Aug 142018
 
 August 14, 2018  Posted by at 7:37 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Vincent’s House in Arles (The Yellow House) 1888

 

Turkey Will Be The Largest EM Default Of All Time (Russell Napier)
‘What Happens In Turkey Won’t Stay In Turkey’ (CNBC)
Italy Expects Financial Market Attack In August (R.)
The Price of Cheap Dollar/Euro Debts: Local Currencies Come Unglued (WS)
Indian Rupee Drops To All-Time Low Against Dollar Over Turkish Crisis (Ind.)
Close Up and Long Shot (Kunstler)
Musk: “I Am Working With Silver Lake, Goldman On Taking Tesla Private” (ZH)
The Law As Weapon (Paul Craig Roberts)
Russia-Gate One Year After VIPS Showed a Leak, Not a Hack (CN)
Greek Fishermen Accuse Turkish Boats of Opening Fire off Leros Island (GR)
Turkish FM Accuses Greece Of Escalating Tensions In Aegean (K.)
Palm Oil A New Threat To Africa’s Primates (BBC)
Scotland’s Mountain Hare Population Is At Just 1% Of 1950s Level (G.)

 

 

Napier thinks Turkey will default on $500 billion in debt by imposing capital controls.

Turkey Will Be The Largest EM Default Of All Time (Russell Napier)

Regular readers of the Fortnightly will know that The Solid Ground has long forecast a major debt default in Turkey. More specifically, the forecast remains that the country will impose capital controls enforcing a near total loss of US$500bn of credit assets held by the global financial system. That is a large financial hole in a still highly leveraged system. That scale of loss will surpass the scale of loss suffered by the creditors of Bear Stearns and while Lehman’s did have liabilities of US$619bn, it has paid more than US$100bn to its unsecured creditors alone since its bankruptcy. It is the nature of EM lending that there is little in the way of liquid assets to realize; they are predominantly denominated in a currency different from the liability, and also title has to be pursued through the local legal system.

Turkey will almost certainly be the largest EM default of all time, should it resort to capital controls as your analyst expects, but it could also be the largest bankruptcy of all time given the difficulty of its creditors in recovering any assets. So the events of last Friday represent only the end of the beginning for Turkey. The true nature of the scale of its default and the global impacts of that default are very much still to come. Strong form capital controls produce a de facto debt moratorium, and very rapidly investors realize just how little their credit assets are worth. A de jure debt moratorium at the outbreak of The Great War in 1914 bankrupted almost the entire European banking system – it was saved by mass government intervention.

While the imposition of capital controls in recent years has hit selected investors hard, in Iceland, Cyprus, Greece and key emerging markets, there has been nothing of this size and it is to be fully borne by financial institutions who believe they hold not just valuable credit assets but actually liquid credit assets! The loss of hundreds of billions of assets recently considered liquid by global financial institutions, through the de facto debt moratorium of capital controls, will be a huge shock to the global financial system.

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Turkey=corporate debt. How do you bail that out?

‘What Happens In Turkey Won’t Stay In Turkey’ (CNBC)

The markets have seen much of this movie before: a heavily indebted country finds itself in crisis, the currency plunges and talk quickly turns to contagion and, ultimately, an expensive globally financed bailout. In Turkey’s case, the plot line is a little different, however. Where the other debt crises generally involved government borrowing, Turkey’s is mostly a corporate story, making the bailout mechanics more complicated and thus raising fears that what started in a small country with only marginal systemic importance on its face could quickly escalate. “How can a country where the entire market cap of Turkish equities traded on the Istanbul Stock exchange is less than the market cap of Netflix wreak such havoc? It is all about the direct and indirect impacts,” wrote Katie Nixon, chief investment officer for wealth management at Northern Trust.

“There are certain emerging market countries with relatively weak currencies and a heavy reliance on external (predominately dollar based) financing. The fear is that what happens in Turkey won’t stay in Turkey.” Nixon said that while the crisis does not appear to have major global implications, a strong U.S. dollar coupled with weakening emerging market currencies could fuel the problem. To date, the debt emergencies in Greece, Cyprus, Italy and other euro zone countries — not to mention Argentina, Malaysia and perhaps Pakistan before long — have had limited global spillovers. Several required bailout loans from the IMF, an organization that gets 17.5 percent of its funding from the U.S.

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Low market volumes in summer make an attack easier to execute.

Italy Expects Financial Market Attack In August (R.)

Speculators will probably attack Italian financial markets this month but the country has the resources to defend itself, a senior and highly influential government official said in a newspaper interview on Sunday. Giancarlo Giorgetti, undersecretary in the prime minister’s office and a leading light in the far-right League party, said thin summer trading volumes helped fuel market assaults. “I expect an attack (in August),” Giorgetti told Libero. “The markets are populated by hungry speculative funds that choose their prey and pounce … In the summer the market volumes are small, you can lay the groundwork for aggressive initiatives against countries. Look at Turkey.”

Turkish markets slumped last week on growing concerns over the country’s economy and political leadership. Italian assets have also come under strain in recent weeks, with investors concerned that the governing coalition, made up of the League and the anti-establishment 5-Star Movement, might tear up EU fiscal rules to pay for big-spending budget plans. “If the (market) storm comes, we will open our umbrella. Italy is a big country and has the resources to react, thanks in part to its large amount of private savings,” said Giorgetti, who is seen as a moderating force within the League. Quoting a report by bankers’ federation Fabi, Italian newspapers said on Sunday household savings in Italy totaled some 4.4 trillion euros against 2.2 trillion in 1998.

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The reason for all the trouble? Cheap central bank credit.

The Price of Cheap Dollar/Euro Debts: Local Currencies Come Unglued (WS)

Turkey has its own sets of problems and isn’t even seriously trying to prop up its currency. Now global bondholders are clamoring for the IMF to step in and calm the waters around the currency crisis in Turkey that has turned into a debt crisis that is now dragging some European banks through the dirt. Those global bondholders want the IMF to lend Turkey money to bail out Turkey’s bondholders to put an end to the turmoil and torture in emerging markets bonds that were so hot just eight months ago. In return for an IMF bailout of its bondholders, Turkey would have to follow the IMF’s program, slash its expenses, including social expenses, and curtail its crazy borrowing binge. But no go.

Instead of trying to address the problem, or beg the IMF for a bailout, the Turkish government has heaped scorn on the West. In return, the Turkish lira plunged another 8% against the dollar on Monday, to 7.04 lira to the dollar. Seen the other way around, as the chart below shows, the value of 1 lira has now dropped to 14.4 US cents, from 25 cents just four months ago, which, if nothing else, tells people to go figure out how to invest in gold and silver. Monday’s drop brings the grand collapse over the past three days to 24%, and over the past four months to 43%.

After nine years of experimental monetary policies in the US, Europe, Japan, and elsewhere, the Emerging Market economies have become addicted to this debt borrowed in a hard currency that they cannot inflate away. In Turkey, this cheap debt – cheap even for junk-rated issuers such as the government of Turkey – funded a construction boom in the property sector. This construction boom has been crucial to the economy – which is why the government is trying to ride this bull all the way. Turkey’s inflation is surging. In July, annual inflation reached 16%, the highest since January 2004. Inflation is what ultimately destroys a currency. But it’s not yet 30% as in Argentina, and perhaps the government thinks it still has some leeway.

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Are you calling New Zealand an emerging market?

Indian Rupee Drops To All-Time Low Against Dollar Over Turkish Crisis (Ind.)

The Indian currency has dropped to an all-time low against the dollar, while the New Zealand dollar has slumped to two-year lows as emerging markets feel the effects of the crisis in Turkey. Investors have instead moved towards safe haven currencies such as the yen, which surged to a six-week high, and the Swiss franc, which jumped close to a one-year high against the euro. The Indian central bank reportedly intervened to prevent a sharp drop in the rupee’s value, however, it did little to stem the decline, and the currency fell to 69.62 rupees per dollar. The New Zealand dollar has also felt the effects of the Turkish crisis, dropping below $0.66 for the first time in two years over the weekend. Meanwhile, the euro fell against the dollar to $1.14, as investors try to work out how badly European banks might be affected by the problems in Turkey, with the Spanish, French, and Italian in particular all hugely exposed to Turkish debt.

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“President Trump’s tariff monkeyshines are shoving the Chinese banking system up against a wall of utterly irresolvable insolvency problems..”

Close Up and Long Shot (Kunstler)

Who cares about the currency of a second-rate player in the global economy? A lot of SIFIs (“systemically important financial institutions”) otherwise known as Too-Big-To-Fail banks. That’s who. Deutsche Bank’s stock dropped over 6 percent when the Turkish Lira tanked on Friday. Turkey’s nickname since the collapse of the Ottoman Empire in the 1920s has been “the sick man of Europe” and Deutsche Bank in the post-2008-crash era is widely regarded as the sick man of SIFI banks. One analyst wag downgraded its status a year ago to “dead bank walking.” Its balance sheet was a Cave of Winds littered with the moldering skeletons of malinvestment.

If the European Central Bank (aka Germany) has to bail out DB, all bets are off for the Euro, which was showing serious signs of distress Friday. And who is going to bail out Turkey? If the IMF is your go-to vehicle, then you mean US taxpayers. Anyway, Turkey’s Lira is only one of several Emerging Market currencies whose hands have been called at the global poker table, where the four-flushers are getting flushed out. The Russian ruble was another one, ostensibly to the delight of America’s Destroy-Russia-at-All-Costs faction. China is also having to play a round of super Three Card Monte with its currency, the yuan.

President Trump’s tariff monkeyshines are shoving the Chinese banking system up against a wall of utterly irresolvable insolvency problems and threatening the stability of Xi Jinping’s one-party government. The Chinese export trade is at the heart of the world’s current economic arrangements. If you pull it out of the globalism machine, the machine will stop. It is going to stop one way or another anyway, but the gathering crisis of autumn 2018 will hasten that. All of this is happening because the whole world can’t handle the debts it has racked up, and the whole world knows it. And knowing it, they also know that their debt-based currencies are worthless. And knowing that, they also know that absolutely everybody else is broke and unable to meet their obligations. That is some dangerous knowledge.

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Will Musk get away with not following the rules?

Musk: “I Am Working With Silver Lake, Goldman On Taking Tesla Private” (ZH)

Update 2: And here things get bizarre because according to Reuters, Silver Lake is not currently discussing participating as an investor in Elon Musk’s proposed take-private deal for Tesla, citing an unidentified person. Reuters also adds that Silver Lake is offering assistance to Musk without compensation and hasn’t been hired as financial adviser in an official capacity.

Update: in a tweet sent out on Monday evening, Musk said the he was working with Silver Lake and Goldman Sachs as financial advisors, as well as Wachtell Lipton as legal advisors, on his “proposal” to take Tesla private.

It was not immediately clear why Silver Lake, an investor, is serving as a financial advisor, nor was it clear why Musk defined the “going private” transaction as merely a proposal when he previously classified it as a firm deal, with “secured funding.” The tweet followed a blog post by Musk in which he finally offered more details on his tweet that he had “funding secured” to take Tesla Inc. private, however as Bloomberg echoed our skepticism from earlier (see below) , “it’s unlikely to get U.S. regulators off his back.” Musk’s elaboration doesn’t wash away the investor confusion he triggered a week ago by failing to provide evidence that he had financing. Without more information, investors were left guessing at how far along negotiations on a bid had progressed.

Musk’s fresh disclosure might even help the Securities and Exchange Commission show that his initial tweet was misleading, lawyers said. Bloomberg quoted Keith Higgins, a Ropes & Gray lawyer who said that “a cautious lawyer would have said you shouldn’t have said ‘funding secured’ unless you had a commitment letter,” which Musk clearly did not have, and certainly not from the Saudi Wealth Fund which as Musk admitted, needed to do more due diligence and analysis and had yet to conduct an “internal review process for obtaining approvals.” John Coffee, director of the Center on Corporate Governance at Columbia Law School, agreed. He said Monday’s post indicates Musk was being overly bullish last week, potentially increasing his vulnerability in any SEC investigation. “He clearly had not secured funding at the time of his tweet – he concedes that obliquely,” Coffee said.

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How Mueller arrived at Manafort.

The Law As Weapon (Paul Craig Roberts)

Robert Mueller is supposed to be investigating Russiagate, which has been shown to be a hoax concocted by former CIA director John Brennan, former FBI director James Comey, and current deputy Attorney General Rod Rosenstein. As Russiagate is a hoax, Mueller has not been able to produce a shred of evidence of the alleged Trump/Putin plot to hack Hillary’s emails and influence the last presidential election. With his investigation unable to produce any evidence of the alleged Russiagate, Mueller concluded that he had to direct attention away from the failed hoax by bringing some sort of case against someone, knowing that the incompetent and corrupt US media and insouciant public would assume that the case had something to do with Russiagate.

Mueller chose Paul Manafort as a target, hoping that faced with fighting false charges, Manafort would make a deal and make up some lies about Trump and Putin in exchange for the case against him being dropped. But Manafort stood his ground, forcing Mueller to go forward with a false case. Manafort’s career is involved with Republican political campaigns. He is charged with such crimes as paying for NY Yankee baseball tickets with offshore funds not declared to tax authorities and with attempting to get bank loans on the basis of misrepresentation of his financial condition. In the prosecutors’ case, Manafort doesn’t have to have succeeded in getting a loan based on financial misrepresentation, only to be guilty of trying.

Two of the people testifying against him have been paid off with dropped charges. Mueller’s investigation is restricted to Russiagate. In other words, Mueller has no mandate to investigate or bring charges unrelated to Russiagate. In my opinion, Muller gets away with this only because the deputy Attorney General is in on the Russiagate plot against Trump. Mueller and Rosenstein know that they can count on the presstitutes to continue to deceive the public by presenting the Manafort trial as part of Russiagate.

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But people like Mueller still claim a hack, because otherwise they can’t involve Russia.

Russia-Gate One Year After VIPS Showed a Leak, Not a Hack (CN)

A year has passed since highly credentialed intelligence professionals produced the first hard evidence that allegations of mail theft and other crimes attributed to Russia rested on purposeful falsification and subterfuge. The initial reaction to these revelations—a firestorm of frantic denial—augured ill, and the time since has fulfilled one’s worst expectations. One year later we live within an institutionalized proscription of proven reality. Our discourse consists of a series of fence posts and taboos. By any detached measure, this lands us in deep, serious trouble. The sprawl of what we call “Russia-gate” now brings our republic and its institutions to a moment of great peril—the gravest since the McCarthy years and possibly since the Civil War. No, I do not consider this hyperbole.

Much has happened since Veteran Intelligence Professionals for Sanity published its report on intrusions into the Democratic Party’s mail servers on Consortium News on July 24 last year. Parts of the intelligence apparatus—by no means all or even most of it—have issued official “assessments” of Russian culpability. Media have produced countless multi-part “investigations,” “special reports,” and what-have-yous that amount to an orgy of faulty syllogisms. Robert Mueller’s special investigation has issued two sets of indictments that, on scrutiny, prove as wanting in evidence as the notoriously flimsy intelligence “assessment” of January 6, 2017. Indictments are not evidence and do not need to contain evidence. That is supposed to come out at trial, which is very unlikely to ever happen.

Nevertheless, the corporate media has treated the indictments as convictions. Numerous sets of sanctions against Russia, individual Russians, and Russian entities have been imposed on the basis of this great conjuring of assumption and presumption. The latest came last week, when the Trump administration announced measures in response to the alleged attempt to murder Sergei and Yulia Skripal, a former double agent and his daughter, in England last March. No evidence proving responsibility in the Skripal case has yet been produced. This amounts to our new standard. It prompted a reader with whom I am in regular contact to ask, “How far will we allow our government to escalate against others without proof of anything?” This is a very good question.

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I hinted at this in my article Sunday. Many Greek islands are off the Turkish coast, as per the 1923 Lausanne Treaty. If Erdogan wants to push nationalism -and he does-, this may be his best bet. In essence, the Treaty finally ended the Ottoman Empire, and a lot more territory was lost, but this part is what Turks will be receptive to. One other piece on the Treaty: Turkey ceded all claims to Cyprus. We know how that fared.

Greek Fishermen Accuse Turkish Boats of Opening Fire off Leros Island (GR)

Greek fishermen have reported that they were fired upon by Turkish fishing boats near Kalapodi islet, 300 meters off the coast of Leros island. Two Greek seamen, owners of fishing boats, spoke to Alpha television saying that the Turkish boats were inside Greece’s territorial waters on Sunday when their crews shot at them. They also said that, since July, Turkish fishing boats have repeatedly intruded upon Greek waters to fish in the area. The Greek fishermen said that usually they call the coast guard upon seeing the Turkish boats; the intruders are forced to exit Greek waters upon the arrival of coast guard ships. This time, however, Leros fisherman Kostas Tsiftis told Alpha, the crew of the Turkish boat fired gunshots at them. He also said that the gunfire was from an automatic weapon because some of the shots were repeated.

The Greek fishermen were forced to leave the area and called the Hellenic Coast Guard. Upon the arrival of two coast guard patrol vessels, the Turkish fishing boats moved towards international waters. The fishermen noted that even though they are used to provocative acts by Turkish fishermen, Sunday’s incident was unprecedented. “We heard six shots. The two of them, the third and the fourth, were repeated. The gun was neither a hunting rifle, nor a revolver,” said Lefteris Giannoukas, who was in one of the Greek boats. “The Turkish fishermen were about 200 meters away. This is the first time that the Turks shot at us. Of course we were afraid, we did not expect it,” Tsiftis said. The Greek fisherman noted that this is the first time the Turkish boats came this close.

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And there you go. For domestic consumption.

Turkish FM Accuses Greece Of Escalating Tensions In Aegean (K.)

Greece is responsible for escalating tension in Aegean and Mediterranean, even though Turkey has always stood by Greeks in their times of difficulty, Turkey’s foreign minister has told his country’s ambassadors. “In their difficult days, we are always at their side. But in the Aegean and the Mediterranean, they are again increasing tension. They do bizarre things, which are not acceptable. Don’t we all want the eastern Mediterranean to become a region of peace and prosperity?” Mevlut Cavusoglu told the 10th conference of Turkish ambassadors. He also called for a new process to resolve the Cyprus issue, blaming the Republic of Cyprus for the impasse. “In order to reach a solution in Cyprus, a new process must be launched. Greek Cypriots do not want to cooperate. And this we saw last year. We saw it in Geneva, we saw it in Crans-Montana,” Tsavousoglou said. And “Greece is no different,” he alleged.

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It’s devastated Borneo. Now it’s coming for Africa. Next up Amazon?

Palm Oil A New Threat To Africa’s Primates (BBC)

Endangered monkeys and apes will almost certainly face new risks if Africa becomes a big player in the palm oil industry. That is the message of a study looking at how large-scale expansion of the oil crop in Africa might affect the continent’s rich diversity of wildlife. Most areas suitable for growing palm oil are key habitats for primates, according to researchers. They say consumers can help by choosing sustainably-grown palm oil. Ultimately, this may mean paying more for food, cosmetics and cleaning products that contain the oil, or limiting their use. “If we are concerned about the environment, we have to pay for it,” said Serge Wich, professor of primate biology at Liverpool John Moores University, and leader of the study. “In the products that we buy, the cost to the environment has to be incorporated.”

[..] Many companies growing palm oil are looking to expand into Africa. This is a worry for conservationists, as potential plantation sites are in areas of rich biodiversity. They are particularly worried about Africa’s primates. Nearly 200 primate species are found in Africa, many of which are already under threat. Habitat destruction is one of the main reasons why all great apes are at the edge of extinction. The introduction of palm oil plantations to Africa is expected to accelerate the habitat loss. [..] The study found that while oil palm cultivation represents an important source of income for many tropical countries, there are few opportunities for compromise by growing palm oil in areas that are of low importance for primate conservation.

“We found that such areas of compromise are very rare throughout the continent (0.13 million hectares), and that large-scale expansion of oil palm cultivation in Africa will have unavoidable, negative effects on primates,” said the research team. To put that figure into context, 53 million hectares of land will be needed by 2050 to grow palm oil in order to meet global demand.

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An entire article without naming any numbers, only percentages. How many mountain hares are there in Scotland? 2, 20, 2 million?

Scotland’s Mountain Hare Population Is At Just 1% Of 1950s Level (G.)

The number of mountain hares on moorlands in the eastern Scottish Highlands has fallen to less than 1% of the level recorded more than 60 years ago, according to a long-term study. The Centre for Ecology & Hydrology and the RSPB teamed up to study counts of the animals over several decades on moorland managed for red grouse shooting and nearby mountain land. From 1954 to 1999, the mountain hare population on moorland sites decreased by almost 5% every year, the study found, saying the long-term decline was likely to be due to land use changes such as the loss of grouse moors to conifer forests. However, from 1999 to 2017 the scale of the “severe” moorland declines increased to over 30% every year, leading to counts last year of less than 1% of original levels in 1954, researchers said.

On higher, alpine sites, numbers of mountain hares fluctuated, but increased overall until 2007, and then declined, although not to the lows seen on the moorland sites, the study noted. The report stated: “The study found long-term declines in mountain hare densities on moorland, but not alpine, sites in the core area of UK mountain hare distribution in the eastern Highlands of Scotland. “These moorland declines were faster after 1999 at a time when hare culling by grouse moor managers with the specific aim of tick and LIV [Louping ill virus, which is spread by ticks] control has become more frequent.” Gamekeepers and estate managers claim culls limit the spread of ticks, protect trees and safeguard fragile environments, and a policy of voluntary restraint is in place. However, campaigners believe the practice is cruel and unnecessary.

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Jan 192017
 
 January 19, 2017  Posted by at 11:27 am Finance Tagged with: , , , , , , , , ,  


Photograph: Palani Mohan/Getty Images

Anxious European Leaders Seek An Early Audience With Trump, Before Putin (AP)
Hands off EU, Trump; We Don’t Back Ohio Secession: Juncker (R.)
Jamie Dimon Says Eurozone May Not Survive (BBG)
In Europe We See Only One Loser From Brexit – And It Won’t Be Us (Quatremer)
Marine Le Pen Centers Presidential Run on Getting France Out of Eurozone (WSJ)
By Ripping NATO, Trump Makes Europe Nervous and Arms Trade Happy (BBG)
Steve Keen Exposes Next Global Economic Shockwaves (FinFeed)
How Deutsche Bank Made €367 Million Disappear at Monte dei Paschi (BBG)
Earth Breaks Heat Record In 2016 For Third Year In A Row (AFP)
‘A Cat In Hell’s Chance’ (Simms)
Over Half of World’s Wild Primate Species Face Extinction (G.)
If you were an elephant … (Foster)

 

 

I’m sorry, I’m trying, but I just can’t NOT find this funny. My article earlier today: He’s Just Not That Into You.

Anxious European Leaders Seek An Early Audience With Trump, Before Putin (AP)

European leaders, anxious over Donald Trump’s unpredictability and kind words for the Kremlin, are scrambling to get face time with the new American president before he can meet with Russian President Vladimir Putin, whose provocations have set the continent on edge. One leader has raised with Trump the prospect of a U.S.-EU summit early this year, and the head of NATO — the powerful military alliance Trump has deemed “obsolete” – is angling for an in-person meeting ahead of Putin as well. British Prime Minister Theresa May is working to arrange a meeting in Washington soon after Friday’s inauguration. For European leaders, a meeting with a new American president is always a sought-after – and usually easy-to-obtain – invitation.

But Trump has repeatedly defied precedent, making them deeply uncertain about their standing once he takes office. Throughout his campaign and in recent interviews, Trump has challenged the viability of the EU and NATO, while praising Putin and staking out positions more in line with Moscow than Brussels. “There are efforts on the side of the Europeans to arrange a meeting with Trump as quickly as possible,” Norbert Roettgen, the head of the German Parliament’s foreign committee and a member of Chancellor Angela Merkel’s party, told AP. In fact, eager to stage an early show of Trans-Atlantic solidarity, Donald Tusk – the former Polish prime minister who heads the EU’s Council of member state governments – invited Trump to meet with the EU early in his administration, according to a EU official.

But a senior Trump adviser essentially rebuffed the offer, telling the AP this week that such a gathering would not be a priority for the incoming president, who wants to focus on meetings with individual countries, not the 28-nation bloc. Trump backs Britain’s exit from the EU, casting the populist, anti-establishment movement as a precursor to his own victory. In a recent joint interview with two European newspapers, Trump said of the EU, “I don’t think it matters much for the United States.” Such rhetoric alone was enough to set off alarm bells in Europe. And Trump’s praise for Putin and promise of closer ties to Moscow have deepened the uncertainty.

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“..he was sure no EU state wanted to follow Britain’s example and leave the bloc..”

Hands off EU, Trump; We Don’t Back Ohio Secession: Juncker (R.)

Donald Trump should lay off talking about the break-up of the European Union, the bloc’s chief executive said on Wednesday, pointing out that Europeans do not push for Ohio to secede from the United States. In pointed remarks on the eve of Trump’s inauguration as U.S. president, Jean-Claude Juncker said the new administration would realize it should not damage transatlantic relations but added it remained unclear what policies Trump would now pursue. Juncker told Germany’s BR television, according to a transcript from the Munich station, that he was sure no EU state wanted to follow Britain’s example and leave the bloc, despite Trump’s forecast this week that others would quit:

“Mr. Trump should also not be indirectly encouraging them to do that,” Juncker said. “We don’t go around calling on Ohio to pull out of the United States.” Juncker, the president of the European Commission, said he had yet to speak to Trump — contrary to what the President-elect said earlier this week. Juncker said Trump had confused him with European Council President Donald Tusk. “Trump spoke to Mr. Tusk and mixed us up,” said Juncker, taking a jab at the American billionaire’s grasp of his new role. “That’s the thing about international politics,” he said. “It’s all in the detail.”

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If even Jamie Dimon can understand it…

Jamie Dimon Says Eurozone May Not Survive (BBG)

The euro region could break up if political leaders don’t get to grips with the discontent that’s spurring support for populist leaders across the continent, JPMorgan Chase CEO Jamie Dimon said. Dimon said he had hoped European Union leaders would examine what caused the U.K. to vote to leave and then make changes. That hasn’t happened, and if nationalist politicians including France’s Marine Le Pen rise to power in elections across the region “the euro zone may not survive,” Dimon, 60, said in a Bloomberg Television interview with John Micklethwait. “What went wrong is going wrong for everybody, not just going wrong for Britain, but in some ways it looks like they’re kind of doubling down,” Dimon said in the interview Wednesday at the annual meeting of the World Economic Forum in Davos.

Unless leaders address underlying concerns, “you’re going to have the same political things about immigration, the laws of the country, how much power goes to Brussels.” Dimon’s remarks on Europe were unusually pessimistic, coming in a wide-ranging interview in which he also criticized regulations that he said stunt economic growth. But he reiterated optimism for President-elect Donald Trump. Minutes later, Goldman Sachs CEO Lloyd Blankfein also expressed concern about Europe, telling CNBC that leaders are facing a backlash in the midst of a long, complicated process to create an economic bloc. “That’s complicated, that’s very hard to do,” said Blankfein. “It’s not done, and it’s not accomplished. We’re finding the pain of that.” [..] The bottom line is that Europe must become more competitive, Dimon said. “I say this out of respect for the European people, but they’re going to have to change,” he said. “They may be forced by politics, they may be forced by new leadership.”

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Journalist Jean Quatremer is Mr. Europe. He’s been called an ‘ayatollah of European federalism’.

In Europe We See Only One Loser From Brexit – And It Won’t Be Us (Quatremer)

When someone wants the impossible, in French we say that they want “the butter, the money from the butter, and the dairymaid’s smile”. In more vulgar usage we say they want something rather more from the dairymaid than a smile. This is precisely what we can take away from Theresa May’s speech on the “hard Brexit” she wants. It is “hard” only for the other 27 states but “soft” for Britain – because May wants to keep all the benefits of EU membership and concede nothing in return. That is not really a surprise since she had already announced it in October during the Conservative party conference. She even considers that any other kind of agreement would be unacceptable, because it would amount to “punishing” the British.

May is threatening to turn Britain into a tax haven by way of retaliation, if, by some misfortune, the Europeans refuse to bend to the demands of Her Glorious Majesty’s subjects. We might think we are dreaming, but no: it is either arrogance or recklessness (or, more likely, a mixture of the two). Let’s sum up: on the one hand, of course, May would like a clear, “clean break” with the union, which means no longer sitting in its institutions, contributing to the budget or respecting EU law. On the other hand, she does not want the status of some kind of “partial or associate” member, which would imply having to meet EU’s requirements in all kinds of areas.

Thus far, we get it: the UK will be treated like any other third country – Zimbabwe, for instance. That’s clear and “clean”. But after that it gets complicated, at least for a continental mind that lacks the subtleties of reflection of a product of Oxbridge. Because May considers it possible for British companies to retain the greatest possible access to the single market, in particular to negotiate sectoral customs agreements with the union. And that’s where things get interesting. Because customs duty or no, importing goods into a market presupposes compliance with local norms and standards: to be clear, if the British want to export their cars (which are in fact German or Japanese cars) to the continent, they need to respect European laws. That means submitting (I know, what an awful word) to those laws. So in reality, the clear, “clean break” could only concern one part of UK industry – the part that manufactures for the local market.

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Le Pen is smartening up. She’s a true contender now.

Marine Le Pen Centers Presidential Run on Getting France Out of Eurozone (WSJ)

National Front leader Marine Le Pen is seeking to turn May’s presidential election into a referendum on the European Union by detailing a strategy to pull France from the bloc and its single currency if she wins. She last ran in 2012 with an initial promise of a sharp and sudden break from the euro, but this time Ms. Le Pen has sought broader support from a splintered French electorate. She says she would organize an orderly exit rather than crashing out with unpredictable consequences. If elected, she and top National Front officials say, her administration will spend its first six months negotiating the creation, along with other disappointed euro nations, of a basket of shadow European currencies. A newly reinstated franc, she says, would eventually be pegged to that basket, replacing the euro.

Ms. Le Pen says other countries struggling to meet European rules would be willing to enter into talks on pulling the EU apart. The threat of having to leave the euro, she says, has been used to blackmail Greece and other Southern European countries into implementing austerity programs their people reject. “The euro has not been used as a currency, but as a weapon—a knife stuck in the ribs of a country to force it to go where the people don’t want to go,” Ms. Le Pen said this month. “Do you think we accept living under this threat, this tutelage? It’s absolutely out of the question.”

[..] An attempt by France, the eurozone’s second-largest economy, to pull out would be far more challenging than Brexit, which doesn’t touch on currency questions. A “Frexit” would likely unleash chaos across the currency union and undermine the broader EU in a way Britain’s departure wouldn’t. No country has attempted to leave the euro, and French polls show that while people want to claw back control from Brussels, a majority wouldn’t vote to leave the currency. The complications of an exit weren’t as clear to Ms. Le Pen in 2012, when she garnered only 17.9% of the presidential vote with her push for a clean break with the euro. “We set off on the idea in 2012 of an immediate exit, slamming the door,” said Jean-Richard Sulzer, a senior economic adviser to Ms. Le Pen. “Things were said too quickly, but this time Marine is much more prudent.”

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Yeah, why not blame Trump for that too.

By Ripping NATO, Trump Makes Europe Nervous and Arms Trade Happy (BBG)

Donald Trump is right to say America’s NATO allies aren’t paying their fair share. But, to the delight of the arms industry, that may be changing. Trump himself is the change-maker. He reaffirmed his skepticism about the North Atlantic Treaty Organization, and his readiness to make deals with Russia, in European media interviews published last weekend. Trump isn’t famous for his policy consistency, but those positions have held fairly steady – leaving European leaders wondering whether they can still rely on the American security umbrella. “Let’s not fool ourselves,” German Chancellor Angela Merkel said last week. “There is no infinite guarantee.”

So Merkel’s Germany, and many other European nations, are boosting military budgets. The plans predate Trump, and under NATO rules they should’ve been carried out long ago. The alliance expects its members to spend 2% of GDP on defense. But it’s no secret that most of them don’t. The shortfall added up to about $121 billion last year at 2010 prices, according to Bloomberg calculations based on NATO country estimates.

Since Trump is promising to increase America’s already enormous military budget too, the prospect of a European arms-shopping spree is a win-win for suppliers. Investors have noticed: From Raytheon to Lockheed Martin to Thales, defense contractors have hit all-time highs since Trump’s election. “This is the best market for defense in many years, across the board,” said Richard Aboulafia, an aerospace analyst with the Teal Group in Fairfax, Virginia. NATO was established after World War II to protect western democracies against the Soviet Union. A key tenet is that an attack on any alliance member is considered an attack on all. And that’s what Trump has questioned. If Russia moved against one of NATO’s Baltic members, Trump told the New York Times in July, he’d come to their aid only after reviewing whether they have “fulfilled their obligations to us.”

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Brilliant! Please don’t miss this!

It’s just that I thought Steve made his own Melania doll (no kidding.) And then she started talking.

Steve Keen Exposes Next Global Economic Shockwaves (FinFeed)

Steve, who is Trump going to be pouring drinks for, as in economic growth and benefits, in 2017?

Steve Keen: He is trying to pour it just for his own economy. And this is going to be the dramatic challenge he faces. Because he is someone who actually knows a lot about money and banks and debt, having used it extensively in his own professional career.

Lelde Smits: And succeeded and failed and hopefully learnt from the failures.

Steve Keen: He’s turned failure into success in many, many ways, and let’s not go there in terms of how beneficial that was for his various suppliers but he understands going bankrupt, he understand re-organisation, he understands finance.

Lelde Smits: So where is this liquid in 2017?

Steve Keen: He’s going to realise at some point he owns his own bank now. Because he’s running the country he is going to spend.

Lelde Smits: So we have the Federal Reserve right?

Steve Keen: The Federal Reserve is there and can top him up as much as it likes.

Lelde Smits: So when does this stop Steve? That’s the magic question.

Steve Keen: It never has to stop. He’s going to enable the American economy to spend dramatically. Taxation is going to be cut. There will be an increase in government spending. There will be a large deficit coming out of that. So the government is going to be creating a lot of money and running a lot of infrastructure projects and so on. There are 4 million Americans who aren’t employed now who were employed in 2000. They are people who are going to get jobs in construction and start spending domestically and so on. And Trump is going to see that as boosting up the American economy. It’s all about Buy America, Made in America and so on.

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How different do we think this is from what happened with Goldman and Greece? How to hide losses 101.

How Deutsche Bank Made €367 Million Disappear at Monte dei Paschi (BBG)

On Dec. 1, 2008, most of the world’s banks were still panicking through the financial crisis. Lehman Brothers had collapsed. Merrill Lynch had been sold. Citigroup and others had required multibillion-dollar bailouts to survive. But not every institution appeared to be in free fall. That afternoon, at the London outpost of Deutsche Bank, the stolid-seeming, €2 trillion German powerhouse, a group of financiers met to consider a proposal from a team led by a trim, 40-year-old banker named Michele Faissola. The scion of an Italian banking family, Faissola was the head of Deutsche’s global rates unit, a division that created and sold financial instruments tied to interest rates. He’d been studying the problems of one of Deutsche’s clients, Italy’s Banca Monte dei Paschi di Siena, which, as the crisis raged, was down €367 million ($462 million at the time) on a single investment.

Losing that much money was bad; having to include it in the bank’s yearend report to the public, as required by Italian law, was arguably much worse. Monte dei Paschi was the world’s oldest bank. It had been operating since 1472 [..] . If investors were to find out the extent of its losses in the 2008 credit crisis, the consequences would be unpredictable and grave: a run on the bank, a government takeover, or worse. At the Deutsche meeting, Faissola’s team said it had come up with a miraculous solution: a new trade that would make Paschi’s loss disappear. The bankers in the room had seen some financial sleight of hand in their day, but the maneuver that Faissola’s staffers proposed was audacious.

They described a simple trade in two parts. For one half of the deal, Paschi would make a sure-thing, moneymaking bet with Deutsche Bank and use those winnings to extinguish its 2008 trading losses. Of course, Deutsche doesn’t give away money for free, so for the second half of the deal, the Italians would make a bet that was sure to lose. But while the first transaction was immediate, the second would play out slowly, over many years. No sign of the €367 million sinkhole would need to show up when Paschi compiled its yearend financial reports.

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New records set in 2005, 2010, 2014, 2015 and 2016.

Earth Breaks Heat Record In 2016 For Third Year In A Row (AFP)

Last year, the Earth sweltered under the hottest temperatures in modern times for the third year in a row, US scientists said Wednesday, raising new concerns about the quickening pace of climate change. Temperatures spiked to new national highs in parts of India, Kuwait and Iran, while sea ice melted faster than ever in the fragile Arctic, said the report by the National Oceanic and Atmospheric Administration. Taking a global average of the land and sea surface temperatures for the entire year, NOAA found the data for “2016 was the highest since record keeping began in 1880,” said the announcement. The global average temperature last year was 1.69 Fahrenheit (0.94 Celsius) above the 20th century average, and 0.07 degrees F (0.04 C) warmer than in 2015, the last record-setting year, according to NOAA.

This was “not a huge margin to set a new record but it is larger than the typical margin,” Deke Arndt, chief of NOAA global climate monitoring, said on a conference call with reporters. A separate analysis by the US space agency NASA also found that 2016 was the hottest on record. The World Meteorological Organization in Geneva confirmed the US findings, and noted that atmospheric concentrations of both carbon dioxide and methane reached new highs. The main reason for the rise is the burning of fossil fuels like oil and gas, which send carbon dioxide, methane and other pollutants known as greenhouse gasses into the atmosphere and warm the planet. The mounting toll of industrialization on the Earth’s natural balance is increasingly apparent in the record books of recent decades. “Since the start of the 21st century, the annual global temperature record has been broken five times (2005, 2010, 2014, 2015 and 2016),” said NOAA.

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Denial is a river in the Arctic.

‘A Cat In Hell’s Chance’ (Simms)

What’s so special about 2C? The simple answer is that it is a target that could be politically agreed on the international stage. It was first suggested in 1975 by the environmental economist William Nordhaus as an upper threshold beyond which we would arrive at a climate unrecognisable to humans. In 1990, the Stockholm Environment Institute recommended 2C as the maximum that should be tolerated, but noted: “Temperature increases beyond 1C may elicit rapid, unpredictable and non-linear responses that could lead to extensive ecosystem damage.” To date, temperatures have risen by almost 1C since 1880. The effects of this warming are already being observed in melting ice, ocean levels rising, worse heat waves and other extreme weather events.

There are negative impacts on farming, the disruption of plant and animal species on land and in the sea, extinctions, the disturbance of water supplies and food production and increased vulnerability, especially among people in poverty in low-income countries. But effects are global. So 2C was never seen as necessarily safe, just a guardrail between dangerous and very dangerous change. To get a sense of what a 2C shift can do, just look in Earth’s rear-view mirror. When the planet was 2C colder than during the industrial revolution, we were in the grip of an ice age and a mile-thick North American ice sheet reached as far south as New York. The same warming again will intensify and accelerate human-driven changes already under way and has been described by James Hansen, one of the first scientists to call global attention to climate change, as a “prescription for long-term disaster”, including an ice-free Arctic.

Nevertheless, in 1996, a European Council of environment ministers, that included a young Angela Merkel, adopted 2C as a target for the EU. International negotiators agreed the same in 2010 in Cancun. It was a commitment repeated in the Paris Climate Accord of 2015 where, pushed by a new group of countries called the Climate Vulnerable Forum, ambitions went one step further, agreeing to hold temperature rises to “well below 2C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5C”.

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I don’t know how much longer I can witness this. At what point do we set up a private army?

“The industries at work in tropical forest areas are expected to be served by an extra 25 million km of roads by 2050..”

Over Half of World’s Wild Primate Species Face Extinction (G.)


Top row l-r: brown-headed spider monkey, chimpanzee, Western gorilla; Bottom row l-r: Bornean orangutan, Siau Island tarsier, ring-tailed lemur. Composite: Alamy and Getty Images

More than half of the world’s apes, monkeys, lemurs and lorises are now threatened with extinction as agriculture and industrial activities destroy forest habitats and the animals’ populations are hit by hunting and trade. In the most bleak assessment of primates to date, conservationists found that 60% of the wild species are on course to die out, with three quarters already in steady decline. The report casts doubt on the future of about 300 primate species, including gorillas, chimps, gibbons, marmosets, tarsiers, lemurs and lorises. Anthony Rylands, a senior research scientist at Conservation International who helped to compile the report, said he was “horrified” at the grim picture revealed in the review which drew on the International Union for the Conservation of Nature (IUCN) red list, peer-reviewed science reports and UN databases.

“The scale of this is massive,” Rylands told the Guardian. “Considering the large number of species currently threatened and experiencing population declines, the world will soon be facing a major extinction event if effective action is not implemented immediately,” he writes in the journal Science Advances, with colleagues at the University of Illinois and the National Autonomous University of Mexico. The most dramatic impact on primates has come from agricultural growth. From 1990 to 2010 it has claimed 1.5 million square kilometres of primate habitats, an area three times the size of France. In Sumatra and Borneo, the destruction of forests for oil palm plantations has driven severe declines in orangutan populations. In China, the expansion of rubber plantations has led to the near extinction of the northern white-cheeked crested gibbon and the Hainan gibbon, of which only about 30 or animals survive.

More rubber plantations in India have hit the Bengal slow loris, the western hoolock gibbon and Phayre’s leaf monkey. Primates are spread throughout 90 countries, but two thirds of the species live in just four: Brazil, Madagascar, Indonesia and the Democratic Republic of the Congo (DRC). In Madagascar, 87% of primate species face extinction, along with 73% in Asia, the report states. It adds that humans have “one last opportunity” to reduce or remove the threats facing the animals, to build conservation efforts, and raise worldwide awareness of their predicament. The market for tropical timber has driven up industrial logging and damaged forest areas in Asia, Africa and the neotropics. Mining for minerals and diamonds have also taken a toll. On Dinagat island in the Philippines, gold, nickel and copper mining endanger the Philippine tarsier. In the DRC, hunters working around the tin, gold and diamond mine industry are the greatest threat to the region’s Grauer’s gorilla. The industries at work in tropical forest areas are expected to be served by an extra 25 million km of roads by 2050, further fragmenting the primates’ habitats.

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If you were an elephant … You would still feel love, hurt and grief.

“Perhaps one of the reasons we’re so keen to deny non-human creatures minds, consciousness and personhood is that, if they’re people, they’re embarrassingly better people than we are. They build better communities; they live at peace with themselves and aren’t, unlike us, actively psychopathic towards other species. ”

If you were an elephant … (Foster)

If you were an elephant living wild in a western city, you’d be confused and disgusted. You’d have one two-fingered hand swinging from your face – a hand as sensitive as tumescent genitals, but which could smash a wall or pick a cherry. With that hand you’d explore your best friends’ mouths, just for the sake of friendship. With that hand you’d smell water miles away and the flowers at your feet. You’d sift it all, triaging. Category 1: immediate danger. Category 2: potential threat. Category 3: food and water. Category 4: weather forecasts – short and long range. Category 5: pleasure. Grumbles from trucks and cabs would shudder through the toxic ground, tickle the lamellar corpuscles in your feet and ricochet up your bones. You’d hear with your feet, and your femurs would be microphones.

As you walked 10 miles for your breakfast you’d chatter with your friends in 10 octaves. A nearby human would throb like a bodhran as subsonic waves bounced around her chest. Even if it swayed with grass instead of being covered in concrete and dog shit, the city would be far, far too small for you. You’d feel the ring roads like a corset. You’d smell succulent fields outside, and be wistful. But you’d make the most of what you had. You’d follow a labyrinth of old roads, relying on the wisdom of long-dead elephants, now passed down to your matriarch. You’d have the happiest kind of political system, run by wise old women, appointed for their knowledge of the world and their judgment, uninterested in hierarchy for hierarchy’s sake, and seeking the greatest good for the greatest number.

No room here for the infantile phallocentric Nietzscheanism that is destroying modern human culture. If you were a boy you’d be on the margins, drifting between family groups (but never allowed to disrupt them) or shacked up with your bachelor pals in the elephant equivalent of an unswept bedsit (though usually your behaviour would be gentler, more convivial and more urbane than cohabiting human males). Your function would be to inseminate, and that’s all. Government would be the business of the females. You’d be a communitarian. Relationality would be everything. It’s not that you couldn’t survive alone, although there would certainly be a survival benefit from being a member of a community, just as humans live longer if they are plugged into a church, a mosque or a bowling club.

Yes, at some level your altruism might be reciprocal altruism, where you scratch my back if I scratch yours, or kin selection, where you are somehow persuaded to sacrifice yourself if your death or disadvantage will preserve a gene in a sufficiently closely related gene-bearer. But at a much more obvious and important level you’d be relational – joyously shouldering the duties that come with community – because it made you happy. Why do elephants seek out other elephants? Not primarily for sex, or for an extra arsenal of receptors to pick up the scent of poachers, or because they assume that the others will have found particularly nutritious food, but because they like other elephants.

[..] As an elephant, you’d have a mind. You would, no doubt at all, be conscious. All the evidence agrees. None – absolutely none – disagrees. You’d have a sense of yourself as distinct from other things. When you looked out contemptuously at humans, wondering why they ate obviously contaminated food, opted to be miserable and alone, or wasted energy on pointless aggression and anxiety, it would be your contempt, as opposed to generic elephantine contempt, or reflexive contempt that bypassed your cerebral cortex, or the contempt of your sister. It would be you looking out, and you’d know it was you.


Photograph: Palani Mohan/Getty Images

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