Dec 132018
 
 December 13, 2018  Posted by at 10:36 am Finance Tagged with: , , , , , , , , , , , , , ,  


René Magritte After the water, the clouds 1926

 

‘Her Goose Is Cooked’ (G.)
Tory Resentment Of Irish Power Within EU (BBC)
Cohen Gets 3 Years, Says He Will Reveal All He Knows About Trump (Ind.)
Yellen, Fed Fear Corporate Debt Bubble, Investors Don’t (CNBC)
US Bank Stocks Spiral Down (WS)
ECB Worries Multiply Even As Money-Printing Presses Stop (R.)
ECB Caught Between Economic Risks And QE Exit (CNBC)
French Government To Face A No-Confidence Vote (CNBC)
Japan Picks The Character For ‘Disaster’ To Define 2018 (Tel.)
Wikileaks’ Assange Undergoes Medical Tests At Ecuador’s Urging (R.)
Assange Complains Of ‘More Subtle’ Silencing Than Khashoggi (RT)
Fentanyl Surpasses Heroin As Deadliest Drug In US (AFP)
Time Magazine Says The US ‘Remains A Free And Fair Press’ (CNBC)

 

 

Might as well do it this way. May survives confidence vote and can now prepare to defend the deal whose certain defeat made her delay Tuesday’s Parliament vote, a delay which led to the confidence vote in the first place. She still can’t win that one. It’s not so much May who is cooked, it’s the country.

‘Her Goose Is Cooked’ (G.)

No 10 will not be happy with today’s front pages, which are all about Theresa May’s survival in the no-confidence vote, but paint the win as less of a triumph for May than a pyrrhic victory. Let’s start with the good news for the prime minister. Two papers have come out in support of the her, with the Express featuring a picture of a smiling May and the headline: “Now just let her get on with it”.


Neil Henderson
(@hendopolis)

EXPRESS: Now just let her get on with it #tomorrowspaperstoday pic.twitter.com/jBhPRSqbAc

The Mail is similarly supportive: “Now let her get on with the job!”, saying that “despite two months of sabre-rattling by her hardline opponents, and deadlock over Brexit, almost two-thirds of Tory MPs backed her”.


Neil Henderson
(@hendopolis)

DAILY MAIL: Now let her get on with the job! #tomorrowspaperstoday pic.twitter.com/oaEihTtsOv

Others were less sympathetic. “Time to call it a May”, says the Sun, never one to miss the chance of putting a pun in a headline. The Sun says the prime minister was “left wounded last night after a battering by Tory Brexit rebels”.

The Sun
(@TheSun)

Tomorrow’s front page: Theresa May was left wounded after a battering by Tory Brexit rebels in a make-or-break confidence vote https://t.co/SZTSNZoCZq pic.twitter.com/3OO11Qrm85

The Mirror has: “It’s lame duck for Christmas”, saying May’s “goose is cooked”. The paper describes her as “wounded” and “battered” and says she only managed to survive the no-confidence vote “by promising not to fight the next election”.


Daily Mirror
(@DailyMirror)

Tomorrow’s front page: It’s lame duck for Christmas#tomorrowspaperstoday https://t.co/fFIeHwiekz pic.twitter.com/xL0ijW0Qzv

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Britain’s -Tory- elites still see Ireland as some backward place way beneath them. “The Irish really should know their place.”

Tory Resentment Of Irish Power Within EU (BBC)

A Tory grandee recently sidled up to me to express grave reservations about the Brexit process. “We simply cannot allow the Irish to treat us like this,” the former minister said about the negotiating tactics of the Taoiseach, Leo Varadkar. The Conservative MP was exasperated that the Republic of Ireland (population: 4.8m) has been able to shape the EU negotiating stance that has put such pressure on the UK (population: 66m). “This simply cannot stand,” the one-time moderniser told me. “The Irish really should know their place.” The remarks explained why Conservatives from both sides of the Brexit divide are so troubled by the negotiations. They also explain why Theresa May might find that any concessions from the EU over the Northern Ireland backstop may fall short of the demands of Tory MPs.

Over the last few months Tory MPs have asked in private how the Irish Republic can believe its relationship with the EU trumps its relationship with the UK. They cite economic reasons (the Irish Republic’s strong trading links with the UK) and the historical relationship. The MPs do of course acknowledge that left a troubled legacy. One minister familiar with Anglo-Irish relations points out that these Tories should bear in mind one date and one word to explain both the Irish and the EU’s approach. The date is 1973: when the Irish Republic joined the EEC at the same time as the UK and Denmark. That was the moment when Ireland took a giant political leap at the same time as the UK.

But it turned out to be arguably the biggest unilateral strategic move since Partition in the 1920s – a move that defined the modern Irish Republic as an independent state within Europe, with a wholly different approach to its larger neighbour.

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I’m afraid I missed something along the way. If you run for office in the US and someone tries to blackmail you, you can’t get rid of them, you need to have lawsuits, court cases etc., interfere with your campaign. Not doing so is illegal. But, as Candace Owens said today,

“Congress has a slush fund, made up of tax dollars, that is used to pay off & silence their alleged sexual assaults and affairs. To date, over 200 million dollars in 200 settlements have been paid since 1998. But tell us more about Trump’s possible campaign finance violations…”

Moreover, a US judge just sentenced Stormy Daniels to paying Trump’s legal costs. But he was still in the wrong? How is that possible?

Cohen Gets 3 Years, Says He Will Reveal All He Knows About Trump (Ind.)

Michael Cohen has warned that he has more to say about what he called the ”dirty deeds” of Donald Trump as the president’s former lawyer and fixer was sentenced to three years in prison for facilitating payments to two women who have had alleged affairs with Mr Trump. Cohen was sentenced to 36 months for tax fraud and for his role in the payment of hush money to porn star Stormy Daniels and the former Playboy model Karen McDougal. Both say they had affairs with Mr Trump before the 2016 presidential election. The judge in a district court in New York also handed Cohen an extra two months for lying to Congress about a proposed Trump Tower project in Russia.

The payments have implicated Mr Trump directly in criminal conduct according to a court filing from prosecutors last week, which said that Cohen was working in coordination with the president. Cohen’s adviser Lanny Davis, who was his attorney for the case, said after the sentencing that Cohen will disclose more information concerning Mr Trump, once Robert Mueller wraps up his investigation into Russian interference in the 2016 US presidential election and possible collusion with Trump campaign officials. “At the appropriate time, after Mr Mueller completes his investigation and issues his final report, I look forward to assisting Michael to state publicly all he knows about Mr Trump – and that includes any appropriate congressional committee interested in the search for truth and the difference between facts and lies,” Mr Davis said in a statement.

Read more …

Why is anyone still listening to Yellen?

Yellen, Fed Fear Corporate Debt Bubble, Investors Don’t (CNBC)

The corporate debt scaring policy experts like former Fed Chair Janet Yellen isn’t throwing too much of a fright into market participants. In fact, some of them are continuing to load up on lower-grade corporate debt because it’s managed to be a better performer than some of the investments considered to be safer. “Offense is the best defense,” Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, told clients in a note pointing out that BBB-rated companies are outperforming their A-rated counterparts. BBB is the last rung before junk, and the increasing level of company bonds going to that level is causing concern.

Some investors worry that the companies whose debt is in danger of slipping into high-yield territory will have trouble meeting their obligations during the next economic downturn. But Mikkelsen thinks those concerns are misplaced. The S&P 500 Triple-B investment-grade corporate bond index is down 2.9 percent year to date, which is not good. However, the group is outperforming the broader S&P 500/MarketAxess Investment Grade Corporate Bond Index, which is off 3.5 percent in 2018. The outperformance grows when isolating for risk-adjusted excess returns and runs counter to history when credit spreads are widening. Higher-quality bonds usually outperform in those cases, Mikkelsen noted.

“This outperformance of BBBs is noteworthy as one of [the] key investor concerns this year remains the possibility that large BBB-rated capital structures get downgraded to high yield during the next downturn,” Mikkelsen wrote. “We think this outperformance reflects in part a low recession probability being priced into credit spreads, as well as the fact that most large BBBs are unlikely to get downgraded to [high-yield] anytime soon as they tend to have stable cash flows and significant financial flexibility.”

Read more …

When do we start talking bailouts?

US Bank Stocks Spiral Down (WS)

On Tuesday, the US KBW Bank index, which tracks the largest 24 US banks and serves as a benchmark for the banking sector, dropped 1.2%, the fifth day in a row of declines, to the lowest close since September 7, 2017. The index is now back where it had been on December 1, 2016. Two years of big gains gone up in smoke. [..] But no, the index doesn’t include Goldman Sachs – which is big in other ways but not as a bank, and which has skidded 35% from its all-time peak in February. The index has now dropped 22.5% since the post-financial crisis peak on January 26:

So far in Q4, the index has dropped 14%. Unless a miraculous banking-Santa-Claus rally pulls banks out of their dive by the end of the quarter, a 14% decline would make it the worst quarterly decline since Q3 2011. If tax selling kicks in, given the losses bank-stock investors have taken so far this year, it could get worse in the coming days. Not even in Q3 2015, during the oil bust, when investors were fearing that banks would take steep losses on their loans to the oil industry, did shares drop this much.

The index is now back where it had first been a couple of years before its crazy peak in February 2007. Said peak occurred about a year before Bear Stearns toppled. During the subsequent collapse of banks stocks, it looked like the index would hit zero. After the bottom in March 2009, the Fed’s strategies to benefit the banks and those that owned them took hold, at the expense of depositors and other classes of US stake holders, such as renters or future home buyers. And it worked. But that era is now over. And the tax cut too has been baked in, and banks are left to fend for themselves:

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Those negative rates will come back to haunt Draghi. But when their damage becomes obvious, he’ll be living quietly in some splendid villa on Lake Como.

ECB Worries Multiply Even As Money-Printing Presses Stop (R.)

The European Central Bank is all but certain to formally end its lavish bond purchase scheme on Thursday but will take an increasingly dim view on growth, raising the odds that its next step in removing stimulus will be delayed. The long-flagged end of bond buys must be irreversible for the sake of credibility, but with France and Italy in political turmoil, a global trade war still looming large and growth slowing, ECB chief Mario Draghi will be keen to emphasize that other forms of support will remain. This leaves Draghi with yet another delicate balancing act: appear confident enough to justify the end of the 2.6 trillion euro ($2.95 trillion), four-year-long bond buying program, but also sound sufficiently concerned to keep investors expectations about further policy tightening relatively cool.

“Ending quantitative easing now looks more like the ammunition is running out rather than (being) based on a convincing economic outlook,” Societe Generale economist Anatoli Annenkov said. The ECB’s problem is that growth is weaker than policymakers thought even just weeks ago while the predicted rise in underlying inflation has failed to materialize, putting in doubt some of the bank’s assumptions about the broader economy. Overall inflation, the ECB’s primary objective, may be near the target now but falling oil prices suggest a dip in the months ahead and a solid rise in wages is not feeding through to prices, leaving the bank with an unexplained disconnect.

Highlighting this complication, the ECB is likely to cut growth and underlying inflation projections and may take a dimmer view on risks, all while Draghi argues that growth is merely falling back to normal after a recent run.

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What a failure Draghi has been. Same goes for all central bank heads in the past decades. They make sure banks are fine at the expense of citizens.

ECB Caught Between Economic Risks And QE Exit (CNBC)

ECB President Mario Draghi has to tread a fine line once again as he gives his latest update on euro area monetary policy on Thursday. While steering the bank out of its QE program and stressing interest rates and reinvestments going forward, Draghi is faced with an economy that may be slowing and a dreary inflation outlook. “We expect the ECB to announce at its meeting next Thursday an end to net-purchases under the APP programme,” said Natixis’ Dirk Schumacher in a note. “While there has been a clear weakening in the economic environment, the ECB will argue that the reinvestment of the stock of bond holdings will ensure a continuing accommodative policy stance justifying an end of the program,” he added.

On Thursday, the ECB also will publish its newest staff projections for economic growth and inflation for the next three years. While it is expected that the central bank will lower its outlook for growth for the next two years, the numbers are also expected to remain just punchy enough to underline the case to exit their purchase program. Another big topic for Thursday will be the design of the ECB’s reinvestments. “The ECB will likely maintain its guidance that it will fully reinvest the proceeds and thus keep its bond holdings constant ‘for an extended period of time’ and ‘for as long as necessary’ to put inflation on track towards its target,” said Florian Hense, Economist with Berenberg.

Read more …

Might work if Le Pen joins the left.

French Government To Face A No-Confidence Vote (CNBC)

Left-of-center lawmakers in France have tabled a motion of no confidence in the French government following repeated protests and scenes of violence. The “gilets jaunes” (“yellow vests”) crisis started as a demonstration against a carbon tax policy and planned fuel tax increases, but have morphed into wider discontent at the leadership of President Emmanuel Macron. Now representatives from the French Communist Party, the Socialist Party and the far-left populist movement France Unbowed (La France Insoumise) have come together to table the motion against Macron’s government.

The government of Georges Pompidou in 1962 was successfully toppled by such a motion but few believe this one will pass as Macron’s centrist La République En Marche! party enjoys a strong majority in the 577-seat house. “The French political system makes it extremely difficult to remove a President from office,” said the Deputy Director of Research at Teneo Intelligence in a note Wednesday. “The only political tool available to the opposition to expel Macron is the constitution’s impeachment procedure, which no one is currently considering,” he added.

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Seems appropriate, but what symbols are left for the much worse years to come?

Japan Picks The Character For ‘Disaster’ To Define 2018 (Tel.)

Japan has chosen the character for ‘disaster’ to symbolise 2018. The public chose the symbol following a series of natural disasters. In July, 200 people died in floods and millions were evacuated from their homes, and mere days later 65 people died in a heatwave that hospitalised more than 20,000 people. The country was also hit by an earthquake with a magnitude of 6.7 and was rocked by its strongest typhoon for 25 years. These numerous natural disasters have had an adverse effect on the Japanese economy, and the country’s GDP has gradually shrunk over the last three months, by 1.2 per cent.

The country also experienced societal problems this year, as stories of sexual harassment in the workplace and suicide rates came to light. The master of the ancient temple in Kyoto, Seihan Mori, wrote the symbol for ‘disaster’ in dark ink on traditional white washi paper to mark the vote. The competition has been run by the Kanji Aptitude Testing Foundation since 1995. In the annual poll, 21,000 of the 190,000 people who voted picked the character to summarise the years events, but the symbol for peace was a close runner-up.

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What kind of headline is this, Reuters? The UK has refused Assange medical care for years, and now you make it look like Ecuador, not Assange himself. makes it happen?

Wikileaks’ Assange Undergoes Medical Tests At Ecuador’s Urging (R.)

Wikileaks founder Julian Assange received a series of medical exams, Ecuador’s top attorney said on Wednesday, in line with a new set of rules for his asylum at the Andean country’s London embassy that prompted him to sue the government. Assange first took asylum in the embassy in 2012, but his relationship with Ecuador has grown increasingly tense, with President Lenin Moreno saying he does not like his presence in the embassy. The government in October imposed new rules requiring him to receive routine medical exams, following concerns he was not getting the medical attention he needed. The rules also ordered Assange to pay his medical and phone bills and clean up after his pet cat.

Inigo Salvador told reporters Ecuador did not have access to results of the tests, which were conducted by doctors Assange trusted, out of respect for his privacy. But he said Assange, who has sued Ecuador arguing that the new rules violate his rights, appeared coherent and lucid to him. On Wednesday, Assange appeared via videoconference in an Ecuadorean court to appeal a previous ruling that had upheld the new rules. Assange is concerned that Ecuador is seeking to end his asylum and extradite him to the United States, but Ecuador has said the United Kingdom told it he would not be extradited.

U.S. officials have acknowledged that federal prosecutors have been conducting a lengthy criminal probe into Assange and Wikileaks. Wikileaks published U.S. diplomatic and military secrets when Assange ran the operation. A lawyer for Assange said he did not know the results of the medical tests, and called on Ecuador to produce documentation proving that the UK would not extradite him to any country where his life was at risk.

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“..accused his Ecuadorean hosts of spying and feeding information to US authorities..”

Assange Complains Of ‘More Subtle’ Silencing Than Khashoggi (RT)

Julian Assange has accused his Ecuadorean hosts of spying and feeding information to US authorities, and slammed attempts to block his journalistic work as a more subtle way of silencing than the murder of Jamal Khashoggi. Suggesting there were “facts of espionage” inside the embassy, the WikiLeaks co-founder expressed concern during a hearing in Quito on Wednesday that Ecuadorean intelligence is not only spying on him, but sharing the data it has harvested with the FBI. Ecuadorean intelligence clearly spent a sizable amount of money equipping the embassy for surveillance, Assange added.

He accused Ecuadorean authorities of “comments of a threatening nature” relating to his journalistic work and compared attempts to silence him to the murder of Washington Post columnist Jamal Khashoggi, who was tortured and cut up in the Saudi embassy in Istanbul in October, but “more subtle.” The comparison elicited a harsh reaction from Ecuadorean Prosecutor General Inigo Salvador, who accused Assange of biting the hand that feeds him. Assange told the Ecuadorean court that the living conditions in the embassy were so detrimental to his health that they may put him in the hospital – and suggested that may be the point, because once he leaves the building, he’s fair game for UK and US authorities.

[..] Assange was in court appealing a strict set of rules handed down in October governing his conduct, which he has called a violation of human rights. He submitted 15 “facts of evidence” along with letters from individuals and groups barred from visiting him at the embassy. An earlier attempt to sue his hosts over the restrictive measures was ultimately dismissed by a judge last month, while Assange rejected E

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That stuff is very bad news.

Fentanyl Surpasses Heroin As Deadliest Drug In US (AFP)

The synthetic drug, fentanyl, has surpassed heroin as the deadliest drug in the United States, taking more than 18,000 lives in 2016, federal health officials said Wednesday. In 2016, the latest year for which full data is available, “29 percent of all drug overdose deaths mentioned involvement of fentanyl,” said the report from the National Center for Health Statistics, part of the US Centers for Disease Control and Prevention. Fentanyl is a powerful, synthetic narcotic that has been blamed for the deaths of rock stars including Prince and Tom Petty. It works on the brain like morphine or heroin, but is 50 to 100 times more potent, and can easily lead to overdose.

The rate of drug overdose deaths in the United States has tripled from 1999 through 2016, as the nation grapples with a persistent opioid epidemic. Fentanyl-related drug overdose deaths have doubled each year from 2013 through 2016, “from 0.6 per 100,000 in 2013 to 1.3 in 2014, 2.6 in 2015, and 5.9 in 2016,” said the report. Meanwhile, deaths from heroin and methamphetamine more than tripled from 2011 to 2016. Heroin was the top cause of drug overdose death from 2012 to 2015, said the report. The prescription painkiller Oxycodone ranked highest in 2011.

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Every word of this is broken. Time defends the MSM against Trump, but he didn’t create fake news. I like the term ‘abuse of truth’, that verges on doublespeak, as does ‘..the willingness to dismiss anything including credible news reporting as fake news”. And c’mon, free and fair press? Who believes that?

Time Magazine Says The US ‘Remains A Free And Fair Press’ (CNBC)

Despite the White House ramping up its rhetoric, the United States remains a free and fair press, Ben Goldberger the assistant managing editor of Time magazine told CNBC on Wednesday. The year 2018 has been marked by manipulation, abuse of truth, along with efforts by governments to instigate mistrust of the facts, the magazine said in an essay when it named killed and imprisoned journalists as Person of the Year for 2018 on Tuesday. “There’s no doubt that the rhetoric from the White House about the demonization of the media as ‘the enemy of the people,’ or the willingness to dismiss anything including credible news reporting as fake news, is incredibly worrisome and chilling,” Goldberger said. “But that said, I return to what I said about the United States — this remains a free and fair press.” “Journalists here enjoy legal protections that are the envy of those in virtually every other country,” he added.

Read more …

Nov 232018
 
 November 23, 2018  Posted by at 9:53 am Finance Tagged with: , , , , , , , , , , , , ,  


René Magritte Golconda 1953

 

438 Stocks on the NYSE Plunged 40%-94% from 52-Week Highs (WS)
Margin Debt Plunges, Next Up: Margin Calls (WS)
QE Created Dangerous Financial Dependence, Italy Hooked, Withdrawal Next (DQ)
Bitcoin Price Crash Causes Bankruptcy And Mass Mine Closures (Ind.)
UK’s Poorest Dying Nearly 10 Years Younger Than Rich (Ind.)
MPs Unite To Condemn May’s ‘Blindfold Brexit’ (Ind.)
Yanis Varoufakis: “The EU Declared War And Theresa May Played Along” (NS)
China Bans Millions From Flights As ‘Social Credit’ System Introduced (Ind.)
Google Wants To Data Mine Your Home And Kids’ Bedroom (ZH)
How Do You Give Thanks For Freedoms That Are Constantly Being Eroded? (RI)
CIA Holds ‘Smoking Gun Phone Call’ Of MbS On Khashoggi Murder (Hurriyet)
Comey, Loretta Lynch Subpoenaed To Testify Before Congress (AFP)
Hillary Clinton: Europe Must Curb Immigration To Stop Rightwing Populists (G.)
Clinton, Blair, Renzi: Why We Lost, And How To Fight Back (G.)
Elephant-Sized Mammal Cousin Lived Alongside Dinosaurs (R.)

 

 

“It’s barely a correction, technically speaking..”

438 Stocks on the NYSE Plunged 40%-94% from 52-Week Highs (WS)

It’s barely a correction, technically speaking, with the S&P 500 down 9.9% from its all-time closing high, the Dow down 9.2%, the Nasdaq down 14%, and the Russell 2000 small-caps index down 15%. But beneath the surface, there has been some serious bloodletting for many stocks. For example, 438 stocks among the 2,051 or so stocks traded on the New York Stock Exchange (NYSE) have plunged between 40% and 94% from their 52-week highs. This does not include any stocks traded on the Nasdaq. They have their own blacklist.

Those 438 plungers on the NYSE include a bunch of foreign companies trading on the NYSE (some are trading as ADRs). They include lots of companies in the oil-and-gas sector, homebuilders, gold miners, retailers, aluminum and steel makers, a weed company (other NYSE-listed weed companies are only down 30% to 40% and didn’t make this blacklist), financial services firms and banks, including some of the biggest in the world. Here is a brief rundown. Below is the complete list. Note that some of these stocks – such as GE, which is also on this blacklist – have plunged far more from their all-time highs established in prior years.

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Tempting to bring up Lehman, but if anything it’s starting to feel like Lehman cubed.

Margin Debt Plunges, Next Up: Margin Calls (WS)

There are many ways to use leverage to fund stock holdings, including credit card loans, HELOCs, loans at the institutional level, loans by companies to its executives to buy the company’s shares, or the super-hot category of SBLs, where brokers lend to their clients. None of them are reported on an overall basis. The only form of stock market leverage that is reported monthly is “margin debt” – the amount individual and institutional investors borrow from their brokers against their portfolios. Margin debt is subject to well-rehearsed margin calls. And apparently, they have kicked off. In the ugliest stock-market October anyone can remember, margin debt plunged by $40.5 billion, FINRA (Financial Industry Regulatory Authority) reported this morning – the biggest plunge since November 2008, weeks after Lehman Brothers had filed for bankruptcy:

During the stock market boom since the Financial Crisis, this measure of margin debt has surged from high to high, reaching a peak in May 2018 of $669 billion, up 60% from the pre-Financial Crisis peak in July 2007, and up 117% since January 2012. Since the peak in May, margin debt has dropped by $62 billion (-9.2%). Note the $40.5-billion plunge in October:

In the two-decade scheme of things, the relationship between stock market surges and crashes and margin debt becomes obvious. Back during the dot-com bubble, dot-com stocks, traded mostly on the Nasdaq, included what today are booming survivors like Amazon, barely hangers-on like RealNetworks, or goners like eToys. At the time, these stocks soared by stunning amounts, and people, such as myself, used margin debt, to enhance their returns. When stocks plunged, the margin calls came, and these people had to sell their holdings into an illiquid and plunging market. They ended up selling their best and most liquid stuff first and watched their trash get trashed further. When it was over by October 2002, the Nasdaq had plunged 78%. Over the same period, margin debt plunged 54%.

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“..who will purchase the roughly €275 billion of government securities Italy is forecast to issue in 2019?”

QE Created Dangerous Financial Dependence, Italy Hooked, Withdrawal Next (DQ)

The Bank of Italy, on behalf of the ECB, has bought up more than €360 billion of multiyear treasury bonds (BTPs) since the QE program was first launched in March 2015. In fact, the ECB is now virtually the only significant net buyer of Italian bonds left standing. This raises a key question, Nowotny said: With the ECB scheduled to exit the bond market in roughly six weeks time, “who will purchase the roughly €275 billion of government securities Italy is forecast to issue in 2019?”

With foreigners shedding a net €69 billion of Italian government bonds since May, when the right-wing League and anti-establishment 5-Star Movement took the reins of government, and Italian banks in no financial position to expand their already bloated holdings, it is indeed an important question (and one we’ve been asking for well over a year). According to former Irish central bank governor and ex-member of the ECB’s Governing Council Patrick Honohan, speaking at an event in London, when the ECB’s support is removed, “the yield on Italian government bonds will be much more vulnerable.”

[..] Perhaps the biggest risk the ECB runs in this latest escalation of tensions with Italy’s populist government is in reminding investors just how much governments in the Eurozone have come to depend on the ECB’s QE program. But it’s not just Italian bonds that are hooked on QE. In the past three years the ECB has spent €512 billion gobbling up German bonds (current 10-year yield: 0.35%); €416 billion on French bonds (10-year yield: 0.76%); €256 billion on Spanish bonds (1.62%); €114 billion on Dutch bonds (0.52%); €72 billion on Belgian bonds (0.83%); €57 billion on Austrian bonds (0.61%), and €36 billion on Portuguese bonds (1.98%).

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So far, crypto fails to replace whatever it is that is failing.

Bitcoin Price Crash Causes Bankruptcy And Mass Mine Closures (Ind.)

Bitcoin mining operations in the US and China are facing closures after the plummeting price of bitcoin means they may no longer be profitable. The world’s most valuable cryptocurrency is currently trading at around $4,500, having lost almost a third of its value in the space of a week. Bitcoin mining – the process of generating new units of the cryptocurrency by solving complex puzzles – requires vast amounts of electricity to power the computers performing the calculations. This means that the profitability of mining falls when bitcoin’s price drops, and if the price falls too far then operations may no longer be economically viable.

The biggest casualty so far may be the US-based mining firm Giga Watt, which was forced to file for Chapter 11 bankruptcy this week after it was unable to pay debts of around $7 million. “The corporation is insolvent and unable to pay its debts when due,” the filing stated, according to CoinDesk. The majority of bitcoin mining operations are based in China, where electricity costs are some of the lowest in the world. Yet despite the cheap electricity, images and videos of mining operations shutting down in the country have been spreading across social media. Hong Kong-based mining platform Suanlitou announced this week that it was unable to cover electricity fees for a 10-day period in November, according to the South China Morning Post.

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This is Theresa May’s prime achievement, and it’s hard to see why nobody calls her on it. The application of austerity and the Hostile Environment on Britain is her baby.

UK’s Poorest Dying Nearly 10 Years Younger Than Rich (Ind.)

The poorest groups in society are dying almost a decade earlier than the richest, new research shows, prompting concern that welfare cuts and a rising cost of living are leaving the most vulnerable “out of the collective gain”. The study by academics at Imperial College London revealed the life expectancy gap between the most affluent and most deprived sections of society increased from six years in 2001 to eight years in 2016 for women, and from nine to 10 years for men. Women in the most deprived communities in 2016 lived until an average 79 years old, compared with 87 years in the most affluent group, while for men, the life expectancy was 74 years among the poorest, compared with 84 years among the richest.

The findings, published in the journal Lancet Public Health, also reveals that the life expectancy of England’s poorest women has fallen in the last seven years – having dropped by three months since 2011. Child mortality rates were also considerably higher among deprived communities, with poorer children two-and-a-half times more likely to die before they reach adulthood than their peers from affluent families. The findings show that people in the poorest sectors died at a higher rate from all illnesses – but that a number of diseases showed a particularly stark difference between rich and poor, notably respiratory diseases, heart disease, lung and digestive cancers and dementias.

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One step up and two steps back every step of the way.

MPs Unite To Condemn May’s ‘Blindfold Brexit’ (Ind.)

MPs of all parties accused Theresa May of delivering a “blindfold Brexit” after she admitted her deal left the public in the dark on a range of vital questions about Britain’s future. Decisions about future trade, the Irish border backstop, fisheries and whether the UK will remain tied to EU rules until after the next general election have all been shelved, a 26-page “political declaration” struck with the EU revealed. The admission came as the deal still looked doomed to defeat in a landmark vote next month – as both pro- and anti-EU Tories attacked it during feisty Commons exchanges in which few supporters spoke up.

Significantly, two leading Brexiteers praised by Ms May for working with her on the document – Iain Duncan Smith and Owen Paterson – said they could not back it unless the backstop was stripped out. More than 80 Tories have criticised the package, pointing to a heavy defeat and a constitutional crisis, unless most can be talked around in the next few weeks of frantic arm-twisting.

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Merkel is a disaster “..but we’re going to miss her because whatever comes next will be worse.“

Yanis Varoufakis: “The EU Declared War And Theresa May Played Along” (NS)

In 2016, shortly before the EU referendum, Yanis Varoufakis warned that the UK was destined for a “Hotel California Brexit”: it could check out but it could never leave. The former Greek finance minister spoke from experience. In 2015, his efforts to end austerity – “fiscal waterboarding” – were thwarted by the EU. Theresa May’s draft Brexit deal confirmed Varoufakis’s prophecy: the UK would be condemned to purgatory. With fortuitous timing, on the evening that May’s agreement was published, Varoufakis delivered an Oxford Union lecture on Europe’s future. The 57-year-old Marxist and game theorist wryly remarked that Conservative cabinet ministers praised his analysis in private.

“The UK should never have entered the negotiations,” he told me when we met afterwards. “You do not negotiate with the EU because the EU does not negotiate with you. It sends a bureaucrat, in this case it was Mr Barnier…they could have sent an android, or an algorithm.” May’s fatal error, Varoufakis said, was to accept a two-phase negotiation: a divorce agreement followed by a new trade deal. “This was a declaration of war because Barnier said: ‘You will give us everything we want: money, people, Ireland. And only then will we discuss what you want.’ Well, that isn’t a negotiation, that’s a travesty. And Theresa May agreed to play along.” But Varoufakis, who helped persuade Jeremy Corbyn to support Remain in 2016, has little sympathy for the “People’s Vote” movement.

“It’s offensive. What was the first vote? Wasn’t it a people’s vote? To call it a people’s vote is to try and delegitimise the original vote – to say it was dictatorial, it was rigged.” He added: “You have to explain two things: first, how are you going to get the referendum completed before the Article 50 period is over? Secondly, how can you have a binary choice between five or six options? Explain those things and I’m with you.” [..] I asked Varoufakis how he viewed the liberal adulation of [Angela Merkel]. “I’m a dialectician: she has been a disaster and we’re going to miss her. She is a disaster because she squandered immense political capital that could have been used to reshape Europe. But we’re going to miss her because whatever comes next will be worse.”

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“Punishments [..] are also believed to include slowing internet speeds, reducing access to good schools for individuals or their children, banning people from certain jobs, preventing booking at certain hotels and losing the right to own pets.

China Bans Millions From Flights As ‘Social Credit’ System Introduced (Ind.)

Millions of Chinese nationals have been blocked from booking flights or trains as Beijing seeks to implement its controversial “social credit” system, which allows the government to closely monitor and judge each of its 1.3 billion citizens based on their behaviour and activity. The system, to be rolled out by 2020, aims to make it “difficult to move” for those deemed “untrustworthy”, according to a detailed plan published by the government this week. It will be used to reward or punish people and organisations for “trustworthiness” across a range of measures. A key part of the plan not only involves blacklisting people with low social credibility scores, but also “publicly disclosing the records of enterprises and individuals’ untrustworthiness on a regular basis”.

The plan stated: “We will improve the credit blacklist system, publicly disclose the records of enterprises and individuals’ untrustworthiness on a regular basis, and form a pattern of distrust and punishment.” For those deemed untrustworthy, “everywhere is limited, and it is difficult to move, so that those who violate the law and lose the trust will pay a heavy price.” The credit system is already being rolled out in some areas and in recent months the Chinese state has blocked millions of people from booking flights and high-speed trains. According to the state-run news outlet Global Times, as of May this year, the government had blocked 11.14 million people from flights and 4.25 million from taking high-speed train trips.

[..] People are awarded credit points for activities such as undertaking volunteer work and giving blood donations while those who violate traffic laws and charge “under-the-table” fees are punished. Other infractions reportedly include smoking in non-smoking zones, buying too many video games and posting fake news online. Punishments are not clearly detailed in the government plan, but beyond making travel difficult, are also believed to include slowing internet speeds, reducing access to good schools for individuals or their children, banning people from certain jobs, preventing booking at certain hotels and losing the right to own pets.

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Admit it or not, but it’s a very small step from China to Google.

Google Wants To Data Mine Your Home And Kids’ Bedroom (ZH)

New patents show Google is quietly developing a smart-home automated system that will routinely eavesdrop on your daily life. The patents describe how cameras and sensors will be mounted in almost every room of the house, scanning and analyzing every movement a human makes. According to the patent description, the smart cameras could recognize Will Smith’s face on a T-shirt. After cross-referencing this data against the human’s browser history, the smart-home might announce or send them a message, “You seem to like Will Smith. His new movie is playing in a theater near you.”

By blending that with an in-depth analysis of other electronic devices in the home, and audio signatures to determine gender, Google will have enough data to create a corporate profile on the human and even their family. The system will then calculate “fashion tastes” by scanning the human’s outfit, and could even determine their income or social class based on any “expensive mechanical and/or electronic devices” it detects. Even creepier, the smart-home will track audio signatures too, could be used to identify users, but also determine gender and age. With a treasure trove of data mined from every room of the home, the smart-home will then tell the human what to watch, what to eat, where to go, and what to buy.

If this all seems invasive, it is essential to understand that tech companies are already data mining you, it just happens to be online: “Google and Facebook both record and analyze user behavior, use it to sort people into categories, and then target them with ads and other content. Facebook likely knows your race and religion, while Google uses your emails and search history to sort you into ad-ready brackets. Netflix infers all types of data on users based on what they watch, then serves back hyper-specific movie and TV categories. This patent simply expands the areas in which your behavior is already mined and recorded from your phone and laptop to your bedroom,” wrote The Atlantic.

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“Washington didn’t intend Thanksgiving to be a day for offering up glib platitudes that require no thought, no effort and no sacrifice.”

How Do You Give Thanks For Freedoms That Are Constantly Being Eroded? (RI)

Listen: I know it’s been a hard, heart-wrenching, stomach-churning kind of year. It’s been a year of hotheads and blowhards and killing sprees and bloodshed and takedowns. It’s been a year in which tyranny took a few more steps forward and freedom got knocked down a few more notches. It’s been a year with an abundance of bad news and a shortage of good news. It’s been a year of too much hate and too little kindness. It’s been a year in which politics and profit margins took precedence over decency, compassion and human-kindness. We’ve been operating in this soul-sucking, topsy-turvy, inside-out, upside-down state for so long that it’s hard not to be overwhelmed by all that is wrong in the world in order to reflect and give thanks for what is good.

And now we find ourselves at this present moment, more than 200 years after George Washington issued the first Thanksgiving proclamation as a time to give thanks for a government whose purpose was to ensure the safety and happiness of its people and for a Constitution designed to safeguard civil and religious liberty. But how do you give thanks for freedoms that are constantly being eroded? How do you express gratitude for one’s safety when the perils posed by the American police state grow more treacherous by the day? How do you come together as a nation in thanksgiving when the powers-that-be continue to polarize and divide us into warring factions?

Washington didn’t intend Thanksgiving to be a day for offering up glib platitudes that require no thought, no effort and no sacrifice. He wanted it to be a day of contemplation, in which we frankly assessed our shortcomings, acknowledged our wrongdoings, and resolved to be a better, more peaceable nation in the year to come.

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Nice new tidbits every single day. “CIA has more wiretapped phone calls at hand than the public knows about.”, “Khashoggi was barred from media appearances after criticizing Trump in late 2016..”

CIA Holds ‘Smoking Gun Phone Call’ Of MbS On Khashoggi Murder (Hurriyet)

The CIA is in possession of a phone call recording of Saudi Crown Prince Mohammed bin Salman in which he is heard giving an instruction to “silence Jamal Khashoggi as soon as possible,” Hürriyet columnist Abdulkadir Selvi wrote on Nov. 22. According to Selvi, CIA Director Gina Haspel “signalled” during her trip to Ankara last month the existence of the wiretapped phone call between Crown Prince Mohammed and his brother Khaled bin Salman, who is Saudi Arabia’s ambassador to the United States. Citing unidentified sources, the Turkish columnist wrote that the two Saudi officials are heard in the CIA recording discussing the “discomfort” created by Khashoggi’s public criticism of the kingdom’s administration.

[..] “It is said that the crown prince gave an instruction to silence Jamal Khashoggi as soon as possible and this instruction was captured during the CIA wiretapping. The subsequent murder is the ultimate confirmation of this instruction,” Selvi added, stressing that an international investigation into the murder, if opened, “can reveal more jaw-dropping evidence, as CIA has more wiretapped phone calls at hand than the public knows about.” [..] Trump declared on Nov. 20 that he will not further punish Saudi Arabia for the murder, making clear in an exclamation-filled statement that the benefits of good relations with the kingdom outweigh the possibility its crown prince ordered the killing. Khashoggi was barred from media appearances after criticizing Trump in late 2016, according to the U.S. State Department.

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There may not be enough time before the new Congress is sworn in. It may become up to the Senate.

Comey, Loretta Lynch Subpoenaed To Testify Before Congress (AFP)

Former FBI director James Comey and former attorney general Loretta Lynch have been subpoenaed to testify before Congress next month before Republicans relinquish control of the House, documents showed Thursday. Comey confirmed he had received a subpoena from the House Judiciary Committee but said he would resist if made to answer questions behind closed doors. “I’m still happy to sit in the light and answer all questions,” he said on his Twitter account. “But I will resist a ‘closed door’ thing because I’ve seen enough of their selective leaking and distortion. Let’s have a hearing and invite everyone to see.”

Lynch, who served under former president Barack Obama, did not immediately comment, but copies of the subpoenas made public Thursday show she was summoned to testify on December 4. Comey was ordered to appear before the committee on December 3. US President Donald Trump has repeatedly accused Comey and Lynch of covering for Hillary Clinton in an investigation into her use of a private server for emails while she was secretary of state. He has often leveled charges of bias in countering a probe by Special Counsel Robert Mueller into whether the Trump campaign colluded with a Russian effort to sway the 2016 elections in the Republican’s favor.

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This is not just revisionist hypocrisy, this is Orwell.

Hillary Clinton: Europe Must Curb Immigration To Stop Rightwing Populists (G.)

Europe must get a handle on immigration to combat a growing threat from rightwing populists, Hillary Clinton has said, calling on the continent’s leaders to send out a stronger signal showing they are “not going to be able to continue to provide refuge and support”. In an interview with the Guardian, the former Democratic presidential candidate praised the generosity shown by the German chancellor, Angela Merkel, but suggested immigration was inflaming voters and contributed to the election of Donald Trump and Britain’s vote to leave the EU. “I think Europe needs to get a handle on migration because that is what lit the flame,” Clinton said, speaking as part of a series of interviews with senior centrist political figures about the rise of populists, particularly on the right, in Europe and the Americas.

“I admire the very generous and compassionate approaches that were taken particularly by leaders like Angela Merkel, but I think it is fair to say Europe has done its part, and must send a very clear message – ‘we are not going to be able to continue provide refuge and support’ – because if we don’t deal with the migration issue it will continue to roil the body politic.” [..] “The use of immigrants as a political device and as a symbol of government gone wrong, of attacks on one’s heritage, one’s identity, one’s national unity has been very much exploited by the current administration here,” she said.

“There are solutions to migration that do not require clamping down on the press, on your political opponents and trying to suborn the judiciary, or seeking financial and political help from Russia to support your political parties and movements.” Brexit, described by Clinton as the biggest act of national economic self-harm in modern history, “was largely about immigration”, she said.

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There are many more in this list, the former left sold out everywhere.

We came, we saw, we became irrelevant.

And Hillary is still entirely clueless about Trump’s appeal.

Clinton, Blair, Renzi: Why We Lost, And How To Fight Back (G.)

Hillary Clinton, Tony Blair, Matteo Renzi: three of rightwing populism’s greatest scalps. Clinton admits she was left dumbfounded by her 2016 election defeat at the hands of Donald Trump. Renzi’s centre-left party was defeated this year after a surge in the anti-establishment vote in Italy, a country he calls “the incubator” of populism. Blair may not have lost at the ballot box, but his legacy, particularly on Europe, was upended in the Brexit referendum. All three are shunned by sections of their own party that accuse them of being responsible for the failure of the centre-left to offer a sufficiently radical alternative.

But all three are still thinking deeply about rightwing populism – its causes and the threat it poses – the mistakes of the centre left, including their own, and how modern politics appears to be mobilising resentment towards a perceived elite. [..] All three interviewees argue that one significant problem for mainstream politicians is that detailed, reasoned arguments stand little chance against the antics of the populist, whose simplified, amplified rhetoric is apt to drown out costed healthcare programmes or earnest paeans to liberal values. And politicians are no longer held to their promises. “The press does not know how to cover these candidates who are setting themselves on fire every day, who are masters of diversion and distraction,” Clinton said. “That is new.

“I always believed in the [2016 US presidential] campaign … the moderators would ask the hard questions, they would force us to respond and they would draw out the differences. That never happened. Because the guy I was running against is a master at just waving his hands and tweeting and insulting, and dominating the news cycles.”

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Mammals lost out for about 150 million years, came back only when the dinosaurs were wiped out. Mammals would need to rule for another 100 million years or so to match the dinosaur rule.

Elephant-Sized Mammal Cousin Lived Alongside Dinosaurs (R.)

A stoutly built mammal cousin the size of an elephant that munched on plants with its horny beak roamed the European landscape alongside dinosaurs during the Triassic Period about 205 million to 210 million years ago, scientists said on Thursday. Scientists announced the surprising discovery in Poland of fossils of a four-legged beast called Lisowicia bojani that demonstrated that dinosaurs were not the only behemoths on Earth at that time and that the group of mammal-like reptiles to which Lisowicia belonged, called dicynodonts, did not die out as long ago as previously believed. “We think it’s one of the most unexpected fossil discoveries from the Triassic of Europe,” said paleontologist Grzegorz Niedzwiedzki of Uppsala University in Sweden.


A comparison of the Lisowicia bojani with a recent elephant. Tomasz Sulej and Grzegorz Niedzwiedzki/Handout via REUTERS

Lisowicia, the largest-known non-dinosaur land animal alive at its time, was about 15 feet (4.5 meters) long, 8.5 feet (2.6 meters) tall and weighed 9 tons. The only other giants around at the time were early members of the dinosaur group called sauropods that had four legs, long necks and long tails. “The Lisowicia skull and jaws were highly specialized: toothless and the mouth was equipped with a horny beak, as in turtles and horned dinosaurs,” Niedzwiedzki said, adding that it was unclear whether it had tusks as some of its relatives did. The Triassic was the opening chapter in the age of dinosaurs, followed by the Jurassic and Cretaceous periods. The first dinosaurs appeared roughly 230 million years ago. Many of the earliest dinosaurs were modest in size, overshadowed by big land reptiles including fearsome predators called rauisuchians and crocodile-like phytosaurs.

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Oct 092018
 
 October 9, 2018  Posted by at 9:02 am Finance Tagged with: , , , , , , , , , , ,  


Ford Madox Brown Finding of Don Juan by Haidee 1873

 

 

World Leaders ‘Have Moral Obligation To Act’ After UN Climate Report (G.)
US Economists Win Nobel Memorial For Work On Climate And Growth (G.)
Nobel Prizes in Economics, Awarded and Withheld (NC)
The End Of The World Will Save Theresa May From Brexit (Ind.)
Stock Markets Stage Sharp Sell-Off Amid Fear Of Italy-EU Budget Fight (G.)
QE Party Is Drying Up, Even at the Bank of Japan (WS)
Higher Rates Will Hurt Stocks Far More Than You Think (SA)
Pakistan Seeks Bailout From IMF (WSJ)
IMF Not Concerned About China’s Ability To Defend The Yuan (R.)
Sharp Slowdown In Consumer Spending Cools UK Retail Sales (G.)
Google Drops Out Of Bidding For $10 Billion Pentagon Data Deal (R.)

 

 

Groundhog Day. They just want to get (re-)elected. Which won’t happen if they tell people to cut their driving and flying.

World Leaders ‘Have Moral Obligation To Act’ After UN Climate Report (G.)

World leaders have been told they have moral obligation to ramp up their action on the climate crisis in the wake of a new UN report that shows even half a degree of extra warming will affect hundreds of millions of people, decimate corals and intensify heat extremes. But the muted response by Britain, Australia and other governments highlights the immense political challenges facing adoption of pathways to the relatively safe limit of 1.5C above pre-industrial temperatures outlined on Monday by the IPCC. With the report set to be presented at a major climate summit in Poland in December, known as COP24, there is little time for squabbles. The report noted that emissions need to be cut by 45% by 2030 in order to keep warming within 1.5C.

That means decisions have to be taken in the next two years to decommission coal power plants and replace them with renewables, because major investments usually have a lifecycle of at least a decade. Mary Robinson, a UN special envoy on climate, said Europe should set an example by adopting a target of zero-carbon emissions by 2050. “Before this, people talked vaguely about staying at or below 2C – we now know that 2C is dangerous,” she said. “So it is really important that governments take the responsibility, but we must all do what we can.” The UK, which has gone further than most nations by cutting its annual emissions by 40% since 1990, will need to step up if the more ambitious goal is to be reached.

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Both think adapting to climate change is easy.

US Economists Win Nobel Memorial For Work On Climate And Growth (G.)

Two American economists at the forefront of work on climate change and the role of governments in boosting growth have been jointly awarded the prestigious Nobel Memorial prize for economics. The Royal Swedish Academy of Sciences said William Nordhaus and Paul Romer were being honoured for their research into two of the most “basic and pressing” economic issues of the age. Nordhaus made his name by warning policymakers during the first stirrings of concern about climate change in the 1970s that their economic models were not properly taking account of the impact of global warming and he is seen as one of the pioneers of environmental economics.

The Yale economist was honoured a day after the latest UN warning on global warming said that urgent and unprecedented changes were needed to keep climate change to a maximum of 1.5C (2.7F). The co-winner – Romer – is seen as the prime mover behind the endogenous growth theory, the notion that countries can improve their underlying performance if they concentrate on supply-side measures such as research and development, innovation and skills. [..] Responding to news of his award, Romer said it was perfectly possible for global warming to be kept to a maximum of 1.5C, in line with the latest recommendation of the UN Intergovernmental Panel on Climate Change. “Once we start to try to reduce carbon emissions, we’ll be surprised that it wasn’t as hard as we anticipated. The danger with very alarming forecasts is that it will make people feel apathetic and hopeless.

“One problem today is that people think protecting the environment will be so costly and so hard that they want to ignore the problem and pretend it doesn’t exist. Humans are capable of amazing accomplishments if we set our minds to it.” [..] Nordhaus has been a prominent advocate of the use of a uniformly applied carbon tax as the best way to put a true cost on the use of burning fossil fuels and so reducing greenhouse gas emissions. The committee that awarded the prize said he was the first person to design “simple but dynamic and quantitative models of the global economic-climate system, now called integrated assessment models (IAMs). “His tools allow us to simulate how the economy and climate would co-evolve in the future under alternative assumptions about the workings of nature and the market economy, including relevant policies.”

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This is useful h/t Yves. Peter Dorman on how Martin Weitzman, who has a far more aggressive take on economics and climate, was snubbed so Nordhaus’ light version would get the attention.

Nobel Prizes in Economics, Awarded and Withheld (NC)

Nordhaus was widely expected to be a winner for his work on the economics of climate change. For decades he has assembled and tweaked a model called DICE (Dynamic Integrated Climate-Economy), that melds computable general equilibrium theory from economics and equations from the various strands of climate science. His goal has been to estimate the “optimal” amount of climate change, where the marginal cost of abating it equals the marginal cost of undergoing it. From this comes an optimal carbon price, the “social cost of carbon”, which should be implemented now and allowed to rise over time at the rate of interest. In his first published work using DICE, from the early 1990s, he recommended a carbon tax of $5 a tonne of CO2, inching slowly upward until peaking at $20 in 2085. His “optimal” policy was expected to result in an atmospheric concentration of CO2 of over 1400 ppm (parts per million) at the end of this planning horizon, yielding global warming in excess of 3º C. (Nordhaus, 1992)

Over time Nordhaus has become slightly more concerned with the potential economic costs of climate change but also more sanguine about the prospects for decarbonized economic growth, even in the absence of policy. In his latest work he advocates a carbon tax of $31 per tonne in 2015, increasing at 3% per year over the following century. This too would result in more than 3º warming. To give a sense of how modest his suggestion is, consider that, in the same paper, Nordhaus calculates that the most efficient carbon tax to limit warming to 2.5º is between $107-184 per tonne depending on assumptions. The target of the Paris Accord is 2º, and most scientists consider this an upper bound for the amount of warming we should permit.

What do these “optimal” tax numbers mean? Based on the carbon content of gas, each $1 carbon tax translates into a one cent tax on a gallon of gas at the pump. If we adopted Nordhaus’ suggestion for carbon pricing, the result would be minuscule compared to the year-to-year fluctuations in energy prices due to other causes. In other words, while his prize is being trumpeted as a statement from the Swedish bankers on the importance of climate change, in fact he is a key spokesman for the position, rejected by nearly all climate scientists, that the problem is modest and can be solved by easy-to-digest, nearly imperceptible adjustments to energy prices. If we go down his road we face a significant risk of a climate apocalypse.

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The benefits of climate change.

The End Of The World Will Save Theresa May From Brexit (Ind.)

Brexit has been in its “something will turn up phase” for some time now and possibly, at last, something has. This is meant to be Theresa May’s “Hell Week”, with important post-Brexit proposals to be published in both Brussels and the UK, both of which will of course necessitate demented rows within her own party (current “strategies” include threatening to vote down the Budget), but Hell Week could hardly have got off to a better start. The most sensible reading of Hell Week is that it looks likely to end with May agreeing to keep the UK in the EU’s customs union until 2022. In the circumstances, the prime minister will not have failed to notice that, according to this morning’s report from the UN’s IPCC, that is a mere eight years before all of the planet’s inbuilt life preserving systems are currently scheduled to turn against humanity in act of vengeance that will be swift and total.

To borrow briefly from the probability-based lexicon of the climate science community, let’s take a look at the likelihood of Brexit being concluded by then in any meaningful way. Even in the unlikely event of Britain voting to leave the European Union, right up until around 8am on 24 June 2016, the latest point at which it was all meant to have been sorted out was 24 June 2018. But when David Cameron decided not to trigger the two-year Article 50 process “straight away” as he had consistently claimed he would, but resigned instead, that date was eventually pushed back by May to 29 March 2019, expanding Brexit by 37.5 per cent.

Then, in March 2018, the Brexit “transition period” was agreed to last until until 31 December 2020, and now, just seven months later, that deadline has been extended until the next general election in 2022, a further eighteen months. At the most conservative estimate, that gives Brexit a rate of expansion of around two hundred per cent, or four years for every two. If the depth to which it can be kicked into the long grass can be maintained on this exponential gradient, May has every reason to be optimistic that tornadoes of sulphuric gas will be moving freely over the Irish border long before she has to deliver any acceptable proposals for how to avoid the reintroduction of customs infrastructure across it.

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Not the only issue.

Stock Markets Stage Sharp Sell-Off Amid Fear Of Italy-EU Budget Fight (G.)

Global stock markets staged a sharp sell-off on Monday amid growing concerns over a budget showdown between Italy and the EU and the prospect of weaker growth in the Chinese economy. Italian borrowing costs jumped and the euro dropped on foreign exchanges as the war of words between Rome and Brussels escalated, while shares on Wall Street and other major international markets declined amid growing concerns over the US-China trade war. Italian bond yields jumped by as much as 30 basis points to the highest levels since early 2014 after the Italian deputy prime minister, Matteo Salvini, attacked the European commission president, Jean-Claude Juncker, and the economics commissioner, Pierre Moscovici, as enemies of Europe.

Speaking at a news conference with the French far-right leader Marine Le Pen, he said the country would not cave to pressure from the financial markets or retreat from its plan for government spending. “We are against the enemies of Europe — Juncker and Moscovici — shut away in the Brussels bunker,” he said. Brussels has told Italy it is concerned over the plan because it would mean the nation running a larger budget deficit – the gap between income from taxes and government spending – than previously planned for the next three years. Rome is to submit its draft budget to the commission, the EU’s executive arm, which will check whether it is in line with EU rules by 15 October.

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When the easy money goes, how do we keep the bubbles inflated?

QE Party Is Drying Up, Even at the Bank of Japan (WS)

As of September 30, total assets on the Bank of Japan’s elephantine balance sheet dropped by ¥5.4 trillion ($33 billion) from a month earlier, to ¥537 trillion ($4.87 trillion). It was the fourth month-over-month decline in a series that started in December. This chart shows the month-to-month changes of the balance sheet. Despite all the volatility, the trend since mid-2016 is becoming clear: Abenomics became the economic religion of Japan in later 2012, and “QQE” (Qualitative and Quantitative Easing) was an integral part of it. So has the “QQE Unwind” commenced? Are central bankers, even at the Bank of Japan, getting cold feet about the consequences?

At BOJ policy meetings, concerns have been voiced over the “sustainability” of the stimulus program, according to the minutes of the July meeting, released on September 25. So the BOJ staff “proposed measures to enhance the sustainability of the current monetary easing while taking into consideration, for example, their effects on financial markets.” And “flexibility” has been proposed as solution to those concerns. The minutes reiterated that the BOJ would continue to buy Japanese Government Bonds (JGBs) in “a flexible manner” so that its holdings would increase by about ¥80 trillion a year. But this is precisely what has not been happening, in line with this “flexibility.”

Over the past 12 months, the BOJ’s holdings of JGBs rose by “only” ¥26.2 trillion – not ¥80 trillion. And they declined in September from the prior month (more in a moment). Shortly after the minutes had been released, BOJ Governor Haruhiko Kuroda, once the most reckless among the money printers, changed his tune and said in a speech that, “in continuing with powerful monetary easing, we now need to consider both its positive effects and side-effects in a balanced manner.” The Fed has already whittled down its balance sheet by $285 billion since it started its QE unwind last October. The ECB has tapered its QE from a peak of buying €85 billion a month to buying €15 billion currently and will end it altogether in December. The discussion has switched to raising rates and unwinding QE.

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Like the graph.

Higher Rates Will Hurt Stocks Far More Than You Think (SA)

Federal Reserve Chair Jerome Powell thinks the economy is awesome. And he has no problem telling us so. What Powell will never discuss, however, is the “way-too-low-for-way-too-long” stimulus that the central bank engaged in to get here. In particular, the Fed has kept the neutral rate of interest far beneath the rate of inflation (CPI) for an entire decade. Consumers, corporations and Uncle Sam predictably borrowed as if there’d never be consequences. What consequences? Asset bubbles. Stocks, bonds, real estate, collectibles, cryptos, alternatives, everything. Straight across the Ouija board.

Perhaps ironically, we have seen this streaming video before. “Too-low-for-to-long” rate policy in the previous economic expansion (11/01-12/07) created an environment whereby the quality and the quantity of household mortgage debt became toxic. Granted, mortgage debt is less of an issue in the current credit cycle. Nevertheless, total household debt levels may not be sustainable at higher average interest costs. Meanwhile, the federal government is making households look downright responsible.

Long after the Great Recession ended, the country averaged $1.07 trillion in deficits (2010-2017). We’ve now hit $21.5 trillion in our national debt. Uncle Sammy’s bar tab won’t be getting smaller anytime soon. The new tax law, which has provided a near-term kick start for economic growth (GDP), will keep the trillion-dollar deficit train running for years to come. None of this would be so ominous were it not for the rapid-fire advance of interest expense. Interest expense alone accounts for 11% of the federal budget. Just interest. No debt repayment. Tack on higher interest rates to new borrowing needs? Pretty soon interest expense will surpass the money that goes to the Department of Defense (13.6%).

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Belt and Road. Silk Road.

Pakistan Seeks Bailout From IMF (WSJ)

Pakistan, the flagship country for China’s global infrastructure building initiative, said Monday that it needed a bailout from the International Monetary Fund, amid growing concerns that Beijing’s program is pushing recipient countries into financial crisis. The fiscal constraints of an IMF program would also undercut the promises made by Prime Minister Imran Khan’s new government, which include millions of new jobs and the establishment of a welfare state.

But a ballooning trade deficit and fast-depleting foreign exchange reserves left the Pakistani government no other choice, officials said, after markets were spooked by the government’s recent suggestions that it might try to make do without the fund. “Uncertainty was growing and the stock market was falling,” said Chaudhry Fawad Hussain, the Information Minister. “We decided to end the uncertainty.” The Pakistani request for an IMF loan could further test already-strained U.S.-China relations. In July, U.S. Secretary of State Mike Pompeo warned that the U.S. didn’t want to see any IMF lending to Pakistan “go to bail out Chinese bondholders or—or China itself.”

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Growing at 6.9%(?) and still in need of pretty extreme support. I’d be concerned.

IMF Not Concerned About China’s Ability To Defend The Yuan (R.)

IMF Chief Economist Maurice Obstfeld said on Tuesday that he was not concerned about the Chinese government’s ability to defend its currency despite the recent depreciation of the yuan. “No, I don’t think it’s a problem,” Obstfeld said when asked about the issue on the sidelines of a news conference at the IMF and World Bank annual meetings in Bali. But Obstfeld also told the news conference that Beijing would face a “balancing act” between actions to shore up growth and ensure financial stability. China’s yuan currency has faced strong selling pressure this year, losing over 8% between March and August at the height of market worries, though it has since pared losses as authorities stepped up support.

On Tuesday, China’s central bank fixed the yuan’s official mid-point for trading at 6.9019 per dollar, edging close to the psychologically important 7.0 barrier and helping to send Asian stocks to a 17-month low. A U.S. Treasury official on Monday repeated that the Trump administration was concerned about the yuan’s recent weakening as the department prepares a semi-annual report on currency manipulation due out next week. Obstfeld said financial markets have overly emphasized short-term movements in China’s currency, adding that the yuan has often quickly recovered from periods of volatility in recent years.

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Reading this, I kept thinking: what sharp slowdown? Where is it? Not in the numbers…

Sharp Slowdown In Consumer Spending Cools UK Retail Sales (G.)

Britain’s retailers experienced a sharp slowdown in consumer spending last month, bringing to a close the World Cup-inspired summer spree on the high street. According to the British Retail Consortium (BRC) and the accountancy firm KPMG, growth in total sales dropped to the weakest level in almost a year. Total sales grew at an annual rate of 0.7% in September, compared with 2.3% growth during the same month a year ago. The BRC said this was the lowest growth rate since October 2017. Excluding new store openings, like-for-like sales dropped by 0.2% in the year to September, compared with a 19.9% increase for the same period a year ago.

The latest snapshot for the retail sector comes before the important autumn and winter shopping periods, vital for industry profits, when sales of gifts and electrical goods are lifted by the Black Friday sales event in November and shoppers buying Christmas presents. Retailers have been hit hard by a combination of problems that have led to job cuts and store closures across Britain. The ongoing shift to online shopping has increased competition, while sluggish wage growth and high levels of inflation have damaged the spending power of British households. Sales of stationery, footwear and clothing fell last month, while retailers sold more computers, jewellery, furniture, home accessories and food.

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If this doesn’t scare you…

Google Drops Out Of Bidding For $10 Billion Pentagon Data Deal (R.)

Alphabet Inc’s Google said on Monday it was no longer vying for a $10 billion cloud computing contract with the U.S. Defense Department, in part because the company’s new ethical guidelines do not align with the project, without elaborating. Google said in a statement “we couldn’t be assured that [the JEDI deal] would align with our AI Principles and second, we determined that there were portions of the contract that were out of scope with our current government certifications.” The principles bar use of Google’s artificial intelligence (AI) software in weapons as well as services that violate international norms for surveillance and human rights.

Google was provisionally certified in March to handle U.S. government data with “moderate” security, but Amazon.com Inc and Microsoft Corp have higher clearances. Amazon was widely viewed among Pentagon officials and technology vendors as the front-runner for the contract, known as the Joint Enterprise Defense Infrastructure cloud, or JEDI. Google had been angling for the deal, hoping that the $10 billion annual contract could provide a giant boost to its nascent cloud business and catch up with Amazon and fellow JEDI competitor Microsoft. That the Pentagon could trust housing its digital data with Google would have been helpful to its marketing efforts with large companies. But thousands of Google employees this year protested use of Google’s technology in warfare or in ways that could lead to human rights violations.

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Jul 312018
 
 July 31, 2018  Posted by at 8:46 am Finance Tagged with: , , , , , , , , , ,  


René Magritte The son of man 1946

 

‘Prophet Of Doom’ Predicts Stock Market Will Plunge More Than 50% (MW)
Prepare For Biggest Stock-Market Selloff In Months – Morgan Stanley (MW)
US Treasury Raises 2018 Borrowing Need To $1.33 Trillion (ZH)
QE Turns Ten (Stephen Roach)
Fruits of the Great 2017 GOP Tax Cut Scam (Lendman)
Britain’s Borrowing Binge Continues As Brexit Looms (Ind.)
Brexit: UK Warns EU Of Tit-For-Tat Measures Over Financial Services (G.)
Trump Offer To Meet Iran President Rouhani Dismissed By Both Sides (G.)
The Ubiquity of Evil (Craig Murray)
World’s Largest King Penguin Colony Has Declined By 90% (G.)
Charities Damned For ‘Abject Failure’ In Tackling Sexual Abuse (G.)

 

 

We take John Hussman seriously.

‘Prophet Of Doom’ Predicts Stock Market Will Plunge More Than 50% (MW)

John Hussman, president of Hussman Investment Trust, describes himself as an economist, a philanthropist, and a “realist optimist often viewed as a prophet of doom” on his Twitter profile. That last bit may be the one investors care about on Monday as the stock market shows signs of unraveling on the back of the tech sector’s stumble. Hussman’s claim to fame includes forecasting the market collapses of 2000 and 2007-2008. Since then, however, he’s also become known as a permabear for his repeated calls for sharp stock market declines and his oft-repeated mantra of “overbought, overvalued, overbullish” as the bull market continues into its ninth year by some measures. Hussman says he’s learned from and addressed past errors.

In his most recent call, he argued that measured “from their highs of early-2018, we presently estimate that the completion of the current cycle will result in market losses on the order of -64% for the S&P 500 index, -57% for the Nasdaq-100 Index, -68% for the Russell 2000 index, and nearly -69% for the Dow Jones Industrial Average.” He admits the numbers seem extreme but says they are backed up what he refers to as the “Iron Law of Valuation.” “The higher the price investors pay for a given set of expected future cash flows, the lower the long-term investment returns they should expect. As a result, it’s precisely when past investment returns look most glorious that future investment returns are likely to be most dismal, and vice versa,” he writes.

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Tech.

Prepare For Biggest Stock-Market Selloff In Months – Morgan Stanley (MW)

The U.S. stock market has been partying all throughout July, and a hangover is coming. That is according to analysts at Morgan Stanley, who said that Wall Street’s rally is showing signs of “exhaustion,” and that with major positive catalysts for trading now in the rearview mirror, there’s little that could continue to propel equities higher. “With Amazon’s strong quarter out of the way, and a very strong 2Q GDP number on the tape, investors were finally faced with the proverbial question of ’what do I have to look forward to now?’ The selling started slowly, built steadily, and left the biggest winners of the year down the most. The bottom line for us is that we think the selling has just begun and this correction will be biggest since the one we experienced in February,” the investment bank wrote to clients.

The decline “could very well have a greater negative impact on the average portfolio if it’s centered on tech, consumer discretionary and small-caps, as we expect.” A correction is technically defined as a decline of at least 10% from a recent peak. Both the Dow Jones Industrial Average DJIA and the S&P 500 corrected in early February, on concerns that inflation was returning to markets. While the Dow remains in correction territory—meaning it hasn’t yet risen 10% from its low of the pullback—the S&P exited just last week, following its longest stint in correction territory since 1984. The Nasdaq Composite Index never fell into correction.

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Infinity and beyond.

US Treasury Raises 2018 Borrowing Need To $1.33 Trillion (ZH)

America’s funding needs are starting to grow at a dangerous pace. Even before the NYT reported of Trump’s startling suggestion of a further $100 billion tax cut in the form of an inflation-adjusted capital gains tax cost basis which mostly benefits the wealthy, earlier today the U.S. Treasury said it expects to borrow $56 billion more during the third quarter than previously estimated, while market participants expect shorter-dated Treasuries to absorb the brunt of the new supply as the Trump administration grapples with a mushrooming budget deficit.

In the Treasury’s latest quarterly Sources and Uses table, it revealed that it expects to issue $329 billion in net marketable debt from July through September, and $56 billion more than the $273 billion estimated three months ago, in April. assuming an end-of-September cash balance of $350 billion, matching its previous estimate. It also forecast $440 billion of borrowing in the final three months of the year, with a $390 billion cash balance on December 31. The borrowing estimate for the third quarter is the highest since the same period in 2010 and the fourth largest on record for the July-September quarter, according to Reuters. In the second quarter, net borrowing totaled $72 billion, slightly below the earlier prediction of $75 billion.

The US fiscal picture continues to darken as a result of rising social security costs, military spending and debt service expenses while corporate tax income is declining after last year’s tax reforms. As a result, the federal budget deficit is expected to reach $833 billion this year, up from $666 billion in the budget year ended last September, a number that is well below the net funding demands for the US Treasury. The new projections put total net borrowing at $769 billion for the second half of 2018 and a whopping $1.33 trillion for the whole year.

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The Fed has been granted far too much power. We’re going to regret that.

QE Turns Ten (Stephen Roach)

November 2018 will mark the tenth anniversary of quantitative easing (QE) — undoubtedly the boldest policy experiment in the modern history of central banking. The only thing comparable to QE was the US Federal Reserve’s anti-inflation campaign of 1979-1980, orchestrated by the Fed’s then-chair, Paul Volcker. But that earlier effort entailed a major adjustment in interest rates via conventional monetary policy. By contrast, the Fed’s QE balance-sheet adjustments were unconventional and, therefore, untested from the start.

[..] The most important lesson pertains to traction — the link between Fed policy and its congressionally mandated objectives of maximum employment and price stability. On this count, the verdict on QE is mixed: The first tranche (QE1) was very successful in arresting a wrenching financial crisis in 2009. But the subsequent rounds (QE2 and QE3) were far less effective. The Fed mistakenly believed that what worked during the crisis would work equally well afterwards. An unprecedentedly weak economic recovery – roughly 2% annual growth over the past nine-plus years, versus a 4% norm in earlier cycles – says otherwise. Whatever the reason for the anemic recovery – a Japanese-like post-crisis balance-sheet recession or a 1930s style liquidity trap – the QE payback was disappointing.

From September 2008 to November 2014, successive QE programs added $3.6 trillion to the Fed’s balance sheet, nearly 25% more than the $2.9 trillion expansion of nominal GDP over the same period. A comparable assessment of disappointing interest-rate effects is reflected in recent “event studies” research that calls into question the link between QE and ten-year Treasury yields. A second lesson speaks to addiction – namely, a real economy that became overly reliant on QE’s support of asset markets. The excess liquidity spawned by the Fed’s balance-sheet expansion not only spilled over into equity markets, but also provided support for the bond market. As such, monetary policy, rather than market-based fundamentals, increasingly shaped asset prices.

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QE, tax cuts, it’s all just a great wealth transfer.

Fruits of the Great 2017 GOP Tax Cut Scam (Lendman)

David Stockman estimates the great GOP tax cut heist will increase the federal debt to around $35 trillion by 2028. Most discretionary US spending goes for militarism, war-making, corporate welfare, and police state harshness. According to Americans for Tax Fairness (ATF), the fruits of last year’s great GOP tax cut heist were as follows: 4.3% of workers got wage hikes or bonuses – 6.7 million out of 155 million. Only a handful of employers provided them so far – 407 out of 5.9 million. Corporate predators are getting 11-fold as much in tax breaks as they’re giving workers in extra pay and bonuses – $77 billion v. $7 billion.

Corporate predators are spending 88 times the amount on stock buybacks as on worker wage hikes and bonuses – $7 billion v. $617 billion. Trump’s highly touted “middle class miracle” was a colossal Big Lie. It’s been a bonanza for corporate predators, high net-worth households, and real estate tycoons like himself – a scam for ordinary Americans. It’s ballooning the deficit, social benefits being slashed to help pay for it, a clearly transparent wealth transfer scheme. Economists know tax cuts don’t create jobs and stimulate growth unless benefits help workers substantially. When money is in the pockets of ordinary people, they spend it, best accomplished through higher wages, at least keeping pace with inflation.

Post-9/11, America has been thirdworldized to benefit corporate predators and high net-worth individuals at the expense of working households. Ordinary Americans have been scammed to make privileged ones richer. Separately, according to Americans for Tax Fairness (ATF), healthcare insurers intend instituting huge premium increases in 2019. They’ll range from around 12% to a whopping 91% requested by a Maryland insurer.

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Credit Cards ‘R’ Us.

Britain’s Borrowing Binge Continues As Brexit Looms (Ind.)

Britain’s credit card fuelled spending binge continues apace, according to the latest figures from the Bank of England. Lending via plastic rose by an annualised 9.5 in June, outpacing other forms of unsecured credit (8.5 per cent). Mortgage lending, by contrast, ticked up by a more modest 3.2 per cent. The release of the figures followed a report by the Office for National Statistics that last week found UK consumers collectively spent more than they earned in 2017, the first time that has happened in almost 30 years. It looks like we’re due a repeat this year. How much of a worry is this? Regulators say most people can afford to repay what they have borrowed.

However, the Prudential Regulatory Authority, that oversees institutions’ financial soundness, last year undertook a review of consumer lending that resulted in what could be read as a shot across the industry’s bows. The Financial Conduct Authority, meanwhile, tweaked its rules in July, making it clear that it wanted lenders to asses not just whether consumers can repay what they have borrowed but whether they can do so “affordably and without this significantly affecting their wider financial situation”. It follows a speech in March by Jonathan Davidson, the watchdog’s director of supervision, in which he said that “a firm whose business model is predicated on selling products to customers who can’t afford to repay them is not acceptable, nor is it a sustainable long-term strategy”.

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Yeah, the UK is really in a position to utter threats.

Brexit: UK Warns EU Of Tit-For-Tat Measures Over Financial Services (G.)

UK negotiators have told their counterparts in Brussels that about 7,000 European-based investment funds that rely on British clients for their cash and profits will be hit by regulators unless the EU changes its position on the City of London after Brexit. As frustration grows within Whitehall at what is seen as a dogmatic position taken by the EU’s chief negotiator, Michel Barnier, the British side has upped the ante by making an implicit threat to EU interests. A section of a UK presentation made to the European commission’s negotiators last week, and seen by the Guardian, says that unless Brussels allows all UK sectors of the City of London to continue to operate after Brexit as they do today, at least initially, obstacles to European financial interests operating in the UK could also be put in place.

The British government says the EU’s “equivalence regime”, under which UK providers would have the right to offer financial services in the European economic area after Brexit, does not cover enough sectors or provide adequate assurances to UK-based banks and fund managers. The UK also wants equivalence decisions to be made collaboratively between Brussels and Whitehall on whether parts of the financial sector will be able to continue to operate across the Channel as regulations diverge after Brexit. As it stands, a declaration of equivalencecan be easily revoked with only 30 days’ notice under existing EU legislation. The EU is resisting, and insists it will not offer a bespoke deal on financial services. It says that what works for US financial services providers will have to work for the UK.

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Peace with Russia, peace with Iran, that’s not the playbook, Donald.

Trump Offer To Meet Iran President Rouhani Dismissed By Both Sides (G.)

Donald Trump has said he would “certainly meet” Iranian president Hassan Rouhani without preconditions, a move that was later rejected by Trump’s own administration and one of Rouhani’s advisers. Speaking during a joint news conference with Italy’s prime minister, Giuseppe Conte, Trump said he would meet Iran “anytime they want to”. “I’ll meet with anybody,” he said. “There’s nothing wrong with meeting.” Asked whether he would set any preconditions, Trump was clear. “No preconditions, no. If they want to meet, I’ll meet any time they want,” he said. “Good for the country, good for them, good for us and good for the world. No preconditions. If they want to meet, I’ll meet.”

Trump’s apparently spontaneous overture marked a significant shift in tone and follows escalating rhetoric in the wake of his dumping in May of the landmark Iran nuclear accord. The administration is set next month to begin reimposing sanctions that had been lifted under the 2015 deal and has been ratcheting up a pressure campaign on the Islamic republic that many suspect is aimed at regime change. After the comment, secretary of state Mike Pompeo appeared to contradict Trump, listing preconditions that had to be met first. He told CNBC on Monday: “If the Iranians demonstrate a commitment to make fundamental changes in how they treat their own people, reduce their malign behaviour, can agree that it’s worthwhile to enter in a nuclear agreement that actually prevents proliferation, then the president said he’s prepared to sit down and have a conversation with him,” he said.

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Murray on his time as a UK diplomat.

The Ubiquity of Evil (Craig Murray)

I had served as First Secretary in the British Embassy in Poland, and bumped up startlingly against the history of the Holocaust in that time, including through involvement with organising the commemoration of the 50th anniversary of the liberation of Auschwitz. What had struck me most forcibly was the sheer scale of the Holocaust operation, the tens of thousands of people who had been complicit in administering it. I could never understand how that could happen – until I saw ordinary, decent people in the FCO facilitate extraordinary rendition and torture. Then I understood, for the first time, the banality of evil or, perhaps more precisely, the ubiquity of evil. Of course, I am not comparing the scale of what happened to the Holocaust – but evil can operate on different scales.

I believe I see it again today. I do not believe that the majority of journalists in the BBC, who pump out a continual stream of “Corbyn is an anti-semite” propaganda, believe in their hearts that Corbyn is a racist at all. They are just doing their job, which is to help the BBC avert the prospect of a radical government in the UK threatening the massive wealth share of the global elite. They would argue that they are just reporting what others say; but it is of course the selection of what they report and how they report it which reflect their agenda.

The truth, of which I am certain, is this. If there genuinely was the claimed existential threat to Jews in Britain, of the type which engulfed Europe’s Jews in the 1930’s, Jeremy Corbyn, Billy Bragg, Roger Waters and I may humbly add myself would be among the few who would die alongside them on the barricades, resisting. Yet these are today loudly called “anti-semites” for supporting the right to oppose the oppression of the Palestinians. The journalists currently promoting those accusations, if it came to the crunch, would be polishing state propaganda and the civil servants writing railway dockets. That is how it works. I have seen it. Close up.

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Bye my friends. I’m going to miss you. Something bad.

World’s Largest King Penguin Colony Has Declined By 90% (G.)

The planet’s largest colony of king penguins has declined by nearly 90% in three decades, researchers have warned. The last time scientists set foot on France’s remote Île aux Cochons – roughly half way between the tip of Africa and Antarctica – the island was blanketed by 2m of the penguins, which stand about a metre tall. But recent satellite images and photos taken from helicopters show the population has collapsed, with barely 200,000 remaining, according to a study published in Antarctic Science. Why the colony on Île aux Cochons has been so decimated remains a mystery.

“It is completely unexpected, and particularly significant since this colony represented nearly one third of the king penguins in the world,” said lead author Henri Weimerskirch, an ecologist at the Centre for Biological Studies in Chize, France, who first set eyes on the colony in 1982. Climate change may play a role. In 1997, a particularly strong El Niño weather event warmed the southern Indian Ocean, temporarily pushing the fish and squid on which king penguins depend south, beyond their foraging range. “This resulted in population decline and poor breeding success for all the king penguin colonies in the region,” Weimerskirch said.

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This goes back to 2002. Nothing has changed.

Charities Damned For ‘Abject Failure’ In Tackling Sexual Abuse (G.)

Charities have shown “complacency verging on complicity” in responding to sexual abuse that is endemic across the sector, according to a damning report by MPs. In the report, the international development committee (IDC) said the aid sector had a record of “abject failure” in dealing with longstanding concerns about exploitation by its own personnel and appeared more concerned for their reputations than for victims. The response to abuse claims has been reactionary and superficial, it added. MPs called for the establishment of an independent aid ombudsman to support survivors and for a global register of aid workers to prevent abusers moving through the system.

Stephen Twigg, the committee chairman, said the sector’s failure to deal with the issue had left victims at the mercy of those who sought to use power to abuse others. The report, published on Tuesday, also criticised the UN, which it said had failed to display sustained leadership in tackling abuse, and said the historical response of the UK’s Department for International Development (DfID) was disappointing. The committee launched its inquiry into sexual exploitation and abuse after revelations that Oxfam covered up claims that its staff had used sex workers while working in the aftermath of the 2010 Haiti earthquake. The sector has faced intense scrutiny, with further allegations of sexual misconduct emerging at Save the Children.

Twigg said the aid sector was first made aware of concerns in 2002, when a report by the UN agency for refugees (UNHCR) and Save the Children documented cases of abuse. Despite this, and a series of other warnings, little action was taken. “There are so many reports that go back over this period of 16 years and the system has failed to respond anything close to adequately over the period,” the Labour MP said. “This is 16 years of failure by the entire international system of governments, the UN and the aid sector.”

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Jun 222018
 
 June 22, 2018  Posted by at 8:08 am Finance Tagged with: , , , , , , , , , , , , ,  


Wassily Kandinsky Yellow-Red-Blue 1925

 

Could China’s Next Target Be the US Housing Market? (Forsyth)
Next Central Bank Puts QE Unwind on the Calendar (WS)
Eurogroup Deal For Greece Clinched After Marathon Session (K.)
IMF Welcomes Greek Debt Deal But Has Reservations On Long-Term (R.)
Germany Has Made Over $3 Billion Profit From Greek Crisis (KTG)
Greek GDP Is Low, But Food Prices Are High (K.)
EU Is Getting Ready For No-Deal Brexit – Juncker (G.)
Multi-Decade Outsourcing Boom Comes to Sticky End in the UK (DQ)
Energy Is The Primary Driver Of The Economy (EI)
Italy To Pick Up Migrants, Impound German Charity Ship (R.)
People Donate Millions To Help Separated Families (AP)
2 Koreas Meet To Arrange Reunions Of War-Split Families (AP)
Tourism Preventing Kenya’s Cheetahs From Raising Young (G.)
India Is Facing Its Worst-Ever Water Crisis (ZH)

 

 

They can’t really sell Treasuries. MBS, though…

Could China’s Next Target Be the US Housing Market? (Forsyth)

While so much attention is focused on foreign purchases of Treasuries, the big action has been in U.S. agencies, most of which consist of mortgage-backed securities from government-sponsored Ginnie Mae, Fannie Mae, and Freddie Mac. In April, overseas investors bought $20 billion of agencies, bringing their 12-month total to $186 billion, or over $100 billion more than Treasuries. Asia accounted for $160 billion of those purchases, including $24 billion from China. U.S. corporations also get key support for their borrowing habit from abroad. Foreign investors bought $128 billion of corporate bonds in the latest 12 months, although just $1.6 billion in April. As for equities, overseas investors bought $82 billion ($6 billion in the latest month).

The numbers show that, even more than Uncle Sam, U.S. home borrowers depend on the kindness of strangers. China could retreat from bolstering the American housing market merely not reinvesting the monthly MBS interest and principal payments, resulting in a stealth tightening of mortgage credit. The housing market is already in the doldrums, as May’s weaker-than-expected existing home sales at an annual rate of 5.43 million, 100,000 less than forecast and below April’s 5.45 million annual pace. That disappointing home sales pace comes with unemployment at just 3.8%. But with single-family home prices up 5.2% from a year ago, home sales are sluggish. A further push up in mortgage rates, already at seven-year highs, would further crimp this key sector of the U.S. economy.

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Do we see nerves there?

Next Central Bank Puts QE Unwind on the Calendar (WS)

Markets were surprised today when the Bank of England took a “hawkish” turn and announced that three out of nine members of its Monetary Policy Committee – including influential Chief Economist Andrew Haldane, who’d been considered dovish – voted to raise the Bank Rate to 0.75%, thus dissenting from the majority who kept it at 0.5%. This dissension, particularly by Haldane, communicated to the markets that a rate hike at the next meeting in August is likely. The beaten-down UK pound jumped. But less prominent was the announcement about the QE unwind. Like other central banks, the BoE heavily engaged in QE and maintains a balance sheet of £435 billion ($577 billion) of British government bonds and £10 billion ($13 billion) in UK corporate bonds that it had acquired during the Brexit kerfuffle.

Before it starts shedding assets on its balance sheet, however, the BoE wants to raise the Bank Rate enough to where it can cut it “materially” if needed, “reflecting the Committee’s preference to use Bank Rate as the primary instrument for monetary policy,” as it said. In this, it parallels the Fed. The Fed started its QE unwind in October 2017, after it had already raised its target range for the federal funds rate four times. The BoE’s previous guidance was that the QE unwind would start when the Bank Rate is “around 2%.” Back in the day when this guidance was given, NIRP had broken out all over Europe, and pundits assumed that the BoE would never be able to raise its rate to anywhere near 2%, and so the QE unwind could never happen.

Today the BoE moved down its guidance about the beginning of the QE unwind to a time when the Bank Rate is “around 1.5%.” The Fed’s target range is already between 1.75% and 2.0%. The Fed leads, other central banks follow. And by August 2, the BoE’s Bank Rate may be at 0.75%. From that point forward, the QE unwind may only be three rate hikes away.

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Many headlines talk about debt relief. But that’s not what this is. It’s just another bunch of loan extensions and a €15 billion new loan. There will be many more years of austerity and creditor oversight. No, the bailout has not been completed.

Eurogroup Deal For Greece Clinched After Marathon Session (K.)

After several hours of negotiations, Greek officials and representatives of the country’s international creditors reached an agreement on securing the sustainability of the country’s debt in the early hours of Friday. Greece is to receive a loan tranche of 15 billion euros (3.3 billion euros of which would be used to pay off part of the country’s debt to the ECB and IMF), European officials said. Greece will also get a 10-year extension for the repayment of its European Financial Stability Facility (EFSF) loans and an additional grace period of 10 years on interest payments. The extension of the repayment period of the EFSF loans and the size of the final bailout tranche had been a sticking points in the talks.

These two issues were the focus of several trilateral meetings between Greek Foreign Minister Euclid Tsakalotos and his French and German counterparts, Bruno Le Maire and Olaf Scholz. At a press conference announcing the details of the deal, European Economic and Financial Affairs Commissioner Pierre Moscovici spoke of a “historical moment for Greece” and said a new chapter was beginning for the country. He expressed “great satisfaction” in seeing Greece emerge from eight years of financial support.

“Tonight’s Eurogroup agreement achieves what we have been calling for, a credible, upfront set of measures, which will meaningfully lighten Greece’s debt burden, allow the country to stand on its own two feet, and reassure all partners and investors,” he said. Eurogroup President Mario Centeno struck a similar note. “This is it,” he said. “After eight long years, the Greek bailout has been completed.”

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The IMF has caved on debt relief. Even though it knows it must be accorded.

IMF Welcomes Greek Debt Deal But Has Reservations On Long-Term (R.)

The IMF welcomed on Friday a deal on debt relief for Greece reached by Athens’ euro zone creditors saying it will improve debt sustainability in the medium term, but maintained reservations on the long term. Euro zone finance ministers earlier on Friday offered Greece a 10-year deferral and maturities extension on a large part of past loans as well as 15 billion euros in new credit to ensure Athens can stand on its own feet after it exits its third bailout in August. “The additional debt relief measures announced today will mitigate Greece medium-term financing risks and improve medium term debt prospects,” the IMF managing director Christine Lagarde told a news conference.

But she added that the fund will not join the expiring 86-billion-euro bailout as the time “has run out”, and maintained “reservations” on the long term sustainability of the Greek debt, which runs until 2060. The fund will begin assessing the sustainability of the Greek debt “as early as next week”, Lagarde said, adding that the fund will remain engaged in Greece and will participate to the monitoring of the Greek economic performance and reforms after the end of the program.

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“Contrary to all right-wing myths, Germany has benefited massively from the crisis in Greece..”

Germany Has Made Over $3 Billion Profit From Greek Crisis (KTG)

Germany has earned around 2.9 billion euros in profit from interest rate since the first bailout for Greece in 2010. This is the official response of the Federal Government to a request submitted by the Green party in Berlin. The profit was transmitted to the central Bundesbank and from there to the federal budget. The revenues came mainly due to purchases of Greek government bonds under the so-called Securities Markets Program (SMP) of the European Central Bank (ECB). Previous agreements between the government in Athens and the eurozone states foresaw that other states will pay out the profits from this program to Greece if Athens would meet all the austerity and reform requirements.

However, according to Berlin’s response, only in 2013 and 2014 such funds have been transferred to the Greek State and the ESM. The money to the euro bailout landed on a seggregated account. As the Federal Government announced, the Bundesbank achieved by 2017 about 3.4 billion euros in interest gains from the SMP purchases. In 2013, approximately 527 million euros were transferred back to Greece and around 387 million to the ESM in 2014. Therefore, the overall profit is 2.5 billion euros. In addition, there are interest profits of 400 million euros from a loan from the state bank KfW.

“Contrary to all right-wing myths, Germany has benefited massively from the crisis in Greece,” said Greens household expert Sven Christian Kindler said and demanded a debt relief for Greece. “It can not be that the federal government with billions of revenues from the Greek interest the German budget recapitalize,” Kindler criticized. “Greece has saved hard and kept its commitments, now the Eurogroup must keep its promise,” he stressed.

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And here’s why the Greek recovery story is simply falsehood.

Greek GDP Is Low, But Food Prices Are High (K.)

Greeks may be among the poorest citizens in the European Union, but that does not mean low prices for basic products and services in this country. According to figures published on Wednesday by Eurostat, Greece was the 17th most expensive country among the 28 EU member-states last year, with the general price level standing at 84 percent of the EU average. However, in the most basic category – food – price levels in Greece stood above the bloc’s average, having a significant negative impact on living standards. Eurostat figures had shown on Tuesday that the per capita GDP in Greece in 2017 amounted to just 67 percent of the EU average, while real private consumption stood 23 percent below the EU mean rate.

A key role in food prices remaining at such high levels – in spite of the decade-long crisis – has been played by a succession of hikes in the value-added tax: From a 9 percent rate on food imposed in 2009, many food products now bear a VAT rate of 24 percent, making Greece the 13th most expensive country for food across the bloc. High indirect taxes also explain the particularly high prices in tobacco and alcoholic beverages in Greece, which make this country the 12th most expensive in the EU in this category.

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A hard Brexit will be very unpretty. Airbus talked today about moving 14,000 jobs out of the UK. And they won’t be the last.

EU Is Getting Ready For No-Deal Brexit – Juncker (G.)

The EU needs to be realistic about the dangerous state of the Brexit negotiations and is preparing to deploy its trillion-pound budget to cushion the bloc from the prospect of a no-deal scenario, the European commission president has warned. With the two sides still far apart on the “hardest issues”, just days from a crunch leaders’ summit in Brussels, Jean-Claude Juncker told the Irish parliament on Thursday he was stepping up preparations for a breakdown in talks, and even drafting plans aimed at keeping the peace in Northern Ireland. The problem of avoiding a hard border with the Republic – said by the Irish taoiseach, Leo Varadkar, to be akin to a “riddle wrapped in an enigma” – is threatening to thwart all attempts to make progress on a wider deal.

With Theresa May refusing to countenance what Juncker described as the bloc’s “bespoke and workable solution”, of the Northern Ireland effectively staying in the customs union and single market, it was crucial for the 27 EU member states to prepare for the worst outcome, the commission president said. Juncker told Irish MPs and senators in a joint session of parliament in Dublin: “With pragmatism comes realism. As the clock to Brexit ticks down, we must prepare for every eventuality, including no deal. This is neither a desired nor a likely outcome. But it is not an impossible one. And we are getting ready just in case.

“We will use all the tools at our disposal, which could have a cushioning impact. The new long-term budget for our union from 2021 onwards has an in-built flexibility that could allow us to redirect funds if the situation arose. “We will also earmark €120m (£105m) for a new peace programme which has done so much in breaking down barriers between communities in Northern Ireland and the border counties.”

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More things coming to an end in Britain.

Multi-Decade Outsourcing Boom Comes to Sticky End in the UK (DQ)

The United Kingdom, widely considered to be the birthplace of the modern incarnation of the public-private partnership (PPP), in which private firms are contracted to complete and manage public projects, could be one of the first countries to jettison the model. The collapse in January of 200-year old UK infrastructure group Carillion, whose outsized role in delivering public services earned it the moniker “the company that runs Britain,” has fueled concerns that other big outsourcing groups could soon follow in its doomed footsteps. Last week the CEO of Interserve, another large outsourcing group, revealed that the government has given the firm a red rating as a strategic supplier, meaning it has “significant material concerns” about the company’s finances.

Fears are growing that Carillion was not a one-off episode but rather the swan song of a deeply flawed and dying business model. Those fears were hardly assuaged by the release this week of a damning parliamentary report into the UK government’s practice of outsourcing public projects through so-called Private Finance Initiatives (PFIs). PFI deals were invented in 1992 by the Conservative government and then enthusiastically rolled out by the subsequent Labour government. The schemes usually involved large-scale public buildings such as new schools and hospitals which were previously funded by the UK Treasury. Under PFI they were put out to tender with bids invited from developers who put up the investment to build new schools, hospitals or other schemes and then leased them back.

[..] The Treasury’s incapacity to measure the actual benefits of PFI should be of grave concern to British taxpayers given that the interest rate of private-sector debt — these projects are debt financed — can be as much as 2 to 3.75 percentage points higher than the cost of government borrowing. Even if the government doesn’t enter into any new PFI-type deals, it will pay private companies £199 billion, including interest, between April 2017 until the 2040s for existing deals, in addition to some £110 billion already paid. That’s for 700 projects worth around £60 billion. British taxpayers could clearly “get a much better deal,” the report concludes.

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John Lounsbury posted this talk by Steve from late 2016 again. And why not? Economics denies the role of energy…

Energy Is The Primary Driver Of The Economy (EI)

Economic theory has failed to incorporate the role of energy in production for two centuries since the Physiocrats, according to Prof. Steve Keen. In this video he derives a production function that includes energy in an essential manner. It implies that economic growth has been driven by the increase in the energy throughput capabilities of machinery. Prof. Keen argues that all economic gain can be traced to the use of energy which we receive at no cost from the sun. Capital and labor participate in the economy only by use of this energy.

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The Dutch play a strange role in this.

Italy To Pick Up Migrants, Impound German Charity Ship (R.)

Italy appeared to relent on Thursday after at first refusing to accept 226 migrants on board a German charity rescue ship, saying later in the day it would take them in but would impound the vessel. Anti-immigrant interior minister Matteo Salvini initially said the Dutch-flagged ship Lifeline should take the people it plucked from the Mediterranean to the Netherlands and not Italy. But transport minister Danilo Toninelli, who oversees the coastguard, later said it was unsafe for the 32-metre vessel to travel such a great distance with so many people on board. “We will assume the humanitarian generosity and responsibility to save these people and take them onto Italian coastguard ships,” Toninelli said in a video posted on Facebook.

Earlier this month Salvini pledged to no longer let charity ships bring rescued migrants in Italy, leaving the Gibraltar-flagged Aquarius stranded at sea for days with more than 600 migrants until Spain offered them safe haven. The Dutch government denied responsibility for the vessel, something Toninelli said Italy would investigate. The Italian coastguard would escort Lifeline “to an Italian port to conduct the probe” and impound the ship, he said. Also on Thursday, the German charity Sea Eye which operates another Dutch-flagged ship, the Seefuchs, said in a statement it was ending its sea rescue mission after the Dutch government told them that it was no longer responsible for the vessel.

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Please make sure it’s spent well.

People Donate Millions To Help Separated Families (AP)

In an outpouring of concern prompted by images and audio of children crying for their parents, hundreds of thousands of people worldwide are donating to nonprofit organizations to help families being separated at the U.S.-Mexico border. Among those that have generated the most attention is a fundraiser on Facebook started by a Silicon Valley couple, who say they felt compelled to help after they saw a photograph of a Honduran toddler sobbing as her mother was searched by a U.S. border patrol agent. The fundraiser started by David and Charlotte Willner had collected nearly $14 million by Wednesday afternoon.

The Willners, who have a 2-year-old daughter, set up the “Reunite an immigrant parent with their child” fundraiser on Saturday hoping to collect $1,500 — enough for one detained immigrant parent to post bond — but money began pouring in and within days people had donated $5 million to help immigrant families separated under the Trump administration’s “zero-tolerance” policy that criminally prosecutes all adults caught crossing the border illegally. “What started out as a hope to help one person get reunited with their family has turned into a movement that will help countless people,” the couple said in a statement released by a spokeswoman Wednesday. The couple, who were early employees at Facebook, declined to be interviewed.

“Regardless of political party, so many of us are distraught over children being separated from their parents at the border.” The money collected from more than 300,000 people in the United States and around the world will be given to the Refugee and Immigrant Center for Education and Legal Services, or RAICES, a Texas nonprofit that that offers free and low-cost legal services to immigrants.

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South Korean President Moon Jae-in doesn’t sit still.

2 Koreas Meet To Arrange Reunions Of War-Split Families (AP)

North and South Korean officials are meeting to arrange the first reunions in three years between families divided by the 1950-53 Korean War. Friday’s meeting at the North’s Diamond Mountain resort comes as the rivals take reconciliation steps amid a diplomatic push to resolve the North Korean nuclear crisis. Seoul’s Unification Ministry said the meeting will discuss ways to carry out an agreement on the reunions made at a summit between North Korean leader Kim Jong Un and South Korean President Moon Jae-in. The two summits between Kim and Moon have opened various channels of peace talks between the Koreas, including military talks for reducing tensions across their tense border and sports talks for fielding combined teams at the upcoming Asian Games in Indonesia.

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Even if we don’t shoot them, we find other ways to kill them off.

Tourism Preventing Kenya’s Cheetahs From Raising Young (G.)

High levels of tourism can lead to a dramatic reduction in the number of cheetahs able to raise their young to independence, new research has found. A study in Kenya’s Maasai Mara savannah found that in areas with a high density of tourist vehicles, the average number of cubs a mother cheetah raised to independence was just 0.2 cubs per litter – less than a tenth of the 2.3 cubs per litter expected in areas with low tourism. Dr Femke Broekhuis, a researcher at Oxford University and the author of the study, surveyed cheetahs in the reserve between 2013 and 2017 to assess how the frequency of tourist vehicles affected the number of cheetah cubs that survived to adulthood.

“During the study there was no hard evidence of direct mortality caused by tourists,” such as vehicles accidentally running over cubs, Broekhuis said. “It is therefore possible that tourists have an indirect effect on cub survival by changing a cheetah’s behaviour, increasing a cheetah’s stress levels or by minimising food consumption.” Broekhuis said she has seen as many as 30 vehicles around a single cheetah at the same time. “The most vehicles that we recorded at a cheetah sighting was 64 vehicles over a two-hour period,” she said.

Too many tourist vehicles can reduce a cheetah’s hunting success rate, the study suggests, and even if the hunt is successful, the disturbance from tourists could cause a female to abandon her kill, making her less likely to be able to provide for her young. Broekhuis said it was “crucial that strict wildlife viewing guidelines are implemented and adhered to,” and suggested limiting the number of vehicles around a cheetah to five and not allowing them to get any closer than 30 metres.

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The shape of things to come.

India Is Facing Its Worst-Ever Water Crisis (ZH)

India is facing its worst-ever water crisis, with some 600 million people facing acute water shortage, a government think-tank says. The Niti Aayog report, which draws on data from 24 of India’s 29 states, says the crisis is “only going to get worse” in the years ahead. Around 200,000 Indians die every year because they have no access to clean water, according to the report. And as The BBC reports, many end up relying on private water suppliers or tankers paid for the by the government. Winding queues of people waiting to collect water from tankers or public taps is a common sight in Indian slums. Indian cities and towns regularly run out water in the summer because they lack the infrastructure to deliver piped water to every home.

• 600 million people face high-to-extreme water stress. • 75% of households do not have drinking water on premise. 84% rural households do not have piped water access. • 70% of our water is contaminated; India is currently ranked 120 among 122 countries in the water quality index. India faces more than one problem – all compounding the nation’s crisis: Droughts are becoming more frequent, creating severe problems for India’s rain-dependent farmers (~53% of agriculture in India is rainfed17). When water is available, it is likely to be contaminated (up to 70% of our water supply), resulting in nearly 200,000 deaths each year.

Interstate disagreements are on the rise, with seven major disputes currently raging, pointing to the fact that limited frameworks and institutions are in place for national water governance. And that means massive problems lie ahead… 40% of the Indian population will have no access to drinking water by 2030 with 21 cities running out of groundwater by 2020 – affecting 100 million people which will cut 6% from GDP by 2050. What remains alarming is that the states that are ranked the lowest – such as Uttar Pradesh and Haryana in the north or Bihar and Jharkhand in the east – are also home to nearly half of India’s population as well the bulk of its agricultural produce.

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Jun 152018
 
 June 15, 2018  Posted by at 8:10 am Finance Tagged with: , , , , , , , , , , , , ,  


OR LIGHT Compassion 2018

 

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)
ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)
Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)
Powell Orchestrates a Masterful Move (DDMB)
The Fed Creates Problems For Itself (Macleod)
The Art of the Deal Worked On Sentosa Island (AT)
Absence of “CVID” In Joint Statement? (Hani)
Optimism (Caitlin Johnstone)
Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)
‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)
Greeks Are Least Satisfied In The EU (K.)
Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)
Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)
A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

 

 

Money has left the building.

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)

Today the Argentina peso plunged another 5.5% against the US dollar. It now takes ARS 27.7 to buy $1. Over the past 16 years, the peso has gone through waves of collapses. This collapse began on April 20. The central bank of Argentina (BCRA) countered it by selling $1 billion per day of scarce foreign exchange reserves and buying pesos. The peso fell more quickly. The BCRA responded with three rate hikes, to finally 40%! On May 8, the government asked the IMF for a bailout. On May 16, after a chaotic plunge of the peso, the BCRA was able to refinance about $26 billion in maturing peso-denominated short-term debt (Lebacs) at an annual interest of 40%, and the peso bounced. It was a dead-cat bounce, however, and the peso plunged another 13% against the dollar through today.

Since April 20, the peso has plunged 27.5%. The annotated chart shows the daily moves of the collapse, and the various failed gyrations to halt it (the chart depicts the value of 1 ARS in USD). The collapse of the peso comes despite an endless series of measures to halt it. Just this week so far: On Tuesday, the BCRA decided to keep its key interest rate at 40%; and on Wednesday, the Ministry of Finance announced it would hold daily auctions to sell $7.5 billion in foreign exchange reserves and buy pesos, to prop up the peso. But it was apparently the only one buying pesos. With inflation at 25.5% and heading to 27% by year-end, according to government estimates, with a rising budget deficit, a surging current account deficit, soaring borrowing costs, and burned investors, what else is there to do?

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Not Draghi’s finest hour.

ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)

The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year. Despite warning that the single currency area was going through a soft patch at a time when protectionist risks were rising, the ECB said it would wind down its bond purchases over the next six months. The ECB is currently boosting the eurozone money supply by buying €30bn of assets each month, but this will be reduced to €15bn a month after September and ended completely at the end of 2018.

The move follows strong pressure from some eurozone countries, led by Germany, that were uncomfortable about the more than €2.4tn of assets accumulated by the ECB since it launched its quantitative easing programme at the start of 2015. Mario Draghi, the ECB’s president, said at the end of a meeting of the bank’s governing council in Latvia that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%. Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75percentage points a year to the average 2.25% annual growth rate.

The ECB’s statement reflected the battle between hawks and doves on the bank’s council, with the decision on QE matched by a softening of its approach to interest rates. Draghi said there would be no prospect of an increase in the ECB’s key lending rate – currently 0.0% – until next summer at the earliest. “We decided to keep the key ECB interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path,” Draghi said.

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No, really, Abenomics is dead.

Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)

The Bank of Japan maintained its ultra-loose monetary policy on Friday and downgraded its view on inflation in a fresh blow to its long-held 2% price goal, further complicating the central bank’s path to rolling back its crisis-era stimulus. Markets are on the lookout for clues from BOJ Governor Haruhiko Kuroda’s post-meeting briefing on how long the central bank could hold off on whittling down stimulus given recent disappointingly weak price growth. As widely expected, the Bank of Japan kept its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around zero%.

The move contrasts with the European Central Bank’s decision to end its asset-purchase program this year and the U.S. Federal Reserve’s steady rate increases, which signaled a break from policies deployed to battle the 2007-2009 financial crisis. “Consumer price growth is in a range of 0.5 to 1%,” the BOJ said in a statement accompanying the decision. That was a slightly bleaker view than in the previous meeting in April, when the bank said inflation was moving around 1%. The BOJ stuck to its view the economy was expanding moderately, unfazed by a first-quarter contraction that many analysts blame on temporary factors like bad weather.

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He just likes the attention.

Powell Orchestrates a Masterful Move (DDMB)

Federal Reserve Chairman Jerome Powell has taken the first steps in remaking the central bank in his “plain-English” image, which can only be a good thing for financial markets. Earlier this week, news leaked that the central bank was considering holding a press conference following each Federal Open Market Committee meeting instead of after every other one like it does now. The reports set off a mini-storm. Speculation rose the Fed would implement this new policy immediately, which could mean the central bank was considering accelerating the pace of interest-rate increases as soon as August. After all, investors had become accustomed to the Fed only making a major policy move at meetings followed by a press conference. Now, every meeting would be “live.”

But in a masterful move, Chairman Jerome Powell managed to confirm the policy while also putting financial markets at ease. Rather than announcing the change in the official statement outlining the Fed’s plan to raise its target for the federal funds rate for the seventh time since December 2015, Powell waited until the start of his press conference to drop the bomb, noting that the policy wouldn’t start until January. Here’s Powell’s reasoning: “My colleagues and I meet eight times a year and take a fresh look each time at what is happening in the economy and consider whether our policy needs adjusting. We don’t put our interest rate decisions on auto-pilot because the economy can always evolve in unexpected ways.

History has shown that moving interest rates either too quickly or too slowly can lead to bad economic outcomes. We think the outcomes are likely to be better overall if we are as clear as possible about what we are likely to do and why. To that end, we try to give a sense of our expectations for how the economy will evolve and how our policy stance may change. As Chairman, I hope to foster a public conversation about what the Fed is doing to support a strong and resilient economy. And one practical step in doing so is to have a press conference like this after every one of our scheduled FOMC meetings. We’re going to do that beginning in January. That will give us more opportunities to explain our actions and to answer your questions.

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“..the unsustainable excesses of unprofitable debt created by suppressing interest rates..”

The Fed Creates Problems For Itself (Macleod)

Since Hayek’s time, monetary policy, particularly in America, has evolved away from targeting production and discouraging savings by suppressing interest rates, towards encouraging consumption through expanding consumer finance. American consumers are living beyond their means and have commonly depleted all their liquid savings. But given the variations in the cost of consumer finance (between 0% car loans and 20% credit card and overdraft rates), consumers are generally insensitive to changes in interest rates. Therefore, despite the rise of consumer finance, we can still regard Hayek’s triangle as illustrating the driving force behind the credit cycle, and the unsustainable excesses of unprofitable debt created by suppressing interest rates as the reason monetary policy always leads to an economic crisis.

The chart below shows we could be living dangerously close to another tipping point, whereby the rises in the Fed Funds Rate (FFR) might be about to trigger a new credit and economic crisis. Previous peaks in the FFR coincided with the onset of economic downturns, because they exposed unsustainable business models. On the basis of simple extrapolation, the area between the two dotted lines, which roughly join these peaks, is where the current FFR cycle can be expected to peak. It is currently standing at about 2% after yesterday’s increase, and the Fed expects the FFR to average 3.1% in 2019. The chart tells us the Fed is already living dangerously with yesterday’s hike, and further rises will all but guarantee a credit crisis.

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The view from Asia Times. Many people in that part of the world don’t understand the criticism.

The Art of the Deal Worked On Sentosa Island (AT)

Some statesmen by their sheer force of personality and unorthodox ways of politicking arouse disdain among onlookers. US President Donald is perhaps the most famous figure of that kind in world politics today. No matter what he does, Trump attracts criticism. He evokes strong feelings of antipathy among a large and voluble swathe of opinion within half of America. The making of history in a virtual solo act on his part, which is the rarest of efforts, on Sentosa Island in Singapore on Tuesday and which the world watched with awe and disbelief, will be instinctively stonewalled. Half of America simply refuses to accept the positive tidings about him coming from Singapore.

The skeptics are all over social media pouring scorn, voicing skepticism, unable to accept that if the man has done something sensible and good for his country and for world peace, it deserves at the very least patient, courteous attention. The problem is about Trump – not so much the imperative need of North Korea’s denuclearization. But western detractors – ostensibly rooting for the “liberal international order” – will eventually lapse into silence because what emerges is that North Korean leader Kim Jong-un has enough to “bite” here in the deal that Trump is offering – broadly, a security guarantee from the US and the offer of a full-bodied relationship with an incremental end to sanctions plus a peace treaty.

Succinctly put, Trump has offered a deal that Kim simply cannot afford to reject. The ending of the US-ROK military exercises forthwith; Trump’s agenda of eventual withdrawal of troops from ROK; the lure of possible withdrawal of sanctions once 20% of the denuclearization process gets underway, or once the process becomes irreversible; Trump’s hint that he has sought assurances from Japan and the ROK that they will be “generous” in offering economic assistance to the reconstruction of North Korea; China’s involvement in the crucial process – these are tangibles.

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The view from South Korea.

Absence of “CVID” In Joint Statement? (Hani)

The absence of any reference to “complete, verifiable, and irreversible dismantlement” (CVID) of North Korea’s nuclear program in the joint statement reached at US President Donald Trump and North Korean leader Kim Jong-un’s June 12 summit in Singapore is being seen by some as a “negotiation failure” on the US’s part. But an analysis of Trump’s subsequent remarks – and a reading between the lines of the Pyongyang’s official announcement – suggests the US achieved practical gains in terms of a commitment from the North in exchange for the face-saving measure of avoiding use of the “CVID” term due to possible North Korean objections to it.

To begin with, the Singapore joint statement’s language marks a step forward from the Panmunjeom Declaration of Apr. 27 in terms of the final goal of denuclearizing the Korean Peninsula. The latest statement refers to Kim having “reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.” While the Panmunjeom Declaration referred to “realizing, through complete denuclearization, a nuclear-free Korean Peninsula,” the new statement includes the additional reference to a “firm and unwavering commitment.”

From the reference to Kim’s “firm and unwavering” commitment to denuclearization, some experts are suggesting North Korea may have agreed to verification in addition to denuclearization – in other words, that the language may be a substitute for the “verifiable” part of the CVID approach demanded by Washington. “You could see them as having used the term out of awareness of North Korea’s discomfort with the word ‘verification,’” Handong Global University professor Kim Joon-hyung said after a Korea Press Foundation debate at Singapore’s Swissotel on June 13. “It may be fair to say North Korea made a definite commitment on the implementation and verification issues,” Kim argued.

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“..while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter. ”

Optimism (Caitlin Johnstone)

Off the top of my head I have a hard time thinking of anything sleazier than smearing peace talks in order to gain partisan political points, but that has indeed been the theme of the last few days when it comes to the Singapore summit. Liberal pundits everywhere have been busily circulating the narrative that Kim Jong-Un “played” Trump by getting him to temporarily halt military drills in exchange for suspended nuclear testing. It was the most fundamental beginning of peace negotiations and a slight deescalation in tensions on the Korean Peninsula, but the way they talk about it you’d think Kim had taken off from Singapore in Air Force One with the keys to Fort Knox and Melania on his lap.

I’m not sure how far up the military-industrial complex’s ass one’s head needs to be to think that one single step toward peace is a gigantic take-all-the-chips win for the impoverished North Korea, but many of Trump’s political enemies are taking it even further. Senate Democrats have introduced a bill to make it more difficult for Trump to withdraw US troops from South Korea, because while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter.

Surprising no one, MSNBC’s cartoon children’s program The Rachel Maddow Show took home the trophy for jaw-dropping, shark-jumping ridiculousness with an eighteen-minute Alex Jones impression claiming that the chief architect of the Korean negotiations was none other than (and if you can’t guess whose name I’m going to write once we get out of these parentheses I deeply envy your ignorance on this matter) Vladimir Putin. [..] This president is facilitating acts of military violence and dangerous escalations around the world; anyone who isn’t relieved by the possibility of one powder keg being defused in that rampage actually has a lot more faith in Trump’s competence than they’re pretending to.

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Easy pickings.

Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)

Private equity firm Blackstone, the undisputed king of property funds, continues to bet big on global real estate. In the last week it raised $9.4 billion for Asian real estate. It was also given the green light to acquire Spain’s biggest real estate investment fund (REIT), Hispania, for €1.9 billion. The move, after its prior acquisitions, will cement its position as Spain’s biggest hotel owner and fully private landlord. Hispania’s 46 hotels, added to Blackstone’s other hotels, will turn the PE firm into Spain’s largest hotelier with almost 17,000 rooms, far ahead of Meliá (almost 11,000), H10 (more than 10,000) and Hoteles Globales (just over 9,000).

It took Blackstone just three moves to become market leader. First, it acquired the hotel group HI Partners from struggling Spanish lender Banco Sabadell for €630 million in October 2017. Then, a month ago, it bought 29.5% of the hotel chain NH Hoteles, which is currently in the hands of the Chinese conglomerate HNA. Now, by raising its stake in Hispania from 16.75% to 100%, it will take up a dominant position in one of the world’s biggest tourist markets. With this deal, it will also expand its residential property empire in Spain. Blackstone has over 100,000 real estate assets controlled via dozens of companies. Those assets include a huge portfolio of impaired real estate assets, including defaulted mortgages and real estate-owned assets (REOs).

Blackstone also owns 1,800 social housing units, which it acquired from Madrid City Hall in a controversial deal brokered by the son of former Spanish prime minister José María Aznar and former Madrid mayor Ana Botella. Blackstone paid €202 million for the apartments in 2013; they are now estimated to be worth €660 million — a 227% return in just five year! Since its purchase of the properties, Blackstone has hiked rents on the flats by 49%. Those who can’t pay have been evicted. Blackstone also played a starring role in one of the world’s biggest real estate operations of 2017, in which it payed €5.1 billion for the defaulted loans Banco Santander inherited from its shotgun-acquisition of Banco Popular.

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“..a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction.”

‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)

It has become a familiar scene: tourists in rented kimonos posing for photographs in front of a Shinto shrine in Kyoto. They and other visitors have brought valuable tourist dollars to the city and other locations across Japan. But now the country’s former capital is on the frontline of a battle against “tourism pollution” that has already turned locals against visitors in cities across the world such as Venice, Barcelona and Amsterdam. The increasingly fraught relationship between tourists and their Japanese hosts has spread to the short-stay rental market. On Friday a new law comes into effect that requires property owners to register with the government before they can legally make their homes available through Airbnb and other websites.

The restriction has caused the number of available properties to plummet and has cost the US-based company millions of dollars. Thanks to government campaigns, the number of foreign tourists visiting Japan has soared since the end of a flat period caused by a strong yen and radiation fears in the aftermath of the 2011 Fukushima disaster. A record 28.7 million people visited last year, an increase of 250% since 2012. Almost seven million were from China, with visitors from South Korea, Taiwan, Hong Kong Thailand and the US taking the next five spots. By 2020, the year Tokyo hosts the Olympic Games, the government hopes the number will have risen to 40 million.

[..] Under the new private lodging law, which was supposed to address a legal grey area surrounding short-term rentals – known as minpaku – properties can be rented out for a maximum of 180 days a year, and local authorities are permitted to impose additional restrictions. The result has been a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction. The legislation has forced the firm to cancel reservations for guests planning to stay in unregistered homes after Friday and to compensate clients to the tune of about $10m.


A sign in Kyoto cautions against touching geishas, taking selfies, littering, sitting on fences and eating and smoking on the street. Photograph: Justin McCurry for the Guardian

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Surprise!

Greeks Are Least Satisfied In The EU (K.)

Greece is the least satisfied nation in the European Union, according to a Eurobarometer survey published Thursday. More specifically, the survey, conducted between March 17 and 28, showed that just 52% of Greeks said they were satisfied with their lives, compared to a 83% average for the 28-member bloc. Only 35% of Greeks surveyed said they were satisfied with the financial situation of their households, compared to 71% across the EU. A staggering 98% said the state of the country’s economy is bad while one in two Greeks said the country’s financial crisis is not over yet and that it will deteriorate even further. As for the country’s general situation, 94% said it is negative. Just 6% said the general situation was positive compared to the 51% average for EU member-states.

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Even turkeys?!

Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)

With Greece featuring prominently in Turkey’s election campaigning, Turkish Foreign Minister Mevlut Cavusoglu raised the tension a notch again Thursday, warning that not even a bird will fly over the Aegean without Ankara’s permission. Responding to criticism by Turkish ultra-nationalists that 18 islands have been “lost” to Greece in recent years, Cavusoglu said that since the crisis over the Imia islets in 1996 there have been no changes in the legal status of the Aegean. “Not only during our own rule, but before that there has been no change in the status of the Aegean. We will not allow this. Even in the case of research we will not give permission, not even to a bird in the Aegean,” he said during an interview with a Turkish radio station.

He went on to say that Turkey will make no concessions in the Aegean and Cyprus, and that Ankara will also begin gas exploration “around” the Eastern Mediterranean island. “We also have a drill,” he said. Turkey has vowed to stop Cyprus from drilling for gas and oil in its exclusive economic zone (EEZ), insisting there can be no development of the island’s natural resources without the participation of the Turkish Cypriots in the island’s Turkish-occupied north. “In the last few months we have prevented drilling and we drove the Italians away. We will not allow anyone to take away the rights of Turkish Cypriots,” he said. Cyprus government spokesman Prodromos Prodromou said that Nicosia will not be dragged into the “climate of tension” that Turkey is cultivating. He cited international law and said that Cyprus has an established EEZ. Moreover, he said the US, Russia and the European Union have all backed Cyprus’s rights.

Read more …

Wonder what the fallout will be.

Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)

James Comey once described his position in the Clinton investigation as being the victim of a “500-year flood.” The point of the analogy was that he was unwittingly carried away by events rather than directly causing much of the damage to the FBI. His “500-year flood” just collided with the 500-page report of the Justice Department inspector general (IG) Michael Horowitz. The IG sinks Comey’s narrative with a finding that he “deviated” from Justice Department rules and acted in open insubordination. Rather than portraying Comey as carried away by his biblical flood, the report finds that he was the destructive force behind the controversy. The import of the report can be summed up in Comeyesque terms as the distinction between flotsam and jetsam.

Comey portrayed the broken rules as mere flotsam, or debris that floats away after a shipwreck. The IG report suggests that this was really a case of jetsam, or rules intentionally tossed over the side by Comey to lighten his load. Comey’s jetsam included rules protecting the integrity and professionalism of his agency, as represented by his public comments on the Clinton investigation. The IG report concludes, “While we did not find that these decisions were the result of political bias on Comey’s part, we nevertheless concluded that by departing so clearly and dramatically from FBI and department norms, the decisions negatively impacted the perception of the FBI and the department as fair administrators of justice.”

The report will leave many unsatisfied and undeterred. Comey went from a persona non grata to a patron saint for many Clinton supporters. Comey, who has made millions of dollars with a tell-all book portraying himself as the paragon of “ethical leadership,” continues to maintain that he would take precisely the same actions again. Ironically, Comey, fired FBI deputy director Andrew McCabe, former FBI agent Peter Strzok and others, by their actions, just made it more difficult for special counsel Robert Mueller to prosecute Trump for obstruction. There is now a comprehensive conclusion by career investigators that Comey violated core agency rules and undermined the integrity of the FBI. In other words, there was ample reason to fire James Comey.

Read more …

Many heads will roll at the Bureau.

A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

As we digest and unpack the DOJ Inspector General’s 500-page report on the FBI’s conduct during the Hillary Clinton email investigation “matter,” damning quotes from the OIG’s findings have begun to circulate, leaving many to wonder exactly how Inspector General Michael Horowitz was able to conclude: “We did not find documentary or testimonial evidence that improper considerations, including political bias, directly affected the specific investigative actions we reviewed” We’re sorry, that just doesn’t comport with reality whatsoever. And it really feels like the OIG report may have had a different conclusion at some point.

Just read IG Horowitz’s own assessment that “These texts are “Indicative of a biased state of mind but even more seriously, implies a willingness to take official action to impact the Presidential candidate’s electoral prospects.” Of course, today’s crown jewel is a previously undisclosed exchange between Peter Strzok and Lisa Page in which Page asks “(Trump’s) not ever going to become president, right? Right?!” to which Strzok replies “No. No he’s not. We’ll stop it.” Nevermind the fact that the FBI Director, who used personal emails for work purposes, tasked Strzok, who used personal emails for work purposes, to investigate Hillary Clinton’s use of personal emails for work purposes. Of course, we know it goes far deeper than that…

The Wall Street Journal’s Kimberley Strassel also had plenty to say in a Twitter thread:
1) Don’t believe anyone who claims Horowitz didn’t find bias. He very carefully says that he found no “documentary” evidence that bias produced “specific investigatory decisions.” That’s different
2) It means he didn’t catch anyone doing anything so dumb as writing down that they took a specific step to aid a candidate. You know, like: “Let’s give out this Combetta immunity deal so nothing comes out that will derail Hillary for President.”
3) But he in fact finds bias everywhere. The examples are shocking and concerning, and he devotes entire sections to them. And he very specifically says in the summary that they “cast a cloud” on the entire “investigation’s credibility.” That’s pretty damning.
4) Meanwhile this same cast of characters who the IG has now found to have made a hash of the Clinton investigation and who demonstrate such bias, seamlessly moved to the Trump investigation. And we’re supposed to think they got that one right?
5) Also don’t believe anyone who says this is just about Comey and his instances of insubordination. (Though they are bad enough.) This is an indictment broadly of an FBI culture that believes itself above the rules it imposes on others.
6) People failing to adhere to their recusals (Kadzik/McCabe). Lynch hanging with Bill. Staff helping Comey conceal details of presser from DOJ bosses. Use of personal email and laptops. Leaks. Accepting gifts from media. Agent affairs/relationships.
7)It also contains stunning examples of incompetence. Comey explains that he wasn’t aware the Weiner laptop was big deal because he didn’t know Weiner was married to Abedin? Then they sit on it a month, either cuz it fell through cracks (wow) or were more obsessed w/Trump
8) And I can still hear the echo of the howls from when Trump fired Comey. Still waiting to hear the apologies now that this report has backstopped the Rosenstein memo and the obvious grounds for dismissal.

Read more …

Jun 092018
 
 June 9, 2018  Posted by at 12:37 pm Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Children and home of cotton workers at migratory camp in southern San Joaquin Valley, CA 1936

 

My long time pal Jesse Colombo, now at Real Investment Advice, recently linked on Twitter to a Zero Hedge article, which quoted CoreLogic as saying more than half of American homes are overvalued. CoreLogic calls itself “a leading provider of consumer, financial and property data, analytics and services to business and government.”

Well, CoreLogic is way off. All American homes are overvalued. How can we tell? It’s easy. It’s so easy it’s perhaps no wonder that people overlook the reasons why. But we all know them: The Fed has pushed some $20 trillion down the throats of the financial system. It has also lowered interest rates to near zero Kelvin. Then the government added a “relaxation” of lending standards and an upward tweak of credit scores. And Bob’s your uncle.

These measures haven’t influenced just half of US homes, they’ve hit every single one of them. Some more than others, not every bubble is as big as San Francisco’s, but the suggestion that nearly half of homes are not overvalued is simply misleading. It falsely suggests that if you buy a home in the ‘right’ place, you’ll be fine. You won’t be. The Washington-induced bubble will and must pop, and precious few homes will be ‘worth’ what they are ‘worth’ today.

Here’s what Jesse tweeted along with his link to the Zero Hedge article:

“Almost half of the US housing market is overvalued” – this is why U.S. household wealth is also overvalued/in an unsustainable bubble.

He followed up with:

U.S. household wealth is in a bubble thanks to Fed-inflated asset prices. This is creating a “wealth effect” that is helping to drive our spurious economic recovery. This economy is nothing but a sham. It’s smoke and mirrors. Wake the F up, everyone!!!

My reaction to this:

Sorry, my friend Jesse, but every single US home is overvalued. It just depends on the vantage point you look from. All prices have been distorted by the Fed’s policies, not just half of them. Arguably some more than others, but can that be the core argument here?

Jesse’s reply:

Yes, that’s a good point.

Another long time pal, Dave Collum, chimed in with a good observation:

I think even us bunker monkeys start recalibrating, no matter how hard we try to maintain what we believe to be perspective.

Yes, we’ve been at this for a while. Even if Jesse was still a student when he started out. We’ve been doing it so long that he recently wrote an article named: Why It’s Right To Warn About A Bubble For 10 Years. And he’s right on that too.

Let’s get to the article the conversation started with:

 

More Than Half Of American Homes Are Overvalued, CoreLogic Warns

CoreLogic reports that residential real estate prices nationwide increased 6.9% year over year from April 2017 to April 2018. The firm’s Home Price Index (HPI) also shows a 1.2% rise on the month-over-month basis from March to April 2018. This has certainly sparked the debate of housing affordability across the nation with many millennials struggling to achieve the American dream.

CoreLogic Market Condition Indicators showed that 40% of the 100 largest metropolitan areas were overvalued in April, compared to 28% undervalued, and 32% in line with valuations. The report uncovers a shocking discovery that of the nation’s top 50 largest residential real estate markets, 52% were overvalued in April.

CoreLogic’s methodology behind overvalued housing markets “as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level.”

The CoreLogic people probably mean well, but they also probably don’t want to rattle the cage. It’s not really important. As soon as someone starts talking about a ‘sustainable level’ for home prices, you can tune out. Because no such thing exists. Unless you first take those $20 trillion out of the ‘market’, free up interest rates, tighten lending standards and lower credit scores. Only then MAY you find a ‘sustainable level’ for prices.

Historically a house in the US cost around 3 to 4 times the median annual income. During the housing bubble of 2007 the ratio surpassed 5 – in other words, the median price for a single-family home in the United States cost more than 5 times the US median annual household income. According to Mike Maloney, this ratio is heavily influenced by interest rates. When interest rates go down the affordability of a house goes up, so people spend more money on a house. Interest rates have now been falling since 1981 when they peaked at 15.32% (for a 10-year US treasury bond).

Mike Maloney, another longtime friend of the Automatic Earth, is dead on. Price to income is a useless point unless you include interest rates in the calculation. And then you can get large differences. Since interest rates have been falling for 37 years, count on them to rise. And see what that does to your model.

“The best antidote for rising home prices is additional supply,” said Dr. Frank Nothaft, chief economist for CoreLogic. “New construction has failed to keep up with and meet new housing growth or replace existing inventory. More construction of for-sale and rental housing will alleviate housing cost pressures,” Nothaft added.

Right, yeah. Now we know the CoreLogic mindset. The more you build, the better home prices will be. Just one of many problems with that is that if you really expect prices to fall once you build, people will build fewer houses, because profit margins fall too. The whole idea that we can save housing markets by simply building ever more has never rung very true. But that’s for another day.

In a recent op-ed piece via The Wall Street Journal, Paul Kupiec and Edward Pinto place the blame on the government for creating another real estate bubble through “loose mortgage terms pushing home prices up.” They claim that mortgage underwriters need to tighten standards.

“Home prices are booming. So far, 2018 has posted the strongest growth since 2005. “About 60% of all U.S. metros saw an acceleration in the rate of price increases through February this year,” according to Housing Wire. Since mid-2012, real home prices have increased 28%, according to data from the American Enterprise Institute. Entry-level home prices are up about double that rate. In contrast, over the same period household income has barely kept pace with inflation. The current pace of home-price inflation is increasing the risk of another housing bubble.

The Fed is raising rates -finally- and home prices grow at the fastest rate in 13 years. Over the past 6 years prices are up 28%. Entry level homes are up more than 50% in that time frame. That is just profoundly scary. It’s like Dante’s descent into hell. And no, it’s not true that “The current pace of home-price inflation is increasing the risk of another housing bubble”. We’re already caught up head first in a new housing bubble.

“The root of the problem is declining underwriting standards. In April Freddie Mac announced an expansion of its 3% down-payment mortgage, the better to compete with the Federal Housing Administration and Fannie Mae . Such moves propel home prices upward. Because government agencies guarantee about 80% of all home-purchase mortgages, their underwriting standards guide the market.

Making lending even more dangerous, CNBC recently reported that “credit scores may go up” because new regulatory guidance allows delinquent taxes to be excluded when calculating credit scores. These are only some of the measures that “expand the credit box” and qualify ever-shakier borrowers for mortgages.”

As I said before: if you lower lending -and underwriting- standards and artificially raise credit scores, then yes, you can keep the bubble going for a while longer. But it overvalues properties. You’re just moving goalposts.

“During the last crisis, easy credit led home prices to rise at an unsustainable pace, leading marginally qualified borrowers to stretch themselves thin. Millions of Americans’ dreams became nightmares when the housing market turned. The lax underwriting terms that helped borrowers qualify for a mortgage haunted many households for the next decade.”

No, it’s not just homes. Stocks and bonds as just as overvalued. Because of a behemoth attempt at making the economy look good, even though it’s entirely fake. No price discovery, no market, just central banks and tweaking standards and surveys. C’mon, we all know where this must go. We just don’t want to know. So this Marketwatch piece gets a wry smile at best:

 

America Is House-Rich But Cash-Poor

The housing market has not only recovered from the Great Recession, it’s heated up. According to an analysis from Attom Data, nearly 14 million Americans are now “equity rich” – meaning they have at least 50% equity in their homes. It bears repeating that many owners and communities are not so lucky: over a million Americans are underwater, and some cities and towns are still reeling under the weight of abandoned and vacant homes and stagnant micro-economies. But for most of the country, rapidly rising home prices and a dearth of anything else to buy means people are staying in their homes longer, allowing them to accrue more and more equity: $15 trillion worth, to be exact.

 

 

Mar 102018
 
 March 10, 2018  Posted by at 11:26 am Finance Tagged with: , , , , , , , , , , ,  


Pablo Picasso The Roaster 1938

 

Trump Tariffs Cause Massive Outflows From US Stocks – BofAML (R.)
Trump-Kim Meeting Contingent On ‘Concrete Steps’ By North Korea (Ind.)
What’s Coming Will Be Much Worse Than 2008 (Phoenix)
313k Jobs Added? Nice Try But It’s Fake News (IRD)
QE Unwind Is Too Slow, Says Fed Governor, Thus Launching First Trial Balloon (WS)
Forget About ‘Free Trade’ (CHS)
Europe’s Most-Leveraged Stocks Surge (BBG)
Cash May Disappear in China – PBOC (BBG)
Canada, Ukraine and Fascism (Carley)
Letter To America – An Opportunity And A Warning (RTB) /span>
Xi Jinping Says China’s Political System Can Be A Model For The World (Qz)
Countries Annoyed Russia Gets All The Credit For 2016 Election Meddling (Onion)
A Warning Cry From the Doomsday Vault (BBG)
West Way Behind Iran, Saudi Arabia When It Comes To Women In Science (Qz)

 

 

Really? Both the Dow and the S&P were up 1.75% yesterday.

Trump Tariffs Cause Massive Outflows From US Stocks – BofAML (R.)

A marked shift toward protectionism by President Donald Trump caused sharp outflows from U.S. large-cap stocks this week, Bank of America Merrill-Lynch (BAML) strategists said on Friday. Investors rushed into government bonds and other safer assets amid rising fears of an international trade war after Trump’s plans for tariffs on imported steel and aluminum met barbed responses from allies and trade bodies. Overall, investors pulled money out of equities, though the damage was mostly in the United States where $10.3 billion flowed out of U.S. equity funds, while global equity funds suffered just $0.4 billion of outflows, according to EPFR data cited by BAML. “As QE ends, protectionism begins,” wrote BAML strategists.

The risk-off mood drove investors into money market funds, pushing assets up to $2.9 trillion – the highest level since 2010. Safe-haven gold also drew in $0.4 billion. U.S. small caps were sheltered from the storm, the only U.S. sector to draw inflows, albeit tiny at $0.03 billion. U.S. large-cap stocks lost $10.1 billion. Flows into Japanese equities continued apace, with the market drawing in $4.1 billion in its 14th straight week of inflows, the longest streak of inflows since 2013. European stock funds managed to draw in $0.1 billion. Trump’s exemption of Canada and Mexico from the final tariffs announced late on Thursday soothed investors somewhat, and news the U.S. president would meet with North Korean President Kim Jong Un caused crude prices to rise.

Read more …

How can Kim say no?

Trump-Kim Meeting Contingent On ‘Concrete Steps’ By North Korea (Ind.)

Vice President Mike Pence has said the US made “zero concessions” in order to get an invitation to meet North Korean leader Kim Jong-un and talk about a possible end to Pyongyang’s nuclear weapons programme. Mr Pence said that President Donald Trump has “consistently increased the pressure” on North Korea, which has continued the development of its weapons – including an increasing number of missile tests in the last 12 months – despite numerous resolutions by the United Nations. Later at the White House, the press secretary made it clear that talks would only take place if Washington saw “concrete action” by North Korea towards denuclearisation. Mr Trump and Mr Kim are expected to meet before the end of May, although a date and location has yet to be set.

After months of escalating rhetoric between the nations the prospect of a thaw has been welcomed by world leaders. Ms Sanders said at a briefing on Friday that President Trump was “in a great mood” in the wake of the announcement, saying that the US was having conversations “from a position of strength” – with denuclearisation having always been the goal of the administration. It has taken many by surprise, including US Secretary of State Rex Tillerson, who had said just hours before the announcement that the US was a “long ways from negotiations”. But, Mr Tillerson said the President made the decision to accept the invite “himself”, a move he said was a “dramatic” reversal in posture for North Korea.

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“When a stock bubble bursts, investors lose money. When a sovereign bond bubble bursts, entire countries go bust..”

What’s Coming Will Be Much Worse Than 2008 (Phoenix)

While everyone is “high fiving” over stocks holding up, the bond market is back to imploding. Already Treasury yields have bounced and are soaring higher in one of the nastiest breakouts in over 20 years.

In a world awash in too much debt (global Debt to GDP is over 300%) this is a MAJOR problem. Most investors believe that the 2008 Crisis was the worst crisis of their lifetimes. They’re mistaken… what’s coming down the pike when the Bond Bubble blows up will be many times worse than 2008. The reason is that bonds, not stocks, represent the bedrock of the financial system. When a stock bubble bursts, investors lose money. When a sovereign bond bubble bursts, entire countries go bust (a la Greece in 2010). On that note, I want to point out that bond yields are not just rising in the US… we’re seeing them spike in Germany, Japan, and others.

This is a truly global problem, and if Central Banks don’t move to get it control soon, we’re heading into a MAJOR crisis.

Read more …

US jobs reports are meaningless. Maybe it’s time to recognize that before they blow up in your faces.

313k Jobs Added? Nice Try But It’s Fake News (IRD)


The census bureau does the data-gathering and the Bureau of Labor Statistics feeds the questionable data sample through its statistical sausage grinder and spits out some type of grotesque scatological substance. You know an economic report is pure absurdity when the report exceeds Wall Street’s rose-colored estimate by 53%. That has to be, by far, an all-time record-high “beat.” If you sift through some of the foul-smelling data, it turns out 365k of the alleged jobs were part-time, which means the labor market lost 52k full-time jobs. But alas, I loathe paying any credence to complete fiction by dissecting the “let’s pretend” report. The numbers make no sense. Why? Because the alleged data does not fit the reality of the real economy.

Retail sales, auto sales, home sales and restaurant sales have been declining for the past couple of months. So who would be doing the hiring? Someone pointed out that Coinbase has hired 500 people. But the retail industry has been laying off thousands this year. Given the latest industrial production and auto sales numbers, I highly doubt factories are doing anything with their workforce except reducing it. And if the job market is “so strong,” how comes wages are flat? In fact, adjusted for real inflation, real wages are declining. If the job market was robust, wages would be soaring. Speaking of which, IF the labor market was what the Government wants us to believe it is, the FOMC would tripping all over itself to hike the Fed Funds rate. And the rate-hikes would be in chunks of 50-75 basis points – not the occasional 0.25% rise.

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Balloons in a bubble.

QE Unwind Is Too Slow, Says Fed Governor, Thus Launching First Trial Balloon (WS)

So we have the first Fed Governor and member of the policy-setting FOMC who came out and said that the QE Unwind that began last October with baby steps isn’t fast enough. And because it’s so slow it may actually contribute to, rather than lower, the “financial imbalances.” In her speech, Kansas City Fed President Esther George pointed at the growth of the economy, the tightness in the labor market, the additional support the economy will get from consumers and companies as they spend or invest the tax cuts, etc., etc. And despite this growth, “the stance of monetary policy remains quite accommodative,” she said. She cited the federal funds rate – the overnight interest rate the Fed targets. The Fed’s current target range is 1.25% to 1.50%, which is “well below estimates of its longer-run value of around 3%,” she said.

The Fed would have to raise rates at least six more times of 25 basis points each, for a total of at least 1.5 percentage points, to bring the federal funds rate to around 3% and get back to neutral. If the Fed wanted to actually tighten after that, it would have to raise rates further. So far, so good. And then came her concerns about the Fed’s balance sheet. Under QE, the Fed acquired $1.7 trillion in Treasury securities and $1.78 trillion in mortgage-backed securities, for a total of about $3.5 trillion. After QE ended in October 2014, the Fed then maintained the levels by replacing maturing securities. But in October last year, it commenced the QE-Unwind and started to not replace some maturing securities. This has the effect of shrinking its balance sheet.

Just like the Fed “tapered” QE by phasing it out over the course of a year, it is also ramping up the QE-Unwind over the course of a year. But the pace of the QE-Unwind has been too slow, according to George – and this may be destabilizing the financial markets: “By the end of this year, however, only about a quarter of the increase to the Fed’s balance sheet resulting from the first round of large scale asset purchases will be unwound. These holdings of longer-term assets were intended to put downward pressure on longer term interest rates. Many investors responded, as would be expected, by purchasing riskier assets in a reach for higher yield. As a result, asset prices may have become distorted relative to the economic fundamentals.”

Read more …

Free trade is a deception tool.

Forget About ‘Free Trade’ (CHS)

The mobility of capital radically alters the simplistic 18th century view of free trade. In today’s world, trade can not be coherently measured as goods moving between nations, because capital from the importing nation owns the productive assets in the exporting nation. If Apple owns a factory (or joint venture) in China and collects virtually all the profits from the iGadgets produced there, this reality cannot be captured by the models of simple trade described by Ricardo. In today’s globalized version of “free trade,” mobile capital can arbitrage labor, currencies, interest rates, regulatory burdens and political favors by shifting between nations and assets. Trying to account for trade in the 18th century manner of goods shipped between nations is nonsensical when components come from a number of nations and profits flow not to the nation of origin but to the owners of capital.

[..] In a world dominated by mobile capital, mobile capital is the comparative advantage. Mobile capital can borrow billions of dollars (or equivalent) in one nation at low rates of interest and then use that money to outbid domestic capital for assets in another nation with few sources of credit. Mobile capital can overwhelm the local political system, buying favors and cutting deals, all with cash borrowed at near-zero interest rates. Mobile capital can buy up and exploit resources and cheap labor until the resource is depleted or competition cuts profit margins. At that point, mobile capital closes the factories, fires the employees and moves on. Where is the “free trade” in a world in which the comparative advantage is held by mobile capital?

And what gives mobile capital its essentially unlimited leverage? Central banks issuing trillions of dollars in nearly-free money to banks and other financial institutions that funnel the free cash to corporations and financiers, who can then roam the world snapping up assets and arbitraging global imbalances with nearly-free money. There’s nothing remotely “free” about trade based not on Ricardo’s simple concept of comparative advantage but on capital flows unleashed by central bank liquidity. The gains reaped by mobile capital flow to those who control mobile capital: global corporations, financiers and banks. No wonder labor’s share of the economy is stagnating across the globe while corporate profits reach unprecedented heights.

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Until the last drop: “A lot of companies have been living off debt and their business model won’t apply to higher interest rates.”

Europe’s Most-Leveraged Stocks Surge (BBG)

Investors shrugged off trade skirmishes and signals of fading monetary stimulus as they rewarded some of Europe’s most leveraged companies, putting the latter on track for their best weekly advance since December 2016. Stocks with the weakest balance sheets gained 4.5% this week, compared to 3.1% for their less-indebted counterparts, according to a Bloomberg analysis of Morgan Stanley data. Since these risky-debt companies were beaten up earlier in the year, they’re beginning to bounce back thanks to the risk-on rally, buoyed by largely positive earnings reports, said Hugh Cuthbert at SVM Asset Management. “Post the jitters that we saw at the start of February, they are more than likely to be beneficiaries”.

“The market appetite for risk will always benefit those guys when it’s high.” Still, it’s a small reprieve after they dropped more than 10% in the 25 trading days through last week. Even after the recent advance, shares of weak balance-sheet companies sit 7.7% below their January peak. The Morgan Stanley-compiled basket tracks 40 European companies with measures that include net debt to Ebitda and interest coverage ratios. The good times may be short-lived, however, as the ECB pares stimulus, said Cuthbert. “Look out, if we are in a tightening cycle,” he said. “A lot of companies have been living off debt and their business model won’t apply to higher interest rates.”

Read more …

A control tool Beijing finds hard to resist. Predictably.

Cash May Disappear in China – PBOC (BBG)

Just because China’s financial regulators are cracking down on cryptocurrencies doesn’t mean they’re souring on the idea of digital money. People’s Bank of China Governor Zhou Xiaochuan made that clear at a press conference in Beijing on Friday, saying physical cash may one day become obsolete. Zhou said the PBOC is looking into digital currencies as it pursues faster, cheaper and more convenient payment methods, even as he warned that cryptocurrencies like Bitcoin – more often used for speculation than payments – don’t serve the economy.

“We must prevent major mistakes that would lead to irreparable losses, so we are cautious,” Zhou said during what may be one of his last public appearances before his expected retirement. “We don’t like creating products for speculation and making people have the illusion that they can get rich overnight.” China, once home to the world’s most active Bitcoin exchanges, banned the venues last year amid a broad-ranging clampdown on virtual currencies. Yet the country is still the world leader in digital payments, thanks to the popularity of platforms developed by tech giants Alibaba and Tencent.

Read more …

Ink black history.

Canada, Ukraine and Fascism (Carley)

The most notorious of the Nazi collaborators who immigrated to Canada was Mykhailo Chomiak, a mid-level Nazi operative in Poland, who came under US protection at the end of the war and eventually made his way to Canada where he settled in Alberta. Had he been captured by the Red Army, he would quite likely have been hanged for collaboration with the enemy. In Canada however he prospered as a farmer. His grand-daughter is the “Ukrainian-Canadian” Chrystia Freeland, the present minister for external affairs. She is a well-known Russophobe, persona non grata in the Russian Federation, who long claimed her grandfather was a “victim” of World War II. Her claims to this effect have been demonstrated to be untrue by the Australian born journalist John Helmer, amongst many others.

In 1940 the Liberal government facilitated the creation of the Canadian Ukrainian Congress (UCC), one of many organisations used to fight or marginalise the left in Canada, in this case amongst Canadian Ukrainians. The UCC is still around and appears to dominate the Ukrainian-Canadian community. Approximately 1.4 million people living in Canada claim full or partial Ukrainian descent though generally the latter. Most “Ukrainian-Canadians” were born in Canada; well more than half live in the western provinces. The vast majority has certainly never set foot in the Ukraine. It is this constituency on which the UCC depends to pursue its political agenda in Ottawa.

After the coup d’état in Kiev in February 2014 the UCC lobbied the then Conservative government under Stephen Harper to support the Ukrainian “regime change” operation which had been conducted by the United States and European Union. The UCC president, Paul Grod, took the lead in obtaining various advantages from the Harper government, including arms for the putschist regime in Kiev. It survives only through massive EU and US direct or indirect financial/political support and through armed backing from fascist militias who repress dissent by force and intimidation. Mr. Grod claims that Russia is pursuing a policy of “aggression” against the Ukraine.

If that were true, the putschists in Kiev would have long ago disappeared. The Harper government allowed fund raising for Pravyi Sektor, a Ukrainian fascist paramilitary group, through two organisations in Canada including the UCC, and even accorded “charitable status” to one of them to facilitate their fund raising and arms buying. Harper also sent military “advisors” to train Ukrainian forces, the backbone of which are fascist militias. The Trudeau government has continued that policy. “Canada should prepare for Russian attempts to destabilize its democracy,” according to Minister Freeland: “Ukraine is a very important partner to Canada and we will continue to support its efforts for democracy and economic growth.”

Read more …

“It is the US government and NATO, and the people who own and control them, who are the threats and the enemies to the future of Humanity.”

Letter To America – An Opportunity And A Warning (RTB) /span>

There is no place that the US or NATO has gone into in the last 4 decades that is better off. Not one. In fact, there is no place that NATO or the US have intervened, (usually against international law) that hasn’t become a failed state, hell on Earth for the citizens, and a genuine danger to the surrounding regions and the world. It is the US government and NATO, and the people who own and control them, who are the threats and the enemies to the future of Humanity. But their days of disregarding international law and destroying weaker nations with impunity are now over, as of March 1st, 2018. The good people of America now have a huge opportunity, and a huge challenge. Russia spends less than one tenth what the USA spends on military and defense, but their military and weapons are superior in every measurable way.

The waste, corruption and abject venality of the US military industrial complex has wasted trillions on weapon systems that are now literally useless, and which have left the US military (and by extension the American people) defenseless before the power of Russia’s weapons, which are designed and produced to be effective rather than profitable. The opportunity is this – the USA can now reduce its military spending (the highest in the world) by 90% and still be safer than you are right now, spending almost a trillion dollars a year on useless weapons and a defenseless military. Safer, because as soon as the American People take control of their government enough to reduce your spending to ONLY as much as Russia spends, Russia will stop having reason to see the USA as an existential threat.

The less you spend, the safer you will be. The more you spend, the more likely World War Three, which will see you as the instigators and the losers. This gives the USA, starting as soon as you want, an extra $800 billion, per year, to spend on things that have actual worth, things you really need. Health care, free college education, fixing the rotting economy and infrastructure that are daily becoming more of a threat to the American people than Russia has ever been. Your challenge is that you must root out an entrenched and ruthless kleptocracy, built on deceit and oppression, and which is bent on war, and will stop at nothing to cling to its power. It is a huge task, an historic task, but in it lies your only hope. These parasites must be stopped, and if the American People are not up to the challenge, if they fail in their historic mission, they will leave it to the armies of the world, led by Russia, who will no longer tolerate those who want to rule the world.

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So-called democracy is no better.

Xi Jinping Says China’s Political System Can Be A Model For The World (Qz)

Chinese president Xi Jinping has repeatedly told the world that China is ready to lead on issues like free trade and climate change. Now, he’s ready to extend his leadership to political parties everywhere. At the big annual gathering of Chinese lawmakers and political advisors that kicked off March 3, Xi said that China is offering a “new type of political party system”—a Chinese solution that contributes to the development of political parties around the world, according to state media (link in Chinese). The Chinese Communist Party (CCP) has always said the country will never copy the political systems of other countries, in particular the Western notion of democracy.

But under Xi—the most powerful Chinese leader in four decades—China’s own one-party system is one that is ready to be exported to regimes everywhere. The term “new type of political party system” was first put forward by Xi when he delivered a speech to non-party political advisors on March 4. It’s not the first time that Xi has floated the idea that China’s political model can make a contribution to the world. This time, however, Chinese state media churned out a wave of articles to underscore the significance of this new phrase. In the past, “some people lacking self-confidence always use Western political theories to criticize China’s political party system,” wrote Wang Xiaohong at the party-backed Central Institute of Socialism, in a commentary widely circulated by Chinese news outlets.

But as Wang argues, Western political systems are associated, among other things, with fractured societies, inefficient government, and “endless power transitions and social chaos” as in the countries of the former Soviet Union, and in north Africa after the Arab Spring. “The new type of political party system has overcome all sorts of problems that the old [one] can’t overcome,” Wang argued. In China, there are eight so-called “democratic parties” that are allowed to participate in the political system, but they are almost completely subservient to the CCP. Every year in March, members of the minor parties meet with their communist counterparts in Beijing to provide advice on everything from healthcare to poverty reduction—largely for show.

The system—called “multi-party cooperation and political consultation under the CCP’s leadership”—has been used as evidence that China is also a democracy. The internationalization of China’s political system is in fact well underway. Since 2014, the Communist Party has hosted an annual summit in Beijing inviting political party leaders from around the world to hear about how it governs China. In recent years, the party has also brought young African politicians to China for training, in a bid to cultivate allies.

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About as valuable as what ‘serious’ press has to report.

Countries Annoyed Russia Gets All The Credit For 2016 Election Meddling (Onion)

Complaining that U.S. investigations into foreign interference in the election have gotten almost everything wrong, officials from dozens of countries around the world expressed irritation Friday that all of the credit for meddling in the 2016 presidential race was going to Russia. Resentful operatives from Serbia, Uruguay, Swaziland, and 45 other nations said they were incredibly annoyed that Kremlin-backed computer hackers and dark-money financiers were receiving all the media attention, while their own far superior efforts to undermine the U.S. electoral process had so far received no recognition at all.

“Do you have any idea how much more sophisticated our attacks on American democracy were than Russia’s?” Laotian president Bounnhang Vorachith said of his government’s efforts to spread misinformation about Democratic candidate Hillary Clinton on social media sites. “We spent millions building a sophisticated bot network that could craft false but believable stories portraying Trump in a good light. And it worked! It’s unbelievably frustrating to pull off something like that and then have all the glory go to someone else.” “Do you really think Russia could’ve hacked into [Clinton campaign chairman] John Podesta’s emails?” Vorachith continued. “Hell no. That was Laos.”

According to sources, every time the American media credits Russian oligarchs with funding election-tampering efforts, numerous foreign agents across the globe throw up their arms and storm out of the room, infuriated because Costa Rican and Nepalese money launderers reportedly did far more to finance such initiatives. These agents have also been known to toss aside newspapers in anger, shouting that Mongolia’s work busing thousands of people with dead voters’ names to cast ballots for Clinton in New Hampshire was more deserving of attention than anything Russia had accomplished.

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A bit more attention might go a long way.

A Warning Cry From the Doomsday Vault (BBG)

On this winter day, the world was upside down: it was raining in the Arctic Circle and snowing in Rome. The contradiction was not lost on those gathered at the Svalbard Global Seed Vault, located near the top of the world. The scientists, activists, executives and government officials were in Longyearbyen, to mark the 10-year anniversary of what has become known as the Doomsday Vault, which stores seeds of the world’s most important crops deep in a mountain against the apocalyptic consequences of climate change and war. The challenge they’re facing now is that the climate is changing far quicker than they’d imagined. The facility sprung a leak last year after construction had failed to take into account that the permafrost could melt.

Norway is now spending about $20 million to secure and improve the facility. But it’s not just the building. “Biodiversity is the building block to develop new plants and because of climate change we’re in a terrible need to quickly develop new varieties,” said Aaslaug Marie Haga, executive director of Crop Trust, a group established to support gene banks. “The climate is changing quicker than the plants can handle.” Svalbard is the farthest north one can travel commercially, about an 1 1/2 hour flight from northern Norway. The vault is about a 10 minute drive from town, past a coal-fired power plant and up a winding two-lane road. Unless armed with a high-caliber rifle, driving is essential, since leaving town also means venturing into polar bear country.

The site’s entrance, not far from the abandoned coal mine that served as the first Nordic seed vault, shines at night like a green beacon, lit up by an artwork of fiber optics, steel and glass called Perpetual Repercussion. The seeds are kept at minus 18 centigrade (-4 Fahrenheit) more than 100 meters into the mountain behind six steel doors. And in an ideal world, the vault would never have to be used. It’s meant to back up the plant gene banks around the world, organized under the International Treaty on Plant Genetic Resources for Food and Agriculture. But many of these facilities are vulnerable. One withdrawal from Svalbard has already been made by the group that ran the seed bank in Aleppo, Syria.

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Math as a female field. Nice.

West Way Behind Iran, Saudi Arabia When It Comes To Women In Science (Qz)

In Iran, nearly 70% of university graduates in science, technology, engineering and mathematics (STEM) are women—a higher percentage than in any other country. Nearby Oman, Saudi Arabia, and the United Arab Emirates (UAE) are close, each boasting over 60% female graduates in science, still more of the rest of the world. Young women in science are the rule, not the exception, in the Middle East. At least a third of STEM trained talent across the Muslim world is female, writes Saadia Zahidi in her new book Fifty Million Rising, which tracks the workplace progress achieved by Muslim women since the turn of the century. Only in Jordan, Qatar and the UAE are girls more comfortable with math than boys.

“The Muslim world has put high investment in education, and the payoff is coming now,” argues Zahidi, a World Economic Forum executive who leads education and gender equality initiatives. While observant Muslim societies are often associated with strict social codes for men and women, Western gender stereotypes about work don’t necessarily apply: Several Muslim countries have filled more than half of STEM jobs with female workers. Zahidi adds that in many cases, Muslim women are pioneering their role in the workforce, so they don’t have preconceived stereotypes about whether tech jobs, for example, constitute “feminine” career goals.

A study published in February found that the social and political gender equality typical of Scandinavian countries may be inversely related to women’s representation in STEM fields. This could be in part due to the fact that countries with greater parity between sexes tend to be wealthier, providing better government support to citizens and allowing women to accept less secure jobs.

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Mar 032018
 
 March 3, 2018  Posted by at 11:11 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Lilac Bush 1889

 

Juncker Threatens Tariffs On Harley-Davidson, Bourbon And Levi’s (G.)
Fed’s QE Unwind Marches Forward Relentlessly (WS)
S&P 500 Companies To Buy Back $800 Billion Of Their Own Shares This Year (MW)
End Times at the OD Corral (Jim Kunstler)
Theresa May Unveils Fragile Truce In Third Brexit Offering (G.)
Eliminate Fannie Mae and Freddie Mac (USNews)
Low-Level Courts Turned Into Dickensian “Debt Collection Mills” (ICept)
The Devil Is in the Details of Citi’s Sordid History (Martens)
The Future Of Economic Convergence (WEF)
Elon Musk to Open Tesla R&D Plant in Greece (G.)
EU’s Wieser: Six Months Of Varoufakis Cost Greece €200 Billion (K.)
‘This Is All Stolen Land’: Canadian Offers To Share His With First Nations (G.)

 

 

I got this one: Translation: Jean-Claude Juncker finally gets his revenge on the 1960s (probably couldn’t get laid back in the day).

Also note: just about every headline and article says Trump wrote: “..trade wars are good, and easy to win..” He did not, or only after explaining conditions for that to be true: “..When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with ..” That makes a big difference. And therefore must be included.

Juncker Threatens Tariffs On Harley-Davidson, Bourbon And Levi’s (G.)

The IMF has warned that Donald Trump’s plan to impose stiff new US tariffs on foreign imports of steel and aluminum would cause international damage – and also harm America’s own economy “The import restrictions announced by the US President (Donald Trump) are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminum and steel,” the IMF said on Friday. The terse statement from the global body came as world leaders threatened retaliation against any fresh tariffs and the US president breezily asserted that “trade wars are good”.

In a morning tweet Trump wrote: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!” The European Union, Germany, Canada and other countries have all threatened retaliation against plans to impose tariffs of 25% on steel and 10% on aluminum. The Canadian prime minister, Justin Trudeau, said US tariffs on steel and aluminum would be “absolutely unacceptable” and the European commission president, Jean-Claude Juncker, warned there would be consequences for the US.

“If the Americans impose tariffs on steel and aluminum, then we must treat American products the same way,” Juncker told German television stations. “We must show that we can also take measures. This cannot be a unilateral transatlantic action by the Americans,” he said. “I’m not saying we have to shoot back, but we must take action. “We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” he added.

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The consensus is more QE when this inevitably blows up. But maybe the Fed does see that coming, and has different plans.

Fed’s QE Unwind Marches Forward Relentlessly (WS)

The fifth month of the QE-Unwind came to a completion with the release this afternoon of the Fed’s balance sheet for the week ending February 28. The QE-Unwind is progressing like clockwork. Even during the sell-off in early February, the QE-Unwind never missed a beat. During QE, the Fed acquired Treasury securities and mortgage-backed securities (MBS) guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. During the QE-Unwind, the Fed is shedding those securities. According to its plan, announced last September, the Fed would reduce its holdings of Treasuries and MBS by no more than: • $10 billion a month in Q3 2017 • $20 billion a month in Q1 2018 • $30 billion a month in Q2 2018 • $40 billion a month in Q3 2018 • $50 billion a month in Q4 2018, and continue at this pace.

This would shrink the balance of Treasuries and MBS by up to $420 billion in 2018, by up to an additional $600 billion in 2019 and every year going forward until the Fed decides that the balance sheet has been “normalized” enough — or until something big breaks. For February, the plan called for shedding up to $20 billion in securities: $12 billion in Treasuries and $8 billion in MBS. On its January 31 balance sheet, the Fed had $2,436 billion of Treasuries; on today’s balance sheet, $2,424 billion: a $12 billion drop for February. On target! In total, since the beginning of the QE Unwind, the balance of Treasuries has dropped by $42 billion, to hit the lowest level since August 6, 2014:

[..] to determine if the QE Unwind is taking place with MBS, we’re looking for lower highs and lower lows on a very jagged line. Also today’s movements reflect MBS that rolled off two to three months ago, so November and December, when about $4 billion in MBS were supposed to roll off per month. The chart below shows that jagged line. Note the lower highs and lower lows over the past few months. Given the delay of two to three months, the first roll-offs would have shown up in early December at the earliest. At the low in early November, the Fed held $1,770.1 billion in MBS. On today’s balance sheet, also the low point in the chart, the Fed shows $1,759.9 billion. From low to low, the balance dropped by $10.2 billion, reflecting trades in November and December:

And the overall balance sheet? Total assets on the Fed’s balance sheet dropped from $4,460 billion at the outset of the QE Unwind in early October to $4,393 billion on today’s balance sheet, the lowest since July 9, 2014. A $67-billion drop:

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“The list includes Dow components Boeing, Coca-Cola, Procter & Gamble, Johnson & Johnson, Citigroup, American Express, Goldman Sachs, Mircrosoft, Apple, Cisco and Intel.”

S&P 500 Companies To Buy Back $800 Billion Of Their Own Shares This Year (MW)

S&P 500 companies will buy back a record $800 billion of their own shares in 2018, funded by savings on tax, strong earnings and the repatriation of cash held overseas, J.P. Morgan said Friday. That will far exceed the $530 billion in share buybacks that was recorded in 2017, analysts led by Dubravko Lakos-Bujas wrote in a note. Companies have already announced $151 billion of buybacks in the year to date. “There is room for further upside to our buyback estimates if companies increase gross payout ratios to levels similar to late last cycle when companies returned >100% of profits to shareholders (vs. 83% now),” said the note. “Corporates tend to accelerate buyback programs during market selloffs.”

The stock market has experienced two bouts of steep declines so far this year, the first in early February, when the Dow Jones Industrial Average fell 1,175 points in a single session to mark its biggest ever one-day point drop, driven by fears about interest rate hikes. There were $113.4 billion of buyback announcements in February, a three-year high, according to Trim Tabs Investment Research. The second selloff was ignited on Thursday, after President Donald Trump said he is planning to impose tariffs on imports of steel and aluminum, triggering a more than 500 point drop in the Dow at its worst level, on fears the move would spark a trade war. The Dow was down another 300 points in early trade Friday.

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“Enjoy the last few weeks of relative normality.”

End Times at the OD Corral (Jim Kunstler)

Surely, the Deplorables of Flyover Land will not like the dumping of their Golden champion one bit. I’d stay away from post offices and other parcels of federal property for a while. If a bunch decides to march on the nation’s capital, it will be a messier affair than anything the hippies pulled off back in the day, perhaps the first battle of Civil War 2. The financial markets wobbled and puked on Wednesday and Thursday of this week, finally mirroring the tremendous stresses in our politics. They’ve been every bit as jacked on unreality as the two major parties for years now. The markets, after all, are not the economy itself, just indexes of the supposed values of things, stocks, bonds, gold, soybeans, etc., and the Federal Reserve has been jamming hallucinogens down their craw since the last little seizure in 2008.

The markets don’t seem to like the new chairman of the Fed, a cipher named Jay Powell. In his first big public performance since stepping into Janet Yellen’s tiny shoes this week, Powell managed to do a complete 180 in 24 hours on whether his outfit will stick to four rate hikes this year… or maybe just ride to the rescue of the floundering markets with their old tricks of lowering interest rates and “printing” shitloads of new “money” to get those animal spirits going again in the S & P. Absolutely nothing Powell’s Fed might try will work. In fact they will only make the cratering indexes fall deeper and harder, along with the value of the US dollar. Interest rates can’t go any higher, anyway, without blowing up half the paper obligations on earth.

Businesses will be terrified to transact. You can’t do much with a crippled financial system. The authorities and the news media will call it a “recession” but a sore-beset public will know it is the start of something a whole lot worse. As a nice side-dish to this banquet of consequences, the Democratic party will be deprived of its only reason to live the past two years: to shove Donald Trump off-stage. And the Republicans will be blamed twice over: once, for not coming to Trump’s defense, and again for getting behind him in the first place. Enjoy the last few weeks of relative normality.

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She’s never sounded more hollow. Theresa May is a certified masochist.

Theresa May Unveils Fragile Truce In Third Brexit Offering (G.)

If Theresa May’s first two speeches unfurled the promise of a “red, white and blue” Brexit, a cold grey day in March will be remembered as the moment a more faded flag was fluttered. As the nation took shelter from the beast from the east, this was intended to be May’s “reality bites” speech. Ten times she used the word “recognise” to underline she no longer believed Britain could have it all. “We recognise that we cannot have exactly the same arrangements with the EU as we do now,” she said. “We recognise this would constrain our ability to lower regulatory standards. We need to face up to facts. Our access to each other’s markets will be less”.

Little wonder that by the time it came for questions, and a German newspaper asked: “Is it all worth it?” The prime minister had to pause awkwardly before replying: “We are not changing our minds.” Much attention will focus on the remaining chasm between Downing Street’s hopes and the increasingly intransigent position adopted in Brussels. There was little to explain how they might solve the current crisis over Northern Ireland in the three weeks allotted. It would be churlish though not to acknowledge creeping realism from a politician whose heart has never really seemed in it. The weary call for “pragmatic common sense” was directed at both her own party and Europe.

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It’s useless to compare GSEs to the private sector. They exist to make ensure government control over the housing bubble.

Eliminate Fannie Mae and Freddie Mac (USNews)

Fannie Mae and Freddie Mac’s recent request for a bailout from the U.S. Treasury (read American taxpayers) has brought back into the public’s eye the unresolved legal status of these two government sponsored enterprises. In this debate, the assumption is that the GSEs, or some replacement entities benefiting from a government guarantee, are necessary for an effective housing finance market. The GSEs, however, do very little that cannot be done – and is not already done – by the private sector. In addition, these institutions pose a significant financial risk to U.S. taxpayers. Weighing this cost against the minimal benefits makes the case that the GSEs should be eliminated.

Without the GSEs, the mortgage market would not look radically different than it does today. Proponents argue that the GSEs lower mortgage rates, ensure the availability of the standard 30-year fixed rate mortgage, support home ownership and lend to people with lower incomes or weaker credit profiles, all of which the private sector presumably would not do. Not true on all fronts. First, the GSEs do not offer lower mortgage rates for consumers despite a government guarantee that allows them to raise capital at a lower cost than the private sector. In the past, the GSEs were able to charge lower mortgage rates by taking risks for which they were not compensated. The result was a massive build-up of housing risk in the run-up to the financial crisis of 2007-08.

Since 2009, the GSEs have been required to recognize risk in their pricing of mortgages, which has driven up their mortgage rates relative to the private sector. As a consequence, since 2014, new research undertaken with my colleague Steve Oliner shows that mortgage rates for private portfolio whole loans have been about one-quarter percentage point below GSE rates – after controlling for risk characteristics. And contrary to Treasury Secretary Steven Mnuchin’s recent statement, the private market could ensure the availability of the 30-year fixed-rate mortgages on its own. Data from CoreLogic show that 76% of private portfolio mortgages originated in 2017 were 30-year mortgages, not much below the GSE’s 85% share.

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Unstoppable.

Low-Level Courts Turned Into Dickensian “Debt Collection Mills” (ICept)

Federal law outlawed debt prisons in 1833, but lenders, landlords and even gyms and other businesses have found a way to resurrect the Dickensian practice. With the aid of private collection agencies, they file millions of lawsuits in state and local courts each year, winning 95 percent of the time. If a defendant fails to appear at post-judgement hearings known as “debtors’ examinations,” collectors can seek a warrant for contempt of court — even if the debtor didn’t realize they were being sued. [..] “A Pound of Flesh: the Criminalization of Private Debt,” the ACLU report, sheds light for the first time on the frequency of modern-day debt imprisonment, estimating that courts are issuing tens of thousands of arrest warrants each year for debtors owing as little as $30.

Forty-four states permit judges to issue these warrants, often known as “body attachments,” in civil cases. “This has been a largely invisible problem, because the people it’s happening to typically don’t have lawyers and aren’t speaking out,” says Jennifer Turner, a human rights researcher at ACLU. “Many low-level courts have essentially become debt-collection mills.” One in three Americans has a debt that’s been turned over to a private collection agency, and the ACLU found cases of warrants being issued over almost every kind of consumer debt—payday and auto loans, utility bills, even daycare fees. Many cases begin with an emergency expense that someone is unable to pay, sending them into a spiral of debt and imprisonment.

The use of cash bail often compounds the problem; debtors languish in jail for up to two weeks, according to the report. In some jurisdictions, judges routinely set bail at the exact amount of the debt owed, then surrender it to the collector once paid. In other cases documented by the ACLU, people with outstanding medical debt were too ill to go to court, as in the case of an Indiana mother of three who had been living with family in Florida while she recovered from thyroid cancer. Unbeknown to her, a small claims court had issued three warrants in a suit over her unpaid medical bills, and she was arrested when she returned home.

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In case anyone starts telling you about Kushner and Citi.

The Devil Is in the Details of Citi’s Sordid History (Martens)

Wall Street On Parade has extensively reported in the past on the dubious dealings of Citigroup in Washington. Citigroup is the bank that pressured the Bill Clinton administration into repealing the depression-era Glass-Steagall Act in 1999. That act had prevented Wall Street’s speculating investment banks and brokerage firms from owning commercial banks that take in FDIC insured deposits in order to prevent another 1929-1932 style Wall Street crash. Just nine years after the repeal of Glass-Steagall, Wall Street experienced another epic crash, with Citigroup playing a major role in the contagion. Citigroup received the largest taxpayer bailout in U.S. history, taking in $45 billion in equity from the U.S. Treasury;

A government guarantee on $300 billion of Citigroup’s dubious assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; and the Federal Reserve secretly funneled $2.5 trillion in almost zero-interest loans to units of Citigroup between 2007 and 2010. Citigroup was created by the merger of Citicorp (parent of Citibank) and Travelers Group (which owned investment bank Salomon Brothers and brokerage firm Smith Barney). It would not have been allowed to exist but for the largess of the Clinton administration. And the Clintons needed a lot of financial help when they exited the White House.

In a June 9, 2014 interview with ABC’s Diane Sawyer, Hillary Clinton said this: “We came out of the White House not only dead broke, but in debt. We had no money when we got there, and we struggled to, you know, piece together the resources for mortgages, for houses, for Chelsea’s education. You know, it was not easy.” One institution that had big confidence in the Clintons’ future earning power was Citigroup. “According to PolitiFact, Citigroup provided a $1.995 million mortgage to allow the Clintons to buy their Washington, D.C. residence in 2000. That liability does not pop up on the Clinton disclosure documents until 2011, showing a 30-year mortgage at 5.375% ranging in face amount from $1 million to $5 million from CitiMortgage. The disclosure says the mortgage was taken out in 2001.

“Citigroup also paid Bill Clinton hundreds of thousands of dollars in speaking fees after he left the White House. It committed $5.5 million to the Clinton Global Initiative — a program which brings global leaders together annually to make action commitments. Citigroup employees have also been major campaign funders to Hillary Clinton’s political campaigns.”

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Oh, no!! Turns out developing markets have borrowed all their growth as well…

The Future Of Economic Convergence (WEF)

The world is now facing what observers are calling a “synchronized” growth upswing. What does this mean for the economic “convergence” of developed and developing countries, a topic that lost salience after the Great Recession began a decade ago? In the 1990s, developing economies, taken as a whole, began to grow faster than their advanced counterparts (in per capita terms), inspiring optimism that the two groups’ output and income would converge. From 1990 to 2007, the developing economies’ average annual per capita growth was 2.5 percentage points higher than in the advanced economies. In 2000-2007, the gap widened, to 3.5 percentage points.

Though not all countries made progress – many small economies did not do well – on an aggregate basis, the structure of the world economy was being transformed. Asian countries were catching up at a particularly rapid clip, driven by the large, dynamic economies of India and, even more so, China (which experienced nearly three decades of double-digit GDP growth). After the global financial crisis began in 2007, however, the dynamic changed. At first, it seemed that convergence was accelerating. With advanced-economy growth having ground to a halt, developing countries’ lead in per capita growth increased to four percentage points.

By 2013-2016, however, growth slowed in many emerging economies – particularly in Latin America, with Brazil experiencing negative growth in 2015 and 2016 – while growth in the United States picked up. Are we, as some observers have claimed, witnessing the end of convergence? The answer will depend on developing economies’ ability to find and tap new, more advanced sources of growth. In the past, the key engine of convergence was manufacturing. Developing countries that had finally acquired the needed skills and institutions applied advanced-country technologies locally, benefiting from plentiful, low-cost labor.

But, as Dani Rodrik has argued, that source of easy copycat catch-up has mostly been exhausted. The low-hanging fruit in manufacturing has already been picked. Technological catch-up is more difficult in the services sector, which now accounts for a larger share of total value-added. Moreover, today’s cutting-edge technologies – such as robotics, artificial intelligence (AI), and bioengineering – are more complex than industrial machinery, and may be more difficult to copy. And, because intelligent machines can increasingly fill low-wage jobs, developing countries’ cost advantage may have been diminished significantly.

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Musk makes his latest victim. There’s one question that must always be asked in these cases: How much in subsidies does he get for this project? Articles that do not ask this should not be published, because they’re mere propaganda.

Elon Musk to Open Tesla R&D Plant in Greece (G.)

Elon Musk may have plans to colonise Mars but back on planet Earth he is extending his reach to Athens, by opening an engineering facility called Tesla Greece. Musk’s electric car business is an unsung success story for the Greek diaspora, with three of Tesla’s top designers boasting degrees from the National Technical University of Athens. Tesla’s plans for the country have such “game-changing potential” that the head of the Hellenic Entrepreneurs’ Association, Vasilis Apostolopoulos, has pledged to hand over his own industrial plant for free as a testing ground for new products.

Addressing delegates at the annual Delphi economic forum, Apostolopoulos said: “I have personally emailed Musk to welcome Tesla Greece … and to say that for the next 10 years I will give, at zero cost to his company, my group’s own industrial plant outside Corinth so that Greece can be on the frontline of global innovation.” Describing the move as a “vote of confidence” in the debt-stricken country, Apostolopoulos, who is chief executive of the Athens Medical Group, a leading private healthcare provider, said he was also prepared to offer full medical coverage for a year to all of Tesla Greece’s staff members and international staff visiting the country on company business.

“It is the least we can do to thank and welcome Mr Musk’s vote of confidence in Hellenic business, research and technology,” he told the Guardian. Outside the UK, the Netherlands and Germany, the electric car manufacturer has no presence in Europe. Its Greek office is expected to attract at least 50 engineers to run a research and development centre out of the state-run Demokritos Centre for Scientific Research. The centre is expected to act as a base for southeast Europe. “Greece has a strong electric motor engineering talent, and technical universities offering tailored programmes and specialised skills for electric motor technology,” a spokesperson told Electrek, a US news website.

It is understood that Tesla’s three Greek designers – principal motor designer Konstantinos Laskaris; motor design engineer Konstantinos Bourchas; and staff motor design engineer Vasilis Papanikolaou – are preparing to move back to Athens under the company’s plans. Demokritos has welcomed the news. “We are very happy to receive all the talented engineers who are returning to work beside us,” it said in a statement.

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In his book ‘Adults in the Room’, Yanis had nothing good about ‘the most powerful man in the EU’. Now, Wieser comes with an unverifiable and fully nonsensical story, that he knows even many Greeks will swallow hook line and sinker.

EU’s Wieser: Six Months Of Varoufakis Cost Greece €200 Billion (K.)

The first six months of the leftist-led SYRIZA government cost Greece around €200 billion, former Euro Working Group chief Thomas Wieser told the Delphi Economic Forum on Friday, describing that estimate as “safe” and “conservative.” In a discussion being moderated by the executive editor of Kathimerini, Alexis Papachelas, Wieser noted that the SYRIZA-led government was basically provoking Grexit from its rise in late January to July of that year. Wieser noted that in 2010, the German government decided that the participation of the IMF in the rescue program for Greece was necessary, noting that the Eurozone lacked the technical knowhow for that sort of program. He noted that former US President Barack Obama took an active role during Greece’s crisis, adding that then Treasury Secretary Jack Lew would call the Eurogroup chairman at the time, Jeroen Dijsselbloem up to five times a week.

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“..Somehow it turns out I’m the first white person to think about giving the land back since Marlon Brando..”

‘This Is All Stolen Land’: Canadian Offers To Share His With First Nations (G.)

Joel Holmberg had been batting the idea around for years. But the final decision came last month, as he scrolled through the online vitriol that erupted after a white farmer was acquitted of killing a young Cree man in the Canadian province of Saskatchewan. Holmberg turned to social media, but instead of joining in the often-vicious debate surrounding that case, he offered to share his family’s five-acre property in northern Alberta with a First Nations family. There would be no bills, no rent, he explained. Instead the family could join him, his wife and two children in living off the land; hunting, fishing and growing food.

“I wanted to offer some sort of hope,” said Holmberg. “It was really disgusting to see the way the racist people were speaking. I wanted to let them know that it’s not everyone in Canada that feels that way.” The invitation to share his acreage near Barrhead, about 100km north-west of Edmonton, seemed like a fair one. “We all know in our heart the truth, that this is all stolen land,” said the 45-year-old. “They’re our hosts and we’re their guests and they’ve been criminally abused for far too long and it has to stop.” Holmberg said his appreciation for First Nations culture began as a child growing up in British Columbia, when members of the Sinixt First Nation began bringing him along as they hunted and fished.

“I had the opportunity to do sweats with them and learn about their culture from them and learn about the real history of Canada,” he said. He continued to delve into Canada’s rich tapestry of indigenous cultures as he moved around the country, from the Northwest Territories to Manitoba and Saskatchewan. “They’re the kindest people I’ve ever met. They’ve been there for me in the worst times in my life when I needed help the most,” he said. “It is very clear to my family and I, that it is us that will be blessed by this thing happening most of all.”

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Feb 242018
 
 February 24, 2018  Posted by at 11:21 am Finance Tagged with: , , , , , , , , , ,  


Arthur Rothstein Rear of interstate truck. Elko, Nevada 1940

 

Debt On Track To Destroy The American Middle Class (GoldT)
The Only Thing That Can Save Stocks Is QE (ZH)
Fed ‘Quite Likely’ To Require Large-Scale QE Again (ZH)
VIX Funds Face Fresh Scrutiny From US Regulators (BBG)
Xi Confidant Emerges As Front Runner To Head China’s Central Bank (R.)
Brexit To End London House Price Boom (Ind.)
UK Post-Brexit Plans Based On A “Pure Illusion”- EU (G.)
Ecuador Blames UK As Assange Talks Break Down (G.)
Europe to Wind Down Latvian Bank Targeted by U.S. Over Sanctions (BBG)
After New Incident Off Cyprus, EU Calls On Turkey To Stop Naval Aggression (K.)

 

 

Going down down down.

Debt On Track To Destroy The American Middle Class (GoldT)

Economists report the household debt to be at its highest in decades. Yet, at the same time, we are being told that the economy is doing great. Does anyone see a serious contradiction? In fact, the current economy only favors the wealthy owing to their flourishing financial assets such as stocks and bonds. Owing to the lack of real assets such as property and commodities, the middle and lower classes are becoming overwhelmed due to the serious consequences of the spending/debt cycle. American consumers have a collective outstanding household debt of about $13.15 trillion of which nearly $1 trillion is the credit card debt alone, households are truly on a debt binge. These figures should be a wake-up call to all the Americans. The convulsive household debt has surpassed the bubble of 2008 and is still escalating. The economy may not be doing so great, after all.

Compared to 2008, the automobile credit balances have increased to $367 billion whereas the outstanding student loans are around $671 billion. Moreover, 67% of household debts belong to consumer mortgages. In 2016, 25% of all the Americans purchased a new or used vehicle and two-thirds of them are repaying through high-interest, long-term loans. In fact, the consumer debt has exceeded their income for majority of the Americans. Consumers have become accustomed using easy credit to maintain a lifestyle unaffordable for them otherwise. If this trend continues, and facts indicate that it will, we will be facing a monumental credit crisis in the near future. A huge portion of credit card debt is the interest. Credit cards are a convenience and consumers readily pay for the privilege.

[..] The decline in automobile sales is already an indication of the future consumer debt crisis. If lenders continue to provide easy access to credit regardless of its looming default and delinquent potential, retail purchase will face a sharp decline in 2018. This will have serious consequences on the overall economy. The Federal Reserve and other global lenders are a significant contribution to the problem. They allow printing of trillions of dollars and yens for the lenders to distribute to the borrowing consumers at a high interest, leading to a worldwide inflation. All this printed wealth is merely an illusion yet it is raising the cost of living. Prices are rising at an alamingly faster rate compared to the consumer income. There is no increase in real assets. All this is but a mere mushrooming of debt.

The consequences of federal policy will be inescapable unless reversed and there are no signs of any reversal in near or distant future. At this rate, the consumers will soon face a critical financial bubble. Financial assets, such as stocks and bonds, risk losing substantial value. The wealthy can absorb the losses but the poor and middle class will face financial ruin. Consumers need to seriously consider the need to increase their “real” assets, such as real estate and commodities to prevent a long-term financial nightmare. The chart below shows how the real assets have curved to an all-time low.

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Gee, what a surprise.

The Only Thing That Can Save Stocks Is QE (ZH)

In the last 45 years, there have been seven periods of persistent US dollar and Treasury bond weakness and as BofAML notes, during six of those periods, stocks have been pressured significantly lower.

This could be a problem, as it’s happening again… and stocks are beginning to wake up to it…

There has only been one period in history when falling dollar and bond prices did not lead to slumping stocks…And that was when QE was expanded drastically in March 2009.

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Tightening and then not.

Fed ‘Quite Likely’ To Require Large-Scale QE Again (ZH)

Ahead of Fed Chair Powell’s first semi-annual monetary policy report to Congress next week (brought forward to 2/27), The Fed has released his prepared remarks warning that “valuations are still elevated across a range of asset classes” and fears “signs of rising non-financial leverage.” To wit: Looking at the key topic of inflation, and the labor market, the Fed found that U.S. labor market is “near or a little beyond” full employment in early 2018, and that while the pace of wage growth has been modest, “serious labor shortages” would probably give it an upward push. Ironically, and paradoxically for an “economy beyond full employment”, the Fed observes that “the pace of wage gains has been moderate; while wage gains have likely been held down by the sluggish pace of productivity growth in recent years.”

Regardless, the Fed clearly is concerned about labor supply-demand imbalances, and has even added a new word: serious, as in “serious labor shortages would probably bring about larger increases than have been observed thus far.” In a separate special section on financial stability, the Fed notes that overall vulnerabilities in the U.S. financial system remain moderate, while noting some spots where things are warming up. These include signs of increased leverage to the nonbank sector, noting greater provision of margin credit to equity investors such as hedge funds. Looking at financial imbalances, the Fed warns that “leverage in the nonfinancial business sector has remained high, and net issuance of risky debt has climbed in recent months. In contrast, leverage in the household sector has remained at a relatively low level, and household debt in recent years has expanded only about in line with nominal income.”

[..] Curiously, before Powell’s remarks were dropped, both Dudley and Rosengren were on the tape this morning talking super dovish about QE as “useful to have in the toolkit for those times when the short-term interest rate tool may not be available,” adding that The Fed is “quite likely” to require large-scale asset purchases again because real rates will remain low due to slow productivity and labor-force growth.

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Horse has left that barn ages ago.

VIX Funds Face Fresh Scrutiny From US Regulators (BBG)

U.S. regulators are scrutinizing this month’s implosion of investments that track stock-market turmoil, including whether wrongdoing contributed to steep losses for VIX exchange-traded products offered by Credit Suisse and other firms, several people familiar with the matter said. The Securities and Exchange Commission and the Commodity Futures Trading Commission have been conducting a broad review of trading since Feb. 5, when volatility spiked and investors lost billions of dollars, the people said. Among those looking into what happened are lawyers in the SEC’s enforcement division, which investigates firms for potential misconduct and fines them if it finds violations of securities laws, two of the people said. There is no indication thus far that specific companies, including Credit Suisse, are being probed.

The scrutiny puts a spotlight on a small corner of the $3.4 trillion exchange-traded fund industry that lets everyone from hedge funds to mom-and-pop investors engage in complex trading strategies. With losses now piling up, allegations of market manipulation are getting more attention and government watchdogs face questions about why small-time investors were permitted to buy such products in the first place. “The values of these exchange-traded products are based on a combination of futures, options and three indices. Quite the maze,” Democratic SEC Commissioner Kara Stein said Friday in a speech at a conference in Washington. “What troubles me is that oftentimes complex products fall into the hands of people who don’t fully understand them.”

SEC Chairman Jay Clayton told reporters at the same event Friday that he wasn’t concerned about how the market functioned during the steep decline in equities on Feb. 5 and in the two weeks since. He said it would be appropriate, however, to review which types of more complex investments are widely available to average investors. “The portfolio of products available to retail investors has changed dramatically and it’s worth taking a look at,” Clayton said.

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Tough job. Xi sets rates all by himself.

Xi Confidant Emerges As Front Runner To Head China’s Central Bank (R.)

Liu He, a Harvard-trained economist who is a trusted confidant of Chinese President Xi Jinping, has emerged as the front runner to be the next governor of the People’s Bank of China (PBOC), according to three sources with knowledge of the situation. Liu may be in a position to become one of China’s most powerful economic and financial officials ever, as he is already top adviser to Xi on economic policy and is also expected to become vice premier overseeing the economy. Liu would replace current PBOC chief, 70-year-old Zhou Xiaochuan, who is China’s longest-running head of the central bank, having taken the job in 2002. Zhou is expected to retire around the time of the annual session of parliament in March, sources previously told Reuters.

The change would be part of a wider government reshuffle following the 19th Communist Party Congress in October last year, during which Xi laid out his vision for China’s long-term development, and elevated his key allies. Speculation has been rife for months over the choice of the next central bank governor. Xi will have the final say, and the sources noted that while Liu is clearly the frontrunner he is not yet certain to get the job. Just before last October’s Congress, sources told Reuters that China’s banking regulator head Guo Shuqing and veteran banker Jiang Chaoliang were leading contenders for the PBOC job. But at the congress, the influence of the 66-year-old Liu continued to grow. He was elected into the 25-member Politburo, the second-highest tier in Beijing’s political power structure after the seven-member Politburo Standing Committee.

Sources previously told Reuters that Liu, a fluent English speaker, is set to become one of China’s four vice premiers and would oversee the economy and financial sector. Two of the sources said that Liu could serve concurrently as vice premier and head of the central bank.

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Brexit is not all bad.

Brexit To End London House Price Boom (Ind.)

UK inflation will outstrip gains in house prices this year and next, particularly in the capital, as uncertainty over Brexit and weak consumer spending power hits demand, a Reuters poll found on Friday. According to the latest quarterly Reuters poll of 33 housing market specialists, taken in the past week, property prices will rise 2.0% this year, much slower than the predicted 2.5% rise in general costs in the economy. In London – long the hotbed for foreign investors behind a decade of skyrocketing prices – the difference will be even starker: the average price is expected to fall 0.5% this year. Next year, house prices will rise 0.9% in London and 2.0 nationally, still both below the 2.1% expected inflation rate. In 2020, London prices will increase 2.0% and by 2.3% nationally. “A significant effect of Brexit is subdued investment confidence,” said Rod Lockhart at online mortgage lender LendInvest.

“Would-be sellers are holding onto assets for longer and buyers are being a little more diligent before committing to significant expenditures, all this against a backdrop of inflation-surpassing wage growth.” Most respondents in the poll said the Brexit vote had been negative for both turnover and prices in London but were split over whether it had been negative or had no impact nationally. Sterling is over 6% weaker than before the June 2016 vote to leave the EU, something that should make properties more attractive to foreign investors, who can take advantage of cheaper prices. But uncertainty over how Brexit divorce talks will pan out has deterred overseas buyers. “Foreigners get more pounds in their pockets, but the nation and its capital has lost some of its allure,” said Tony Williams at property consultancy Building Value.

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May the masochist.

UK Post-Brexit Plans Based On A “Pure Illusion”- EU (G.)

Theresa May’s reported agreement with her cabinet on a future trading relationship with the EU has been criticised as based on “pure illusion” by the European council president, Donald Tusk, as frustration with the UK erupted in Brussels. Reports that May’s inner cabinet had agreed on a policy of “managed divergence” during eight hours of talks at an awayday in Chequers were met with incredulity by EU leaders. Tusk told reporters on Friday: “I am glad the UK government seems to be moving towards a more detailed position. “However, if the media reports are correct, I am afraid the UK position today is based on pure illusion. It looks like the cake [and eat it] philosophy is still alive. “From the very start it has been a set principle of the EU27 that there cannot be any cherrypicking of single market à la carte. This will continue to be a key principle, I have no doubt.”

Speaking at a summit of EU27 member states in Brussels, to discuss the EU’s budget and leadership post-Brexit, Leo Varadkar, the Irish taoiseach, also insisted that the single market was “not à la carte”. It is believed the British government is seeking to maintain frictionless trade in some sectors by staying in lock-step alignment with EU regulation, while opening up the prospect of diverging in other areas in order to gain a competitive advantage in the international marketplace. “It is not possible for UK to be aligned to EU when it suits and not when it doesn’t,” Varadkar said. “The UK position needs to be backed up with real detail that can be written into a legal treaty with the EU. We are well beyond the point of aspirations and principle. We need detail.”

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Britain should be taken to The Hague for its involvement.

Ecuador Blames UK As Assange Talks Break Down (G.)

Talks between the UK and Ecuador over the future of Julian Assange at its London embassy have broken down, the South American country’s foreign minister has said. Maria Fernanda Espinosa suggested British officials had been unwilling to negotiate over the Wikileaks founder’s potential release. Earlier this month, a judge upheld an arrest warrant issued when Assange skipped bail as he fought extradition to Sweden in 2012. The 46-year-old has been at the embassy ever since because he fears extradition to the United States for questioning over the activities of WikiLeaks if he leaves. Espinosa said of the failed talks: “To mediate you need two parties, Ecuador is willing, but not necessarily the other party.”

Ecuador said it would continue to protect Assange’s rights, however there was a risk to his physical and psychological wellbeing after spending nearly six years in the building as a “refugee”. The country has assessed more than 30 similar cases in a bid to break the deadlock, including that of British-Iranian citizen Nazanin Zaghari-Ratcliffe, who is in prison in Iran accused of spying. This included options for granting diplomatic immunity, although Ecuador said it would continue to respect the UK’s laws. In November, Espinosa said Assange had been granted Ecuadorian citizenship. The foreign minister said Ecuador was trying to make Assange a member of its diplomatic team, which would grant him additional rights under the Vienna Convention on Diplomatic Relations – including special legal immunity and safe passage.

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All because of North Korea?!

Europe to Wind Down Latvian Bank Targeted by U.S. Over Sanctions (BBG)

European authorities moved to liquidate Latvia’s ABLV Bank after clients pulled assets from the lender following U.S. accusations that it laundered money. The ECB, which had already placed a freeze on payments by the lender, said that ABLV was failing or likely to fail, handing it over to Europe’s Single Resolution Board. That authority said a resolution of the bank, which generally means a sale or restructuring, isn’t in the public interest because neither ABLV nor its Luxembourg-based subsidiary provide “critical functions” and their failure won’t have a “significant adverse impact” on financial stability. ABLV was plunged into crisis after the U.S. Treasury this month proposed to ban it from the American financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile program.

The bank responded by saying the allegations are wrong and misleading and that it was working to provide information to the Treasury that would help to overturn the proposal. “The bank is likely unable to pay its debts or other liabilities as they fall due,” the ECB said in a statement on Saturday in Frankfurt. “The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit-guarantee fund starts.” ABLV took a different view, saying it accumulated more than €1.36 billion over four business days to strengthen its liquidity and ensure 86% of its demand deposits. “The bank considers that it has fulfilled all requirements of the regulator in order to resume operation,” ABLV said. “It was absolutely sufficient for the bank to resume executing payments and meet all obligations toward its clients, yet due to political considerations the bank was not given a chance to do it.”

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Turkey threatens to fire on an Italian ship.

After New Incident Off Cyprus, EU Calls On Turkey To Stop Naval Aggression (K.)

Just a day after it said it won’t allow Cyprus to conduct a “unilateral” gas search off the Eastern Mediterranean island’s coast if Turkish Cypriots don’t also reap the benefits, Ankara ratcheted up tensions with Nicosia Friday when its warships threatened to use force against a drillship contracted to Italian energy giant Eni as it tried, again, to reach an area in Cyprus’s exclusive economic zone (EEZ) to commence exploratory gas drilling. Turkey has been obstructing the Saipem 12000 drillship from approaching an area in Block 3 of Cyprus’s EEZ since February 9, citing naval exercises. This week it announced it is reserving the area until March 10. Earlier in the month a Turkish gunboat rammed a Hellenic Coast Guard vessel near the eastern Aegean islet of Imia. Turkey’s aggression was raised by Greek Premier Alexis Tsipras and Cypriot President Nicos Anastasiades at the informal summit of EU leaders in Brussels Friday.

European Council President Donald Tusk told reporters after the meeting that the bloc was calling on Turkey to stop activities that have led to recent incidents in Greece and Cyprus, stressing that both countries have the “sovereign right” to explore for resources. He also said the EU will assess during March’s European Council meeting whether the conditions are ripe for a high-level meeting with Turkey in Varna on March 26. The drillship left the area after the incident and headed west for the city of Limassol, where it is expected to remain for a few days before sailing to Morocco. “Unfortunately, the drillship was halted by five Turkish warships and after threats of violence and the threat of a collision, it was compelled to return back,” said Cypriot government spokesman Victoras Papadopoulos, who stressed, however, that the postponement of the scheduled drilling does not mean that the island’s energy plans will change.

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