Nov 102016
 
 November 10, 2016  Posted by at 10:24 am Finance Tagged with: , , , , , , , , ,  


Byron In Chinatown, Pell Street, New York 1900

To Make America Great Again, Write Off The Private Debt (Steve Keen)
Asian Markets Soar, Nikkei Rockets Close To 7% (CNBC)
Dow Closes Up 250 Points; Financials Surge After Trump Election Upset (CNBC)
The Jig Is Up: America’s Voters Just Fired Their Ruling Elites (Stockman)
Thousands Protest Trump Win Around US (BBG)
White House Won’t Rule Out Pardon to Protect Clinton From Trump (BBG)
Trump Would Have Lost US Election If Bernie Had Been The Candidate (Ind.)
WikiLeaks Mocks Dems After Election Loss (Hill)
Trump Could Bring Russia In From The Cold (Dejevsky)
Donald Trump’s Financial Advisory Team Stocked With Wall Streeters (WSJ)
Mexico Will Not Pay For Trump Wall, But Seeks Cooperation (R.)
Meanwhile, As The World Watched The Election.. (Black)
Vancouver Wields $10,000-a-Day Fine in Crackdown on Empty Homes (BBG)
India’s Shock Bank Note Ban Sparks Cash Chaos (R.)
Hand Grenade Thrown Outside French Embassy In Athens (AP)

 

 

Too many pieces and opinions on Trump to keep count of. Let’s start with Steve Keen’s, the most practical one. It would be great and highly useful if Trump and/or his people read it.

To Make America Great Again, Write Off The Private Debt (Steve Keen)

Dear President Trump, The key source of America’s economic weakness today is something you have experience with: private debt. All leaders before you have obsessed about government debt while ignoring private debt, which is far higher (150% of GDP versus 100%) and far more dangerous. You can do something about this, and unlike your purely political predecessors, your experience tells you that it can be done—the only question is how to do it. The private debt mound sitting on top of American households and businesses is the reason demand is depressed right now. With that debt mountain weighing them down, firms are reluctant to borrow and invest, while households are reluctant to use credit to consume. Credit demand is now back to the average of the 1950s to 1970s—the “Golden Age” of America, when your supporters today and their parents had well-paying manufacturing jobs.

But it will easily turn negative again like it did during the Great Recession, given how enormous the debt burden still is today, since your immediate predecessor put more effort into rescuing Wall Street than he did into rescuing Main Street. The Washington insider economists who are now going to attempt to get your ear will tell you that this private debt doesn’t matter, and that nothing can be done about it anyway. They’re wrong on both counts. On whether it matters, they’ll say that one person’s debt is another person’s asset, so the total level of debt doesn’t matter. What they ignore is that banks create money and demand when they lend, and both money and demand fall when debt is repaid. They ignore the evidence shown in Figure 2, which I’ve been shoving in front of their faces for over a decade now (from early 2006, well before the Great Recession began).

On whether it can be done, they’ll tell you that this is “helicopter money”, and that it’s a dreadful idea. But the reality is that they’re doing it already. It’s just that the Fed’s helicopter, which they call “Quantitative Easing”, has been dropping that money on Wall Street rather than Main Street. When the Fed buys bonds off a pension fund under QE, it creates the money that it buys that pension’s funds bonds with. The pension fund then does what pension funds do with money: they buy shares and other bonds. This drives up share markets, which benefits Wall Street and the 1% directly. Brokers get paid lots of commission, most of which they stuff in their offshore bank accounts. They spend a fraction of this on Main Street, buying the odd hamburger.

But there would be far more money in Main Street’s hands if you put it there directly. There are many ways to do this, and it’s important to do it in a way that doesn’t favour people who borrowed over people who didn’t. But the easiest way to illustrate it is to imagine that you tell the Federal Reserve to buy mortgages directly from the public. For the Federal Reserve, there’s little practical difference what it’s doing right now, only 100% of the money it creates turns up in Main Street bank accounts rather than those of Pension Funds and Wall Street brokers. With less debt, there’ll be more spending by Main Street, and, as a result, more employment. The only sufferers will be bankers and Wall Street, who will have far less income-earning assets than they have now, and may even have to work for a living.

Read more …

So much for those predictions too.

Asian Markets Soar, Nikkei Rockets Close To 7% (CNBC)

Asia markets soared on Thursday with the Nikkei jumping close to 7%, as traders reassessed the economic impact of Donald Trump’s victory in the U.S. presidential election. The Nikkei 225 ended up 6.72%, or 1,092.88 points, at 17,344.42, as the yen weakened against the dollar, trading at 105.42 as of 2:50 pm HK/SIN. The dollar/yen had plunged to 101 levels on Wednesday. “U.S. yields surged higher on the back of expected increased fiscal spending by Trump. This has helped the dollar rally sharply against other currencies but especially the low yielding yen and the euro,” Anthony Darvall, chief market strategist at easyMarkets, said in a note on Thursday.

“A weaker yen has helped propel Japanese stocks up…completely erasing yesterday’s losses.” The Australian benchmark index closed up 3.34%, or 172.27 points, at 5,328.8. The ASX’s strength was underpinned by its energy subindex, up 3.29%, and the materials subindex, up 5.75%. The gold subindex shed 4.82%. New Zealand’s NZX 50 ended up 1.04%, or 69.51 points, at 6,733.72. Before markets opened, the Reserve Bank of New Zealand cut rates by 25 basis points to a record low of 1.75%. The RBNZ statement warned that “numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.”

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The predicted crash took exactly 49 minutes.

Dow Closes Up 250 Points; Financials Surge After Trump Election Upset (CNBC)

U.S. stocks surged more than 1% Wednesday with financials and health care leading after Republican Donald Trump won the presidential election, defying market expectations for a Hillary Clinton win. The day’s rally took the major averages within 2% of their all-time intraday highs, and marked a stunning recovery from a sharp plunge in stock index futures overnight. Trade volume Wednesday was roughly 12 billion shares, the highest since the surprise U.K. vote to leave the European Union in June. “Overnight was all about uncertainty. Today we know” the result,” said JJ Kinahan, chief strategist at TD Ameritrade. He said part of the day’s rally was fueled by short covering, and that volatility will likely continue as traders eye Trump’s potential Cabinet picks.

The Dow Jones industrial average closed up more than 250 points at 18,589, with Goldman Sachs and Caterpillar contributing the most to gains. With about half an hour to the close, the Dow briefly added more than 300 points and was tracking to close at a record high. The index came within about 25 points of its all-time intraday high of 18,668.44 touched in August and closed within half a% of that level. Financials leaped 4% in their best day since 2011 to lead S&P 500 advancers, followed by health care. Banks and diversified financials such as Morgan Stanley led financial sector gains, while biotech stocks led health care gains. “Within financial services, there is a guarded view that there may be less regulation [under Trump] than under a Clinton presidency,” said John Stadtler, head of U.S. financial services at PwC.

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Strong from David. “..the giant stock market bubble will now crash. [..] We will be in an official recession within 6 months.”

The Jig Is Up: America’s Voters Just Fired Their Ruling Elites (Stockman)

America’s voters fired their ruling elites last night. After 30 years of arrogant misrule and wantonly planting the seeds of economic and financial ruin throughout Flyover America, the Wall Street/Washington establishment and its mainstream media tools have been repudiated like never before in modern history. During the course of the past year, upwards of 70 million citizens – 59 million for Trump and 13 million for Bernie Sanders – have voted for dramatic change. That is, for an end to pointless and failed wars and interventions abroad and a bubble-based economic policy at home. The latter showered Wall Street and the bicoastal elites with vast financial windfalls – even as it left 90% of Flyover America behind, where households struggled with stagnant wages, vanishing jobs, soaring health costs, shrinking living standards and diminishing hope for the future.

The voters also said in no uncertain terms that they are fed-up with a “rigged” system that has one set of rules for establishment insiders and another for everyone else. In essence, that’s what servergate, the Clinton Foundation pay-to-play scandals and the trove of Wikileaks DNC/Podesta hacks was all about. Indeed, in his brawling style, the Donald in effect convinced a huge slice of the electorate that the Clintons amounted to America’s leading crime family. And while he may have exaggerated the extent of their personal crimes and misdemeanors, the latter functioned as a proxy for the beltway racketeering that has become the modus operandi of the Imperial City. Stated differently, the people did connect the dots. There is a straight line from repeal of Glass-Steagall by the Rubin-Clinton democrats in the late 1990s through the resounding repudiations of the Clintons last night.

This string includes the M&A roll-up of the giant Wall Street banks after 1998; the subprime mortgage scams, housing booms and subsequent crash during the next decade; the panicked multi-trillion bailouts of the Wall Street gambling houses in the fall of 2008 and the lunatic spree of central bank money pumping that followed; the soaring stock market fueled by the Fed’s free money that arose therefrom; and the egregious global fund-raising and shakedowns of the Clinton Foundation and personal wealth accumulations by the Clinton’s personally, capped by Hillary’s notorious $250,000 off-the-record speeches to Goldman Sachs.

What happened was that during the eight Obama years, Washington essentially borrowed $10 trillion, or nearly as much as the first 43 presidents did over 220 years, while the Fed expanded its balance sheet by 5X more than had happened during its first 94 years of existence. [..] For months and years to come, the Imperial City will be ungovernable and the nation will be racked with fiscal, financial, political and even constitutional crisis. By kicking the can in a ruinous direction for decades, America implicitly opted eventually for the bleeding cure. To wit, the giant stock market bubble will now crash. The stock-price obsessed C-suites of corporate America will now panic and begin pitching inventory and workers overboard. We will be in an official recession within 6 months. The Federal budget will plunge back into trillion dollar annual deficits very soon.

Accordingly, Washington will descend into permanent warfare over the debt ceiling and an exploding $20 trillion+ public debt. Any notion of a Trump economic revival program – even if it could now be confected – will be stillborn in the financial and fiscal chaos ahead. And most important of all, the almighty Fed will be stranded high and dry – out of dry powder and under political attack like never before from angry politicians and citizens alike. The jig is up.

Read more …

Earlier today I read what looks to be an apt observation: ‘Every white person in New York who didn’t vote for Trump is now out in the streets protesting against him’. Chaotic scenes in LA and other places too. But the people who protest now are miles off target and months too late: they should have stood up for Bernie when the Hillary camp and the DNC conspired to oust him. Indeed, Bernie himself should have stood up back then, not for himself but for his supporters; they would have stood up with him. Whether they all like it or not, being asleep and/or silent when big things happen that count, does carry a price. If you drop the ball, you can’t just pick it back up again and pretend it didn’t fall. Shouting ‘not my president’ in the wake of an election is a sign of weakness, no matter how well-intentioned. The protests should have taken place before the election, not after.

Thousands Protest Trump Win Around US (BBG)

The raw divisions exposed by the presidential race were on full display across America on Wednesday, as protesters flooded city streets to condemn Donald Trump’s election in demonstrations that police said were mostly peaceful. From New England to heartland cities like Kansas City and along the West Coast, many thousands of demonstrators carried flags and anti-Trump signs, disrupting traffic and declaring that they refused to accept Trump’s triumph. In Chicago, where thousands had recently poured into the streets to celebrate the Chicago Cubs’ first World Series victory in over a century, several thousand people marched through the Loop. They gathered outside Trump Tower, chanting “Not my president!”

Chicago resident Michael Burke said he believes the president-elect will “divide the country and stir up hatred.” He added there was a constitutional duty not to accept that outcome. A similar protest in Manhattan drew about 1,000 people. Outside Trump Tower on Fifth Avenue in midtown, police installed barricades to keep the demonstrators at bay. Hundreds of protesters gathered near Philadelphia’s City Hall despite chilly, wet weather. Participants — who included both supporters of Democratic nominee Hillary Clinton and independent Vermont Sen. Bernie Sanders, who lost to Clinton in the primary — expressed anger at both Republicans and Democrats over the election’s outcome.

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Shouldn’t this be left up to Congress?

White House Won’t Rule Out Pardon to Protect Clinton From Trump (BBG)

The White House on Wednesday wouldn’t rule out issuing a pardon to protect Hillary Clinton from prosecution by the incoming administration over her use of a private e-mail server. President-elect Donald Trump threatened during his campaign to assign a special prosecutor to investigate Clinton. He blamed a “rigged system” for protecting her from prosecution after FBI director James Comey announced in July and again on Nov. 6, two days before the election, that his agency wouldn’t seek charges against the Democrat. “You’d be in jail,” Trump memorably warned Clinton during their final debate. Asked whether President Barack Obama might issue Clinton a pardon before he leaves office in January, White House press secretary Josh Earnest said the administration doesn’t discuss such cases in advance.

Earnest indicated Obama was hopeful a pardon wouldn’t be necessary, noting that Trump was gracious toward Clinton in his victory speech early Wednesday morning. “We’ve got a long tradition in this country of people in power not using the criminal justice system to exact political revenge,” Earnest said. “We go to great lengths to insulate our criminal justice system from partisan politics.” Crowds at Trump’s rallies frequently chanted “lock her up” when the Republican mentioned Clinton’s name. Trump would occasionally join them. On Wednesday, as he claimed victory in the presidential race, Trump complimented Clinton for her campaign and her public service. “Hillary has worked very long and very hard over a long period of time, and we owe her a major debt of gratitude for her service to our country,” he said.

Comey said in July that Clinton and her aides were “extremely careless” in handling classified information, but that criminal prosecution wasn’t warranted. The Justice Department agreed. But proactively offering a pardon isn’t unprecedented. In 1974, Gerald Ford gave former president Richard Nixon a full and unconditional pardon for any crimes he might have committed while in the Oval Office. That move, derided by critics, underscored the political risks of such a move. Ford lost re-election to Democrat Jimmy Carter. Obama and Clinton are in a less perilous situation; Obama cannot run for president again, and Clinton’s political career is also likely over.

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Nothing new. And everyone knew it, too. Including Hillary and the DNC.

Trump Would Have Lost US Election If Bernie Had Been The Candidate (Ind.)

“Right now in every major poll, national poll and statewide poll done in the last month, six weeks, we are defeating Trump often by big numbers, and always at a larger margin than Secretary Clinton is.” So spoke Bernie Sanders, Hillary Clinton’s Democratic rival in the primary, when he appeared on the May 29 2016 edition of NBC’s ‘Meet the Press’. It was not the first time the socialist former Mayor of Burlington had made the claim. And it was something that his supporters believed passionately. Time after time, supporters of the white-haired, frequently cantankerous Democratic socialist, said the media was helping prepare a coronation for Ms Clinton in a way that was neither fair or democratic.

At a rally in the Bronx, New York, in April, Paul Nagel, 58, a gay rights and housing activist, told The Independent that Mr Sanders would go into the Oval Office on the back of a popular movement and that he could continue to listen to the people. “What we’re seeing now feels 1969,” he said. At rallies for the 74-year-old across the country, there was a sense of euphoria and excitement that simply did not exist at those for Ms Clinton. Ms Clinton’s supporters said they had made a calculation to vote for her as they believed she would be the best candidate to lead the country, but there was no sense of the passion witnessed at her rivals’ events, or those of Barack Obama eight years earlier.

But it was not just anecdotal evidence. A series of polls suggested that Mr Sanders – with his calls for free college tuition, the removal of student debt, a national health service and the removal of big money from politics – would stand a better chance against Mr Trump than Ms Clinton. A poll by NBC News-Wall Street Journal on May 15 said Ms Clitnon would beat Mr Trump by three points, but said Mr Sanders would win by 15 points. A CBS News-New York Times on May 3 gave Ms Clinton a six-point advantage over Mr Trump, but said Mr Sanders would win by 13 points. At the same time, Fox News said Ms Clinton would lose to Mr Trump by three points, but said Mr Sanders would win by four.

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‘Mocks’ is a ridiculous term to use here.

WikiLeaks Mocks Dems After Election Loss (Hill)

WikiLeaks capped off Tuesday’s surprising presidential election with a tweet appearing to mock Democrats for picking Hillary Clinton as their nominee. “By biasing its internal electoral market the DNC selected the less competitive candidate defeating the purpose of running a primary,” the official account tweeted near midnight. Throughout the campaign, WikiLeaks published hacked DNC emails that it said showed the party was biased toward Clinton over her primary rival, Bernie Sanders. Some emails showed DNC staffers discussing how to expedite Sanders’s exit from the primary race after it was clear Clinton would win. Others appeared to show then-CNN analyst Donna Brazile leaking questions to the Clinton campaign in advance of town hall debates between the two Democrats.

Donald Trump’s campaign also seized on the hacked emails to argue that Clinton and Democrats had treated Sanders unfairly, as he made a play for the Vermont senator’s supporters. On Tuesday, WikiLeaks head Julian Assange posted a winding statement on his site expressing his dislike of both candidates, saying that the site had an obligation to leak the Clinton-related emails even though it did not have a similar set of Trump documents. “Publishing is what we do. To withhold the publication of such information until after the election would have been to favour one of the candidates above the public’s right to know,” Assange wrote.

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Whaddaya know: A voice of reason in the otherwise full-tard anti-Trump Guardian.

Trump Could Bring Russia In From The Cold (Dejevsky)

As the tally turned towards a victory for Donald Trump in the middle of the European night, comments began to appear on social media to the effect that Russian intelligence had won its biggest victory in the country’s history. More than this, that the Kremlin had actually captured the United States. The prominent, if spectral, role played by Russia was one of the stranger aspects of this already strange US election. And these comments were alarmist, if logical, extensions of the claims made by the Clinton camp during the campaign that Trump was somehow in cahoots with President Vladimir Putin and that the Russian state was interfering in the election on his behalf. There was precious little evidence for such claims, and Putin himself ridiculed them at his annual Valdai meeting with international Russian specialists two weeks ago.

Was the US a banana republic, he asked, that its elections could be so easily manipulated? Of course not. But they were useful to the Democrats’ campaign in showing off Hillary Clinton as a tough foreign policy president-in-waiting and demonising Trump by association. They were not useful enough, though, given the result. Either the voting public dismissed them, or perhaps they agreed with Trump that improved relations with Russia might be a good thing. In any case, they turned out not to be the black mark the Clinton campaign expected. There is no mystery about why the accusations took hold. It was in part because Trump had said early on that he thought he could do business with Putin, earning him the reputation of being soft on big bad Russia. Then the Democrats at their convention chose to divert blame for the hacking of their computer system on to Russian intelligence.

This was never conclusively proved and all the supposedly corroborating statements from US officials contained get-out clauses. People with intelligence connections suggested that everyone tried to hack everyone’s computers, especially at election time, without any intention of actually interfering. The truth of any Russian involvement will probably never be known. But certain myths that gained currency need to be dispelled. One was that Trump was receiving privileged information from Russia. In fact, anything he said was already openly available before he said it. Another was that Trump had complicated and suspect business dealings with Russia. No evidence was ever produced – despite what must have been exhaustive efforts by the Clinton campaign[..]. There also seems to have been some confusion between Russia and other parts of the former Soviet Union, which hardly reflects well on the accusers.

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Let’s see first. But Donald had better be careful with that. All nominations will face heavy scrutiny.

Donald Trump’s Financial Advisory Team Stocked With Wall Streeters (WSJ)

Donald Trump’s successful insurgent bid for the White House promised to upend a global power structure that benefited large corporations. Now, several Wall Street financiers and other successful business leaders could be in line to run top posts in his presidential administration. People close to Mr. Trump have said he is considering Steven Mnuchin, a former Goldman Sachs banker who became his national campaign finance chairman in May, as his pick for Treasury secretary. If tapped for the job, Mr. Mnuchin would become the third Goldman alumnus in the last 20 years to head the Treasury, following Robert Rubin and Hank Paulson, who both served as the bank’s chief executive.

After a 17-year career at Goldman, where Mr. Mnuchin led the mortgage-trading department and was the bank’s chief information officer, he turned to investing. He briefly worked for a hedge fund tied to George Soros, the big Democratic donor. In his closing campaign ad, Mr. Trump featured both Goldman and Mr. Soros as “the establishment…who control the levers of power in Washington.” Advisers to Mr. Trump have said promptly filling senior appointments would help calm jittery markets, which saw volatility soar after it became apparent that Mr. Trump, a political outsider who broke with the political philosophy that has defined both parties, would win the election.

“Just as he comforted a lot of people when he picked Mike Pence as his running mate, they’ll be much more comfortable when they see what the team will be,” predicted Wilbur Ross, the private-equity investor who has advised Mr. Trump on economic policy. Business leaders have been “incorrectly worried about what might happen under Trump,” Mr. Ross said.

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Cooperation it is.

Mexico Will Not Pay For Trump Wall, But Seeks Cooperation (R.)

Mexico said on Wednesday it would work with Donald Trump for the benefit of both nations after his surprise U.S. election win, but reiterated it would not pay for his planned border wall, which stirred up deep resentment during a fraught presidential campaign. As Trump strode toward victory, the peso plunged 13% in its biggest fall since the Tequila Crisis devaluation 22 years ago, before paring losses to trade down 8.7% at 19.91 per dollar. Still, officials held back from taking action to support the peso despite it hitting lifetime lows overnight. Trump’s threats to dump the NAFTA agreement with Mexico and Canada, and to tax money sent home by migrants to pay for the controversial wall on the southern border, have made the peso particularly vulnerable to events in the U.S. presidential race.

“Very hard times are coming to Mexico,” said analyst Gabriela Siller of Mexican bank BASE. Still, President Enrique Pena Nieto said he called to congratulate Trump, and had agreed to meet the New Yorker during the transition phase to discuss joint cooperation, which he hopes would strengthen the competitiveness of North America. Welcoming Trump’s victory speech pledge to seek “common ground” and partnership with other countries, Pena Nieto said in a televised statement that Mexico shared the same vision. [..] Foreign Minister Claudia Ruiz Massieu reiterated that Mexico would not pay for Trump’s proposed wall. The vow to make Mexico pay for the barrier was a key feature of his stump speeches.

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“..the word “never” apparently means 49 minutes to a Nobel laureate, because that’s how long it took for the S&P 500 to turn positive for the day..”

Meanwhile, As The World Watched The Election.. (Black)

[..] when I woke up this morning here in Thailand and flipped on the TV, the first thing I saw was Wolf Blitzer having an orgasm every time Hillary won an electoral vote. It’s almost comical to suggest there was any semblance of objectivity throughout the entire cycle. Hillary Clinton had the full and unabashed backing of the entire media establishment. And the banking establishment. And the political establishment. And countless billionaires, Hollywood celebrities, rock stars, international press, foreign leaders, and even the President of the United States. Yet all of those big guns proved to be ineffective against a citizenry that’s fed up with the status quo.

At least the losing side has accepted its defeat with quiet dignity. University students across the country have come out of their safe spaces to protest by the thousand, chanting “F*ck Donald Trump” and “Not my President”. The students’ sudden fury may be what caused the Canadian government’s immigration website to temporarily go down (though I’m sure this will somehow be blamed on the Russians). Liberal papers like the Huffington Post are running headlines like “An American Tragedy”, while NYT bloggers are calling Trump voters “racist, xenophobic, misogynistic and homophobic.” Celebrities had some real gems like “Well, congratulations America you f–ked this one up,” and “I feel like I’m about to give birth to a baby that’s already dead.”

Comedian Chelsea Handler posted one of the most bizarre Tweets of the night, saying “My condolences to the President and First Lady. We will keep aiming high. We may not have you honored you this time, but we will honor you.” So apparently this exercise of American democracy has dishonored the President. Nobel Prize-winning economist Paul Krugman commented that tumultuous financial markets would “never” recover. Wow. Never. But the word “never” apparently means 49 minutes to a Nobel laureate, because that’s how long it took for the S&P 500 to turn positive for the day once the market opened. Investors ostensibly realized that, despite the Trump victory, Disney will keep making superhero movies, Coke will keep distributing poisonous flavored water, and Mark Zuckerberg will keep selling your personal data to advertisers.

[..] I thought the late-night quickie from Clinton campaign chairman John Podesta summed it up perfectly. While Hillary stayed in her $20,000/night suite at the Peninsula Hotel, Podesta was sent to tell the crowd of Clinton supporters that “She is not done yet!” Nonsense. It was a big fat lie. Minutes later she called Donald Trump to concede the election. Anyone trying to understand why she lost might take note of this deceit– even at the bitter end. She lied to her own supporters.

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All bubble cities should pay attention. Vancouver appears to be making this work.

Vancouver Wields $10,000-a-Day Fine in Crackdown on Empty Homes (BBG)

Want to keep your million-dollar luxury pad in Vancouver empty? Get ready to pay C$10,000 ($7,450) annually in extra taxes. Lie about it? That’ll be C$10,000 a day in fines. Canada’s most-expensive property market, suffering from a near-zero supply of rental homes, announced the details of a new tax aimed at prodding absentee landlords into making their properties available for lease. The empty-home tax will take effect by Jan. 1 and will be calculated at 1% of the property’s assessed value, Vancouver Mayor Gregor Robertson told reporters at City Hall. “Vancouver is in a rental-housing crisis,” Robertson said. “The city won’t sit on the sidelines while over 20,000 empty and under-occupied properties hold back homes from renters.”

The measure is among efforts to make housing more accessible and affordable in Vancouver, ranked the world’s third-most-livable city, and has drawn attention for its sky-high prices fomented by global money flows. Public scrutiny has focused on absentee landlords, particularly from overseas, who are accused of sitting on investment properties where windows remain dark throughout the year. In August, the provincial government imposed a 15% tax on foreign buyers, and last month the federal government tightened mortgage insurance eligibility requirements. The city of Vancouver has focused its efforts on the rental market, where vacancies can get scooped up within hours while bidding wars drive up leasing costs.

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The only possible outcome.

India’s Shock Bank Note Ban Sparks Cash Chaos (R.)

Indians struggled to pay for basic goods like food and fuel on Wednesday and fretted about their savings, after the government withdrew 500 and 1,000 rupee notes from circulation in a bid to flush out money hidden from the tax man. The shock measure also sent shudders through the investment community on a day when the markets were also reeling at the election of Republican candidate Donald Trump as the next U.S. president. India’s National Stock Exchange share index slumped as much as 6.3% in early trade before recovering most losses to close the day off 1.3%.

The currency move, announced late on Tuesday night by Prime Minister Narendra Modi, aims to bring billions of dollars worth of unaccounted wealth into the mainstream economy and curb corruption. The biggest disruption in decades to cash transactions, which power much of the rural economy, comes months before a series of state elections including in India’s most populous Uttar Pradesh state. Critics have warned that ordinary people who do not have access to the banking system will be hardest hit, and that Modi risks upsetting his ruling party’s support base of small traders and businessmen who largely deal in cash.

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Obama visits Athens Nov 15.

Hand Grenade Thrown Outside French Embassy In Athens (AP)

A hand grenade attack outside the French Embassy in central Athens lightly wounded a policeman early Thursday, police said, days before U.S. President Barack Obama is due to visit the Greek capital. Authorities said the policeman, who had been on guard outside the embassy, was wounded when unknown assailants threw a hand grenade outside the embassy building, located opposite Parliament on a major avenue. Police shut down the area to vehicles and pedestrians, while anti-terrorism forensics experts combed the scene for evidence.

Police said the attack was apparently carried out by two people on a motorbike, and a bike matching the description was later found in a central Athens neighborhood popular with anarchists and was being examined to determine whether it was the one that had been used in the attack. Authorities said it appeared the policeman had only been lightly wounded because he had been inside an armored guard post outside the embassy entrance. The attack came days before Obama is to arrive in Athens next week for an expected overnight visit. Left-wing organizations have announced they will hold protests during the visit.

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Oct 232016
 
 October 23, 2016  Posted by at 9:12 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 23 2016


NPC Oldsmobile Golden Rocket 88 Holiday Sedan for 1957, Columbus GA 1908

Financial Crises: 1987, 1997, 2007, 2017?! (BBG)
Government Debt Isn’t The Biggest Threat To Australia’s Credit Rating (G.)
Britain’s Leading Banks Set To Pull Out Of UK Early Next Year (G.)
AT&T To Buy Time Warner In Deal Trump Says ‘Destroys Democracy’ (G.)
Hillary Has ‘Nothing To Say’ About Email Revealing $12 Million Quid Pro Quo (DM)
Obama Warned of Rigged Elections Back in 2008 (ZH)
Trump Lays Out His Plan For First 100 Days In Office (ZH)
Official Publication Says China Needs Xi As Mao-Like Strongman Leader (SCMP)
Edward Snowden Is A Saint, Not A Sinner (Jimmy Wales)
75% Of Young Greeks, Italians Live With Their Parents (Kath.)
Rescuers Save 2,400 Migrants In Mediterranean, Recover 14 Bodies (R.)

 

 

Fun with numbers.

Financial Crises: 1987, 1997, 2007, 2017?! (BBG)

Next year ends in a 7. If you’re superstitious or a little loose with statistics, that makes us due for another financial crisis. The biggest one-day stock drop in Wall Street history happened in 1987. The Asian crisis was in 1997. And the worst global meltdown since the Great Depression got rolling in 2007 with the failure of mortgage lenders Northern Rock in the U.K. and New Century Financial in the U.S. You can’t really mark the next crisis down on your calendar, of course. The point is that crackups come fairly regularly. And some of the prerequisites for the next one do seem to be falling into place. The IMF may have gotten things about right in its annual Global Financial Stability Report, which was issued in October. It doesn’t sound an alarm but expresses concern.

Short-term risks have actually abated, the IMF says, pointing to rebounding commodity prices, which help some key emerging markets, and the prospect of easier money in developed markets. But, it says, “medium-term risks continue to build.” It cites the unsettled political climate, which makes entrenched problems harder to tackle; some weak financial institutions in developed markets; and heavy corporate debts in emerging markets. Risks that aren’t acute can build for a while before triggering a crisis. What’s indisputable is that debt, the tinder of almost every financial conflagration, is growing rapidly. At 225 percent of world gross domestic product, combined public and private debt outside the financial sector “is currently at an all-time high,” the IMF says. Debt fuels growth but also makes borrowers brittle. Debtors keep owing money even if they lose the ability to repay. If they default, their lenders are damaged and sometimes default on their own obligations, and so the dominoes fall.

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The last paragraphs of a piece that just can’t seem to get going, but ends ‘well’. Private debt is by far Australia’s main problem, as it is nearly everywhere else.

Government Debt Isn’t The Biggest Threat To Australia’s Credit Rating (G.)

The new head of the Reserve Bank, Philip Lowe, told the house economics committee soon after taking over the position last month, that the effects of a ratings downgrade on borrowing costs are “quite small”. He suggested that rather than be the main game, that credit ratings were just “a useful reminder that we need to make sure the recurrent budget is on a good path”. But while our government debt remains “admirable” by international standards, as the secretary of the treasury, John Fraser, noted this week, our levels of private debt are extremely high – indeed fifth-highest in the world. Worryingly, the IMF in its recent fiscal monitor report noted the level of this debt was a concern for Australia’s ongoing financial stability.

Fraser noted this aspect as well in his appearance before the Senate estimates committee, telling the committee that the Treasury, “are also conscious that credit rating agencies are focusing on household debt as well as corporate and government debt”. Policies to lower private debt however are much more thin on the ground than are the cries about the need to cut government spending to reduce government debt. The shadow treasurer, Chris Bowen, this week raised the issue in an opinion piece published by Guardian Australia. He highlighted that the ALP’s policy on capital gains tax and negative gearing, which it took to the last election, was the type of policy proscribed by organisations like the IMF to temper our love of taking on more and more private debt.

Should S&P downgrade Australia’s credit rating, no doubt almost all commentary and debate will focus on government debt. But regardless of whether or not such a downgrade will cause interest rates for governments and companies to rise, private – not government – debt will remain the issue that most urgently needs to be addressed.

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Hubris. Largely.

Britain’s Leading Banks Set To Pull Out Of UK Early Next Year (G.)

Britain’s biggest banks are preparing to relocate out of the UK in the first few months of 2017 amid growing fears over the impending Brexit negotiations, while smaller banks are making plans to get out before Christmas. The dramatic claim is made in the Observer by the chief executive of the British Bankers’ Association, Anthony Browne, who warns “the public and political debate at the moment is taking us in the wrong direction”. A source close to Brexit secretary David Davis said he and the chancellor Philip Hammond had last week sought to offer reassurance that they were determined to secure the status of the City of London.

However, the government’s stated intention to take control of the freedom of movement into the UK is widely recognised among officials to be a hammer blow to any chance of retaining the present terms of trade for banks, particularly given the bellicose rhetoric of major politicians on the continent. The so-called passporting rights for members of the single market allow UK-based banks to offer financial services to companies and individuals across the EU unimpeded, yet the French president François Hollande is among those who have insisted in recent weeks that hard Brexit will mean “hard negotiation” and that Britain will need to “pay the price” of leaving.

A hard Brexit would involve the UK leaving both the single market, a cental pillar of which is freedom of movement, and the customs union, which could potentially reintroduce tariff and non-tariff restrictions on British imports and exports. Browne warns that both British and European politicians who appear to be pursuing “anti-trade” goals need to recognise that “putting up barriers to the trade in financial services across the Channel will make us all worse off”. Browne, whose organisation has been in intense negotiations with the government, further warns the EU that banks based in UK are currently lending £1.1tn, therefore “keeping the continent afloat financially”, and that this arrangement is at risk.

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How many times has Time Warner been bought and sold now? Remember AOL?

AT&T To Buy Time Warner In Deal Trump Says ‘Destroys Democracy’ (G.)

The telecoms giant AT&T has agreed to pay $85bn to buy the media powerhouse Time Warner and create one of the world’s largest media, TV and telecoms firms. The boards of the two companies unanimously approved the deal on Saturday. AT&T will pay $107.50 per Time Warner share, in a combination of cash and stock, worth $85.4 billion overall. The deal, which combines America’s second-largest wireless telecoms company with the owner of HBO, CNN, Cartoon Network and the Warner Brothers movies, is likely to face tough regulatory scrutiny due to fears it could lead to less consumer choice and higher prices. If approved, the deal would be the biggest in the world this year.

AT&T’s CEO, Randall Stephenson, says he does not anticipate government blocking the acquisition, which the company says is expected to go through by the end of 2017. Time Warner’s CEO, Jeff Bewkes, says he expects all of his company’s creative and business executives to stay on “for a number of years”. The Republican presidential nominee said on Saturday he would block the deal if he were elected. In a speech in Gettysburg, Pennsylvania, Donald Trump said AT&T’s purchase of Time Warner would give the combined group “too much concentration of power” and would “destroy democracy”. Speaking about his continuing battle with the “dishonest mainstream media”, Trump said: “They’re trying desperately to suppress my vote and the voice of the American people.

“As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.” Trump said he would also consider “breaking” up the last big media deal, Comcast’s acquisition of NBC Universal in 2013. “Deals like this destroy democracy,” he said.

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Hillary and her campaign blaming everything on Russia is prodoundly damaging to the US, and on the office of President of the Unted States in case she gets elected.

Hillary Has ‘Nothing To Say’ About Email Revealing $12 Million Quid Pro Quo (DM)

A stone-faced Hillary Clinton refused to comment tonight on an email a top aide sent calling a Clinton Foundation quid pro quo a ‘mess’ of the former secretary of state’s own making. ‘I have nothing to say about Wikileaks, other than I think we should all be concerned about what the Russians are trying to do to our election and using Wikileaks very blatantly to try to influence the outcome of the election,’ Clinton said. The Democratic nominee was responding to a question posed by DailyMail.com during a media avail with reporters riding on her campaign plane.

Hacked emails revealed an internal disagreement among Clinton’s aides about her desire to hold a conference in Marrakech, Morocco.The country’s king made a $12 million pledge to fund the Clinton Global Initiative conference – but only if the the likely presidential candidate attended. Top confidante Huma Abedin bluntly wrote in a January 2015 email that ‘if HRC was not part of it, meeting was a non-starter.’ Then she warned: ‘She created this mess and she knows it.’ It was an uncharacteristic remark from Abedin, who is known for her abiding loyalty to Clinton over the years.

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Whatever direction the wind comes from.

Obama Warned of Rigged Elections Back in 2008 (ZH)

At a campaign rally for Hillary Clinton on Thursday in Miami Gardens, Fla., President Obama condemned Donald Trump’s “rigged election” claims, describing these remarks as “dangerous.” “When you try to sow the seeds of doubt in people’s minds about the legitimacy of our election, that undermines our democracy,” he said. “When you suggest rigging or fraud without a shred of evidence, when last night at the debate, Trump becomes the first major party nominee in American history to suggest that he will not concede despite losing…that is not a joking matter,” Obama added.

Trump said at the third presidential debate that he would keep the United States “in suspense” as to whether he would accept the election results. Later, at a campaign rally, he promised in a jesting manner that he would accept the results “if I win” as the crowd roared. But despite condemning Trump for suggesting an election can be rigged, here is a clip of then-candidate Barack Obama in 2008 warning about voter fraud and suggesting Republicans could try to sway the election in their favor. A female audience member asked… “I would just like to know what you can do to reassure us that this election will not be rigged or stolen?” Obama replies…

 

 

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On politics, he sounds less than crazed.

Trump Lays Out His Plan For First 100 Days In Office (ZH)

In a keynote speech in Gettysburg, Pa., about his plans for his first 100 days in office, Donald Trump laid out what he sees as the the core priorities of a Trump presidency, while focusing in the early part of the speech on attacks against Hillary Clinton and Wall Street, and repeating his core message by telling his audience that Washington and Wall Street are “rigged” against him and that he is the candidate to bring “the change that has to come.” “I am not a politician,” Trump told the crowd. “But when I saw the trouble our country was in, I felt I had to act.” Then, moments after promising Americans that he represented a break from the status quo, he promised to sue a number of women who have come forward to accuse him of sexual assault, calling them liars.

Trump also railed against the media for seeking to concentrate its power through mergers and for colluding with his accusers to align against his campaign. He added a new threat to his repeated criticisms of U.S. media companies, when he vowed that in his administration such mega mergers as that between AT&T and Time Warner, which was just announced, would not pass as it leads to “too much concentration of power in the hands of too few.” [..] In terms of soundbites, the following quotes stood out.

On the economy:
• “Change has to come from outside our very broken system.”
• “We’ve doubled our national debt to $20 trillion under President Obama.”
• “Nearly 1 in 4 Americans in their prime earning years isn’t even working.”
• “I am asking the American people to dream big once again.”
• “Will withdraw the U.S. from the Trans-Pacific Partnership.
• “Will cancel every un-Constitutional executive action, memorandum, and order issued by President Obama.”
• “We will cancel all federal funding of sanctuary cities.”
• “The veterans will finally be taken care of properly.”
• “If we follow these steps, we will once more have a government of, by, and for the people.”

In terms of actual political measures that Trump would propose and/or enact, he listed the following six:
1) “A Constitutional Amendment to impose term limits on all members of Congress.”
2) “A hiring freeze on all federal employees.”
3) “A requirement that for every new federal regulation, 2 existing regulations must be eliminated.”
4) “A 5-year ban on White House and Congressional officials becoming lobbyists after they leave government.”
5) “A lifetime ban on White House officials lobbying on behalf of a foreign government.”
6) “A complete ban on foreign lobbyists raising money for American elections.”

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We’ll see lots of this as things continue to slide downhill.

Official Publication Says China Needs Xi As Mao-Like Strongman Leader (SCMP)

China needs a leader like Mao Zedong and President Xi Jinping fits the bill, according to a media outlet affiliated to the Communist Party. Analysts said the call to make Xi a strongman leader was an attempt to raise his status to the equivalent of “Great Leader”. The exhortation was made by Peoples’ Tribune, which is affiliated with party organ People’s Daily and came just ahead of a key meeting of top officials this week to lay the groundwork for the leadership reshuffle next year. The article, published on October 18, also echoed praise from senior politicians earlier this year, calling for Xi to be named “the core” of the party leadership – a term that carries strong political meaning.

China needed a strongman politician so the nation could again rise to greatness amid a time of strategic challenges and risks, it said. Xi, as party general secretary, was widely regarded by officials and the public as such a leader, it said. “There is no longer such salutation as ‘leader’ after Mao,” said Chen Daoyin, a political scientist at Shanghai University of Political Science and Law. Mao’s brief successor Hua Guofeng was once called “Wise Leader”, but no one used “leader” to address Deng Xiaoping, Jiang Zemin or Hu Jintao, Chen said. The magazine added that without the awareness of loyalty to the “core” leadership of the party there was a danger policies would never be adhered to outside the walls of Zhongnanhai, the nerve centre of the party and central government.

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Jimmy Wales is the founder of Wikipedia.

Edward Snowden Is A Saint, Not A Sinner (Jimmy Wales)

Wikipedia is founded on a bedrock principle of neutrality, seeking to describe all relevant sides without taking a political stance. As an individual, I, too, try to stay out of most political debates — except where they directly impact my personal passion for the free flow of information. This is one of those times. When I founded Wikipedia in 2001, the Internet was a place where ordinary people could freely create and share with one another. Wikipedia emerged from that egalitarian spirit, as a community committed to the free exchange of knowledge. Our mission was and continues to be to collect the sum total of all human knowledge and make it available to everybody in their own language. Since its founding, Wikipedia has become one of the most popular websites in the world.

And we zealously guard the privacy of our users, both the 75,000 people who write the encyclopedia and the half-billion people who read it. In 2013, when Edward Snowden revealed the scope and scale of the system of mass surveillance that had been built by the National Security Agency and other national security agencies, we were horrified. It is thanks to Snowden that we can now participate in an informed and democratic debate about how the US government subverted the power of the Internet in the name of mass surveillance. As a result of what he disclosed, people began to realize their privacy had been massively eroded over the past decade, and not just by the NSA. They recognized that their personal information was being collected, stored, analyzed and shared.

Text messages, emails and phone records they thought were private were actually up for grabs, easily accessed by the US government either directly from major tech companies or by tapping the cables and switches that comprise the Internet’s “backbone.” And all of the surveillance was done without a warrant. That is why I’ve signed onto the campaign asking President Barack Obama to pardon Snowden. Without him, ordinary people around the world would still know little of the growing dragnet stifling the Internet’s enormous potential for good. As a result of Snowden’s actions, the Internet has become safer and users are better equipped to protect themselves. Since the disclosures began in 2013, the number of websites moving to HTTPS to encrypt traffic has skyrocketed. (This includes Wikipedia and US federal government websites.) Popular messaging apps like WhatsApp have adopted end-to-end encryption [..]

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And still there’s talk of recovery. And people who believe it, too.

75% Of Young Greeks, Italians Live With Their Parents (Kath.)

Three out of four Greeks aged between 15 and 24 were still living at home in 2014, according to a report by the OECD made public this month. The annual report, called “Society at a Glance,” found that southern European countries hardest hit by the debt crisis had the highest rates of young people remaining with their parents. Greece came second in the list of 35 OECD member states, after Italy, with 76% of young people reporting that they still lived at home. Italy and Greece were followed by Slovakia, Portugal and Spain, while northern European countries, namely Denmark, Sweden, Finland and Norway, had the lowest rates of young people remaining at home. Greece continues to have the highest rate of youth unemployment in the eurozone with more than half of young Greeks jobless and often obliged to live at home.

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Meanwhile, where human rights go to drown….

Rescuers Save 2,400 Migrants In Mediterranean, Recover 14 Bodies (R.)

Rescuers pulled 2,400 boat migrants to safety on Saturday, the Italian coastguard said, adding 14 dead bodies had been recovered in the past two days. The migrants were on rubber boats and other small vessels, it said in a statement. Some 20 operations were carried out on Saturday alone, including rescues involving an Irish naval ship and boats from humanitarian groups Doctors Without Borders and Sea Watch. Doctors Without Borders said in a tweet on Saturday it believed 12 people had died during rescue operations, four of them children. More than 3,100 migrants have gone missing or died this year while trying to use the route from north Africa to Europe by boat, the International Organization for Migration estimates.

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Sep 252016
 
 September 25, 2016  Posted by at 8:50 am Finance Tagged with: , , , , , , ,  Comments Off on Debt Rattle September 25 2016


Harris&Ewing Boy Scout farm 1917

The Market Is In Line With History. The History Of Crashes (Stockman)
How to Suffocate Your Economy: Drown it in Massive Private Debt (Vague)
Vancouver Property Sales To Foreigners Crash 96% (ZH)
Merkel Rules out State Assistance for Deutsche Bank (BBG)
EU Must Turn Off the Dividend Spigot at Under-Capitalized Banks (PS)
China Continues to Battle Massive Capital Flight Problem (Brink)
Naked Shorts Can’t Stay Naked Forever (Dayen)
Whistleblower Describes Years Of Fraudulent, Criminal Culture At Wells Fargo (BB)
Former Employees File Class Action Against Wells Fargo (R.)
Clinton Server Tech Told FBI Of Colleagues’ Worries About System (R.)
America’s War On Its Own Children (G.)
Death Toll In Migrant Shipwreck Off Egypt Rises To 300 (G.)

 

 

The level of high grade corporate debt is more than 2X its pre-crisis peak. As Capex is down 10%, and net fixed business investment is 20% below 2000 levels. Corporations are burning and bleeding cash left right and center. Question: what has the debt been used for?

The Market Is In Line With History. The History Of Crashes (Stockman)

By punting again [this week], our dithering money printers at the Fed are continuing to fuel a monumental orgy of corporate bond issuance. It only enables companies to speculate in their own stocks with borrowed money, while heaping windfall gains on the fast money traders who hound corporate boards into strip-mining their own balance sheets. The level of high grade corporate debt outstanding has gone nearly parabolic in the last few years and now stands at more than 2X its pre-crisis peak. Yet even Yellen admitted during yesterday’s mindlessly meandering presser that business capital expenditure (CapEx) has been extraordinarily weak. In fact, non-defense CapEx orders excluding aircraft peaked in mid-2104 and are now down by 10%.

Even more to the point, real net fixed business investment after depreciation is still 20% below the level it reached way back in early 2000. That is, two bubbles ago. Perhaps the question about where all this hand-over-fist corporate borrowing is going might have occurred to at least one of the geniuses who voted to stand pat. But apparently it didn’t because once again Yellen insisted that “valuations are largely in line with their historical trends.” What in the world is our clueless school marm talking about? At the closing price yesterday, the S&P 500 traded at 25X the $87 per share reported for the last twelve month (LTM) period ending in June. And that was in the face of earnings that have plunged 19% since peaking in the September 2014 LTM period.

Yellen is right about the historical trends, of course. But not at all in a good way. In fact, on the eve of the last crash when the market peaked in October 2007 at about 1550, S&P 500 earnings during the most recent LTM period had posted at $79 per share. That means the peak pre-crash multiple was substantially lower than today at 19.7X. Even when S&P earnings peaked at $54 per share in September 2000, the multiple was only a tad higher than today at 26.5X. So, yes, the market is in line with history. That is, the history of crashes! The truth is, the Fed is inherently, relentlessly and radically in the financial bubble business. But the Keynesian school marm who runs it wouldn’t know a bubble if one transported her to the moon and back.

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The role of debt has been growing for a long time.

How to Suffocate Your Economy: Drown it in Massive Private Debt (Vague)

[..] if a country’s private debt to GDP ratio is low, let’s say 50%, then the households and businesses in that country generally have low loan-to-income ratios and are well positioned to power growth through increased leverage. And if a country’s private debt to GDP ratio is high, let’s say 200%, then the households and businesses in that country are generally overleveraged, with, on average, very high debt ratios. They are much less likely to be able to boost growth through more borrowing.

Chart 2 showed that private debt to GDP in major economies has been growing rapidly since World War II. However, it has been growing in size relative to GDP for a lot longer than that. It’s part of a process often described by economists as “financialization” or “financial deepening,” an increase in the size of a country’s debt and equity markets usually explained as simply the maturation of a market. But as we have seen, when it comes to debt, it is much more than that—it is the path from low leverage to overleverage for the participants in that economy. The benefit of increasing leverage from low levels has played a central role in the miraculous gains in incomes over the 200-plus years since the Industrial Revolution.

You can see this clearly in Chart 3. I have made a concerted effort to reconstruct more than 200 years of private debt history for the six countries in this chart—China, Japan, Germany, Britain, France, and the United States—because collectively, they have accounted for roughly 50% or more of global GDP since the Industrial Revolution. So studying the data of these six countries during this period gives us a fairly solid proxy for the world during the most important era of economic history. (This chart is a work-in-progress which will be augmented and refined in preparation for an upcoming book on this same subject.)

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Auckland, Sydney, London etc. should do the same.

Vancouver Property Sales To Foreigners Crash 96% (ZH)

China’s favorite offshore money laundering hub is officially no longer accepting its money. According to data released by British Columbia’s Ministry of Finance on Thursday, foreign investors officially disappeared from Vancouver’s property market last month after the local government imposed a 15% surcharge to curb a record-shattering surge in home prices. Overseas buyers accounted for a paltry 0.7% of the C$6.5 billion of residential real estate purchases in August in Metro Vancouver; this represents a 96% plunge from the seven weeks prior, when foreigners were responsible for 16.5% of transactions by value. According to the latest data overseas buyers snapped up C$2.3 billion of homes in the seven weeks before the tax was imposed, and less than C$50 million in the next four weeks.

[..] As Bloomberg notes, the plunge in foreign participation joins other signs of a slowdown in Canada’s most expensive property market. The silver lining is that while transactions may have ground to a halt, the government did pick up some extra tax revenues: British Columbia has raised C$2.5 million in revenue from the new levy since it took effect. Budget forecasts released last week indicated that the Pacific coast province expects foreign investors to scoop up about C$4.5 billion of real estate through March 2019. That may prove optimistic, because as reported two weeks ago as Chinese buyers wave goodbye to Vancouver, they have set their sights on another Canadian city: Toronto. According to the Star, sales of $1-million-plus Toronto-area single-family homes rose 83% year over year in July and August. That’s 3,026 homes, with 55% of them inside Toronto’s borders.

[..] if they are looking in Canada, we believe Toronto will be the most logical place for people to consider. Montreal and Calgary will probably also get a look-see,” Henderson said. Or maybe not. As CBC reported earlier this week, economist Benjamin Tal of CIBC said that Ontario will have little choice but to copy Vancouver and implement a tax on foreign house buyers. In a recent note to clients, the economist said the biggest problem facing policymakers with regard to hot housing markets in Toronto and Vancouver is a limit on the supply of new homes. “The main reason behind higher prices in the [Greater Toronto Area] is a policy-driven lack of land supply,” Tal said. “And with no change on that front, policymakers have to use demand tools to deal with what is essentially a supply problem.”

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I’m going to have my doubts here.

Merkel Rules out State Assistance for Deutsche Bank (BBG)

Chancellor Angela Merkel has ruled out any state assistance for Deutsche Bank in the year heading into the national election in September 2017, Focus magazine reported, citing unidentified government officials. The German leader also declined to step into the bank’s legal imbroglio with the U.S. Justice Department, which may seek as much as $14 billion in sanctions against Deutsche Bank’s mortgage-backed securities business, the magazine said. The finances of Germany’s biggest lender, which has lost almost half of its market value this year, are raising concern among German politicians.

At a closed session of Social Democratic finance lawmakers this week, Deutsche Bank’s woes came up alongside a debate over Basel financial rules, according to two people familiar with the matter. Germany’s government expects a “fair outcome” in the U.S. probe, the Finance Ministry said on Sept. 16. Deutsche Bank has said it’s unwilling to pay the maximum amount sought by U.S. authorities as investors fret about the bank’s capital. Chief Executive Officer John Cryan, 55, has struggled to boost profitability by selling riskier assets and eliminating jobs as unresolved legal probes and claims add to concerns that the lender will be forced to raise capital.

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Cut off dividends and share prices will fall through the floor.

EU Must Turn Off the Dividend Spigot at Under-Capitalized Banks (PS)

Dividend payments made by under-capitalized banks amount to a substantial wealth transfer from subordinated bondholders to shareholders, because it is bondholders who will suffer the losses in a crisis. Moreover, it is potentially a wealth transfer from taxpayers to private shareholders, because under new banking rules government bailouts are possible after bondholders have covered (bailed in) 8% of a bank’s equity and liabilities. By contrast, undercapitalized banks in the US are forced to halt all forms of capital distribution if they fail a stress test. Fortunately, following the 2016 round of stress tests, the EBA is now also considering this type of regulatory sanction. Thus, “competent authorities may also consider requesting changes to the institutions’ capital plan,” which “may take a number of forms such as potential restrictions on dividends required for a bank to maintain the agreed trajectory of its capital planning in the adverse scenario.”

We estimate that if European regulators had adopted this approach and forced banks to stop paying dividends in 2010 – the start of the sovereign debt crisis in Europe – the retained equity could have paid for more than 50% of the 2016 capital shortfalls. The figure above shows our calculated capital shortfalls, using the EBA stress test’s “adverse scenario” losses and the cumulative dividends these banks have distributed since 2010. Dividends paid out by some banks, such as BNP Paribas and Barclays, actually exceed the current capital shortfalls, while at others – such as Deutsche Bank, Commerzbank, and Société Générale – capital shortfalls far exceed dividends that would have been retained. The latter banks would still require substantial capital issuances on top of dividend restrictions to make up the difference. Nonetheless, our findings suggest a simple first step toward preventing bank capital erosion: stop banks with capital shortfalls from paying dividends (including internal dividends such as employee bonuses).

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Not everyone believes the omnipotency tale Beijing likes to spread.

China Continues to Battle Massive Capital Flight Problem (Brink)

Last summer, China’s stock market collapse and unexpected devaluation deepened its capital outflow problem and accelerated the fall of reserves, which had started in mid-2014. Since February, reserves have started to stabilize. While the situation is clearly better, China continues to struggle in terms of stabilizing its massive capital outflows. Within that context, foreign reserves seem to have become a policy target. Although capital outflows are still large, it’s not enough for reserves to start falling again. In 2015, the largest net outflows stemmed from the repayment of bank loans (close to $500 billion in “other investment” outflows), followed by unrecorded outflows of residents amounting to nearly $200 billion.

Portfolio flows (equity and bond) were also negative, but smaller. The situation has hardly improved in 2016, based on first quarter data. In fact, all types of capital recorded outflows, even net foreign direct investment (FDI), which was not the case in 2015. It’s important to note that Chinese residents have been driving capital outflows for years. The difference in 2015 is that non-residents stopped investing in China and started to move their capital out. Still, the bulk of the outflow was made by residents. These are unrecorded outflows and also include the investment of Chinese companies, as well as the loans of Chinese banks abroad (increasingly in the emerging world).

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SEC? FBI? Who can be trusted to investigate?

Naked Shorts Can’t Stay Naked Forever (Dayen)

A few years into his personal quest to understand how he had lost a million dollars on a penny stock, Chris DiIorio developed a sweeping hypothesis involving Knight Capital, the mammoth brokerage company that frequently traded in them. Knight earned $333 million in pre-tax profits in 2008, and another $232 million in 2009. But DiIorio didn’t think Knight was making that kind of money simply from executing transactions for clients. As a market maker, Knight was in the rare position of being able to legally sell a stock it didn’t have (the principle being that it will get that stock soon, so no worries). That’s called naked shorting. It’s illegal when regular people do it. DiIorio suspected that Knight, either on its own behalf or on behalf of clients, made a practice of artificially increasing the number of shares available in a stock through naked shorting, thereby depressing the price.

His suspicion grew when he noticed that Knight often traded in securities that were red-flagged on the Depository Trust Company’s “chill list.” The DTC is an obscure financial industry-owned company that manages the custody of more than $1 quadrillion in securities annually, recording the transfers with journal entries and guaranteeing the trade. The company makes it easy for people to buy and sell securities without needing to exchange paper stock But when the DTC senses trouble, it will stop clearing trades on a stock temporarily. A chilled stock can still trade — as long as the market participants handle the physical certificates themselves. But it can be a sign that something is gravely wrong. The DTC states on its website that it chills stocks “when there are questions about an issuer’s compliance with applicable law.” That doesn’t stop Knight from buying and selling them, though.

Its chief legal officer, Thomas Merritt, acknowledged at a 2011 Securities and Exchange Commission roundtable that the company actively traded chilled stocks, saying that as long as the security still trades, “we are going to be involved in that business.” And DiIorio found numerous examples of Knight trading chilled penny stocks. “I didn’t know they did that,” said Jim Angel, a Georgetown University business school professor. “I’m kind of shocked to think that Knight would be working with paper stock certificates.” He suggested that Knight might simply want to accommodate customers trying to get out of chilled stocks. “Or maybe they feel there’s enough interest in a security that they can trade profitably, even if they have to shuffle the certificates.” Because most other market makers flee chilled stocks, however, this means Knight can assume even more control over the stock price.

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Upper management should be dragged before a public committe.

Whistleblower Describes Years Of Fraudulent, Criminal Culture At Wells Fargo (BB)

Beth Jacobson was a Wells Fargo loan officer who blew the whistle on the bank’s predatory, racist loan-fraud in the runup to the 2008 financial crisis, which tanked the world’s economy and nearly wiped out Wells Fargo (they were rescued with a $36B taxpayer-funded bailout). Eight years later, Wells Fargo has fired 5,300 employees for participating in a scam that involved opening 2,000,000 fake accounts in its customers’ names, stealing their money and crashing their credit-ratings – the exec who oversaw this a $125M taxpayer-subsidized bonus, and CEO John Stumpf, who took home $200M in bonuses based on profits from the fraud, will keep the money and his job, but the whistleblowers who reported the fraud starting in 2011 were all illegally fired.

Jacobson describes how Stumpf – now CEO, then a top exec – was complicit in the fraud that helped precipitate the crash and the worst recession since the Great Depression. She pins blame for the loan-fraud on the bank’s aggressive sales targets – the same thing that caused the current fraud, suggesting that the bank hasn’t learned a fucking thing since 2008, except that it can get away with crime, every time. “One means of falsifying loan applications that I learned of involved cutting and pasting credit reports from one applicant to another. I was aware of A reps who would ‘cut and paste’ the credit report of a borrower who had already qualified for a loan into the file of an applicant who would not have qualified for a Wells Fargo subprime loan because of his or her credit history.

I was also aware of subprime loan officers who would cut and paste W-2 forms. IDs deception by the subprime loan officer would artificially increase the creditworthiness of the applicant so that Wells Fargo’s underwriters would approve the loan. I reported this conduct to management and was not aware of any action that was taken to correct the problem. “High-ranking Wells Fargo managers knew that this practice was going on, because after about a year of these standby explanations being given, underwriters in the underwriting department were told to call the customers directly rather than contact the loan officer who was working with the customer. The loan officers quickly figured out how to work around this by warning customers that underwriters might call them and then coaching the customers about what to say.

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CEO gone.

Former Employees File Class Action Against Wells Fargo (R.)

Two former Wells Fargo employees have filed a class action in California seeking $2.6 billion or more for workers who tried to meet aggressive sales quotas without engaging in fraud and were later demoted, forced to resign or fired. The lawsuit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas. “Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts,” the lawsuit filed on Thursday in California Superior Court in Los Angeles County said.

Wells Fargo has fired some 5,300 employees for opening as many as 2 million accounts in customers’ names without their authorization. On Sept. 8, a federal regulator and Los Angeles prosecutor announced a $190 million settlement with Wells. The revelations are a severe hit to Wells Fargo’s reputation. During the financial crisis, the bank trumpeted being a conservative bank in contrast with its rivals. The lawsuit accuses Wells Fargo of wrongful termination, unlawful business practices and failure to pay wages, overtime, and penalties under California law. Former employees Alexander Polonsky and Brian Zaghi allege Wells Fargo managers pressed workers to meet quotas of 10 accounts per day, required progress reports several times daily and reprimanded workers who fell short.

Polonsky and Zaghi filed applications matching customer requests and were counseled, demoted and later terminated, the lawsuit said. While executives at the top benefited from the activity, the blame landed on thousands of $12-per-hour employees who tried to meet the quotas and were often required to work off the clock to do so, the lawsuit said.

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It’s time to scrutinize the FBI’s role in the whole ‘affair’. That the Hillary people have not been fully honest is now so obvious one wonders why Comey et al have granted many immunity and let them off the hook in general.

Clinton Server Tech Told FBI Of Colleagues’ Worries About System (R.)

A technician hired by Hillary Clinton to run the private email system she used while U.S. secretary of state told investigators he tried to pass on colleagues’ concerns that the system might not comply with records laws, FBI interview summaries show. Bryan Pagliano, the technician Clinton hired when she joined the State Department in 2009, told federal investigators he relayed the concerns to Cheryl Mills, then Clinton’s chief of staff. Mills has previously testified under oath she could not recall anyone alerting her to potential problems with Clinton’s email arrangement.

The episode had not been disclosed until the Federal Bureau of Investigation released on Friday night nearly 200 pages of additional records from its year-long investigation into the handling of classified government documents by Clinton and her staff via an unauthorized email server in the basement of her New York home. Clinton has said the decision to use a private email system was a mistake, but the controversy has dogged her campaign as the Democratic candidate for the presidency and raised public doubts about her trustworthiness, public opinion polls show. Republicans have criticized her for putting national security at risk. The FBI closed the year-long investigation in July, recommending no charges, although FBI Director James Comey said Clinton and her staff had been “extremely careless” in handling classified government secrets.

Pagliano has declined to answer questions by Republican lawmakers about his work on Clinton’s server, but spoke to federal investigators after securing a form of immunity from prosecution. He told investigators two colleagues from the technology office approached him with concerns during Clinton’s first year after learning about the email system. One said it could lead to a “federal records retention issue,” Pagliano told investigators, and urged him to raise the concern with Clinton’s “inner circle.” A colleague also warned Pagliano “he wouldn’t be surprised” if classified information was being sent through Clinton’s unsecure system, Pagliano told the FBI.

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“Every day, on average, seven children and teens are killed by guns in America.”

America’s War On Its Own Children (G.)

It was just another day in America. And as befits an unremarkable Saturday, 10 children and teens were killed by gunfire. They died in altercations at gas stations, accidents in bedrooms, standing on stairwells and walking down the street, in gangland hits and by mistaken identity. Like the weather, none of them would make the national news because, like the weather, their deaths did not disturb the accepted order of things. Every day, on average, seven children and teens are killed by guns in America. Firearms are the leading cause of death among black children under 19, and the second greatest cause of death for all children of the same age, after car accidents. I picked this day at random, and spent two years trying to find out who these children were.

I searched for their parents, pastors, baseball coaches, and scoured their Facebook and Twitter feeds. The youngest child was nine, the oldest 19. Four years ago, for a moment, there was considerable interest in the fact that large numbers of Americans were being fatally shot. On 14 December 2012, 20-year-old Adam Lanza shot his mother, then drove to Sandy Hook Elementary School and shot 20 small children and six staff dead. Mass shootings comprise a small proportion of gun violence, but they disturb America’s self-image in a way that the daily torrent of gun deaths does not. “Seeing the massacre of so many innocent children … it’s changed America,” said the Democrat senator Joe Manchin, who championed a tepid gun-control bill. “We’ve never seen this happen.”

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“At the current rate, the death toll for 2016 is expected to easily surpass the figure for 2015 of 3,771..”

Death Toll In Migrant Shipwreck Off Egypt Rises To 300 (G.)

A record number of migrants is expected to drown in the Mediterranean in 2016, after the estimated death toll in this week’s latest shipwreck rose to about 300 on Friday. Egyptian officials have rescued about 160 survivors from Wednesday’s shipwreck off the country’s north coast, leaving about 150 people still unaccounted for, according to the International Organisation for Migration (IOM). Those confirmed dead include 10 women and a baby, taking the estimated number of migrants to die in the Mediterranean so far this year to more than 3,500. At the current rate, the death toll for 2016 is expected to easily surpass the figure for 2015 of 3,771, which was the highest ever recorded. By this stage in 2015, 2,887 people had drowned.

The number of people trying to reach Europe has fallen significantly since last year’s record levels, as a result of the deal struck between the EU and Turkey and the closure of a humanitarian corridor between Greece and Germany. The flow of migrants from the three main departure points – Libya, Turkey and Egypt – stands at roughly the same level as 2014.

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Aug 142016
 
 August 14, 2016  Posted by at 8:26 am Finance Tagged with: , , , , , , , ,  


Harris&Ewing Goat team, Washington, DC 1917

Silicon Valley May Get Hit By China’s ‘Virtual Reality’ Economy (CNBC)
High-Risk ‘Shadow’ Credit in China Put at $2.9 Trillion by IMF (BBG)
Insanity, Oddities and Dark Clouds in Credit-Land (AM)
The Next President Should Forgive All Student Loans (TIME)
The Big Idea about Private Debt (Steve Keen)
How to Break the Power of Money (Korten)
TTIP: The Suicide of Nations (PCR)
How Global Elites Forsake Their Countrymen (Noonan)
Megaupload’s Dotcom To Seek A Review Of US Court’s Forfeiture Ruling (R.)
A Year After The Crisis Was Declared Over, Greece Is Still Spiralling Down (G.)
The Greek Crisis Will Flare Up Again. And Why Should It Not? (G.)
Aid and Attention Dwindling, Refugee Crisis Intensifies in Greece (NYT)
Germany To Send 3,000 Refugees Back To Greece (KTG)

 

 

Virtual money economy.

Silicon Valley May Get Hit By China’s ‘Virtual Reality’ Economy (CNBC)

“Japan 25 years ago and China now were both debt [and] currency fueled flood of cash into U.S. assets inflating both valuations and fears,” Josh Wolfe, co-founder and managing partner of Lux Capital, a $700 million venture capital firm, told CNBC via email this week. Like other skeptical investors, Wolfe believes there are “really two Chinas: A high growth tech and biotech driven economy conflated with a levered old asset state owned influenced burden of very bad decision making and governance.” China’s high debt, slowing growth and appetite for U.S. assets—the country already owns trillions in U.S. Treasuries and dollars—raises the stakes for tech companies if the country’s fortunes should suddenly reverse.

Of the nearly $60 billion that the National Venture Capital Association says was invested in U.S. startups last year, about a quarter of those flows came from one destination: China. Along with art and high end real estate, tech ventures have been the primary recipient of China’s largesse. Meanwhile, 2016 has already exceeded last year’s record flow of Chinese capital, according to recent figures from The Rhodium Group. Wolfe told CNBC that Chinese investors “are fleeing a virtual reality economy in China and funding virtual reality startups in the U.S. They seem to be choosing illiquidity and uncertainty, denominated in dollars over liquidity and certainty of devaluation denominated in yuan.”

China’s slowing economy has reverberated across the globe, sending commodities reeling and giving investors fright. That pain is far from over: The IMF warned on Friday that China’s real GDP could sink below 6% in 2020. If Chinese interest rates rise or liquidity tightens, the flood of money threatens to do “what all excesses do: reverse or stop,” said Lux Capital’s Wolfe. “As the China bubble pops, it has been commodities and commodity exporting countries in the first wave, then banks and non-performing loans, then it will be the assets they financed or were secured by.”

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Yuan+Junk=Yunk.

High-Risk ‘Shadow’ Credit in China Put at $2.9 Trillion by IMF (BBG)

IMF staff said that 19 trillion yuan ($2.9 trillion) of Chinese “shadow” credit products are high-risk compared with corporate loans and highlighted the danger that defaults could lead to liquidity shocks. The investment products are structured by the likes of trust and securities companies and based on equities or on debt – typically loans – that isn’t traded, staff members John Caparusso and Kai Yan said in a report released Friday. The commentary highlighted the potential for risks bigger to the nation’s financial stability than from companies’ loan defaults. While loan losses can be realized gradually, defaults on the shadow products could trigger risk aversion that’s harder to manage, the report said.

The “high-risk” products offer yields of 11% to 14%, compared with 6% on loans and 3% to 4% on bonds, the commentary said. The lowest-quality of these products are based on “nonstandard credit assets,” typically loans, it said. In a separate document in a bundle released by the IMF, the Chinese banking regulator was cited as saying that banks’ exposures to “nonstandard credit assets” were a key concern, with moves already made to require higher provisioning against such exposures than for regular loans.

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“Foreign buying of US assets very often reaches record highs prior to major financial accidents.”

Insanity, Oddities and Dark Clouds in Credit-Land (AM)

Bond markets are certainly displaying a lot of enthusiasm at the moment – and it doesn’t matter which bonds one looks at, as the famous “hunt for yield” continues to obliterate interest returns across the board like a steamroller. Corporate and government debt have been soaring for years, but investor appetite for such debt has evidently grown even more. A huge mountain of interest-free risk has accumulated in investor portfolios and on bank balance sheets. Globally, more than $13 trillion in sovereign bonds trade at negative yields to maturity. In spite of soaring defaults, junk bond yields have collapsed again as well. In short, insanity rules in the bond markets. A recent article in the FT informs us of “a wave of foreign demand for US corporate debt”:

“Record-low interest rates are no barrier for US companies finding buyers for their debt thanks to a relentless global quest for fixed returns that shows little sign of easing. The pace of US corporate debt sales – which has not been fast enough to quench investor demand – is expected to continue unabated driven by foreign buyers in a world where roughly $13tn of sovereign and corporate debt trades in negative territory. “It is a low return world,” says Ed Campbell, a portfolio manager with asset manager QMA. “You don’t have a lot of asset classes that are attractive and there is a flight to quality where the US is outperforming.” More than $2.3tn of dollar-denominated debt has been issued by companies and banks since the year began, including three of the ten largest corporate bond sales on record, Dealogic data show.”

This not only shows that “investors” (we use the term loosely) are insane, it also happens to be a contrary indicator. Foreign buying of US assets very often reaches record highs prior to major financial accidents. Is this really a “flight to quality?” Corporate defaults are currently at the highest level since 2009, with US defaults clearly leading the pack:

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And what should(s)he do for everyone else who’s in trouble? Can’t very well help only students.

The Next President Should Forgive All Student Loans (TIME)

If Hillary Clinton is to win this November, she needs to motivate the electorate to come out to vote for something more than a justified aversion to Donald Trump. Particularly for younger voters and voters with families, she has to capture their imaginations with a bold, simple, and common sense proposal to address one of the most critical financial and social problems currently facing a generation: the student loan crisis. And she needs to do so in a way that can do the most immediate good for the nation at large. First, all outstanding student loan debt should be forgiven. Second, a new loan program should be created that is tied to incentives for college graduates to choose careers in public service and which indexes repayment to income.

Current outstanding student loans amount to 1.3 trillion dollars, roughly 10% of all household debt. Student loan debt is larger than either car loans or credit card debt. Forty-two million Americans hold student loan debt. Student debt has been a drag on younger generations’ incomes and has contributed to the stagnation in middle class earnings. The average debt at graduation has skyrocketed from $10,000 in 1993 to more than $35,000 in 2016. Furthermore, the federal government has set interest rates on student loans at twice the current market rate of other types of loans. Going to college should not be a profit center for Wall Street and the federal government.

By forgiving student loan debt—which is largely held by the government—a tremendous economic stimulus would be generated, whose beneficiaries are people, not banks. The cost is comparable to the stimulus program created in the wake of the financial crisis of 2008, and, in this case, Main Street and not Wall Street will benefit. Quickly, more than two generations of Americans would be able to invest in homes and develop and support families. And the Americans who benefit are those who have obtained education and skills, but whose careers have been hobbled by an inordinate amount of debt.

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Private debt sinks societies. For no good reason. Make forgiving student debt part of a modern jubilee?!

The Big Idea about Private Debt (Steve Keen)

This is a talk I gave to the Northern Ireland Big Ideas Event organised by NICVA: the “Northern Ireland Council for Voluntary Action” (https://www.nicva.org/event/big-ideas-…). Unfortunately I ran out of time to finish my presentation on why a “Modern Debt Jubilee” is needed to escape from the current economic state of credit stagnation, but I covered why it is this–and not “secular stagnation” that explains the prevalence of low rates of economic growth globally.

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True but not strong.

How to Break the Power of Money (Korten)

Our current political chaos has a simple explanation. The economic system is driving environmental collapse, economic desperation, political corruption, and financial instability. And it isn’t working for the vast majority of people. It serves mainly the interests of a financial oligarchy that in the United States dominates the establishment wings of both the Republican and Democratic parties. So voters are rebelling against those wings of both parties—and for good reason. As a society we confront a simple truth. An economic system based on the false idea that money is wealth—and the false promise that maximizing financial returns to the holders of financial assets will maximize the well-being of all—inevitably does exactly what it is designed to do:

1. Those who have financial assets and benefit from Wall Street’s financial games get steadily richer and more powerful. 2. The winners use the power of their financial assets to buy political favor and to hold government hostage by threatening to move jobs and tax revenue to friendlier states and countries. 3. The winners then use this political power to extract public subsidies, avoid taxes, and externalize environmental, labor, health, and safety costs to further increase their financial returns and buy more political power. This results in a vicious cycle of an ever greater concentration of wealth and power in the hands of those who demonstrate the least regard for the health and well-being of others and the living Earth, on which all depend.

Fewer and fewer people have more and more power and society pays the price. A different result requires a different system, and the leadership for change is coming, as it must, from those for whom the current system does not work.

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“The agreements make global corporations immune to laws and regulations that can be said to adversely impact their profits.”

TTIP: The Suicide of Nations (PCR)

The TransAtlantic and TransPacific “partnerships” are the economic and financial counterpart to Washington’s military and foreign policy push for world hegemony. TTIP and TPP are neither partnerships nor trade agreements. They are instruments of financial imperialism that, if they come into effect, subordinate the sovereignty of countries to the profits of global corporations. The reason the “partnerships” are negotiated in secrecy without public discussions and the participation of the national legislatures is that the so-called agreements cannot stand the light of day. The reason is simple. The agreements make global corporations immune to laws and regulations that can be said to adversely impact their profits.

It makes no difference whether the laws protect the environment, the safety of food and workers or are part of the social fabric. If the laws impose costs that reduce profits, corporations can sue the governments in “corporate tribunals” in which the corporations themselves serve as judge and jury. This is no joke. Public Citizen reports that the agreements would greatly expand the privileges given to foreign corporations by the North American Free Trade Agreement under which $350 million has been paid out by governments to corporations because of costs of complying with toxic waste and logging rules, with $13 billion in claims pending.

Economist Michael Hudson cites a British study that public provision of health care, such as the UK’s National Health Service, is a TTIP target on the grounds that not only health care regulations but also public provision of health care harms the commercial interests of corporations. TTIP and TPP are tools for disenfranchising electorates and overturning democratic outcomes and for looting taxpayers via damage suits against governments for the costs of complying with health, safety, environmental, and social laws and regulations. The agreements place corporations above the laws of countries. The agreements have the potential of producing a worldwide sweatshop with starvation wages devoid of environmental and safety legislation.

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Curious ideas when coming from the Wall Street Journal.

How Global Elites Forsake Their Countrymen (Noonan)

On Wall Street, where they used to make statesmen, they now barely make citizens. CEOs are consumed with short-term thinking, stock prices, quarterly profits. They don’t really believe that they have to be involved with “America” now; they see their job as thinking globally and meeting shareholder expectations. In Silicon Valley the idea of “the national interest” is not much discussed. They adhere to higher, more abstract, more global values. They’re not about America, they’re about … well, I suppose they’d say the future. In Hollywood the wealthy protect their own children from cultural decay, from the sick images they create for all the screens, but they don’t mind if poor, unparented children from broken-up families get those messages and, in the way of things, act on them down the road.

From what I’ve seen of those in power throughout business and politics now, the people of your country are not your countrymen, they’re aliens whose bizarre emotions you must attempt occasionally to anticipate and manage. In Manhattan, my little island off the continent, I see the children of the global business elite marry each other and settle in London or New York or Mumbai. They send their children to the same schools and are alert to all class markers. And those elites, of Mumbai and Manhattan, do not often identify with, or see a connection to or an obligation toward, the rough, struggling people who live at the bottom in their countries. In fact, they fear them, and often devise ways, when home, of not having their wealth and worldly success fully noticed.

Affluence detaches, power adds distance to experience. I don’t have it fully right in my mind but something big is happening here with this division between the leaders and the led. It is very much a feature of our age. But it is odd that our elites have abandoned or are abandoning the idea that they belong to a country, that they have ties that bring responsibilities, that they should feel loyalty to their people or, at the very least, a grounded respect.

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“Did they think they can separate me from my kids without a fight? I fight corrupt US empire clowns all day, every day. Not even tired.”

Megaupload’s Dotcom To Seek A Review Of US Court’s Forfeiture Ruling (R.)

German tech entrepreneur and alleged internet pirate Kim Dotcom will seek a review of a Federal Court decision which rejected his bid to keep hold of millions of dollars in assets held in Hong Kong and New Zealand, his lawyer said. A three-judge panel of the 4th Circuit U.S. Court of Appeals ruled two to one on Friday that Dotcom could not recover his assets because by remaining outside the U.S., he was a fugitive, which disentitled him from using the resources to fight his case. Dotcom’s lawyer Ira P. Rothken said his client would seek a review of the decision in front of the full bench and, if necessary, petition the Supreme Court.

“This opinion has the effect of eviscerating Kim Dotcom’s treaty rights by saying if you lawfully oppose extradition in New Zealand, the U.S. will still call you a fugitive and take all of your assets,” Rothken said in an email to Reuters received on Sunday. Dotcom has been fighting extradition from New Zealand over charges of copyright infringement, racketeering and money laundering in the United States related to the Megaupload file-sharing site he founded in 2005. A New Zealand court ruled in December he could be extradited, but an appeal hearing has been set for later this month. Dotcom responded to the Federal Court ruling on Twitter. “Did they think they can separate me from my kids without a fight? I fight corrupt US empire clowns all day, every day. Not even tired.”

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The writedowns total down the road keeps growing rapidly.

A Year After The Crisis Was Declared Over, Greece Is Still Spiralling Down (G.)

In a side street in the heart of Athens, two siblings are hard at work. For the past year they have run their hairdressing business – an enterprise that was once located on a busy boulevard – out of a two-bedroom flat. The move was purely financial: last summer, as it became clear that Greeks would be hit by yet more austerity to foot the bill for saving their country from economic collapse, they realised their business would go bust if it continued operating legally. “We did our sums and understood that staying put made no sense at all,” says one sibling. “If we didn’t [offer] receipts, if we avoided taxes and social security contributions, we could just about make ends meet.”

They are far from being alone. A year after debt-stricken Greece received its third financial rescue in the form of international funding worth €86bn, such survival techniques have become commonplace. For a middle class eviscerated by relentless rounds of cuts and tax rises – the price of the country’s ongoing struggle to avert bankruptcy – the draconian conditions attached to the latest bailout are invariably invoked in their defence. Measures ranging from the overhaul of the pension system to indirect duties – slapped on beer, fuel and almost everything in between – and a controversial increase in VAT are similarly cited by Greeks now reneging on loan repayments, property taxes and energy bills.

Against a backdrop of monumental debt – €320bn, or 180% of GDP, the accumulation of decades of profligacy – fatalism is fast replacing pessimism on the streets. “Our country is doomed,” sighs Savvas Tzironis, summing up the mood. “Everything goes from bad to worse.” Close to half a million Greeks are believed to have migrated since the crisis begun, thanks to the searing effect of persistent unemployment (at just under 24%, the highest in Europe) and an economy that has shed more than a third of its total output over the past six years. The nation has been assigned some €326bn in bailout loans since May 2010 – the biggest rescue programme in global financial history. Yet the fear that it is locked in an economic death spiral was given further credence last week when Eurobank analysts announced that consumption and exports had also fallen, by 6.4% and 7.2%, in the second quarter of the year.

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And why should Larry Elliott not call a spade a spade? What’s happening to Greece is not some ‘policy mistake’, all parties involved know exactly what they do.

The Greek Crisis Will Flare Up Again. And Why Should It Not? (G.)

Greece has ceased to make headlines. A year ago, the TV cameras were trained on the protesters thronging the streets of Athens because there were fears that a crisis that had been steadily becoming more acute in the first half of 2015 could result in the single currency splintering. That threat was removed by a deal that involved a humiliating climbdown by the Syriza-led government. Greece received a bailout, but with harsh conditions attached. There were three obvious problems with that 2015 deal, which secured Greece its third bailout in five years. The first was that the new dose of austerity would make it more difficult for Greece to emerge from a slump just as severe as that which gripped the US in the 1930s.

The second was that Greece’s creditors were making unrealistic assumptions for growth and deficit reduction. The third was that sooner or later the Greek crisis would flare up again. It was a case of when, not if. It has not all been bad news over the past 12 months. Fears that yields on Greek bonds would soar after the UK’s Brexit vote did not materialise. Some of the tough capital controls that were imposed in the summer of 2015 to protect the banking system have been eased. There has been talk that by next summer it will be possible for the government in Athens to raise money in the world’s financial markets by selling Greek government bonds. All that said, though, the first two predictions have come true.

By last summer, Greece had suffered a five-year slump that was on a par with the damage caused to the US economy in the Great Depression. Yet the country’s creditors thought it was a good idea to suck even more demand out of the economy through spending cuts and tax increases. The result has been depressingly predictable. Far from there being a resumption of growth, the economy has continued to contract. Greece’s national output was 1.4% lower in the first three months of 2016 than it was a year earlier. Consumer spending was down by 1.3%. Nor, with confidence at rock bottom, is there much prospect of better times. Greece remains deep in recession.

[..] The IMF says that without debt relief, Greece’s debt could hit 250% of GDP by the middle of the century. Germany would prefer those discussions to be delayed until after its election in autumn next year. But the chances are that Greece will be back in the headlines before then.

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Oh, irony. Just a few days after I wrote about Greece’s 15 minutes of fame in Meanwhile in Greece.., both the Guardian and the NY Times happen to notice the same thing. “..ceased to make headlines..” , “..Attention dwindling..”

Aid and Attention Dwindling, Migrant Crisis Intensifies in Greece (NYT)

Seven months after the EU shut the doors to large numbers of newcomers, Greece remains Europe’s de facto holding pen for 57,000 people trapped amid the chaos. Many are living in a distressing limbo in sordid refugee camps on the mainland and on Greek islands near Turkey. A year after the world was riveted by scenes of desperate men, women and children streaming through Europe, international attention to their plight has waned now that the borders have been closed and they are largely confined to camps. Anti-immigrant sentiment has surged since last year in many countries, especially as people who entered Europe with the migrant flow are linked to crimes and, in a few cases, attacks planned or inspired by the Islamic State or other radical groups.

Neither the prosperous nations of Western and Northern Europe, where the refugees want to settle, nor Turkey, their point of departure for the Continent, are living up to their promises of help. [..] The ranks of those in limbo are most likely to grow despite a deal to resolve the crisis that took effect March 20 between the EU and Turkey. While the number of migrants entering Greece has dwindled from nearly 5,000 a day last year, hundreds have started crossing the Aegean Sea again after the July 15 coup attempt in Turkey. Few of the resources pledged by the EU to assist the asylum seekers and process their applications have actually come through, leaving the Greek authorities struggling to cope with a daunting humanitarian and logistical challenge that has fallen from view in the rest of Europe.

European Union member states have sent just 27 of the 400 asylum specialists and 24 of the 400 interpreters they had agreed to provide to process claims for refugees like Mrs. Madran. So far, 21,000 migrants have been registered for asylum; 36,000 have not. A union plan to ease Greece’s burden by relocating tens of thousands of asylum seekers to the Continent has also fizzled, with European countries taking less than 2,300 people.

The bottlenecks have overwhelmed many of the camps, especially on the Greek islands, where migrants arriving after the March 20 deal are supposed to be held until being deported to Turkey. That program has stalled because of legal challenges and because Greece must process each asylum application first. So far, 468 of the more than 10,000 people who have arrived since the deal took effect have been returned. Turkish monitors assigned to assist were fired by President Recep Tayyip Erdogan of Turkey after the coup attempt against him.

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“The cost for Greece since the beginning of the Refugee Crisis “is more than €2 billion, the EU has allocated so far €330million – not to the Greek government but to NGOs, mostly NGOs from abroad..” Makes you wonder how much of that €330million has actually been used to help refugees, and how much on NGO operating costs.

Germany To Send 3,000 Refugees Back To Greece (KTG)

I thought, EU members states were supposed to take 6,000 refugees per month from Greece – according to some forgotten EU Deal signed the European Commission and the EU member states. Reality teaches us, the deal will work the other way around. Member states will send refugees back to …Greece. Blame the Dublin III Agreement. Germany decided to send to Greece and specifically to Crete more than 3,000 refugees in first phase. Berlin considers that this number is “redundant” in its territory. According to local media ekriti.gr, the Greek government has adopted this German decision, while Migration Minister Yiannis Mouzalas chaired a revelant meeting in Herakleion recently and announced the transfer.

The refugees will start coming by plane initially in Heraklion and Chania in December. Mouzalas had said that they will come after the tourist season. Independent MEP Notis Marias also confirmed the transfer in an interview with Radio Kriti. The cost for Greece since the beginning of the Refugee Crisis “is more than two billion euro, the EU has allocated so far €330million – not to the Greek government but to NGOs, mostly NGOs from abroad,” ekriti notes. Meanwhile the influx from Turkey started to increase again, more than 650 refugees and migrants arrived last week. Athens is worried that Ankara will draw back from the EU-Turkey deal in October.

Read more …

Feb 282016
 
 February 28, 2016  Posted by at 9:07 am Finance Tagged with: , , , , , , , , ,  


Harris&Ewing US Weather Bureau kiosque, Pennsylvania Avenue, Washington, DC 1921

Markets At Risk As G20 Proves Investor Hopes Were “Pure Fantasy” (ZH)
Currency Wars Coming In Leaderless World: Citi’s Buiter (CNBC)
G-20 Wants Governments Doing More, and Central Banks Less (BBG)
We’re In Recession And It’s Getting Worse: Ron Paul (CNBC)
PBoC Defends Halting Publication Of Sensitive Financial Data (SCMP)
How Xi Jinping Is Bringing China’s Media To Heel (Guardian)
Mervyn King: New Financial Crisis Is ‘Certain’ Without Reform Of Banks (PA)
Hidden Debt That No One Is Talking About -And It Involves You- (SMH)
North Sea Firms Are ‘Sleepwalking Into Disaster’ As Insolvencies Loom (Tel.)
European Oil Majors Tally $19 Billion In Losses (MW)
Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses (BBG)
How Land Barons, Industrialists And Bankers Corrupted Economics (Kent)
Alabama Lawmakers To Cities: We Won’t Let You Raise The Minimum Wage (CSM)
The Donald – The Good And Bad Of It (David Stockman)
Switzerland Votes On Expelling Foreigners For Minor Offences (Guardian)
Double Crisis Deepens Despair In Greece’s ‘Warehouse Of Souls’ (Guardian)

As I said yesterday before the communique was out.

Markets At Risk As G20 Proves Investor Hopes Were “Pure Fantasy” (ZH)

Anyone hoping this week’s G-20 meeting would yield some manner of “Shanghai Accord” to revive sluggish global growth, pull the global economy out of the deflationary doldrums and calm jittery markets that have seen harrowing bouts of volatility in the first two months of the year are disappointed on Saturday. The joint communique issued by policymakers at the end of the two-day summit is bland and generic, with officials parroting vacuous promises to avoid competitive currency devaluations and maintain monetary policies aimed at supporting economic activity and price stability. Officials pledged to “consult closely” on FX markets, a reference presumably to China’s “surprise” August 11 deval and the PBoC’s move in December to adopt a trade weighted basket as a reference point for the RMB, a move that telegraphed lots of downside for the currency.

The statement also “acknowledges” the fact that geopolitical risks abound and as Bloomberg noted this morning, “officials added a potential ‘Brexit’ to its long worry list in the communique.” “That’s a win for Chancellor of the Exchequer George Osborne, who had sought to rally international finance chiefs behind the campaign to keep Britain in the European Union,” Bloomberg goes on to point out. “Downside risks and vulnerabilities have risen,” due to volatile capital flows and slumping commodities but – and this was a critical passage – “monetary policy alone cannot lead to balanced growth.” What?! We thought counter-cyclical Keynesian tinkering was the magic elixir. A cure-all that smooths business cycles and creates demand out of thin air.

Now you’re telling us it “can’t lead to balanced growth” and implicitly that Paul Krugman is a snake oil salesman? This can’t be. “The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” the statment continues, in a rather dour assessment of the economic landscape. “While recognising these challenges, we nevertheless judge that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy,” officials added. Right. If markets were “reflecting the underlying fundamentals” of this global deflationary trainwreck, things would probably be even more volatile.

Predictably, everyone called on fiscal policy to save the day, in what amounts to a tacit admission that central banks have failed. “Countries will use fiscal policy flexibly to strengthen growth, job creation and confidence, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path,” the statement reads. So countries will somehow adopt expansionary fiscal policies without resorting to deficit financing via debt sales. So, magic. Got it. Long story short, there is no “Shanghai Accord” akin to the 1985 Plaza Accord between the United States, France, West Germany, Japan, and the United Kingdom, which agreed to weaken the USD to shore up America’s trade deficit and boost economic growth. All we have here is a generic statement and empty promises.

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Even Buiter agrees.

Currency Wars Coming In Leaderless World: Citi’s Buiter (CNBC)

The global economy is bound to remain leaderless, as G-20 countries meeting in Shanghai on Friday are unlikely to produce anything more than a rhetorical statement, Citigroup’s chief economist Willem Buiter said. Buiter said Friday the global economy truly needs an agreement on exchange rates that will be defended through intervention, as well as expansion of supportive monetary policy, fiscal stimulus modulated according to countries’ needs, and “supply side reforms that sustain animal spirits in the corporate sector.” “You’re not going to get any of that in substance. There is no leadership in the global economy. And there is no willingness to forgo the short-run benefits of beggar-thy-neighbor exchange rate depreciation. Currency wars will be the reality of what we’ll see over the next few years,” he told CNBC’s “Squawk on the Street”.

Buiter and Citigroup analysts said in a note Wednesday the risk of the global economy falling into a recession is rising as fundamentals remain poor. “We are currently in a highly precarious environment for global growth and asset markets after two to three years of relative calm,” Citigroup said, noting that global growth was “unusually weak” in the fourth quarter at around 2 percent. Buiter said central banks are nearly out of ammo when it comes to using conventional and unconventional monetary policy as a means of stimulating demand. “If we have a further slowdown, it will have to be combined more with the fiscal policy, and the world just isn’t ready for that, institutionally, politically and any other way,” he said.

At the same time, the private and public sectors in most advanced economies have become highly leveraged, he noted. Citi is not expecting a U.S. recession, provided no surprises from abroad send the dollar sharply higher. But it does anticipate a further incremental slowing in the absence of a supportive Federal Reserve and as corporations ratchet up debt following a period of “unspectacular, mediocre” growth, he said. Markets have appropriately priced in the risk of recession following last year’s “excessive optimism,” he said. “Markets are ahead of the policymakers here for once,” he said. “People have now rediscovered that, yes, future earnings growth projections on which the stock valuations were based were unrealistic.”

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While knowing that governments won’t.

G-20 Wants Governments Doing More, and Central Banks Less (BBG)

Finance chiefs from the world’s top economies committed their governments to doing more to boost global growth amid mounting concerns over the potency of monetary policy. In a pledge that will prove easier to write than deliver and may disappoint investors looking for a coordinated stimulus plan, the Group of 20 said “we will use fiscal policy flexibly to strengthen growth, job creation and confidence.” After a two-day meeting in Shanghai, finance ministers and central bank governors also doubled down on a line from their last gathering that “monetary policy alone cannot lead to balanced growth.” For those few analysts calling for a 1985 Plaza Accord-type agreement to address exchange-rate tensions, there was no such luck: IMF Managing Director Christine Lagarde said there were no discussions about anything like that.

The G-20 members did reaffirm they will refrain from competitive devaluations, and – in new language – agreed to consult closely on currencies. An increasing sense monetary policy is reaching its limit permeated officials’ briefings during the meetings that ended Saturday. While central banks proved critical in avoiding a global slide into depression last decade, there is now no consensus among the world’s top economic guardians backing stepped-up monetary stimulus. That leaves focus on fiscal polices that are subject to domestic political constraints, and a structural-reform agenda the G-20 said will be gauged through a new indicator system. “Central bankers have done their bit in recent years to stabilize the world economy,” said Frederic Neumann at HSBC in Hong Kong.

“But as their tools are losing their effectiveness, only more aggressive fiscal policy and structural reforms will help to lift growth.” Among those publicly indicating a potentially reduced role for central banks was Lagarde, who said Friday the effects of monetary policies, even innovative ones, are diminishing. Bank of England Governor Mark Carney used a Shanghai speech ahead of the G-20 to voice skepticism over negative interest rates – now in place in continental Europe and Japan – and their ability to boost domestic demand.

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“They’re paid to spin it in a positive manner..” “You can’t expect them to say anything else.”

We’re In Recession And It’s Getting Worse: Ron Paul (CNBC)

Ron Paul wants to deliver a message to the market that he claims the Federal Reserve refuses to do itself. The former U.S. Republican congressman said this week that the Fed has been propping up markets, and the U.S. economy has already entered a recession despite what central bankers might say. “They’re paid to spin it in a positive manner,” the libertarian firebrand told CNBC’s “Futures Now” in an interview. He added: “You can’t expect them to say anything else.” Paul’s warning comes as a growing number on Wall Street have turned pessimistic on the economy. This week, Citigroup analysts cautioned in a note that the risk of the global economy sinking into a full-fledged recession is on the rise, amid a “tightening in financial conditions everywhere.”

Dragging down the economy is a massive load of personal and sovereign debt, Paul said. A 2015 analysis by the McKinsey Global Institute said that global debt had grown by $57 trillion in the last several years, while no major economy has successfully de-leveraged since 2007. According to Paul, the Fed has played a large role in that accumulation of debt by implementing artificially low interest rates for years. This has pushed individuals and companies to spend beyond their means, he added.

“When things get out of kilter from artificially low interest rates…the only correction is the liquidation of the debt, but that is not permissible,” Paul said. Now, Paul warned that the government may be losing control of markets, which will lead to more volatility in stocks. “Everything is designed to keep the stock market alive. At the same time, the employment numbers when you look at them closely aren’t all that great,” he said. In January, the U.S. economy added 151,000 jobs, missing economist expectations and falling well short from the previous month. From here, Paul said growth will continue to deteriorate. “I think that the conditions will get a lot worse,” he said. “The slope is going to be down, for economic growth and prosperity.”

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Lame defense that breaks down confidence instead of building it up.

PBoC Defends Halting Publication Of Sensitive Financial Data (SCMP)

China’s central bank has defended the removal of sensitive data from a regular financial report used by the market to assess the flow of capital in and out of the country. The People’s Bank of China said in a statement that the figures were no longer published as they were misleading and not an accurate reflection of capital flows. The removal of the data comes as huge amounts of cash is flowing out of China as the nation’s economy slows and its currency weakens. China’s foreign exchange reserves fell by a record US$108 billion in December and US$99.4 billion in January. The absence of the regular figures in the report was first reported by the South China Morning Post last week. Analysts had complained that sudden lack of clear information made it hard for markets to draw a clear picture of the financial positions in China’s banking system.

Figures on the “position for forex purchase” for all financial institutions, including the central bank, were regularly published in the PBOC’s monthly report on the “Sources and Uses of Credit Funds of Financial Institutions”. The December reading in yuan was 26.6 trillion yuan. But the data was missing in the central bank’s latest report. The central bank did publish figures for its own purchases of foreign exchange. A central bank statement issued before the start of a G20 finance ministers and central bank leaders meeting in Shanghai said the figures on “commercial banks foreign exchange transactions do not necessarily affect the central bank’s foreign exchange position, nor necessarily reflect capital flows”. The data has “little resemblance to its original meaning and cannot reflect the real condition of capital flows”, the statement said.

The indicator was useful to measure capital flows when almost all foreign exchange at commercial banks was purchased in yuan, but particularly after China joined the World Trade Organisation in 2001 the correlation between foreign exchange and yuan positions at commercial banks was no longer clear, the central bank said. The data removed from the report used to be closely monitored by analysts and the media as a guide to capital flows in and out of China. Chen Xingdong, chief economist at BNP Paribas in Beijing, said: “If China’s capital flows were not so closely watched, the tweak may not stir debate, but as China’s capital flow situation is such a hot issue the central bank’s adjustment is put under the spotlight. China’s central bank has to improve its communications” with the market, he said.

[..] Christopher Balding, an associate professor at Peking University HSBC Business School, said the change in published data was relatively small, but still made it more complicated to track China’s capital flows. “Rather than censoring or redacting, it is better to say obfuscating or making [it] more difficult to track,” said Balding. It showed the central bank was unaware “how sceptical people are of these types of surprises and Chinese data”, he said. The problems with central bank data were similar to figures released by other Chinese government agencies, according to Balding. “They are constantly redefining key data to mean different things, most of the time without telling anyone…you never know if you are making the correct comparison.”

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Great way to create confidence.

How Xi Jinping Is Bringing China’s Media To Heel (Guardian)

It was an astonishing admission from one of the Communist party’s key mouthpieces: with China’s economic star fading, its leaders now urgently needed to strengthen their hold on the media in order to maintain control. “It is necessary for the media to restore people’s trust in the Party,” an editorial in the China Daily argued this week in the wake of a high-profile presidential tour of the country’s top news outlets in which Xi Jinping demanded “absolute loyalty” from their journalists. “The nation’s media outlets are essential to political stability.” China’s government-run media has long been a propaganda tool of the Party with Chairman Mao once famously declaring: “Revolution relies on pens and guns.”

But as Xi Jinping enters his third year as president experts say he is seeking to cement that grip even further, doubling down on the Party’s control of organisations such as state broadcaster CCTV, official news agency Xinhua, and Beijing’s flagship newspaper, the People’s Daily. “They must love the party, protect the party, and closely align themselves with the party leadership in thought, politics and action,” Xi told newsroom staff during a highly choreographed tour of the three outlets last Friday after which he set out his blueprint for the media. In case Xi’s message had been missed, an editorial in the People’s Daily informed news reporters their key role was not as speakers of truth to power but “disseminators of the Party’s policies and propositions”. “Guiding public opinion for the Party is crucial to governance of the country,” the newspaper said.

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‘Lord King’. How odd that sounds.

Mervyn King: New Financial Crisis Is ‘Certain’ Without Reform Of Banks (PA)

Another financial crisis is “certain” and will come sooner rather than later, the former Bank of England governor has warned. Mervyn King, who headed the bank between 2003 and 2013, believes the world economy will soon face another crash as regulators have failed to reform banking. He has also claimed that the 2008 crisis was the fault of the financial system, not individual greedy bankers, in his new book, The End Of Alchemy: Money, Banking And The Future Of The Global Economy, serialised in The Telegraph. “Without reform of the financial system, another crisis is certain, and the failure … to tackle the disequilibrium in the world economy makes it likely that it will come sooner rather than later,” Lord King wrote.

He added that global central banks were caught in a “prisoner’s dilemma” – unable to raise interest rates for fear of stifling the economic recovery, the newspaper reported. A remark from a Chinese colleague who said the west had not got the hang of money and banking was the inspiration for his book. Lord King, 67, said without understanding what caused the crash, politicians and bankers would be unable to prevent another, and lays the blame at the door of a broken financial system. He said: “The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers, incompetent and greedy though some of them undoubtedly were.” Spending imbalances both within and between countries led to the crisis in 2008 and he believes a current disequilibrium will lead to the next.

To solve the problem, Lord King suggests raising productivity and boldly reforming the banking system. He said: “Only a fundamental rethink of how we, as a society, organise our system of money and banking will prevent a repetition of the crisis that we experienced in 2008.” Lord King was in charge of the Bank of England when the credit crunch struck in 2007, leading to the collapse of Northern Rock and numerous other British lenders, including RBS, and has been criticised for failing to see the global financial crisis coming.

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Private debt. Warrants far more attention than it gets. See Steve Keen.

Hidden Debt That No One Is Talking About -And It Involves You- (SMH)

There’s a paradox when it comes to debt in Australia. We have endless debate about the magnitude of the government’s borrowings, even though they are comparatively low by global standards. Meanwhile, the level of household debt gets relatively little attention even though it’s among the highest in the world. In the past two decades the debt owed by households has risen from about 80% of combined income to more than 180%. A fresh surge in borrowing driven by the recent boom in house prices, coupled with slow wage growth, has pushed the debt-to-income ratio to new heights. When economist Kieran Davies last year compared countries using another measure – the ratio of household debt to gross domestic product – he found Australia’s to be the world’s highest, just above Denmark, Switzerland and the Netherlands.

Australians’ household debts may be manageable now, but higher interest rates would stretch many people. Even so, I think Australia’s household debt story gets less scrutiny than it deserves, considering the risks. About 85% of household borrowings – which include mortgages, credit cards, overdrafts and personal loans – are owed to Australian lenders, mostly banks. The Reserve Bank pointed out recently that a small but fast-growing proportion is owed to Australian governments – mostly university-related HECS/HELP debt – and to overseas banks and governments, which is mostly owed by recent migrants. Household surveys by research firm Digital Finance Analytics have found more than one in 10 owner-occupiers would have difficulty meeting their mortgage repayments if interest rates were to rise by just 1 percentage point from their current historic lows.

Martin North, the principal of Digital Finance Analytics, says it’s not just low-income households that are exposed. “My reading is that overall the market is OK but there are some significant pockets of stress even in this low-interest rate environment,” he said. “But those pockets are not necessarily where you would expect the risk to be, it’s not just western Sydney for example. Some quite affluent people who have taken out very large mortgages are more leveraged and therefore more exposed if interest rates were to rise.” One striking trend going largely under the radar is the dramatic shift in customers using short-term loans from so called “payday lenders” following regulatory changes in 2013 and advances in information technology. In the past, payday loans were typically used by those on very low incomes in financial crisis. But a growing share of these loans – now called “small amount credit contracts” – are being taken out by those in higher income groups.

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High time to scrutinize the lenders.

North Sea Firms Are ‘Sleepwalking Into Disaster’ As Insolvencies Loom (Tel.)

The North Sea industry is “sleepwalking” into a wave of insolvencies in the coming months as the full brunt of the collapse in the price of crude causes the finances of many companies to buckle, some of the City’s top restructuring lawyers have said. The majority of North Sea firms have so far endured a punishing 70pc oil price decline since 2014 by relying on loans which were approved based on market hedges secured one to two years before the market crash. But with hedge positions now unwinding firms will be exposed to the full brunt of the oil collapse and the increasingly stressed loan facilities keeping them afloat will be stretched to breaking point. Lenders may have offered firms a stay of execution last year in anticipation of a market recovery, but hopes for significantly higher crude prices are now dashed.

Within weeks, big North Sea lenders will begin a review of the loans that have propped up many Aim-listed explorers through the 18-month oil price rout, prompting a swath of insolvencies later this year.. Stephen Phillips, head of restructuring at Orrick, Herrington & Sutcliffe, said: “There’s a sense that the North Sea may be sleepwalking into a disaster zone.” Simon Tysoe a partner at Latham & Watkins, said half a dozen North Sea explorers were being actively discussed by banks and lenders as firms which will go into restructuring and possibly insolvency. North Sea bankruptcies have been rare in the past but the severity of the current downturn has already forced Iona Energy and First Oil Expro, two smaller oil companies, to call in administrators.

Now larger Aim-listed firms look at risk, which will also leave project partners and oilfield service firms vulnerable as the financial contagion spreads through the embattled sector. Mr Tysoe said: “Most oil companies have in fact not been selling their oil at $30 a barrel, they’ve been selling their oil at prices like $75 a barrel, notwithstanding the spot price of oil, because they’ve had financial hedges in place.” “The impact of this collapse is going to look very bad. In oilfield services, the position is significantly worse. The question is: when will lenders pull the trigger?”

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How much did the banks lose?

European Oil Majors Tally $19 Billion In Losses (MW)

How much has Big Oil in Europe lost in the last quarter? Try $19 billion — or slightly more than Iceland’s entire economy. The culprit is of course an unrelenting decline in crude and Brent prices through the period, when the contracts slid 18% and 24%, respectively. That sparked a round of significant impairment charges, project delays and reduced exploration among Europe’s major energy companies, with the majority of the Stoxx Europe 600’s oil and gas producers reporting losses in the one-billion dollar territory. “It’s been a mixed bag for oil company results — most have been pressured by weaker oil prices,” said Jason Kenney, head of pan-European oil equity research at Banco Santander, in emailed comments.

“Many have had to write down assets given the new oil price environment. The key to weathering the storm is disinvestment in our view — cutting costs, lowering capex, deferring spend, divesting peripheral businesses, offloading capital commitments, restructuring operations, and generally squeezing more from current operations for hopefully a lot less,” he added. Earnings from Europe’s oil majors have trickled out through February and were rounded off with a set of downbeat fourth-quarter numbers from Italian oil giant Eni on Friday. Eni said its quarterly loss more than tripled to 8.5 billion euros ($9.4 billion) in the final three months of the year, bringing the total tally of losses among the European oil majors to $19.3 billion..

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Does Belgium jail people for fraud? How about bankers?

Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses (BBG)

Citigroup Inc. was sued for fraud by investors and creditors of a bankrupt Mexican oil services firm over claims they were harmed by a loan scheme that also led the bank to cut 2013 profit by $235 million and fire at least a dozen people. Citigroup’s loans led to the 2014 collapse of the Mexican firm Oceanografia, and caused Dutch lender Rabobank, with investors and creditors, to lose at least $1.1 billion, according to the lawsuit filed Friday in Miami federal court. Rabobank and other investors separately filed a negligence suit in Delaware state court against auditor KPMG. Citigroup’s Mexican subsidiary, Banamex, made short-term loans to Oceanografia, which did work for state-run Petroleos Mexicanos, or Pemex. In turn, Pemex repaid the bank.

Citigroup CEO Michael Corbat said in February 2014 that $400 million of accounts receivable from Oceanografia were fraudulent. He said the bank was working with Mexican authorities and would find out “who perpetrated this despicable crime.” Rabobank and the investors claim Citigroup conspired with Oceanografia to accept falsified work estimates even as the oil services firm became increasingly dependent on cash advances to survive. Those Citigroup loans propped up Oceanografia, while Pemex repaid the bank with millions of dollars in interest, according to the complaint. “Intentional misconduct on the part of Wall Street banks – including Citigroup specifically – is far from unfamiliar,” according to the complaint. “Yet again, greed and dishonesty have victimized blameless businesses and investors.”

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Things weren’t always like this.

How Land Barons, Industrialists And Bankers Corrupted Economics (Kent)

The Corruption of Economics by Mason Gaffney and Fred Harrison, while free online, is hardly known; as of December 2015 only three New Zealand university libraries and the Auckland Public Library held copies. Yet in it is a very important story. Fred Harrison describes the phenomenon of Henry George, the San Francisco journalist who took the world by storm with his book Progress and Poverty in 1879, in which he argues that the benefits of land ownership must be shared by all and that a single tax is needed to fund government – a land tax. The factors of production are land, capital and labour. Untax labour and tax land was the cry. Poverty could be beaten. Social justice was possible! Of Henry George influential economic historian John Kenneth Galbraith writes,

“In his time and even into the 1920s and 1930s Henry George was the most widely read of American economic writers both at home and in Europe. He was, indeed, one of the most widely read of Americans. Progress and Poverty… in various editions and reprintings… had a circulation in the millions.” Unlike many writers, Henry George didn’t stop there. He took his message of hope everywhere he could travel – across America and to England, New Zealand, Australia, Scotland and Ireland. He turned political. Seven years after his book came out in remote California, in 1886 he narrowly missed out on being elected Mayor of New York, outpolling Teddy Roosevelt. During the 1890s George, Henry George was the third most famous American, after Mark Twain and Thomas Edison. Ten years after Progress and Poverty he was influencing a radical wing of the British Liberal Party.

He was read by semi-literate workers from Birmingham, Alabama to Liverpool, England. His Single Tax was understood by peasants in the remotest crofts of Scotland and Ireland. Gaffney’s section of the book outlines how certain rich land barons, industrialists and bankers funded influential universities in America and proceeded to change the direction of their economics departments. He names names at every turn, wading through presidents and funders of many prestigious universities. In particular, Gaffney, an economist himself, names the economists bought to discredit his theories, their debates with George and their papers written over many decades.

“George’s ideas were carried worldwide by such towering figures as Lloyd George in England, Leo Tolstoy and Alexander Kerensky in Russia, Sun Yat-sen in China, hundreds of local and state and a few power national politicians in both Canada and the USA, Billy Hughes in Australia, Rolland O’Regan in New Zealand, Chaim Weizmann in Palestine, Francisco Madero in Mexico, and many others in Denmark, South Africa and around the world. In England Lloyd George’s budget speech of 1909 reads in part as though written by Henry George himself. Some of Winston Churchill’s speeches were written by Georgist ghosts.” When he died there were 100,000 at his funeral.

The wealthy and influential just couldn’t let the dangerous ideas spread. Their privileged position was gravely threatened. Henry George must be stopped. But the strategy had to be subtle. What better route than by using their money to influence the supposed fount of all knowledge, the universities? That would then indoctrinate journalists and the general public. Nice one! The story explains how, for their wealthy paymasters, academics corrupted the language to subsume it under capital. They redefined rent, and created a jargon to confuse public debate. Harrison says, ‘For a century they have taken people down blind alleys with abstract models and algebraic equations. Economics became detached from the real world in the course of the twentieth century.’ Yes, the wealthy paid money to buy scholars to pervert the science.

Gaffney’s rich, whimsical language is a joy to read. He writes to Harrison, ‘Systematic, universal brainwashing is the crime, tendentious mental conditioning calculated to mislead students, to impoverish their mental ability, to bend their minds to the service of a system that funnels power and wealth to a parasitic minority.’

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“..we’re talking about a legislature … that says we don’t care about y’all.”

Alabama Lawmakers To Cities: We Won’t Let You Raise The Minimum Wage (CSM)

While major demonstrations have led to a $15 minimum wage in San Francisco, Seattle, New York Los Angeles, and 10 other cities in the past year, Birmingham’s plans to boost local wages have been thwarted by state legislation. The city council of Birmingham, Ala., voted 7 to 0 (with one abstention) to become the first city in the deep South to enact a minimum wage above the current federal level of $7.25. The ordinance planned an increase to $8.50 per hour by July 2016, with a second increase to $10.10 set for July 2017. But the Alabama legislature this past week fired back, passing a bill that prevents cities and counties from mandating their own benefits, including minimum wage, vacation time, or set work schedules. The bill passed easily in both houses and Gov. Robert Bentley signed it into law on Thursday.

Supporters argued that a “patchwork” of varying wages would devastate businesses, cost jobs, and send the regional economy into a slump. “We want businesses to expand and create more jobs – not cut entry-level jobs because a patchwork of local minimum wages causes operating costs to rise,” said State Sen. Jabo Waggoner (R) after the bill’s passage. Critics of the new law countered that higher wages lift families out of poverty and inject new spending into the regional economy. “We’re talking about the bare survival of people,” said Sen. Rodger Smitherman (D), reported the Montgomery Advertiser. “And we’re talking about a legislature … that says we don’t care about y’all.” “When you lift a person on the bottom, everybody above them is lifted up,” he added.

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No space here for the whole thing, but very much worth the time.

The Donald – The Good And Bad Of It (David Stockman)

[..] Once upon a time, by contrast, the GOP actually stood for free markets, fiscal rectitude, hard money and minimalist government. Calvin Coolidge did a pretty good job of it. And even the unfairly besmirched Warren G. Harding got us out of the foreign intervention business—-a path that the great Dwight D. Eisenhower pretty consistently hewed to under the far more challenging conditions of the cold war. But these were sons of America’s old school interior – Massachusetts, Ohio and Kansas. As temporary sojourners in Washington, they remained incredulous and chary of grand state missions either at home or abroad. Harding called it returning to “normalcy”. Coolidge said Washington’s business was to get out of the way.

And Ike actually shrank the Warfare state by one-third, ended Truman’s wars and started no new ones, resisted much of the Dulles’ brother’s interventionist agenda, balanced the budget and froze the New Deal as hard in place at he had the votes to achieve. Today’s Republican crowd bears no resemblance. They live in the capital, fully embrace its projects and pretensions and visit the provinces as sparingly as possible. And that’s why The Donald has them so rattled, even petrified. To be sure, there is much that is ugly, superficial and stupid about Donald Trump’s campaign platform, if you can call it that, or loose cannon oratory to be more exact. More on that below, but at the heart of his appeal are two propositions which strike terror in the hearts of the Imperial City’s GOP operatives.

To wit, he is loudly self-funding his own campaign and bombastically insisting that America is getting a bad deal everywhere in the world. The first of these propositions explicitly tells the legions of K-Street lobbies to take a hike, thereby posing a mortal threat to the fund raising rackets which are the GOPs lifeblood. And while the “bad deal” abroad is superficially about NAFTA and our $500 billion trade deficit with China, it is really an attack on the American Imperium The American people are sick and tired of the Lindsay Graham/John McCain/George Bush/neocon wars of intervention and occupation; and they resent the massive fiscal burdens of our outmoded but still far-flung alliances, forward bases and apparatus of security assistance and economic aid. They especially have no patience for the continued huge cost of our commitments to cold war relics like NATO, the stationing of troops in South Korea and the defense treaty with the incorrigible Japanese, who still blatantly rig their trade rules against American exports.

In short, The Donald is tapping a nationalist/isolationist impulse that runs deep among a weary and economically precarious main street public. He is clever enough to articulate it in the bombast of what sounds like a crude trade protectionism. Yet if Pat Buchanan were to re-write his speech, it would be more erudite and explicit about the folly of the American Imperium, but the message would be the same. That’s why the War Party is so desperate, and why its last great hope is the bantam weight Senator from Florida. In truth, Marco Rubio is an obnoxious kid who wants to be President so he can play with guns, planes, ships and bombs. He is a pure creature of the Imperial City, even if at his young age he has idled there only since 2010.

Yet down to the last nuance of his insipid neocon worldview and monotonous recitation of the American Exceptionalism catechism, he might as well have been born in Washington of GS-16 parents, not Cuban refugees, raised as a Congressional page, and apprenticed to the Speaker of the US House rather than serving as the same in the backwaters of Tallahassee. What Marco Rubio is all about is Warfare State republicanism. When he talks about restoring American Greatness it is through the agency of Imperial Washington. He has no kinship with Harding, Coolidge or Eisenhower. None of them were intent on searching the earth for monsters to destroy, as does Rubio in every single speech.

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Traffic violations?! Gives a whole new meaning to ‘two strikes you’re out’.

Switzerland Votes On Expelling Foreigners For Minor Offences (Guardian)

Switzerland votes in a referendum Sunday on whether foreigner citizens who commit two minor offences, like traffic violations, in the space of 10 years should be automatically deported. The referendum asks whether any foreign national found guilty of two lower-level infractions, including fighting, money laundering, giving false testimony and indecent exposure, should be expelled. The vote comes at a time when many European countries are hardening their attitudes to migrants after more than a million arrived on the continent last year. A quarter of the people living in Switzerland have a foreign passport, the majority of them from European countries.

More than half of Swiss voters backed strengthening rules to automatically expel foreign nationals convicted of violent or sexual crimes in a referendum on the same topic six years ago. But the populist right-wing Swiss People’s Party (SVP), which won the biggest share of the vote in parliamentary elections last October, has accused parliament of dragging its feet on writing the text into law and watering it down when it did so last March. Known for its virulent campaigns against immigration, the European Union and Islam, the party has proposed tougher rules, calling for “a real deportation of criminal foreigners”. The initiative faces stiff opposition, including from the government, parliament and all the other major political parties, who have warned it circumvents the “fundamental rules” of democracy.

If passed, it would dramatically increase the number of offences that could get foreign nationals automatically kicked out of Switzerland, including misdemeanours usually punishable with fines or short prison sentences. It would also remove a judge’s right to refrain from deportation in cases where it would cause the foreign national “serious personal hardship”. More than 50,000 people including hundreds of celebrities have signed a petition against the proposals. [..] Opponents warn that if the text passes, people born to foreign parents in Switzerland risk being deported to countries they have never lived in, for petty offences.

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Getting worse fast.

Double Crisis Deepens Despair In Greece’s ‘Warehouse Of Souls’ (Guardian)

There are more than 25,000 refugees and migrants stuck in Greece, police sources have told the Observer. The borders leading out have closed down one by one, leaving the country in danger of becoming what the Greek prime minister, Alexis Tsipras, described last week as a “warehouse of souls”. Tsipras has threatened to block future EU agreements and has withdrawn the Greek ambassador to Austria from Vienna in protest at the lack of support being offered by other nations during the refugee crisis. Austria is accepting only 80 migrants a day. The Hungarian prime minister, Viktor Orbán, plans to hold a referendum on compulsory migrant quotas. Macedonia, Croatia, Serbia and Slovenia are refusing to accept Afghans and other refugees deemed not to be from conflict zones and are accepting a maximum of 580 migrants a day. The German chancellor, Angela Merkel, appears to be staking everything on a crucial EU-Turkey summit, scheduled to take place on 7 March.

[..] The convergence of two crises – the refugee influx and the debt drama that has plagued the country for the past six years – has caused the rhetoric of catastrophe to be ratcheted up in Athens and abroad. After the announcement by the European commission on Friday that, in the wake of border closures, it had been forced to put together a humanitarian aid plan for Greece, there is an inescapable sense of impending doom. “It was difficult for the government to manage Greece’s own domestic economic crisis,” said Dirk Reinermann, project manager for southern Europe at the World Bank. “The new exogenous challenge of having to deal with refugees and migrants is such that the overall task at hand borders on the impossible.” While EU diplomats spoke of the nightmare scenario of seeing hundreds of thousands of people trapped in the country by May, analysts predicted that Europe’s southern flank could soon become embroiled in scenes of chaos and immense social hardship.

“It’s going to get a lot worse before it gets better,” said Thanos Dokos, who heads Eliamep, a leading Greek thinktank. He told the Observer: “We are at risk of seeing an economy without any hope of recovery, and the country being flooded by people who have no intention of staying in camps but instead [will be] making their way to borders where there will be no shelter or facilities to host them.” Anger at the influx has mounted on Aegean islands close to the Turkish coast, where tourism has been hard hit. In an interview, Constantine Michalos, president of the Athens chamber of commerce and industry, said pre-bookings in Kos, Rhodes and Lesbos, the islands that have borne the brunt of the refugee and migrant arrivals, were down by 60%.

[..] Dimitra Koutsavli is working for Doctors of the World – Greece. The organisation is having constantly to move its operations to follow the ever-changing makeshift camps opening and closing on political orders across the country. She said she had never seen the situation as bad in Athens as over the past few days. “The situation here is worsening. Refugees are all over the city, in squares, in the port. According to our emergency mission in Piraeus port on Friday, we saw thousands of refugees there, among them many children.” To say that Greeks think the rest of Europe could do more is an understatement. There were peaceful protests in Athens and Piraeus last week by Greeks and refugees, and on Saturday there was a protest by 300 people outside the Austrian embassy in Athens. Not many of those in Victoria Square went to the demonstration. “It’s for Europe to decide if it can help us. We just say, ‘Please open the borders.’ We don’t want to sit here,” said Sharzai..

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