poverty Archives - Page 2 of 5 - The Automatic Earth

Nearly half of middle-class Americans face a slide into poverty as they enter their retirement, a recent study by the Schwartz Center for Economic Policy Analysis at the New School has concluded. That risk has been driven by depressed earnings, depressed asset values and increased health-care costs — causing 74 percent of Americans planning to work past traditional retirement age. Additionally, both private and public pension plans have been allowed to become seriously underfunded. So what can be done? Fundamental changes in the structure of the U.S. economy, combined with increased health-care costs and lack of saving, have created a financial trap for millions of American workers heading into retirement.

Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65, according to the study. The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household.

In total, “71 percent of Americans aged 17-24 do not meet the military’s sign-up requirements..”

• One-Third Of Young Americans Too Overweight To Join The Military (AFP)

Forget about the high-tech military challenges from China and Russia, the Pentagon is facing a fast-growing national security threat that could be even trickier to tackle: America’s obesity crisis. A study released this week has found that nearly one-third of young Americans are now too overweight to join up, a worrying statistic for military officials already facing recruitment challenges. “Obesity has long threatened our nation’s health. As the epidemic grows, obesity is posing a threat to our nation’s security as well,” the Council for a Strong America states in its new report. The Army last month announced it would miss its goal of attracting 76,500 new recruits in 2018. The shortfall is of about 6,500 soldiers — the first time since 2005 the service had missed its hiring targets.

A strong US economy and tight jobs market played a role, but the numbers highlight the dwindling pool of applicants the Pentagon has to draw from. According to the Defense Department, obesity is one of the top reasons why a stunning 71 percent of Americans aged 17-24 do not meet the military’s sign-up requirements. “Given the high percentage of American youth who are too overweight to serve, recruiting challenges will continue unless measures are taken to encourage a healthy lifestyle beginning at a young age,” states the study, entitled “Unhealthy and Unprepared.”

Double or nothing.

• We Are All In….Again! (Roberts)

Despite the recent angst in the market over increasing interest rates, there has been little evidence of concern by investors overall. A recent report showed that investors have the LEAST amount of cash in their investment accounts…EVER. “Individual investors drew down cash balances at brokerage accounts to record lows as the S&P 500 surged 7.2 percent in the three months ended Friday. Cash as a percentage of assets among Charles Schwab Corp. clients in August fell to 10.4 percent, matching the level in January that marked the lowest since at least 2004.” Of course, eight months ago the markets suffered a 10.4% decline just as investors scrambled to “get in.”

The monthly survey from the American Association of Individual Investors shows the same. Individuals are carrying some of the highest levels in history of equities, are reducing their exposure to bonds, and carrying very low levels of cash. As Dana Lyons recently noted: ” From the Federal Reserve’s Z.1 release, we find that U.S. Households had a reported 34.3% of their financial assets invested in the equity market as of the 2nd quarter. Outside of a slightly higher reading in the 4th quarter of 2017, that is the highest level of stock investment in the 70-plus year history of the series, other than the 1999-2000 bubble top.”

What did Erdogan get?

• American Pastor Freed In Turkey Will Visit White House Saturday (AP/R.)

The pastor who was at the center of a diplomatic spat between Turkey and the United States will land at a military base near Washington on Saturday and will likely visit the White House the same day, President Donald Trump said on Friday. “We’re very honored to have him back with us,” Trump told reporters, referring to the release of pastor Andrew Brunson by a Turkish court. “He suffered greatly but we’re very appreciative to a lot of people,” Trump added, saying no deal had been made with Turkey on lifting U.S. sanctions in exchange for Brunson’s release.

Earlier Friday, a Turkish court convicted Brunson of terror links but released him from house arrest and allowed him to leave the country, removing a major irritant in fraught ties between two NATO allies that still disagree on a host of other issues. The court near the western city of Izmir sentenced North Carolina native Brunson to just over three years in prison for allegedly helping terror groups, but let him go because the 50-year-old evangelical pastor had already spent nearly two years in detention. An earlier charge of espionage was dropped.

“Khashoggi was wearing an Apple watch when he entered the consulate..”

• Saudi Isolation Grows Over Khashoggi Disappearance (G.)

Saudi Arabia has found itself further isolated over the disappearance of Jamal Khashoggi after the business world turned its back on a high-profile investment conference in the kingdom and US officials claimed audio and video recordings had captured the moment the journalist was murdered in Istanbul. The Future Investment Initiative conference, to be held in Riyadh later this month, was rapidly turning into a fiasco on Friday after most media partners and several top business allies pulled out. More were expected to follow. All said they had been disturbed by the circumstances of Khashoggi’s disappearance from the Saudi consulate in Turkey and the lack of credible responses.

Saudi Arabia has been under pressure to explain what happened to Khashoggi after he entered the consulate building at 1.14pm on 2 October. Turkey has claimed the exiled journalist and critic of Crown Prince Mohammed bin Salman was murdered by a hit squad sent from Riyadh. Authorities in Istanbul have hinted they hold undisclosed evidence that proves what took place. On Friday, US officials revealed to Khashoggi’s employer, the Washington Post, that Turkish investigators had claimed audio and video tapes existed of conversations between the missing 59-year-old and his alleged killers. “You can hear his voice and the voices of men speaking Arabic,” an official said. “You can hear how he was interrogated, tortured and then murdered.”

The references to recordings could suggest that Turkish intelligence officers had bugged the consulate or some of the accused killers. Hatice Cengiz, Khashoggi’s Turkish fiancee, told the Associated Press on Friday that Khashoggi was wearing an Apple watch when he entered the consulate and investigators were examining his cellphones, which he had left with her. In written responses to questions by the AP, Cengiz said Turkish authorities had not told her about any recordings and that Khashoggi was officially “still missing”. Cengiz said Khashoggi was not nervous when he entered the Saudi consulate in Istanbul and did not suspect anything bad would happen to him. “He said ‘See you later my darling’ and went in,” Cengiz said, and they were his last words to her.

As long as the arms sales can go on…

• UK ‘Gears Up’ To Target Saudis With Sanctions After Journalist Vanishes (Ind.)

UK officials have begun drawing up a list of Saudi security and government officials who could potentially come under sanctions pending the outcome of investigations into the disappearance of dissident journalist Jamal Khashoggi, a source close to both Riyadh and London told The Independent. The list being drawn up by the Foreign and Commonwealth Office could be used in case the UK decides to invoke the “Magnitsky amendment,” passed this year, which allows Britain to impose sanctions on foreign officials accused of human rights violations, or to apply restrictions on Saudi trade and travel in coordination with the European Union.

Asked to confirm or deny the drawing up of the list, the Foreign Office said it “had nothing to add” to the Khashoggi matter other than comments the foreign secretary, Jeremy Hunt, made on Thursday. “Across the world, people who long thought themselves as Saudi’s friends are saying this is a very, very serious matter,” said Mr Hunt. “If these allegations are true there would be serious consequences.” The source, a former government advisor, told The Independent they were briefed by a UK intelligence official and others. “Initially this was a position-paper scenario,” the source said. “Now it is definitely being looked at as a real possibility.”

“..the sudden attention “seems very strange” considering the “bloody murder that the Saudis have gotten away with for decades.”

• ‘Pressure Will Be On Turkey’ If Saudis Found Guilty Of Journalist’s Murder (RT)

Former US diplomat Jim Jatras and investigative journalist Rick Sterling tell RT what could happen if allegations that the Gulf monarchy, headed by Saudi crown prince Mohammed bin Salman, is behind the plot prove to be true. If Saudi Arabia is found to be complicit in Khashoggi’s disappearance, Sterling believes “the pressure will be on [Turkish president] Erdogan and Turkey to escalate.” “Saudi Arabia effectively abducted Lebanese Prime Minister [Saad] Hariri and he appeared in Riyadh, resigned – supposedly – and then it turned out he was coerced in some form or manner,” Sterling added. “The Saudi government is extreme, it’s bizarre and we’ll have to see how the facts develop in this case but it points towards the instability of that government that beheads hundreds of citizens a year.”

However, he adds, the Saudi regime has been “an extremely close ally of the US and Israel. This would be a huge earthquake in international relations if the calls for a serious reduction in relations continues.” Despite the years of brutality against their own people, Khashoggi’s disappearance seems to have ushered the Saudi regime’s reckless violence into the global spotlight, Jatras told RT. “Saudi Arabia is usually immune from criticism from the American establishment, They can destroy Yemen, they can cut people’s heads off… and suddenly over one journalist everyone is outraged; We discover that Saudi Arabia is an oppressive regime that kills people,” Jatras said, adding that the sudden attention “seems very strange” considering the “bloody murder that the Saudis have gotten away with for decades.”

Can’t please everyone.

• Theresa May Faces Her Party As A Desperate Gambler In Hope Of A Break (G.)

Brexit is unusual as a game of poker, in that one side folded long ago but has still not revealed its losing hand. For months, the EU has insisted that Theresa May’s only options for a deal would lead to either a soft Brexit for the whole UK, or a sea border between Great Britain and Northern Ireland. For months, critics have challenged the government to spell out which of these two ostensibly intolerable concessions it intends to make. Now it seems we know. The prime minister will concede both. Capitulating to Brussels will be the easy part. After that, May will have to lie to the hard Brexiters, bully the Tory remainers, and call the bluff of the Democratic Unionist party. As the Brexit circus enters its final month, here is its tightrope.

First, Brussels. The EU’s offer springs from its immutable and non-negotiable red lines: to preserve the single market, the Good Friday agreement, and Ireland’s invisible border. Only two outcomes can satisfy all those requirements: the whole UK remains in the whole single market and customs union, or Northern Ireland stays in the customs union and single market in goods while Great Britain diverges. May has decided to mix and match those outcomes. It appears the whole UK will remain in the customs union, so there are no tariff divergences or checks either on the island of Ireland or within the United Kingdom. And Great Britain will leave the single market, thus necessitating “de-dramatised” regulatory checks on goods crossing the Irish Sea.

May’s surrender is not in doubt. Neither is the resistance to this deal from all opposition parties. Consequently, the prime minister’s only task is to fool or blackmail her MPs into supporting it. Her most pressing duty will be to hoodwink the parliamentary hardliners in thrall to Boris Johnson and Jacob Rees-Mogg. May will attempt this ambitious deception principally by insisting that the permanent customs union will in fact be temporary. It will not.

“..many people were shocked and questioned why they had not been made aware of the implications sooner.”

• UK Consumers Face ‘Catastrophic’ Consequences From No-Deal Brexit (Ind.)

Millions of consumers could face “immediate” and “catastrophic” consequences in the event of a no-deal Brexit, the watchdog Which? has said. The consumer group said the government’s preparations for a no-deal exit suggested a reduction in consumer rights and choice as well as price hikes that would have a “direct and hard” impact in areas ranging from travel to food and energy. The watchdog, which based its conclusions on its assessment of the government’s technical notices in preparation for the event of a no-deal Brexit, online forums and surveys, said two in five people did not understand the potential implications of a no-deal scenario.

In its report – Brexit no deal: a consumer catastrophe? – Which? says: “Our latest consumer research shows that most people are unprepared for what ‘no deal’ would mean in practice – and many do not understand how it would have multiple impacts across so many aspects of their daily lives. “When the everyday repercussions and government’s plans on issues such as food and medical supplies were explained to people in our research, many people were shocked and questioned why they had not been made aware of the implications sooner.”

Good to see support for the Greens.

• Merkel Faces Poll Disaster As Coalition Support Collapses (Ind.)

Angela Merkel’s conservative allies in the German state of Bavaria are facing losses in regional elections as liberal-minded voters defect to the Greens. The Christian Social Union, which has enjoyed six decades of dominance in the state, is predicted to suffer heavy losses in the vote on 14 October. The party is part of Germany’s grand coalition with its sister party, Ms Merkel’s Christian Democrats (CD) and the centre-left Social Democrats (SDP). A Forschungsgruppe Wahlen poll predicted the CSU could lose up to 14 percentage points in the upcoming elections as voters flock to the pro-immigration Greens.

Support for the CSU stood at 34 per cent, compared to the 48 per cent it won in the last regional election in 2013. The Greens appear poised to overtake the Social Democrats (SPD) to become Bavaria’s second-largest party, with up to 19 per cent of the vote, an increase of 10 percentage points since the last elections. If the polls are correct, the Greens could become a potential coalition partner for the CSU in Bavaria. The polls also showed the anti-immigration Alternative for Germany (AfD) party on 11 per cent, which would be enough to enter the Bavarian state parliament for the first time.

Europe’s IMF. Too much power.

• The New Face of the Eurozone Bailout Fund (Spiegel)

The first step is that of transforming the ESM into a kind of European replacement for the IMF. The IMF played a central role in Greece during the crisis, but there were often clashes over the best way to help the country. In the future, the IMF does not intend to participate in state bankruptcies in Europe. For the ESM to function as a European IMF, the organization is to be granted oversight rights to look over the individual finances of eurozone member states. Should a new crisis crop up, the ESM would be armed with additional control and enforcement rights.

[..] One of the ESM’s new tasks is ringing the alarm bells early when there are signs of an approaching crisis. The ESM possess a deep knowledge of the financial situations of former crisis countries, in part because analysts tag along when donor state representatives visit those countries’ capitals. The organization also knows a lot about larger member states like Germany and France, Regling says. “But if, purely hypothetically, something were to happen in, say, Austria or Malta, we would currently be at a loss.” To fulfill its role as an early-warning system, the ESM must recruit experts on all member countries. A larger staff is also needed for the ESM’s second area of operation. In the future, the plan is for the ESM to provide financial backing for the European mechanism for the resolution of failing credit institutions. For this, Regling needs banking experts.

The ESM will also receive a set of new financial instruments geared toward helping ailing countries quickly. A precautionary line of credit is in discussion that could be extended to countries not yet in acute need but which require help to calm wary investors. In a paper for the Eurogroup, as the board of eurozone finance ministers is known, the ESM also proposes another instrument. It would provide short-term liquidity assistance to countries that have temporarily run out of money because they have unfairly landed in speculators’ crosshairs. “These funds would be paid out without a big fuss, and the country wouldn’t have to subject itself to a complete adjustment program,” the paper reads.

Bathwater

Aug 262018

August 26, 2018 Posted by Raúl Ilargi Meijer at 1:56 pm Finance Tagged with: abuse, bathwater, bombing, child sex abuse, children, church, Greece, McCain, Nauru, pope, poverty, resignation syndrome 7 Responses »

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:

‘Begging To Die’: Succession Of Critically Ill Children Moved Off Nauru

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.

Debt Rattle May 7 2018

May 072018

May 7, 2018 Posted by Raúl Ilargi Meijer at 8:51 am Finance Tagged with: Argentina, China, collapse, collusion, Congress, Conoco, emerging markets, Greece, Merkel, middle class, Mueller, poverty, Trump 10 Responses »

John French Sloan Sunday, Women Drying Their Hair 1912

• Behold The Sudden Stop. Risk of Emerging Markets Collapse (Lacalle)

• Dollar Surge Bringing Emerging Market Rate Cut Cycle To A Halt (R.)

• WTF Just Happened to Argentina’s Peso? (Fernet)

• Remedies Trump Prescribes For Trade Problems Harm US (Xinhua)

• In the Coming Crash We’ll be Falling from a Higher Height – Nomi Prins (USAW)

• Mueller Investigation is In Jeopardy (ZH)

• Why The Justice Department Defies Congress (WSJ)

• Merkel Allies Reject Idea Of European Finance Minister (R.)

• Weak Foreign Demand Pushes Down German Industrial Orders (R.)

• A Million More UK Children In Poverty Than In 2010 (G.)

• Air France Survival In Doubt Over Strikes (BBC)

• Greece’s Incredibly Shrinking Middle Class (K.)

• Conoco Moves To Take Over Venezuelan PDVSA’s Caribbean Assets (R.)

Argentina, Turkey, Indonesia. Brazil in a bit. The list will grow. As the dollar rises, emerging countries need more dollars to pay their debt, pushing the dollar up even more. And investors pull their money out of these countries. Vicious circles everywhere.

• Behold The Sudden Stop. Risk of Emerging Markets Collapse (Lacalle)

Argentina even issued a one-hundred-year bond at a spectacularly low rate (8.25%) with a very high demand, more than 3.5 times bid-to-cover. That $ 2.5 billion issuance seemed crazy. A one-hundred-year bond from a nation that has defaulted at least six times in the previous hundred years! Worse of all, those funds were used to finance current expenditure in local currency. The extraordinary demand for bonds and other assets in Argentina or Turkey was justified by expectations of reforms and a change that, as time passed, simply did not happen. Countries failed to control inflation, deliver lower than expected growth and imbalances soared just as the U.S. started to see some inflation, rates started to rise.

Suddenly, the yield spread between the U.S. 10-year bond and emerging markets debt was unattractive, and liquidity dried up faster than the speed of light even with a modest decrease of the Federal Reserve balance sheet. Liquidity disappears because of extremely leveraged bets on one single trade – a weaker dollar, higher global growth- unwind. However, another problem exacerbates the reaction. An aggressive increase in the monetary base by the Argentine central bank made inflation rise above 23%. With an increase in the monetary base of 28% per year, and seeking to finance excess spending by printing money and raising debt to “buy time”, the seeds of the disaster were planted. Excess liquidity and the US dollar weakness stopped. Local currencies and external funding face risk of collapse.

The Sudden Stop. When most of the emerging economies entered into twin deficits -trade and fiscal deficits- and consensus praised “synchronized growth”, they were sealing their destiny: When the US dollar regains some strength, US rates rise due to an increase in inflation, the flow of cheap money to emerging markets is reversed. Synchronized indebted growth created the risk of synchronized collapse.

Is this really the end of cheap debt? It’s dangerous too: if Turkey gets into real trouble, Erdogan will seek a scapegoat.

• Dollar Surge Bringing Emerging Market Rate Cut Cycle To A Halt (R.)

A resurgent dollar and higher borrowing costs are smashing through Argentina and Turkey’s currencies like a wrecking ball and raising the likelihood more broadly that emerging markets’ three-year long interest rate cutting cycle is at an end. Emerging markets came into the year flying, riding on the back of a healthy global economy and rising commodity prices alongside tame inflation and a weak dollar. It looked more than likely that a wave of rate cuts would keep rolling, allowing a bond rally to continue. From Brazil and Russia to Armenia and Zambia, developing countries, big and small, have been on a rate cutting spree. With hundreds of rate cuts since Jan. 2015, the average emerging market borrowing cost fell under 6% earlier this year from over 7% at the time.

Fund managers’ profits too have soared in this time, with emerging local currency debt among the best performing asset classes, with dollar-based returns of 14% last year. Even in the first quarter of 2018, returns were a buoyant 4.3% Now though, almost exactly five years since the so-called taper tantrum shook an emerging market rally, these gains appear to be on the cusp of reversal. Argentina has jacked up its interest rates to 40% in response to a rout in its peso currency, while Turkey was also forced into a rate rise as its lira hit record lows against the dollar. Indonesia, after heavy interventions to stem rupiah bleeding, has also said it could resort to policy tightening.

Déja vu.

• WTF Just Happened to Argentina’s Peso? (Fernet)

If you’re watching Argentina’s economy, it hasn’t been a banner week. This week, Argentina had to raise its key interest rate three times to keep the Argentine peso from losing even more value against the dollar. Three interest rate hikes in one week is a lot – it implies the first two didn’t work, and the Central Bank is not in control. The interest rate currently sits at 40%. That means the Central Bank pays 40% per year on peso-denominated debt, which can imply that they expect the value of the peso to fall somewhere in the ballpark of 40% over a one year period. A year ago in April, the rate was closer to 26%. Yikes. And the exchange rate kicked off the week at around 20.5 ARS/USD. It jumped almost to 23 ARS/USD, and is currently hovering around 21.8 ARS/USD.

[..] When the US dollar increases in value, emerging market currencies decrease, meaning in Argentina’s case it will take increasingly more pesos to buy dollars. This then amplifies the risk that emerging markets will be unable to make payments on dollar denominated debt, causing investors to sell their emerging market investments, further amplifying the currency stress. The timing specifically in the case of Argentina is uncannily bad. Until this week, non-residents investing in Argentina were exempt from paying the equivalent of capital gains taxes across the board, including local-currency peso-denominated central bank notes, or LEBACs. This Tuesday, this exemption on LEBACs officially no longer applied, meaning foreign holders of these notes now incur a tax equal to 5% on profits.

“Increased American consumption born of an overstimulated economy..”

• Remedies Trump Prescribes For Trade Problems Harm US (Xinhua)

Remedies the Trump administration is prescribing for U.S. trade problems won’t work, and forays in trade disputes with China will harm the United States, a veteran China expert with decades of experience in bilateral relations said [in Silicon Valley] on Saturday. “I believe that Washington has misdiagnosed our trade problems, that its remedies for them won’t work, and that what it is doing will harm the United States and other countries as much or more than it does China,” said Chas Freeman, senior fellow at Brown University’s Watson Institute, when addressing the annual conference of a prominent Chinese American group, the Committee of 100 (C100).

“The United States and China are each too globalized and dynamic to contain, too big and influential to ignore, and too successful and entangled with each other to divorce without bankrupting ourselves and all associated with us,” Freeman, also former U.S. assistant secretary of defense, said in an opening keynote speech. Pointing out that there are many reasons for the United States to seek cooperative relations with a rising China, Freeman added that the Trump administration has decided “to pick a fight — to confront China both militarily and economically.” “The fact that we Americans consume more than we save means that we import more than we produce. That creates an overall trade deficit. Ironically, the Trump administration has just taken steps guaranteed to increase this deficit,” he said.

“It has reduced tax revenues and boosted deficit spending, mostly on military research, development, and procurement. These actions take the national savings rate even lower while inflating domestic demand for goods and services. They cause imports to surge,” he added. “Increased American consumption born of an overstimulated economy explains why China’s trade surplus with the United States is again rising even as its surplus with the rest of the world falls,” he said. “Unless Americans boost our national savings rate by hiking taxes or cut our consumption by falling into recession, our overall trade deficit is sure to bloat,” he said.

The Market Will Plummet if Global Central Banks Pull Plug

“..the reality is when a financial crisis happens, banks close their doors to depositors..”

• In the Coming Crash We’ll be Falling from a Higher Height – Nomi Prins (USAW)

Join Greg Hunter as he goes One-on-One with two-time, best-selling author Nomi Prins, who just released “Collusion: How Central Bankers Rigged The World.” Will the next crash be worse than the last one? Prins says, “Yes, it will because we will be falling from a higher height. The idea here is you are sinking on the Titanic as opposed to sinking on a canoe somewhere. All of this artificial conjured money is puffing up the system, along with money that is borrowed cheaply is also puffing up the system and creating asset bubbles everywhere. So, when things pop, there is more leakage to happen. The air in all these bubbles has created larger bubbles than we have had before.”

How does the common man protect himself? Prins says, “They have to own things, and by that I mean real assets, hard assets like silver and gold. That’s not as liquid, so taking cash out of banks and sort of keeping it in real things and keeping it on site . . . keeping cash physically. You need to extract it from the system because the reality is when a financial crisis happens, banks close their doors to depositors. . . . Also, basically try to decrease your debt.”

Did Flynn plead guilty because he couldn’t pay the legal bills?

How much longer until Mueller is whistled back by his superiors? Can Rosenstein keep silent as one judge after another slams the Special Counsel?

• Mueller Investigation In Jeopardy (ZH)

A funny thing happened on the way to impeaching Donald Trump. After two-years of investigations by a highly politicized FBI and a Special Counsel stacked with Clinton supporters, Robert Mueller’s probe has resulted in the resignation of National Security Advisor Michael Flynn, the arrests of Paul Manafort and Rick Gates, and the indictment of 13 Russian nationals on allegations of hacking the 2016 election – along with the raid of Trump’s personal attorney, Michael Cohen.

The nation has been on the edge of insanity waiting for that much-promised and long awaited link tying President Trump to Vladimir Putin we were all promised, only to find out that there is no link, the deck appears to have been heavily stacked against Donald Trump by bad actors operating at the highest levels of the FBI, DOJ, Obama admin and Clinton camp, and the real Russian conspiracy in the 2016 election was the participation of high level Kremlin sources used in the anti-Trump dossier that Hillary Clinton paid for. Now, as the out-of-control investigation moves from the headlines and into court, the all-encompassing “witch hunt,” as Trump calls it, may be in serious jeopardy.

As of Friday, three separate Judges have rendered harsh setbacks to the Mueller investigation – demanding, if you can believe it, facts and evidence to back up the Special Counsel’s claims – in unredacted format as one Judge demands, or risk having the cases tossed out altogether. [..] And as we noted yesterday, some have suggested that Flynn pleaded guilty due to the fact that federal investigations tend to bankrupt people who aren’t filthy rich – as was the case with former Trump campaign aide Michael Caputo, who told the Senate Intelligence Committee “God damn you to hell” after having to sell his home due to mounting legal fees over the inquiry. “Your investigation and others into the allegations of Trump campaign collusion with Russia are costing my family a great deal of money — more than $125,000 — and making a visceral impact on my children.”

Quite strong for the Wall Street Journal: “Mr. Comey, Peter Strzok, Lisa Page, Andrew McCabe – they have already shattered the FBI’s reputation and public trust.”

• Why The Justice Department Defies Congress (WSJ)

Until this week, Deputy Attorney General Rod Rosenstein and fellow institutionalists at the department had fought Congress’s demands for information with the tools of banal bureaucracy – resist, delay, ignore, negotiate. But Mr. Rosenstein took things to a new level on Tuesday, accusing House Republicans of “threats,” extortion and wanting to “rummage” through department documents. A Wednesday New York Times story then dropped a new slur, claiming “Mr. Rosenstein and top FBI officials have come to suspect that some lawmakers were using their oversight authority to gain intelligence about [Special Counsel Bob Mueller’s ] investigation so that it could be shared with the White House.”

Mr. Rosenstein isn’t worried about rummaging. That’s a diversion from the department’s opposite concern: that it is being asked to comply with very specific – potentially very revealing – demands. Two House sources confirm for me that the Justice Department was recently delivered first a classified House Intelligence Committee letter and then a subpoena (which arrived Monday) demanding documents related to a new line of inquiry about the Federal Bureau of Investigation’s Trump investigation. The deadline for complying with the subpoena was Thursday afternoon, and the Justice Department flouted it. As the White House is undoubtedly monitoring any new congressional demands for information, it is likely that President Trump’s tweet Wednesday ripping the department for not turning over documents was in part a reference to this latest demand.

Republicans also demand the FBI drop any objections to declassifying a section of the recently issued House Intelligence Committee report that deals with a briefing former FBI Director James Comey provided about former national security adviser Mike Flynn. House Republicans say Mr. Comey told them his own agents did not believe Mr. Flynn lied to them. On his book tour, Mr. Comey has said that isn’t true. Someone isn’t being honest. Is the FBI more interested in protecting the reputations of two former directors (the other being Mr. Mueller, who dragged Mr. Flynn into court on lying grounds) than in telling the public the truth?

We can’t know the precise motivations behind the Justice Department’s and FBI’s refusal to make key information public. But whether it is out of real concern over declassification or a desire to protect the institutions from embarrassment, the current leadership is about 20 steps behind this narrative. Mr. Comey, Peter Strzok, Lisa Page, Andrew McCabe – they have already shattered the FBI’s reputation and public trust. There is nothing to be gained from pretending this is business as usual, or attempting to stem continued fallout by hiding further details.

And debt pooling. So much for closer integration.

• Merkel Allies Reject Idea Of European Finance Minister (R.)

Leading politicians from Chancellor Angela Merkel’s conservatives want to pass a resolution at a meeting this week to reject any pooling of debts in Europe and any fiscal policy without national parliamentary controls, Handelsblatt reported. The daily business newspaper, citing sources from the conservative bloc’s parliamentary leadership, said the senior politicians also oppose European Commission plans for a European finance minister. The group includes the parliamentary leaders of the conservative bloc in the Bundestag, the European Parliament as well as from Germany’s 16 states, Handelsblatt reported.

Merkel will join them on Monday for a meeting in Frankfurt. The report highlights the resistance among Merkel’s conservatives to any euro zone reforms that could see more German taxpayers’ money being used to fund other member states. The conservatives are nervous about European Union reform after bleeding support to the anti-euro Alternative for Germany (AfD) party at national elections last September. Last month, Merkel called for a spirit of compromise on reforming the euro zone at a meeting with French President Emmanuel Macron, who pressed for solidarity among members of the currency union.

No smooth sailing.

• Weak Foreign Demand Pushes Down German Industrial Orders (R.)

German industrial orders unexpectedly dropped for the third month running in March due to weak foreign demand, data showed on Monday, suggesting factories in Europe’s largest economy are shifting into a lower gear. Contracts for German goods fell 0.9% after a downwardly revised drop of 0.2% the previous month, data from the Federal Statistics Office showed. Analysts polled by Reuters had on average predicted a 0.5% rise in orders. “The economy is slowing down, that’s the sure take-away from today’s industrial orders data,” VP Bank Group analyst Thomas Gitzel said, adding that some growth forecasts would soon have to be revised down.

The government last month cut its 2018 growth forecast to 2.3% from 2.4% and expressed concern about international trade tensions. “The debate about tariffs has probably created great uncertainty in Europe’s export-driven industry,” Gitzel added. As Europe’s biggest exporter to the United States, Germany is desperate to avoid an EU trade war with the United States. In the run-up to a June 1 deadline for U.S. President Donald Trump to decide on whether to impose steel and aluminum tariffs on the EU, Berlin is urging its European partners to be flexible and pursue a broad deal that benefits both sides. The drop in industrial orders was led by foreign orders which fell by 2.6%, while domestic orders rose 1.5%, the data showed.

But the government says there a million LESS people in poverty.

• A Million More UK Children In Poverty Than In 2010 (G.)

The number of children growing up in poverty in working households will be a million higher than in 2010, a new study has found. Research for the TUC estimates that 3.1 million children with working parents will be below the official breadline this year. About 600,000 children with working parents have been pushed into poverty because of the government’s benefit cuts and public sector pay restrictions, according to the report by the consultancy Landman Economics. The east Midlands will have the biggest increase in child poverty among working families, followed by the West Midlands and Northern Ireland, the research found. Frances O’Grady, the TUC general secretary, said child poverty in working households had shot up since 2010.

“Years of falling incomes and benefit cuts have had a terrible human cost. Millions of parents are struggling to feed and clothe their kids,” she said. “The government is in denial about how many working families just can’t make ends meet. We need ministers to boost the minimum wage now, and use the social security system to make sure no child grows up in a family struggling to get by.” [..] A government spokeswoman said it did not recognise the TUC’s figures. She said: “The reality is there are now 1 million fewer people living in absolute poverty compared with 2010, including 300,000 fewer children. “We want every child to get the very best chances in life. We know the best route out of poverty is through work, which is why it’s really encouraging that both the employment rate and household incomes have never been higher.”

Shares down 13% this morning.

• Air France Survival In Doubt Over Strikes (BBC)

The survival of strike-hit Air France is in the balance, according to the country’s economy minister. Bruno Le Maire’s warning that Air France could “disappear” comes as staff begin another round of industrial action over a pay dispute. Despite the French state owning 14.3% of the Air France-KLM parent group, the loss-making airline would not be bailed out, he said. On Friday Air France-KLM’s chief executive quit over the crisis. Air France-KLM is one of Europe’s biggest airlines, but has seen a series of strikes in recent weeks. Monday’s walk-out is the 14th day of action, as staff press for a 5.1% salary increase this year. The government’s response is seen as a test of labour reforms launched by French President Emmanuel Macron. There have also been strikes at the state-owned SNCF rail company.

On Sunday, Mr Le Maire told French news channel BFM: “I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes. “The survival of Air France is in the balance,” he said, adding that the state would not serve as a backstop for the airline’s debts. “Air France will disappear if it does not make the necessary efforts to be competitive,” he warned. Despite the strike, the airline insisted that it would be able to maintain 99% of long-haul flights on Monday, 80% of medium-haul services and 87% of short-haul flights. On Friday, Jean-Marc Janaillac, chief executive of parent company Air France-KLM, resigned after staff rejected a final pay offer from him, which would have raised wages by 7% over four years.

That’s about 1 in 20: “From the 8.8 million individual taxpayers who submitted a declaration last year, no more than 450,000 showed a net annual income of 18,000 euros or more..”

• Greece’s Incredibly Shrinking Middle Class (K.)

For salaried workers to bring home 1,500 euros per month net on a 12-month basis, or 18,000 euros per year not including holiday bonuses, their employers need to pay 2,610 euros a month or over 31,300 euros a year, given Greece’s particularly high taxes and social security contributions. For a self-employed professional to pocket the same amount , about 18,000 euros per annum, he or she would have to earn at least 50,000 euros on a yearly basis so as to cover professional expenses, taxes and contributions. As for new pensioners, a net income of 1,500 euros/month or 18,000 euros/year can only be achieved if they worked without pause for 40 years at an average monthly salary of 2,400 euros over that entire period.

The framework that has emerged in the last three years with tax and contribution hikes, in particular, as well as the new way pensions are being calculated are drastically reducing the chances of any worker or pensioner to have a decent monthly salary or pension. Official figures already highlight the shrinking of the so-called middle class: From the 8.8 million individual taxpayers who submitted a declaration last year, no more than 450,000 showed a net annual income of 18,000 euros or more, down from 840,000 in 2010. The shrinking trend of the middle class is expected to continue both for taxation and for practical reasons.

An employer will face the same cost hiring five or six part-timers offering a total of 20-24 working hours per day as in hiring one full-timer offering eight hours of work. Particularly in sectors where there is no need for highly skilled workers, such as retail commerce or tourism, the trend to replace well paid positions has already become dominant. Among the self-employed, overtaxation is this year anticipated to reduce the number of those declaring a taxable income of over 30,000 euros per year. As for pensioners, already the first pensions issues on the basis of the new system of calculation prove that the chances for anyone to secure a benefit of 1,500 euros after retirement are next to zero, and will shrink further in the years to come.

Curious. Bonaire and St. Eustatius are part of the Dutch Kingdom. Conoco can’t move without their permission.

• Conoco Moves To Take Over Venezuelan PDVSA’s Caribbean Assets (R.)

U.S. oil firm ConocoPhillips has moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award over a decade-oil nationalization of its projects in the South American country, according to two sources familiar with its actions. The U.S. firm targeted Caribbean facilities on the islands of Bonaire and St. Eustatius that play critical roles in PDVSA’s oil exports, the country’s main source of revenue. PDVSA relies on the terminals to process, store and blend its oil. “We will work with the community and local authorities to address issues that may arise as a result of enforcement actions,” ConocoPhillips said in a statement to Reuters.

Debt Rattle February 15 2018

Feb 152018

February 15, 2018 Posted by Raúl Ilargi Meijer at 11:08 am Finance Tagged with: Aegean, boomers, China, gas tax, Greece, household debt, Merkel, meth, poverty, public transport, rate hike, Trump, Turkey 8 Responses »

Grete Stern Sueño No. 1: Artículos eléctricos para el hogar 1949

• Global Debt Crisis II Cometh (Goldcore)

• The % Puzzle Coming Together (Northman)

• Trump Surprises Democrats, Supports 25 Cent Federal Gas Tax Hike (ZH)

• Household Debt Is China’s Latest Time Bomb (BBG)

• China’s Currency Policy May Be Facing a New Chapter (BBG)

• Angela Merkel Pays a Steep Price to Stay in Power (BBG)

• Meth, the Forgotten Killer, Is Back in America. And It’s Everywhere. (NYT)

• German Cities To Trial Free Public Transport To Cut Pollution (G.)

• Who Keeps Britain’s Trains Running? Europe (NYT)

• Europe’s Poverty Time Bomb (PS)

• Erdogan’s Chief Advisor: US Has Plan To Make Greece Attack Turkey (K.)

• Greece Looks at USA to Calm Down Turkey (GR)

There is no escape. No matter what anyone says about recovery etc., the piper will come calling.

• Global Debt Crisis II Cometh (Goldcore)

• Global debt ‘area of weakness’ and could ‘induce financial panic’ – King warns
• Global debt to GDP now 40 per cent higher than it was a decade ago – BIS warns
• Global non-financial corporate debt grew by 15% to 96% of GDP in the past six years
• US mortgage rates hit highest level since May 2014
• US student loans near $1.4 trillion, 40% expected to default in next 5 years
• UK consumer debt hit £200b, highest level in 30 years, 25% of households behind on repayments

The ducks are beginning to line up for yet another global debt crisis. US mortgage rates are hinting at another crash, student debt crises loom in both the US and UK, consumer and corporate debt is at record levels and global debt to GDP ratio is higher than it was during the financial crisis. When you look at the figures you realise there is an air of inevitability of what is around the corner. If the last week has taught us anything, it is that markets are unprepared for the fallout that is destined to come after a decade of easy monetary policies. Global debt is more than three times the size of the global economy, the highest it has ever been. This is primarily made up of three groups: non financial corporates, governments and households. Each similarly indebted as one another.

Debt is something that has sadly run the world for a very long time, often without problems. But when that debt becomes excessive it is unmanageable. The terms change and repayments can no longer be met. This sends financial markets into a spiral. The house of cards is collapsing and suddenly it is revealed that life isn’t so hunky-day after all. Rates are set to rise and as they do they will spark more financial shocks, as we have seen this week. Mervyn King, former Governor of the Bank of England, gave warning about global debt levels earlier this week: “The areas of weakness in the current system are really focused on the amount of debt that exists, not just in the U.S. and U.K. but across the world,” he said on Bloomberg Radio last Wednesday. “Debt in the private sector relative to GDP is higher now than it was in 2007, and of course public debt is even higher still.”

When you see US debt is out of hand, don’t stop there. All global debt is.

• The % Puzzle Coming Together (Northman)

The US is drowning in debt and as long as rates are low it’s all fun and giggles, but there is a point where it cramps on growth and the simple question is when and where. In recent weeks we have had a nasty correction coinciding with technical overbought readings and both bonds and stocks testing 30 year old trend lines. In the meantime we continue to get data that keeps sending the same message: It’s a debt bonanza that keeps expanding and is unsustainable. Janet Yellen a few months ago said the debt to GDP ratio keeps her awake at night. Yesterday the Director of National Intelligence came out and described the national debt on an unsustainable path and a national security threat. This is literally where we are as a nation.

What’s Congress’s and the White House’s response? Spend more and blow up the deficit into the trillion+ range heading toward 2-3 trillion. What is there to say but stand in awe at the utter hubris that is being wrought. Last night the Fed came out with the latest household debt figures and it’s equally as damning, record debt and ever more required to keep consumer spending afloat:

The non-mortgage piece is particularly disturbing:

Higher interest rates will ultimately trigger the next recession as the entire debt construct will be weighted down by the burdens of cost of carry. And today’s inflation and correlated weakening retail sales data suggested that there’s price sensitivity already at these, historically speaking, still very low rates. The Fed may find itself horribly behind the curve and this will have consequences.

Makes a lot of sense. Therefore not going to happen.

• Trump Surprises Democrats, Supports 25 Cent Federal Gas Tax Hike (ZH)

President Trump surprised a group of lawmakers during a Wednesday meeting at the White House by repeatedly mentioning a 25-cent-per-gallon increase on federal gasoline and diesel tax in order to help pay for upgrading America’s crumbling infrastructure by addressing a serious shortfall in the Highway Trust Fund, which will become insolvent by 2021. The tax increase was first pitched by the U.S. Chamber of Commerce in January, while the White House had originally been lukewarm towards the idea. The federal gasoline and diesel tax has been at 18.4 and 24.4-cents-per-gallon respectively since 1993, with no adjustments for inflation. It currently generates approximately $35 billion per year, while the federal government spends around $50 billion annually on transportation projects.

Senator Tom Carper (D-DE), the top Democrat on the Senate Environment and Public Works Committee, seemed pleasantly surprised at Trump’s repeated mention of the tax as a solution to pay for upgrading American roads, bridges and other public works. “While there are a number of issues on which President Trump and I disagree, today, we agreed that things worth having are worth paying for,” Carper said in a statement. “The president even offered to help provide the leadership necessary so that we could do something that has proven difficult in the past.” Rep. Peter DeFazio (D-OR) – the top Democrat on the House Transportation and Infrastructure Committee was also present at the meeting, in which he says President Trump told lawmakers he would be willing to increase federal spending beyond the White House’s $200 billion, 10-year proposal. “The president made a living building things, and he realizes that to build things takes money, takes investment,” DeFazio said.

[..] Republican leaders have already rejected the idea, however, along with various other entities tied to billionaire industrialists Charles and David Koch. [..] Republican Senator Chuck Grassley (R-IA) doesn’t think the gas tax has any chance of even coming up for a vote in the Senate. “He’ll never get it by McConnell,” said Grassley, referring to Senate Majority Leader Mitch McConnell.

Bloomberg always has graphs for everything. But now that I would like to see how fast personal debt has grown in China, nada. Still, this is a whole new thing: Chinese never used to borrow, and now it’s the new national pastime.

• Household Debt Is China’s Latest Time Bomb (BBG)

For years, economists and policymakers have hailed the propensity of Chinese to save. Among other things, they’ve pointed to low household debt as reason not to fear a financial crash in the world’s second-biggest economy. Now, though, one of China’s greatest economic strengths is becoming a crucial weakness. Over the past two weeks, as they’ve held their annual work meetings, China’s various financial regulatory bodies have raised fears that Chinese households may be overleveraged. Banking regulators sound especially concerned, and understandably so: Data released Monday showed that Chinese households borrowed 910 billion renminbi ($143 billion) in January – nearly a third of all RMB-denominated bank loans extended that month.

While too much can be made of the headline number – lending is always disproportionately large in January, and bank loans are rising as regulators crack down on more shadowy forms of financing – the pace of growth for household debt is worrying. Between January and October last year, according to recent data from Southwestern University of Finance and Economics, Chinese household leverage rose more than eight percentage points, from 44.8% to 53.2% of GDP – a record increase. By contrast, between 2009 and 2015, households had added an average of just three percentage points to their debt-to-GDP ratio each year, and that includes a large jump of 5.5 percentage points in 2009 as banks ramped up lending in response to the global financial crisis. Before 2009, household debt levels had hovered around 18% of GDP for five years.

In other words, the debt burden for Chinese consumers has nearly tripled in the past decade. Part of that rapid debt expansion has been deliberate. China’s government has encouraged increased borrowing and spending on items like cars and houses, to boost both consumption and investment. At the G-20 summit in February 2016, China’s sober central bank chief Zhou Xiaochuan remarked that rising household leverage had “a certain logic to it.” Most worryingly, though, skyrocketing home prices seem to be driving much of the increase in household debt. Higher mortgage rates – and, especially, government policy – have compounded the problem. In order to slow rising prices, officials have raised down-payment requirements, pushed banks to slow mortgage lending and placed administrative restraints on purchases. That’s led buyers to borrow from different, often more expensive, channels.

Beijing’s dilemma: allowing capital outflows (a no-no) would bring down the yuan (a yes please). Ergo: they can achieve what they want by allowing what they can’t afford to let happen.

• China’s Currency Policy May Be Facing a New Chapter (BBG)

In the fraught history of Chinese currency policy, a new chapter could be looming this year as authorities consider the consequences of a yuan that’s testing its strongest levels since mid-2015. After successfully shutting off potentially destabilizing capital outflows and putting a floor under the yuan, policy makers may now have the luxury of looking at relaxing some of the strictures on domestic money. But China watchers warn that any moves are likely to be gradual and calibrated, given the turmoil of 2015 – when a sliding yuan spooked global markets. “Big changes in the capital account are less likely, but some slight easing can be expected,” said Xia Le at Banco Bilbao Vizcaya Argentaria in Hong Kong. Policy makers have put a priority on deleveraging, “which is likely to cause instability,” he said – all the more reason to go cautiously on cross-border flows.

The yuan has strengthened 2.6% this year, after posting its first annual gain in four years in 2017. While no officials have clearly signaled an intent to relax controls, recent comments and moves hint at the potential for modification of the one-way capital account opening that China has been pursuing since 2016 – in which it has encouraged inflows but not outflows. The State Administration of Foreign Exchange, which oversees foreign-exchange reserves, said last week it sees more balanced capital flows. Pan Gongsheng, the director of SAFE, said last week that there will be a “neutral” policy in managing cross-border transactions. In a free trade zone in Shenzhen, near Hong Kong, officials have revived a program allowing for overseas investment that was suspended in 2015. Authorities in January removed a “counter-cyclical” factor from the daily fixing of the yuan, a move seen to let the market take more of a role.

Any return to the sustained appreciation the yuan saw over the decade to 2015 could hurt Chinese exporters’ profits – just as big companies face challenges from the leadership’s drive to reduce excess credit and cut back polluting industries. Yet the disorderly moves that followed 2015 efforts to promote international use of the yuan serve as a warning against any sudden lifting of barriers to capital outflows. “A degree of undershooting” in the dollar against the yuan “is probably necessary to provide reformists in China’s policy circle a window of opportunity to lobby for more capital account liberalization,” analysts led by David Bloom, global head of currency strategy at HSBC in London, wrote in a recent report.

Merkel should have stepped down. This can only end in chaos.

• Angela Merkel Pays a Steep Price to Stay in Power (BBG)

Angela Merkel once claimed she had bested Vladimir Putin during their first meeting in the Kremlin, employing what she said was an old KGB technique: staring at the Russian leader in silence for several long minutes. As the sun rose over a frigid Berlin on Feb. 7, the German chancellor’s rivals from the Social Democratic Party used the same tactic. This time, Merkel blinked. Merkel and her team had spent the previous day and night at the headquarters of her Christian Democratic Union locked in tense negotiations with the SPD leadership. The SPD had issued an ultimatum that broke with long-standing protocol of German coalition-building: Off the bat, they demanded three key posts, including the finance and foreign ministries, power centers from which the SPD planned to set the government’s agenda, especially on Europe.

An earlier attempt at an alliance with the Greens and the Free Democrats had failed. A second collapse in talks, more than four months after the September election, threatened to sweep out the governing elite, including the chancellor who has dominated German politics for 12 years. As delegates were summoned back to the CDU building, they could barely believe what Merkel and her party’s Bavarian sister group, the Christian Social Union, had negotiated. With so much at stake, she surrendered the portfolios for finance, foreign affairs, and labor to the Social Democrats (though the deal still needs to be approved by the SPD’s 464,000 members). CDU lawmaker Olav Gutting captured the mood with gallows humor. “Puuuh! At least we kept the Chancellery!” he tweeted Wednesday. On Sunday, Merkel took to the airwaves to explain her position. “It was a painful decision,” she told the ZDF television network. “But what was the alternative?”

The New York Times making the case for Trump’s border wall?

• Meth, the Forgotten Killer, Is Back in America. And It’s Everywhere. (NYT)

The scourge of crystal meth, with its exploding labs and ruinous effect on teeth and skin, has been all but forgotten amid national concern over the opioid crisis. But 12 years after Congress took aggressive action to curtail it, meth has returned with a vengeance. Here in Oregon, meth-related deaths vastly outnumber those from heroin. At the United States border, agents are seizing 10 to 20 times the amounts they did a decade ago. Methamphetamine, experts say, has never been purer, cheaper or more lethal. Oregon took a hard line against meth in 2006, when it began requiring a doctor’s prescription to buy the nasal decongestant used to make it. “It was like someone turned off a switch,” said J.R. Ujifusa, a senior prosecutor in Multnomah County, which includes Portland. “But where there is a void,” he added, “someone fills it.”

The decades-long effort to fight methamphetamine is a tale with two takeaways. One: The number of domestic meth labs has declined precipitously, and along with it the number of children harmed and police officers sickened by exposure to dangerous chemicals. But also, two: There is more meth on the streets today, more people are using it, and more of them are dying. [..] In the early 2000s, meth made from pseudoephedrine, the decongestant in drugstore products like Sudafed, poured out of domestic labs like those in the early seasons of the hit television show “Breaking Bad.” Narcotics squads became glorified hazmat teams, spending entire shifts on cleanup. In 2004, the Portland police responded to 114 meth houses. “We rolled from meth lab to meth lab,” said Sgt. Jan M. Kubic of the county sheriff’s office. “Patrol would roll up on a domestic violence call, and there’d be a lab in the kitchen. Everything would come to a screeching halt.”

[..] But meth, it turns out, was only on hiatus. When the ingredients became difficult to come by in the United States, Mexican drug cartels stepped in. Now fighting meth often means seizing large quantities of ready-made product in highway stops. The cartels have inundated the market with so much pure, low-cost meth that dealers have more of it than they know what to do with. Under pressure from traffickers to unload large quantities, law enforcement officials say, dealers are even offering meth to customers on credit. In Portland, the drug has made inroads in black neighborhoods, something experienced narcotics investigators say was unheard-of five years ago.

Will they sponsor this in Greek cities too?

• German Cities To Trial Free Public Transport To Cut Pollution (G.)

“Car nation” Germany has surprised neighbours with a radical proposal to reduce road traffic by making public transport free, as Berlin scrambles to meet EU air pollution targets and avoid big fines. The move comes just over two years after Volkswagen’s devastating “dieselgate” emissions cheating scandal unleashed a wave of anger at the auto industry, a keystone of German prosperity. “We are considering public transport free of charge in order to reduce the number of private cars,” three ministers including the environment minister, Barbara Hendricks, wrote to EU environment commissioner Karmenu Vella in the letter seen by AFP Tuesday. “Effectively fighting air pollution without any further unnecessary delays is of the highest priority for Germany,” the ministers added.

The proposal will be tested by “the end of this year at the latest” in five cities across western Germany, including former capital Bonn and industrial cities Essen and Mannheim. The move is a radical one for the normally staid world of German politics – especially as Chancellor Angela Merkel is presently only governing in a caretaker capacity, as Berlin waits for the centre-left Social Democratic party (SPD) to confirm a hard-fought coalition deal. On top of ticketless travel, other steps proposed Tuesday include further restrictions on emissions from vehicle fleets like buses and taxis, low-emissions zones or support for car-sharing schemes. Action is needed soon, as Germany and eight fellow EU members including Spain, France and Italy sailed past a 30 January deadline to meet EU limits on nitrogen dioxide and fine particles.

Never sell your basic needs to foreigners.

• Who Keeps Britain’s Trains Running? Europe (NYT)

The privatization of public services “was one of the central means of reversing the corrosive and corrupting effects of socialism,” Margaret Thatcher wrote in her memoirs. “Just as nationalisation was at the heart of the collectivist programme by which Labour governments sought to remodel British society, so privatisation is at the centre of any programme of reclaiming territory for freedom.” Those sentiments fueled a sell-off that put nearly every state-owned service or property in Britain on the auction block in the final decade of the 20th century, eventually including the country’s expansive public transportation infrastructure. Enshrined by parliamentary acts under Mrs. Thatcher and implemented by her two immediate successors, John Major, a Conservative, and Tony Blair of New Labour, the gospel of privatization was embraced by leaders around the world, notably including Mrs. Thatcher’s closest overseas ally, President Ronald Reagan.

In the realm of transportation, that gospel was soon betrayed by its own chief disciples. Put simply, there were few private-sector buyers with the expertise and deep pockets necessary to maintain control of a transit system that serves approximately seven billion passengers per year. With minimal transparency, operational ownership of the network of train and bus lines that crisscross the 607-square-mile sprawl of Greater London, linking it to the far-flung corners of Britain, was peddled in bits and pieces by the British state or acquired in corporate takeovers. But the new bosses were not private, business-savvy British firms. By 2000, the masters of British public transit — thanks to a scheme that was intended to replace state waste and sloth with soundly capitalist business principles — were foreign governments, most of them members of the European Union.

In short, the privatization devolved into a de facto re-nationalization — but under the direction of foreign states — that somehow went largely unnoticed. It now poses a startling and unprecedented dilemma thanks to Brexit, which will soon divorce Britain from the state bureaucracies beyond the English Channel that literally keep its economy in motion. The largest single stakeholder and operator in British transit is the Federal Republic of Germany [..] Germany is followed closely in the ranks of British transit bosses by France, proprietor of the London United bus system, among many other holdings. Its iconic red double-deckers openly announce themselves as the property of the RATP Group (Régie Autonome des Transports Parisiens), the state-owned Paris transport company, and are emblazoned with its logo of a zigzagging River Seine flowing through an abstract representation of the French capital.

As EU growth is at 10-year highs, boomers keep it all to themselves.

• Europe’s Poverty Time Bomb (PS)

The poor don’t often decide elections in the advanced world, and yet they are being wooed heavily in Italy’s current electoral campaign. Former Prime Minister Silvio Berlusconi, the leader of Forza Italia, has proposed a “dignity income,” while Beppe Grillo, the comedian and shadow leader of the Five Star Movement, has likewise called for a “citizenship income.” Both of these proposals – which would entail generous monthly payments to the disadvantaged – are questionable in terms of their design. But they do at least shed light on the rapidly worsening problem of widespread poverty across Europe. Poverty represents an extreme form of income polarization, but it is not the same thing as inequality. Even in a deeply unequal society, those who have less do not necessarily lack the means to live a decent and fulfilling life.

But those who live in poverty do, because they suffer from complete social exclusion, if not outright homelessness. Even in advanced economies, the poor often lack access to the financial system, struggle to pay for food or utilities, and die prematurely. Of course, not all of the poor live so miserably. But many do, and in Italy their electoral weight has become undeniable. Almost five million Italians, or roughly 8% of the population, struggle to afford basic goods and services. And in just a decade, this cohort has almost tripled in size, becoming particularly concentrated in the country’s south. At the same time, another 6% live in relative poverty, meaning they do not have enough disposable income to benefit from the country’s average standard of living.

The situation is equally worrisome at a continental level. In the EU in 2016, 117.5 million people, or roughly one-fourth of the population, were at risk of falling into poverty or a state of social exclusion. Since 2008, Italy, Spain, and Greece have added almost six million people to that total, while in France and Germany the proportion of the population that is poor has remained stable, at around 20%. In the aftermath of the 2008 financial crisis, the probability of falling into poverty increased overall, but particularly for the young, owing to cuts in non-pension social benefits and a tendency in European labor markets to preserve insiders’ jobs. From 2007 to 2015, the proportion of Europeans aged 18-29 at risk of falling into poverty increased from 19% to 24%; for those 65 and older, it fell from 19% to 14%.

“..Greece is no match for Turkey’s might. It would be like a “fly picking a fight with a giant..” What will the world do when the fighting starts? It could at any moment now.

• Erdogan’s Chief Advisor: US Has Plan To Make Greece Attack Turkey (K.)

The chief advisor to Turkish President Recep Tayyip Erdogan has told Turkey’s TRT channel that he is “in no doubt” that the US has a plan to make Greece attack Turkey while its military is engaged in Syria. Turkey’s response, Yigit Bulut said, will be tough, adding that Greece is no match for Turkey’s might. It would be like a “fly picking a fight with a giant,” he said and warned that terrible consequences would follow for Greece. Bulut made similar comments earlier in the month referring to Imia over which Greece and Turkey came close to war in 1996. “We will break the arms and legs of any officers, of the prime minister or of any minister who dares to step onto Imia in the Aegean,” Bulut said.

It may take Putin to halt Erdogan. But he will expect a reward for that.

• Greece Looks at USA to Calm Down Turkey (GR)

Greece is expecting the US administration to intervene and de-escalate the crisis with Turkey over the Imia islets, according to diplomatic sources in Athens. The Greek government is hoping that US Secretary of State Rex Tillerson, who is currently in Ankara for an official visit, will persuade the Turkish leadership to tone down its actions in the Aegean. The US Ambassador to Greece Geoffrey R. Pyatt will also be in Ankara and will brief Tillerson about recent developments. On Monday night, a Turkish patrol boat rammed into a Greek coast guard vessel near Imia, in the most serious incident between the two NATO allies in recent years. The two countries went almost to war in 1996 over sovereignty of Imia islets (Kardak in Turkish).

A confrontation was avoided then largely due to the intervention of Washington. The Department of State issued a statement on Tuesday stressing that Greece and Turkey should take measures to reduce the tension in the region. On Wednesday, Greek defense minister Panos Kammenos briefed Greece’s NATO allies on the incident at Imia and presented audiovisual material that prove Turkey’s provocation. “The Imia islets are Greek, the Greek Coast Guard and Navy are there and we will not back down on issues of national sovereignty for any reason. We ask our allies in the EU and NATO to adopt a clear stance,” he told AMNA. He also said that it was inconceivable that Turkey, a NATO ally, behaved like this toward another ally, in this case Greece.

Debt Rattle December 30 2017

Dec 302017

December 30, 2017 Posted by Raúl Ilargi Meijer at 10:28 am Finance Tagged with: Brexit, bubble, Catalonia, coral reef, haircut, poverty, Putin, repatriation, tax bill, Trump, volatility 6 Responses »

Ansel Adams Evening at McDonald Lake, Glacier National Park 1942

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• Global Markets End On Record High After Adding $9 Triilion In 2017 (G.)

• Value Of US Housing Market Climbs To Record $31.8 Trillion (HW)

• Return of Volatility Foreshadowed In Economic Data (BBG)

• Trump’s Tax Changes To Blow A $5 Billion Hole In Goldman Sachs Profits (G.)

• Doug Casey on the Coming Financial Crisis (CR)

• The Year in Trump (Jim Kunstler)

• The New Poverty (Alt)

• Theresa May’s Infrastructure Czar Quits, Lashing Out at Brexit (BBG)

• Rajoy Says Spain Won’t Yield to Blackmail by Catalan Separatists (BBG)

• Putin Tells Assad Russia Will Help Defend Syrian Sovereignty (R.)

• Greek Banks Offer Borrowers Haircuts Of Up To 90% (K.)

• How Did Half Of The Great Florida Coral Reef System Disappear? (G.)

No, this is not actual value, this is just another bubble in a system built exclusively on bubbles.

• Global Markets End On Record High After Adding $9 Triilion In 2017 (G.)

Global stock markets have ended 2017 on record highs, gaining $9tn in value over the year due to a strong worldwide economy, President Donald Trump’s tax cuts and central banks’ go-slow approach to easing financial support. The FTSE 100 hit a new peak in London, with an all-time closing high of 7687.77, having earlier hit a new all-time peak of 7697.62. The leading UK index was boosted by a late surge in mining stocks as commodity prices rose against a weaker dollar and optimism grew about the Chinese economy, leaving the index up 7.6% over the year. In global terms, the MSCI all-country world index gained 22% or $9tn on the year to an all-time high of 514.53.

Even the rival attractions of bitcoin, up nearly 14 times over the year, and concerns about war with North Korea, political upheaval in Europe with the Catalan separatist movement in Spain and an inconclusive German election failed to dampen the party mood. Craig James, chief economist at Sydney-based fund manager CommSec, said that of the 73 bourses it tracks globally, all but nine have recorded gains in local currency terms this year. The key for 2018 will be whether central banks maintain a benign approach to reducing their financial support, he added, with the Federal Reserve and Bank of England raising borrowing costs only gradually this year. Low interest rates and quantitative easing, where central banks buy bonds from financial institutions, have been a major support for investors and asset prices in recent years.

“For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,” said James. “Globalisation and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.”

And here’s your next bubble. Now, remember, the Fed is set to tighten, taking the fuel for the bubble away with it.

• Value Of US Housing Market Climbs To Record $31.8 Trillion (HW)

The total value of all homes in the U.S. increased in 2017 to a total $31.8 trillion, according to the latest report from Zillow. This is up from last year’s record high of $29.6 trillion, data from 2016 shows. This is so high, that total homes in Los Angeles and New York City metro areas are worth $2.7 trillion and $2.6 trillion, respectively, the size of the U.K. and French economies. To put it in perspective, the total value of the housing market is 1.5 times greater than the GDP of the U.S., and nearly three times that of China. This is an increase of $1.95 trillion over the past year, more than all of Canada’s GDP or two companies the size of Apple, Zillow’s report showed. And renters are also now spending more money than ever before on housing, spending a record $485.6 billion in 2017.

This is an increase of $4.9 billion from 2016. Renting in San Francisco is especially expensive as renters collectively paid $616 million more than renters in Chicago, despite having 467,000 fewer renters in San Francisco. Of the 35 largest U.S. markets, most home value growth occurred in Columbus, Ohio, which saw an increase of 15.1% to $152.3 billion in 2017. But home prices continue to increase, fueling the housing market’s value growth. Home prices recently increased in October, and experts are beginning to fear 2018 could lock many potential buyers out of the housing market, forcing them to rent, according to the latest report released by S&P Dow Jones Indices and CoreLogic.

Stating the obvious.

• Return of Volatility Foreshadowed In Economic Data (BBG)

If financial market volatility was given up for dead in 2017, then get ready for a resurrection. To understand why, take a look at the incoming economic data. When the underlying dynamics of the economy change, the data tend to become more volatile before markets react. Economic volatility as expressed by the standard deviation of changes in the monthly data has been on the rise since the summer as the global economy gained strength. Financial market volatility, though, has fallen amid a lack a surprises in central bank policies, receding geopolitical tensions and upbeat corporate earnings. But as history shows, such divergences between economic and financial market volatility only last for brief periods. As such, a rebound in market volatility has the potential to be a key driver of risk premiums, bond yields and valuations in 2018.

Volatility is also linked to “financial vulnerability,” which is an aggregate of indicators such as fiscal and current-account balances, the share of local currency bonds held by nonresidents, and short-term external debt as a percentage of currency reserves. Such vulnerabilities picked up in 2017 as portfolio flows into local emerging-market bond and currency funds swelled by $7.5 billion to 15% of local GDP with the growing popularity of exchange-traded funds. And although the data coming from emerging-market economies have been solid, it’s become more volatile, which contrasts with the drop in financial market volatility brought on by large portfolio flows. Countries such as South Africa and Turkey that are political hot spots have seen portfolio flows increase even though their current-account balances have deteriorated. Historically, market volatility has closely tracked economic volatility in emerging markets.

$2.5 trillion coming back home?

• Trump’s Tax Changes To Blow A $5 Billion Hole In Goldman Sachs Profits (G.)

Goldman Sachs has said Donald Trump’s radical US tax changes will knock about $5bn (£3.7bn) off its profits this year. The investment bank said most of the cost would come from Trump’s “repatriation tax” designed to encourage multinationals to bring back the trillions of dollars they hold overseas to avoid tax. Goldman, which made profits of $7.4bn last year, said: “The enactment of the tax legislation will result in a reduction of approximately $5bn in the firm’s earnings for the fourth quarter and year ending 31 December 2017, approximately two-thirds of which is due to the repatriation tax. “The remainder includes the effects of the implementation of the territorial tax system and the remeasurement of US deferred tax assets at lower enacted corporate tax rates,” the bank said in a filing with the Securities and Exchange Commission on Friday.

Last week Congress approved the biggest tax overhaul in 30 years, which includes big tax cuts for companies and wealthy people. The reduction in corporation tax – from 35% to 21% – is designed in part to encourage multinational to repatriate cash from overseas. US companies were estimated, by Citigroup, to hold $2.5tn of capital overseas. Companies had previously explained that they had a duty to shareholders to keep the money abroad, rather than bring it back to the US and pay large tax bills. The tax overhaul will allow Apple to bring back its $252.3bn foreign cash mountain without a major tax hit. The huge amount of untaxed profits Apple holds overseas has become a major political football and a headache for the world’s most valuable company. Drugmaker Amgen said last week that it expected to pay $6bn to $6.5bn repatriating its cash to the US.

More of the obvious, in a long article: “I don’t care that some university gave her a Ph.D., and some politicians made her Fed Chair ..”

• Doug Casey on the Coming Financial Crisis (CR)

Justin’s note: Earlier this year, Fed Chair Janet Yellen explained how she doesn’t think we’ll have another financial crisis “in our lifetimes.” It’s a crazy idea. After all, it feels like the U.S. is long overdue for a major crisis. Below, Doug Casey shares his take on this. It’s one of the most important discussions we’ve had all year. Justin: Doug, I know you disagree with Yellen. But I’m wondering why she would even say this? Has she lost her mind?

Doug: Listening to the silly woman say that made me think we’re truly living in Bizarro World. It’s identical in tone to what stock junkies said in 1999 just before the tech bubble burst. She’s going to go down in history as the modern equivalent of Irving Fisher, who said “we’ve reached a permanent plateau of prosperity,” in 1929, just before the Great Depression started. I don’t care that some university gave her a Ph.D., and some politicians made her Fed Chair, possibly the second most powerful person in the world. She’s ignorant of economics, ignorant of history, and clearly has no judgment about what she says for the record. Why would she say such a thing? I guess because since she really believes throwing trillions of dollars at the banking system will create prosperity.

It started with the $750 billion bailout at the beginning of the last crisis. They’ve since thrown another $4 trillion at the financial system. All of that money has flowed into the banking system. So, the banking system has a lot of liquidity at the moment, and she thinks that means the economy is going to be fine. [..] The whole banking system is screwed-up and unstable. It’s a gigantic accident waiting to happen. People forgot that we now have a fractional reserve banking system. It’s very different from a classical banking system. I suspect not one person in 1,000 understands the difference… Modern banking emerged from the goldsmithing trade of the Middle Ages. Being a goldsmith required a working inventory of precious metal, and managing that inventory profitably required expertise in buying and selling metal and storing it securely.

Those capacities segued easily into the business of lending and borrowing gold, which is to say the business of lending and borrowing money. Most people today are only dimly aware that until the early 1930s, gold coins were used in everyday commerce by the general public. In addition, gold backed most national currencies at a fixed rate of convertibility. Banks were just another business—nothing special. They were distinguished from other enterprises only by the fact they stored, lent, and borrowed gold coins, not as a sideline but as a primary business. Bankers had become goldsmiths without the hammers.

“..we’re more likely to land in a return to something more like 1834, with scant central heating, and a lot of suspense about getting a hot meal at sundown. I want a mule…”

• The Year in Trump (Jim Kunstler)

There he is, our president, both immovable object and irresistible force, unsmiling with slitty eyes beneath that car-hood of a hair-doo, lumbering from one presidential prerogative to the next through squalls of opprobrium, perplexing leaders from foreign lands, punking congressmen and senators, inducing swoons of un-safeness among the zhes, theys, and thems on campus, provoking the op-ed bards of The Times to mouth-foaming hysterics, tweeting any old thing that flies through the interstices of his brain-pan, our Golden Golem of Greatness, MAGA sword in smallish hand against a swirling red sky. Well, he made it through the year. I thought the fucker would be sandbagged by a claque of Pentagon patriots inside of three months, but I was wrong, wrong, wrong.

What seems to be forgotten is that Donald Trump brought his own swamp to Washington, as in a history of hinky real-estate wheelings-and-dealings, stiffed vendors, bankruptcies, lowbrow TV hijinks, and dark adventures in the Manhattan nightlife of the late 20th century. So, it’s swamp versus swamp. You may detect that I’m not exactly a fan of the president, but I rather admire his standing up to the permanent bureaucracy that we call the Deep State, and especially its elite poobahs, who have driven this polity into a deeper ditch than the voters realize. The Mueller investigation hangs over Trump’s head like a piñata filled with dog-shit, but he soldiers on.

After more than a year, the RussiaGate narrative is looking like something fished out of the Goodwill Industries dumpster, its chief sponsor, the FBI, riddled with conflicts-of-interest, suspicious political motivations, and flat-out partisan animosity. Right now, there’s more reason to suppose Mueller will have to start asking some hard questions about Russia collusion among the Hillary cohort —and don’t forget, there’s that stinky business featuring ex-DNC-Chief Debbie Wasserman-Schultz and her mysterious Pakistani IT go-fer, Imran Awan, waiting in the wings.

[..] I’m skeptical of Trump’s MAGA program. We’re not going to replay the industrial age in North America, and we’re for sure not going to return to the life-ways of 1962. I also doubt that we are heading into a Silicon Valley inspired robotic A-I nirvana of “creative” weenies in flying, pilotless Ubers. Rather, I think we’re more likely to land in a return to something more like 1834, with scant central heating, and a lot of suspense about getting a hot meal at sundown. I want a mule.

Pay people for work in non-profit-oriented jobs. Education, health care etc. Good for society, and the only way to save these fields.

• The New Poverty (Alt)

We define poverty, I suppose, as that living condition which is unable to acquire enough dollars to purchase some, or most, of the basic necessities of life. It also seems to be an accepted notion that a certain amount of “poverty” is a necessary condition of our modern market economy—that a certain segment of the population will always be “unemployable” by the profit-oriented business community, either because they lack skills or because the business community simply does not need their services in order to generate its profits. Nobody really knows what to do with these “unneeded” people. We talk about “retraining” them—but there is no guarantee the profit-seeking business community will need them even with their newly acquired skills. In the meantime, these “unneeded” people don’t know what do with themselves either.

This is, perhaps, the biggest problem of all—though I will not, in this short essay, go into the details of that (except to say that it is contributing to a tragedy that is now disrupting the lives of too many of us). The point is this: It is time to begin imagining specific, concrete solutions to what is becoming a fundamental dilemma of our time. Imagine, for example, that every American citizen over the age of 16 can choose to earn a living-wage in exchange for providing a useful service to their local or regional community. Imagine that every local community has a free health and pharmacy clinic (in conjunction with a free methadone and counseling center)—where some of the employees are the living-wage earners. Imagine further that every local community has a housing co-op system (built in part by some of the living-wage earners) that makes available—to every family that needs it—a basic dwelling unit that is warm, dry, well-ventilated, and which provides for cooking, bathing, sleeping, and family gathering.

Imagine that every local community has at least one community garden and rookery (managed by some of the living-wage earners) which grows, harvests, and processes vegetables, fruits, eggs, cheese—and perhaps fish—for local consumption. Imagine that every local community has at least one pre-school day-care (manned at least in part by some of the living-wage earners) which provides, free of charge, a safe, early child-hood learning environment between the hours of 6 A.M. and 6 P.M. Imagine that every local community has a system of retirement co-housing villages (built and staffed, in part, by the living-wage earners). Imagine, in other words, replacing what we now define as “poverty” with another kind of living condition—we might call it “community subsistence.”

If he feels so strongly anti-Brexit, why did he agree to be part of May’s government?

• Theresa May’s Infrastructure Czar Quits, Lashing Out at Brexit (BBG)

Andrew Adonis quit as Theresa May’s infrastructure czar, but not before delivering a blistering verdict on the Brexit policy being pursued by the U.K. prime minister and her Conservative Party. The Labour peer and former transport secretary described Brexit as a “populist and nationalist spasm worthy of Donald Trump” in a resignation letter published by the Guardian that he confirmed as “accurate” on Twitter. As for May’s flagship piece of Brexit legislation, which cleared the House of Commons in December, Adonis described it as “the worst legislation of my lifetime,” and indicated he’ll oppose it when the House of Lords debates it. “I feel duty bound to oppose it relentlessly from the Labour benches,” Adonis wrote.

“You are pursuing a course fraught with danger…If Brexit happens, taking us back into Europe will become the mission of our children’s generation, who will marvel at your acts of destruction.” Adonis was appointed to the National Infrastructure Commission in 2015 by then Chancellor of the Exchequer George Osborne, to push cross-party consensus over long-term decisions to invest in infrastructure. His departure and pledge to oppose May’s Brexit strategy is another sign that even as Britain leaves the EU, divisions permeate throughout the political establishment.

His departure means 2017 is bookended by resignations for May. Three days into the year, her EU envoy Ivan Rogers unexpectedly quit, depriving her of a key figure in dealing with EU negotiators. And now, days from the end of the year, Adonis is departing with an excoriating verdict on the country’s direction. “Brexit is causing a nervous breakdown across Whitehall,” Adonis wrote. “The government is hurtling towards the EU’s emergency exit with no credible plan for the future of British trade and European cooperation, all the while ignoring – beyond sound-bites and inadequate programs – the crises of housing, education, the NHS and social and regional inequality which are undermining the fabric of our nation and feeding a populist surge.”

Rajoy calls an election, tries to influence it be jailing some opponents and making sure others remain in exile, then loses anayway and starts blabbing about extortion. Who’s blackmailing who?

• Rajoy Says Spain Won’t Yield to Blackmail by Catalan Separatists (BBG)

Spanish Prime Minister Mariano Rajoy set in motion the process for convening a new Catalan parliament and said he wouldn’t allow a new separatist administration to blackmail his government. A session to swear in lawmakers in Barcelona will take place on Jan. 17 before a vote days later to appoint a new regional president if there is a candidate, Rajoy said in an end-of-year news conference in Madrid. Rajoy dissolved the Catalan parliament in October after drawing on emergency constitutional powers to respond to a unilateral declaration of independence from Spain. Elections held last week in the region produced a majority for parties that support independence in a result that threatens to prolong a secession crisis that is damaging Spain’s economy.

“I hope that very soon in Catalonia we can count on a government dedicated to reversing the grave social and economic effects of the crisis of recent months,” Rajoy said. “There’s no room for more appeals for rupture or illegality because the law will not allow it.” Choosing a president for Catalonia won’t be easy for the pro-independence parties with former President Carles Puigdemont in Brussels avoiding arrest and his former deputy, Oriol Junqueras, already in jail. A Supreme Court judge is investigating whether the campaign to split from Spain amounted to a rebellion against the government. Rajoy said his most pressing task for the start of the year would be the need to build consensus for his minority government to pass a budget for 2018.

Syria is no-go for the US and its allies. Leave it alone. Let them rebuild.

• Putin Tells Assad Russia Will Help Defend Syrian Sovereignty (R.)

Russian President Vladimir Putin told his Syrian counterpart Bashar al-Assad in a new year’s greeting that Russia will continue supporting Syria’s efforts to defend its sovereignty, the Kremlin said on Saturday. Earlier this month Putin ordered the Russian forces in Syria to start withdrawing from the country, but said Russia would keep its Hmeymim air base in Syria’s Latakia Province as well as its naval facility at Tartous “on a permanent basis”.

The Troika will use this to come up with additional demands.

• Greek Banks Offer Borrowers Haircuts Of Up To 90% (K.)

Greek lenders are proposing huge haircuts, ranging from 70% to 90%, for borrowers with debts from consumer loans, credit cards or small business loans without collateral. In the context of the sale of a €2.5 billion bad-loan portfolio named Venus, Alpha Bank is using the incentive of major haircuts in letters it has sent to some 156,000 debtors. The fact that this concerns some 240,000 bad loans means that some debtors may have two or three overdue loans. Eurobank is employing the same strategy for a set of loans adding up to €350 million. Most of them range between €5,000 and €7,000 each and have been overdue for over a decade. This means that the banks are expecting to collect a small amount of those debts, coming to €250 million for Alpha and €35 million for Eurobank – in effect accepting that the rest of the debt is uncollectible.

Man happened.

• How Did Half Of The Great Florida Coral Reef System Disappear? (G.)

The great Florida coral reef system stretches hundreds of miles down the eastern seaboard of the US. It is the world’s third largest, and nearly 1,400 species of plants and animals and 500 species of fish have been recorded there. But last year marine scientists found nearly half the reef was missing. They took the latest satellite images, compared them with precisely drawn 250-year-old British admiralty charts and found them nearly identical. But where the historic charts showed there had been extensive coral reefs close to the shore in the 1760s, the satellite maps revealed just sea grasses and mud. Only those reefs far from the shore were still intact and alive with fish and plants. So when and why did so much of the world’s third largest reef system just disappear?

Natural forces like spells of extreme rainfall and heatwaves may have played some part, but it is more likely that man was responsible. In those 250 years, fishing off the Florida Keys intensified, causeways and cities were built, pollution increased and the flow of freshwater, sediments and nutrients from the land all changed. Any of these factors could have led to the stress and decline of the reef, but it probably took a combination to kill off half the corals. Something similar to what took place over 250 years off the Florida coast is now accelerating across reefs around the world as natural and new anthropogenic threats emerge and combine with deadly effect.

Corals are intolerant both of temperature and salinity change and it just takes a rise of 1C for a few weeks or extreme rainfall for them to begin to die. In the past 20 years, extreme weather linked to El Niño events and climate change has hit the world’s shallow reefs hard. Abnormally warm water caused the world’s first recorded widespread coral bleaching in 1998. Stretches of the Great Barrier Reef off Australia, and other reefs off Madagascar, Belize and the Maldives, were left white and seemingly dead. Most recovered because corals survive if conditions return to normal. But since then, widespread bleaching and other events have occurred nearly every year, leaving many of the world’s reefs stressed and vulnerable to disease.

Debt Rattle December 16 2017

Dec 162017

December 16, 2017 Posted by Raúl Ilargi Meijer at 10:32 am Finance Tagged with: America, EU, Greece, ignorance, MSM, Ovid, Panama Papers, poverty, reform, refugees, Russiagate, Uber 6 Responses »

Ann Rosener Salvage. Chicago automobile graveyard. 1942

• A Journey Through A Land Of Extreme Poverty: Welcome To America (G.)

• The Chart That Jeffrey Gundlach Calls “Must Watch” For 2018 (ZH)

• Ignorance Is No Excuse (Roberts)

• Uber Stole Trade Secrets, Bribed Foreign Officials And Spied On Rivals (G._

• While Truth Puts On Its Shoes (W.Standard)

• Taking Liberty (Jim Kunstler)

• France, Germany To Unveil Eurozone Reforms In March (AFP)

• EU To Force Firms To Reveal True Owners In Wake Of Panama Papers (G.)

• EU Gives Itself June Deadline On Refugees (K.)

• First Vulnerable Child Refugee Arrives In UK From Greece (G.)

• Ovid’s Exile To The Remotest Margins Of The Roman Empire Revoked (G.)

“That way lies 50 blocks of concentrated human humiliation.”

• A Journey Through A Land Of Extreme Poverty: Welcome To America (G.)

Los Angeles, California, 5 December “You got a choice to make, man. You could go straight on to heaven. Or you could turn right, into that.” We are in Los Angeles, in the heart of one of America’s wealthiest cities, and General Dogon, dressed in black, is our tour guide. Alongside him strolls another tall man, grey-haired and sprucely decked out in jeans and suit jacket. Professor Philip Alston is an Australian academic with a formal title: UN special rapporteur on extreme poverty and human rights. General Dogon, himself a veteran of these Skid Row streets, strides along, stepping over a dead rat without comment and skirting round a body wrapped in a worn orange blanket lying on the sidewalk. The two men carry on for block after block after block of tatty tents and improvised tarpaulin shelters. Men and women are gathered outside the structures, squatting or sleeping, some in groups, most alone like extras in a low-budget dystopian movie.

We come to an intersection, which is when General Dogon stops and presents his guest with the choice. He points straight ahead to the end of the street, where the glistening skyscrapers of downtown LA rise up in a promise of divine riches. Heaven. Then he turns to the right, revealing the “black power” tattoo on his neck, and leads our gaze back into Skid Row bang in the center of LA’s downtown. That way lies 50 blocks of concentrated human humiliation. A nightmare in plain view, in the city of dreams. Alston turns right. So begins a two-week journey into the dark side of the American Dream. The spotlight of the UN monitor, an independent arbiter of human rights standards across the globe, has fallen on this occasion on the US, culminating on Friday with the release of his initial report in Washington. His fact-finding mission into the richest nation the world has ever known has led him to investigate the tragedy at its core: the 41 million people who officially live in poverty. Of those, nine million have zero cash income – they do not receive a cent in sustenance.

History is a poet.

• The Chart That Jeffrey Gundlach Calls “Must Watch” For 2018 (ZH)

Having shown us his favorite trade of the year for 2018, DoubleLine CEO Jeffrey Gundlach tweeted last night his “must watch” chart for 2018. “Since Jan SPX up big & way above MA’s all year…” “…yet JNK unchanged and below 50, 100 & 200 MA’s with a death cross even… As Gundlach concludes: This is “unusual… Must Watch”

So, what happens next?

“80% of Americans continue to live paycheck-to-paycheck” That’s an economy that doesn’t have much of a foundation left. It’s wobbly at best, prone to collapse.

• Ignorance Is No Excuse (Roberts)

On Thursday, the retail sales report for November clicked up 0.8%. Good news, right? Not so fast. First, sales of gasoline, which directly impacts consumers ability to spend money on other stuff, rose sharply due to higher oil prices and comprised 1/3rd of the increase. Secondly, building products also rose sharply from the ongoing impact of rebuilding from recent hurricanes and fires. Again, this isn’t healthy longer-term either as replacing lost possessions drags forward future consumptive capacity. But what the headlines miss is the growth in the population. The chart below shows retails sales divided by those actually counted as part of the labor force. (You’ve got to have a job to buy stuff, right?)

As you can see, retail sales per labor force participant was on a 5% annualized growth trend beginning in 1992. However, after the financial crisis, the gap below that long-term trend has yet to be filled as there is a 22.7% deficit from the long-term trend. (If we included the entirety of the population, given the number of people outside of the labor force that are still consuming, the trajectory would be worse.) But wait, retail sales were really strong in November? Again, not so fast. The chart below shows the annual % change of retail sales per labor force participant. The trend has been weakening since the beginning of 2017 and shows little sign of increasing currently.

While tax cuts may provide a temporary boost to after-tax incomes, that income will simply be absorbed by higher energy, gasoline, health care and borrowing costs. This is why, 80% of Americans continue to live paycheck-to-paycheck and have little saved in the bank. It is also why, as wages have continued to stagnate, that the cost of living now exceeds what incomes and debt increases can sustain. Yes, corporations will do well under the “tax reform” plan, and while the average American may well see an increase in take-home pay, it will unlikely change their financial situation much. As a result, economic growth will likely remain weak as the deficit expands to $1 Trillion over the next couple of years and Federal debt marches toward $32 trillion.

Anyone surprised?

• Uber Stole Trade Secrets, Bribed Foreign Officials And Spied On Rivals (G._

Uber allegedly engaged in a range of “unethical and unlawful intelligence collections”, including the theft of competitive trade secrets, bribery of foreign officials and spying on competitors and politicians, according to an explosive legal document published on Friday. It’s the latest chapter in the discovery process for the company’s messy legal squabble with Waymo, Google’s driverless car spin-off, which has accused Uber of stealing trade secrets. The details were outlined in a 37-page demand letter filed by the ex-Uber security manager Richard Jacobs, who left the company earlier this year. The document paints a picture of a team of employees dedicated to spying on rivals and “impeding” legal investigations into the company.

Jacobs alleges that when he raised concerns over the techniques being used, he was given a poor performance review and demoted as “pure retaliation” for refusing to buy into the culture of “achieving business goals through illegal conduct even though equally aggressive legal means were available”. He had sent the letter to Uber’s in-house counsel with his allegations about possible criminal activity carried out by the special group in May this year, threatening to sue the company. Uber did not provide the letter to Waymo as part of legal discovery before the trial started. An Uber spokeswoman said in a statement: “While we haven’t substantiated all the claims in this letter – and, importantly, any related to Waymo – our new leadership has made clear that going forward we will compete honestly and fairly, on the strength of our ideas and technology.”

MSM destroying its credibility more every day.

• While Truth Puts On Its Shoes (W.Standard)

Covering the Trump presidency has not always been the media’s finest hour, but even grading on that curve, the month of December has brought astonishing screwups. Professor and venerable political observer Walter Russell Mead tweeted on December 8, “I remember Watergate pretty well, and I don’t remember anything like this level of journalistic carelessness back then. The constant stream of ‘bombshells’ that turn into duds is doing much more to damage the media than anything Trump could manage.” [..] Since October of last year, when Franklin Foer at Slate filed an erroneous report on a computer server in Trump Tower communicating with a Russian bank, there have been an unprecedented number of media faceplants, most of them directly related to the Russia-collusion theory. The errors always run in the same direction—they report or imply that the Trump campaign was in league with Moscow.

For a politicized and overwhelmingly liberal press corps, the wish that this story be true is obviously the father to the errors. Just as obviously, there are precedents for such high-profile embarrassments in the past. Editors at top news organizations once treated anonymous sourcing as a necessary evil, a tool to be used sparingly. Now anonymous sources dominate Trump coverage. It’s not just a problem for readers, who should rightly be skeptical of information someone isn’t willing to vouch for by name. It’s a problem for reporters, too, because anonymous sources are less likely to be cautious and diligent in providing information. According to CNN, the sources behind the busted report on Trump Jr.’s contact with WikiLeaks didn’t intend to deceive and had been reliable in the past. Maybe so, but given the network’s repeated errors it’s difficult to just take CNN’s word for it.

But it’s one thing to use anonymous sources; it’s quite another to be entirely trusting of them. CNN decided to report the contents of an email to Donald Trump Jr. based only on the say-so of two anonymous sources and without seeing the emails. [..] For their part, the media don’t seem to be coming to grips with the damage they’re doing to their own credibility. CNN, which calls itself “the most trusted name in news,” didn’t retract their WikiLeaks report but rewrote it in such a way as to render the story meaningless. They also came to the defense of Raju and Herb, saying the reporters acted in accordance with the network’s editorial policies. And of course they didn’t out their sources—the ultimate punishment news organizations can mete out to anonymous tipsters who steer them wrong.

It understandably infuriates the media that President Trump remains unwilling to own up to his own glaring errors and untruths, while news organizations run correction after correction. And it also understandably upsets the media to watch the president actively attack and seek to undermine their work, which remains vital to ensuring accountability in American governance. What they haven’t grasped is how perversely helpful to him they are being: On a very basic level, President Trump’s repeated salvos against “fake news” have resonance because, well, there does indeed appear to be a lot of fake news.

“The desperation to get rid of Trump by the Democratic Party and its handmaidens in the media has an odor of reckless dishonesty..”

• Taking Liberty (Jim Kunstler)

I’m not a Trump admirer, didn’t vote for the guy (nor Hillary, either), am not invested emotionally in his political survival, but I do have a pretty firm idea of what he represents: primitive maleness in all its lumbering vulgarity. I can see why he has a certain symbolic appeal in a society that increasingly shouts “men need not apply here.” He also represents the widespread disappointment with the poor job that the remaining men in charge of things have done in recent decades caretaking this polity. They’ve managed to dodge the repair of every broken institution and duck engagement with any of the really scary problems facing citizens of this republic, from the gross disparities of wealth, to pervasive racketeering in health care and education, to our rotting infrastructure, to the quandaries of race, immigration, climate change — you name it and they have done squat.

Men mostly in charge of the FBI are currently busy demonstrating that they can completely botch the wished-for Trump-ending investigation of Russian “meddling and collusion” — whatever that is as a legal matter — under special prosecutor Robert Mueller. The agency begins to look like the brotherhood depicted on The Sopranos TV show some years back. The congressional committees (mostly men) with oversight on the FBI (and its umbrella agency, the Department of Justice) can’t even get a few deputy Attorneys General to answer a subpoena. If ever there was a display of feckless impotence, this is it. The desperation to get rid of Trump by the Democratic Party and its handmaidens in the media has an odor of reckless dishonesty from a faction that succumbs more and more each day to the dangerous idea that the ends justify the means.

Despite the momentary jubilation over the defeat of Roy Moore in the Alabama special election for senator, the party is close to committing suicide via the collective fantasy that all romantic gambits by men are always and everywhere a prelude to rape. But then, the Republican Party ought to be on suicide watch, too, as it debates a stupendously mendacious tax reform bill that will only shove the country closer to financial meltdown.

2018 is set to become a very divisive year for the EU.

• France, Germany To Unveil Eurozone Reforms In March (AFP)

Germany and France will offer their joint vision for reforming the eurozone by March, German Chancellor Angela Merkel said on Friday, in an effort to bridge divisions over the future of the single currency. Meeting without departure-bound Britain, the bloc’s 27 leaders were tasked by EU President Donald Tusk to speak freely about their often clashing visions for the single currency’s future at a summit widely expected to be dominated by Brexit. Overhauling the eurozone and making it more resilient to economic shocks has been a top priority of French President Emmanuel Macron, as well as for European Commission head Jean-Claude Juncker.

But these ambitions have been stymied by political uncertainty in Germany, where Macron ally Merkel is still trying to form a government after the pro-business FDP party abandoned talks amid doubts about eurozone reform. “We will find a common position because it is necessary for Europe,” Merkel said at a news briefing, speaking alongside Macron after a summit focused mostly on Brexit. Merkel’s overture to France will rankle her conservative CDU party which toes an austerity-minded line on economic matters, but appeals to Social Democrats, with whom she must now build a coalition. Reform of the eurozone is often blocked by political divisions, with rich countries – such as Germany and the Netherlands – reticent to adopt policies that share risks with their heavily-indebted eurozone partners, such as France, Spain, Italy or Greece.

EU needs to open up about Luxembourg, Netherlands et al as tax havens.

• EU To Force Firms To Reveal True Owners In Wake Of Panama Papers (G.)

Companies across the EU will be forced to disclose their true owners under new legislation prompted by the release of the Panama Papers. Anti-corruption campaigners applauded the agreement as a major step in the fight against tax evasion and money laundering, but expressed disappointment that trusts will mostly escape scrutiny. The revised terms of the EU’s fourth anti-money laundering directive include: • A requirement for companies to disclose their beneficial, or true, owners in a publicly available register. • Data on the beneficial owners of trusts to be available to tax and law enforcement authorities, as well as sectors with an obligation to follow anti-money laundering rules, such as lawyers. • A requirement for member states to verify beneficial ownership information submitted to their registers. • Extending anti-money laundering and counter-terrorism regulations to apply to virtual currencies, provision of tax services and those dealing in works of art.

EU member states will have 18 months to transpose the new directive into domestic legislation. As a current member of the EU, the UK will implement the legislation. “This is a big breakthrough and confirms that full transparency of corporate ownership is now the global standard against which other countries will be judged,” said Laure Brillaud, the anti-money laundering policy officer at Transparency International EU. “The EU deserves credit for taking this bold leap to end the secrecy that facilitates corruption, tax evasion and other crimes.” Global Witness applauded the move “in the face of opposition from countries like the UK, Luxembourg, Ireland, Malta and Cyprus,” but criticised the failure to introduce the same requirements for trusts.

All the time in the world. Who cares about the misery?

• EU Gives Itself June Deadline On Refugees (K.)

EU leaders appealed for unity in a last-ditch effort to break their deadlock on sharing out refugees by June, telling reluctant eastern states they could otherwise be outvoted on a dispute that has shaken the bloc’s foundations. Coming out from a fraught discussion among 28 EU leaders that went into the small hours on Friday morning in Brussels, rivals in the two-year-old dispute all stuck to their guns, hemmed in by expectations they have raised with their own voters. The Mediterranean frontline states Italy and Greece, and the rich destination countries including Germany, Sweden, Belgium, France, Luxembourg and the Netherlands are demanding that all countries host some refugees as a way to demonstrate solidarity.

Their four ex-communist peers Poland, Slovakia, Hungary and the Czech Republic refuse to accept people from the mostly-Muslim Middle East and North Africa, saying that would threaten their security after a raft of Islamic attacks in Europe. “There are areas where there is no solidarity and this is something I find unacceptable,” German Chancellor Angela Merkel told reporters. At one point during the two days of talks in Brussels, cameras caught Merkel, the bloc’s paramount national leader, as she appeared to become agitated when talking with the leaders’ chairman, Donald Tusk, making her displeasure with him clear. That came after Tusk, a former prime minister of Poland, came out strongly against “ineffective” and “highly divisive” obligatory refugee quotas, ruffling the feathers of those states that back them as well as the executive European Commission.

“The manner in which the principle of solidarity was being questioned does not only undermine the discussion on the refugee issue, but the future of Europe,” Greek Prime Minister Alexis Tsipras told reporters after what he called “intense” talks. Tusk said the ineffectiveness of relocation schemes was demonstrated by the fact that only 35,000 asylum seekers had been transferred from Greece and Italy under a 2015 plan meant to move 160,000 people. “Mandatory quotas remain a contentious issue,” Tusk told a joint news conference with the Commission’s head Jean-Claude Juncker, the disagreement between the two playing out visibly despite their usually friendly rapport. “Relocation is not a solution to the issue of illegal migration.”

Oh well, that only took a year and a half. Were they hoping his suicide attempts would be successful?

• First Vulnerable Child Refugee Arrives In UK From Greece (G.)

The first vulnerable child refugee stranded in Greece who qualifies for sanctuary under the Dubs amendment has arrived in the UK, more than a year after the government pledged to bring over hundreds of children. The Home Office had accepted that the boy was vulnerable and eligible for transfer 16 months ago. The Dubs amendment, part of the 2016 Immigration Act, was passed after a campaign to transfer 3,000 unaccompanied child refugees stuck in camps to Britain. There are more than 3,300 unaccompanied children in Greece, 11,186 in France and 13,867 in Italy. The Home Office agreed to resettle 480 under the Dubs scheme. Conditions for lone children in Greece have been condemned by Human Rights Watch, which found filthy cells infested with bugs and vermin, sometimes without mattresses or access to showers.

Hammersmith and Fulham council in west London has stepped in to offer the boy a home and one of its social workers travelled to Greece to assess the child, who has lost contact with his family in Syria. The boy, who is said to be deeply traumatised, was detained until last month in a police cell with no access to medical professionals, and forced to sleep on an inch-thick mattress on the ground. Police said the boy had repeatedly self-harmed, tried to kill himself and was at “imminent risk” of doing this. According to Antonia Moustaka, a lawyer for the humanitarian agency Praksis, he spent more than 380 days in psychiatric clinics, 124 days in shelters for unaccompanied minors and six weeks in police detention.

[..] George Gabriel, the project lead at the charity Safe Passage, said: “There are more than 3,300 unaccompanied children in Greece and only 1,130 spaces in shelters. The winter is bitterly cold and conditions are getting worse. “Over a year and a half ago, the Dubs amendment brought hope that hundreds of these kids would be brought to safety. It has been appalling to watch these minors wait, month after month, on bureaucratic delays.”

Only took 2,000 years. What were all other mayors of Rome during that time thinking?

• Ovid’s Exile To The Remotest Margins Of The Roman Empire Revoked (G.)

More than 2,000 years after Augustus banished him to deepest Romania, the poet Ovid has been rehabilitated. Rome city council on Thursday unanimously approved a motion tabled by the populist M5S party to “repair the serious wrong” suffered by Ovid, thought of as one of the three canonical poets of Latin literature along with Virgil and Horace. Best known for his 15-book epic narrative poem Metamorphoses and the elegy Ars Amatoria, or the Art of Love, Publius Ovidius Naso was exiled in 8 AD to Tomis, the ancient but remote Black Sea settlement now known as the Romanian port city of Constanta. He remained there until his death a decade later. Although ordered directly by the emperor, scholars have long speculated over the motive for Ovid’s exile; the poet himself attributed it to “carmen et error”, a poem and a mistake.

Experts believe the cause was probably a combination of three factors: that Ovid’s erotic poetry was considered offensive, his attitude to Augustus was too disrespectful, and that he may have been involved in an unspecified plot or scandal. La Republicca reported that M5S, which holds a majority of the seats on the council, demanded that “necessary measures” be adopted to revoke the order in what the capital’s deputy mayor, Luca Bergamo, described as an important symbol. “It is about the fundamental right of artists to express themselves freely in societies in which, around the world, the freedom of artistic expression is increasingly constrained,” Bergamo told councillors.

Ovid was indisputably “one of the greatest poets in the history of humanity,” the deputy mayor said, and moreover the real reasons for his mysterious banishment by the emperor “were never placed on the historical record”. Sulmona, the Abruzzo town where the poet was born (then Sulmo), formally acquitted him of any wrongdoing. Dante, the great Renaissance poet, was similarly pardoned in 2008 by Florence – from where he was exiled on pain of death in 1302.

Brexit Is Pandora’s Gift To Britain

Dec 042017

December 4, 2017 Posted by Raúl Ilargi Meijer at 1:44 pm Finance Tagged with: Blair, Corbyn, DUP, EU, Ireland, May, Pandora, poverty, referendum, secrecy, Trump 8 Responses »

Saul Leiter Raining on two 1957

First of all, let me reiterate that I don’t think Brexit is a bad thing per se. Getting rid of Brussels is at least as much of a relief as it is a headache. Moreover, Britain needed a makeover, badly, as has ironically been shown especially after the referendum. But as an outsider it is still top class theater to see it playing out. And the real high value drama hasn’t even started.

But we can already hear the orchestra changing tone, and mood, and the fat lady’s warming up her voice. To see the whole negotiating process being led and conducted by a woman who voted against initiating it in the first place is a guaranteed added bonus. Not sure Shakespeare would have found it a credible plotline, but there you go.

It’s much less amusing to see that poverty in Britain is soaring and a fifth of the population is now poor, including an additional 400,000 children in the past 5 years. But that is a strong indicator of how much of a failed state the country has become, and it makes the Brexit vote outcome that much easier to explain. Still, whether the vote had been Leave or Remain, the real damage had been done long before.

The people doing the negotiations are to a large extent accountable for that damage, they’re all Tories from the Cameron era, and Tony Blair, who’s just as much to blame, is speaking up again as well. The Brexit mess thus functions to expose the abject failure of the entire British political system as much as Donald Trump’s ascent to the US presidency does in America.

It’s now just a matter of learning the right lessons from these events. And that is not that the US would be fine if Trump were not there, or that Brexit itself is the main problem in the UK. It’s that these are the consequences of systems failing across the board, with Blair turning UK’s Labour party into a right wing force, and the DNC doing the same with the Democrats.

Try to take away people’s voices along with their money, and they will speak up. It’s one easy step from there for the other side of the spectrum to claim they are the real voice of the people, and getting the benefit of the doubt. Not that it will end there, but until and unless the left has re-defined itself as actual left again, representing people instead of themselves, there will be no easy way out.

That said, both Trump and Brexit will become mired in cesspools, just not because of Russia but because both turn against their fast impoverishing populations. But even then, redefining is a crucial issue.

As Theresa May is in Brussels to hold talks aimed merely at just getting negotiations started, something she will have to make hefty concessions for, the majority her party had before she called a snap election keeps slip sliding away. Labour would now get that majority. If she were smart, she’d call another election today, lose it and let Corbyn deal with the mess, but she won’t, the Tories are addicted to the smell of power in the morning, and so is May herself.

May seems to have reached some shaky sounding deal with the EU about the Irish border issue (“regulatory alignment”), but that will only lead to more problems (as will all deals she manages to reach in the talks). In this case, her coalition with Northern Ireland DUP party, which keeps her in power to begin with, comes under strain. Every solution will lead to another problem, and she can’t keep everybody happy.

Brexit is Pandora’s gift to Britain. Suppose the DUP accepts open borders with EU member Ireland, why would not Scotland, for instance, demand a similar deal?

Labour Open Up 8-Point Lead Over Conservatives In Latest Opinion Poll

Jeremy Corbyn’s Labour party has extended its lead over the Conservatives to eight points, according to a new poll that will provide grim reading for the Prime Minister. The poll by Survation puts Labour on 45%, with Theresa May’s Conservatives trailing behind on 37%, and the Liberal Democrats under Vince Cable on six%. An eight point lead, the polling company added, would likely put Labour into overall majority territory if such vote share totals were reflected at the ballot box.

Meanwhile, ever more people want a say in what Brexit will look like, via another referendum. Before the negotiations are finished, someone will add up how much Brexit will really cost, and that’ll be the end of it, unless the Tories prevent that second referendum. There will come a point that the Tories realize this whole process will push them out of power for a long time, but it’ll be too late then.

Second Brexit Referendum Has 16-Point Lead As Half Of Britons Back New Vote

Half of Britons want a public vote on the UK’s final Brexit deal with the EU once the Government’s negotiations are over, a new poll suggests. Of the 1,003 people surveyed in the Survation poll , 497, or 50%, said they would “support holding a referendum asking the public if they will accept or reject the deal”. A total of 343, or 34%, said they were against the idea of a public vote, while 164 (16%) said they did not know. Of the people who were in favour of a referendum on the UK’s deal for exiting the EU, 271 (54.5%) had voted Remain in the 2016 Brexit vote, while 145 (29%) voted Leave.

Jeremy Corbyn is set to become UK PM, if he can shake off Tony Blair, but he hasn’t quite screwed up the courage to turn his back on the Brexit vote, so he’s as much in an impossible split as May is. It’s all he can do is to wait until she makes ever more mistakes and then stumbles over them. Meanwhile, he can carefully open up the second referendum option, because it doesn’t directly contradict the outcome of the first.

Corbyn Signals Labour Could Be Open to Second Brexit Referendum

U.K. Labour Party leader Jeremy Corbyn hinted that he could be open to holding a second referendum on Brexit as the consequences of leaving the European Union become clearer. Asked if he was prepared to rule out a second vote after meeting with Portuguese Prime Minister Antonio Costa in Lisbon on Saturday, Corbyn said his party hasn’t fixed its position on the issue. “We’ve not made any decision on a second referendum,’’ Corbyn said at a European Socialist Party conference in the Portuguese capital. “What we’ve said is that we would respect the result of the first referendum.”

And May’s own people are starting to turn their backs on her, slowly at first but that will pick up, because they start fearing for their own future careers if they back her for too long. She has to balance this with her fanatical Brexiteers who are only looking to replace her.

Theresa May Faces New Crisis After Mass Walkout Over Social Policy

Theresa May was plunged into a new crisis on Saturday night after the government’s social mobility adviser revealed he and his team were quitting, warning that the prime minister was failing in her pledge to build a “fairer Britain”. In a major blow to No 10, Alan Milburn, the former Labour cabinet minister who chairs the government’s social mobility commission, said that he and all three of his fellow commissioners were walking out – including a leading conservative, Gillian Shephard. The move will be seen as a direct challenge to May’s vow in Downing Street to place fairness and social justice at the heart of her premiership. In his resignation letter, seen by the Observer, Milburn warns that dealing with Brexit means the government “does not seem to have the necessary bandwidth to ensure the rhetoric of healing social division is matched with the reality.

An interesting suggestion from commission chair Milburn was that while he thought May might actually want to tackle inequality and connected issues, he doesn’t think the government has the time to do that, because all its attention is most be focused on Brexit. That suggests the country effectively has no functioning government at the moment, and perhaps for years to come. Great prospect for a country deep in doodoo.

And it’s not a big surprise in this climate that May tries to keep all kinds of things secret. Not a big surprise, but certainly a big mistake.

Theresa May Under Growing Pressure To Reveal True Cost Of Divorce Bill

Senior Conservatives are demanding Theresa May be clear about how much the British public will be forced to pay to settle the Brexit “divorce bill”. MPs and peers, including former cabinet ministers, say that with the bill agreed this week and likely to be between £40bn and £50bn, the time has come for the Prime Minister to be completely open on how much Brexit will cost. Labour is threatening to bring the matter to a head by calling on Tory MPs to back a plan to let the UK’s spending watchdogs assess the financial settlement and give Parliament a vote on it, The Independent can reveal.

It comes 24 hours before Ms May will sit down with European Commission President Jean-Claude Juncker to secure an agreement-in-principle on the withdrawal terms of Brexit – including the divorce bill, Irish border and EU citizens’ rights. But despite any deal being likely to gain approval at the European Council in mid-December, the British public have not been told by the Government how big the divorce bill is likely to be, or how it is being worked out.

Indeed, secrecy is a policy in Tory Britain.

Irish warn Theresa May: Change Course Or Risk Brexit Chaos

Ministers are under mounting pressure to come clean over the extent of economic damage that a “no deal” outcome could cause to the economy. In the budget, Philip Hammond announced that the Office for Budget Responsibility revised downwards forecasts for UK growth over the next few years, mainly because of concerns of low productivity growth. But the OBR made clear that these downgrades were premised on a benign outcome to Brexit negotiations. Both the Treasury, privately, and leading independent economists recognise that actual growth will be considerably lower than the gloomy budget projections if the UK does not achieve most of its negotiating goals, or if there is a “no deal” result.

Government sources said ministers would this week release sections of assessments into the potential economic impact of Brexit carried out across Whitehall, which until recently they had tried to keep secret. Many MPs believe the published sections will be heavily redacted and will not make clear the extent of potential economic damage. Last night Nicky Morgan, who chairs the Treasury select committee, said it was essential that as many projections as possible were made public.

The latest work by economists at the London School of Economics estimates that, if the UK crashes out of the EU with no deal, the impact will be far more severe than the projections in the budget suggested. Thomas Sampson of the LSE’s Centre for Economic Performance said Brexit could reduce UK living standards by up to 9% in the most pessimistic case.

The best thing by a mile that May could possible do is to get out of the way before the way steamrollers all over her. But as I said, she won’t. And that is as tragic for her as it is for Britain. It’ll be entertaining to see the show -and May- go down. As long as you don’t live in Britain.

Debt Rattle December 4 2017

Dec 042017

December 4, 2017 Posted by Raúl Ilargi Meijer at 9:46 am Finance Tagged with: Attenborough, BIS, bitcoin, Blair, Brexit, crypto, May, Merkel, poverty, Venezuela, volatility 4 Responses »

Amedeo Modigliani Jeanne Hebuterne 1919

• The Bitcoin Ramp – Is It Sustainable? (Lebowitz)

• UK, EU Plan Regulatory Crackdown On Cryptocurrencies (ZH)

• Venezuela To Launch Cryptocurrency To Combat US ‘Blockade’ (G.)

• Today’s Central Bank Vol Suppression Will End In Spectacular Fashion (Peters)

• Market Is Reminiscent Of 1999 Bubble, On Verge Of Significant Change (ZH)

• BIS Joins Chorus Saying Stock Valuations Are Looking ‘Frothy’ (BBG)

• Financial Markets Could Be Over-Heating – BIS (G.)

• Strong Leadership Across Europe Now Looks Like Wishful Thinking (CNBC)

• Theresa May Fails To Strike Border Deal With Irish Government (G.)

• Nigel Farage Refuses To Give Up EU Pension (Ind.)

• Tony Blair Confirms He Is Working To Reverse Brexit (G.)

• Fifth of UK Population Now Live In Poverty (Ind.)

• David Attenborough Issues Appeal To Save ‘The Future Of Humanity’ (Ind.)

Wherever you stand on the issue, that is quite the graph. We’ll do a series on BTC soon.

• The Bitcoin Ramp – Is It Sustainable? (Lebowitz)

Believers in BTC claim it is quickly becoming a widely accepted global currency. To better understand their view let’s see how BTC meets the definition of a currency, both as a means of transacting (money) as well as a store of value. Money: money is anything that two parties can agree is acceptable in exchange for goods and services. For example, if I pay you a case of beer to mow my lawn, the beer, in this instance, is money. However, for “money” to be widely accepted, the masses must ascribe similar value to it. While there is an increasing number of vendors accepting BTC, it is nearly impossible to use BTC to meet your everyday needs. Further, the value, or price of money, needs to be relatively stable to be effective. If a dollar bill bought you a case of beer today, but only a single bottle tomorrow and a keg the following week, few consumer or vendors would trust the dollar’s value. BTC’s value can fluctuate 5-10% on an hourly basis.

Store of value: a store of value is something that allows one to save money and retain its value. When we save money we want comfort in knowing the money we earned can buy us the same amount of goods and services tomorrow that it can buy today. Again, the extreme volatility of the price of BTC makes it difficult to project how much purchasing power a BTC will buy you in the future. All currencies fluctuate but typically nowhere near the degree we are witnessing in BTC. If the extreme price movements of BTC subside it is possible that BTC can serve as a widely accepted currency and the believers could be correct.

A second camp believes BTC is a financial bubble. The chart below compares BTC to other recent investment fads. You will notice in all instances above the bubbles rise steadily in price before transitioning to an exponential increase prior to collapse. Often, in the so-called euphoric phase, prices go well beyond the point most investors think is reasonable. In this respect, BTC is following the path of prior bubbles. Bubbles are not solely defined by price movements, but more importantly by a lack of supporting fundamental value. If you subscribe to the value of BTC as does the first camp, the rapid increase in price may well be justified. If you believe there is no value, BTC is showing the classic pattern of most bubbles.

Politicians, banks, they’re all trying to get control. But can they?

• UK, EU Plan Regulatory Crackdown On Cryptocurrencies (ZH)

However, in retrospect this appears to not have been the case, and as the Telegraph reported just around the time of the big drop, UK “ministers are launching a crackdown on the virtual currency Bitcoin amid growing concern it is being used to launder money and dodge tax.” Taking a page out of the Chinese playbook, the UK Treasury has announced plans to regulate the Bitcoin that will force traders in so-called crypto-currencies to disclose their identities and report suspicious activity. According to the Telegraph, while “until now, anybody buying and selling Bitcoins and other digital currencies have been able to do so anonymously, making it attractive to criminals and tax avoiders. But the Treasury has now said it intends to begin regulating the virtual currency, which has a total value of £145 billion, to bring it in line with rules on anti-money laundering and counter-terrorism financial legislation.”

“John Mann, a member of the Treasury select committee, said he expected to hold an inquiry into the need for better regulation of Bitcoin and other alternative currencies in the new year. He said: “These new forms of exchange are expanding rapidly and we’ve got to make sure we don’t get left behind – that’s particularly important in terms of money-laundering, terrorism or pure theft. “I’m not convinced that the regulatory authorities are keeping up to speed. I would be surprised if the committee doesn’t have an inquiry next year. “It would be timely to have a proper look at what this means. It may be that we want speed up our use of these kinds of thing in this country, but that makes it all the more important that we don’t have a regulatory lag.”

The proposed changes come amid increasing fears that Bitcoin is being used by gangs to launder the proceeds of crime while also attracting currency speculators – with the value of the coin soaring in the past 12 months. In other words, the same reason why the IRS is cracking down on Coinbase clients in the US is also why UK and European regulators are joining China in cracking down on capital flight. While such legislation by the UK alone would hardly have a major impact on crypto pricing – after all the UK is a very minor player in a market that is dominated by Korea and Japan (as proxies for China), and to a growing extent, the US, the new rules will also be applied across the European Union, and “are expected to come into force by the end of the year or early in 2018, the minister in charge has said.”

Backed by the world’s biggest oil reserves. But who’s going to buy?

• Venezuela To Launch Cryptocurrency To Combat US ‘Blockade’ (G.)

President Nicolas Maduro has said Venezuela would launch a cryptocurrency to combat a US-led financial “blockade,” although he provided few clues about how the economically crippled Opec member would pull off the feat. “Venezuela will create a cryptocurrency … the ‘petro,’ to advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade,” leftist Maduro said during his weekly Sunday televised broadcast. The digital currency will be backed by Venezuelan reserves of gold, oil, gas, and diamonds, he said during the near five-hour show, which included traditional Christmas songs and dancing. “The 21st century has arrived!” Maduro added to cheers, without providing specifics about the currency launch.

Opposition leaders scorned the announcement, which they said needed congressional approval, and some cast doubt on whether the digital currency would ever see the light of day in tumultuous Venezuela. Still, the announcement highlights how US sanctions this year are hurting Venezuela’s ability to move money through international banks. Sources say compliance departments are scrutinising transactions linked to Venezuela, which has slowed some bond payments and complicated certain oil exports. Maduro’s move away from the US dollar comes after the recent spectacular rise of bitcoin, which has been fuelled by signs that the digital currency is slowly gaining traction in the mainstream investment world. Cryptocurrencies typically are not backed by any government or central banks.

Bitcoin already has a strong following among tech-savvy Venezuelans looking to bypass dysfunctional economic controls to obtain dollars or make internet purchases. Venezuela’s traditional currency, meanwhile, is in free fall. Currency controls and excessive money printing have led to a 57% depreciation of the bolivar against the dollar in the last month alone on the widely used black market. That has dragged down the monthly minimum wage to a mere $4.30.

A pretend free market suppressed close to a choking point. That cannot end well.

• Today’s Central Bank Vol Suppression Will End In Spectacular Fashion (Peters)

After his provocative admission published earlier that he now checks “Breitbart daily and InfoWars too… You can no longer understand America unless you do”, One River’s CIO Eric Peters published the following anecdote revealing an earlier moment of his life, when as a currency trader, he learned a valuable lesson following the spectacular blow up of Europe’s Exchange Rate Mechanism, or ERM, and why the lesson from some 25 years ago, leads Peters to conclude that “Today’s central bank volatility suppression regime resembles it, and will end in spectacular fashion”.

Anecdote: “Let’s step into my office,” he said. So I did. He was my boss. “The firm’s most important client needs help.” I listened, uninterested, unconcerned about clients, their problems. Barely cared about my boss. I had a game to play, solo sport, and loved it to the exclusion of all else. “They need to do a very large trade.” A twenty-six-year-old proprietary trader’s mind is rather primitive. Which is good and bad. Being young and dumb allows you to see things elders can’t. And take risks one rarely should. In 1992, I’d done both. “They need to buy three hundred million Mark/Lira.” Europeans established a mechanism to lock their exchange rates into narrow ranges to reduce market volatility and promote economic convergence. In theory it worked, in practice it didn’t. Politicians named it the ERM.

“What would you like to do?” he asked, calm. I stood there, processing. Such a sum was extraordinary even before the ERM blew up, which it just had. For months, I’d bought options in anticipation of its demise. Honestly, it was obvious. The ERM encouraged speculators to build massive leveraged carry positions, discouraged corporations from hedging exchange rate risk, suppressing volatility and interest rate spreads everywhere. The process was reflexive. Today’s central bank volatility suppression regime resembles it, and will end in spectacular fashion. All such things do. “I want to buy more!” I answered. My foreign-exchange options left me long the exact amount our client needed to buy. No other bank would sell them such a large sum. So naturally, I wanted more.

“You should sell them your whole position,” he told me, firm. I couldn’t understand, it made no sense. “Big customer orders like this usually mark the highs – never forget it,” he said. I left his office angry, irate, sold my whole position. And he was right.

There’s far too much crap out there for it all to escape through the emergency exits.

• Market Is Reminiscent Of 1999 Bubble, On Verge Of Significant Change (ZH)

Just hours after Neil Chriss announced that his $2.2 billion Hutchin Hill hedge fund is shuttering due to underperformance and admitted that “we fought hard, but did not deliver the performance that you expected from us”, another legendary hedge fund announced it was undergoing a significant restructuring as a result of relentless investor withdrawals: citing a November 30 letter, Bloomberg reported that Paul Tudor Jones’ Tudor Investment Corp, which lost 1.6% YTD, was closing its Discretionary Macro fund “and letting investors shift assets to the main BVI fund as of Jan. 1” with the letter clarifying that “Jones will also principally manage Tudor’s flagship BVI fund, which will be the firm’s only multi-trader fund next year.”

[..] while the internal reorganization of multi-billion hedge funds are hardly of material interest to ordinary retail, or even institutional, investors, PTJ’s outlook on the market always is, and it was concerning: frustrated by the collapse of market vol as a result of record central bank monetary easing, Jones said “the environment is on the verge of a significant change” and that the current market is reminiscent of the bubble of 1999. “That was a year in which Tudor BVI’s macro book was basically flat while U.S. equities experienced one of the greatest bubbles in history,” Jones, 63, wrote. “The termination of that bull market kicked off a three-year macro feast.” adding that “the plot is much the same today but we can substitute Bitcoin and fine art for the Nasdaq 100 of 1999.”

“In the face of a shock, investors may be surprised to find themselves jammed running for the exit,” he wrote. However, as Howard Marks has repeatedly cautioned in the past 3 years, this will be a problem as “the amount and quality of liquidity is lower than people recognize”, and “hidden leverage in the market will make a mass exit even more challenging.”

They are the central bank cheerleaders, who now try to issue a warning against what they were cheering for.

• BIS Joins Chorus Saying Stock Valuations Are Looking ‘Frothy’ (BBG)

The Bank for International Settlements added its voice to institutions questioning whether stocks have become too expensive, saying they look “frothy” – particularly in the U.S. The BIS weighed in on the debate just days after Goldman Sachs said a prolonged bull market across stocks, bonds and credit left its measure of average valuation at the highest since 1900. Stock prices are above historical averages and U.S. companies may struggle to continue their pace of dividend growth, the BIS said in its quarterly review on Sunday. Warnings on elevated asset prices have become more frequent as the world’s biggest central banks move toward tighter monetary policy. A Bank of America Merrill Lynch survey showed a record 48% of investors say equities are overvalued.

Nobel-Prize winning economist Richard H. Thaler said in October he can’t understand why stocks are still rising. The California State Teachers’ Retirement System CIO said last week that holding shares feels like “sitting on a pin cushion.” The paradox is that financial conditions have continued to ease even in the U.S., by far the most advanced in increasing interest rates, leaving investors struggling to judge how rates will drive prices. “Ultimately, the fate of nearly all asset classes appeared to hinge on the evolution of government bond yields,” the Basel, Switzerland-based institution said. “There is also significant uncertainty about the levels those yields will reach once monetary policies are normalized in the core jurisdictions.”

The price-earnings ratio of the U.S. stock market, cyclically adjusted, was recently above 30, exceeding its post-1982 average by almost 25%, the BIS said. While that’s below the peak of 45 reached in the dotcom bubble of the late 1990s, it’s nearly double the long-term average of 1881–2017. The gauges for European and U.K. equities were at their post-1982 averages.

More BIS. Woodford: “Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations..”

• Financial Markets Could Be Over-Heating – BIS (G.)

Investors are ignoring warning signs that financial markets could be overheating and consumer debts are rising to unsustainable levels, the global body for central banks has warned in its quarterly financial health check. The Bank for International Settlements (BIS) said the situation in the global economy was similar to the pre-2008 crash era when investors, seeking high returns, borrowed heavily to invest in risky assets, despite moves by central banks to tighten access to credit. The BIS, known as the central bankers’ bank, said attempts by the US Federal Reserve and the Bank of England to choke off risky behaviour by raising interest rates had failed so far and unstable financial bubbles were continuing to grow.

Claudio Borio, the head of the BIS, said central banks might need to reconsider changing the way they communicated base interest rate rises or the speed at which they were increasing rates to jolt investors into recognising the need to calm asset markets. “The vulnerabilities that have built around the globe during the long period of unusually low interest rates have not gone away. High debt levels, in both domestic and foreign currency, are still there. And so are frothy valuations. “What’s more, the longer the risk-taking continues, the higher the underlying balance sheet exposures may become. Short-run calm comes at the expense of possible long-run turbulence,” he said. The warning came as Neil Woodford, one of the UK’s most high-profile fund managers, said stock markets were in danger of crashing, resulting in huge losses for millions of people.

The founder of Woodford Investment Management, which manages £15bn worth of assets, told the Financial Times that investors were at risk of the market experiencing a repeat of the dotcom crash of the early 2000s. Woodford said he was concerned that historically low levels of interest rates in most developed nations over the last decade were pushing asset prices to unsustainable levels. “Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history,” he said. “Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations. “There are so many lights flashing red that I am losing count.”

I said this before: Merkel’s failure to form a coalition is a big deal all across Europe. Even if she succeeds the second time around. She leaves a big vacuum.

• Strong Leadership Across Europe Now Looks Like Wishful Thinking (CNBC)

Strong and stable leadership is difficult to come by these days across Europe. The countries that have traditionally been the bastion of reliable leadership – Germany and the U.K. — are leaving citizens feeling disappointed – and more worryingly, it is having spillover effects into matters outside of domestic politics. Brexit and U.K. leader Theresa May’s ill-fated snap election have left the Conservative government hamstrung and weakened, as the prime minister seems to be hanging onto her position by a thread. The latest installment of this political vacuum was showcased by Ireland, where the minority government was at risk of collapsing after a no-confidence motion was tabled against the Deputy Prime Minister Frances Fitzgerald over a police whistleblower scandal. This could have led to new elections in December.

And in Germany, which is usually considered an absolute beacon of stability, we are facing a political earthquake as exploratory talk on a potential “Jamaica” coalition have faltered spectacularly after the FDP’s (Free Democratic Party) Christian Lindner proclaimed blearily after another long night of talks that he would pull his support for further discussions to form a government. As I am writing this, the parties in Germany are under pressure to deal with shock of the unprecedented nature of the collapse and the utter lack of workable alternatives. New elections have been favored by Chancellor Angela Merkel but talks are still ongoing about a potential return of the much-loathed, yet functioning “grand coalition” between the CDU (Christian Democratic Union), its Bavarian sister party the Christian Social Union (CSU), and the Social Democratic Party (SPD). A revival of talks about a potential Jamaica coalition including the Greens, CDU/CSU and the liberal FDP party has now been ruled out by Lindner.

But surprisingly, the impact on the German economy is non-existent so far. Last month, we saw the German business morale hitting another record high in November, with the IFO Institute adding that the economy is “headed for a boom.” Just last week, data confirmed that the German economy grew by 0.8% in the third quarter, which led to the IFO Institute upgrading its growth forecast for the German economy to 2.3% this year, from 1.9% previously. Talking to me on CNBC, Clemens Fuest, the president of Munich-based IFO Institute, said that only a period of prolonged uncertainty brought about by new elections early next year might impact business sentiment, adding that “we are very far away from that scenario.” Even a minority government might work as this would “revitalize parliamentary debate,” he added.

In fact, when I asked Hans Redeker, head of foreign exchange strategy at Morgan Stanley, about a slowdown in investment in growth as a result of the collapse in coalition talks, he said: “When things are going well in the economy, you don’t necessarily need strong leadership – it is only when the economy isn’t doing well that you need leadership”.

What if talks with the EU today fall flat on their face? Will she still stay on?

• Theresa May Fails To Strike Border Deal With Irish Government (G.)

Theresa May and the Irish government have failed to reach a deal on the crucial Brexit issue of the Northern Ireland border ahead of a crunch meeting on Monday lunchtime with the European commission president, Jean-Claude Juncker. Despite intense efforts over the weekend to agree a proposal on how to avoid a hard border in Ireland, Irish officials revealed at midnight on Sunday that “there is still a way to go” to achieve a meeting of minds on the issue. “The Irish government remains hopeful – but at this stage it is very difficult to make a prediction,” said an official. The failure to seal a deal threatens to delay the progression of the Brexit negotiations to the second phase covering trade and the UK’s future relationship with the EU. May will meet Juncker with the UK’s final offer on the three main issues in the first round of Brexit talks – the Irish border, citizens’ rights and the financial settlement.

Talks could continue into Wednesday when the European commissioners are due to meet to discuss their recommendation to European leaders on whether “sufficient progress” has been achieved to move talks on to trade and transition arrangements. May had been given the deadline of Monday 4 December to table the offers before a European council summit on 14 December, when EU leaders will decide if “sufficient progress” has been made to proceed to the next phase. But although the money and citizens’ rights issues have been mostly resolved, the future arrangement with Ireland has remained a significant obstacle because the British government has yet to offer a firm commitment explaining how it will guarantee avoiding a return to a hard border after Brexit. For Ireland, and the EU27 as a whole, the problem has become a potential dealbreaker, with Dublin given an effective veto on progress of talks.

What hypocrisy is getting worked up about this.

• Nigel Farage Refuses To Give Up EU Pension (Ind.)

Nigel Farage has refused to give up his EU pension after Brexit, asking: “Why should my family and others suffer even more?” The former Ukip leader was asked on BBC One’s Andrew Marr Show whether he would stick to his principles and turn down his annual MEP pension. “All I can say is, given the arbitrary way the European Union behaves in terms of money, I’d be very surprised if I get any of it,” Mr Farage said. Mr Farage is entitled to an estimated annual pension of £73,000, The Times reports. The 53-year-old would be able to claim the pension at the age of 63.

Pressed by host Andrew Marr on whether he would stick to his principles and turn down the pension, Mr Farage said: “I’m not going to get it anyway. So I don’t think this would even occur.” When he was asked if he would take it, he said: “Of course I would take it. I’ve said that from day one. Why should my family and others suffer even more?” Replying to accusations of hypocrisy, Mr Farage said: “It is not hypocrisy. I’ve just voted to get rid of my job. I was the turkey that voted for Christmas. How is that hypocrisy? If it was hypocrisy, I’d have said we should stay in the EU.”

People should oinstead get worked up about Blair not being able to shut his face. He’s done enough damage.

• Tony Blair Confirms He Is Working To Reverse Brexit (G.)

Tony Blair has confirmed that he is trying to reverse Brexit, arguing that voters deserve a second referendum because the “£350m per week for the NHS” promise has now been exposed as untrue. In an interview with the BBC Radio 4’s The World This Weekend on Sunday, the former prime minister said that what was happening to the “crumbling” NHS was a “national tragedy” and that it was now “very clear” that the Vote Leave promise about Brexit leading to higher NHS spending would not be honoured. “When the facts change, I think people are entitled to change their mind,” said Blair, who has always been a strong opponent of Brexit but who has rarely been so explicit about being on a personal mission to stop it happening.

Asked if his purpose in relation to Brexit was to reverse it, Blair replied: “Yes, exactly so.” He added: “My belief is that, in the end, when the country sees the choice of this new relationship, it will realise that it’s either going to be something that does profound damage to the country, or alternatively, having left the European Union, left the single market, we will try and by some means recreate the benefit of that in some new relationship, in which case I think many people will think, ‘What’s the point?’” Blair rejected the argument that he was defying the will of the people. “The will of the people is not something immutable. People can change their mind if the circumstances change,” he said.

And certainly get worked up about this: ..400,000 more children and 300,000 more pensioners are now living in poverty than five years ago..”

• Fifth of UK Population Now Live In Poverty (Ind.)

Britain’s record on tackling poverty has reached a turning point and is at risk of unravelling, following the first sustained rises in child and pensioner poverty for two decades, a major report has warned. Nearly 400,000 more children and 300,000 more pensioners are now living in poverty than five years ago, during which time there have been continued increases in poverty across both age groups – prompting experts to warn that hard-fought progress towards tackling destitution is “in peril”. The report, by the independent Joseph Rowntree Foundation (JRF), shows that a total of 14 million people in the UK currently live in poverty – more than one in five of the population. While poverty levels fell in the years to 2011-12, changes to welfare policy – especially since the 2015 Budget – have seen the numbers creep up again.

The findings will fuel challenges currently facing Theresa May over failure to improve equality in the UK, after the entire board of her social mobility commission quit over the weekend at the lack of progress towards a “fairer Britain”. ..] The report echoes the concerns of the commission, warning that significant reductions in poverty levels – which researchers measured by the proportion of people in households with an income lower than 60 per cent of the median household income – are at risk of being reversed without immediate action. It warns that the squeeze on living standards now risks storing up problems for the future, with people being caught in a “standstill generation” – unable to build the foundations for a decent, secure life.

Debbie Abrahams MP, Shadow Work and Pensions Secretary, said the 700,000 increase in the number of children and older people in poverty was “totally unacceptable”, adding: “The past seven years of flat-lining wages and austerity cuts, now combined with sharply rising costs of household essentials, is a truly terrifying prospect for millions trying to make ends meet.

Attenborough has been in nature for 70 years. Imagine the changes he’s witnessed, the beauty he’s seen disappear.

• David Attenborough Issues Appeal To Save ‘The Future Of Humanity’ (Ind.)

Sir David Attenborough has urged people to take action to save the “future of humanity” as he opened up about the heartrending Blue Planet II scene in which a baby albatross was killed by a toothpick. The creature was shown lying dead after its mother had mistaken the plastic toothpick for healthy food. In a column in the Radio Times, the veteran presenter spoke of the threats earth is facing, including the eight million tonnes of plastic dumped into the sea each year, global warming and the rate of overfishing. There are concerns that more than a million birds and 100,000 sea mammals and turtles die every year from eating and getting tangled in plastic waste.

Sir David, 91, also echoed a previous call that he hoped US President Donald Trump would reconsider his threat to withdraw from the Paris Agreement on climate change. He wrote that “never before have we been so aware of what we are doing to our planet – and never before have we had such power to do something about it”. “Surely we have a responsibility to care for the planet on which we live? The future of humanity, and indeed of all life on Earth, now depends on us doing so,” he added. “Plastic is now found everywhere in the ocean, from its surface to its greatest depths,” Sir David wrote. “There are fragments of nets so big they entangle the heads of fish, birds and turtles, and slowly strangle them. Other pieces of plastic are so small that they are mistaken for food and eaten, accumulating in fishes’ stomachs, leaving them undernourished.”

When nations grow old
The arts grow cold
And commerce hangs on every tree
–William Blake

Debt Rattle December 2 2017

Dec 022017

December 2, 2017 Posted by Raúl Ilargi Meijer at 9:39 am Finance Tagged with: acceleration, AI, con job, fat lady, Greece, pensions, poverty, refugees, rent, tax bill 9 Responses »

James McNeill Whistler Harmony in Blue and Silver: Trouville 1865

• Senate Approves Republicans’ Tax Overhaul (R.)

• Debt, Taxes, Growth And The GOP Con Job (Stockman)

• SocGen: The Good Times Are Coming To An End In 2018 (BI)

• Keeping You Awake At Night (Roberts)

• Stock Market Acceleration In Final Stage (Kessler)

• Pensions Aren’t The Ticking Timebomb – Rents Are (G.)

• Carmageddon for Tesla (WS)

• AI Has Already Taken Over, It’s Called the Corporation (Lent)

• The UN Is Investigating Extreme Poverty … In America (G.)

• Despite Greek Shelter, Yazidis Struggle To Integrate (AFP)

Largely hastily and secretly written by lobbyists, and mostly unread by lawmakers. Doesn’t seem to be the way to do things. Have you no pride?

• Senate Approves Republicans’ Tax Overhaul (R.)

The U.S. Senate approved a sweeping tax overhaul on Saturday, moving Republicans and President Donald Trump a major step closer to their goal of slashing taxes for businesses and the rich while offering everyday Americans a mixed bag of changes. In what would be the largest U.S. tax overhaul since the 1980s, Republicans want to add $1.4 trillion over 10 years to the $20 trillion national debt to finance changes that they say would further boost an already growing economy. U.S. stock markets have rallied for months in hopes Washington would provide significant tax cuts for corporations. Following the 51-49 vote, talks will begin, likely next week, between the Senate and the House of Representatives, which has already approved its own tax bill. The two chambers must craft a single bill to send to Trump to sign into law.

Trump wants that to happen before the end of the year, allowing him and his Republicans to score their first major legislative achievement of 2017, despite controlling the White House, the Senate and the House since he took office in January. Celebrating their victory, Republican leaders said the tax cuts would encourage U.S. companies to invest more and boost economic growth. “We have an opportunity now to make America more competitive, to keep jobs from being shipped offshore and to provide substantial relief to the middle class,” said Mitch McConnell, the Republican leader in the Senate. The tax overhaul is seen by Republicans as crucial to their prospects in the November 2018 mid-term election campaigns when they will have to defend their majorities in Congress.

In a legislative battle that moved so fast a final draft of the bill was unavailable to the public until just hours before the vote, Democrats slammed the measure as a give-away to businesses and the rich financed with billions in taxpayer debt.

Stockman agrees.

• Debt, Taxes, Growth And The GOP Con Job (Stockman)

During more than four decades in Washington and on Wall Street it is quite possible that we never picked up any useful skills. But along the way we did unavoidably acquire what amounts to a survival tool in those fair precincts—-namely, a nose for the con job. And what a doozy we have going now as a desperate mob of Capitol Hill Republicans attempts to enact something—anything— that can be vaguely labeled tax reform/tax cut. And for a reason that lies only slightly below the surface. In a word, they are scared to death that the political train wreck in the Oval Office will put them out of business for years to come. So they are attempting to erect a shield of legislative accomplishment that can be sold in 2018 as the work of the GOP Congress, not the unhinged tweet-storm in the White House.

To be sure, some element of political calculus always lies behind legislation. For instance, the Dems didn’t pass the Wagner Act in 1935, the Voting Rights Act of 1965 or the Affordable Care Act of 2010 as an exercise in pure civic virtue—-these measures targeted huge constituencies with tens of millions of votes at stake. Still, threadbare theories and untoward effects are just that; they can’t be redeemed by the risible claim that this legislative Rube Goldberg Contraption is being jammed through sight unseen (in ACA redux fashion) for the benefit of the rank and file Republican voters—and most especially not for the dispossessed independents and Dems of Flyover America who voted for Trump out of protest against the failing status quo. To the contrary. The GOP tax bill is of the lobbies, by the PACs and for the money. Period.

There is no higher purpose or even nugget of conservative economic principle to it. The battle cry of “pro-growth tax cuts” is just a warmed over 35 year-old mantra from the Reagan era that does not remotely reflect the actual content of the bill or disguise what it really is: Namely, a cowardly infliction of more than $2 trillion of debt on future American taxpayers in order to fund tax relief today for the GOP’s K-Street and Wall Street paymasters. On a net basis, in fact, fully 97% of the $1.412 trillion revenue loss in the Senate Committee bill over the next decade is attributable to the $1.369 trillion cost of cutting the corporate rate from 35% to 20% (and repeal of the related AMT). All the rest of the massive bill is just a monumental zero-sum pot stirring operation.

She sings.

• SocGen: The Good Times Are Coming To An End In 2018 (BI)

The party’s almost over, Societe Generale strategists say. A strong earnings recovery and a growing economy have fueled investor interest in buying risky corporate bonds this year. SocGen’s credit strategists see 2018 as a transition year for the credit market, with the low-yield environment that has driven some investors into riskier credit instruments likely to turn. “We expect 2018 to see the last of the good times, with very positive conditions early in the year,” the strategists Juan Esteban Valencia and Guy Stear said. “In our view, the ultra-low yield environment will remain in place, making credit a very attractive proposition, even at current levels. Additionally, economic growth should remain healthy and the CSPP (and QE program) should remain supportive of the asset class. However, at some point, we expect these idyllic conditions to start shifting.”

By stopping their bond-buying programs, the ECB and the Fed would leave credit, including the market for government bonds, more vulnerable to market movements, according to SocGen. Global credit already looks overvalued, the strategists said. Sustained demand for riskier corporate bonds has reduced the spread between their yields and comparable government bonds to the lowest levels in three years. A previous study they conducted showed that the level of spreads explained about half of the following year’s performance. “Low spreads are the mother of negative excess returns,” they said, adding that credit markets would start 2018 on the wrong footing with tight valuations and low breakevens. Like Societe Generale’s credit strategists, the firm’s economists see a risk that the US economy starts to slow down in 2019 or 2020 amid lower profit margins.

More great graphs from Lance. The last breaths of the system: It now requires nearly $4.00 of debt for each $1.00 of economic growth..

• Keeping You Awake At Night (Roberts)

[..] while Janet Yellen was focused on Federal Debt, the real issue is total debt as a percentage of the economy. Every piece of leverage whether it is government debt, personal debt and even leverage requires servicing which detracts “savings” from being applied to more productive uses. Yes, in the short-term debt can be used to supplant consumption required to artificially stimulate growth, but the long-term effect is entirely negative. As shown in the chart below, total system debt how exceeds 370% of GDP and is rising.

It now requires ever increasing levels of debt to create each $1 of economic growth. From 1959 to 1983, it required roughly $1.25 of debt to create $1 of economic activity. However, as I have discussed previously, the deregulation of the financial sector, combined with falling interest rates, led to a debt explosion. That debt explosion, which allowed for an excessive standard of living, has led to the long-term deterioration in economic growth rates. It now requires nearly $4.00 of debt for each $1.00 of economic growth.

Tick. Tock.

• Stock Market Acceleration In Final Stage (Kessler)

Secular stock-market bullish trends tend to accelerate as they mature. The last three big bull moves in the Dow Jones Industrial Average look very similar and suggest a near-term major correction. See below:

What happens when you blow bubbles to hide your failures. But just make homes places to live in again, not speculative assets. It’s not that hard to understand, or do.

• Pensions Aren’t The Ticking Timebomb – Rents Are (G.)

Scottish Widows is the sort of unassuming pensions company that rarely likes to publicly criticise government policy. But an analysis it published this week is a stark warning about the ticking time bomb that will explode in 10 to 20 years’ time. And it’s not pension incomes that are the worry – it’s the fact that so many of tomorrow’s pensioners who never got on to the property ladder in the 2000s and 2010s will have to find huge amounts of money to pay ever-escalating rents to private landlords. Scottish Widows skirts around the issue by suggesting that non-homeowners currently in their 50s should start saving an extra £6,000 a year now to be able to afford their rent in retirement. As if people on low incomes are going to find that sort of money. The reason they are renting is that they were never able to find the savings for a deposit on a house in the first place, or didn’t earn enough to qualify for a mortgage.

The reality is that these people are likely to retire with little more than the state pension plus a small bit of private pension. Maybe they will be picking up about £200 a week once they are 67. Given that the average rent in England and Wales is £845 a month – and in London it’s about £1,250 a month – then the whole lot will be gobbled up by the landlord. So the taxpayer will have no alternative but to step in and pay most of the rent, and we are then on the hook for payments going on for maybe 20 or 30 years. All so that the buy-to-let landlord with multiple properties can enjoy a lavish retirement themselves. This is the lunacy of promoting buy to let as a long term form of tenure for millions of people. Even in developed countries where renting is common, such as Germany, most people are living in a home they own by the time they reach retirement.

Renting all the way through retirement, funded by the taxpayer, to a landlord who has the power to evict without reason and at short notice, is the worst possible situation. And it’s one we are hurtling towards. Make no mistake about the dramatic change in the retirement landscape that is coming. Scottish Widows projects that one in eight retirees will be renting by 2032 – treble today’s figure. After that it will continue rising. It says there is a £43bn gap between the income and savings people have now and what the rent bill will be in retirement. That’s more than one-third of the entire NHS budget for a year – to be squandered on rent.

“In February 2017, Tesla hyped these Model 3 production numbers for 2017: “Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018.” November is solidly in the fourth quarter. 5,000 vehicles per week would mean over 20,000 a month. OK, this is November and not December, so maybe 4,000 a week for a total of 16,000. We got 345.”

• Carmageddon for Tesla (WS)

Today was the monthly moment of truth for automakers in the US. They reported the number of new vehicles that their dealers delivered to their customers and that the automakers delivered directly to large fleet customers. These are unit sales, not dollar sales, and they’re religiously followed by the industry. Total sales in November rose 0.9% from a year ago to 1,393,010 new vehicles, according to Autodata, which tracks these sales as they’re reported by the automakers. Sales of cars dropped 8.2%. Sales of trucks – which include SUVs, crossovers, pickups, and vans – rose 6.6%. Strong replacement demand from the hurricane-affected areas in Texas papered over weaknesses elsewhere. As always, there were winners and losers. And one of the losers was Tesla.

First things first: There is nothing wrong with a tiny automaker trying to design, make, and sell cool but expensive cars that a few thousand Americans might buy every month, and trying to do so on a battleground dominated by giants. Porsche has been doing that for years. Porsche AG is owned by Volkswagen AG, which is itself majority-owned by Porsche Automobil Holding SE. Tesla is out there by itself. And Tesla has put electric vehicles on the map. That was a huge feat. EVs have been around since the 1800s, but given the challenges that batteries posed, they simply didn’t catch on until Tesla made EVs cool. Yet Tesla has to buy the battery cells from battery makers, such as Panasonic. Tesla isn’t quite out there by itself, though. The Wall Street hype machine backs it up, dousing it with billions of dollars on a regular basis to burn through as fast as it can.

This masterful hype has created a giant market capitalization of about $52 billion, more than most automakers, including Ford ($50 billion). It’s not far behind GM ($61 billion). But Tesla – which lost $619 million in Q3 – delivered only 3,590 vehicles in November in the US, down 18% from a year ago. There are all kinds of interesting aspects about this. One: 3,590 vehicles amounts to a market share of only 0.26%, of the 1,393,010 new cars and trucks sold in the US in November. Porsche outsold Tesla by 55% (5,555 new vehicles). Two: Tesla doesn’t report monthly deliveries. It wants to play with the big boys, but it doesn’t want people to know on a monthly basis just how crummy and by comparison inconsequential its US sales numbers are. Opaque and dedicated to hype, it refuses to disclose how many vehicles it delivered that month in the US.

So the industry is estimating Tesla’s monthly US sales. Tesla discloses unit sales data in its quarterly earnings reports, long after everyone has already forgotten about the months in which they occurred. Three: So how are Model 3 sales doing? Since Tesla doesn’t disclose its monthly deliveries in the US, the industry is guessing. The assembly line still isn’t working. “Manufacturing bottlenecks,” as Tesla calls it, and “manufacturing hell,” as Elon Musk calls it, rule the day. In Q3, Tesla delivered 220 handmade Model 3’s. In October, it delivered about 145 handmade units. In November, the assembly line still wasn’t assembling cars. Inside EVs estimates that Tesla delivered a whopping 345 units in November.

Interesting angle.

• AI Has Already Taken Over, It’s Called the Corporation (Lent)

When corporations were first formed back in the seventeenth century, their inventors—just like modern software engineers—acted with what they believed were good intentions. The first corporate charters were simply designed to limit an investor’s liability to the amount of their investment, thus encouraging them to finance risky expeditions to India and Southeast Asia. However, an unintended consequence soon emerged, known as moral hazard: with the potential upside greater than the downside, reckless behavior ensued, leading to a series of spectacular frauds and a market crash that resulted in corporations being temporarily banned in England in 1720. Thomas Jefferson and other leaders of the United States, aware of the English experience, were deeply suspicious of corporations, giving them limited charters with tightly constrained powers.

However, during the turmoil of the Civil War, industrialists took advantage of the disarray, leveraging widespread political corruption to expand their influence. Shortly before his death, Abraham Lincoln lamented what he saw happening with a resounding prophecy: “Corporations have been enthroned … An era of corruption in high places will follow… until wealth is aggregated in a few hands … and the Republic is destroyed.” Corporations, just like a potential runaway AI, have no intrinsic interest in human welfare. They are legal constructions: abstract entities designed with the ultimate goal of maximizing financial returns for their investors above all else. If corporations were in fact real persons, they would be sociopaths, completely lacking the ability for empathy that is a crucial element of normal human behavior.

Unlike humans, however, corporations are theoretically immortal, cannot be put in prison, and the larger multinationals are not constrained by the laws of any individual country. With the incalculable advantage of their superhuman powers, corporations have literally taken over the world. They have grown so massive that an astonishing sixty-nine of the largest hundred economies in the world are not nation states but corporate entities.

The UN fails to speak out on far too many issues. It has made itself a lame duck.

• The UN Is Investigating Extreme Poverty … In America (G.)

The United Nations monitor on extreme poverty and human rights has embarked on a coast-to-coast tour of the US to hold the world’s richest nation – and its president – to account for the hardships endured by America’s most vulnerable citizens. The tour, which kicked off on Friday morning, will make stops in four states as well as Washington DC and the US territory of Puerto Rico. It will focus on several of the social and economic barriers that render the American dream merely a pipe dream to millions – from homelessness in California to racial discrimination in the Deep South, cumulative neglect in Puerto Rico and the decline of industrial jobs in West Virginia. With 41 million Americans officially in poverty according to the US Census Bureau (other estimates put that figure much higher), one aim of the UN mission will be to demonstrate that no country, however wealthy, is immune from human suffering induced by growing inequality.

Nor is any nation, however powerful, beyond the reach of human rights law – a message that the US government and Donald Trump might find hard to stomach given their tendency to regard internal affairs as sacrosanct. The UN special rapporteur on extreme poverty and human rights, Philip Alston, is a feisty Australian and New York University law professor who has a fearsome track record of holding power to account. He tore a strip off the Saudi Arabian regime for its treatment of women months before the kingdom legalized their right to drive, denounced the Brazilian government for attacking the poor through austerity, and even excoriated the UN itself for importing cholera to Haiti. The US is no stranger to Alston’s withering tongue, having come under heavy criticism from him for its program of drone strikes on terrorist targets abroad.

In his previous role as UN special rapporteur on extrajudicial executions, Alston blamed the Obama administration and the CIA for killing many innocent civilians in attacks he said were of dubious international legality. Now Alston has set off on his sixth, and arguably most sensitive, visit as UN monitor on extreme poverty since he took up the position in June 2014. At the heart of his fact-finding tour will be a question that is causing increasing anxiety at a troubled time: is it possible, in one of the world’s leading democracies, to enjoy fundamental human rights such as political participation or voting rights if you are unable to meet basic living standards, let alone engage, as Thomas Jefferson put it, in the pursuit of happiness?

Untreated traumas. A largely forgotten part of the refugee crisis.

• Despite Greek Shelter, Yazidis Struggle To Integrate (AFP)

Having run the gauntlet of invasion, combat, killings and enslavement by Islamic State jihadists in Iraq, the members of this religious minority have found temporary shelter in the largely agricultural region of Serres in northern Greece. The camp they have been allocated to is one of the best in the country – their prefabricated homes have air conditioning and solar panels to heat water. The grounds are clean and there is a playground for the children. Many hope to be reunited with other Yazidis stranded in Greece, but with the country struggling to manage more than 50,000 refugees and migrants stranded on its territory, that is not always an option. “Creating a camp just for Yazidis is neither possible nor viable,” said a Greek official with knowledge of refugee management efforts.

The camp can normally accommodate 700 people. At the moment there are some 350 Yazidis, most of them women and children, waiting for EU-sponsored relocation to other parts of Europe. Greece’s policy is to move eligible refugees from overcrowded island camps – where they undergo identity checks upon arrival from Turkey – to the mainland, where more comfortable accommodation is available in better camps, UN-funded flats and hotels. But the Yazidis, who have already faced an ordeal keeping their dwindling community together thus far, oppose this policy. This is partly down to fear of other communities. They had a scare earlier this year, when a Yazidi celebration in Kilkis, another part of northern Greece, descended into violence between Arabs and Kurds.

[..] In areas controlled by Islamic State, thousands of women and girls from the Yazidi minority were used as sex slaves and suffered horrific abuse, including rape, abduction, slavery and cruel, inhumane and degrading treatment. The suffering the Yazidis have endured explains why community elders in Serres have written to the migration ministry to officially request that the camp be assigned to Yazidis alone. “We ask for our community not to be disturbed and to live here in safety until we depart,” says Hajdar Hamat, a self-styled spokesman for the Yazidis at the camp. “Everybody knows about our peoples’ genocide. We did not come from Sinjar to Greece for fun. Europe must protect us,” says Hamat.

Debt Rattle October 18 2017

Oct 182017

October 18, 2017 Posted by Raúl Ilargi Meijer at 9:14 am Finance Tagged with: Airbus, Brexit, China, Dalio, derivatives, EU, gig economy, methane, Obamacare, poverty, UBI 1 Response »

Marcel Bovis Lovers, Paris 1934

• No, China Isn’t Fixing Its Economic Flaws (BBG)

• US Senators Reach Bipartisan Deal On Obamacare, Trump Indicates Support (R.)

• Fixing Macroeconomics Will Be Really Hard (BBG)

• Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks (ZH)

• Money Will Divide Europe After Brexit (R.)

• Dalio’s Fund Opens $300 Million Bet Against Italian Energy Firm (BBG)

• Boeing’s Attack on Bombardier Backfires (BBG)

• The Gig Economy Chews Up And Spits Out Millennials (G.)

• Greek Growth Data Cast Doubt On Recovery

• Debt-Ridden Greece to Spend $2.4bn Upgrading its F-16 Fighter Jet Fleet (GR)

• Canada Methane Emissions Far Worse Than Feared (G.)

• The Lie That Poverty Is A Moral Failing Is Back (Fintan O’Toole)

Antidote for the Party Congress.

• No, China Isn’t Fixing Its Economic Flaws (BBG)

In our China Beige Book, we quiz over 3,300 firms across China about the performance of their companies as well as the broader economy. Their responses reveal that much of the exuberance about China today is based on dangerous misconceptions. The first and most obvious myth is that China is actually deleveraging, as officials claim. Responses from Chinese bankers support the notion that regulators, at least for the moment, have successfully targeted certain forms of shadow financing such as wealth management products. Companies, however, don’t seem to be feeling much pressure to curb their excesses. In the second quarter, while firms reported facing moderately higher interest rates and borrowing modestly less, that only slowed the pace of leveraging instead of reversing it. And even that progress has since stalled.

Third-quarter loan applications rose, rejections fell and companies borrowed more. Interest rates at both banks and shadow financials slid. What officials are calling deleveraging – rolling back excess credit – still represents more, uneven leveraging. If the restrictions on financials do extend to companies in 2018 and deleveraging actually begins, the process could be much more traumatic for the Chinese economy than most people currently recognize. The second myth is that the Chinese economy has finally begun to rebalance away from manufacturing and investment to services and consumption. In reality, China’s stronger 2017 performance has depended almost entirely on a revival of the old economy; the improvement in both growth and jobs drew heavily upon commodities, property and, most consistently, manufacturing. Call it “de-balancing.”

[..] China hasn’t slashed overcapacity in commodities sectors. Xi has incessantly touted what he calls “supply-side reforms,” which would seem to give Chinese companies very strong incentive to report results showing such cuts. Yet for more than a year, firms have indicated the opposite. While some gross capacity has been taken offline to much fanfare, net capacity has continued to rise. From July through September, hundreds of coal, steel, aluminum and copper companies reported a sixth straight quarter of overall capacity rising, not falling.

Getting Bernie to support the same as Trump is an achievement.

• US Senators Reach Bipartisan Deal On Obamacare, Trump Indicates Support (R.)

Two U.S. senators on Tuesday reached a bipartisan agreement to shore up Obamacare for two years by reviving federal subsidies for health insurers that President Donald Trump planned to scrap, and the president indicated his support for the plan. The deal worked out by Republican Senator Lamar Alexander and Democratic Senator Patty Murray would meet some Democratic objectives, including reviving the subsidies for Obamacare and restoring $106 million in funding for a federal program that helps people enroll in insurance plans. In exchange, Republicans would get more flexibility for states to offer a wider variety of health insurance plans while maintaining the requirement that sick and healthy people be charged the same rates for coverage.

The Trump administration said last week it would stop paying billions of dollars to insurers to help lower-income Americans pay medical expenses, part of the Republican president’s effort to dismantle Obamacare, former Democratic President Barack Obama’s signature healthcare law. The subsidies to private insurers cost the government an estimated $7 billion this year and were forecast at $10 billion for 2018. Trump’s move to scuttle them had raised concerns about chaos in insurance markets. Trump hoped to make good on his campaign promise to dismantle the law when he took office in January, with Republicans, who pledged for seven years to scrap it, controlling Congress. But he has been frustrated with their failure to pass legislation to repeal and replace it.

Obamacare, formally known as the Affordable Care Act, extended health insurance coverage to 20 million Americans. Republicans say it is ineffective and a massive government intrusion in a key sector of the economy. The Alexander-Murray plan could keep Obamacare in place at least until the 2020 presidential campaign starts heating up. “This takes care of the next two years. After that, we can have a full-fledged debate on where we go long-term on healthcare,” Alexander said of the deal.

[..] Senator Bernie Sanders threw his weight behind the effort. In an interview with Reuters, Sanders said Alexander was a “well-respected figure” known for bipartisanship and that the Tennessee senator’s reputation would help propel the legislation through the Senate. Trump, during comments at the White House, suggested he could get behind the Alexander-Murray plan as a short-term solution. In remarks later at the Heritage Foundation, a conservative think tank, Trump commended the work by Alexander and Murray, but said: “I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies.”

Nuff said: “Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time.”

• Fixing Macroeconomics Will Be Really Hard (BBG)

A presentation by Blanchard and Summers provides a useful summary of how elite thinking has changed. They basically draw three lessons from the crisis: 1) the financial industry matters, 2) government should use a wider array of policies to fight recessions, and 3) recessions can last longer than expected. [..] The real sea change is the third one – the reconsideration of what recessions really are. Most modern econ theories posit that recessions arrive randomly, instead of as the result of pressures that build up over time. And they assume that recessions are short-lived affairs that go away of their own accord. If these assumptions are wrong, then most of the theories written down in macroeconomics journals over the past several decades – and most of those being written as we speak – are of questionable usefulness.

Blanchard and Summers are hardly the first to raise this possibility – economists have known for decades that recessions might not be random, short-lived events, but the idea always remained on the fringes. One big reason was simple mathematical convenience – models where recessions are like rainstorms, arriving and departing on their own, are mathematically a lot easier to work with. A second was data availability – unlike in geology, where we can draw on Earth’s whole history, reliable macroeconomic data goes back less than a century. If economic fluctuations really do have long-lasting effects, it will be very hard to identify those patterns from just a few decades’ worth of history.

If macroeconomists heed Blanchard and Summers’ advice, they will have to do harder math, and they will find better data to test their models. But their challenges won’t end there. If the economy can linger in a good or bad state for a long time, it’s almost certainly a chaotic system. Researchers have known for decades that unstable economies are very hard to work with or predict. In the past, economists have simply ignored this unsettling possibility and chosen to focus on models with only one possible long-term outcome. But if Blanchard and Summers are any indication, the Great Recession might mean that’s no longer an option.

Derivatives.

• Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks (ZH)

This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony. Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a “hard” or “no-deal” Brexit. We wonder whether Juncker and Barnier appreciate the threat that a “no-deal” Brexit poses for the EU’s already fragile financial system? When asked does the European Council “get it” in terms of potential shocks to financial stability, Carney diplomatically commented that “a learning process is underway.” Having sounded alarm bells about clearing in his last Mansion House speech, he noted “These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.”

Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was “pretty clear they will no longer be valid”, that this “could only be solved by both sides” and has been “underappreciated” by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation “We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.” Maybe it’s Europe, not the UK, that needs the transition period most.

In Carneys view “It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…If one thinks about the implementation of Basel III, we are alone in the current members of the EU in having extensive experience of managing the transition for individual firms of various derivative and risk activities from one jurisdiction back into the UK. That tends to take 2-4 years. Depending on the agreement, we are talking about a substantial amount of activity.”

Europe borrows from the future.

• Money Will Divide Europe After Brexit (R.)

The British government once hoped that the Oct. 19-20 meeting would be the moment when the Brexit negotiations could move on to discuss trade. That aspiration now seems hopeless. European leaders look set to insist on further delay until there is more progress in the first stage of talks, above all in reaching agreement on how much Britain will have to pay to settle its obligations when it leaves.

[..] If economic size and time favor the EU, the British government’s strongest card is money – one that it has played in various guises for centuries with its continental neighbors – and it is naturally reluctant to show its full hand too early. Even so May has already made an important concession. As part of the transition period of around two years that she called for in her emollient Florence speech last month, Britain would continue to pay in to the EU budget to ensure that none of the member states was out of pocket owing to the decision to leave. These net payments of around €10 billion ($11.8 billion) a year would fix the immediate problem facing the EU, the hole that would otherwise open up in its finances during the final two years of its current budgetary framework, which runs from 2014 to 2020.

But that extra money from aligning Britain’s effective date of departure with the end of the EU’s budgeting plan will not be enough, for two reasons. One is the way the EU in effect borrows from the future, by making spending commitments that it pays for later. In principle, the EU cannot borrow to pay for expenditure. But, through its accounting procedures, the EU can and does commit it to spending that will be paid for by future receipts from the member states. What this means is that even after 2020 there will still be payments due on commitments made under the current seven-year spending plan. That pile of unpaid bills, eloquently called the “reste à liquider” (the amount yet to be settled), is forecast to be €254 billion at the end of 2020.

Estimates of what Britain might owe towards this vary, but taking into account what might have been spent on British projects it could be around €20 billion. On top of that – and the second main reason why the EU is holding out for more – the EU has liabilities, notably arising from the unfunded retirement benefits of European staff estimated at €67 billion at the end of 2016, which it is expecting Britain to share. Even taking into account some potential offsets from its share of assets, Britain may face a bill of between €30 billion and €40 billion on top of the €20 billion paid during the transition period.

Biggest threat of all to Europe may be Italy’s weaknesses.

• Dalio’s Fund Opens $300 Million Bet Against Italian Energy Firm (BBG)

Bridgewater Associates is adding to its billion-dollar short against the Italian economy. The world’s largest hedge fund disclosed a $300 million bet against Eni SpA, Italy’s oil and gas giant, data compiled by Bloomberg show. Bloomberg previously reported that Ray Dalio’s firm had wagered more than $1.1 billion against shares of six Italian financial institutions and two other companies. This latest bet is the hedge fund’s second-largest against an Italian company, trailing only the $310 million against Enel SpA, the country’s largest utility. Eni’s majority holder is the Italian government via state lender Cassa Depositi e Prestiti SpA and the Ministry of Economy. The public involvement also is reflected in the government’s role in appointing the chief executive officer. Current CEO Claudio Descalzi has been at the helm since 2014 and was reconfirmed this year.

Airbus buys C Series for $1?!

• Boeing’s Attack on Bombardier Backfires (BBG)

Boeing’s diminutive Canadian rival just found itself one heck of a wingman. The world’s largest aerospace company tried to block Bombardier’s all-new C Series jet from the U.S. by complaining to the government about unfair competition. Now that move is backfiring as Boeing’s primary foe, Airbus, takes control of the Canadian aircraft – with plans to manufacture in Alabama. The deal leaves Boeing’s 737, the company’s largest source of profit, to face a strengthened opponent in the market for single-aisle jetliners, where Airbus’s A320 family already enjoys a sales lead. The European planemaker is riding to the rescue of a plane at the center of a trade dispute that soured U.S. relations with Canada and the U.K., where the aircraft’s wings are made.

“For Boeing, its decision to wage commercial war on Bombardier has arguably had some unintended negative outcomes,” Robert Stallard, an analyst at Vertical Research Partners, said in a report. “As well as damaging relations with the Canadian and U.K. governments and some major airline customers, it has now driven Bombardier into the arms of its arch competitor.” Boeing on Tuesday held firm to its stance against the C Series, saying the deal with Airbus would have “no impact or effect on the pending proceedings at all” in the trade dispute. Boeing won a preliminary victory against Bombardier last month when President Donald Trump’s administration imposed import duties of 300% on the C Series.

Self-employment as a means to hide unemployment.

• The Gig Economy Chews Up And Spits Out Millennials (G.)

Huws says the golden age for the gig economy was some time around 2013, when companies took a smaller cut and there were fewer drivers/riders/factotums to compete with. “As Deliveroo pass on all risk to the rider, there’s nothing to stop them over-recruiting in an area and flooding the city with riders, which is exactly what we saw last winter,” says Guy McClenahan, another Brighton rider (Deliveroo maintain that the hundreds of riders in the area earn on average well above the national living wage). Over time, Uber has increased the commission it takes from drivers while reducing fares. Drivers are finding themselves working much longer hours in order to make the same pay – or far less. (There are currently no time limits on how many hours Uber drivers can work a week in the UK, but the company is testing changes and says it plans to introduce limits over a 24-hour period.)

TaskRabbit, the online platform for handymen and odd jobs, which was recently bought by Ikea, took away a rate in which contractors would earn more money for repeat commissions – and buried that news in an email about introducing the option for clients to tip. [..] Huws points out that the gig economy has always existed: cash-in-hand or on-call work or people turning up at building sites or dockyards in the hope of a day’s work. But since the 2008 crash, jobs that provide a secure income have become harder to come by. It is true that the unemployment rate among 16- to 24-year-olds in the UK is 12%, while in parts of Europe it is 40%. But that doesn’t mean much if many of those people are in precarious “self-employment” – the McKinsey Global Institute estimates this may be up to 30% of working-age adults across Europe. Huws says the notion of a career is being eroded, with young people often working a patchwork of different occupations.

[..] Huws worries about something else, too: the wellbeing of gig-economy millennial workers. This kind of employment can be “really damaging for self-esteem”, she says. As Hughes and Diggle both say, crowd work can be lonely. “Especially if you’re working a double shift,” says Diggle. “Or sometimes you don’t feel human. You’re just handing a bag over and some people take the bag, don’t look at you and close the door. And then don’t tip. One day I’ll be on stage singing, and the next I’m delivering food on my bicycle and it does feel … deflating.”

A Greek recovery is mathematically impossible.

“..taxation on products increased 7.8%..”

• Greek Growth Data Cast Doubt On Recovery

Greece was in recession last year, as revised data from the Hellenic Statistical Authority (ELSTAT) showed on Tuesday that the economy shrank 0.2% compared to 2015 against a previous estimate for zero growth. Furthermore, the Foundation for Economic and Industrial Research (IOBE) forecast that 2017 will close with growth of just 1.3%, against a government estimate of 1.8%. That the way out of the crisis is proving more arduous and uncertain than many had predicted was underscored by the two sets of data released on Tuesday, with IOBE Director General Nikos Vettas warning that the recovery may turn out to be “short-term and fragile” unless the pending crucial structural reforms are implemented.

ELSTAT’s downward revision for 2016 is mainly based on consumer spending, which declined 0.3% compared to 2015, against a previous estimate in March 2017 for an increase of 0.6%. Even in March, when ELSTAT announced zero growth for 2016, the figures created a headache for Prime Minister Alexis Tsipras, who had previously said the economy had grown in 2016. Yesterday’s revision turned stagnation into recession for another year. It is also impressive that while the economy shrank 0.2%, taxation on products increased 7.8%, against a hike of 1.7% in 2015 and 0.8% in 2014. The revision also revealed that 2014 saw growth of 0.7%, against an estimate of 0.3% in March. That upward course was clearly interrupted by the January 2015 election.

IOBE undercut the government’s growth estimates for this year and next, with its president, Takis Athanasopoulos, saying, “Indeed, our economy is showing signs of improvement, but its rate remains below what is necessary for the country to leave the crisis behind it for good.” Next year IOBE anticipates growth of 2%, against an official forecast of 2.4%, putting the achievement of fiscal targets into question. The weak 1.3% recovery rate seen for this year, compared to the original 2.7% estimate of the budget and the bailout program, is according to IOBE due to the weak momentum of investments.

Wonder who pays the bill. Which is not as bas as it seems.

• Debt-Ridden Greece to Spend $2.4bn Upgrading its F-16 Fighter Jet Fleet (GR)

The United States has approved the possible sale of more than 120 upgrade kits from Lockheed Martin to the Greeks for their F-16 fighter jet fleet. The deal, worth $2.4bn, was announced as U.S. President Donald Trump met with Greek Prime Minister Alexis Tsipras in Washington, D.C. Trump, who has repeatedly criticized NATO countries for not meeting the alliance’s defense budget targets, applauded Greece for meeting the goal of each member spending two percent of their gross domestic product on their military and highlighted the F-16 upgrade plans. “They’re upgrading their fleets of airplanes – the F-16 plane, which is a terrific plane,” Trump said ahead of a bilateral meeting. “They’re doing big upgrades.”

“This agreement to strengthen the Hellenic Air Force is worth up to 2.4 billion U.S. dollars and would generate thousands of American jobs,” Trump said during his joint press conference with Tsipras. Greek Defense Minister Panos Kammenos sought later to downplay the cost of the deal for Greece. In a message on twitter he said that the cost to Greece will be 1.1 billion euros. “The ceiling in the budget for the upgrading of the F-16 is 1.1 billion euros”, he said. “The rest will come from aid programs and offsets”, he added. According to the U.S. Defense Security Cooperation Agency (DSCA) there are currently no known offsets. However, Greece typically requests offsets. Any offset agreement will be defined in negotiations between Greece and the contractor, Lockheed Martin. .

“..the type of heavy oil recovery used released 3.6 times more methane than previously believed..”

• Canada Methane Emissions Far Worse Than Feared (G.)

Alberta’s oil and gas industry – Canada’s largest producer of fossil fuel resources – could be emitting 25 to 50% more methane than previously believed, new research has suggested. The pioneering peer reviewed study, published in Environmental Science & Technology on Tuesday, used airplane surveys to measure methane emissions from oil and gas infrastructure in two regions in Alberta. The results were then compared with industry-reported emissions and estimates of unreported sources of the powerful greenhouse gas, which warm the planet more than 20 times as much as similar volumes of carbon dioxide.

“Our first reaction was ‘Oh my goodness, this is a really big deal,” said Matthew Johnson, a professor at Carleton University in Ottawa and one of the study’s authors. “If we thought it was bad, it’s worse.” Carried out last autumn, the survey measured the airborne emissions of thousands of oil and gas wells in the regions. Researchers also tracked the amount of ethane to ensure that methane emissions from cattle would not end up in their results. In one region dominated by heavy oil wells, researchers found that the type of heavy oil recovery used released 3.6 times more methane than previously believed. The technique is used in several other sites across the province, suggesting emissions from these areas are also underestimated.

UBI.

• The Lie That Poverty Is A Moral Failing Is Back (Fintan O’Toole)

By the time he died, in 1950, Bernard Shaw, as the most widely read socialist writer in the English-speaking world, had done as much as anyone to banish the fallacy that poverty is essentially a moral failing – and conversely that great riches are proof of moral worth. His most passionate concern was with poverty and its causes. He was haunted by the notorious Dublin slums of his childhood. As his spokesman Undershaft puts it in Major Barbara: “Poverty strikes dead the very souls of all who come within sight, sound or smell of it.” The question – why are the poor poor? – has a number of possible answers in the 21st century, just as it had in the late 19th. A Eurobarometer report in 2010 examined attitudes to poverty in the European Union. The most popular explanation among Europeans (47%) for why people live in poverty was injustice in society.

[..] In the preface to Major Barbara, Shaw attacks “the stupid levity with which we tolerate poverty as if it were … a wholesome tonic for lazy people”. His great political impulse was to de-moralise poverty, and his most radical argument about poverty was that it simply doesn’t matter whether those who are poor “deserve” their condition or not – the dire social consequences are the same either way. He assails the absurdity of the notion implicit in so much rightwing thought, that poverty is somehow more tolerable if it is a punishment for moral failings: “If a man is indolent, let him be poor. If he is drunken, let him be poor. If he is not a gentleman, let him be poor. If he is addicted to the fine arts or to pure science instead of to trade and finance, let him be poor … Let nothing be done for ‘the undeserving’: let him be poor. Serve him right! Also – somewhat inconsistently – blessed are the poor!”

In an era when many on the left purported to despise money and romanticised poverty, Shaw argued that poverty is a crime and that money is a wonderful thing. He recognised that there is no relationship between poverty and a supposed lack of a work ethic: Eliza Doolittle is out selling her flowers late at night in the pouring rain but she is still dirt poor. (Conversely, when she is “idle” and being kept by Higgins, she leads a life of relative luxury.) And therefore the cure for poverty can never be found in moral judgments. The cure for poverty is an adequate income. “The crying need of the nation,” he wrote, “is not for better morals, cheaper bread, temperance, liberty, culture, redemption of fallen sisters and erring brothers, nor the grace, love and fellowship of the Trinity, but simply for enough money.

And the evil to be attacked is not sin, suffering, greed, priestcraft, kingcraft, demagogy, monopoly, ignorance, drink, war, pestilence, nor any other of the scapegoats which reformers sacrifice, but simply poverty.” The solution he proposed was what he called a “universal pension for life”, or what we now call a universal basic income.

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