, exports to Vietnam, which has emerged as South Korea’s third-largest exports market, maintained an upward trend. Exports grew 7.6% to $7 billion, although growth rates showed signs of slowing.
A crisis rocking a loosely regulated lending network is underlining the risks of a financing boom that has channeled Chinese household money into Hollywood movies and Wall Street deals Droves of teary-eyed investors from around China have descended on Shanghai Kuailu Investment Group’s swanky offices over the past week to demand their money back after the firm halted redemptions on wealth-management products for the roughly 250,000 clients of the firm and three affiliates. The uncertainty around investments handled by Kuailu could force a re-evaluation of a financing trend that has become widespread, in the latest knock to a financial system damaged by months of stock-market turmoil and a slowing economy.
Kuailu is one of thousands of finance companies in a universe of Chinese “shadow banks” that funnel investors funds to businesses and individuals, often with an assurance of high returns. Moody’s estimated credit extended by nonbank financing companies in China stood at $370 billion in mid-2015. Many Chinese refer to the diverse industry using English: P2P, as in peer-to-peer lending, though that business of matching small lenders and borrowers is just one segment of operations at Kuailu. Kuailu isn’t the first such lender to leave investors hanging amid recent collapses in the sector. What is distinctive is how its problems are exposing an international dimension to the industry, which bankers said is common but little understood.
The Shanghai firm invested in at least 20 feature films, including the coming release of “The Bombing” starring Bruce Willis, according to the company. Client money holds a slice of a $9 billion deal to privatize NYSE-listed Chinese Internet-security company Qihoo 360 Technology, firm marketing documents show. A crisis-management specialist that Kuailu’s founding chairman this month put in charge of sorting through $1.5 billion in liabilities told the WSJ it wasn’t a Ponzi scheme, a fear some investors have raised with the company. “No cash flow. That’s the issue,” said Xu Qi, who estimated assets cover about 90% of what is owed to investors, but that most of it is tied up in investments or projects that can’t be quickly converted to cash.
Companies like Kuailu got their start in peer-to-peer lending, initially a modest effort to supply money to Chinese households and entrepreneurs that was endorsed by top government officials as a way to power new streams of consumer activity. But crowdsourced lending has quickly expanded and now powers financing across China, from wedding loans to land speculation. Like banks, but with less regulation, such lenders compete aggressively for deposits, often via online platforms. Many attract money faster than they can thoroughly research investments, according to analysts.
A meeting between OPEC and non-OPEC oil producers on an agreement to freeze output ran into last-minute trouble in Qatar on Sunday due to a new request by OPEC’s de facto leader Saudi Arabia, sources told Reuters. Oil ministers were heading into a meeting with the Qatari emir, Sheikh Tamim bin Hamad al-Thani – who was instrumental in promoting output stability in recent months – in an attempt to rescue the deal designed to bolster the flagging price of crude. “There is an issue. Experts are discussing how to find an acceptable solution. I’m confident they will come up with a solution,” one of the sources said. According to another source, Saudi Arabia said it wanted all OPEC members to participate in the talks, despite insisting earlier on excluding Iran because Tehran does not want to freeze production.
Saudi Arabia has taken a tough stance on Iran, the only major OPEC producer to have refused to participate in the freeze. Tehran says it needs to regain market share after the lifting of international sanctions against it in January. Deputy Crown Prince Mohammed bin Salman told Bloomberg that the kingdom would restrain its output only if all other major producers, including Iran, agreed to freeze production. More than a dozen nations inside and outside OPEC have officially confirmed they would attend the meeting in Doha but the role of Iran has been the key issue overhanging the talks. “We have told some OPEC and non-OPEC members like Russia that they should accept the reality of Iran’s return to the oil market,” Iran’s oil minister, Bijan Zanganeh, was quoted as saying by his ministry’s news agency SHANA on Saturday.
Iran’s top central banker is adding to growing doubts about an agreement to freeze output at a meeting of oil producers in Doha, Qatar on Sunday. Ahead of a pivotal meeting that may determine the near-term outlook for crude prices, Iran on Saturday announced that it would not participate in the conference. The country, still trying to recover from Western sanctions, is seen trying to preserve market share, and has steadfastly resisted any suggestions that Iran should freeze or curb output in order to prop up prices. On the sidelines of an IMF meeting in Washington, D.C., Valiollah Seif, head of Iran’s central bank told CNBC that asking Iran to freeze output right now is unfair.
“What Iran is doing right now is trying to get back and secure its share of the market,” Seif said, adding that “what Saudi Arabia is asking Iran to do is not a very fair [or] logical request.” On several occasions, the leadership of Saudi Arabia has repeatedly said they would agree to an output freeze as long as Iran did too. Currently, analysts believe the two rivals are unlikely to reach a near-term consensus. Seif told CNBC that Iran, as a member of OPEC, has a quota of 2.4 million barrels per day. Under sanctions for its nuclear program, that quota went unfilled.
At the same other members used their output to fill the gap. “And right now, Iran is trying to just take back the quota it is entitled to get, so we are going to do that and this is the main direction of our economy,” Seif added. He went as far as to say other OPEC members are to blame for the sharp fall in oil prices, which are down more than 37% year to date. “This request is coming from those countries which are responsible for this surplus production in the market, because they have exceeded output beyond their quota, and I think this is not fair,” Seif added. He cautioned that this was his personal viewpoint, and the ultimate decision lies with Iran’s oil minister, Bijan Zangeneh.
Greece’s creditors are considering seeking extra austerity measures that would be triggered if Athens misses its fiscal targets, in a bid to bridge differences between Europe and the IMF and break a deadlock threatening to unravel the Greek bailout. Under the proposal, say officials involved in the discussions, Greece would have to sign up to so-called contingency measures of up to about €3 billion, on top of the package of about €5 billion in tax increases and spending cuts Greece and its lenders are already negotiating. The country would only have to implement the extra measures if falls short of targeted budget surpluses for coming years that were set out in last year’s bailout agreement, the officials say.
The idea, which has support from the eurozone’s dominant power Germany, hasn’t yet been agreed upon, and officials on the creditors’ side say it would be politically hard for Greece’s embattled government to swallow. Creditors say the contingency-measures idea could finally overcome the monthslong disagreement between European institutions and the IMF about the outlook for Greece’s budget. That disunity has paralyzed talks about what Greece needs to do to secure a new IMF loan program and unlock rescue funding from Europe. Without billions of euros in fresh bailout funds, Greece faces bankruptcy in July, when large debts fall due. Months of talks without agreement have stoked concern in Europe about another Greek debt drama this summer, reviving fears the country could tumble out of the eurozone.
Athens has argued that imposing even-more austerity measures would go beyond what was agreed in the July 2015 bailout deal, according to people familiar with Athens’s thinking. The deadlock among creditors since last fall stems from Germany’s insistence that Greece get no more money from the eurozone’s bailout fund until the IMF agrees to lend more money too. Since Greece’s bailout odyssey began in 2010, German Chancellor Angela Merkel has insisted IMF involvement is essential. But the IMF is unconvinced by the math of the eurozone’s July 2015 bailout plan for Greece. The fund says it can’t resume lending to Greece unless there is a combination of a credible fiscal plan for Greece and debt relief from Europe.
The creditors and Greece agreeing on a fiscal plan would allow for the start of concrete talks on a second thorny issue: debt relief for Greece. Germany is deeply reluctant to offer much debt relief, but tends to agree with the IMF about the weaknesses of Greece’s budget, rather than with the more upbeat assessments of the European Union’s executive arm, the Commission. The Commission believes around €5 billion of austerity measures would be enough for Greece to hit a key target in the bailout plan: a primary budget surplus, meaning before interest payments, of 3.5% of gross domestic product. But the IMF is more pessimistic about Greek growth and finances. It insists about €8 billion of savings are needed to hit the target. The European side’s proposed measures, the IMF thinks, would only get Greece to a primary surplus of 1.5% of GDP.
The name Nicolaus Copernicus is not usually mentioned in the same breath as corporate tax planning or Mossack Fonseca. This month, however, it probably should be. Six centuries ago, the Polish astronomer formulated a model of the universe that put the sun, rather than the earth, at the centre of the solar system. It was a paradigm shift that led to a transformation in the way that we view the universe. I suspect something similar might be happening with global finance. This month, the International Consortium of Investigative Journalists (ICIJ) published some 11.5 million documents leaked from the Panamanian law firm Mossack Fonseca. Among other things, these gave details about offshore companies the firm created for the elite.
The leak has already provoked a number of political scandals: last week, the Icelandic prime minister resigned after it emerged that he had an offshore company in Panama; and David Cameron, the British prime minister, has faced a steady stream of criticism about an offshore company created by his late father. Meanwhile, revelations about Chinese and Russian billionaires could spark further recriminations. To my mind, it is not just the revelations concerning the rich and famous that make the Panama Papers so fascinating; after all, it is not illegal to create such companies, unless they are used to evade taxes or launder money. Instead, the most interesting issue is whether this leak will create something akin to a Copernican moment.
Think about it. Most of us vaguely know that money flows through offshore centres but the details of this world are very shadowy and opaque. Thus, insofar as any of us have ever tried to visualise the 21st-century “map” of global finance, we assumed that the visible onshore activity was the “sun” that dominated this universe — and offshore finance just a fuzzy little planet, that hovered on the edge. But the Panama Papers have given contours to that fuzzy, offshore world. More specifically, anyone who wants to get a sense of what has been happening in Panama can now go on to the ICIJ website and search those 11.5 million documents with keywords. Try it out at home — it is as simple as a Wikipedia search.
As further details tumble out, it’s not just more names that will be generated but numbers too. Even before the data were readily available, activist groups such as the Tax Justice Network had claimed that some $21tn-$32tn was being stashed in offshore centres, but they had no real way of verifying the figure. With the Panama Papers online, more precise figures could emerge — and with that the ability to compare them with the overall picture of global banking. Could this spark a bigger policy change, such as a crackdown on tax avoidance or money laundering? A cynic might argue not. Remember, powerful vested interests are involved. But if you want to get a sense of what can happen when that mental map flips, think about how attitudes to shadow banking have changed in the past decade.
Wolfgang Schäuble, Germany’s finance minister, has warned British chancellor George Osborne that Berlin would be a tough negotiator if the UK votes to leave the EU. Speaking on the sidelines of the IMF spring meetings on Saturday, Mr Schäuble, one of the strongest forces in European politics, also jested that British football teams in a post-Brexit world should be excluded from the European champions league — something not actually linked to EU membership. His confirmation that Germany would not readily agree to an easy trading relationship with Britain after Brexit undermines the Leave campaign’s argument that the UK would be able to secure preferential EU trade deals without freedom of movement of people or the need for Britain to contribute to the EU budget.
The German finance minister, who is known for his unyielding negotiating positions, told German media that he wanted the UK to remain in the EU and did not want to inflame the British debate. But he added that if Britain were to leave, the process would not be easy. The Treasury confirmed that Mr Schäuble told Mr Osborne just how tough negotiations would be after Brexit during a bilateral meeting this weekend — and made the same joke about European football. In Washington this weekend, finance minsters from around the world have gradually been waking up to the possibility that Britain will seek to leave the EU within a matter of months. The IMF said it would wreak “severe damage” to the British and European economies.
Christine Lagarde, the IMF head, admitted this week that while she hoped Europe would avoid having to deal with Brexit, “the continued relationship with other countries in the EU would be at risk”. The difficulties of post-Brexit negotiations will be amplified by elections in Germany and France in 2017, European finance ministers said privately on the sidelines of the IMF meetings. With populist rightwing Eurosceptic parties threatening mainstream politics in both countries, the domestic incentives would prevent concessions to Britain as politicians would need to show their electorates that leaving the EU comes with a heavy price.
Many European officials and ministers have tried to avoid the subject of how they would negotiate with the UK after Brexit, saying instead that they hoped the British people would vote to remain. But some did speak out. Klaus Regling, head of the European Stability Mechanism, said that the leave campaign’s ambition to secure full access to the single market without accepting free movement of people and budget contributions “has never happened in Europe”. “I’m pretty certain [the negotiations ] would take quite a while — two years is not enough — so there would be several years of high uncertainty, which would have a negative impact on the UK economy,” Mr Regling said.
For several years, Laurence D. Fink, chairman and chief executive of BlackRock, the money management giant, has been on a crusade, exhorting corporations to change their short-term ways. Executives should forgo tricks that reward short-term stock traders, he argues, like share buybacks purchased at high valuations. Instead, corporate managers should focus on creating value for long-term shareholders. It’s an admirable argument that has won Mr. Fink wise-man status on Wall Street and accolades in the press. Hillary Clinton has echoed his ideas on the campaign trail. Certainly, as the head of BlackRock, Mr. Fink wields an outsize stick. With $4.6 trillion in assets and ownership of shares in roughly 15,000 companies, BlackRock is the world’s largest investment manager.
But if Mr. Fink really wants to get the attention of company executives on stock buybacks and other corporate governance issues, why doesn’t BlackRock vote more often against CEO pay packages of companies that play the short-term game? Executive compensation is inextricably linked to the shareholder-unfriendly actions Mr. Fink has identified; voting against pay packages infected by short-termism would help curb the problem. But BlackRock rarely takes such a stance. From July 1, 2014, to last June 30, according to Proxy Insight, a data analysis firm, BlackRock voted to support pay practices at companies 96.2% of the time. On pay issues, anyway, Mr. Fink’s big stick is more like a wet noodle. BlackRock’s “yes” percentage runs far higher than that of other money managers that express concern about corporate responsibility. Domini Funds supported pay practices only 6% of the time during the period, while Calvert Investments did so at 46% of companies.
As fund manager Mark Williams deliberated from his London office where next to invest, the world’s most remote stock market was just too good to pass up. That’s worrying locals, 11,000 miles away in New Zealand. The S&P/NZX 50 Index is the world’s best-performing developed stock gauge this year, climbing more than 7% to a record after overseas buying of equities jumped 21% in 2015. That’s driven stock valuations in the South-Pacific nation close to a record high, leaving them more expensive than anywhere else in the region. Funds from Henderson Global Investors to Liontrust Asset Management are buying into New Zealand, lured by dividends almost double the global average, rising earnings and expectations the central bank will cut interest rates to maintain growth.
Yet with a market cap of about $75 billion, smaller than the publicly traded value of Nike, opportunities are becoming more limited, says Matthew Goodson, an Auckland-based investor. “We’ve seen significant offshore inflows into larger-cap stocks and that’s driven their valuations to unusually high levels,” Goodson, who helps oversee about $1 billion at Salt Funds Management, said by phone. “It’s swamped the market and it leaves them very vulnerable. We’re somewhat nervous.” Foreigners now own about one third of New Zealand’s market, about three times the overseas ownership of U.S. equities, according to estimates from brokerage JBWere. Mark Williams, a money manager at Liontrust, is optimistic, given he expects the nation’s central bank will cut its key interest rate from an already record-low 2.25%.
While New Zealand accounts for less than 0.1% of the MSCI All Country World Index, Williams said he has 4.5% of his fund invested in the country. He bought Spark New Zealand and Fletcher Building in March, attracted by dividend yields of more than 5%. Spark, a communications provider, is the largest member by weighting of the S&P/NZX 50 gauge. “We find plenty of opportunities in New Zealand,” Williams, who helps manage $6.7 billion running an Asian equity-income fund at Liontrust, said by phone from London. “Interest rates remain relatively high, so that could lead to further cuts.”
The Tata Steel sale has revived the battle between protectionists and free traders, a debate that became particularly acute in the run-up to the creation of the World Trade Organisation in 1995, which marked the success of “free traders” all around the world. In the protectionist camp, there is now a wide range of political parties from the extreme left to the extreme right: from Syriza to Ukip, from the Front National to Podemos. The common element for all these parties is that they dream of returning to a time when “we were in control”; when we could easily open or close our borders; when the world was manageable and small and we did not have to compromise. That is why they want national rules rather than international ones; and that is also why ultimately most of them despise the EU, because it is based not on direct control but on compromise.
The problem with that notion is that such a cosy world does not exist any more. The new generations expect to talk, travel and trade with each other all over the world, no matter where they are. My children, for example, know more about startup products released for crowdfunding around the world than about what is sold in shops in our high street; they respond to fashions that are created thousands of miles away; and they expect products to reach them almost instantaneously, no matter where they are made. Fluidity, speed, seamlessness and complexity define the 21st century. Fighting those trends makes sense only if you are of such an age and means that you can afford the luxury of whingeing about the present and dreaming nostalgically about the past, but if you are still trying to make your way in life, you have to embrace change and adapt.
Companies are rightly responding as quickly as possible to those new demands and, as a result, we are witnessing a level of international outsourcing that we could never have imagined. “Made in” labels mean little nowadays: companies based in the west often have their production plants elsewhere and use components sourced from third countries; and are financed by investors in yet other countries. If that were not complex enough, when countries impose trade barriers and erect controls, companies simply move overnight. Regulators and governments often do not stand a chance. That does not mean regulators should let modern trade become the Wild West. But it means they need to have the flexibility and tools to react better and faster.
I like Joe Stiglitz, both professionally and personally. His Globalization and its Discontents was virtually the only work by a Nobel Laureate economist that I cited favourably in my Debunking Economics, because he had the courage to challenge the professional orthodoxy on the “Washington Consensus”. Far more than most in the economics mainstream—like Ken Rogoff for example—Joe is capable of thinking outside its box. But Joe’s latest public contribution—“The Great Malaise Continues” on Project Syndicate—simply echoes the mainstream on a crucial point that explains why the US economy is at stall speed, which the mainstream simply doesn’t get. Joe correctly notes that “the world faces a deficiency of aggregate demand”, and attributes this to both “growing inequality and a mindless wave of fiscal austerity”, neither of which I dispute.
But then he adds that part of the problem is that “our banks … are not fit to fulfill their purpose” because “they have failed in their essential function of intermediation”: Between long-term savers (for example, sovereign wealth funds and those saving for retirement) and long-term investment in infrastructure stands our short-sighted and dysfunctional financial sector… Former US Federal Reserve Board Chairman Ben Bernanke once said that the world is suffering from a “savings glut.” That might have been the case had the best use of the world’s savings been investing in shoddy homes in the Nevada desert. But in the real world, there is a shortage of funds; even projects with high social returns often can’t get financing. I’m the last one to defend banks, but here Joe is quite wrong: the banks have very good reasons not to “fulfill their purpose” today, because that purpose is not what Joe thinks it is.
Banks don’t “intermediate loans”, they “originate loans”, and they have every reason not to originate right now. In effect, Joe is complaining that banks aren’t doing what economics textbooks say they should do. But those textbooks are profoundly wrong about the actual functioning of banks, and until the economics profession gets its head around this and why it matters, then the economy will be stuck in the Great Malaise that Joe is hoping to lift us out of. The argument that banks merely intermediate between savers and investors leads the mainstream to a manifestly false conclusion: that the level of private debt today is too low, because too little private debt is being created right now. In reality, the level of private debt is way too high, and that’s why so little lending is occurring.
I can make the case empirically for non-economists pretty easily, thanks to an aside that Joe makes in his article. He observes that when WWII ended, many economists feared that there would be a period of stagnation: Others, harking back to the profound pessimism after the end of World War II, fear that the global economy could slip into depression, or at least into prolonged stagnation. In fact, the period from 1945 till 1965 is now regarded as the “Golden Age of Capitalism”. There was a severe slump initially as the economy changed from a war footing to a private one, but within 3 years, that transition was over and the US economy prospered—growing by as much as 10% in real terms in some years. (see Figure 1). The average from 1945 till 1965 was growth at 2.8% a year. In contrast, the average rate of economic growth since 2008 to today is precisely zero.
Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks. The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.
Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts. Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States. The administration, which argues that the legislation would put Americans at legal risk overseas, has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated.
In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot. “It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation. President Obama will arrive in Riyadh on Wednesday for meetings with King Salman and other Saudi officials. It is unclear whether the dispute over the Sept. 11 legislation will be on the agenda for the talks. Saudi officials have long denied that the kingdom had any role in the Sept. 11 plot, and the 9/11 Commission found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.”
But critics have noted that the commission’s narrow wording left open the possibility that less senior officials or parts of the Saudi government could have played a role. Suspicions have lingered, partly because of the conclusions of a 2002 congressional inquiry into the attacks that cited some evidence that Saudi officials living in the United States at the time had a hand in the plot. Those conclusions, contained in 28 pages of the report, still have not been released publicly. The dispute comes as bipartisan criticism is growing in Congress about Washington’s alliance with Saudi Arabia, for decades a crucial American ally in the Middle East and half of a partnership that once received little scrutiny from lawmakers. Last week, two senators introduced a resolution that would put restrictions on American arms sales to Saudi Arabia, which have expanded during the Obama administration.
Former Greek finance minister Yanis Varoufakis on Saturday addressed opponents of the French government’s workplace reforms at a protest in Paris, telling them the planned changes would “devalue labor.” “He (French President Francois Hollande) wants to devalue French labor… it can’t work,” Varoufakis told protesters as he paid a visit to the latest “Nuit Debout” (Up All Night) gathering at the city’s vast Place de la Republique. “Devaluing French labor can only deepen the crisis… I’m bringing to you solidarity from Athens,” he told the crowd. The labor reforms of France’s Socialist government aim to make it easier for struggling companies to fire people.
The government says they will make France’s rigid labor market more flexible but opponents say the reforms are too pro-business and will fail to reduce the 25% jobless rate among the young. Hundreds, at times thousands, of people have been demonstrating every night for the past two weeks at the Place de la Republique in central Paris. The labor reforms are a unifying theme of the gatherings but the so-called “Nuit Debout” movement is broader, embracing a range of anti-establishment grievances. The nightly protests have been marred by sporadic violence. The latest clashes erupted late Friday when, according to police, some 100 protesters set rubbish on fire and threw bottles and stones at officers, who responded with tear gas. Twenty-two people were arrested. The “Nuit Debout” demonstrations have spread to cities across France, becoming a major headache for the government.
Pope Francis made an emotional visit to the Greek island of Lesbos Saturday, plucking 12 Syrian refugees to take back to Rome with him and draw attention to what he called Europe’s most serious humanitarian crisis since the end of World War II. Francis, who has made migration a defining issue of his papacy, visited a refugee center as he appealed to the international community to deal with the migrants crisis as a humanitarian catastrophe. The pope said there was “reason to weep” on his visit to the refugees, and he brushed aside any political reasons for his invitation to have three families from Syria, 12 people including six children, accompany him on the flight home. “It is a purely humanitarian thing,” he told reporters on his chartered plane.
The Vatican will take financial responsibility for the families and an organization of volunteers, Comunità di Sant’Egidio, will initially host the groups, according to a statement. During the five-hour visit to Lesbos, the pontiff visited a refugee center with Ecumenical Patriarch Bartholomeos, the spiritual leader of the Orthodox Church, and was welcomed by Greek Prime Minister Alexis Tsipras. He also criticized the use of walls to keep migrants out. “In reality, barriers create divisions instead of promoting the true progress of peoples, and divisions sooner or later lead to conflicts,” Francis said in a speech at the port of Lesbos.
The visit was made days after migrants to Greece started being sent back to Turkey under a European Union agreement that has been criticized by the Vatican and denounced by human rights groups as impractical and legally suspect. Lesbos has become a repository for migrants seeking a better life in the EU: there were 3,560 refugees on the island as of Wednesday morning with more arriving each day, according to a daily tally issued by the Greek authorities. As he began the journey to Greece, the pope told reporters on his flight that the trip is marked by sadness. “This is important. It is a sad trip,” he said. “Refugees are not numbers, they are people who have faces, names, stories and need to be treated as such,” the pontiff said through his Twitter account.
The ECB will continue to do what is necessary to boost inflation and has not seen evidence so far that exceptionally loose monetary policies are creating asset bubbles, ECB President Mario Draghi said on Friday. Draghi added that the economic outlook for the euro zone faces uncertainty due to risks to growth prospects in emerging market economies, a clouded outlook for oil prices and geopolitical risks. “While accommodative monetary policies over an extended horizon may have unintended consequences for certain sectors in the form of excessive risk-taking and misaligned asset prices, we do not currently see any broad-based evidence of excesses in the behavior of banks and other financial institutions and valuations of euro area asset prices,” Draghi said in a statement. Draghi also repeated the ECB’s forward guidance that the key policy rates will remain at the current or lower levels for an extended period of time, well past the horizon of the net asset purchases.
Over $1 trillion in just one quarter. My comment yesterday: “This is such a contradiction in terms it’s crazy the WSJ prints it: “China’s economy may have stabilized for now, thanks to gobs of new debt..”
When China reported its economic data dump last night which was modestly better than expected (one has to marvel at China’s phenomenal ability to calculate its GDP just two weeks after the quarter ended – not even the Bureau of Economic Analysis is that fast), the investing community could finally exhale: after all, the biggest source of “global” instability for the Fed appears to have been neutralized. But what was the reason for this seeming halt to China’s incipient hard landing? The answer was in the secondary data that was reported alongside the primary economic numbers: the March new loan and Total Social Financing report.
As the PBOC reported last night, Chinese banks made 1.37 trillion yuan ($211.23 billion) in new local-currency loans in March, well above analyst expectations, as the central bank scrambled to keep the economy engorged with new loans “to keep policy accomodative to underpin the slowing economy” as Reuters put it. This was up from February’s 726.6 billion yuan but off a record of 2.51 trillion yuan extended in January. Outstanding yuan loans grew 14.7% by month-end on an annual basis, versus expectations of 14.5%. But it wasn’t the total loan tally that is the key figure tracking China’s credit largesse: for that one has to look at the total social financing, which in just the month of March rose to 2.34 trillion yuan, the equivalent of more than a third of a trillion in dollars!
And there is your answer, because if one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China’s economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing “debt reform.” Quite the contrary, China has once again resorted to the old “growth” model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.
And to put it all together, the PBOC also reported that the broad M2 money supply measure grew 13.4% in March from a year earlier, or precisely double the rate of growth of GDP. This means that it took two dollars in new loans to create one dollar of GDP growth. With China’s debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?
China is about to open the floodgates on its huge supplies of cotton, sparking a rout in prices. The country plans to auction about 2 million metric tons from May through August, a government statement showed Friday. That’s almost equal to total shipments expected this season from American growers, the world’s top exporters. The auction sales would represent about 14% of the 13.9-million tons that the U.S Department of Agriculture estimates that China has in its stockpiles. Cotton futures fell the most in six weeks. The price slid more than 7% in the past year in part because the large Chinese inventories curbed overseas purchases from the Asian nation, the biggest consumer of the fiber.
“We knew this was coming, but it’s probably a bit more than what people were expecting” and reduces the country’s import outlook in the near term, Keith Brown, president of brokerage Keith Brown & Co. in Moultrie, Georgia, said in a telephone interview. Adding to the outlook for bigger supplies is favorable growing weather in U.S. cotton areas. Rains in the next few days will boost soil moisture in Texas, the country’s top producer, according to MDA Weather Services in Gaithersburg, Maryland. Drier conditions will aid planting in the U.S. Southeast, the forecaster said. American farmers are expected to increase plantings in the season that starts in August as low prices for competing crops leave farmers with few options, the USDA projects.
“Any increase in production, as well as any volume pushed out of Chinese reserves, will be added to globally available supply in the coming crop year,” industry researcher Cotton Inc. said in a report this week. “High levels of available supply can be expected to keep downward pressure on prices.” Still, the auction sales come as China’s crop is set to shrink this year to the lowest in more than a decade, USDA data show. That’s reducing global output by more than 16%, the biggest annual slide since at least 1961. As the Asian country depletes inventories, in the “long-run it’s positive,” for prices because it means that there will be less supply further down the road, boosting the outlook for eventual imports, Brown said.
The ECB has included European Financial Stability Facility (EFSF) notes in its list of eligible securities for purchasing under its so-called quantitative easing program, an ECB spokesperson said on Friday. “Up to 50% of the outstanding amount can be purchased as this is the limit applicable to securities issued by eligible international organizations,” the spokesperson told Reuters. With holdings of more than €30 billion of such notes after rounds of recapitalization, Greek banks stand to make gains on the securities.
Bank shares were rebounding 16.2% on Friday after losses in the previous sessions. “The market jumped on this one-off positive piece of news after days of negativity,” said Eurobank analyst Nick Koskoletos. Banks had not been not allowed to sell the EFSF notes in the market but they repoed them with the ECB to obtain cheap funding. Apart from capital gains, selling a portion of their EFSF notes to the ECB could reduce the amount Greek banks borrow from it.
Venture-capital investors hit the brakes on investing in the first quarter, following a funding bonanza the past two years that pushed valuations of once-hot technology startups to soaring heights. Funding for U.S. startups fell 25% from the fourth quarter to $13.9 billion, the largest quarterly decline on record since the dot-com bust, according to data from Dow Jones VentureSource. The numbers of deals also hit a four-year low of 884. The drop threatens to hasten a slump rippling through Silicon Valley that is pushing startups to slash marketing budgets, lay off staff and dial back lofty ambitions. Investors such as mutual funds and big banks that pumped money into startups on the promise of big returns have since retrenched, as a punishing market for initial public offerings has spoiled the runaway optimism.
The sky-high valuations of last year have retreated as a result. In the first quarter, the median value of U.S. startups plummeted to $18.5 million after hitting a peak of $61.5 million in last year’s third quarter. “I think investors are nervous, sitting on the sidelines waiting to see what happens,” said Brian Mulvey at PeakSpan Capital, which recently raised a venture fund of $150 million. Investors caution the first-quarter data spans a relatively small period and that capital tends to fluctuate widely throughout the year. VentureSource counts funding rounds for U.S.-based companies with at least one venture-capital firm as an investor. It doesn’t include startups only backed by individuals or majority-owned by corporations or private-equity firms. Several other data providers with varying methodologies show less of a decline.
Goodrich Petroleum filed for chapter 11 bankruptcy Friday with investment firms slated to pick up the pieces, as yet another company sought court protection amid the shakeout in the oil and gas industry. Houston-based Goodrich, an oil and gas producer which struggled to cut its debt as crude prices tumbled, has a deal in place that would erase $400 million in debt from its books through a swap with a group of investors that own bonds the company issued last year. The Goodrich bondholders, who include Franklin Advisors, Penn Capital Management and Jefferies, have agreed to forgive $175 million in debt in exchange for ownership of the company. The deal is part of a larger bankruptcy-exit plan that would pay off or carry over $40 million of higher-ranking senior bank debt and wipe out $224 million in unsecured bonds.
Goodrich’s bankruptcy deal mirrors those proposed recently by other struggling oil producers as the energy slump transforms a U.S. industry once dominated by Texas oil men into one controlled by financial firms from across the nation. Falling oil prices have roiled the industry since the summer of 2014. Since that time, about 60 North American oil and gas companies have filed for bankruptcy, involving nearly $20 billion in debt, according to the law firm Haynes & Boone. On Thursday, Houston’s Energy XXI filed for bankruptcy to complete a debt-for-equity swap with a group of bondholders that includes Oaktree Capital Management.
Denver-based Venoco filed for bankruptcy last month after striking a deal with Apollo Global Management and MAST Capital Management that will erase nearly $1 billion in debt. Energy & Exploration Partners, Magnum Hunter Resources and New Gulf Resourcesare among other energy companies that have brokered similar deals. The rising number of debt-for-equity swaps is due to lenders’ unwillingness to accept the fire-sale prices that potential buyers are offering for oil assets, according to Ian Peck, head of Haynes & Boone’s bankruptcy practice.
Saudi Arabia won’t restrain its oil production unless other producers, including Iran, agree to freeze output at a meeting this weekend in Doha, the kingdom’s deputy crown prince said. The world’s biggest crude exporter would cap its market share at about 10.3 million to 10.4 million barrels a day, if producers agree to the freeze, Prince Mohammed bin Salman said during an interview on Thursday at King Salman’s private farm in Diriyah, the original home of the Al Saud royal family. “If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force. “If we don’t freeze, then we will sell at any opportunity we get.”
At least 15 nations including Saudi Arabia and Russia, the world’s two largest crude oil producers, will gather in Doha on April 17 to discuss freezing output to stabilize an oversupplied market. Prince Mohammed has said Saudi Arabia’s commitment to a production cap would depend on Iran’s participation. Iran’s oil minister has dismissed the prospect of joining the deal as “ridiculous” for now. A Russian official said it was possible to reach a deal in Doha to freeze oil output, regardless of Iran whose crude shipments have risen by more than 600,000 barrels a day this month. That increase has added to the pressure on producer nations to reach an agreement to prop up prices as economies from Venezuela to Nigeria reel from the market rout. The meeting in Doha is only relevant if no deal is reached, prompting a sharp selloff in the markets, according to Ed Morse at Citigroup.
[..] It may seem strange that a doctrine promising choice and freedom should have been promoted with the slogan “there is no alternative”. But, as Hayek remarked on a visit to Pinochet’s Chile – one of the first nations in which the programme was comprehensively applied – “my personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism”. The freedom that neoliberalism offers, which sounds so beguiling when expressed in general terms, turns out to mean freedom for the pike, not for the minnows. Freedom from trade unions and collective bargaining means the freedom to suppress wages. Freedom from regulation means the freedom to poison rivers, endanger workers, charge iniquitous rates of interest and design exotic financial instruments.
Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty. As Naomi Klein documents in The Shock Doctrine, neoliberal theorists advocated the use of crises to impose unpopular policies while people were distracted: for example, in the aftermath of Pinochet’s coup, the Iraq war and Hurricane Katrina, which Friedman described as “an opportunity to radically reform the educational system” in New Orleans. Where neoliberal policies cannot be imposed domestically, they are imposed internationally, through trade treaties incorporating “investor-state dispute settlement”: offshore tribunals in which corporations can press for the removal of social and environmental protections. When parliaments have voted to restrict sales of cigarettes, protect water supplies from mining companies, freeze energy bills or prevent pharmaceutical firms from ripping off the state, corporations have sued, often successfully. Democracy is reduced to theatre.
Another paradox of neoliberalism is that universal competition relies upon universal quantification and comparison. The result is that workers, job-seekers and public services of every kind are subject to a pettifogging, stifling regime of assessment and monitoring, designed to identify the winners and punish the losers. The doctrine that Von Mises proposed would free us from the bureaucratic nightmare of central planning has instead created one. Neoliberalism was not conceived as a self-serving racket, but it rapidly became one. Economic growth has been markedly slower in the neoliberal era (since 1980 in Britain and the US) than it was in the preceding decades; but not for the very rich. Inequality in the distribution of both income and wealth, after 60 years of decline, rose rapidly in this era, due to the smashing of trade unions, tax reductions, rising rents, privatisation and deregulation.
Lots of criticism of Merkel for this, not sure that’s justified. She must be careful when it comes to trumping the law. Let the courts decide. It’s not as if they’ll lock the guy up. Many EU nations have similar antiquated ‘insult to foreign leaders’ laws, by the way.
Jan Böhmermann has disappeared. He’s not giving interviews; he’s not answering his phone. Since Monday, he has also gone silent on Twitter, where he is normally extremely active. He has hardly left his home in Cologne in the last few days and he is also now under police protection. He had his Thursday show on the German public broadcaster ZDF cancelled and his Sunday radio show on RBB will likewise not be broadcast this week. It was cancelled last Sunday as well. Böhmermann was already in his home studio ready to record when he realized that he was in no mood to be funny. So he called it off. Friends and acquaintances who have had contact with him in the last few days are worried that he won’t be able to withstand the pressure.
The ZDF satirist is a sensitive person, even if that hasn’t always been part of his public persona. The scandal surrounding the disparaging poem he wrote about Turkish President Recep Tayyip Erdogan has affected him more deeply than many have realized. Perhaps one has to be vulnerable to emotional pain in order to know how to inflict such pain on others. Two weeks ago, when he was still active on social media, he tweeted out the Beatles hit “The Fool on the Hill.” The song is about a simpleton sitting alone on a hill with a silly grin on his face – and everyone can see that he is a half-wit. It is essentially how people see Böhmermann, and it is how he wanted to be seen: The misunderstood fool. The tweet went out two days after his insulting Erdogan poem was broadcast on his ZDF show “Neo Magazin Royale” and one day after the broadcaster deleted the show from its video hub and distanced itself from Böhmermann’s verses.
And that was just the beginning. Prior to the scandal, Böhmermann had led a niche existence in Germany’s media landscape, but now everybody in the country knows who he is. The 35-year-old has triggered an affair of state, one which has served to demonstrate just how limited Chancellor Angela Merkel’s power really is. And how absurd German law can be. If Böhmermann intended to show just how powerful satire can be, he has been incredibly successful. The Böhmermann scandal is now entering its third week, and only now is it becoming clear just what the five-minute clip has set in motion. It didn’t just shine the spotlight on the Turkish president’s sensitivity and the limits of chancellor’s steadfastness, it has also unsettled all of Germany – a country which normally doesn’t spend much time thinking about satire and art and the freedoms associated with them.
On Friday, the need for doing so became even more apparent. Chancellor Merkel announced that the federal government had granted permission for criminal proceedings to go ahead against Jan Böhmermann under the controversial Paragraph 103 of the German Criminal Code. The law makes it illegal to insult the representatives of foreign countries. The federal government must approve the initiation of Paragraph 103 proceedings.
The global temperature in March has shattered a century-long record and by the greatest margin yet seen for any month. February was far above the long-term average globally, driven largely by climate change, and was described by scientists as a “shocker” and signalling “a kind of climate emergency”. But data released by the Japan Meteorological Agency (JMA) shows that March was even hotter. Compared with the 20th-century average, March was 1.07C hotter across the globe, according to the JMA figures, while February was 1.04C higher. The JMA measurements go back to 1891 and show that every one of the past 11 months has been the hottest ever recorded for that month.
Data released released later on Friday by Nasa confirmed last month was the hottest March on record, but the US agency’s data indicated February had seen the biggest margin. The Nasa data recorded March as 1.65C above the average from 1951-1980, while February was 1.71C higher. The World Meteorological Organisation, the UN body for climate and weather, said the March data had “smashed” previous records.
Pope Francis, widely regarded as one of the world’s greatest defender of refugees, flies into Lesbos on Saturday to highlight the humanitarian crisis unfolding in Europe. The Roman Catholic leader will spend five hours on the island with the Ecumenical head of world Orthodoxy, Patriarch Bartholomew I, and Archbishop of Athens and All Greece, Ieronymos II. Imbued with added urgency on the frontline of the EU’s migrant emergency, the meeting is also being seen as a further warming of ties between the western and eastern branches of Christianity, almost 10 centuries after their bitter split in 1054. The pontiff, who has publicly criticised Europe’s “anaesthetised conscience” on refugees, will go straight to the menacing detention centre above the hilltop village of Moria where more than 3,000 men, women and children are held.
On Friday, just hours before Francis’ scheduled visit, detainees chanted “freedom, freedom” as demonstrators denounced their incarceration. Standing under the razor wire-topped fence, Sham Jutt, a young Pakistani, spoke of the refugees’ plight, saying he hoped the pope could intervene. “We expected a life of hope and now he is our only hope,” said the 21-year-old, adding that he had seen the camp change from being a registration centre to a prison following the controversial pact the EU signed with Turkey to stem the flows. “Now, with this agreement, we are very afraid they will deport us.” Greece’s leftist-led government described Saturday’s visit of religious leaders as “extremely significant”. Lesbos has borne the brunt of the refugee influx with over 850,000 of the 1.1 million Syrians, Afghans and Iraqis who streamed into Europe last year, coming through the island.
Prime minister Alexis Tsipras, also due to fly in, was expected to underline Greece’s increasingly fragile situation in talks with Francis. More than 50,000 migrants and refugees have been trapped in the country since Macedonia and other Balkan states cut off the migrant trail by closing borders. Greece has been struggling to house refugees in makeshift facilities even if arrivals have dropped dramatically since the deal came into effect on 20 March. For detainees who have arrived since then, conditions have deteriorated dramatically. Human rights organisations have withdrawn from Moria and other detention centres for fear of being associated with mass expulsions.
Before the church leaders’ visit, authorities had gone out of their way to clean up the camp, whitewashing graffiti-splattered walls, replacing tents with containers, installing air conditioning and taking families out of the overcrowded facility to an open-air holding centre nearby. “In every sense of the word, they have given it a whitewash,” said Jakob Mamzzak, a volunteer from California. “Today we even heard they had given [inmates] clean clothes, let them have their first shower in 25 days and brought them good food when the truth is conditions are inhumane.”
Pope Francis arrived on the Greek island of Lesbos on Saturday, turning the world’s attention to the frontline of Europe’s migrant crisis which has claimed hundreds of lives in the past year. Francis, leader of the world’s 1.2 billion Roman Catholics, was scheduled to spend about six hours on the small Aegean island. Based on his schedule, he was to meet 250 refugees and have lunch with eight of them. Hundreds of people have died making the short but precarious crossing from Turkey to the Lesbos shores in inflatable dinghies in the past year, and the island is full of unmarked graves. “This is a trip that is a bit different than the others … this is a trip marked by sadness,” Francis told reporters on the airplane taking him to Lesbos.
“We are going to encounter the greatest humanitarian catastrophe since World War Two. We will see many people who are suffering, who don’t know where to go, who had to flee. We are also going to a cemetery, the sea. So many people died there … this is what is in my heart as I make this trip.” With Ecumenical Patriarch Bartholomew, leader of the world’s Orthodox Christians, and Greek Prime Minister Alexis Tsipras, Francis will visit Moria, a sprawling, fenced complex holding more than 3,000 refugees. “This is an island which has lifted all the weight of Europe upon its shoulders,” Tsipras told Francis at Lesbos airport, where a red carpet was rolled out for the pontiff’s arrival. Greek state TV reported Francis was planning to take ten refugees back with him to the Vatican, eight of them Syrians.
Aid organizations have described conditions at Moria, a disused army camp, as appalling. Journalists have no access to the facility on a hillside just outside Lesbos’s main town of Mytiline, but aid workers said walls were whitewashed, a sewer system fixed and several dozen migrants at the overcrowded facility were transferred to another camp, which the pope will not visit. . Aid organizations say queues for food are long, and people often wait for an hour or more. Saturday’s encounter with refugees would be ‘no frills’ and the religious leaders would eat the same food as everyone else at the camp, an official at the camp told Reuters.
A detention centre for asylum seekers in Greece is being urgently spruced up ahead of a visit by the Pope as thousands of people remain trapped inside, waiting to find out if they will be sent back to Turkey. Workers were dispatched to whitewash the wall surrounding Moria, a former refugee camp on the island of Lesbos, while others painted fences, cleared litter and moved stray tents. The last-minute efforts on Friday came ahead of Pope Francis’ arrival tomorrow with a delegation of Catholic and Orthodox leaders. Sacha Myers, who is working inside Moria with Save the Children, told The Independent that the now “very white” wall was not a priority for the families living inside Moria. “We hope the improvements continue but they don’t change the fact that we have still got thousands of people locked inside this detention centre with no idea how long they will be here,” she said.
“The camp was built to hold 2,000 people and now there are 2,900. Families are living on top of each other, there is absolutely no privacy. “We’re seeing a real deterioration in conditions.” Ms Myers, a communications and media manager for the charity, said she had met Iraqi and Syrian mothers whose babies were ill with diarrhoea and fever amid declining hygiene. “Some people are aware of the Pope’s visit,” she added. “They really want him to help them and understand their issues.” Save the Children is warning that child refugees are being held in appalling conditions at the centre, where they report illness, fights and theft. Charity workers described dirty rooms without enough beds, where children are denied legal services and basic support despite concerns for their mental and physical wellbeing.
High-profile visits by Angelina Jolie, Greek Prime Minister Alexis Tsipras and Labour MP Yvette Cooper, among others, have done little to improve the situation in Moris. It was set up last year as one of two refugee camps in Lesbos, but on 20 March the gates were locked as it was turned into a detention centre as part of the controversial EU-Turkey deal. The Pope will be joined by leaders of the Catholic and Orthodox churches as he tours Lesbos, which has seen the highest number of refugees arrive out of any island in Europe. After visiting Moria, they will have lunch with refugee representatives and make a joint declaration, before heading to the island’s capital for a prayer service in memory of the many asylum seekers who have drowned attempting to reach Europe.
The Vatican said the five-hour visit to Lesbos was purely humanitarian and religious in nature, not political, and wasn’t meant as a criticism of the deportation programme seeing some asylum seekers sent back to Turkey. Pope Francis said he intended “to express closeness and solidarity both to the refugees and to the Lesbos citizens and all the Greek people who are so generous in welcoming (refugees)”. The pontiff has been outspoken in calls for greater compassion and international co-operation in the refugee crisis, denouncing the “globalisation of indifference” during a trip to Lampedusa – another migrant hotspot.
The British government’s claim to be tackling tax evasion is about as credible as Al Capone claiming to be leading the fight against organized crime. In fact, Britain is at the heart of the global tax haven network, and continues to lead the fight against its regulation. The 11 and a half million leaked documents from Panamanian law firm Mossack Fonseca have proven, once again, what we have already known for some time – that the ‘offshore world’ of tax havens is a den of money laundering and tax evasion right at the heart of the global financial system. Despite attempts by Western media to twist the revelations into a story about the ‘corruption’ of official enemies – North Korea, Syria, China and, of course, Putin, who is not even mentioned in the documents – the real story is the British government’s assiduous cultivation of the offshore world.
For whilst corruption exists in every country, what enables that corruption to flourish and become institutionalized is the network of secretive financial regimes that allow the world’s biggest criminals and fraudsters to escape taxation, regulation and oversight of their activities. And this network is a conscious creation of the British state. Of the 215,000 companies identified in the Mossack Fonseca documents, over half were incorporated in the British Virgin Islands, one single territory in what tax haven expert Nicholas Shaxson calls a “spider’s web” of well over a dozen separate UK-controlled dens of financial chicanery. In addition, the UK was ranked number two of those jurisdictions where the banks, law firms and other middlemen associated with the Panama Papers operate, only topped by Hong Kong, whose institutional environment is itself a creation of the UK.
And of the ten banks who most frequently asked Mossack Fonseca to set up paper companies to hide their client’s finances, four were British: HSBC, Coutts, Rothschild and UBS. HSBC, recently fined $1.9bn for laundering the money of Mexico’s most violent drug cartels, used the Panamanian firm to create 2,300 offshore companies, whilst Coutts – the family bank of the Windsors – set up just under 500. And, of course, David Cameron’s own father was named in the papers, having “helped create and develop” Blairmore Holdings, worth $20million, from its inception in 1982 till his death in 2010.
Blairmore, in which Cameron junior was also a shareholder, was registered in the Bahamas, and was specifically advertised to investors as a means of avoiding UK tax. The Daily Mail noted that: “Even though he lived in London, the Prime Minister’s father would leave the country and fly to Switzerland or the Bahamas for board meetings of Blairmore Holdings – to ensure it would not have to pay UK income tax or corporation tax. He hired a small army of Bahamas residents, including a part-time bishop, to sign its paperwork – as part of another bid to show his firm was not British-based.”
That Britain should emerge as central to this scandal is no surprise. For as Nicholas Shaxson, a leading authority on tax havens put it when I interviewed him in 2011, “The City of London is effectively the grand-daddy of the global offshore system.” Whilst there are various different lists of tax havens in existence, depending on how exactly they are defined, on any one of them explains Shaxson, “you will see that about half of the tax havens on there, of the ones that matter, are in some way British or partly British.” Firstly, are “Jersey, Guernsey and the Isle of Man: the crown dependencies. They’re very fundamentally controlled by Britain.” Then there are the Overseas Territories, such as the Caymans, Bermuda, and the Virgin Islands, in which “all the things that matter are effectively controlled by Great Britain.”
This goes back a long way. The Panamanian state was originally created to function on behalf of the rich and self-seeking of this world – or rather their antecedents in America – when the 20th century was barely born. Panama was created by the United States for purely selfish commercial reasons, right on that historical hinge between the imminent demise of Britain as the great global empire, and the rise of the new American imperium. The writer Ken Silverstein put it with estimable simplicity in an article for Vice magazine two years ago: “In 1903, the administration of Theodore Roosevelt created the country after bullying Colombia into handing over what was then the province of Panama. Roosevelt acted at the behest of various banking groups, among them JP Morgan, which was appointed as the country’s ‘fiscal agent’ in charge of managing $10m in aid that the US had rushed down to the new nation.”
The reason, of course, was to gain access to, and control of, the canal across the Panamanian isthmus that would open in 1914 to connect the world’s two great oceans, and the commerce that sailed them. The Panamanian elite had learned early that their future lay more lucratively in accommodating the far-off rich than in being part of South America. Annuities paid by the Panama Railroad Company sent more into the Colombian exchequer than Panama ever got back from Bogotá, and it is likely that the province would have seceded anyway – had not a treaty been signed in September 1902 for the Americans to construct a canal under terms that, as the country’s leading historian in English, David Bushnell, writes, “accurately reflected the weak bargaining position of the Colombian negotiator”.
Colombia was, at the time, riven by what it calls the “thousand-day war” between its Liberal and Historical Conservative parties. Panama was one of the battlefields for the war’s later stages. The canal treaty was closely followed by the “Panamanian revolution”, which was led by a French promoter of the canal and backed by what Bushnell calls “the evident complicity of the United States” – and was aided by the fact that the terms of the canal treaty forbade Colombian troops from landing to suppress it, lest they disturb the free transit of goods. The Roosevelt/JP Morgan connection in the setting-up of the new state was a direct one. The Americans’ paperwork was done by a Republican party lawyer close to the administration, William Cromwell, who acted as legal counsel for JP Morgan.
JP Morgan led the American banks in gradually turning Panama into a financial centre – and a haven for tax evasion and money laundering – as well as a passage for shipping, with which these practices were at first entwined when Panama began to register foreign ships to carry fuel for the Standard Oil company in order for the corporation to avoid US tax liabilities.
The prime minister took the unprecedented decision to release his personal tax records on Saturday, as growing anger over revelations in the Panama Papers threatened to derail his premiership. But the extraordinary move seems set to plunge David Cameron into further controversy, as it emerged that his mother transferred two separate payments of £100,000 to his accounts in 2011, allowing the family estate to avoid a potential £80,000 worth of inheritance tax. Four years after first promising to open his financial affairs to public view, Downing Street published a document detailing Cameron’s income and tax payments from 2009-10 to 2014-15. The move came after an emotional Cameron admitted to the Conservative party’s spring forum that he alone was to blame for the furore caused by his failure to be frank about his profits from an offshore investment fund.
On Monday, Cameron will announce the establishment of a taskforce, led by HM Revenue & Customs and the National Crime Agency, to examine the legality of the financial affairs of companies mentioned in the Panama Papers, where documents relating to his father’s offshore fund were discovered by the Guardian and the International Consortium of Investigative Journalists. The taskforce will draw on investigators, compliance specialists and analysts from HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. There will be new money provided of up to £10m. But following the release of the prime minister’s tax records, Cameron now faces questions over whether his family took elaborate steps to minimise the amount of inheritance tax that would eventually be due on their estate.
The records show that the prime minister received a considerable boost to his savings in 2011. Following the death of his father in 2010, Cameron was left £300,000 tax free as an inheritance. However, his mother also transferred two payments of £100,000 to him in May and July 2011. Inheritance tax is not payable on gifts up to £325,000 that are paid at least seven years before the source of the possession dies, be it property or money. A spokesman for the prime minister said that Cameron’s mother and father had “some years earlier” transferred the family home to their eldest son, Alexander Cameron, and the sums paid in 2011 were considered to be Cameron’s share.
The question of tax havens and financial opacity has been headline news for years now. Unfortunately, in this area there is a huge gap between the triumphant declarations of governments and the reality of what they actually do. In 2014, the LuxLeaks investigation revealed that multinationals paid almost no tax in Europe, thanks to their subsidiaries in Luxembourg. In 2016, the Panama Papers have shown the extent to which financial and political elites in the north and the south conceal their assets. We can be glad to see that the journalists are doing their job. The problem is that the governments are not doing theirs. The truth is that almost nothing has been done since the crisis in 2008. In some ways, things have even got worse.
Let’s take each topic in turn. Exacerbated fiscal competition on the taxing of profits of big companies has reached new heights in Europe. The United Kingdom is going to reduce its rate to 17%, something unheard of for a major country, while continuing to protect the predatory practices of the Virgin Islands and other offshore centres under the British Crown. If nothing is done, we will all ultimately align ourselves on the 12% of Ireland, or possibly on 0%, or even on grants to investments, as is already sometimes the case. In the meantime, in the United States where there is a federal tax on profits, that rate is 35% (not including the taxes levelled by states, ranging between 5% and 10%). It is the political fragmentation of Europe and the lack of a strong public authority which puts us at the mercy of private interests.
The good news is that there is a way out of the current political impasse. If four countries, France, Germany, Italy and Spain, who together account for over 75% of the GDP and the population in the eurozone put forward a new treaty based on democracy and fiscal justice, with as a strong measure the adoption of a common tax system for large corporations, then the other countries would be forced to follow them. If they did not do so they would not be in compliance with the improvement in transparency which public opinions have been demanding for years and would be open to sanctions.
There is still a complete lack of transparency as far as private assets held in tax havens are concerned. In many areas of the world, the biggest fortunes have continued to grow since 2008 much more quickly than the size of the economy, partly because they pay less tax than the others. In France in 2013 a junior minister for the budget calmly explained that he did not have an account in Switzerland, with no fear that his ministry might find out about it. Once again, it took journalists to reveal the truth.
“Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise. Add another $3 trillion or so in state and local debt.”
The weakest recovery in modern history has stretched on for 69 months. By 2017, it will be the third-longest recovery without a recession since the Great Depression. By 2018, it will be the second longest. Only during the halcyon economic days of the 1960s have we seen a longer recovery; but that record, too, will be eclipsed sometime in 2019—if we don’t see a recession first. And note that we were growing at well over 3% in the 1960s, not the anemic 2% we have averaged during this recovery and certainly not the positively puny 1.5% we have endured lately. Global growth is slowing down. Given the limited number of arrows left in the Federal Reserve’s monetary policy quiver, the US is going to have a difficult time dealing with the fallout from a recession. Even worse, a number of factors are coming together that will require serious crisis management.
Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise. Add another $3 trillion or so in state and local debt. As you may imagine, the interest on that debt is beginning to add up, even at the extraordinarily low rates we have today. Sometime in 2019, entitlement spending, defense, and interest will consume all the tax revenues collected by the US government. That means all spending for everything else will have to be borrowed. The CBO projects the deficit will rise to over $1 trillion by 2023. By that point, entitlement spending and net interest will be consuming almost all tax revenues, and we will be borrowing to pay for our defense. Let’s look at the following chart, which comes from CBO data:
By 2019, the deficit is projected to be $738 billion. There are only three ways to reduce that deficit: cut spending, raise taxes, or authorize the Federal Reserve to monetize the debt. At the numbers we are now talking about, getting rid of fraud and wasted government expenditures is a rounding error. Let’s say you could find $100 billion here or there. You are still a long, long way from a balanced budget. But implicit in the CBO projections is the assumption that we will not have a recession in the next 10 years. Plus, the CBO assumes growth above what we’ve seen in the last year or so.
German Finance Minister Wolfgang Schäuble called on governments in Europe and the U.S. to encourage their central banks to gradually exit easy-money policies, in the strongest sign yet of Berlin’s growing impatience with the ultralow interest rates of the ECB. “There is a growing understanding that excessive liquidity has become more a cause than a solution to the problem,” Mr. Schäuble said, comparing the move away from easy-money policies to ending a drug addiction. The unusually blunt comments from Chancellor Angela Merkel’s closest political ally come as the ECB has repeatedly ramped up its stimulus in recent months, seeking to support economic growth in the face of rising global headwinds and financial-market volatility.
While Mr. Schäuble’s opposition to the ECB’s monetary policy is well known, the veteran politician has voiced his criticism more openly lately, suggesting Berlin is growing impatient amid a mounting popular backlash against a policy that has depleted the returns on the savings of millions of Germans. Government officials and central bankers are preparing to converge on Washington, D.C., next week for the Spring meetings of the IMF, where they are expected to discuss policies to revive global growth. Speaking in Kronberg near Frankfurt late Friday at a prize ceremony organized by a German economic think tank, Mr. Schäuble said he had just discussed central-bank policies with his U.S. counterpart, Treasury Secretary Jacob Lew. “I just said to Jack Lew that you should encourage the Federal Reserve and we should encourage the ECB and the Bank of England in a concerted action, to carefully but slowly exit,” Mr. Schäuble said.
In the U.S., the Treasury secretary doesn’t have authority over the Federal Reserve, which is tasked with setting monetary policy. The ECB has twice ramped up its €1.5 trillion stimulus since December, most recently in March, when it rolled out a series of rate cuts, cheap loans for banks and an acceleration of bond purchases. Top ECB officials have stressed in recent days that they are ready to do even more to support the bloc’s economy. Meanwhile Federal Reserve officials have signaled that the U.S. central bank will raise rates only gradually until the global economy picks up steam, according to the minutes of their March policy meeting. Japan’s central bank stunned the markets in January by setting the country’s first negative interest rates.
The U.S. ought to be spending more on infrastructure. This is the view of all right-thinking people, and as a right-thinking person I of course endorse it. With interest rates near record lows and the working-age population still, by historical and international standards, underemployed, governments (or in some cases entrepreneurs) should be borrowing much more to repave roads, shore up bridges, expand mass-transit systems, build new sewage-treatment plants, replace water mains, you name it. Such borrowing and spending would make the nation richer by stimulating economic activity now and paving the way for stronger economic growth in the future.
That said, the U.S. probably also ought to be spending less on infrastructure. Not overall, but on something like a per-mile basis. Broad international cost comparisons across all kinds of infrastructure don’t seem to be available, but there is a growing body of evidence on one particular infrastructure area that matters a lot to me as a New York City commuter: subways and other rail systems. And it shows that U.S. construction costs are among the world’s highest.
Transportation blogger Alon Levy has probably done the most to raise awareness of this, with five years of posts documenting the cost differences. And last year, Tracy Gordon of the Urban-Brookings Tax Policy Center and David Schleicher of Yale Law School examined 144 planned and finished rail projects in 44 countries and found that the four most expensive on a per-kilometer basis (and six of the top 12) were in the U.S. To put these numbers in global perspective, New York’s Second Avenue Subway will cost roughly eight times more than Tokyo’s Koto Waterfront line and 36 times more than Madrid’s Metrosur tunnels on a per-kilometer, purchasing power parity (PPP) basis.
Why is this? It’s actually pretty hard to answer. Here’s Levy, writing in November 2014: “I try to avoid giving explanations for these patterns of construction costs. If I knew for certain what caused them, I would not be blogging; I would be forming a consultancy and teaching New York and other high-cost cities how to build subways for less than $100 million per kilometer.” Still, others have been willing to offer explanations. In a 2012 Bloomberg View piece, New York land-use and transit writer Stephen Smith blamed over-reliance on outside consultants, overly ambitious station architecture and a legal system that favors contractors over the agencies paying them to build things.
Gordon and Schleicher agreed that the legal system may be an issue, but for other reasons: “Many of the world’s most expensive projects are in the United Kingdom, Australia, and New Zealand, which, like the United States, have common-law systems. So it might be that common-law systems provide legal protections for property owners – allowing more lawsuits over noise, smoke, and other nuisances, as well as limits on eminent domain – that increase costs by forcing the government to pay off opponents or to locate projects inefficiently to avoid angering property owners.” They also cite political fragmentation as a factor that drives up costs – U.S. commuter rail systems often cross city and state lines, which brings coordination challenges – and note that when regional authorities are created to manage these challenges, they can bring a whole new set of problems.
The latest flare up regarding Greece has followed publication by Wikileaks of illegally taped discussions among IMF officials. To analyse the significance of this event it is vital to bear one point in mind: Greece cannot meet the terms of the bailout agreement struck on July 2015 by Prime Minister, Alexis Tsipras. The agreement is effectively dead and all parties involved are aware of that, even if they are not openly admitting it. To establish this point there is no need to engage either in Debt Sustainability Analysis, or in macroeconomic projections of output. Suffice to mention that the agreement requires Greece to ensure a primary surplus of 3.5% of GDP in 2018.
The Greek economy actually returned to recession in the last quarter of 2015 and the available indicators since the end of 2015 have ranged from bad to appalling: industrial turnover in December was down 13.5%, retail turnover in January down 3.8%, unemployment in the last quarter of 2015 up to 24.4%, job vacancies for the whole of the economy in the last quarter of 2015 stood at a pitiful 3119, and the banking system currently has perhaps €115bn of non-performing exposure, roughly 50% of its loan book. Once the austerity measures of the bailout agreement kick in, substantially reducing aggregate demand for 2016-17 via tax increases and lower pensions, the recession will become deeper. There is no way that this ruined economy could generate a 3.5% primary surplus in 2018. The problems thereby created for all parties to this disastrous bailout are legion.
In the worst position is the Greek government, which signed up to the bailout in direct contravention of everything that it had promised to do in 2015. As the reality of its deception and the harshness of the squeeze have begun to sink in, electoral support for Tsipras has vanished. All competent polls show the opposition New Democracy – with a new leader – comfortably ahead. The outlook has become even worse for SYRIZA via the refugee wave, which has turned Greece into a kind of EU repository for refugees and migrants. For the time being the country has avoided a major crisis, but the situation remains extremely fraught as the deportation of migrants to Turkey has just started.
In this context, the last thing that the Tsipras government would like to do is to impose further pressure on wage earners, or tax payers in an attempt to meet the impossible target of 3.5%. On the contrary, it is extremely keen to complete the first review of the bailout programme on a nod and a wink, pretending that current measures are sufficient to hit the bailout targets. It then hopes to receive a tranche of bailout money that will give it breathing space for a few months. The government’s further hope is that investment will pick up by the end of 2016, possibly through foreign capital inflows, thus allowing the economy to recover somewhat.
The island of Lesbos tends to go to town when celebrities descend. The last time it welcomed a VIP, the razorwire running along large parts of its infamous detention centre was hastily removed. Angelina Jolie got a brief glimpse of it as she walked in, but reportedly not as she later walked around the camp greeting migrants and refugees. The superstar special envoy of the UN high commissioner for refugees (UNHCR) was instead given an edited view of the camp, volunteers say. It will be different when Pope Francis flies in on Saturday. The purpose of the pontiff’s visit to the Aegean is to see the migrant emergency up close, and the authorities are keen that no blinkers are involved. This time, the island on the frontline of the biggest movement of people in modern times intends to show it as it is.
“We won’t be changing anything,” says mayor Spyros Galinos when asked if municipal workers will at least be cleaning up the graffiti on the camp’s walls. “His visit has huge symbolism. It is what we have wanted, what we have seen in our sleep, what we have dreamed of for years.” For four hours, Francis will grant that wish when he arrives in Greece for what will be a rare papal visit. The leader of the worldwide Catholic church will be accompanied by the Istanbul-based spiritual leader of the world’s 300 million Orthodox Christians, Bartholomew I, and Ieronymos II of Athens, head of the Greek Orthodox church. It will be a whirlwind tour of the island traversed by many of the 1.1 million men, women and children who have streamed into Europe, mostly from Syria but also from other parts of the Middle East, Africa and Asia last year.
The pope has long had refugees in his sights – and encyclicals. The trip, say Vatican officials, is aimed squarely at drawing attention to the centre of Europe’s migration crisis. By highlighting the “increasingly precarious living conditions for thousands of refugees and migrants” who have reached Lesbos, the Holy See’s newspaper, L’Osservatore Romano, said Francis hoped to offer a “Christian response to the tragedy that is unfolding”. [..] “His visit is not going to do anything for one single refugee in this country,” laments Alison Terry-Evans, who runs Dirty Girls, an organisation in Lesbos that launders blankets distributed by the UNHCR and the wet clothes of arriving refugees. “It is so hypocritical that a man who heads a multibillion-dollar corporation like the Vatican is unlikely to take any action that will contribute financially. That is the pity of it. ”
Greece says it will take at least two weeks to fix the process of deporting migrants from the eastern Aegean islands to Turkey. The country’s deputy foreign minister for European affairs, Nikos Xydakis, admitted as much at a press conference attended also by his colleagues from France, Italy, Malta and Portugal, as well as the foreign ministers of the Netherlands and Slovakia. Deportations from Greece to Turkey have been temporarily halted as most of the 6,750 migrants in the Greek islands are applying for asylum and there is a lack of qualified officials such as translators to process the applications.
Most of the experts promised by the EU have not yet arrived. French European affairs minister Harlem Desir is urging refugees from war-torn Syria and Iraq to follow legal procedures to seek asylum in Europe rather than risk their lives in the perilous sea crossing into Greece, which now leads only back to Turkey, since Balkan countries north of Greece have shut their borders. Desir says France will welcome 200 refugees directly from Turkey “in the coming days and weeks.”
The danger lurking in the risk asset markets was succinctly captured by MarketWatch’s post on overnight action in Asia. The latter proved once again that the casino gamblers are incapable of recognizing the on-rushing train of global recession because they have become addicted to “stimulus” as a way of life:
Shares in Hong Kong led a rally across most of Asia Tuesday, on expectations for more stimulus from Chinese authorities, specifically in the property sector…….The gains follow fresh readings on China’s economy, which showed further signs of slowdown in manufacturing data released Tuesday (which) remains plagued by overcapacity, falling prices and weak demand. The dimming view casts doubt that the world’s second-largest economy can achieve its target growth of around 7% for the year. The central bank has cut interest rates six times since last November.
More stimulus from China? Now that’s a true absurdity – not because the desperate suzerains of red capitalism in Beijing won’t try it, but because it can’t possibly enhance the earnings capacity of either Chinese companies or the international equities. In fact, it is plain as day that China has reached “peak debt”. Additional borrowing there will not only prolong the Ponzi and thereby exacerbate the eventual crash, but won’t even do much in the short-run to brake the current downward economic spiral. That’s because China is so saturated with debt that still lower interest rates or further reduction of bank reserve requirements would amount to pushing on an exceedingly limp credit string. To wit, at the time of the 2008 crisis, China’s “official” GDP was about $5 trillion and its total public and private credit market debt was roughly $8 trillion.
Since then, debt has soared to $30 trillion while GDP has purportedly doubled. But that’s only when you count the massive outlays for white elephants and malinvestments which get counted as fixed asset spending. So at a minimum, China has borrowed $4.50 for every new dollar of reported GDP, and far more than that when it comes to the production of sustainable wealth. Indeed, everything is so massively overbuilt in China – from unused airports to empty malls and luxury apartments to redundant coal mines, steel plants, cement kilns, auto plants, solar farms and much, much more – that more borrowing and construction is not only absolutely pointless; it is positively destructive because it will result in an even more destructive adjustment cycle. That is, it will only add to the immense already existing downward pressure on prices, rents and profits in China, thereby insuring that even more trillions of bad debts will eventually implode.
[..] When peak debt is reached, additional credit never leaves the financial system; it just finances the final blow-off phase of leveraged speculation in the secondary markets.
Manufacturing in the U.S. unexpectedly contracted in November at the fastest pace since the last recession as elevated inventories led to cutbacks in orders and production. The Institute for Supply Management’s index dropped to 48.6, the lowest level since June 2009, from 50.1 in October, its report showed Tuesday. The November figure was weaker than the most pessimistic forecast in a Bloomberg survey. Readings less than 50 indicate contraction. The report showed factories believed their customers continued to have too many goods on hand, indicating it will take time for orders and production to stabilize.
Manufacturers, which account for almost 12% of the economy, are also battling weak global demand, an appreciating dollar and less capital spending in the energy sector. “There are some clear signs of weakness — industries that are tied to oil and gas, agriculture or are heavily dependent on exports are all clearly slowing,” Mark Vitner at Wells Fargo Securities said before the report. “It wouldn’t surprise me if the manufacturing numbers remain soft for the next five to six months.”
It’s seven years after the financial crisis and the banking industry is still in receipt of state support – support that will be available for two more years, and perhaps for longer. The Treasury and the Bank of England have decided to extend their Funding for Lending Scheme (FLS), which supplies banks with cheap money with the aim of keeping the supply of credit flowing. What ought, in theory, to be the scheme’s final outing will be very specifically targeted at lending to small and medium-sized enterprises (SMEs). This is a sector which is still struggling to obtain the funding it needs at a time when lending to other sectors has largely recovered. The Bank says that things are improving, and its figures bear that out. But not quickly, and the growth in small business lending pales by comparison to the growth in consumer lending.
The expansion of the latter is starting to cause concern, with the Bank’s chief economist, Andy Haldane, fretting about personal loans. He says they’re picking up at a rate of knots. Britain has long nursed an addiction to the drug of debt that it’s never really addressed and the growth in unsecured lending is an indication of a return to bad habits. Given that Mr Haldane and his colleagues are engaged in the unenviable task of walking an economic tightrope, it’s no wonder that he’s getting twitchy. But consumers are not, as yet, shooting up with the sort of wild abandon they exhibited in the run-up to the crisis. And, as Investec’s Philip Shaw points out, it wasn’t so long ago that we were still talking about the need to make more credit available.
Workers in the UK will have the worst pensions of any major economy and the oldest official retirement age of any country, according tothe Organisation for Economic Co-operation and Development. The typical British worker can look forward to a pension worth only 40% of their pay , once state and private pensions are combined. The Paris-based thinktank said on Tuesday that this compares with about 90% in the Netherlands and Austria and 80% in Spain and Italy. Only Mexico and Chile offer their workers a worse prospect after retirement, although Turkey is the surprise table-topper, giving its retirees an average pension equal to 105% of average wages, according to the OECD report. Britain has begun an auto-enrolment scheme that will offer millions of low-paid workers a private pension for the first time.
But with contribution rates low, the payouts will not be generous. Last week the chancellor, George Osborne, gave employers a six-month delay to planned increases in their contribution rates. Pensions expert Tom McPhail of Hargreaves Lansdown said: “This analysis makes embarrassing reading for the politicians who have been responsible for the UK’s pensions over the past 25 years. “The state pension was in steady decline for years. Even though it is improving for lower earners now, average payouts will not be rising. It is in the private sector though where the real damage has been done; the collapse in final salary pensions has not yet been replaced with well-funded alternatives.” The age at which workers qualify for a state pension in the UK will, at 68 years old, be the highest of any country in the world, equalled only by Ireland and Czech Republic.
The prize for earliest retirees goes to France and Belgium. “Workers stay the longest in the labour market in Korea, Mexico, Iceland and Japan; men exit the soonest in France and Belgium while women leave the earliest in the Slovak Republic, Slovenia and Poland,” said the OECD. While many European countries offer significantly better pensions than in Britain, the cost is now close to sustainable, said the OECD. In recent years there have been frequent warnings about the “demographic timebomb” that will wreck the finances of ageing European nations. But the OECD said that changes to taxation, contribution rates and pensionable ages means that the burden of paying pensions will rise from the current level of 9% of GDP to just 10.1% by 2050.
Standard and Poor’s cut Volkswagen’s credit rating to “BBB+” from “A-” on Tuesday, shortly after the automaker reported that an emissions-cheating scandal took a serious bite out of its U.S. sales last month. The German automaker said that November U.S. sales fell almost 25% from a year ago. The company blamed the decline on stop-sale orders for diesel-powered vehicles that the government says cheated on pollution tests. The VW brand sold just under 24,000 vehicles last month compared with almost 32,000 a year ago.
S&P noted the emissions scandal also contributed to its ratings cut. The agency said it expects Volkswagen to “experience ongoing adverse credit impacts.” The U.S. is a relatively small market for Volkswagen. The VW brand sold 490,000 vehicles worldwide in October, 5% below a year ago. VW has admitted that 482,000 2-liter diesel vehicles in the U.S. contained software that turned pollution controls on for government tests and off for real-world driving. The government says another 85,000 six-cylinder diesels also had cheating software.
Thomas Piketty is out with a new argument about income inequality. It may prove more controversial than his book, which continues to generate debate in political and economic circles. The new argument, which Piketty spelled out recently in the French newspaper Le Monde, is this: Inequality is a major driver of Middle Eastern terrorism, including the Islamic State attacks on Paris earlier this month — and Western nations have themselves largely to blame for that inequality. Piketty writes that the Middle East’s political and social system has been made fragile by the high concentration of oil wealth into a few countries with relatively little population.
If you look at the region between Egypt and Iran — which includes Syria — you find several oil monarchies controlling between 60 and 70% of wealth, while housing just a bit more than 10% of the 300 million people living in that area. (Piketty does not specify which countries he’s talking about, but judging from a study he co-authored last year on Middle East inequality, it appears he means Qatar, the United Arab Emirates, Kuwait, Saudia Arabia, Bahrain and Oman. By his numbers, they accounted for 16% of the region’s population in 2012 and almost 60% of its gross domestic product.) This concentration of so much wealth in countries with so small a share of the population, he says, makes the region “the most unequal on the planet.”
Within those monarchies, he continues, a small slice of people controls most of the wealth, while a large — including women and refugees — are kept in a state of “semi-slavery.” Those economic conditions, he says, have become justifications for jihadists, along with the casualties of a series of wars in the region perpetuated by Western powers. His list starts with the first Gulf War, which he says resulted in allied forces returning oil “to the emirs.” Though he does not spend much space connecting those ideas, the clear implication is that economic deprivation and the horrors of wars that benefited only a select few of the region’s residents have, mixed together, become what he calls a “powder keg” for terrorism across the region.
Piketty is particularly scathing when he blames the inequality of the region, and the persistence of oil monarchies that perpetuate it, on the West: “These are the regimes that are militarily and politically supported by Western powers, all too happy to get some crumbs to fund their [soccer] clubs or sell some weapons. No wonder our lessons in social justice and democracy find little welcome among Middle Eastern youth.” Terrorism that is rooted in inequality, Piketty continues, is best combated economically.
All totlly legal, no doubt. “..an emerald and diamond jewellery set containing a ring, earrings, bracelet, and necklace, which was valued at $780,000 [was given to] Teresa Heinz Kerry, wife of US Secretary of State John Kerry.
Three quarters of the value of all official gifts given to the US administration in 2014 came from Saudi Arabia, according to US government records. US President Barack Obama, First Lady Michelle Obama, their daughters and US federal government employees received official gifts estimated to be worth a total of $3,417,559 last year. Analysis of the annual disclosure, released by the US Department of State’s Office of the Chief of Protocol, found Saudi Arabia gave the US gifts valued at around $2,566,525. It dominated the report and represented 75% of the value of all gifts received by Obama and his government employees last year.
When all other Arab countries are added to the mix the total value rises to nearly $3 million, with the Arab region accounting for 87% of the value of all gifts. The most lavish gift was an emerald and diamond jewellery set containing a ring, earrings, bracelet, and necklace, which was valued at $780,000. It was not given to Obama, his wife Michelle or his children, but Teresa Heinz Kerry, wife of US Secretary of State John Kerry. The jewels were given to Mrs Kerry in January 2014 by the late King Abdullah bin Abdulaziz Al-Saud. First Lady Michelle Obama is included in the top five with two gifts of jewels from Saudi Arabia, each worth well over half a million dollars.
The president himself is further down the list, behind his children and wife, and ranked 7th with a white gold men’s watch worth $67,000. The six other Gulf states also gave lavish gifts to the Obama administration. Qatar gave Eric Holder, US Attorney General, a $24,150 gold and silver ship depicting United States and the State of Qatar flags in a case, in addition to an engraved Cartier bracelet. The UAE also gifted a gold necklace and earring set with white stones worth around $3,200 to Deborah K. Jones, Ambassador of the US to the State of Libya. The gift was presented in March 2014 on behalf of Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE.
Soon after launching a brutal air and ground assault in Yemen, the Kingdom of Saudi Arabia began devoting significant resources to a sophisticated public relations blitz in Washington, D.C. The PR campaign is designed to maintain close ties with the U.S. even as the Saudi-led military incursion into the poorest Arab nation in the Middle East has killed nearly 6,000 people, almost half of them civilians. Elements of the charm offensive include the launch of a pro-Saudi Arabia media portal operated by high-profile Republican campaign consultants; a special English-language website devoted to putting a positive spin on the latest developments in the Yemen war; glitzy dinners with American political and business elites; and a non-stop push to sway reporters and policymakers. That has been accompanied by a spending spree on American lobbyists with ties to the Washington establishment.
The Saudi Arabian Embassy, as we’ve reported, now retains the brother of Hillary Clinton’s campaign chairman, the leader of one of the largest Republican Super PACs in the country, and a law firm with deep ties to the Obama administration. One of Jeb Bush’s top fundraisers, Ignacio Sanchez, is also lobbying for the Saudi Kingdom. Saudi Arabia’s relationship with the U.S. has come under particular strain in recent years as the government has not only launched the brutal war in Yemen, but has embarked on a wave of repression. Following the appointment of Salman bin Abdulaziz Al-Saud to the Saudi throne in January, the Kingdom sharply increased the number of people executed — often by beheading and crucifixion — for daring to protest or criticize the government or for crimes as minor as adultery or “witchcraft.” On November 17, a Saudi court sentenced Ashraf Fayadh, a famed poet, to death for “apostasy.”
There have also been reports that Saudi Arabia continues to be a leading driver of Sunni terror networks worldwide, including in Syria and Iraq. The Saudi Arabian government is currently supplying weapons to a Syrian rebel coalition that includes the Nusra Front, al Qaeda’s affiliate in the region. As the New York Times has reported, private donors in Saudi Arabia have also worked as fundraisers for the Islamic State, or ISIS. And there is a renewed, bipartisan push by lawmakers to declassify the 28 pages of the 9/11 Commission Report, a censored section that reportedly relates to Saudi state support for al Qaeda’s operation.
Pope Francis, galvanized by a scandal over Vatican finances, has ordered the most powerful bodies in the city-state to launch an unprecedented audit of its wealth and crack down on runaway spending. At the suggestion of his economic chief, Cardinal George Pell, Francis has set up a “Working-Party for the Economic Future” which brings together the Secretariat of State, or prime minister’s office, the Vatican Bank and other agencies. Francis has told the panel “to address the financial challenges and identify how more resources can be devoted to the many good works of the Church, especially supporting the poor and vulnerable,” Danny Casey, director of Pell’s office at the Secretariat for the Economy, said in an interview.
The pope’s initiatives come as five people stand trial in the Vatican over the leak of confidential documents in two books published last month that described corruption, mismanagement and wasteful spending by church officials. Those on trial deny wrongdoing. Francis, 78, has pushed for more openness and transparency in Vatican financial and economic agencies but he has faced resistance from the Rome bureaucracy. On the flight back to Rome on Monday after a visit to Africa, Francis told reporters that the so-called Vatileaks II scandal was an indication of the mess that he’s trying to sort out.
The trial of two former Vatican employees alongside the books’ authors highlighted Church efforts “to seek out corruption, the things which aren’t right,” he said, according to a transcript provided by the Vatican. The working group, which held its first meeting last week, will study measures to cut costs and raise revenue as part of a long-term financial plan. “This will include comparing actual expenditure against budgets at a consolidated level, which is a new initiative,” Casey said.
The IMF’s decision to add China’s yuan to its reserves basket is a triumph for Beijing, but the fund’s verdict that the currency met its “freely usable” test will have little financial impact unless Beijing recruits more users. The desire of Chinese reformers to internationalize the currency has a clear economic rationale; a yuan in wide circulation overseas would reduce China’s dependence on the dollar system and on policy set in Washington. It would also make it easier for Chinese firms to invoice and borrow offshore in yuan, reducing the risk of exchange rate fluctuations and prompting China’s inefficient state-owned banks to improve their performance or lose business. Those concerned about a potential global liquidity crisis caused by overdependence on the United States might also welcome the yuan as an alternative to the dollar, as would countries locked out of dollar capital markets by sanctions.
But to serve these purposes, there needs to be a much bigger pool of yuan outside China, which requires offshore institutions – and not just in Hong Kong – to buy and hold yuan. Few believe the IMF decision alone, which economist Alicia Garcia-Herrero called a “beauty contest”, will change investor behavior much. For that, says Swiss bank UBS, Beijing needs to continue financial reforms and capital account liberalization to improve the efficiency of capital allocation in China. Foreign investors want Beijing to provide predictable and transparent legal and taxation treatment, and drop its penchant for pilot programs and quotas in favor of consistency. They also want to know they can freely sell their yuan assets, not just buy, a concern that only grew over the summer, when Beijing stepped into its stock markets to stop a sell-off.
Foreign investors aren’t making full use of the existing channels to buy Chinese assets that Beijing allows – quotas for the two Qualified Foreign Institutional Investor programs (QFII and RQFII) and the Shanghai-Hong Kong Stock Connect have yet to be used up. And for all the impressive trade statistics, much of the “offshore” yuan isn’t traveling the globe but bouncing to and fro across the internal border with Hong Kong, largely traded between Chinese companies. “The number one thing we would like to see changed is that the QFII and RQFII quotas are dropped, just as they dropped in July the quotas for central banks, sovereign wealth funds and supernationals. It’ll make it a lot easier for global institutional investors,” said Hayden Briscoe at AllianceBernstein in Hong Kong.
Why would China want the IMF to put the yuan in the SDR? It may want to engineer a bump in capital inflows, at a time when money is trying to leave China. Generating some foreign demand for yuan-denominated assets might help stabilize the Chinese currency, which is expected to depreciate a bit in the months ahead. The IMF might be motivated to help China limit the moves in its currency in order to promote global macroeconomic stability, or it might want to lure China into making sovereign loans through the fund instead of on its own. Ultimately, the yuan’s status as a reserve currency will be driven by China’s further liberalization of its capital account. The easier it becomes to move money in and out of yuan, the more asset managers will be willing to put their money in.
And if China ascends to true reserve currency status, the most important effects will be in the long term – not all of them good. True reserve currency status makes it cheaper for a government to borrow, which means that – all else equal – more borrowing will happen. That will increase net capital inflows. And as many countries have learned during the last decade, capital inflows can cause trouble. That doesn’t make a lot of sense, intuitively. How could it harm a country to allow it to borrow cheaply? If countries were rational and foresighted, they would borrow no more than is healthy. But sovereign borrowing decisions are the result of government decisions not market ones, and no one would argue that governments always make wise choices. Even the private sector, though, could be harmed by capital inflows.
As economists Gianluca Benigno, Nathan Converse, and Luca Fornaro have found, large influxes of foreign money can lead to booms and busts. They can also cause a country to shift resources out of manufacturing, where productivity growth is often high, into service-oriented industries where productivity is relatively stagnant. Over the past several decades, the U.S. dollar has been the main reserve currency, and the U.S. has experienced huge capital inflows, especially from countries such as China. Those capital inflows in turn have caused a large, persistent trade deficit. Perhaps not coincidentally, U.S. manufacturing hasn’t grown very fast since the late 1990s. In the year ahead, reserve-currency status might help cushion the country’s economic slowdown. But in the long term, it might be a poisoned chalice for China.
The EU is warning Greece it faces suspension from the Schengen passport-free travel zone unless it overhauls its response to the migration crisis by mid-December, as frustration mounts over Athens’ reluctance to accept outside support. Several European ministers and senior EU officials see the threat of pushing out Greece over “serious deficiencies” in border control as the only way left to persuade Alexis Tsipras, Greece’s prime minister, to deliver on his promises and take up EU offers of help. If the EU follows through on its threat, it would mark the first time a country has been suspended from Schengen since its establishment in 1985. The challenge to Athens comes amid a bigger rethink on tightening joint border control to ensure the survival of the Schengen zone.
The European Commission will this month propose a joint border force empowered to take charge of borders, potentially even against the will of frontline states such as Greece. Greece’s relatively weak administration has been overwhelmed by more than 700,000 migrants crossing its frontiers this year. Given the severity of the crisis, EU officials are vexed by Athens’s refusal to call in a special mission from Frontex, the EU border agency; its unwillingness to accept EU humanitarian aid; and its failure to revamp its system for registering refugees. EU home affairs ministers, who meet on Friday, are to make clear that more drastic measures will be considered if Greece fails to take action before a summit of EU leaders in mid-December, according to four senior European diplomats.
The suspension warning has been delivered repeatedly to Greece this week, including through a visit to Athens by Jean Asselborn, foreign minister of Luxembourg, which holds the EU’s rotating presidency. One Greek official strongly denied accusations of being unco-operative and said claims Mr Tsipras has failed to meet pledges made at a summit of western Balkan leaders last month were “untrue”. But another official acknowledged the foot-dragging. He said it stemmed from a legal requirement that only Greeks were allowed to patrol the country’s borders as well as sensitivity over the long-running dispute over Macedonia’s name and suspicions about Turkish designs on certain Greek islands, including Lesbos, point of entry for many migrants.
As Greece shares no land borders with Schengen , Greek officials point out it will have no impact on migrant flows. “There are no refugees leaving Greece who are flying ,” he said. EU officials acknowledge this but say the withdrawal of travel rights for Greeks is one of their few points of leverage over Mr Tsipras. Athens has recently turned down a deployment of up to 400 Frontex staff to immediately reinforce its border with Macedonia, complaining in a letter to the European Commission that their mandate was too broad and went beyond registration. Greek officials have yet to accept an invitation to invoke an emergency aid scheme – the EU civil protection mechanism — that would rush humanitarian support to islands and border areas.
Danes head to the polling stations on Thursday (3 December) for their eighth EU referendum since a majority voted Yes to join the club back in 1972. So far, they voted five time Yes and two times No, with a narrow lead for the No side this time around. A Gallup poll published on Saturday in the Berlingske Tidende daily showed 38% intend to vote No, with 34% Yes, and 23% undecided. You need to go back to the Maastricht treaty referendum over 20 years ago to find the reason for this week’s plebiscite. Maastricht was initially rejected by the Danes in 1992. In order to save the entire treaty, Denmark, at a summit in Edinburgh, was offered a handful of treaty-based opt-outs, preserving Danish sovereignty over EU-policy areas, such as the euro and justice and home affairs.
The Maastricht treaty was then approved together with the opt-outs in a re-run of the vote in 1993. EU legislation in the area of justice and home affairs has ballooned in the 20 years which followed. Today, it includes important areas such as cybercrime, trafficking, data protection, the Schengen free-travel system, refugee and asylum policy, and closer police co-operation on counter-terrorism. Bound by the old treaty opt-out, Denmark automatically stays out of all the supra-national EU justice and home affairs policies and doesn’t take part in EU Council votes in these areas. A frustrated majority in the Danish parliament, nick-named “Borgen” (The Castle), in August voted to call the referendum asking citizens to scrap the old arragement. They wanted permission from voters to opt in to the justice and home affairs policies over time, without having to consult people, each time, in a referendum.
The Yes parties identified 22 existing EU initiatives they want Denmark to join right after a Yes vote. They also promised Denmark won’t take part in 10 other EU initiatives – including the hot-button issue of asylum and immigration. The day after the referendum was announced, Gallup polled that a safe majority of 58% would vote Yes. But something happened during the campaign. First, the refugee crisis hardened public opinion. Liberal prime minister Lars Loekke Rasmussen promised there would be a new referendum before Denmark ever joins EU refugee and asylum policies. The move confused voters, who saw no reason to scrap the opt-out if Denmark was to stay out of key policies anyway. Then more terror attacks hit Paris in November.
The European People’s Party (EPP) has reiterated its opposition to EU membership for Turkey, despite the agreement that was reached on Sunday (29 November). EurActiv Germany reports. The deal that was struck with Ankara in relation to providing aid to tackle the refugee crisis and reopening accession talks has done nothing to quell the scepticism of the conservative EPP. “For us in the EPP, it is clear that we want a close partnership, but not full membership,” Manfred Weber (CSU), the EPP’s group leader, told Bavarian television on Monday (30 November). Although supporting the financial pledge made by the EU, he called the decision to allow Turks visa-free travel a “bitter pill” to swallow.
On Sunday evening (29 November), the EU and Turkey concluded talks that had been made necessary by the ongoing refugee crisis. Ankara committed itself to strengthening its land and sea borders, as well as stepping up its efforts against traffickers. In return, the EU pledged €3 billion to be used exclusively to care for refugees, to remove the visa-requirement for Turkish travellers and to re-energise accession talks. Alexander Graf Lambsdorff (FDP), Vice-President of the European Parliament, criticised the reopening of accession talks, given the civil and human rights situation in Asia Minor. It is not right that the EU have thrown their “values overboard” in dealing with the refugee crisis, the liberal politician said in a radio interview. Lambsdorff accused the German Chancellor of kowtowing to Turkish President Erdogan.
Secret official documents about the searching of three trucks belonging to Turkey’s national intelligence service (MIT) have been leaked online, once again corroborating suspicions that Ankara has not been playing a clean game in Syria. According to the authenticated documents, the trucks were found to be transporting missiles, mortars and anti-aircraft ammunition. The Gendarmerie General Command, which authored the reports, alleged, “The trucks were carrying weapons and supplies to the al-Qaeda terror organization”. But Turkish readers could not see the documents in the news bulletins and newspapers that shared them, because the government immediately obtained a court injunction banning all reporting about the affair.
When President Recep Tayyip Erdogan was prime minister, he had said, “You cannot stop the MIT truck. You cannot search it. You don’t have the authority. These trucks were taking humanitarian assistance to Turkmens”. Since then, Erdogan and his hand-picked new Prime Minister Ahmet Davutoglu have repeated at every opportunity that the trucks were carrying assistance to Turkmens. Public prosecutor Aziz Takci, who had ordered the trucks to be searched, was removed from his post and 13 soldiers involved in the search were taken to court on charges of espionage. Their indictments call for prison terms of up to 20 years. In scores of documents leaked by a group of hackers, the Gendarmerie Command notes that rocket warheads were found in the trucks’ cargo. According to the documents that circulated on the Internet before the ban came into effect, this was the summary of the incident:
Russia is working with the UN Security Council on a document that would enforce stricter implementation of Resolution 2199, which aims to curb illegal oil trade with and by terrorist groups, Russian ambassador to the UN Vitaly Churkin told RIA Novosti. The draft resolution intends to quash the financing of terrorist groups, including Islamic State (IS, formerly ISIS/ISIL) extremists. “We are not happy with the way Resolution 2199, which was our initiative, is controlled and implemented. We want to toughen the whole procedure,” Churkin said. “We are already discussing the text with some colleagues and I must say that so far there is not a lot of contention being expressed.” US Ambassador Samantha Power said that America has “a shared objective” with Russia on this, since it is also working towards bringing the financing of terrorism to a halt.
The new document is a follow-up to Russian-sponsored Resolution 2199, which was adopted by the UN on February 12 to put a stop to illicit oil deals with terrorist structures using the UN Security Council’s sanctions toolkit. February’s resolution “has become an integral part of efforts by the UN Security Council, with Russia’s active involvement, to consolidate the international legal framework for countering the terrorist threat from ISIS and Jabhat al-Nusra,” Dr Alexander Yakovenko, Russian Ambassador to the United Kingdom of Great Britain and Northern Ireland, wrote for RT. “Its urgency is prompted by the considerable revenues that the terrorists are receiving from trade in hydrocarbons from seized deposits in Syria and Iraq.” More specifically, it bans all types of oil trade with IS and Jabhat al-Nusra.
If such transactions are discovered, they are labeled as financial aid to terrorists and result in targeted sanctions against participating individuals or companies. Back in July, the UN Security Council expressed “grave concern” over reports of oil trading with IS militant groups in Iraq and Syria. The statement came after IS seized control of oilfields in the area and was reportedly using the revenues to finance its nascent “state.” While Ambassador Churkin has proposed sanctioning states trading with IS terrorists, a retired US army general, believes that Churkin should be more specific in identifying the state actors involved in the illegal oil trade. Retired US Army Major General Paul E. Vallely, who has recently been lobbying for the Syrian rebels to cooperate with Russia against Islamic State, as well as for Washington to take a more active role in the war on IS, says Turkish President Recep Tayyip Erdogan should be singled out as a “negative force” for supporting Islamic State’s black market oil revenues.
While the rebels in eastern Syria where the oil fields are located “could align with certain forces that are there – the Russians, if they were so inclined to do so… the key is to destroy ISIS, and one of the initiatives that ambassador Churkin should be moving toward with the Security Council is Erdogan in Turkey,” Vallely told RT. “He [Erdogan] has been supporting ISIS since I was over there several years ago. I’ve met some of the black-marketeers along the Syrian border there in [Turkish] Hatay province, and so they’re alive and well. But Erdogan is a problem, he really is, and if I was ambassador Churkin, not only would I propose something in the Security Council for cutting off the finances, but also doing some kind of action against Erdogan. He is a very, very negative force in that area.”
Russia may freeze work on the Turkish Stream gas pipeline project for several years in retaliation against Ankara for the shooting down of a Russian Air Force jet, two sources at Russian gas giant Gazprom have told Reuters. The project is to involve, initially, building a new gas pipeline under the Black Sea to Turkey, and in subsequent phases the construction of a further line from Turkey to Greece, and then overland into Southeastern Europe. Even before the row with Ankara, the project had been delayed and reduced in scale, leading some industry insiders to doubt if it would ever happen.
Virtually out of cash and with its revenues fast deteriorating, Puerto Rico is moving toward default on $7 billion in loans owed by its public corporations to free up money to repay loans backed by the territory’s full faith and credit, Gov. Alejandro Garcia Padilla told a Senate hearing Tuesday. The move allowed Puerto Rico to make a $355 million bond payment due today. Still, the financial gimmick, which violates the terms of some of those bond deals, only provides a short-term fix for the island’s liquidity problems. With at least $687 million in payments due on Jan. 1 and others to follow, it will only be a matter of time before Puerto Rico misses large payments on its $73 billion in outstanding debt, officials said.
“In simple terms we have begun to default on our debt in an effort to attempt to repay bonds issued with full faith and credit of the commonwealth and secure sufficient resources to protect the life, health, safety and welfare of the people of Puerto Rico,” Garcia Padilla told the Senate Judiciary Committee. If Congress does not pass legislation to allow Puerto Rico to reorganize its debts in bankruptcy, Tuesday’s financial move will just be “the beginning of a very long and chaotic process” that will harm the island’s creditors and allow a budding humanitarian crisis on the island to grow out of control, the governor said.
Human Rights Watch called on the Obama administration on Tuesday to investigate 21 former U.S. officials, including former President George W. Bush, for potential criminal misconduct for their roles in the CIA’s torture of terrorism suspects in detention. The other officials include former Vice President Dick Cheney, former CIA Director George Tenet, former U.S. Attorney General John Ashcroft and National Security Adviser Condoleezza Rice. Human Rights Watch argued that details of the Central Intelligence Agency’s interrogation program that were made public by a U.S. Senate committee in December 2014 provided enough evidence for the Obama administration to open an inquiry.
“It’s been a year since the Senate torture report, and still the Obama administration has not opened new criminal investigations into CIA torture,” Kenneth Roth, executive director of Human Rights Watch, said in a statement. “Without criminal investigations, which would remove torture as a policy option, Obama’s legacy will forever be poisoned.” Representatives for Bush and Tenet declined comment. Representatives for Cheney, Ashcroft and Rice could not immediately be reached for comment. Former Bush administration officials and Republicans have argued that the CIA used “enhanced interrogation techniques” that did not constitute torture. They argue that the Senate report was biased.
“It’s a bunch of hooey,” James Mitchell, one of the architects of the interrogation program told Reuters nearly a year ago after the release of the Senate Intelligence Committee’s findings. “Some of the things are just plain not true.” In a video released in conjunction with the report, “No More Excuses” “A Roadmap to Justice for CIA Torture,” the president of the American Bar Association calls for a renewed investigation as well. In June, the ABA sent a letter to U.S. Attorney General Loretta Lynch also saying that the details disclosed in the Senate report merited an investigation. “What we’ve asked the Justice Department to do is take a fresh look, a comprehensive look, into what has occurred to basically leave no stone unturned into investigating possible violations,” said American Bar Association President Paulette Brown.
“And if any are found to take the appropriate action as they would in any other matter.” CIA interrogators carried out the program on detainees who were captured around the world after the Sept. 11, 2001 hijacked plane attacks on the United States. In 2008, the Bush administration opened a criminal inquiry into whether the CIA destroyed videotapes of interrogations. After taking office in 2009, the Obama administration expanded the inquiry to include whether the interrogation program’s activity involved criminal conduct. In 2012, the Obama administration closed the criminal inquiry. Then Attorney General Eric Holder said that not enough evidence existed for criminal prosecution, including the death of two detainees.
A 4-year-old child was reported drowned in the early hours of Tuesday as she and 28 fellow passengers tried to swim to the shore of Rho, a small islet off the coast of Kastellorizo in the southeastern Aegean. The coast guard says it was able to rescue the other 28 passengers on board the craft that had set sail from Turkey as they tried to reach Europe, but the young girl drowned in the final scramble. Greek coast guard officers have rescued over 200 refugees and migrants from Greece’s seas since Monday.