Jul 062019
 


Jack Delano A welder in the roundhouse of the Chicago and North Western Railroad’s Proviso yard 1942

 

It’s rare that I reach back into the past of the Automatic Earth, but it’s not entirely unique either. The reason I do it today is not only the relevance of the article -in my view-, or the fact it was published so long ago, but it’s that the ‘world’ has changed so much since January 1 2014, the date I wrote the piece below, as Everything Better Is Purchased At The Price Of Something Worse. It’s gained much new relevance since.

This essay, way back when, dealt with Carl -Gustav- Jung, probably the most influential psycho-analist we’ve ever known (he’s having a heated discussion with Freud about this as we speak, over a glass of brandy), and his take in the 1950s on our ability to incorporate new technologies into our lives, our minds and brains.

Jung couldn’t have dreamt how much of that was yet to come, but he already put some very dire warnings out there. His main point appears to be that our capacity to ’embrace’ anything new is per definition -very- limited because we ARE our ancestors, and whatever they never knew, we will have a hard if not impossible time making part of our lives.

It’s just that, as he warns, we are completely blind to this. Once you lose the link to your ancestors, you will move away from them ever faster. Because there’s nothing left to anchor you. But at the same time, you ARE your ancestors.

I am thinking about this on a near constant basis as I see people sit or move around with their iPhones et al, and their Facebook and Instagram et al, and I wonder what they did with their lives before they could walk the streets bumping into each other -or the odd car- before a constant link to faraway places seemed appropriate and/or needed.

Jung already thought about this, before it existed, 60-odd years ago. He framed it as: what are you giving up for what you gain? But of course the whole younger part of the poulation, who’ve never known anything else, have no notion of having given up anything. They never did anything else with their lives.

Well, Jung had a completely different idea. He said our brains haven’t even processed the times we never knew, ‘primitivity’, ‘antiquity’, or the Middle Ages yet, let alone radio, TV, or the internet. “We are very far from having finished completely with the Middle Ages, classical antiquity, and primitivity, as our modern psyches pretend.”

Carl Jung claimed that our only true frame of reference is our ancestors, and since they never knew radio, TV, internet, we cannot incorporate such things into our lives without losing our connection to them. But we ARE them, and if we would ever lose that connection, we would be beyond lost. We’d be gone. First mentally, then -inevitably- physically.

And what we label ‘progress’ is then merely a way to move ever faster awasy from what we really are, which is the ancestors that gave birth to us. Gone, lost, into some empty space, with no grounding and no purpose.

Perhaps that goes a ways towards explaining why we are destroying the planet we live on. We lost the connection to who we are. We are focused today only on progress, on the future, and not on the present, because the present requires a link to the past.

Here’s my take on this 5.5 years ago. Before all these millions of zombies were stalking the streets looking only at their phones, eagerly – nay, desperately- awaiting messages from people thousands of miles away. Mostly about what food they eat, no less, or what dress they wear.

The concept of what constitutes our lives has changed profoundly. It is no longer the people around us, or even the landscape, our lives now are made up of people who are not here (and landscapes in travel brochures and nature documentaries). That is quite something.

Carl Jung said quite a while ago that our minds and brains cannot handle that. But there you are and here we go.

 

 

Ilargi, Jan 1 2014: I thought I’d start off 2014 on a philosophical note, with something that I hope perhaps people will remember as the year progresses, or even through the rest of their lives, and share with those around them. In my humble view, that would do the planet a world of good. But it’s not easy; we have wandered far.

There are many things we have neglected and forgotten, if not never understood or even thought about, that are nevertheless essential to our personal well-being and that of our surroundings. If anyone in the western world has considered and analyzed these forgotten ‘things’, it’s Carl Gustav Jung, the psycho-therapist who died in 1961. Jung defined the collective unconscious, archetypes and synchronicity, among many other things. It was his active interest in Eastern civilization and philosophies that led him to ponder how the collective unconsciousness influences our notion of progress.

In general, Jung suggested that our minds are woefully ill-equipped to incorporate progress into our lives when it takes the shape of new methodology, and new machinery, gadgets, because we don’t have a suitable frame of reference for them. We interpret the world through the frame of reference embedded in our minds that was built through countless generations of our ancestors. That is not to say we can never comprehend or incorporate new things, but that it must always be a gradual process, and if we are not at all times sufficiently aware of how this process takes place, as it takes place, we will lose ourselves, because we risk losing our connection to our ancestors, and we ARE, in essence, our ancestors.

In particular, we need to be aware of the fact that there is no such thing as absolute progress, that every time we add something to our world, we take something away as well. It’s the Eastern notion of balance, of yin and yang, at play: Everything Better Is Purchased At The Price Of Something Worse. Life does not by definition only get better when someone invents a new phone or car or facial cream, even if that phone makes it easier to talk to someone thousands of miles away, or the car makes it easier to go see people, or get away from them, or the cream dissolves wrinkles like magic. It doesn’t work like that. We pay a price: for everything we add, we lose something. The question then becomes: what do we value most. But that’s a question we never ask: we see everything new as an addition to our lives, and ignore what gets taken away from us.

As Jung wrote about these issues, probably in the late 1950s, the world was very different from what it is today. If he were alive now, he would undoubtedly have found that difference very painfully unsettling, and declared it dangerous for all of mankind. When we lose our connection to the collective references passed on by those whose DNA we carry, references that we are born with, we lose our connection with ourselves, and we become disoriented, dissatisfied.

There is no happy ending to this process. It needs to be shut down at some point, and therefore it will, in order for us to reconnect with our own minds and brains, which owe their composition and very existence to our forefathers. But for the process to be shut down, we must be deprived of both our ability and our drive to generate progress, since we will never volunteer to stop. We must go on, because we lost our connection to ourselves. There is no way back, not if we insist on keeping on going “forward”. That suggests a return to a sort of stone age world is the only possible outcome.

 

It is precisely Jung and Freud’s insights into the human mind that have made it possible for politicians and advertisers and other tricksters to fool us into thinking we want or need the things that make our world poorer, not richer. There is a huge amount of irony in this: that we use our increased ability to understand our minds in order to fool ourselves. If that doesn’t prove that Everything Better Is Purchased At The Price Of Something Worse, what does?

Although it would be best to incorporate the principle into our lives as just that, a general principle, it is of course possible to name specific examples. The automobile, the car, has brought us a lot of pleasure and comfort. It has also polluted our world like maybe no other single invention has ever done. And that’s not even the worst part: the car has cut through our communities like a gutting knife (to the point where we have no recollection of what these communities used to look like), separating us from each other, turned public space into no-go zones, and arguably been made more important than the people whose comfort they were was supposed to serve. For many people who have no car, for one reason or another, their own communities have become de facto inaccessible and unnavigable.

And the car is an easy example. What about medicine? We have, through progress in medicine, been able to save so many people from dying, and/or enabled them to die later, that our population has exploded, a huge problem in more ways than I could even attempt to discuss here. And that’s a hard one: nobody, including me, will suggest we stop saving lives, or start killing people, but there is a problem all the same. Everything Better Is Purchased At The Price Of Something Worse.

We can all come up with many examples, fridges, supermarkets, nuclear plants, photographs, indoor plumbing, and think about how they have changed our lives for the better or the worse. But I don’t think it’s a good idea to risk losing ourselves in examples. We should keep sight of the overriding principle: that we risk destroying our world as we seek to improve it. And that the lessons from a behemoth mind like Jung’s should be used to make us wiser, not to fool us into buying things that harm our lives.

You could be forgiven for thinking that Jung’s prolific writing should be obligatory course material in every single educational institution on the planet, but then you wouldn’t understand your world’s priorities, now, would you? We go with what we find convenient, not with what can make us wiser people. We pick material wealth over mental wealth any day and every day, or mental wealth only if there’s money in it. And perhaps that points to the reason why we find people like Carl Gustav Jung so easy to ignore.

I’ll leave you with Jung’s own words, after saying this: Our rush to obtain new things, a rush we call progress, and to make money from these new things – after all, what money is there in old things? – has disconnected us from our ancestors. Unfortunately, we ARE our ancestors. There is a price we pay for everything that is different today from what is was when our parents were our age, and our grandparents, and their parents before them, and so on. We ignore that price, and pretend we don’t need to pay it, encouraged by the fact that it doesn’t always have to be paid immediately, and we can leave it to our kids to settle the bill. Something we do all too willingly, which somehow puts our connections to our ancestors in a cynical, bleak light even more.

 

Here’s Jung from his book ‘Memories, Dreams, Reflections’, published in 1963, 2 years after his death, in the paragraphs with which he closes the chapter “The Tower”:

 

Our souls as well as our bodies are composed of individual elements which were all already present in the ranks of our ancestors. The “newness” in the individual psyche is an endlessly varied recombination of age-old components. Body and soul therefore have an intensely historical character and find no proper place in what is new , in things that have just come into being. That is to say, our ancestral components are only partly at home in such things. We are very far from having finished completely with the Middle Ages, classical antiquity, and primitivity, as our modern psyches pretend.

Nevertheless, we have plunged down a cataract of progress, which sweeps us on into the future with ever wilder violence the farther it takes us from our roots. Once the past has been breached, it is usually annihilated, and there is no stopping the forward motion. But it is precisely the loss of connection with the past, our uprootedness, which has given rise to the “discontents” of civilisation and to such a flurry and haste that we live more in the future and its chimerical promises of a golden age than in the present, with which our whole evolutionary background has not yet caught up.

We rush impetuously into novelty, driven by a mounting sense of insufficiency, dissatisfaction, and restlessness. We no longer live on what we have, but on promises, no longer in the light of the present day, but in the darkness of the future, which, we expect, will at last bring the proper sunrise. We refuse to recognise that everything better is purchased at the price of something worse; that, for example, the hope of greater freedom is cancelled out by increased enslavement to the state, not to speak of the terrible perils to which the most brilliant discoveries of science expose us.

The less we understand of what our fathers and forefathers sought, the less we understand ourselves, and thus we help with all our might to rob the individual of his roots and his guiding instincts, so that he becomes a particle in the mass, ruled only by what Nietzsche called the spirit of gravity.

Reforms by advances, that is, by new methods or gadgets, are of course impressive at first, but in the long run they are dubious and in any case dearly paid for. They by no means increase the contentment or happiness of people on the whole. Mostly, they are deceptive sweetenings of existence, like speedier communications, which unpleasantly accelerate the tempo of life and leave us with less time than ever before. Omnis festinatio ex parte diaboli est – all haste is of the devil, as the old masters used to say.

Reforms by retrogressions, on the other hand, are as a rule less expensive and in addition more lasting, for they return to the simpler, tried and tested ways of the past and make the sparsest use of newspapers, radio, television, and all supposedly timesaving innovations.

In this book I have devoted considerable space to my subjective view of the world, which, however, is not a product of rational thinking. It is rather a vision such as will come to one who undertakes, deliberately, with half-closed eyes and somewhat closed ears, to see and hear the form and voice of being. If our impressions are too distinct, we are held to the hour and minute of the present and have no way of knowing how our ancestral psyches listen to and understand the present – in other words, how our unconscious is responding to it. Thus we remain ignorant of whether our ancestral components find elementary gratification in our lives, or whether they are repelled. Inner peace and contentment depend in large measure upon whether or not the historical family, which is inherent in the individual, can be harmonised with the ephemeral conditions of the present.

In the Tower at Bollingen it is as if one lived in many centuries simultaneously. The place will outlive me, and in its location and style it points backwards to things of long ago. There is very little about it to suggest the present. If a man of the sixteenth century were to move into the house, only the kerosene lamp and the matches would be new to him; otherwise, he would know his way about without difficulty.

There is nothing to disturb the dead, neither electric light nor telephone. Moreover, my ancestors’ souls are sustained by the atmosphere of the house, since I answer for them the questions that their lives once left behind. I carve out rough answers as best I can. I have even drawn them on the walls. It is as if a silent, greater family, stretching down the centuries, were peopling the house. There I live in my second personality and see life in the round, as something forever coming into being and passing on.

 

 

 

 

Mar 072019
 
 March 7, 2019  Posted by at 3:12 pm Primers Tagged with: , , , , , , , , , , , , ,  


Wassily Kandinsky Succession 1935

 

 

While we’re on the issue of the Green New Deal, here’s an article by Dr. D. with an intro by Dr. D., one he sent me in the mail that contained the actual article, and that I think shouldn’t go to waste. I hope he agrees.

Waste being the key term here, because he arrives at the same conclusion I’ve often remarked upon: that our societies and economies exist to maximize waste production. Make them more efficient and they collapse.

Ergo: no Green New Deal is any use if you don’t radically change the economic models. Let’s see AOC et al address that, and then we can talk. It’s not as if a shift towards wind and solar will decrease the economic need for waste production (though it may change the waste composition), and thus efficiency is merely a double-edged sword at the very best.

Here’s Dr. D. First intro, then article:

 

 

Dr. D: [..] of course there are a thousand things I can say, but I wanted to make just this one point:  that the economy as we know it is prohibited from contracting by its own system structure.  One thing I couldn’t expand on is that I believe it is almost entirely unconscious.  People like AOC, the Aspen Ecological Center, these people have in the back of their minds “What is possible” and “how things are done” and “can I sell this or will people turn away.” 
 
As I say, the idea of saying, “Everything will be perfect, just live like a Zen Monk” is a non-starter.  Why, I don’t know, as it’s very pleasant and quite provable. WHY that is in the back of OUR minds (and only ours, they often say “humans” are violent, mean or exploitative, but Algonquins or Kalahari Bushmen might show otherwise), is another whole question, however, it is the root of our, and only OUR, western culture: limitless growth and progress. A religion of Progress that replaces God himself, as the Archdruid would say.
 
However, here we are. And our system parameters, of our western system do NOT permit ANY contraction of growth or progress. At this point, the entire economic and financial system would collapse, and as we no longer have any religion, community, or moral framework, or possibly even reason, our whole society would collapse with it. 
 
That’s a lot to take on, so let’s just simply ask in public why we are calling for 20 years of furious concrete/CO2-producing growth must occur to rebuild those windmills and 4,000 buildings a day, or whether we should just take the Yankee mantra (and no doubt a Norwegian one too) to “Use it up, wear it out, make it do, or do without.” There is so much wasted you could dumpster dive and Craigslist the first 10 years, giving us enormous resources to apply to raw energy use. But we won’t, and no one will even say it, although everyone knows it, has done it, and CLAIMS there’s an urgent crisis. 
 
So let’s start here and ask why we’re not doing the most stupid, basic, cheap, things, like turning down the thermostat and walking to the store AT ALL, instead of (sorry to pick on this) saving the bats in Mauritania, or the whales in Japan. Why?  Because then SOMEBODY ELSE has to take a boot to the teeth, not me in Brooklyn or London. And we will MAKE THEM take in the teeth for me, so I DON’T HAVE TO. We were already down this road in 1970 as the Archdruid has said, we already made this decision not to wear sweaters way back. Instead, I can claim rights to $100 Trillion in wealth and dole it out like the queen, making friends and fame without limit. 
 
But it won’t work, and we need to get on it right away. I believe the leaders already know we’re going to hit the wall and are purposefully trying to hit the accelerator as with outlawing seeds, meat, poisoning soil and water, outlawing gardens, controlling travel – these are all the foundations of Stalin about to approach Ukraine. I can see that in 20 approaches they’re pushing, but I don’t expect them to be very successful.  Such as, WE are going to have to do it, not the other guy. And I in fact do, but I’m pretty busy, so this is the best I can do right now. 
 
And perhaps you too.

 

 

The Real New Deal

 

Dr. D: The Green New Deal has taken front page headlines lately, and the discussion on how to green the economy and become more ecological is real. Certainly all sides have wide agreement, where while the Left may call for salvation from Global Warming, yet the Right will call for efficient resource use, preserved farmland and better hunting camps. Everyone loves National Parks, being one of the largest tourist draws in our nation and also for our fellow nations worldwide, nobody likes to see animals run down or the environment destroyed.

With so much agreement, so widespread, it’s difficult to see why a consensus cannot be agreed on. Even if the means are different – statist control vs volunteer capitalism – surely the goals would be reached in any case. Perhaps with two methods, approaches, and visions, attaining our common goals could be far easier. If so, then why does there seem to be such obstacles and reluctance in our joint moment into a greener, better future? The Left says it’s because of the Right, and the Right because of the Left. Yet I can tell you it’s neither: it’s simply math and physics.

An “Economy” is the “the wealth and resources of a country or region, especially in terms of the production and consumption of goods and services.” That is to say they are the static things, like land, rivers, and copper mines, as well as the specific ways in which those blank resources are put to use: the transportation of them to factories, their manufacture, sale, and disposal. This encompasses things not on-ledger, like where environmental and social costs are offloaded, and who is enjoying the benefit of a resource that will run out for our children. This is also the things that are on-ledger, such as who benefits from profits or productivity, and which sectors are subsidized and which are starved. The Financial System rides atop of the Economic System, simply accounting it, keeping track of it, and sending the messages to it about where the needs are and which products should go where.

But neither exist in a vacuum. Although we generally overlook it, the Economic and Financial Systems are an expression of our personal beliefs and values, and those of our nation and national culture or personality. So in the U.S., we have chosen to measure our national prosperity using headline metrics such as the S&P and the GDP. These change character from time to time, as we used to measure the GNP, and now follow the NASDAQ. And the way we characterize them is also relevant: in the U.S., for instance, we measure all government spending in GDP as if it were private spending; that is, as if it were a profit, not an expense.

Nor is this financial arcana: although when this choice was made to make it seem the economy was stronger during the Great Depression, “you optimize what you measure”, and now the government itself has become the economy, with $22T in debts owed, and is directing most resources, but at a LOSS, not a profit. We then record that loss as prosperity. Nor is that different for the S&P or NASDAQ: if the popular financial numbers decline, the Fed will openly take money from the people and push the numbers back up again to indicate “success” and “prosperity” as we measure it. Yet the money borrowed from the taxpayers, the currency holders, makes them poorer, not richer.

 


World energy consumption per capita based on 2003 data from the International Energy Agency

 

What does this have to do with the Green New Deal and our joint goal of a cleaner, greener world? Well, the Green New Deal proposes to spend vast sums of money to transfer energy use to renewables and carbon-free sources, and there are unimaginable profits to be made should anyone do this. Unfortunately, the fact this hasn’t occurred is strong proof that it’s not possible. Not that green energy can’t be made or doesn’t exist, but that it’s not PROFITABLE to do so – that’s why the government, or rather the taxpayers, are asked to pay for it. But profit is only money, as the MMT-believers will avow.

What really matters is that thermodynamically, the EROEI, the “energy returned on energy invested” is too low. That is to say, you put in 90 calories and get out only 91. Or worse, put in 101 calories and get out only 90. This is easily shown in a wide variety of green projects, from solar – it’s estimated the electric produced over 20 years is equal to the glass-and-silicon manufacture – to ethanol, where despite enormous carbon, petrol, and water use in the cement, steel, shipping, and manufacturing of the distilling plant, the corn may only produce 10 units gain per 90 invested, or possibly none at all.

This is likely true for windmills, which if needing repair will add costs, while requiring a full-scale standing grid behind them at all times, as well as electric cars, which not only require a grid, but also may use more energy and cause more pollution in mining and smelting the batteries than the vehicle saves over a lifetime. Nor was this a surprise: again, as bad a system as financial accounting is in a system riddled with stock frauds and subsidies, nevertheless, if any of these saved energy, the huge drop in input costs – no gas used – would immediately render all these projects profitable, and not in need of a subsidy.

This is how coal replaced wood, and tractors replaced horses – sometimes in as little as 10 years. This is how LEDs instantly replaced incandescents, or the Prius replaced the K-car –lower costs, better products. And is how the U.S. has had one of the largest drops in CO2 emissions despite shutting down green subsidies and pulling out of the Paris Accord – organically, by market forces. Because despite our terrible, corrupt, interventionist system screwing up all the incentives, everybody loves a deal, and those arbitrages, those improvements still stand out.

 

Since we’re already using our technical limit, there is another way we can join together, reduce energy use, reduce waste and green the planet: lower demand.

The U.S. uses about half our energy for transportation, and if you’ve been to America, you know that most of that transportation is unnecessary: people live on average +20 minutes from work, and our oversized, centralized schools mean they are nearly as far. It’s not uncommon for every child to have a 40-minute bus ride each morning and night to and from school, and although more efficient than cars, there’s little need, only habit. We concentrated millions of small schools into a few huge ones from 1950 to 2000, just as we concentrated millions of small towns and shops into a few mega-centers. The remaining small businesses – dentists, phone stores, pizza shops – are randomly distributed, without any location in neighborhoods nor any access to public transit, and this would take decades to transform.

Nor is this a thing the people prefer. Commuting is one of the least-liked aspects of modern life as well as the most energy-intensive one. So instead of following massive hundred-trillion debt expenditures that show no promise of returning value, shouldn’t we grasp the low hanging fruit of efficiency? In fact, thermodynamically, efficiency is the only game in town, a 100 or 1,000:1 EROEI instead of 1.2:1. We have even done this from time to time during wars when massive campaigns led to massive efficiency, massive production, massive savings, ration books, and near-total recycling.

But nobody wants that. And that’s why the Green New Deal is structured exclusively as a SPENDING program, and not a SAVING one, because we don’t want to save, we want to SPEND. Part of this of course is that it’s more fun to spend than to save, but more importantly, it’s what we do, it’s what we measure. If you were to have a Green New Deal that is easy to implement and proven to work like the WWII model, GDP and profits would fall sharply. Although much, perhaps most, energy is wasted on unimportant things, the higher efficiencies would mean lower sales, lower production, and lower throughput EVEN IF IT MEANT A HIGHER QUALITY OF LIFE. This is easily seen in the U.S. vs Japan or Europe comparisons:

 


World energy consumption per capita based on 2013 data from the World Bank

 

The U.S. uses 10,000kg oil while Japan uses 5,000 and Portugal uses 2,500, and while there are important differences between nations, we don’t think of Japan or Portugal as sacrificing quality of life. This is strictly a choice, a design built up over lifetimes of effort. So if we could become as efficient as Japan and live far better too, why don’t we? This is a no-argument left-right win that can be implemented in hours, why isn’t capturing this easy gain the real target of the GND?

“You get what you incentivize.” If efficiency were the Real Green Deal, money would NOT be spent in Congress, Companies would NOT be paid, and lobbyists go home empty and poor. People would NOT be employed for the new projects and they would NOT vote for the new Congressmen. Government spending falls, even private-sector GDP would decline, and falling with it would be protected sectors of the economy like oil and utilities. How do you sell “Let’s cancel the party and stay home with the lights out”?

But it’s far worse than that in ways we don’t see. We think about New Deal SPENDING because spending has been exclusively incentivized for 100 years. The economy, the society, the financial system have all been built around GROWTH, not efficiency; MORE, not less, until the systems themselves can no longer function with anything less than unceasing expansion, ever-increasing, forever.

If GDP drops for any reason, even for efficiency and an easy increase in the quality of life – even to save all life on earth – consumption drops. A simpler life with fewer miles driven means less gas wasted and fewer cars sold. Fewer cars means fewer meals out. Sales drop. Employment drops. Stock markets drop. The lower valuation of companies means bond quality drops. Lower sales and lower activity mean tax revenue drops. Government programs drop. Treasury bonds drop and with it, military power drops. As stocks, bonds, and T-bill drop, pensions drop. Insurance drops. In short, the entire economy drops, contracts, goes into a sharp deflation and depression with world-wide unemployment and mass bankruptcies.

But worse than that. Economies come and go, wax and wane and adjust to the new realities. However, unlike previous eras, under a debt-based fiat-money system, one thing does NOT drop: debt. As the value of all things declines, the debt owed only increases. By companies. By citizens. By whole governments. And so soon as the numbers in a debt-based system stop increasing, that debt defaults.

 

Now in previous times, the relative values of debts, assets, and money would simply re-adjust. Bonds would fall, gold (cash) would rise. Bad companies and inefficiencies would be driven out, and the system would recover without the dead weight and bad ideas at a more accurate pricing. But that won’t happen this time. Because everything is so highly leveraged and centralized, and the financial system is our primary means of directing the economy, that system under a debt-based fiat system would almost entirely collapse, and the disruptions of reforming and restarting it would almost certainly take years, during which the economy itself, the production of wheat bread and toothpaste, heating oil and electric lights, would come to a virtual halt, threatening the lives of millions, hundred millions, even billions worldwide.

Wars would start. Nations would fall. So while we don’t think of these things, the reality is, if one were to have a major contraction, much less plan a voluntary, intentional one, the pressure to stop it would be overwhelming and from every side: retail, political, financial, human, ecological, economic, military; there is no way such a plan could be seriously considered, much less implemented. WE ARE NEVER MOVING TO EFFICIENCY UNDER A DEBT-BASED MONETARY SYSTEM. End of story. To the contrary: such a system incentivizes and even DEMANDS new waste and expensive, ruinous ideas like the Green New Deal. And even if they fail, they must ever-increase.

So why are we not having a Green New Deal of easy efficiency, one that we know works, but instead spending ever-more on ever more massive expenditures that are ever-less fruitful? Because this is what the system is designed to do. It’s what it depends on. And as you get what you incentivize, every body, everywhere in the system, will be incentivized to do this or die trying. And this will continue until we change the base assumptions, what we measure, what we capture and profit by. Left or Right, big or small, town or country, public or private, nothing can change in our system until we change it, until we change our beliefs about who we are, what we want, and what we are doing.

For me, I prefer easy, provable gains and a higher, easier quality of life, and I’m not afraid to make those changes that improve us without being at the expense of others. And we will need to face where we are and the challenges of the steps before us. Because essentially we all agree. We not only need a New Green Deal, we need a New Deal altogether. A better one, a fairer one. A possible one. One with a future. So let’s start acting like it and begin.

 

 

Jul 312017
 
 July 31, 2017  Posted by at 8:45 am Finance Tagged with: , , , , , , , , ,  


Elvis Presley with parents Gladys and Vernon 1937

 

Whatever It Took To Save The Euro (BBG)
US To Cut 755 Us Diplomatic Staff In Russia, Says Putin (AFP)
Despite Appearances, The Idea Of Social Progress Is A Myth (Satyajit Das)
China Bond Buyers Quiz Taxi Drivers to See If Credit Good (BBG)
Uber, Lyft Mangle Rental Cars & Taxis. Other Sectors Next (WS)
Pence Sketches Possible Patriot Deployment In Estonia, Vows US Support (AFP)
How Immigration Is Changing Italian and European Demographics (Sp.)
Greece’s Road to Bailout Exit: 140 Reforms Down, Many More to Go (BBG)
Greeks Can’t See Any Light At The End Of Any Tunnel (G.)
Greece: A (Basket) Case Study In Savage Globalization (Nevradakis)
‘Human Life Is More Expendable’: Why Slavery Has Never Made More Money (G.)

 

 

Cute, funny. But the real cost is much higher. It’s not just the ECB.

Whatever It Took To Save The Euro (BBG)

So how much did it end up taking after ECB President Mario Draghi memorably said five years ago he’d do “whatever it takes” to save the euro? About €1.2 trillion ($1.4 trillion). That’s the amount that the ECB’s balance sheet has expanded in the half-decade since Draghi made those remarks at a conference in London (an ironic location from today’s post-Brexit perspective.) Deutsche Bank analysts including Luke Templeman go on to note there’s several things that have changed by that magnitude – €1.2 trillion – in the past five years, in an eerie Da Vinci Code-like confluence:
• The euro region’s gross domestic product has risen about €1.2 trillion
• The Federal Reserve’s balance sheet has also climbed the equivalent of roughly €1.2 trillion
• The combined market cap of the FANG stocks – Facebook, Amazon, Netflix and Alphabet – has jumped about the equivalent of €1.2 trillion

Templeman and his colleagues warn against making too much of the symmetry. After all, for the U.S. numbers to be related, it would suggest “every bond the Federal Reserve bought drove people to spend more time on these websites.”

Read more …

Think uranium.

US To Cut 755 Us Diplomatic Staff In Russia, Says Putin (AFP)

President Vladimir Putin on Sunday said the United States would have to cut 755 diplomatic staff in Russia and warned of a prolonged gridlock in its ties after the US Congress backed new sanctions against the Kremlin. Putin added bluntly that Russia was able to raise the stakes with America even further, although he hoped this would be unnecessary. A US State Department official denounced the move as a “regrettable and uncalled for act,” adding that Washington was now weighing a potential response. On Friday, the Russian foreign ministry demanded Washington cut its diplomatic presence in Russia by September 1 to 455 people – the same number Moscow has in the US.

“More than a thousand people – diplomats and technical personnel – were working and are still working” at the US embassy and consulates, Putin said in an interview with Rossia-24 television. The US State Department would not confirm the number of US officials serving at the mission. Putin added that an upturn in Russia’s relations with Washington could not be expected “any time soon.” “We have waited long enough, hoping that the situation would perhaps change for the better,” he said. “But it seems that even if the situation is changing, it’s not for any time soon.” Putin warned that Russia could further ratchet up the pressure, but he hoped this would not be needed.

Read more …

“If you are not busy being born, you are busy buying”.

Despite Appearances, The Idea Of Social Progress Is A Myth (Satyajit Das)

The undeniable improvement in living standards over the last 150 years is seen as evidence of progress. Improvements in diet, health, safe water, hygiene and education have been central to increased life spans and incomes. The lifting of billions of people globally out of poverty is a considerable achievement. But many of these individuals earn between $2 and $10 dollars a day. Their position is fragile, exposed to the vicissitudes of health, employment, economic conditions and political and societal stability. As William Gibson observed: “The future is already here — it’s just not very evenly distributed”. Economic progress also has come at a cost. Growth and wealth is increasingly based on borrowed money, used to purchase something today against the uncertain promise of paying it back in the future.

Debt levels are now unsustainable. Growth has been at the expense of existentially threatening environmental changes which are difficult to reverse. Higher living standards rely on the profligate use of under-priced, finite resources, especially water and energy, which have been utilised without concern about conservation for future use. Current growth, short-term profits and higher living standards for some are pursued at the expense of costs which are not evident immediately but will emerge later. Society has borrowed from and pushes problems into the future. The acquisition of material goods defines progress. The concept of leisure as shopping and consumption as the primary economic engine now dominate. Altering Bob Dylan’s lyrics, the Angry Brigade, an English anarchist group, described it as: “If you are not being born, you are busy buying”.

[19th-century Thomas Carlyle], who distrusted the “mechanical age”, would have been puzzled at the unalloyed modern worship of technology. Much of our current problems, environmental damage and pollution, are the unintended consequences of technology, especially the internal combustion engine and exploitation of fossil fuels. The invention of the motor vehicle was also the invention of the car crash. Technology applied to war continues to create human suffering. Mankind’s romance with technology increasingly is born of a desperate need for economic growth and a painless, cheap fix to problems such as reducing in greenhouse gas without decreasing living standards.

[..] Pre-occupation with narcissistic self-fulfilment and escapist entertainment is consistent with Carlyle’s concern about the loss of social cohesiveness, spirituality and community. His fear of a pervasive “philosophy of simply looking on, of doing nothing, of laissez-faire … a total disappearance of all general interest, a universal despair of truth and humanity, and in consequence a universal isolation of men in their own ‘brute individuality” … a war of all against all … intolerable oppression and wretchedness” seems modern.

Read more …

Taxi drivers and shoeshine boys. There’s your peak.

China Bond Buyers Quiz Taxi Drivers to See If Credit Good (BBG)

In China, taxi rides aren’t just a form of transportation any more. They’ve also become useful for bond buyers doing due diligence. Dining out at restaurants is also helpful. It’s all part of a boom in field trips by market participants coming to grips with a new reality in China: the potential for bond defaults. After decades when authorities effectively provided blanket assistance to keep troubled companies from going under, the Communist leadership’s focus on shuttering unproductive assets has upended the market. A total of 45 onshore corporate bonds have defaulted since the start of last year, a surge from the eight recorded in 2014 and 2015 – which themselves were the first since the market was established in the 1980s. While China has the world’s third-largest bond market, corporate financial transparency can be limited, forcing investors to get creative.

“If you just sit in the office, you would never know if an issuer has actually closed business,” said Xu Hua at Colight Asset Management in Shanghai. “When you go to the local places, be sure to have a chat with taxi drivers or restaurant customers after talking to the issuer – ask them if they have friends working for the company. Has their friends’ pay been cut or raised this year? Has the company delayed paying salaries? What’s the local reputation?” Recent incidents have showcased concerns about corporate governance and disclosure standards. The onshore bonds of two China Hongqiao units slumped in March after the world’s biggest aluminum maker said full-year results may be delayed because of issues raised by its auditor. Bondholders of China Shanshui Cement are still trying to recoup most of their money – at one point the company said it couldn’t repay interest without a company seal.

Read more …

We really want monopolies? They’re calling it freedom, and beneficial, but…

Uber, Lyft Mangle Rental Cars & Taxis. Other Sectors Next (WS)

Rideshare companies – mostly Uber, but now also Lyft elbowing into the scene – are changing the way business travelers look at ground transportation. In the process, these worker bees, who’re spending their company’s money, are not only crushing the taxi business but also that end of the rental car business. The collapse of business travel spending on taxis and rental cars is just stunning. And there is no turning back. Uber’s and Lyft’s combined share of the ground transportation market in terms of expense account spending in the second quarter has soared to 63%, with Uber hogging 55% and Lyft getting 8%. The share of taxis has plunged to 8%, now equal with Lyft for the first time, according to Certify, which provides cloud-based expense management software.

Uber hit that point in Q1 2015, when expense account spending on Uber matched spending on taxis for the first time, each with 25% of the market; rental cars still dominated with a 50% share. But that was an eternity ago. Note that the share of rental cars and taxis has declined at roughly the same rate. Uber’s growth in the business travel ground transportation market has continued despite its constant drumbeat of intricate debacles in the news, but the rate of growth has slowed. And Lyft’s rate of growth has surged. The chart above shows this surge in the growth rate of Lyft, which caused its share to jump from 3% a year ago to 8% now.

Read more …

We all know of teh US promise to Russia to not expand NATO.

Pence Sketches Possible Patriot Deployment In Estonia, Vows US Support (AFP)

US Vice President Mike Pence on Sunday raised the possibility of deploying the Patriot anti-missile defence system in Estonia, one of three NATO Baltic states worried by Russian expansionism, Prime Minister Juri Ratas said. “We spoke about it today, but we didn’t talk about a date or time,” Ratas told state broadcaster ERR after Pence began a visit to the tiny frontline state. The Patriot is a mobile, ground-based system designed to intercept incoming missiles and warplanes. “We talked about the upcoming (Russian military) manoeuvres near the Estonian border… and how Estonia, the United States and NATO should monitor them and exchange information,” Ratas said.

Relations between Moscow and Tallinn have been fraught since Estonia broke free from the crumbling Soviet Union in 1991, joining both the EU and NATO in 2004 – a move that Russia says boosted its own fears of encirclement by the West. Concern in Estonia and fellow Baltic states Latvia and Lithuania surged after Russia annexed Crimea from Ukraine in 2014 and stepped up military exercises. Pence, in remarks to journalists in the Estonian capital of Tallinn, spoke in strong but general terms about US support for eastern European countries. On Monday, he heads to Georgia – a non-NATO member that is also worried about Russia – and then to Montenegro, which became NATO’s 29th member on June 5. “President (Donald) Trump sent me to Europe with a very simple message. And that is that America first doesn’t mean America alone,” Pence said.

Read more …

This is not going to be smooth. Throw in a fierce financial crisis and what do you get?

How Immigration Is Changing Italian and European Demographics (Sp.)

Some European countries, namely Italy, Germany, France and the UK, are facing the so-called “substitution of nations,” where the national ethnical majority is disappearing physically and biologically, and is being substituted by migrants, according to a recent report. Sputnik Italy discussed the issue with Daniele Scalea, the author of the report. The recent report of the Italian-based Machiavelli Center of Political and Strategic Studies, “How immigration is changing Italian demographics” has revealed that a number of European countries are facing the “biological and physical extinction” of their national ethnicities. Ethnic majorities in such countries as Italy, Germany, France and the UK, are gradually turning into ethnic minorities, while being “substituted” by incoming migrants. Sputnik Italy discussed the issue with Daniele Scalea, an analyst at the center and the author of the report.

Migration is drastically changing the habitual course of life in Italy, he told Sputnik. The reason for the influx of African migrants into Europe is not wars or catastrophes, but an explosive demographic increase on the African continent, from 9% to 25% of the global population throughout the last century. While Europe, which accounted for over a fifth of the entire world population in 1950 (22%), is expected to make up just 7% of the world population in the year 2050, the%age of the African population will make a sweeping rise from 9% to 40%. Italy’s fertility rate is less than half of what it was in 1964, the analyst explained in his report. It has dropped from 2.7 children per woman to just 1.5 children per woman currently, a figure well below the replacement level for zero population growth of roughly 2.1 children per woman.

As of the first half of this year, Italy had over 5 million foreigners living as residents, a remarkable 25% growth relative to 2012 and a whopping 270% since 2002. At that time, foreigners made up just 2.38% of the population while 15 years later the figure has nearly trebled to 8.33% of the population. Moreover, even the children being born in Italy are overrepresented by immigrants, whose birthrate is considerably higher than native Italians, the study revealed. It is “unsurprising,” therefore, that Italian regions with the highest fertility rates are no longer in the south, as was usual the case, but in the Italian north and in the Lazio region, where there is a higher concentration of immigrants. If current trends continue, by 2065, first- and second-generation immigrants will exceed 22 million persons, or more than 40% of Italy’s total population.

By comparison, it was only in the not far-off 2001 that the percentage of foreigners living in Italy crossed the low threshold of 1%, which reveals the speed and magnitude of demographic change occurring in Italy, a phenomenon “without precedent” in Italy’s history, the study asserts.

Read more …

Waterboarding. Disregard all stories of recovery.

Greece’s Road to Bailout Exit: 140 Reforms Down, Many More to Go (BBG)

Greece’s hard times aren’t over. A return to the bond market last week, the pledge of 8.5 billion euros ($9.5 billion) in new loans from euro-area creditors, the possibility of more money from the International Monetary Fund and a S&P Global Ratings outlook upgrade have coalesced to bolster investor sentiment that Greece has turned a corner. Trouble is, much depends on the country implementing reforms — dozens of the 140 measures agreed to are in various stages of application and more than 100 additional actions are needed to access the remaining 26.9 billion euros in funds before the current bailout program ends in August 2018. While the evidence of belt-tightening is everywhere in Greece, from falling incomes to rising poverty, the country has less to show in terms of structural overhauls.

Creditor demands for more measures threaten to become politically explosive as Greek citizens and businesses count the cost of the financial crisis that has thrown their lives into turmoil over the last seven years. Over the years, creditors have imposed reforms that have affected the daily lives of Greeks, from requiring receipts for tax breaks and e-prescriptions for patients to prevent abuse to pension payout cuts of as much as 50%. While Greece’s record of implementing reforms hasn’t won it any kudos, it is now hitting against even more challenging structural measures aimed at profoundly changing entrenched habits. The real problem is with reforms like fixing the tax system and the judiciary that require “long implementation,” said Gerassimos Moschonas, an associate professor of comparative politics at Panteion University in Athens. Belt-tightening measures have had a dramatic effect on life, making further long-lasting reforms difficult, he said.

“The income of an average household has decreased at least 40% during the crisis, poverty risk has increased 35.6%, pension cuts are enormous and there is over-taxation,” he said. Since Greece became the epicenter of the European debt crisis in 2010, the country has agreed to austerity measures to restructure its economy, which has shrunk by more than a quarter over the period. In exchange, euro-area creditors and the IMF have provided more than 260 billion euros in bailout funds to keep Greece afloat. “Progress with structural reforms has fallen far short of what is needed to allow Greece to succeed in the euro zone, but the program foresees some intensification of efforts,” the IMF said in its report on July 20.

Prime Minister Alexis Tsipras’s government is struggling to squeeze pensions even more, allow Sunday openings for stores – which could threaten the livelihoods of small mom-and-pop shops that dot the country – consider further taxes and change labor laws that would make it even harder for employees to go on a strike. “There’s no serious implementation,” of difficult structural reforms, said Moschonas. “The Greek state has failed” to put them in place even after they were voted in parliament because of a lack of political will and the absence of technical expertise, he said.

Read more …

Got them by the balls.

Greeks Can’t See Any Light At The End Of Any Tunnel (G.)

Athens, like most urban centres, has been hardest hit by a crisis that has seen the country’s economic output contract by a devastating 26%. A study by the DiaNeosis thinktank found that 15% of the population, or 1,647,703 people, in 2015 earned below the extreme poverty threshold. In 2009 that number did not exceed 2.2%. The net wealth of Greek households fell by a precipitous 40% in the same period, according to the Bank of Greece. Unemployment, austerity’s most pernicious effect, hovers around 22%, by far the highest in the EU, despite a 5% drop in the last two years. Although the worst is over in terms of fiscal adjustment, few believe Greece will be able to escape a fourth bailout even if Athens regains market access when its current EU-IMF sponsored programme ends in August next year.

“It is very difficult to see the country being able to make a clean exit [from international stewardship] and raise the sort of money it needs to refinance its debt,” said Kyriakos Pierrakakis, director of research at DiaNeosis. “It will almost certainly need a new financial credit line, a bailout light, and that will come with new conditions.” In such circumstances, faith in government claims that the country has turned the corner – based as much on last week’s market foray as completion of a landmark compliance review and disbursement of €8.5bn in bailout funds – is in short supply. “Greeks can’t see any light at the end of any tunnel,” said Christodoulaki, shaking her head in disbelief. “They won’t believe anything at this point until they see it for real in front of their eyes.”

Across town in the communist party stronghold of Kaisariani, municipal authorities are already preparing for winter. In the giant 1960s concrete town hall, the social services department has lined up fundraising events, including concerts and theatre performances, to finance food donations that local stores and supermarkets can no longer afford to make. “Needs have grown exponentially,” said Marilena Christodoulou, her office wall adorned with the slogan “poverty is not a crime”.

Read more …

Last bits of a really good piece from a Greek American.

Greece: A (Basket) Case Study In Savage Globalization (Nevradakis)

Jean-Paul Sartre once famously stated that “a lost battle is a battle one thinks one has lost.” The tragic reality in Greece today, most Greeks, beaten down by the crisis and by the effects of what can be described as savage globalization, are plagued by feelings of collective guilt, self-loathing, hopelessness, feelings of inferiority, and apathy. The “inferiority” of Greece and the Greek people, and their “guilt,” are accepted as “facts of life.” It is, therefore, no surprise to see Greece ranked fourth worldwide in Bloomberg’s misery index for 2017. When one believes they have lost a battle, that means that they also recognize some other entity as the victor. In the case of Greece, that victor could be recognized as the EU and countries considered by average Greeks as “superior” and “civilized.” Writing in 1377, North African historian and historiographer Ibn Khaldun provides us with insights which could help explain Greece’s “xenomania” and nationwide Stockholm Syndrome today:

“The vanquished always want to imitate the victor in his distinctive mark, his dress, his occupation, and all his other conditions and customs. The reason for this is that the soul always sees perfection in the person who is superior to it and to whom it is subservient. It considers him perfect, either because the respect it has for him impresses it, or because it erroneously assumes that its own subservience to him is not due to the nature of defeat but to the perfection of the victor. If that erroneous assumption fixes itself in the soul, it becomes a firm belief. The soul, then, adopts all the manners of the victor and assimilates itself to him. This, then, is imitation.” It is, unfortunately, this very imitation that one observes in crisis-stricken Greece today. A society where the majority whines and complains, or simply gets up and leaves, but does not demand.

A nation that is demoralized; defeated; consumed by hopelessness; devoid of pride, self-respect, and self-confidence; paralyzed by fear; hampered by ignorance; and gripped by feelings of inferiority, cannot deliver change. This situation, of course, suits the powers that be magnificently. A society of self-loathers, a nation that is defeated and demoralized, will not pose a threat to those responsible for that oppression, while other “civilized” countries reap the ancillary benefits of the crisis, as the economic beneficiaries of the mass exodus and “brain drain” from Greece. This is savage globalization in action. In other words, Greece is a prime candidate for, in the words of Oscar López Rivera, the kickstarting of a decolonization process. His words may have been intended for Puerto Rico, but they are similarly applicable to Greece. But will the people of Greece heed Oscar’s words?

Read more …

21 million slaves. And we talk about Scaramucci’s rants.

‘Human Life Is More Expendable’: Why Slavery Has Never Made More Money (G.)

Slave traders today make a return on their investment 25-30 times higher than their 18th- and 19th-century counterparts. Siddharth Kara, a slavery economist and director of the Carr Center for Human Rights Policy at Harvard Business School, has calculated that the average profit a victim generates for their exploiters is $3,978 (£3,030) a year. Sex trafficking is so disproportionately lucrative compared to other forms of slavery that the average profit for each victim is $36,000. In his book Modern Slavery, to be published in October, Kara estimates that sex trafficking accounts for 50% of the total illegal profits of modern slavery, despite sex trafficking victims accounting for only 5% of modern slaves. Kara based his calculations, shared exclusively with the Guardian, on data drawn from 51 countries over a 15-year period, and from detailed interviews with more than 5,000 individuals who have been victims of slavery.

The first move to eradicate slavery was made in 1833, when the British parliament abolished it, 26 years after outlawing the trade in slaves. Nonetheless, at least twice as many people are trapped in some form of slavery today as were traded throughout the 350-plus years of the transatlantic slavery industry. Experts believe roughly 13 million people were captured and sold as slaves by professional traders between the 15th and 19th centuries. Today, the UN’s International Labour Organisation believes at least 21 million people worldwide are in some form of modern slavery. “It turns out that slavery today is more profitable than I could have imagined,” Kara said. “Profits on a per slave basis can range from a few thousand dollars to a few hundred thousand dollars a year, with total annual slavery profits estimated to be as high as $150bn.”

Read more …

Jun 102016
 
 June 10, 2016  Posted by at 8:24 am Finance Tagged with: , , , , , , , ,  


Lewis Wickes Hine Workers in Maryland packing company 1909

Marc Faber: Brexit Would Be Best Thing To Happen in Britain’s History (CNBC)
Brexit Might Trigger Run On Britain’s Record Financial Debts, S&P Warns (AEP)
Heavy Cost Of UK’s Access To The Single Market In Europe (Connolly)
Germans Get Richer While Southern Europe Lags (R.)
Bill Gross Says Negative Rates Are Like ‘Supernova’ That Will Explode (BBG)
It Took The US $10 In New Debt To Create $1 Of Growth In Q1 (ZH)
Global Investors Are Fleeing US Stocks at a Record Pace (BBG)
US Tax Receipts Signaling Recession? (Mish)
Ready, Set, Crash – Could New Zealand Be Next To Fall? (NZ Herland)
Pity Poor China: There’s No Easy Fix to the S-Curve (CH Smith)
China’s Propaganda Department Not Good Enough At Propaganda (AFP)
How Mishandling Classified Info Affects People Not Named Clinton (USA T.)
They Died of Progress (Greer)
The Money Cult (Dmitry Orlov)
In Greek Refugee Camps, Wait For Asylum Fuels Unrest (R.)
3,000 Migrants Rescued Off Italian Coast; Two Bodies Found (R.)

Not a fan of the Union.

Marc Faber: Brexit Would Be Best Thing To Happen in Britain’s History (CNBC)

As investors wring their hands over the impact of Britain’s potential withdrawal from the European Union, otherwise known as “Brexit,” one of the market’s biggest bears delivered a surprising message. “I happen to think that a Brexit would be bullish for global economic growth,” Marc Faber told CNBC’s “Trading Nation” on Wednesday. “It would give other countries incentive to leave the badly organized EU.” The editor and publisher of The Gloom, Boom & Doom Report emphasized that a vote on June 23 by Britain to leave the EU would be an ideal course of action for the country. Additionally, Faber expressed the belief that small countries like Croatia, Estonia and Malta would also prosper as independent nations versus being a part of a larger system.

Currently, the EU has 28 members that operate within a single market with the goal of encouraging the free movement of goods and services. British Prime Minister David Cameron has expressed disdain for leaving the bloc, explaining in a piece for The Telegraph that doing so would “be the gamble of the century.” However, that’s a risk that Faber says Britain should be willing to take and noted that the EU is an “empire that is hugely bureaucratic.” Faber further reasoned that a Brexit would not be a disaster. “On the contrary, it would be the best thing for Britain that would ever happen!” Faber defended his case by citing Switzerland, which is not a member of the EU nor the European Economic Area, but instead operates in the “single” market. That enables the Swiss to have rights in the U.K., but theoretically allows them to operate independently of both groups.

Read more …

“The level of debt coming due over the next 12 months is 755pc of the country’s external receipts..”

Brexit Might Trigger Run On Britain’s Record Financial Debts, S&P Warns (AEP)

Britain is the world’s most vulnerable state on a key measure of short-term debt and credit markets might suddenly seize up if voters opt for Brexit, Standard & Poor’s has warned. The US credit rating agency is crystal clear that Britain will be stripped of its coveted AAA status immediately and may face a double-barrelled downgrade if the country takes a leap in dark, jeopardizing its trading and financial ties to its biggest market. “We are categorical about this,” said Moritz Kraemer, the agency’s head of sovereign ratings. “There is no clear ‘Plan B’ in the UK and we are not going to wait until we find out what the British position actually is. We could potentially see a two-notch downgrade,” he told The Daily Telegraph.

Mr Kraemer said the British financial system is extremely dependent on external financing. This is the Achilles Heel for an economy that relies so heavily on the City of London, and has a current account deficit above 5pc of GDP – the highest in Britain’s peace-time history. The level of debt coming due over the next 12 months is 755pc of the country’s external receipts, the highest for all 131 sovereign states rated by S&P. This compares to 318pc for the US and 316pc for France, the next two states most exposed. Much of this short-term debt is owed by banks operating in the City, some of them American, Japanese, European, or Mid-East institutions.

In theory, the liabilities are matched by assets and therefore simply ‘net out’ if stress forces banks to shrink their operations, but crises have a nasty habit of revealing skeletons in the cupboard. “If there is no currency and maturity mismatch, then there is no big issue. But we don’t know that for sure,” Mr Kraemer said. “These sums are very large and have to be rolled over constantly. Nobody has ever hesitated in the past because it was always assumed that Britain is a safe haven and there is no risk,” he said.

Read more …

Bernard Connolly was never a fan of the EU. He sees Germany take over if Britain remains in the Union.

Heavy Cost Of UK’s Access To The Single Market In Europe (Connolly)

We are told that Britain’s net contribution to the EU budget, about 0.5pc of our GDP after the rebate (our gross contribution is much bigger; what we “get back” is EU payments to universities and interest groups as part of the EU’s subversion strategy) is the entry fee we must pay for “access” to the EU single market. Why do numerous other countries, with equal access to the single market, receive substantial net payments from the EU – that is, from us and a few other countries? Jean-Claude Juncker has said that France gets away with breaking the budgetary rules “because it’s France”. Britain is gleefully given the rough end of the stick by our partners “because it’s Britain”.

What access brings to Britain is the enormous cost of single market regulations imposed on all firms, not just the very small minority of exporters to the EU. It also brings higher prices in the shops because we are forced to apply the EU’s common external tariff to imports from third countries. Importantly, it brings a massive deficit with the EU on trade in goods and services – reducing the amount we can spend without borrowing from abroad by close to a massive 4pc of our GDP. But we do borrow. The trade deficit with the EU is the biggest single contributor to Britain’s unsustainable current-account position.

We do not yet have much net debt to the rest of the world. But if the current account deficit continues at anything like its present rate it will not be long before we build up foreign debt that leaves us with four choices: default; an economic depression like that in Greece; substantial sterling depreciation; and total political submission to Germany in the hope of getting permanent transfers from that country. The last option is far-fetched beyond science fiction. The first and second are obviously unthinkable for a country such as Britain, at least if we restore control over our own affairs by leaving the EU. That leaves just sterling depreciation, and the sooner it happens the less disruptive it will be. The more Leave thrives in the opinion polls, the better it is for the prospect of avoiding default and depression.

Read more …

Why the eurozone should fall. Everything moves towards the center. Design flaw, intentional or not, can’t be fixed.

Germans Get Richer While Southern Europe Lags (R.)

The wealth disparity in the euro zone is increasing, with rising property prices helping Germans get richer while southern European countries lag behind, a study has found. While the gap between northern countries, such as the Netherlands, and southern states like Portugal has long been a feature of the euro bloc, the study by an arm of German fund manager Flossbach von Storch shows it is getting ever wider. Taking a basket of items including property, stocks, art and expensive wine, the research concluded that wealth in Germany and Austria jumped more than 7% at the end of 2015 compared to a year earlier.

That was roughly twice the growth rate of Italy and Spain, while Greeks saw their wealth drop by more than 4%. Property prices, which, for example, jumped by more than 6% in Germany, are the biggest driver of wealth. This difference leads to political tension in the 19-member euro zone, while weak property prices in southern countries hit their banks, which hold homes and commercial property as security for loans. “Until 2006 when the bubble burst, countries in the south were really taking off. Now they are in a Japan-like situation,” said Thomas Mayer, founder of the research institute that carried out the study.

Read more …

Inevitable.

Bill Gross Says Negative Rates Are Like ‘Supernova’ That Will Explode (BBG)

Bill Gross, the manager of the $1.4 billion Janus Global Unconstrained Bond Fund, warned central bank policies that pushed trillions of dollars into bonds with negative interest rates will eventually backfire violently. “Global yields lowest in 500 years of recorded history,” Gross, 72, wrote Thursday on the Janus Twitter site. “$10 trillion of neg. rate bonds. This is a supernova that will explode one day.” A supernova is a star at the end of its life that suddenly increases greatly in brightness because of a catastrophic explosion that ejects most of its mass. Gross has argued for some time that the economy is at the end of a decades-long cycle of expanding credit that has culminated in negative interest rates, a situation he said is unsustainable.

Rather than spurring economic growth, low rates are promoting asset bubbles as investors reach for higher yields while punishing individual savers and industries that rely on interest rates, such as bank and insurance companies, according to Gross. He said in a June 2 note that the era of 7.5% annualized investment gains is history and that investors should eventually take positions to protect principal or profit from market declines. Returns will be low, risk will be high and at some point the ‘Intelligent Investor’ must decide that we are in a new era with conditions that demand a different approach,” he wrote. “Negative durations? Voiding or shorting corporate credit? Buying instead of selling volatility? Staying liquid with large amounts of cash? These are all potential ‘negative’ carry positions that at some point may capture capital gains or at a minimum preserve principal.”

Read more …

You can neither purchase nor borrow growth. When China reaches this phase, watch out.

It Took The US $10 In New Debt To Create $1 Of Growth In Q1 (ZH)

today we had a chance to update the total US credit following the release of the Fed’s Flow of Funds (Z.1) statement, which is usually parsed for its tracking of changes to household wealth. And while it showed that in  the first quarter the net worth of US residents, mostly the wealthy ones as the bulk of financial assets is held by a small fraction of the total population, rose by $837 billion to $88 trillion mostly as a result of a change in real estate holdings, we were more interest in the aggregate picture. It wasn’t pretty.

As a reminder, according to the latest BEA revision, nominal Q1 GDP was $18.23 trillion, an increase of just $65 billion from the previous quarter or an annualized 0.7% rate, the question is how much credit had to be created to generate this growth. Well, according to the Z.1, total credit rose to a new record high $64.1 trillion. This was an increase of $645 billion from the previos quarter. It means that in the first quarter, it “cost” $10 in new debt to generate just $1 in new economic growth!

 

And here are the two other key charts: the first, showing total credit (debt and loans) vs GDP growth since 1950. The trend is hardly anyone’s friend, except for those who create the debt out of thin air to pocket the ever lower cash flows associated with it (and await the next inevitable bailout):

 

More importantly, on a leverage ratio basis, the US economy is now at a level of 352% total credit/GDP, the highest since Q1 2013, and a level which has been relatively flat since it peaked at 380% just before the crash. One way to read this chart perhaps is that the “carrying debt capacity” of the US economy is roughly 380% at which point something “unexpected” happens. At the current rate of surging credit relative to slowing GDP, the US economy should be there in the not too distant future.

Read more …

This supposes people merely switch their money somewhere else, but some may simply need it fr other purposes.

Global Investors Are Fleeing US Stocks at a Record Pace (BBG)

The most determined seller of U.S. stocks may not be in the U.S. at all. Investors outside the country dumped $128 billion in American shares over the past year, data from the U.S. Treasury International Capital System show. Despite the higher quality of companies in the U.S., long-term investors may be drawn to the faster pace of growth in other economies, said Stewart Warther, an equity strategist at BNP Paribas.

Read more …

There’s those nasty pesky withholding taxes again.

US Tax Receipts Signaling Recession? (Mish)

US federal personal tax receipts receipts are falling fast. So is the Evercore ISI State Tax Survey. The last two times the survey plunged this much, the US was already in recession. Is it different this time?

Read more …

Boy oh boy.

Ready, Set, Crash – Could New Zealand Be Next To Fall? (NZ Herland)

“We’ve almost got the perfect storm,” says veteran fund manager Brian Gaynor as he reels off the many reasons New Zealand house prices and debt levels are soaring to precipitous heights. There are many ingredients. But right now, New Zealand seems to have them all: not enough building, restrictions on development, surging migration, baby boomer savings, low interest rates and banks that are all too happy to lend for property investment. “When you get the perfect storm like we did in the 1980s with the sharemarket, you see things just go up and up. People start to believe they will never fall,” he says.

“People didn’t believe the sharemarket would fall in the 80s. I’d come in from a trip to Australia and the guy at customs wouldn’t let me in unless I gave him sharemarket tips. It was just euphoria. Everyone was talking about the sharemarket. Now everyone is talking about the property market.” New Zealand’s gross debt is a whopping half trillion dollars; housing now accounts for $218 billion of that. As of April that housing debt was growing at an annualised rate of 8.3% – and that rate is accelerating. The median price of an Auckland house has almost doubled since the bottom of the last cycle in 2009, in the depths of the global financial crisis. The boom has now spilt over into the regions, with places like Hamilton and Tauranga surging 26 and 23% respectively in the past 12 months.

Read more …

We should think about how scary this is.

Pity Poor China: There’s No Easy Fix to the S-Curve (CH Smith)

The fundamental context of China’s economy is that it has traced out an S-Curve – as did previous fast-developing nations such as Japan and South Korea. The S-Curve can be likened to a rocket’s trajectory: first, there’s an ignition phase, as the fuel of financialization, cheap labor and untapped productive capacity is ignited. The boost phase lasts as long as credit-fueled production and consumption expand rapidly. In the boost phase, investors and financial authorities can do no wrong. The high growth rate of credit and production overwhelms all other factors, as the virtuous cycle of expanding profits and production increases wages which then support further expansion of credit and consumption which then supports more production, and so on.

A vast tide of foreign investment fuels an equally vast expansion of fixed capital assets such as factories and new homes. But then the fuel of financialization is consumed, and the previously fast-growing economy slows to stall speed. Depending on how much leverage, corruption and wealth has piled up in the boost phase, this phase may last a few years. This is the top of the S-Curve. As the economy weakens, everything that worked in the boost phase no longer works: expanding credit no longer boosts growth, inflating yet another real estate bubble no longer generates a widespread wealth effect, and every effort to shift from being an export-dependent economy to a self-supporting consumer economy fails to achieve liftoff.

Read more …

Study western media to see how it’s done?!

China’s Propaganda Department Not Good Enough At Propaganda (AFP)

hina’s propaganda department, tasked with controlling the media and arts, has been given a slap on the wrist for not being good enough at shaping public opinion, according to a report on a government website. The Central Commission for Discipline Inspection (CCDI) posted an article on its website Wednesday that described findings from its two-month-long probe of the ruling Communist party’s propaganda department, which began in February. Leaders in the department did not feel a sufficient sense of responsibility for undertaking ideological work, the piece cited CCDI member and investigation spokesman Wang Huaichen as saying. Art was not directed clearly enough towards socialist aims and political thought not emphasised enough in universities, he was quoted as saying.

News propaganda was not targeted or effective enough, especially in the field of new media, where the department had failed to fully implement the principle of “the party controlling the media”, the post cited him as saying. Wang called upon the department to make propaganda appear more valid by enhancing its attractiveness and appeal, it said. The Communist party tolerates no opposition to its rule and newspapers, websites, and broadcast media are strictly controlled. An army of censors patrols social media and many Western news websites are blocked. President Xi Jinping reminded top state media outlets to “strictly adhere to the orders of the Chinese Communist Party” during a series of high-profile visits to their headquarters in February.

Read more …

How Hillary stands out against the US Marine Corps. Click the link to read a young man’s sense of duty and honor. Perhaps a bit overcharged, but what Clinton tries to get away with drags down the entire nation. She’s not the only one to flaunt the rules, but if the commander-in-chief -supposing she’s elected- does this, what does that tell everyone else? I can’t see the military and the FBI accepting it. Maybe the higher-ups would, but you don’t want widespread unrest in the ranks.

How Mishandling Classified Info Affects People Not Named Clinton (USA T.)

Clinton is the antithesis of that young captain, someone with no honor, little courage and commitment only to her endless ambition. This has nothing to do with gender, party affiliation, ideology or policy. It is a question of character — not just hers, but ours. Electing Clinton would mean abandoning holding people accountable for grievous errors of integrity and responsibility. What we already know about her security infractions should disqualify her for any government position that deals in information critical to mission success, domestic or foreign. But beyond that, her responses to being found out — dismissing its importance, claiming ignorance, blaming others — indict her beyond anything the investigation can reveal. Those elements reveal her character. And the saddest thing is that so many in America seem not to care.

Read more …

The downfall of the tech religion?!

They Died of Progress (Greer)

[..] the unspeakable has become the inescapable in today’s world. It’s become a running joke on the internet that the word “upgrade” inevitably means poorer service, fewer benefits, and more annoyances for those who have to deal with the new and allegedly improved product. The same logic can be applied equally well across the entire landscape of modern technology.  What’s new, innovative, revolutionary, game-changing, and so on through the usual litany of overheated adjectives, isn’t necessarily an improvement. It can be, and very often is, a disaster. Examples could be drawn from an astonishingly broad range of contemporary sources, but I have a particular set of examples in mind. 

To make sense of those examples, it’s going to be necessary to talk about military affairs. As with most things in today’s America, the collective conversation of our time provides two and only two acceptable ways to discuss those, and neither of them have anything actually useful to say. The first of them, common among the current crop of American pseudoconservatives, consists of mindless cheerleading; the second, common among the current crop of pseudoliberals all over the industrial world, consists of moralizing platitudes. I don’t particularly want to address the moralizing platitudes just now, other than to say that yes, war is ghastly; no, it’s not going away; and it’s not particularly edifying to watch members of the privileged classes in the countries currently on top of the international order insist piously that war ought to be abandoned forever, just in time to keep their own nations from being displaced from positions they won and kept at gunpoint not that many decades ago. 

The cheerleading is another matter, and requires a more detailed analysis. It’s common among the pseudoconservative right these days to insist that the United States is by definition the world’s most powerful nation, with so overwhelming a preponderance of military might that every other nation will inevitably have to bow to our will or get steamrollered. That sort of thinking backstops the mania for foreign intervention that guides neoconservatives such as Hillary Clinton on their merry way, overthrowing governments and destabilizing nations under the fond delusion that the blowback from these little adventures can never actually touch the United States. 

In America these days, a great deal of this sort of cheerleading focuses on high-tech weapons systems—inevitably, since so much of contemporary American pop culture has become gizmocentric to the point of self-parody. Visit a website that deals with public affairs from a right-of-center viewpoint, and odds are you’ll find a flurry of articles praising the glories of this or that military technology with the sort of moist-palmed rapture that teenage boys used to direct to girlie-mag centerfolds. The identical attitude can be found in a dizzying array of venues these days, very much including Pentagon press releases and the bombastic speeches of politicians who are safely insulated from the realities of war. There’s only one small difficulty here, which is that much of the hardware in question doesn’t work. 

Read more …

Lovely from Dmitry.

The Money Cult (Dmitry Orlov)

are there any unintended consequences of negative interest rates? Unintended consequences are hard to think about, and most people get a headache even trying. How can it be that clean, plentiful nuclear energy will eventually pollute the whole planet with long-lived radionuclides, resulting sky-high cancer rates? How can it be that wonderful genetically modified seeds will render us sickly and infertile in just a few generations? And how can it be that ingenious mobile computing technology has turned our children into zombies who are constantly twiddling their smartphones as they sleepwalk through life? It s hard to think about any of this without taking some happy pills; and how can it be that taking those happy pills has… you get the idea.

The unintended consequence of negative interest rates is that they destroy money. This is true in an entirely trivial sense: if you deposit x dollars at -p% annual, then a year later you will only have x(1-p) dollars because xp dollars has been destroyed. (In case you prefer to count on your fingers and toes, if you deposit $10 at -10% annual, then a year later you will only have $9 because $1 has been destroyed.) But what I mean is something slightly more profound: negative interest rates erode the very concept of money. To get at the reason for this, we have to ask a slightly more profound question: What is money? I think that money is the cult of the god Mammon.

Read more …

“Despite its intention to process all cases, Greece lacks the manpower to deal with the volume of applications. It says it needs more help from EU institutions. As many as 6,656 people applied for asylum in March and April this year, up from 1,899 in those months last year. Even if it could hire more people, they would need to be highly qualified legal experts, government officials say.”

In Greek Refugee Camps, Wait For Asylum Fuels Unrest (R.)

Tents were set on fire, punches were thrown, children cried through the night and families were forced to flee the burning detention camp and sleep in open fields. The tension is palpable on Greece’s islands, where about 8,000 asylum seekers feel stranded by a European Union deal with Turkey to stem the arrival of refugees and other migrants on European shores from Syria, Iraq, Afghanistan and beyond. The deal, hailed a success by its European architects, prevents migrants from going beyond Greece – or even its islands – in their search for a new home in Europe, until their asylum claims are processed and those rejected are sent back to Turkey, from where they arrived. But some European officials say the assessment has been slow, and the wait long for those confined to often overcrowded camps.

In June, the most violent month yet, dozens were injured in clashes on three islands, police said. Videos in Greek media showed clouds of smoke rising over the centers on three occasions. In clashes on Lesvos the night of June 1-2, families with young children had to flee and spend the night in nearby fields or Mytilene town, several kilometers away, Amnesty International said. Many returned to burned down tents and destroyed belongings. Women told Amnesty they “live in constant fear” in camps where fights break out in food queues. Journalists are barred from entering the camps on the islands. But humanitarian organizations and police officials on the ground speak of people on edge. “They’re reacting. They want to leave the islands,” said a police official for the northern Aegean region which includes the islands of Lesvos, Samos and Chios where rival migrant groups brawled. “We’re bracing for all eventualities.”

Read more …

We will never know how many people drown unnoticed. If a tree falls in a forest…

3,000 Migrants Rescued Off Italian Coast; Two Bodies Found (R.)

More than 3,000 boat migrants have been rescued in the Mediterranean over the past two days and two bodies have been recovered, Italy’s coastguard said on Thursday. The coastguard coordinated rescues of migrants from 15 different boats on Thursday, bringing 1,950 people to safety. Two bodies were recovered from a rubber boat. Some 1,100 migrants were rescued at sea on Wednesday. The coastguard had no details about the nationalities of the migrants, nor about the two deaths.

All the rescues took place between Italy and Libya, where people-smugglers operate with impunity amid the chaos of civil war. Britain’s HMS Enterprise and Germany’s FGS Frankfurt, patrolling the area as part of the European Union’s anti-people-smuggling operation, together rescued migrants from seven boats, a coastguard spokesman said. A Doctors without Borders vessel, the Dignity 1, rescued almost 500 from four boats, while the Phoenix, run by humanitarian group Migrant Offshore Aid Station, took 243 people from two boats.

Read more …