Jun 162022
 


Caravaggio The calling of St. Matthew 1599-1600

 

Severe COVID-19 ‘Rare’ In Unvaccinated People (MD)
FDA Advisors Unanimously Endorse COVID Shots for Infants and Young Kids (CHD)
The World Is Looking At You (Batiushka)
First American Mercenary Contractors Captured in Ukraine (CTH)
The ‘New G8’ Meets China’s ‘Three Rings’ (Escobar)
Schiff: Evidence That Trump “Engaged in Likely Multiple Criminal Acts (Turley)
ECB Holds Emergency Meeting To Discuss Market Turmoil (ZH)
PPI: Smoking -AGAIN- (Denninger)
Today’s The Day…. (Denninger)
“Red Flag” Laws Put a Target on the Back of Every American (Whitehead)
Erdogan Issues Fresh Threats Against Greece (K.)
A Whistleblower’s Agony (Kiriakou)
Patel Responsible For Assange’s ‘Slow-Motion Execution’ If Extradited (DIss.)

 

 

 

 

Consumer feelings

 

 

 

 

Blink

 

 

 

 

DeSantis Musk

 

 

 

 

We’ve known for a while that the vaccines don’t protect against infection or transmission. The last thing they had left was protection against severe disease. That is now gone too. It’s over.

Severe COVID-19 ‘Rare’ In Unvaccinated People (MD)

A survey has found that people who did not get the vaccine had a lower rate of suffering severe COVID-19 amid the pandemic. The survey uploaded to the preprint server ResearchGate presented data from more than 18,500 respondents from the “Control Group” project with more than 300,000 overall participants. An analysis revealed that compared to those who got jabbed, unvaccinated people reported fewer hospitalizations. The international survey also found that the unvaccinated people from more than 175 countries were more likely to self-care to prevent and manage COVID-19 infection. They used natural products like vitamin D, vitamin C, zinc, quercetin, and drugs, such as ivermectin and hydroxychloroquine.

Many participants experienced discrimination for refusing the administration of “genetic vaccines” and struggled with mental health burdens due to the stigma in the mostly “vaccinated” society. Since the participants were self-selected and self-reported, the survey findings had to be interpreted with care compared to statistics or studies based on randomly selected populations, according to the Alliance for Natural Health International. The participants admitted to avoiding vaccines due to their preference for natural medicine interventions and skepticism of pharmaceutical interventions. They also voiced distrust of government information and fear of the possible adverse effects of the vaccines in the long run.

The survey was conducted from September 2021 through February 2022. During the period, participants experienced mild to moderate COVID-19 infection and were infrequently hospitalized. A number of female participants suffered menstrual and bleeding abnormalities, prompting the researchers who analyzed the data to surmise that the issues might have been caused by spike protein exposure and shedding, as per The Epoch Times.


Well, no

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Read the article above and then explain this.

FDA Advisors Unanimously Endorse COVID Shots for Infants and Young Kids (CHD)

The U.S. Food and Drug Administration’s (FDA) vaccine advisory panel today unanimously voted 21-0 to recommend Pfizer and Moderna’s COVID-19 vaccines for infants and young children, stating the totality of the evidence available shows the benefits of the vaccines outweigh the risks of use. Pfizer’s three-dose vaccine would cover children 6 months to 5 years old, while Moderna’s two-dose vaccine covers children 6 months to 6 years old. States have already ordered millions of doses made available prior to FDA authorization by the Biden administration. Depending on whether the FDA and Centers for Disease Control and Prevention (CDC) accept the recommendations of their advisory panels, White House officials have said the administration of vaccines for these age groups could start as early as June 21.


The Vaccines and Related Biological Products Advisory Committee (VRBPAC) ignored pleas from experts, the vaccine injured and a congressman representing 17 other lawmakers to halt authorization until questions about the safety and efficacy of COVID-19 vaccines for the nation’s youngest children could be properly addressed. Many of the committee members, including pediatrician Dr. Ofer Levy, said the decision to authorize the shots was about providing a choice to parents who wanted access to COVID-19 vaccines, despite concerns by public commenters the panel was not adhering to the requirements for Emergency Use Authorization (EUA) and that authorization would eventually lead to mandates — as it did with adult vaccines.

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“..the eyes of the freedom-loving world are turned to the Russian Federation..”

The World Is Looking At You (Batiushka)

As a result of this first War atheist Bolsheviks seized power in the former Russian Empire. Although well over 600,000 Russian troops had died in the two and half years up until February 1917, as they, unlike the Allies on the Western Front, had faced the vast majority of the forces of Germany, Austro-Hungary and Turkey, far worse was to come. Foreign-sponsored foreigners, like the brain-fevered Blank-Lenin and the evil genius Bronstein-Trotsky, killed millions in a civil war, including the Imperial Family, and through deliberate starvation. Many more would later die in concentration camps. And unlike in the First War when the enemy never even entered Russia, in the Second War the enemy reached the very gates of Moscow, Leningrad and the banks of the Volga, slaughtering 27 million, mainly civilians.

But then there was the American flu (called for propaganda reasons ‘Spanish flu’). Beginning in Kansas, it was brought to Europe in 1917 by American troops, who had entered the First War, as arranged, as soon as the treacherous ‘Allies’ (not Germany) had succeeded in overthrowing Imperial Russia. The Americans had come to conquer Europe. After the Great European Suicide of the First War, this flu may have killed another 50 million, though some say far more. But above all, exactly as the French Marshal Foch foretold at Versailles, the ‘Peace’ of 1919 led directly to the Second Great War that broke out twenty years later. And that murdered tens of millions and in 1945 made Western Europe into a conquered and occupied province of the USA, which then set about creating a USE (United States of Europe) in its own image.

And so came the Cold War, with its MAD (mutually assured destruction) phobia, bunker-building, wasteful spending on arms, and the new generation’s social revolution of the 1960s. In turn came the next generation of 1989, 75 years after 1914 and 50 years after 1939, and the occupation of Eastern Europe by the same US colonists, sending out their proconsul-ambassadors to the client states of the ‘New Europe’. In 1991, 50 years after Operation Barbarossa of Nazi Imperialism ravaged the USSR but was defeated, the latter fell to Nato Imperialism. And in turn, 100 years after the Great European Suicide began, the Evil Empire began its occupation of the Ukraine in 2014, turning it into a dependent vassal. The whole pattern of the hundred years, 1914-2014, had the same source.

Until 2022 there had never been any hope of justice and restitution for any of this. Then on 24 February began the Special Operation to liberate the Ukraine and denazify the world. This is the last throw of the dice and the eyes of the freedom-loving world are turned to the Russian Federation. Even with all its troubles, imperfections and treacheries, we have no other hope. The world is looking at you.

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“The traditional end result for captured mercenaries is execution; however, Russian President Vladimir Putin may not want to hang these two State Dept. conscripts.”

First American Mercenary Contractors Captured in Ukraine (CTH)

A contracted mercenary has no legal recognition or protection as a prisoner of war. Two American mercenary soldiers have been captured by Russian forces and now present a rather unique issue for the Biden administration. The traditional end result for captured mercenaries is execution; however, Russian President Vladimir Putin may not want to hang these two State Dept. conscripts. (Via Telegraph) – “Two former US servicemen have been captured during fighting with Russian forces in Ukraine, The Telegraph has been told. The pair were taken prisoner during a fierce battle outside the north-east city of Kharkiv last week, according to comrades who were fighting alongside them.


Alexander Drueke, 39, and Andy Huynh, 27, had been serving as volunteers with a regular Ukrainian army unit. They are believed to be the first US servicemen to end up as Russian prisoners of war. They join a growing number of Western military volunteers captured by Russian forces, including at least two Britons. Aiden Aslin and Shaun Pinner have already been told they face the death penalty as “mercenaries”. The capture of the two Americans will be diplomatically sensitive as the Kremlin may seek to use it as proof that America is becoming directly involved in the war. Vladimir Putin, the Russian president, is likely to demand significant concessions to release them.”

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“The new G8, instead, “does not impose anything on anyone, but tries to find common solutions.”

The ‘New G8’ Meets China’s ‘Three Rings’ (Escobar)

The speaker of the Duma, Vyacheslav Volodin, may have created the defining acronym for the emerging multipolar world: “the new G8”. As Volodin noted, “the United States has created conditions with its own hands so that countries wishing to build an equal dialogue and mutually beneficial relations will actually form a ‘new G8’ together with Russia.” This non Russia-sanctioning G8, he added, is 24.4% ahead of the old one, which is in fact the G7, in terms of GDP in purchasing power parity (PPP), as G7 economies are on the verge of collapsing and the U.S. registers record inflation.

The power of the acronym was confirmed by one of the researchers on Europe at the Russian Academy of Sciences, Sergei Fedorov: three BRICS members (Brazil, China and India) alongside Russia, plus Indonesia, Iran, Turkey and Mexico, all non adherents to the all-out Western economic war against Russia, will soon dominate global markets. Fedorov stressed the power of the new G8 in population as well as economically: “If the West, which restricted all international organizations, follows its own policies, and pressures everyone, then why are these organizations necessary? Russia does not follow these rules.” The new G8, instead, “does not impose anything on anyone, but tries to find common solutions.”

The coming of the new G8 points to the inevitable advent of BRICS +, one of the key themes to be discussed in the upcoming BRICS summit in China. Argentina is very much interested in becoming part of the extended BRICS and those (informal) members of the new G8 – Indonesia, Iran, Turkey, Mexico – are all likely candidates. The intersection of the new G8 and BRICS + will lead Beijing to turbo-charge what has already been conceptualized as the Three Rings strategy by Cheng Yawen, from the Institute of International Relations and Public Affairs at the Shanghai International Studies University.

Cheng argues that since the beginning of the 2018 U.S.-China trade war the Empire of Lies and its vassals have aimed to “decouple”; thus the Middle Kingdom should strategically downgrade its relations with the West and promote a new international system based on South-South cooperation. Looks like if it walks and talks like the new G8, that’s because it’s the real deal.

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Schiff himself “Engaged in Likely Multiple Criminal Acts”.

Schiff: Evidence That Trump “Engaged in Likely Multiple Criminal Acts (Turley)

Representative Adam Schiff (D-CA) went on CNN’s “Don Lemon Tonight” to tout the work of the House Select Committee investigating the Jan. 6th riot. In that interview, Schiff declared that the Committee has enough evidence showing former President Donald Trump “engaged in likely multiple criminal acts.” While vague on the specific crimes, Schiff emphasized that the Justice Department did not have to wait any further to launch a criminal investigation based on what has already been disclosed. While the Committee has disclosed new evidence in the form of videotapes and testimony, it has not presented new material evidence of criminal acts in my view. That could still come but the first two hearings largely focused on a “conspiracy” to challenge the election certification and allegations that Trump knew the there was no compelling evidence of widespread election fraud.

If there is evidence of criminal conduct by former president Trump or others, most of us would support the calls for prosecution. It is also possible that the Justice Department is investigating such crimes or has undisclosed evidence. The hearings, however, have not established such a foundation. That can still come but these crimes have elements that have not been addressed in hearings that have lacked any opposing views or adversarial elements. The decision of Speaker Nancy Pelosi to abandon the long tradition of bipartisan members on such selection committee has robbed the investigation of credibility and legitimacy for many Americans.

Indeed, Schiff’s reference to evidence held by the Committee is likely to bring up memories of his highly controversial public statements that the House Intelligence Committee, which he chairs, had direct evidence of Russian collusion despite the countervailing findings of Special Counsel Robert Mueller. He never produced the evidence and later it was revealed that Justice officials and FBI agents had told his Committee that they did not find such evidence. Now, Schiff is maintaining that:

“I certainly believe there’s enough evidence for them to open an investigation of several people, and so did Judge David Carter of California believes the former president and others were engaged in likely multiple criminal acts. So if the Justice Department concurs with Judge Carter, let alone my own view or others, they should be pursuing that. So, yes, I think there is sufficient evidence to open an investigation. It would be of you up to the Justice Department ultimately to decide does that evidence rise to proof beyond a reasonable doubt such that they’re comfortable indicting someone. But there’s certainly, in my view, enough evidence to open up investigations.”

The reference to the Carter opinion has become a mainstay on cable news. I was critical of Judge Carter’s opinion when it was released. Much of the Jan. 6th hearings seem to be structured along the same lines as the Carter decision which was, in my view, strikingly conclusory and unsupported in critical parts of the analysis. Judge Carter simply declares that Trump knew that the election was not stolen and thus “the illegality of the plan was obvious.” Putting aside the court’s assumption of what Trump secretly concluded on the election, a sizable number of Americans still do not view Biden as legitimately elected. The court is not simply saying that they are wrong in that view but, because they are wrong, legislative challenges amounted to criminal obstruction of Congress.

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First Japan, then Europe, then the US. Russia and China will remain standing.

ECB Holds Emergency Meeting To Discuss Market Turmoil (ZH)

Last week, shortly after the ECB’s latest meeting disappointed markets and concluded without a discussion of Europe’s growing bond market fragmentation which has since sent Italian bond yields soaring above 4%, we joked that “at this rate the ECB would make an emergency rate cut” just hours after announcing an end to QT and guiding to a July rate hike. Once again, our jokes was not too far from the truth because on Wednesday morning, just hours before the Fed’s first 75bps rate hike sine 1994, and with Italian bonds in freefall, European Central Bank unexpectedly announced it would hold an emergency , ad hoc meeting of its rate-setters starting 11am CET in which it would “discuss current market conditions.”

The meeting, which comes less than a week after the rate-setting governing council’s last vote, raised investor expectations that the central bank is preparing to announce a policy instrument to stave-off another debt crisis in the region, which can only come in the form of more QE… which is ironic at a time when the ECB just announced it was phasing out all QE! Italian government bonds rallied in price following news of the planned meeting, reversing some of the recent sell-off that analysts said brought the country’s borrowing costs towards the “danger zone”. Gilles Moec, chief economist at Axa, an insurer, said the “stakes are high” for the ECB “now that everyone is dusting off their debt sustainability spreadsheets for Italy, they probably need to go up an extra notch”.

[..] ECB executive board member Isabel Schnabel indicated in a speech on Tuesday evening that the central bank was getting closer to the point where it would intervene in bond markets, saying “some borrowers have seen significantly larger changes in financing conditions than others since the start of the year”. She added: “Such changes in financing conditions may constitute an impairment in the transmission of monetary policy that requires close monitoring.” Schnabel, the ECB executive who oversees its market operations and one of the most influential voices on its board, said the central bank’s commitment to the euro had no limits. “And our track record of stepping in when needed backs up this commitment,” she added. But wait, this means… more QE at a time when the ECB just vowed… less QE!!??

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”Choose one and only one: Feel good or be able to afford food and basically everything else.”

PPI: Smoking -AGAIN- (Denninger)

Oh my look what we have here! “The Producer Price Index for final demand increased 0.8 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.4 percent in April and 1.6 percent in March. (See table A.) On an unadjusted basis, final demand prices moved up 10.8 percent for the 12 months ended in May.” So…. two points, more or less, higher than CPI. PPI leads, I remind you, so the consumer inflation level has not peaked. Let’s look inside. “Final demand goods: The index for final demand goods moved up 1.4 percent in May, the fifth consecutive rise. Over 70 percent of the increase in May can be traced to a 5.0-percent advance in prices for final demand energy. The index for final demand goods less foods and energy moved up 0.7 percent, while prices for final demand foods were unchanged.”

Oh really? Only 5% eh? Well, don’t look at June, because gasoline, for example, has risen by more than 10% in the last two weeks which is all in June. Oops. “Product detail: Nearly 30 percent of the May increase in the index for final demand services can be attributed to prices for truck transportation of freight, which rose 2.9 percent.” No kidding? You mean $6+ diesel fuel turns directly into higher shipping prices? I just got back from a cross-country trip and saw lots of dead dinosaurs coming out of the stack of 18 wheelers and every one of them had better keep moving or you’re not eating, never mind being able to buy and consume anything else. The current Administration’s war on fossil fuels might make you feel good but it is also directly responsible for this insanity. Choose one and only one: Feel good or be able to afford food and basically everything else.

The really nasty is that the 12 month trend is unbroken and, as I noted, it all started right after Biden was inaugurated. He said he was going to do this during the campaign and he has. It takes time for the PPI to reflect down into the final shelf price and it has. But the 12 month final demand number, less food, energy and trade from 12 months prior stands at 6% which it has run at or above since August of last year. Shut it off now and it will be next summer before that has all worked its way through and there’s nothing you can do about the time requirement.

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“At the core what The Fed does is not the question. It’s what Congress does.”

Today’s The Day…. (Denninger)

….. we “celebrate” The Fed decision on rates. Well, yeah, ok. The 13 week bill says the FFR should be 1.5% now. As has almost-always been the case historically (go look at FRED if you don’t believe me) the market leads and The Fed is not actually in charge of rates. Of course this runs counter to the “all-powerful Fed” which suits everyone on all sides. The politicians and conspiracy nuts get to blame someone else for an agency that follows what the market demands because if it doesn’t it is proved impotent and takes a huge loss on top of it. Unfortunately 50 bips will do nothing to cool inflation; to do that short-term rates must be higher than the inflation rate so that the real cost of borrowing is positive. That would mean putting about 700bips on the FFR right here and now – which we know won’t happen.

Then again this has been the problem for the last 30ish years. The slope of the interest rate curve has gone from the upper left to the lower right and thus serial refinancing at the corporate and government level, say much less at the personal level, has looked “free.” That’s the sneaky part of inflation which I explained back when I wrote Leverage with a nice graph. When you run a deliberate inflationary policy over decades the first years look like a free lunch because the apparent “wealth” initially goes up faster than the debt service (which is on a smaller base) and thus produces a “belly” (an area of expansion of the space between the two lines of available spending power and debt service.) This is a chimera and to intentionally run such a policy as a business or government is fraud because all exponential expansions eventually go vertical, and the debt service will eventually cross available funds at which point you’re screwed since you cannot spend 110% of what you have — ever — no matter what you do.

It’s happening now. At the core what The Fed does is not the question. It’s what Congress does. The Fed is constrained to use only Federal Government backed securities for its monetary operations and policy. Yes, it has shaved that repeatedly, most-egregiously with Fannie and Freddie paper during the housing crash which at the time was wildly illegal yet not one person in Congress called them on it nor did anyone from the Executive (e.g. DOJ) stop it despite its blatant illegality. Then Congress went even further and, for all intents and purposes, explicitly backstopped said paper on a retroactive basis which is also illegal, but heh, nobody cared because it was “too big to fail.”

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Total control is the goal.

“Red Flag” Laws Put a Target on the Back of Every American (Whitehead)

What we do not need is yet another pretext by which government officials can violate the Fourth Amendment at will under the guise of public health and safety. Indeed, at a time when red flag gun laws (which authorize government officials to seize guns from individuals viewed as a danger to themselves or others) are gaining traction as a legislative means by which to allow police to remove guns from people suspected of being threats, it wouldn’t take much for police to be given the green light to enter a home without a warrant in order to seize lawfully-possessed firearms based on concerns that the guns might pose a danger. Frankly, a person wouldn’t even need to own a gun to be subjected to such a home invasion.

SWAT teams have crashed through doors on lesser pretexts based on false information, mistaken identities and wrong addresses. Nineteen states and the District of Columbia have adopted laws allowing the police to remove guns from people suspected of being threats. If Congress succeeds in passing the Federal Extreme Risk Protection Order, which would nationalize red flag laws, that number will grow. As The Washington Post reports, these red flag gun laws…”allow a family member, roommate, beau, law enforcement officer or any type of medical professional to file a petition [with a court] asking that a person’s home be temporarily cleared of firearms. It doesn’t require a mental-health diagnosis or an arrest.”

In the wake of yet another round of mass shootings, these gun confiscation laws—extreme risk protection order (ERPO) laws—may appease the fears of those who believe that fewer guns in the hands of the general populace will make our society safer. Of course, it doesn’t always work that way. Anything—knives, vehicles, planes, pressure cookers—can become a weapon when wielded with deadly intentions. With these red flag gun laws, the stated intention is to disarm individuals who are potential threats… to “stop dangerous people before they act.”

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I think he has elections coming up.

Erdogan Issues Fresh Threats Against Greece (K.)

Turkish President Recep Tayyip Erdogan has issued fresh threats against Greece, this time accusing the country of supporting an international campaign directed against his country. “We have sent a clear message to everyone concerned about developments in the Aegean,” Erdogan told MPs of his AK Party in the wake of the EFES-2022 military exercise near the Aegean port city of Izmir. “We have seen through the game being played at the expense of our country. They are allowing Greece to behave like a spoiled child as they have done in the past,” he said. “The problem is that Greece is not aware of this game, or it has voluntarily adopted a supporting role,” he said, adding that the country would pay a hefty price for “making the same mistake.”

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Joshua Schulte. Treated like an animal.

A Whistleblower’s Agony (Kiriakou)

A C.I.A. whistleblower languishes awaiting trial in a federal prison under inhumane conditions and almost nobody is paying attention. Joshua Schulte is a former C.I.A. hacker, one of those computer geniuses whose job it is to work his way into the computer systems of our country’s enemies in support of some of the most highly-classified operations the C.I.A. carries out. The government believes that Schulte was a malcontent who released to WikiLeaks in 2017 the equivalent of 2 billion pages of top secret C.I.A. data with code names like Brutal Kangaroo, AngerQuake and McNugget. These programs, collectively known as Vault 7, were custom-made techniques used to compromise Wifi networks, hack into Skype, defeat anti-virus software and even hack into smart TVs and the guidance systems in cars.

They were the C.I.A.’s modern-day crown jewels. One senior C.I.A. officer likened the revelations to “a modern-day Pearl Harbor.” The C.I.A. accused Schulte of stealing the data in 2016 and of sending it to WikiLeaks in 2017. He was eventually charged with 13 felonies, mostly related to the Espionage Act. He was later charged with a number of additional felonies related to child pornography, accusations that he has adamantly denied. Schulte went to trial in New York in early 2020 with the Justice Department accusing him of “the single biggest leak of classified national defense information in the history of the C.I.A.”

After four weeks of testimony and six days of jury deliberation, he was found guilty of contempt of court and making a false statement, both minor charges for which federal sentencing guidelines call for imprisonment of zero-to-six months. The jury deadlocked on all other counts, and the judge declared a mistrial. Schulte remains in prison awaiting retrial. He has been incarcerated since October 2018.

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“This dramatic deterioration of Mr Assange’s health has not yet been considered in his extradition proceedings.”

Patel Responsible For Assange’s ‘Slow-Motion Execution’ If Extradited (DIss.)

A coalition of over 300 doctors warned UK Home Secretary Priti Patel that she may be responsible for the “slow-motion execution” of WikiLeaks founder Julian Assange if her office approves the United States government’s extradition request. Patel has until June 19, which is ten years after Assange entered Ecuador’s embassy in London and sought political asylum, to decide whether to approve the extradition. Assange faces 18 charges brought against him by the US Justice Department, 17 of which are under the Espionage Act. All the charges relate to documents WikiLeaks released in 2010 and 2011, which were provided by US Army whistleblower Chelsea Manning.

Doctors for Assange” is an international coalition of medical doctors, psychiatrists, and psychologists who have spoken up for Assange because of the toll the US government’s prosecution has taken on his health. Many of the doctors are from the UK and Australia, which is Assange’s home country. The doctors sent a letter to Patel on June 10, 2022, ahead of the Home Office’s extradition decision. “Should [Assange] come to harm in the US,” the group contends Patel “will be left holding the responsibility for that negligent outcome.” They add, “The extradition of a person with such compromised health, moreover, is medically and ethically unacceptable.” As the doctors recall, Assange’s health has deteriorated in UK custody at Belmarsh prison, where he’s been detained since April 11, 2019.

“In October 2021, Mr. Assange suffered a ‘mini-stroke.’” “This dangerous deterioration of Mr Assange’s health underscores the medical concern that the chronic stress caused by his harsh prison conditions, as well as his justified fear of the conditions that he would face in the case of extradition, leaves Mr. Assange vulnerable to cardiovascular events,” the doctors add. “This dramatic deterioration of Mr Assange’s health has not yet been considered in his extradition proceedings.” The doctors argue the basis for accepting US “assurances” was based upon “outdated medical information,” which should render the assurances “obsolete.” “Under conditions in which the UK legal system has failed to take Mr Assange’s current health status into account, no valid decision to approve his extradition may be made, by you, or anyone else.”

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Tucker Dore

 

 

 

 

Rooster

 

 

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Nov 182017
 
 November 18, 2017  Posted by at 1:49 pm Finance Tagged with: , , , , , , , , ,  8 Responses »


Rembrandt van Rijn The Three Crosses 1653

 

John Rubino recently posted a graph from Bob Prechter’s Elliot Wave that points to some ominous signs. It depicts the S&P 500, combined with consumer confidence and savings rate. As the accompanying video at Elliott Wave, What “Too Confident to Save” Means for Stocks, shows, when the gap between high confidence and low savings is at its widest, a market crash -often- follows.

In 2000, the subsequent crash was 39%, in 2007 it was 54%. We are now again witnessing just such a gap, with the S&P 500 at record levels. Here’s the graph, with John’s comments:

 

Consumers Are Both Confident And Broke

Elliott Wave International recently put together a chart that illustrates a recurring theme of financial bubbles: When good times have gone on for a sufficiently long time, people forget that it can be any other way and start behaving as if they’re bulletproof. They stop saving, for instance, because they’ll always have their job and their stocks will always go up. Then comes the inevitable bust. On the following chart, this delusion and its aftermath are represented by the gap between consumer confidence (our sense of how good the next year is likely to be) and the saving rate (the portion of each paycheck we keep for a rainy day). The bigger the gap the less realistic we are and the more likely to pay dearly for our hubris.

 

 

John is mostly right. But not entirely. Not that I don’t think he knows, he simply forgets to mention it. What I mean is his suggestion that people stop saving because they’re confident, bullish. To understand where and why he slightly misses, let’s turn to Lance Roberts. Before we get to the savings, Lance explains why the difference between the Producer Price Index (PPI) and Consumer Price Index (CPI) is important to note.

Summarized, producer prices are rising, but consumer prices are not.

 

You Have Been Warned

There is an important picture that is currently developing which, if it continues, will impact earnings and ultimately the stock market. Let’s take a look at some interesting economic numbers out this past week. On Tuesday, we saw the release of the Producer Price Index (PPI) which ROSE 0.4% for the month following a similar rise of 0.4% last month. This surge in prices was NOT surprising given the recent devastation from 3-hurricanes and massive wildfires in California which led to a temporary surge in demand for products and services.

 

 

Then on Wednesday, the Consumer Price Index (CPI) was released which showed only a small 0.1% increase falling sharply from the 0.5% increase last month.

 

 

Such differences have real life consequences. In Lance’s words:

 

This deflationary pressure further showed up on Thursday with a -0.3% decline in Export prices. (Exports make up about 40% of corporate profits) For all of you that continue to insist this is an “earnings-driven market,” you should pay very close attention to those three data points above. When companies have higher input costs in their production they have two choices: 1) “pass along” those price increase to their customers; or 2) absorb those costs internally.

If a company opts to “pass along” those costs then we should have seen CPI rise more strongly. Since that didn’t happen, it suggests companies are unable to “pass along” those costs which means a reduction in earnings. The other BIG report released on Wednesday tells you WHY companies have been unable to “pass along” those increased costs.

The “retail sales” report came in at just a 0.1% increase for the month. After a large jump in retail sales last month, as was expected following the hurricanes, there should have been some subsequent follow through last month. There simply wasn’t. More importantly, despite annual hopes by the National Retail Federation of surging holiday spending which is consistently over-estimated, the recent surge in consumer debt without a subsequent increase in consumer spending shows the financial distress faced by a vast majority of consumers.

 

That already hints at what I said above about savings. But it’s Lance’s next graph, versions of which he uses regularly, that makes it even more obvious. (NOTE: I think he means to say 2009, not 2000 below)

 

The first chart below shows a record gap between the standard cost of living and the debt required to finance that cost of living. Prior to 2000(?!), debt was able to support a rising standard of living, which is no longer the case currently.

 

 

The cut-off point is 2009, unless I miss something in Lance’s comment. Before that, borrowing could create the illusion of a rising standard of living. Those days are gone. And it’s very hard to see, when you take a good look, what could make them come back.

Not only are savings not down because people are too confident to save, they are down because people simply don’t have anything left to save. The American consumer is sliding ever deeper into debt. And as for the Holiday Season, we can confidently -there’s that word again- predict that spending will be disappointing, and that much of what is still spent will add to increasing Consumer Credit Per Capita, as well as the Gap Between Real Disposable Income (DPI) And Cost Of Living.

The last graph, which shows Control Purchases, i.e. what people buy most, a large part of which will be basic needs, makes this even more clear.

 

With a current shortfall of $18,176 between the standard of living and real disposable incomes, debt is only able to cover about 2/3rds of the difference with a net shortfall of $6,605. This explains the reason why “control purchases” by individuals (those items individuals buy most often) is running at levels more normally consistent with recessions rather than economic expansions.

 

 

If companies are unable to pass along rising production costs to consumers, export prices are falling and consumer demand remains weak, be warned of continued weakness in earnings reports in the months ahead. As I stated earlier this year, the recovery in earnings this year was solely a function of the recovering energy sector due to higher oil prices. With that tailwind now firmly behind us, the risk to earnings in the year ahead is dangerous to a market basing its current “overvaluation” on the “strong earnings” story.

“Prior to 2009, debt was able to support a rising standard of living..” Less than a decade later, it can’t even maintain the status quo. That’s what you call a breaking point.

To put that in numbers, there’s a current shortfall of $18,176 between the standard of living and real disposable incomes. In other words, no matter how much people are borrowing, their standard of living is in decline.

Something else we can glean from the graphs is that after the Great Recession (or GFC) of 2008-9, the economy never recovered. The S&P may have, and the banks are back to profitable ways and big bonuses, but that has nothing to do with real Americans in their own real economy. 2009 was a turning point and the crisis never looked back.

Are the American people actually paying for the so-called recovery? One might be inclined to say so. There is no recovery, there’s whatever the opposite of that is, terminal decline?!. It’s just, where does that consumer confidence level come from? Is that the media? Is The Conference Board pulling our leg? Is it that people think things cannot possibly get worse?

What is by now crystal clear is that Americans don’t choose to not save, they have nothing left to save. And that will have its own nasty consequences down the road. Let’s raise some rates, shall we? And see what happens?!

One consolation: Europe, Japan, China are in the same debt-driven decline that Americans are. We’re all going down together. Or rather, the question is who’s going to go first. That is the only hard call left. America’s a prime candidate.

 

 

Feb 142017
 
 February 14, 2017  Posted by at 10:09 am Finance Tagged with: , , , , , , , , , ,  2 Responses »


David Myers Theatre on 9th Street. Washington, DC July 1939

 

Top Trump Aide Flynn Resigns Over Russia Contacts (AFP)
Judge Grants Injunction Against Trump Travel Ban In Virginia (AP)
Is Trump the New Boris Yeltsin? (Max Keiser)
Bond Traders Fear Yellen Is Planning A ‘St. Valentine’s Day Massacre’ (MW)
Yellen Outlook ‘Irrelevant’ Because Trump Will Reshape Fed (CNBC)
The Fed Is Bad For America – But Getting Rid Of It Isn’t The Answer (DDMB)
Made For Each Other (Jim Kunstler)
Democracies Must Reclaim Power Over The Production Of Money (Pettifor)
China Factory Prices Surge Most Since 2011, Boosting Reflation (BBG)
Putin’s Central Banker Is on a Tear (BBG)
The Euro May Already Be Lost (ETT)
Greece To Exceed Its Primary Surplus Target In 2018 (R.)
Greece Lines Up Rothschild For Debt Advisory Role As Bankruptcy Looms (IW)
To Those Who Kept Me Alive All These Years: Thank You (Chelsea Manning)
Lesbos Doctors Accuse NGOs Of Failing To Care For Refugees (K.)

 

 

I still don’t fully get it. Was Flynn set up? Hard to believe he didn’t know his calls would be recorded and transcribed. He ran US -military- intelligence for a number of years, for pete’s sake. How could he not have known?

Top Trump Aide Flynn Resigns Over Russia Contacts (AFP)

Donald Trump’s national security advisor Michael Flynn resigned amid controversy over his contacts with the Russian government, a stunning first departure from the new president’s inner circle less than a month after his inauguration. The White House said Trump had accepted Flynn’s resignation amid allegations the retired three star general discussed US sanctions strategy with Russia’s ambassador Sergey Kislyak before taking office. Flynn – who once headed US military intelligence – insisted he was honored to have served the American people in such a “distinguished” manner. But he admitted that he “inadvertently briefed” the now Vice President Mike Pence with “incomplete information” about his calls with Kislyak. Pence had publicly defended Flynn, saying he did not discuss sanctions, putting his own credibility into question.

“Regarding my phone calls with the Russian Ambassador. I have sincerely apologized to the President and the Vice President, and they have accepted my apology,” read Flynn’s letter, a copy of which was released by the White House. The White House said Trump has named retired lieutenant general Joseph Kellogg, who was serving as a director on the Joint Chiefs of Staff, to be interim national security advisor. Flynn’s resignation so early in an American administration is unprecedented, and comes after details of his calls with the Russian diplomat were made public – upping the pressure on Trump to take action. Several US media outlets in Monday reported that top Trump advisors were warned about Flynn’s contacts with the Russians early this year. Questions will now be raised about who knew about the calls and why Trump did not move earlier to replace Flynn.

Read more …

The ban is now all but dead. But they’ll throw out another one soon.

Judge Grants Injunction Against Trump Travel Ban In Virginia (AP)

A federal judge Monday granted a preliminary injunction barring the Trump administration from implementing its travel ban in Virginia, adding another judicial ruling to those already in place challenging the ban’s constitutionality. The ruling is significant from a legal standpoint because U.S. District Judge Leonie Brinkema found that an unconstitutional religious bias is at the heart of the travel ban, and therefore violates First Amendment prohibitions on favoring one religion over another. She said the evidence introduced so far indicates that Virginia’s challenge to the ban will succeed once it proceeds to trial. A federal appeals court in California has already upheld a national temporary restraining order stopping the government from implementing the ban, which is directed at seven Muslim-majority countries.

But the ruling by the 9th Circuit Court of Appeals was rooted more in due process grounds, said Virginia Attorney General Mark Herring, a Democrat who brought the lawsuit against Trump in Virginia. “Judge Brinkema’s ruling gets right to the heart of our First Amendment … claim,” Herring said in a conference call Monday night. In her 22-page ruling, Brinkema writes that Trump’s promises during the campaign to implement what came to be known as a “Muslim ban” provide evidence that the current executive order unconstitutionally targets Muslims. “The president himself acknowledged the conceptual link between a Muslim ban and the EO (executive order),” Brinkema wrote. She also cited news accounts that Trump adviser Rudy Giuliani said the executive order is an effort to find a legal way for Trump to be able to impose his Muslim ban. Herring said that “the overwhelming evidence shows that this ban was conceived in religious bigotry.”

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“The creeping tide of kleptocracy will be appeased at every juncture.”

Is Trump the New Boris Yeltsin? (Max Keiser)

The hope that Trump would take on Wall Street crooks is dead. It was a long shot to begin with but it’s now clear that his level of financial illiteracy and corruption, a hallmark of Obama’s Presidency, is on par, or perhaps even exceeds Obama’s. What we see shaping up in the first few weeks of Trump’s Presidency is his emergence as the new Boris Yeltsin, the puppet idiot installed by America’s neo-cons and Wall St. bankers after the Soviet Union collapsed to drown the country in debt and deceit. Yeltsin was a drunk clown who gave away the country to oligarchs, who turned the country into a kleptocracy – all happening under the laughing approval of President Bill Clinton. Today Trump fills the Yeltsin role in American politics. As Wall St. laughs, Trump begins the process of giving away (read: privatizing) America’s assets to be owned by our new ruling kleptocracy.

Inflation is coming…But not because wages go up, but because price gouging and monopoly pricing starts to dominate our everyday lives with no cheap substitutes coming from overseas due to an increasing global level of distrust and illiquidity among trading partners. Leveraged buyouts fueled by bailouts and free money from the central bankers will continue to kill competition in America. Media, energy, pharmaceutical, finance and agriculture will all be controlled by impregnable monopolies (and Warren Buffett). It’s a pitiful sham and a godawful shame – a situation where Trump’s supporters will, in the not too distant future, turn on him after they’ve had their illusions shattered – but will it be too late? The creeping tide of kleptocracy will be appeased at every juncture. The vanishing middle class will cling to their guns and bibles – hoping for a miracle. They simply will not be able to believe that they could have been so wrong. The triumph of the will.

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The always colorful language of Albert Edwards.

Bond Traders Fear Yellen Is Planning A ‘St. Valentine’s Day Massacre’ (MW)

Is Federal Reserve Chairwoman Janet Yellen capable of conducting a bond-market bloodbath? That’s what some on Wall Street are wondering. Albert Edwards, market strategist at Société Générale and noted permabear, expects Yellen, who is set to deliver semiannual testimony to the Senate Banking Committee on Tuesday, will trigger a steep bond selloff by talking up the possibility that the central bank will raise interest rates in March. In a note, he refers to the possibility as “The St. Valentine’s Day Massacre,” a homage to the 1929 gangland murder of seven men in a garage in the Lincoln Park neighborhood on Chicago’s North Side. The killings were allegedly planned by famed mobster Al Capone, who was trying to wrest power away from Chicago’s Irish gangsters.

Edwards isn’t the only one who expects Yellen to remind investors that the central bank could raise interest rates at its next meeting for what would be the third time in a decade. “The market is bracing for the possibility that Yellen will talk up the chances of a rate increase in March,” said Guy LeBas, chief fixed income strategist at Janney. Treasury yields, which move inversely to prices, are on track to rise for the third straight day, a selloff that has largely been driven by these concerns, LeBas said. The yield on the 10-year Treasury note rose 3.6 basis points to 2.447%. But a March hike is still viewed as far from likely. Although the central bank back projected back in December that it would raise interest rates three times in 2017, investors have remained skeptical—probably because they’ve been burned by the Fed before.

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If Brainard leaves too, that makes five seats to fill with Yellen gone early next year.

Yellen Outlook ‘Irrelevant’ Because Trump Will Reshape Fed (CNBC)

With at least three vacancies expected on the Federal Reserve’s Board of Governors this year, the central bank may not be exempt from a Trump-led shakeup, strategist Mark Grant told CNBC on Monday. “The Fed of today is not going to be the Fed of tomorrow,” the chief strategist at Hilltop Securities told “Squawk Box.” Grant, who accurately predicted the Brexit vote and Donald Trump’s victory, said the president and Treasury Secretary nominee Steven Mnuchin will take advantage of filling key vacancies on the Fed board to further their agenda. Grant spoke a day ahead of Fed Chair Janet’s Yellen’s semiannual monetary report to the Senate. The Fed has said it expect to raise interest rates three times this year.

“I think what the Fed says at this point is, for all practical purposes, irrelevant, because Mr. Trump is going to be able to appoint three members of the Fed,” Grant said. “I think they’re going to be business people and the days of an academic, economist Fed are going to be over.” Removing academics from the Fed’s board remains a point of contention, but Grant said the Trump administration is likely to do so with the economic landscape and policy goals in mind. “I also believe that Trump and company, as I call them, know as they put in the infrastructure or the military expansion that there’s going to be a balance to the balance sheet, and … that the new people on the Fed are going to keep interest rates low,” Grant said. “So all this talk of a three interest rate or four interest rate hike, in my opinion, is baloney.”

On Friday, Fed Governor Daniel Tarullo announced plans to leave the board in April, creating a third vacancy. Danielle DiMartino Booth, author of “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America,” said that there is a high probability that board member Lael Brainard will also leave, creating yet another vacancy. She said Trump’s bold spending plan may require low interest rates (and, in turn, a more dovish Fed), but she wondered about whom the president would appoint to the board. “It’s really going to come down to whether or not he’s got the gumption to totally change the complexion of the Federal Reserve board, or if he steps back and says, ‘You know what, I’ve got to finance all this stuff, so I’m going to put more doves in.’ These are hard decisions,” she said.

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Fed insider Danielle DiMartino Booth’s new book Fed Up is here.

The Fed Is Bad For America – But Getting Rid Of It Isn’t The Answer (DDMB)

On September 20, 2005, Mark Olson did something ordinary that’s since proved to be extraordinary. Never heard of him? You’re not alone. Nevertheless, the banking expert had the gumption to lob a dissenting vote in his capacity as a governor on the Federal Reserve Board. He joined the estimable company of Edward “Ned” Gramlich, a fellow governor who dissented at the September 2002 Federal Open Market Committee meeting. Gramlich is best known for sounding an early warning on the subprime crisis, and being resolutely dismissed by Alan Greenspan. The two gentlemen represent central banking’s answer to the “Last of the Mohicans,” the sole two dissents that have been recorded by governors since 1995. And that’s a problem. At last check, ‘No” was not a four-letter word.

It’s no longer a secret that an abundance of anger is churning among many working men and women who feel they’ve been excluded by the current economic recovery and the longest span of job creation in postwar history. The funny thing about a sense of abandonment is that more often than not, anger follows. What too few Americans appreciate is how directly the inability to say “no” at the Fed has determined their station in life. But that’s just the case. The Fed directly impacts a slew of the most important decisions we make — the values we instill in our children, the things we buy and how they are financed and how we best prepare for what follows after a lifetime of laboring in the trenches.

Stop and think for a moment about the first time you discovered the miracle of compounding interest, that first bank statement that proved savings does pay. Can your children experience that same sensation? What about the roof over your head and the car you drive? Can you afford the payments or did you stretch to buy more than you could afford, out of sheer necessity? What about your mom and dad’s retirements? Do they say their prayers that the stock market will hang in there and that the safety of their bond holdings will protect them if that’s not the case? All of these dysfunctional dynamics lay at the feet of an academic-led Fed being hellbent on launching unconventional monetary policy with the false prerequisite that interest rates had to be zero before quantitative easing (QE) could be deployed.

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“The Republican Party is Norma Desmond’s house in Sunset Boulevard, starring Donald Trump as Max the Butler, working extra-hard to keep the illusions of yesteryear going.”

Made For Each Other (Jim Kunstler)

Don’t be fooled by the idiotic exertions of the Red team and the Blue team. They’re just playing a game of “Capture the Flag” on the deck of the Titanic. The ship is the techno-industrial economy. It’s going down because it has taken on too much water (debt), and the bilge pump (the oil industry) is losing its mojo. Neither faction understands what is happening, though they each have an elaborate delusional narrative to spin in the absence of any credible plan for adapting the life of our nation to the precipitating realities. The Blues and Reds are mirrors of each other’s illusions, and rage follows when illusions die, so watch out. Both factions are ready to blow up the country before they come to terms with what is coming down.

What’s coming down is the fruit of the gross mismanagement of our society since it became clear in the 1970s that we couldn’t keep living the way we do indefinitely — that is, in a 24/7 blue-light-special demolition derby. It’s amazing what you can accomplish with accounting fraud, but in the end it is an affront to reality, and reality has a way of dealing with punks like us. Reality has a magic trick of its own: it can make the mirage of false prosperity evaporate. That’s exactly what’s going to happen and it will happen because finance is the least grounded, most abstract, of the many systems we depend on. It runs on the sheer faith that parties can trust each other to meet obligations. When that conceit crumbles, and banks can’t trust other banks, credit relations seize up, money vanishes, and stuff stops working.

You can’t get any cash out of the ATM. The trucker with a load of avocados won’t make delivery to the supermarket because he knows he won’t be paid. The avocado grower will have to watch the rest of his crop rot. The supermarket shelves empty out. And you won’t have any guacamole. There are too many fault lines in the mighty edifice of our accounting fraud for the global banking system to keep limping along, to keep pretending it can meet its obligations. These fault lines run through the bond markets, the stock markets, the banks themselves at all levels, the government offices that pretend to regulate spending, the offices that affect to report economic data, the offices that neglect to regulate criminal misconduct, the corporate boards and C-suites, the insurance companies, the pension funds, the guarantors of mortgages, car loans, and college loans, and the ratings agencies.

The pervasive accounting fraud bleeds a criminal ethic into formerly legitimate enterprises like medicine and higher education, which become mere rackets, extracting maximum profits while skimping on delivery of the goods. All this is going to overwhelm Trump soon, and he will flounder trying to deal with a gargantuan mess. It will surely derail his wish to make America great again — a la 1962, with factories humming, and highways yet to build, and adventures in outer space, and a comforting sense of superiority over all the sad old battered empires abroad. I maintain it could get so bad so fast that Trump will be removed by a cadre of generals and intelligence officers who can’t stand to watch someone acting like Captain Queeg in the pilot house.

Read more …

Ann Pettifor’s new book is out too.

Democracies Must Reclaim Power Over The Production Of Money (Pettifor)

Today, the international monetary system is run by the equivalent of Goethe’s Sorcerer’s Apprentice. In the absence of the equivalent of the Sorcerer – regulatory democracy – financial risk-takers and fraudsters have, since 1971, periodically crashed the global economy and trashed the lives of millions of people. And let’s be clear: there is no such thing as effective global regulation. Ask the Bitcoiners – that is why they operate in the ‘dark web’. The question is this: who should control our socially constructed, publicly-backed financial institutions and relationships? Private, unaccountable, rent-seeking authority? Or public, democratic, regulatory authority? Policy and regulation requires boundaries. Pensions policy, criminal justice policies, taxation policies, policies for the protection of intellectual property – all require boundaries.

Finance capital abhors boundaries. Like the Sorcerer’s Apprentice, global financiers want to be free to use the magic of money creation to flood the global economy with ‘easy’ (if dear) money, and just as frequently to starve economies of any affordable finance. And they want to have ‘the freedom’ to do that in the absence of the Sorcerer – regulatory democracy. If we want to strengthen democracy, then we must subordinate bankers to their role as servants of the economy. Capital control over both inflows and outflows, is, and will always be a vital tool for doing so. In other words, if we really want to ‘take back control’ we will have to bring offshore capital back onshore. That is the only way to restore order to the domestic economy, but also to the global economy.

Second, monetary relationships must be carefully managed – by public, not private authority. Loans must primarily be deployed for productive employment and income-generating activity. Speculation leads to capital gains that can rise exponentially. But speculation can also lead to catastrophic losses. Loans for rent-seeking and speculation, gambling or betting, must be made inadmissible. Third, money lent must not be burdened by high, unpayable real rates of interest. Rates of interest for loans across the spectrum of lending – short- and long-term, in real terms, safe and risky – must, again, be managed by public, not private authority if they are to be sustainable and repayable, and if debt is not going to lead to systemic failure. Keynes explained how that could be done with his Liquidity Preference Theory, still profoundly relevant for policy-makers, & largely ignored by the economics profession.

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Remember: there can be no inflation without consumer spending going up. Prices may rise for other reasons, but that’s not the same.

China Factory Prices Surge Most Since 2011, Boosting Reflation (BBG)

China’s producer prices increased the most since 2011, with the world’s biggest exporter further lifting the outlook for global inflation. Producer price index rose 6.9% in January from a year earlier, compared with a median estimate of 6.5% in a Bloomberg survey and a 5.5% December gain. Consumer-price index climbed 2.5%, boosted by the week-long Lunar New Year holiday beginning in January this year, versus a 2.4% rise forecast by analysts. Producer prices for mining products surged 31% year-on-year while those for raw materials climbed 12.9%, the National Bureau of Statistics said Tuesday. China is again exporting inflation as factories increase prices after emerging from years of deflation. That fresh strength may moderate in coming months as year-ago comparisons gradually rise and Donald Trump’s policies add uncertainties to the global demand outlook.

Continued pressure for raw materials is forcing companies to increase prices, according to Tao Dong at Credit Suisse in Hong Kong. “Without strong demand, producers have limited space for price hikes,” he said. “But I see a wide range of price increases because the cost push is so severe.” Both consumer and producer inflation will peak soon, Julian Evans-Pritchard, an economist at Capital Economics in Singapore, wrote in a report. “Tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium-term,” he said. “The latest inflation data add to the case for a continued moderate tightening in monetary policy,” Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, wrote in a report.

“The central bank is likely to continue on that path in the months ahead, as policy makers lean against excess leverage, yuan weakness and capital outflows, and nascent inflationary pressure.” “We haven’t seen significant pass-through effect from PPI to CPI inflation yet, suggesting that the strong rebound in PPI inflation is a reflection of proactive fiscal policies,” Zhou Hao, an economist at Commerzbank in Singapore, wrote in a report. With the Communist Party Congress later this year, “local governments are keen to deliver decent growth figures. Against this backdrop, the infrastructure investment pipeline will remain solid.”

Read more …

It’s almost 2 years ago that I wrote Russia’s Central Bank Governor Is Way Smarter Than Ours. This is a pretty crazy story. Russian banking appears to take place in some kind of black hole, complete with event horizons.

Putin’s Central Banker Is on a Tear (BBG)

In Russia, Peresvet Bank had an edge no other big private financial institution could match. Its largest shareholder was the powerful Russian Orthodox Church. In a 2015 pitch to investors, Peresvet said the backing of the church and the bank s other big owner, Russia’s Chamber of Commerce and Industry, gave it a quasi-sovereign status. For more than two decades, big state companies stashed their cash with the bank, whose ponderous full name Joint Stock Commercial Bank for Charity and Spiritual Development of Fatherland suggested its grand standing. Even so, it took less than a month last fall for the bank, one of Russia’s 50 largest, to come undone and be taken over by the central bank. Peresvet was just the latest casualty in a financial purge presided over by Central Bank chief Elvira Nabiullina, a bookish economist who’s a favorite of Vladimir Putin.

The regulator closed almost 100 banks in 2016, and in a cleanup with few precedents, Nabiullina has shut almost 300 over the past three years. This may be only the beginning. There are about 600 banks left across the world’s largest country, but Fitch Ratings analyst Alexander Danilov, adjusting for population, calculates that as an emerging market Russia would be fine with about 1 in 10 of those. A warning from Fitch signaled Peresvet’s fall: Almost a tenth of its loans were to companies seemingly without real businesses. Then Russian media reported that the chief executive officer, Alexander Shvets, had disappeared. The bank issued denials and publicized positive comments from other analysts. But within days, as depositors clamored for their cash, the bank said it was “temporarily” limiting withdrawals. The regulator took control of the lender four days later.

As of late January the central bank was still trying to determine the scale of Peresvet’s financial woes. Nabiullina, 53, has emerged as one of Putin’s most influential economic advisers following a low-key government career that began in the 1990s, before the Russian leader’s rise to power. Soft-spoken and unassuming, she runs what in Russia is called a “megaregulator.” When it comes to the economics behind Putin’s overarching goal of restoring Russia’s place in the world, there’s no one more influential. As central bank governor, she’s in charge of a banking system whose weak links are an economic burden, driving up the cost of financing so badly needed in the face of stagnant growth. She’s also the chief guardian of Russia’s foreign currency reserves. Those holdings are more than just a tool of monetary policy; according to several senior officials, Putin views them as a vital safeguard of the country’s sovereignty. [..]

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The eurozone’s core problem: as soon as harder economic times come, the poorer countries are hit hardest. Solution: a transfer union like the US. But that will never be accepted in the EU, because it means giving up more sovereignty.

From Finland’s EuroThinkTank, h/t Mish

The Euro May Already Be Lost (ETT)

The 1st of January 2017 marked the 18th anniversary of the European common currency, the euro. Despite its success from 1999 to 2007, after 2008 the euro has become a burden for many of its members. For example, living standards in Italy and Greece are below the levels when they joined the euro. Finland is the only Nordic country using the euro and it is also the only Nordic country which has not yet recovered from the financial crash of 2008. There have been many proposals on how to fix the euro and the EMU, but they are politically unpopular and unrealistic. In this blog-entry, we will argue that the euro will almost surely fail; we just do not know the exact timing of its demise. The problem of the euro can be visualized in the development of the GDP per capita.

Germany has been successful in the Eurozone, while Greece and Italy have not. France is not doing well either. The jury is still out for Finland. The different growth paths are a symptom of a general problem that has haunted currency unions for centuries. Competitiveness and productivity develop at a different pace in different countries. Over time, this leads to large competitiveness differences among the members of a currency union. These differences do not usually pose a problem during economic booms because strengthening aggregate demand supports ailing fields of production. However, when a currency union faces an economic downturn or a crisis, falling aggregate demand hits less competitive industries and countries hard and the financing costs of less competitive countries jump. This is an asymmetric shock.

The detrimental effects of asymmetric shocks can be mitigated by transferring funds from prosperous to declining member states. When the dollar union of the US threatened to fall apart during the Great Depression, the federal government enacted federal income transfers from prosperous states to aid ailing ones. The federal budget also increased rapidly and, in practice, income transfers became permanent. The no bailout policy of crisis-hit states had already been enacted earlier. According to the ECB, competitiveness of the German economy has improved by around 19.3%, Greece’s competitiveness has improved by around 6.5%, France’s around 3.9%, Finland’s around 1.7% and Italy’s around 0.9% since 1999. Thus, for survival in its present form and size, the Eurozone needs a similar income transfer system, that is, a full political union as in the US.

Read more …

Meaningless numbers.

Greece To Exceed Its Primary Surplus Target In 2018 (R.)

Greece will have a primary surplus in the budget of 3.7% of GDP next year, exceeding the target of 3.5% agreed with its euro zone creditors, the European Commission forecast on Monday. The size of next year’s Greek primary surplus, which is the budget balance before debt-servicing costs, is a bone of contention between euro zone governments and the IMF, which believes it will be only 1.5%. A further disagreement between the two lenders to Greece is what surplus Athens will be able to maintain in the years after 2018. The higher the surplus and the longer it is kept the less is the need for any further debt relief to Greece.

The IMF insists Greek debt, which the Commission forecast on Monday would fall to 177.2% of GDP this year from 179.7% in 2016 and then decline again to 170.6% in 2018, is unsustainably high and that Greece must get debt relief. Germany and several other euro zone countries say that, if Greece does all the agreed reforms, then debt relief will not be necessary. The Commission forecast that Greek investment would triple to 12% of GDP this year and rise further to 14.2% of GDP next year as the economy expands 2.7% in 2017 and 3.1% in 2018 after years of recession. It also forecast Greek unemployment would fall to 22% of the workforce this year from 23.4% last year and decline further to 20.3% in 2018.

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If all else fails, sell your soul.

Greece Lines Up Rothchild For Debt Advisory Role As Bankruptcy Looms (IW)

Greece is reportedly planning to hire Rothschild as its debt adviser, replacing current adviser Lazard in the role, as it attempts to end a long-running stand off with creditors. According to the Financial Times, government officials in Greece hope to finalise the appointment before a gathering of euro-area finance ministers on 20 February. Unless Greece receives fresh funds it will not be able to make €7bn of debt payments due this July, including €2.1bn to private sector creditors. In the role, Rothschild will reportedly advise the country on negotiations with creditors, potential inclusion in the European Central Bank’s bond-buying programme, and the sale of Greek government bonds.

The deal would replace the Greek government’s current deal with Lazard, which guided the country through its original bailout in 2012. According to the FT, out of Greece’s €323bn of outstanding government debt just €36bn is owned by private investors who hold Greek bonds, while the rest is owned by sector creditors. Last week, yields on two-year Greek bonds rose to their highest level since June last year after the IMF and the EU failed to reach an agreement on how to lend the €7bn required by the country to avoid bankruptcy. The IMF refused to sign up to the aid programme unless the EU grants further debt relief to Greece. However, the head of the eurozone’s €500bn rescue fund has rejected this demand.

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Power to you, Chelsea.

To Those Who Kept Me Alive All These Years: Thank You (Chelsea Manning)

To those who have kept me alive for the past 6 years: minutes after President Obama announced the commutation of my sentence, the prison quickly moved me out of general population and into the restrictive housing unit where I am now held. I know that we are now physically separated, but we will never be apart and we are not alone. Recently, one of you asked me “Will you remember me?” I will remember you. How could I possibly forget? You taught me lessons I would have never learned otherwise. When I was afraid, you taught me how to keep going. When I was lost, you showed me the way. When I was numb, you taught me how to feel. When I was angry, you taught me how to chill out. When I was hateful, you taught me how to be compassionate. When I was distant, you taught me how to be close. When I was selfish, you taught me how to share.

Sometimes, it took me a while to learn many things. Other times, I would forget, and you would remind me. We were friends in a way few will ever understand. There was no room to be superficial. Instead, we bared it all. We could hide from our families and from the world outside, but we could never hide from each other. We argued, we bickered and we fought with each other. Sometimes, over absolutely nothing. But, we were always a family. We were always united. When the prison tried to break one of us, we all stood up. We looked out for each other. When they tried to divide us, and systematically discriminated against us, we embraced our diversity and pushed back. But, I also learned from all of you when to pick my battles. I grew up and grew connected because of the community you provided.

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I’ll get back to this soon. It’s good to see others address this issue too.

Lesbos Doctors Accuse NGOs Of Failing To Care For Refugees (K.)

State hospital doctors on the eastern Aegean island of Lesvos, which has been hard particularly hit by the refugee crisis, have complained that nongovernmental organizations receiving European Union funding to help migrants are not doing enough, resulting in them being forced to bear an excessive burden. In a statement released on Monday, the island’s union of state hospital doctors said the two refugee camps at Moria and Kara Tepe do not have any pediatricians, meaning that all sick children from the camps must be treated at local hospitals, which are seriously understaffed. Noting that the NGOs “get paid handsomely” by the EU to help refugees, the union claimed they had “totally failed to provide humane conditions for the refugees.” Several human rights groups have complained about conditions at Greek refugee camps, particularly Moria and Elliniko, in southern Athens.

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Nov 132014
 
 November 13, 2014  Posted by at 9:26 pm Finance Tagged with: , , , , , , ,  14 Responses »


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

Looks I have to return to the deflation topic. I’m a bit hesitant about it, because the discussion always gets distorted by varying definitions and a whole bunch of semi-religious issues. The Automatic Earth has for many years said that an immense bout of deflation is inevitable because of global debt levels, and it’s all only gotten a lot worse since we first said that. Our governments and central banks have ‘fought’ deflation with more debt, and that was always the stupidest idea in human history. Or at least, most of us were stupid for believing it would work, or was even intended to.

Just so we don’t get into yet more confusion, i probably need to explain that the debt deflation we’re talking about here is not some subdivision like consumer inflation or price inflation or cookie inflation, those are just hollow and meaningless terms. Debt deflation is deflation caused by too much debt, and the deleveraging it must and will lead to. Deflation does not equal falling prices, those are merely an effect of it.

The reason this matters is that when you equate inflation and deflation with rising or falling prices, you’re not going to be able to know when you actually have deflation. Because prices can rise for all sorts of reasons. Inflation/deflation is the money/credit supply in an economy multiplied by the speed at which money is spent in that economy, the velocity of money.

It should be obvious that prices for some items can still rise, certainly initially, when deflation sets in. Producers that see less sales can try to raise prices for their remaining buyers. Basic necessities will always be needed. Governments can raise taxes. Rising/falling prices tell us only part of the story, and with a considerable time delay.

Ergo: rising/falling prices are a lagging factor, and if you look at them only, you will have missed the point where deflation has set in. What follows, obviously, is that you can’t measure deflation by looking at consumer prices (CPI) or production prices (PPI) numbers. You’d be way behind the curve. CPI and PPI tell you something, but they don’t tell what causes falling or rising prices. And that is a valuable thing to know.

I see even John Mauldin in this week’s The Last Argument of Central Banks talk about ‘good deflation’, but that doesn’t exist any more than cookie inflation, sorry, John. Prices for some items may fall due to innovation etc. while an economy booms, but if you call that deflation, you’ll miss what’s really deflation when it arrives.

Deflation is always bad. It either occurs when money/credit is so short that people can not get their hands on it no matter how hard and productive they work, and how much demand there is for their products, or it occurs when people are too poor, too much in debt or too reluctant to part with what they have.

In a deflation, people spend only what they absolutely must, provided even that they can afford to, which leads to large swaths of an economy being liquidated. Falling prices lead to falling wages lead to ever further falling prices lead to factory closings lead to more people who can’t afford to spend which leads to closings which leads to less spending which leads to faling prices etc. This continues until the debt has been deleveraged. Governments will lose tax revenue and raise taxes, but soon enough they will in quick succession disband and be replaced, rinse and repeat until even essential services can no longer be provided.

Until recently, a shrinking money/credit supply was very clearly not in the cards. Central banks have gone absolutely nuts in their stimulus plans, and this has artificially kept price levels up somewhat, though far less than they, and scores of ‘experts’ had hoped and expected. Now that game, too, is up. Japan went crazier than ever the other day out of fear that falling oil prices would sink consumer spending even more, but the US Fed has cut QE. That is an admission it has failed to do what it officially was supposed to, not the sign of triumph it’s made out to be, as in ‘the economy is doing so well, it doesn’t need our support anymore’.

Central banks have spent like maniacs, and consumer spending only keeps falling. Just ask Japan. And while you’re at it, ask them how entrenched deflation can become even in an economy that still has the benefit of growing world market to sell its products in. We won’t have any such benefit. The world has stopped growing, and there’s no massaging of numbers left strong enough to hide it. Not that it won’t be tried. As I said earlier this week, we now live in a world built on debt and propaganda.

Since QE and other ‘plans’ never reached the real economy, most nations’ money supplies have also either fallen or at best remained stagnant. We have the perfect set-up for deflation, and we therefore have deflation. It hasn’t reached the US yet, though we should be careful with that because the numbers being reported are notoriously flaky. But it has reached Europe and Asia. Which means the US is only a matter of time. And people, reluctantly, start taking notice. Steve Hochberg and Pete Kendall penned the following for Bob Prechter’s Elliott Wave:

Deflation Rearing its Ugly Head in Subtle and Not-So-Subtle Ways Around the Globe

According to the latest figures, deflation is now perched on China’s doorstep. In September, China’s consumer price index was up 1.6%, but its producer price index fell 1.8%. The CPI increase was its lowest since 2010. [..] in September, demand for electric power, a “bellwether for China economic activity,” fell 8.4% from the prior month, the second straight monthly decline.

“Deflation is the real risk in China,” stated the chief economist at a Hong Kong bank. In Europe, deflation is no longer a possible risk; it’s reality. In September, eleven of fifteen European Union members experienced lower goods prices, and the latest quarter-over-quarter Eurozone growth in real GDP is zero.

With Alice-in-Wonderland naiveté, U.S. financial media place the United States outside the risk of global deflation. Headlines talk of “Mild Inflation” and insist that the U.S. will gain “From Good Deflation.” On October 14, Bloomberg reported that consumer spending is strong enough “to steer the U.S. economy safely through the shoals of deteriorating global growth and the turbulent financial markets.” In early September, we stated that it was only a matter of time before economic weakness and deflation (which will be anything but good) jump the Atlantic and Pacific oceans and arrive in the U.S.

According to the U.S. Labor Department, real wages for full-time employees averaged $790 a week in the third quarter, about $1 less than in the third quarter of 2007. “There’s been no net gain for workers since 1999.” In recent months, spending has been uneven. Retail sales fell 0.3% in September. Most economists are baffled: “one of the great mysteries is why the U.S. has lacked inflation despite all the money being pumped into the economy.” A study by the St. Louis Fed finds that the answer is “a dramatic increase in the private sector’s willingness to hoard money instead of spend it.”

Note: the ‘hoarding meme’ is habitually used by economists, re: Bernanke and his Chinese savings glut, to point out situations which are more often than not characterized by people being too poor to spend, not sitting on anything at all. For economists, if people don’t spend, it must be because they save, never because they’re poor. I kid you not.

For years now, the Fed along with most economists have anticipated the imminent return of inflation, but it continues stubbornly subdued. This long-term chart above of the CPI shows a succession of lower highs since the early 1980s, as inflation turned into disinflation, which is on the cusp of leading to outright deflation. Some argue that the CPI is rigged to show milder levels of inflation, but the bottom graph shows the same steady move toward the zero line in the Personal Consumption Expenditures Index, an alternate inflation measure favored by the U.S. Fed.

When outright deflation hits, recognition of it will play an important role. Once its presence becomes widely observed, investors and the debt markets will belatedly take defensive action. Eventually, notes Conquer the Crash, “default and fear of default exacerbate the trend as it causes creditors to reduce lending. A downward ‘spiral’ begins feeding on pessimism just as the previous boom fed on optimism.”

Moving from theory to practice, we end up with our old friend Ambrose. Though he confuses inflation and consumer prices, and thinks they’re one and the same thing, he does have useful numbers:

Spreading Deflation Across East Asia Threatens Fresh Debt Crisis

Deflation is becoming lodged in all the economic strongholds of East Asia. It is happening faster and going deeper than almost anybody expected just months ago, and is likely to find its way to Europe through currency warfare in short order. Factory gate prices are falling in China, Korea, Thailand, the Philippines, Taiwan and Singapore. Some 82% of the items in the producer price basket are deflating in China. The figures is 90% in Thailand, and 97% in Singapore.

These include machinery, telecommunications, and electrical equipment, as well as commodities. Chetan Ahya from Morgan Stanley says deflationary forces are “getting entrenched” across much of Asia. This risks a “rapid worsening of the debt dynamic” for a string of countries that allowed their debt ratios to reach record highs during the era of Fed largesse. Debt levels for the region as a whole (ex-Japan) have jumped from 147% to 207% of GDP in six years.

These countries face a Sisyphean Task. They are trying to deleverage, but the slowdown in nominal GDP caused by falling inflation is always one step ahead of them. “Debt to GDP has risen despite these efforts,” he said. If this sounds familiar, it should be. It is exactly what is happening in Italy, France, the Netherlands, and much of the eurozone. Data from Nomura show that the composite PPI index for the whole of emerging Asia – including India – turned negative in September.

China itself is now one shock away from a deflation trap. Chinese PPI has been negative for 32 months as the economy grapples with overcapacity in everything from steel, cement, glass, chemicals, and shipbuilding, to solar panels. It dropped to minus 2.2% in October. The sheer scale of over-investment is epic.

The country funnelled $5 trillion into new plant and fixed capital last year – as much as Europe and the US combined – even after the Communist Party vowed to clear away excess capacity in its Third Plenum reforms. Old habits die hard. Consumer prices are starting to track factory prices with a long delay. Headline inflation dropped to 1.6% in October. This is so far below the 3.5% target of the People’s Bank of China that it looks increasingly like a policy mistake. Core inflation is down to 1.4%.

China has flirted with deflation before: during its banking crisis in the late 1990s, and again during the West’s dotcom recession from 2001-2002. Both episodes proved manageable. This time the level of debt is greater by orders of magnitude, with a large chunk in trusts, wealth products, and other parts of the shadow banking nexus, and a further $1.2 trillion in “carry trade” loans from Hong Kong.

Standard Chartered thinks total debt has reached 250% of GDP. This is roughly $26 trillion, the same size as the US and Japanese commercial banking systems put together, and therefore a headache for us all. Larry Brainard from Trusted Sources says China is sliding towards a European debt-compound trap. “It’s arithmetic.Deflation will kill you if you’re leveraged. It is just a question of how quickly. We don’t know how big the problem is because China is playing a game of three-card Monte and moving the debt to different buckets,” he said.

Asia is not yet in a full-blown currency war, but no country can stand idly by as neighbours dump toxic deflationary waste on their front lawn. Korea has threatened to force down the won, pari passu with the yen. The central bank of Taiwan has been intervening. These skirmishes are happening in a region of festering grievances and territorial disputes, with no Nato-style security structure – or for that matter EU-style soft governance – to damp down fires.

[Chinese] purchases of foreign bonds have dropped to zero, down from $35bn a month at the start of the year. The yuan has appreciated 22% against the yen since June, and 50% since mid-2012. It is up 12% against the euro since the early summer. China is in effect strapped to the rocketing dollar through its quasi-peg, increasingly a torture machine.

George Magnus from UBS says this cannot continue. “What is happening in the property market is the tip of the iceberg for the whole economy. China will have to resort to monetary reflation over the winter, and I think this will include a lower yuan. We are heading into a currency war,” he said.

We have the debt. And we recognize it. Still, the line politics and media feed us is that more debt can be a good thing, that we need more debt in order to attain what they like to call ‘escape velocity’ from the financial crisis caused by that same debt. Oil on fire.

We have the propaganda. We don’t always recognize it for what it is, but the, that’s the idea, isn’t it? It’s to make people think that things are not really what they really are. That we need to spend more public funds on saving banks, not saving people, or else armageddon. There’s hardly a news story left today that is not to an extent phrased by propaganda.

And now we have deflation. Which is not the falling prices, though they are a – delayed – symptom. Still, other symptoms are as valid, as nobody is spending. Mass unemployment in southern Europe is a symptom. West Texas oil at $74 dollars today is one. The Chinese economy, allegedly still growing at $7.5%, but at 250% debt-to-GDP, is another. Throw in 207% debt-to-GDP debt levels across southeast Asia.

With deflation becoming a daily topic in our propagandistic media, despite the fact that governments and central banks are vehemently allergic to it (for good reasons), rest assured that we are entering a next phase of the crisis. Just not one that they would like you to think we are. When debt starts being deleveraged for real, deflation cannot be avoided. And debt must be deleveraged, we can’t sit on it till Kingdom Come and keep adding more while we’re at it. That was never in the cards. And we’ve accumulated too much of it to ever outgrow it. We simply can’t sell or make enough iPhones to accomplish that. Or eat enough burgers, hard as we try.

Our world, our life, has been built on debt and propaganda for many years. They have kept us from noticing how poorly we are doing. But now a third element has entered the foundation of our societies, and it’s set to eat away at everything that has – barely – kept the entire edifice from crumbling apart. Deflation.

It’s time to check where your basic needs will come from when it becomes first harder and them impossible to obtain them from the sources you have been used to. And please, get out of debt. Debt during deflation is a cruel and unforgiving mistress. Think of deflation as a biblical plague.