Mar 082018
 
 March 8, 2018  Posted by at 11:01 am Finance Tagged with: , , , , , , , , , , , , ,  


Paul Gauguin Tahitian village 1892

 

We May Have Hit ‘Peak Trade’ Even Without Trump’s Tariffs – UBS (CNBC)
China’s Exports Surge At The Fastest Pace In 3 Years (R.)
42% of Americans Are Set To Retire Broke (CNBC)
Trump’s Volley (Lebowitz)
Divorced From Reality (RIA)
A Currency War Is Coming – With Japan (BBG)
Hallelujah! The Squid Regency At The White House Is Finally Over (Stockman)
Canada, Mexico to Get Initial Exemption From Trump Tariffs (BBG)
New iPhones Aren’t Selling In Asia (CNBC)
Vancouver Declares 5% Of Homes Empty And Liable For New Tax (G.)
More People Called David And Steve Lead FTSE 100 Companies Than Women (Ind.)
‘Why Would We Want A World Without Russia?’ – Putin (RT)
Sergei Skripal Is Not Litvinenko (Ind.)
Turkey Renews Threat Against Cyprus Offshore Gas Exploration (AP)
US State Department Stresses Cyprus’s Right To Develop Resources In EEZ (K.)
Tepco’s ‘Ice Wall’ Fails To Freeze Fukushima’s Toxic Water Buildup (R.)
Over 500 Quebec Doctors Protest Their Own Pay Raises (CNBC)

 

 

And not a day too soon. There’s nothing more destructive than schlepping 10 million things 10,000 miles across the planet that don’t neeed to be.

We May Have Hit ‘Peak Trade’ Even Without Trump’s Tariffs – UBS (CNBC)

The world may have hit ‘peak trade,’ according to an expert who pointed to robotics, digitization and localization as major game-changers for the sprawling supply chains that have defined globalization. Paul Donovan, global chief economist at UBS Wealth Management, said Wednesday that President Donald Trump’s recently announced trade tariffs are not to blame. “I don’t think that the modest taxes imposed by Trump are a driver of peak trade, at this stage. Trade protectionism — mainly non-tariff barriers to trade — have been rising for some years,” he told CNBC. Rather, Donovan said, the peak trade argument is based on “a reversal of the structural way in which globalization took place in recent years.” Globalization as we know it has meant long cross-border supply chains, where many different countries and entities would take part in the production or processing of goods.

The resulting value of trade rose for each country as a proportion of GDP. Trade to GDP, therefore, rose as supply chains lengthened. “What is now happening is that robotics and digitization mean we can produce efficiently, locally,” Donovan said. As an example, he compared the purchase of a compact disc — whose components, intellectual property and packaging would come from different places — a decade ago to downloading music now, which requires only one transaction of intellectual property. This reduces the ratio of trade to GDP. [..] “Robotics, digitization and localization mean that trade wars today are fighting battles from the past,” Donovan said. “I think global trade in goods (not services) revert to something like the old ‘imperial model’ of importing raw materials and then processing close to the consumer.”

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Cancer growth.

China’s Exports Surge At The Fastest Pace In 3 Years (R.)

China’s exports unexpectedly surged at the fastest pace in 3 years in February, suggesting its economic growth remains resilient even as trade relations with the United States rapidly deteriorate. Trade tensions have jumped to the top of the list of risks facing China this year, with proposed U.S. tariffs on steel and aluminium imports suggesting more measures may be on the way, Zhou Hao, senior emerging markets economist at Commerzbank, [said]. China’s February exports rose 44.5% from a year earlier, compared with analysts’ median forecast for a 13.6% increase, and an 11.1% gain in January, official data showed on Thursday. Imports grew 6.3%, the General Administration of Customs said, missing analysts’ forecast for 9.7% growth, and down from a sharper-than-expected 36.9% jump in January.

Analysts caution Chinese data early in the year can be heavily distorted by the timing of the Lunar New Year holiday, which fell in February this year but in January in 2017. But combined January-February trade data also showed a dramatic acceleration in export growth. Exports rose 24.4% on-year in Jan-Feb, much better than 10.8% in December and 4% growth in Jan-Feb last year. The government also releases combined data for the first two months in an attempt to smooth out seasonal distortions. The deceleration in import growth for February may be payback for the previous month’s unusual strength, rather than a sign there has been an abrupt weakening in demand. Robust import growth in January was mostly led by commodities as factories scrambled to restock inventories ahead of the long holiday. Imports in the first two months of the year rose 21.7%, compared with 4.5% in December.

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Jesse Colombo’s comment: “And what’s amazing is that these retirement stats are during a massive, Fed-driven asset bubble that has inflated the value of retirement accounts – and people STILL can’t retire! Stick a fork in it…we’re done.”

42% of Americans Are Set To Retire Broke (CNBC)

At this rate, retirement is more of a fantasy than a reality for many people in this country. About 42% of Americans have less than $10,000 saved for when they retire, according to a study by GoBankingRates released Tuesday. The No. 1 reason most people cited for not stashing more away was because they didn’t earn enough to save, followed by the fact that they were already struggling to pay bills, GoBankingRates said. The personal finance site polled more than 1,000 adults online in February.

For those with little or no savings, a serious lack of proper investment income and planning, coupled with a longer life expectancy, has destroyed any retirement expectations. Although millennials are most likely to have less than $10,000 saved, older Americans are also becoming steadily more pessimistic about their future economic prospects, according to a separate study by United Income, a start-up that aims to apply big-data analysis to financial planning.

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The role of teh reserve currency warrants way more attention.

Trump’s Volley (Lebowitz)

America relinquished its role as the world’s leading manufacturer in exchange for cheaper imported goods and services from other countries. The profits of U.S.-based manufacturing companies were enhanced with cheaper foreign labor, but the wages of U.S. employees were impaired, and jobs in the manufacturing sector were exported to foreign lands. This had the effect of hollowing out America’s industrial base while at the same time stoking foreign appetite for U.S. debt as they received U.S. dollars and sought to invest them. In return, debt-driven consumption soared in the U.S. The trade deficit, also known as the current account balance, measures the net flow of goods and services in and out of a country. The graph shows the correlation between the cumulative deterioration of the U.S. current account balance and manufacturing jobs.

Since 1983, there have only been two quarters in which the current account balance was positive. During the most recent economic expansion, the current account balance has averaged -$443 billion per year. To further appreciate the ramifications of the reigning economic regime, consider that China gained full acceptance into the World Trade Organization (WTO) in 2001. The trade agreements that accompanied WTO status and allowed China easier access to U.S. markets have resulted in an approximate quintupling of the amount of exports from China to the U.S. Similarly, there has been a concurrent increase in the amount of credit that China has extended the U.S. government through their purchase of U.S. Treasury securities as shown below.

To further understand why the current economic regime is tricky to change, one must consider that the debts of years past have not been paid off. As such the U.S. Treasury regularly issues new debt that is used to pay for older debt that is maturing while at the same time issuing even more debt to fund current period deficits. Therefore, the important topic not being discussed is the United States’ (in)ability to reduce reliance on foreign funding that has proven essential in supporting the accumulated debt of consumption from years past. Trump’s ideas are far more complicated than simply leveling the trade playing field and reviving our industrial base. If the United States decides to equalize terms of trade, then we are redefining long-held agreements introduced and reinforced by previous administrations.

In breaking with that tradition of “we give you dollars, you give us cheap goods (cars, toys, lawnmowers, steel, etc.), we will most certainly also need to source alternative demand for our debt. In reality, new buyers will emerge but that likely implies an unfavorable adjustment to interest rates. The graph below compares the amount of U.S. Treasury debt that is funded abroad and the total amount of publicly traded U.S. debt. Consider further, foreigners have large holdings of U.S. corporate and securitized individual debt as well. (Importantly, also note that in recent years the Fed has bought over $2 trillion of Treasury securities through QE, more than making up for the recent slowdown in foreign buying.)

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“Investors still believe in stocks as an asset class.”

Divorced From Reality (RIA)

There are many ways of assessing the value of the stock market. The Shiller PE (price relative to the past decade’s worth of real, average earnings) and Tobin’s Q (the value of companies’ outstanding stock and debt relative to their replacement cost) are likely the two best. That doesn’t mean those metrics are accurate crash indicators, or that one can use them profitably as trading signals. Expensive stocks can stay expensive or get more expensive, and cheap stocks can stay cheap or get cheaper for inconveniently long periods of time.

But those metrics do have a good record of forecasting future long-term (one decade or more) returns. And that’s important for financial planning and wealth management. Difficult though it is sometimes, everyone must plug in an estimated return into a formula for retirement savings. And if an advisor is plugging in a 7% or so return for a balanced portfolio currently, he or she is likely not doing their job well. Stocks will almost certainly return less than their long-term 10% annualized average for the next decade or two given a starting Shiller PE over 30. The long-term average of the metric, after all, is under 17.

[..] Companies are always manipulating items on income statements to arrive at a particular earnings number. Recently, record numbers of companies have supported net income numbers with non-GAAP metrics. That can be legitimate sometimes. For example, depreciation on real estate is rarely commensurate with reality. But it can also be nefarious[..] So I created a chart showing sales per share growth and price per share growth of the S&P 500 dating back to the end of 2008. From the beginning of 2009 through the end of 2016, companies in the index grew profits per share by nearly 4% annualized, a perfectly respectable number for a mature economy. But price per share grew by a whopping 14.5% over that time. Over that 8 year period, sales grew less than 50% cumulatively, while share prices tripled.

Anyone invested in stocks should worry about this chart. How do share prices get so divorced from underlying corporate sales? One likely answer is low interest rates. But there must be other reasons because we’ve had low interest rates and low stock prices before – namely in the 1940s. That was after the Great Depression, and stocks were still likely viewed as suspect investments. Today, by contrast, stocks are not viewed with much suspicion, despite the technology bubble peaking in 2000 and the housing bubble in 2008. Investors still believe in stocks as an asset class.

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Japan cannot do a strong yen for too long.

A Currency War Is Coming – With Japan (BBG)

As if a brewing trade war wasn’t enough to worry about, investors also need to be alert to the threat of a major currency conflict. Norihiro Takahashi, president of Japan’s Government Pension Investment Fund, dismissed Donald Trump’s tariffs plan as a “performance” for his supporters, and said U.S. assets are no longer expensive, in an interview with The Wall Street Journal this week. That marks a change in stance since the December quarter, when the world’s largest pension fund scaled back its exposure to foreign assets. Takahashi’s comments could well be a veiled expression of Japan’s displeasure at a stronger yen. The Japanese currency has soared 6.6% against the greenback this year — and we’re only three months into 2018. For a yen-based investor, Treasuries, in particular, do indeed look more reasonably priced than in December.

In theory, currency policy falls under the jurisdiction of Japan’s finance ministry. In practice, government agencies from the Bank of Japan to the GPIF co-ordinate their actions. Don’t forget that on Oct. 31, 2014, the central bank expanded its monetary policy on the same day the GPIF adopted a “new policy asset mix” that increased the fund’s exposure to foreign bonds. BOJ Governor Haruhiko Kuroda can deny it, but the central bank has every interest in seeking a weak yen. Japanese corporate earnings are highly cyclical: On a market-weighted basis, companies on the Topix index derive more than 37% of their revenue from abroad, data compiled by Gadfly show. A strengthening yen can cause stocks to plunge, depressing consumption and tipping the economy back into deflation.

With the Topix down more than 10% from its January high, that’s no idle threat. CPI ex-food, the BOJ’s inflation metric, was 0.9% in January, still nowhere near the 2% target that was last breached in 2015. Kuroda’s domestic toolbox, meanwhile, is starting to look empty. With a record 40% of government bonds already in its hands, the central bank is running out of assets to buy.

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I was wondering yesterday why not more people were happy about this. Question is: how far do the Squid’s tentacles still reach?

Hallelujah! The Squid Regency At The White House Is Finally Over (Stockman)

The financial commentariat and the robo-machines are all in a tizzy this morning because Gary Cohn up and quit. But we say good riddance: The man gave Trump bad advice on nearly every single issue – trade, taxes, fiscal policy and the Fed. We didn’t make any bones about that viewpoint during our appearance on Fox Business this AM. When Maria Bartiromo asked us about Cohn’s departure, our reply was: Hallelujah, the Goldman Sachs Regency in the White House is finally over! The fact is, we do have a trade crisis, but Gary Cohn and the Wall Street pseudo-free traders don’t care and never have. That’s because they fiercely support a perverted, self-serving monetary regime that systematically and massively inflates financial assets, even as it strip mines and deflates the main street economy.

As we have been pointing out in this series, there is a perverse symbiosis between the Fed and the Dirty Float central banks of the 10 major countries (China, Vietnam, Mexico, Japan, etc), which account for 90% of the nation’s $810 billion trade deficit (2017). Together they have ripped the guts out of the US industrial economy – effectively sending jobs and production abroad and cash flow and liquidated capital to Wall Street. For its part, the Fed has monkey-hammered US competitiveness. That’s the result of its insensible 2.00% inflation policy, which has fatally inflated nominal dollar wages in a world market drowning in cheap labor priced in artificially under-valued currencies. At the same time, its massive interest rate repression and price-keeping operations in the stock market have turned the C-suites of corporate America into financial engineering joints.

So doing, they have slashed real net business investment by nearly 3o% since the turn of the century, by 20% from the 2007 pre-crisis peak and, actually, to a level in 2016 that barely exceeded real net investment two decades earlier in 1997. Meanwhile, the C-suites shuttled upwards of $15 trillion of cash flow and debt capacity during the last decade alone into stock buybacks, vanity M&A deals and excess dividends and recaps.

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Re-negotiate.

Canada, Mexico to Get Initial Exemption From Trump Tariffs (BBG)

The Trump administration will initially exclude Canada and Mexico from stiff tariffs on steel and aluminum imports, an exemption they would lose if they fail to reach an updated Nafta agreement with the U.S., White House trade adviser Peter Navarro said on Wednesday. The two nations won’t be subject to tariffs on their steel and aluminum if they sign a new NAFTA that meets the satisfaction of the U.S., Navarro said, adding that other American allies could use a similar system to ask for an exemption. If Nafta talks fall through, Canada and Mexico would face the same tariff as other nations, expected to be 25% on steel and 10% on aluminum. “Here’s the situation, and the president has made this public,” Navarro said. “There’s going to be a provision which will exclude Canada and Mexico until the Nafta thing is concluded one way or another.”

The decision-making process regarding the tariffs has evolved and more changes could be made before President Donald Trump formally approves them. China on Thursday vowed to retaliate, its most forceful comments yet on the threatened tariffs. “A trade war is never the right solution,” China’s Foreign Minister Wang Yi told reporters in Beijing. “In a globalized world, it is particularly unhelpful, as it will harm both the initiator and the target countries. In the event of a trade war, China will make a justified and necessary response.” Earlier Wednesday, White House Press Secretary Sarah Huckabee Sanders said the tariff plan would feature “potential carve outs for Canada and Mexico based on national security” considerations and also possible exclusions for specific countries. Australia is among those making the case for exemption, with Foreign Minister Julie Bishop citing her nation’s status as a “close ally and partner” in a Sky News interview on Thursday.

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Good headline, followed by shameless promo.

New iPhones Aren’t Selling In Asia (CNBC)

Apple’s iPhone X may not have wooed Asian consumers during the Lunar New Year holiday — but the company has some new products in the pipeline, according to Rosenblatt Securities’ Jun Zhang. Zhang chopped 5.5 million units off expectations for iPhone X sales for the first half of this year in a Wednesday research note. But with sales of high-end smartphones shrinking, Apple could offset lower iPhone sales with new products. “We are not surprised with the quick cooldown of iPhone X sales following Chinese New Year,” Zhang wrote. “Further iPhone X cuts, in our view, suggest the high-end smartphone market upgrade cycle continues to extend. We are seeing similar issues for Samsung’s S9 model since our research suggests that preorders are weak.”

Apple and Samsung, like many tech companies, and rarely release data on new products or unit sales outside of quarterly reports or launch events. But, Zhang wrote, Apple could sell 6 million to 8 million iPad Pro units with more advanced 3-D sensing, as well as new phones in the fall. A new red iPhone model, lower-end iPhones and a lower-priced HomePod might also be in the works, Zhang said. (Apple has had a partnership with HIV/AIDS organization (RED) for over a decade, and often sells red-colored products to support AIDS research and prevention.) “Since we expect the overall smartphone market to be flat this year, particularly in the mid-to-high end markets, Apple’s upcoming lower priced iPhone model could drive Apple’s unit growth,” Zhang wrote.

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Why do I get the idea there’s not an actual plan behind any of this, or a philosophy?

Vancouver Declares 5% Of Homes Empty And Liable For New Tax (G.)

Thousands of homes in Vancouver have been declared unused and liable for a new empty homes tax as part of a government attempt to tackle skyrocketing home prices and soaring rents. About 4.6% or 8,481 homes in the western Canadian city stood empty or underutilised for more than 180 days in 2017, according to declarations submitted to the municipality by 98.85% of homeowners. Properties deemed empty will be subjected to a tax of 1% of their assessed value. Vancouver has rolled out a raft of measures to cool prices and improve housing affordability in the country’s most expensive real estate market. Empty houses, also a big issue in the UK, are only one aspect of the problem. In 2017 the provincial government of British Columbia raised its foreign buyer tax from 15% to 20% to target offshore investors blamed for pushing up prices.

Toronto, Canada’s biggest city, followed suit with a 15% tax in April. Before the foreign buyer tax, sales agents said investors in Hong Kong, China and other parts of Asia were acquiring up to 40% of Vancouver condominium projects marketed abroad, absorbing the more expensive units that domestic buyers could not afford. Nearly 61% of the homes declared empty in Vancouver were condos, and other multi-family properties made up almost 6%, according to the city government. More than a quarter of the empty properties were in downtown Vancouver. Property owners who did not submit a declaration and those who claimed exemptions, such as for renovations or if the owner was in hospital or long-term care, were included in the empty homes number.

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I’m a sucker for headlines. The original says “..women and ethnic minorities..”, but that had me wondering how many immigrants are named David or Steve. More than women, I’d bet.

More People Called David And Steve Lead FTSE 100 Companies Than Women (Ind.)

There are more people called David or Steve who head up FTSE 100 companies than there are women or ethnic minorities, underscoring the extent to which corporate Britain is still dominated by men. According to research conducted by INvolve, a group that champions diversity and inclusion in business, there are currently five ethnic minority and seven female chief executives of FTSE 100 companies. Nine are named David and four are called Steve. Later this month Royal Mail, which is headed up by Moya Greene, is set to join the index of the UK’s biggest publicly listed companies, taking the total number of female-led firms to eight.

The number highlights how women and ethnic minorities are still dramatically underrepresented on corporate boards across the UK. According to the Government’s Hampton-Alexander Review into female leaders across FTSE companies published last November, only five FTSE 250 companies had at the time achieved a gender-balanced board. Speaking at an event in London to mark International Women’s Day this week, Carolyn Fairbairn, director general of the Confederation of British Industry, said that women are now joining boards in greater numbers than ever, but often as non-executive directors.

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He doesn’t give an inch. Why would he?

‘Why Would We Want A World Without Russia?’ – Putin (RT)

President Vladimir Putin, who recently startled the world by unveiling Russia’s advanced nuclear arsenal, has again spoken of nuclear arms, clarifying the circumstances in which Moscow is prepared to enter a nuclear war. “Certainly, it would be a global disaster for humanity; a disaster for the entire world,” Putin said, in an interview for a Russian documentary “The World Order 2018,” adding that “as a citizen of Russia and the head of the Russian state I must ask myself: Why would we want a world without Russia?” Even though Putin admitted that any conflict involving the use of nuclear weapons would have dire consequences for humanity, he maintained that Russia would be forced to defend itself using all available means if its very existence is put at stake.

“A decision on the use of nuclear weapons may only be taken if our ballistic missile attack warning system not only detects a launch, but also predicts that the warheads would hit Russian territory. This is called a retaliation strike,” he said in the interview. Russia’s latest edition of its nuclear doctrine allows the use of nuclear weapons in response to a nuclear attack against Russia or its allies, or to a conventional attack that threatens the existence of Russia. Putin also denied Russia was interested in pursuing a nuclear arms race, saying that “to begin with, we did not start this… nuclear bomb was first developed not by us but by the US,” he said in the interview, pointing out that “we have never used nuclear weapons [although] the US used them against Japan.”

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A rare dose of reality in a British press -and politics- engaged in full-steam Russia bashing.

Sergei Skripal Is Not Litvinenko (Ind.)

Boris Johnson just about observed diplomatic protocol when he addressed MPs about the apparent poisoning of Sergei Skripal. He stopped short of accusing the Russian state directly. But his inference – a malevolent and unjustified inference for the Foreign Secretary of a country that harps on about the rule of law – was indeed of Russian guilt. And it was clearest in the parallel he invited MPs to draw with the death of Alexander Litvinenko. Now it may indeed be that Russia – or Russians (something rather different) – are responsible for whatever happened in Salisbury. And it is true that Russians in the UK seem disproportionately accident-prone. But it is premature in the extreme to blame the Russian state, and just as misleading to draw this particular parallel with the Litvinenko case.

Both men may have been Russians branded traitors by their homeland, and both may have been victims of poisoning, but there are important differences. In Russia, Litvinenko worked against organised crime; he was less a spy in the conventional sense than a criminal intelligence officer. He fled the country after blowing the whistle on his corrupt bosses, and applied for asylum in the UK. His first choice, the US, had turned him down on the apparent grounds that the information he had to offer was not valuable enough. Unlike Skripal, he started working for MI5/6 only after arriving in the UK, and even then seems to have had difficulty getting on the payroll. His widow, Marina, is still battling to get the intelligence agencies to pay a pension or recognise a duty of care. It is cruel to say so, but Litvinenko seems almost to have been more use to the UK in death – as a totem of Russia’s general badness – than he was in life.

[..] For the moment, though, I will resist the temptation to delve into my inner Le Carre and return to Litvinenko. As I said, there are crucial differences between the two – differences that should militate against state-sponsored assassination being the favoured explanation for Skripal’s plight. But there should be doubts, too, about this judgment in the case of Litvinenko. The conclusions of the Litvinenko inquiry, now treated as unimpeachable proof of Russian state culpability, are nowhere near as definitive – or credible – as they have since been presented. The much-trumpeted (and over-interpreted) conclusion of the judge, Sir Robert Owen, was that “the FSB operation to kill Litvinenko was probably approved by Mr Patrushev [then head of the FSB] and also by President Putin”. He said there was “a strong probability” that Andrei Lugovoy poisoned Litvinenko “under the direction of the FSB” and the use of polonium-210 was “at very least a strong indicator of state involvement”. What sort of proof is that?

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They better be careful….

Turkey Renews Threat Against Cyprus Offshore Gas Exploration (AP)

Turkey’s prime minister has renewed a threat against efforts to search for offshore gas around Cyprus. Turkey opposes what it says are “unilateral” efforts to search for gas, saying they infringe the rights of Turkish Cypriots to the ethnically split island’s resources. Binali Yildirim said Wednesday during a joint news conference with Tufan Erhurman, the so-called “prime minister” of the breakaway north of Cyprus, that “provocative activities will be met with the appropriate response.” Yildirim’s comments were in response to reports that an ExxonMobil vessel was heading toward the Mediterranean, coinciding with exercises in the area involving the US Navy. Last month, Turkish warships prevented a rig from reaching an area southeast of Cyprus where Italian company Eni was scheduled to drill for gas.

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….because the US must defend Exxon.

US State Department Stresses Cyprus’s Right To Develop Resources In EEZ (K.)

The United States recognizes the right of Cyprus to develop the resources in its Exclusive Economic Zone, and discourages any actions or statements that provoke a rise in tensions in the region, a State Department official has said. In a statement late on Wednesday, the official said that Washington’s policy on Cyprus’ EEZ was longstanding and has not changed, noting that the US “recognizes the right of the Republic of Cyprus to develop its resources in its Exclusive Economic Zone.” “We continue to believe the island’s oil and gas resources, like all of its resources, should be equitably shared between both communities in the context of an overall settlement,” the official said. “We discourage any actions or rhetoric that increase tensions in the region.” The official did not comment directly on threats from Ankara regarding the arrival in the region of a research vessel belonging to US company ExxonMobil.

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How is it possible that TEPCO is allowed to just keep on lying?

Tepco’s ‘Ice Wall’ Fails To Freeze Fukushima’s Toxic Water Buildup (R.)

A costly “ice wall” is failing to keep groundwater from seeping into the stricken Fukushima Dai-ichi nuclear plant, data from operator Tokyo Electric Power Co shows, preventing it from removing radioactive melted fuel at the site seven years after the disaster. When the ice wall was announced in 2013, Tepco assured skeptics that it would limit the flow of groundwater into the plant’s basements, where it mixes with highly radioactive debris from the site’s reactors, to “nearly nothing.” However, since the ice wall became fully operational at the end of August, an average of 141 metric tonnes a day of water has seeped into the reactor and turbine areas, more than the average of 132 metric tonnes a day during the prior nine months, a Reuters analysis of the Tepco data showed.

The groundwater seepage has delayed Tepco’s clean-up at the site and may undermine the entire decommissioning process for the plant, which was battered by a tsunami seven years ago this Sunday. Waves knocked out power and triggered meltdowns at three of the site’s six reactors that spewed radiation, forcing 160,000 residents to flee, many of whom have not returned to this once-fertile coast. Though called an ice wall, Tepco has attempted to create something more like a frozen soil barrier. Using 34.5 billion yen ($324 million) in public funds, Tepco sunk about 1,500 tubes filled with brine to a depth of 30 meters (100 feet) in a 1.5-kilometre (1-mile) perimeter around four of the plant’s reactors. It then cools the brine to minus 30 degrees Celsius (minus 22 Fahrenheit).

The aim is to freeze the soil into a solid mass that blocks groundwater flowing from the hills west of the plant to the coast. However, the continuing seepage has created vast amounts of toxic water that Tepco must pump out, decontaminate and store in tanks at Fukushima that now number 1,000, holding 1 million tonnes. It says it will run out of space by early 2021. “I believe the ice wall was ‘oversold’ in that it would solve all the release and storage concerns,” said Dale Klein, the former chairman of the U.S. Nuclear Regulatory Commission and the head of an external committee advising Tepco on safety issues.

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The people that see the threats to the entire system are not politicians.

Over 500 Quebec Doctors Protest Their Own Pay Raises (CNBC)

In Canada, more than 500 doctors and residents, as well as over 150 medical students, have signed a public letter protesting their own pay raises. “We, Quebec doctors who believe in a strong public system, oppose the recent salary increases negotiated by our medical federations,” the letter says. The group say they are offended that they would receive raises when nurses and patients are struggling. “These increases are all the more shocking because our nurses, clerks and other professionals face very difficult working conditions, while our patients live with the lack of access to required services because of the drastic cuts in recent years and the centralization of power in the Ministry of Health,” reads the letter, which was published February 25.

“The only thing that seems to be immune to the cuts is our remuneration,” the letter says. Canada has a public health system which provides “universal coverage for medically necessary health care services provided on the basis of need, rather than the ability to pay,” the government’s website says. The 213 general practitioners, 184 specialists, 149 resident medical doctors and 162 medical students want the money used for their raises to be returned to the system instead. “We believe that there is a way to redistribute the resources of the Quebec health system to promote the health of the population and meet the needs of patients without pushing workers to the end,” the letter says.

“We, Quebec doctors, are asking that the salary increases granted to physicians be canceled and that the resources of the system be better distributed for the good of the health care workers and to provide health services worthy to the people of Quebec.” A physician in Canada is paid $260,924 ($339,000 Canadian) for clinical services by the government’s Ministry of Health per year on average, according to a report from the Canadian Institute for Health Information published in September 2017. On average, a family physician is paid $211,717 ($275,000 Canadian) for clinical services and a surgical specialist is paid $354,915 ($461,000 Canadian), according to the same report.

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Jan 302017
 
 January 30, 2017  Posted by at 10:15 am Finance Tagged with: , , , , , , , , ,  


Edvard Munch Vampire 1893

Canadian PM Says Québec Mosque Shooting A ‘Terrorist Attack On Muslims’ (R.)
Canada To Offer Temporary Residency To Travelers Stranded By US (R.)
Trump Immigration Order Restricted By More US Judges (R.)
Priebus Says Trump’s Immigration Ban Doesn’t Include Green Card Holders (BBG)
Theresa May Confirms UK Exempt From Trump’s ‘Muslim Ban’ (Ind.)
A Clarifying Moment in American History (Eliot A. Cohen)
US Became A Dumping Ground For The World. No More (CNBC)
The Persuasion Filter and Immigration (Adams)
Theresa May To Warn Devolved Nations: You Have No Veto On Brexit (G.)
UK and EU Heading For Economic Cold War – Italian Foreign Minister (G.)
Eurozone ‘Destruction’ Necessary For Countries To Thrive Again – Stark (Tel.)
The Dollar Will Die With a Whimper, Not a Bang (Rickards)
Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (WS)
Eurozone Bailout Fund Says Greek Public Debt Is ‘Manageable’ (R.)
Turkish Gunboat With Army Chief Sails Into Greek Waters; High Alert (K.)
Greek Fishermen Who Brave The Seas To Rescue Refugees Now Need Saving (NBC)
NASA – 30 Years Of Before And After Images Around The World (F.)

 

 

Be wary of false flags. And ponder how much Canada is ahead of anybody else on immigration.

Canadian PM Says Québec Mosque Shooting A ‘Terrorist Attack On Muslims’ (R.)

Six people were killed and eight wounded when gunmen opened fire at a Quebec City mosque during Sunday night prayers, in what Canadian Prime Minister Justin Trudeau called a “terrorist attack on Muslims”. Police said two suspects had been arrested, but gave no details about them or what prompted the attack. Initially, the mosque president said five people were killed and a witness said up to three gunmen had fired on about 40 people inside the Quebec City Islamic Cultural Centre. Police said only two people were involved in the attack. “Six people are confirmed dead – they range in age from 35 to about 70,” Quebec provincial police spokeswoman Christine Coulombe told reporters, adding eight people were wounded and 39 were unharmed.

The mosque’s president, Mohamed Yangui, who was not inside when the shooting occurred, said he got frantic calls from people at evening prayers. “Why is this happening here? This is barbaric,” he said. Prime Minister Justin Trudeau said in a statement: “We condemn this terrorist attack on Muslims in a center of worship and refuge”. “Muslim-Canadians are an important part of our national fabric, and these senseless acts have no place in our communities, cities and country.” The shooting came on the weekend that Trudeau said Canada would welcome refugees, after U.S. President Donald Trump suspended the U.S. refugee program and temporarily barred citizens from seven Muslim-majority countries from entering the United States on national security grounds.

A Canadian federal Liberal legislator, Greg Fergus, tweeted: “This is an act of terrorism – the result of years of sermonizing Muslims. Words matter and hateful speeches have consequences!” The premier of Quebec province, Philippe Couillard, said security would be increased at mosques in Quebec City and Montreal. “We are with you. You are home,” Couillard said, directing his comments at the province’s Muslim community. “You are welcome in your home. We are all Quebecers. We must continue together to build an open welcoming and peaceful society”.

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Immigration Minister Ahmed Hussen was born in Somalia.

Canada To Offer Temporary Residency To Travelers Stranded By US (R.)

Canada will offer temporary residency to any travelers stranded by U.S. President Donald Trump’s orders temporarily barring people from seven Muslim-majority countries, a senior official said on Sunday. Immigration Minister Ahmed Hussen told a news conference he did not know how many people might be eligible but said only a handful of passengers headed to the United States from Canada had been denied boarding. Trump’s decision on Friday, which also affects refugees, left many people uncertain of whether they could enter the United States. “Let me assure those who may be stranded in Canada that I will use my authority as minister to provide them with temporary residency if they need it,” Hussen said.

Liberal Prime Minister Justin Trudeau’s government has refrained from criticizing the United States, which takes 75% of Canadian exports, preferring instead to stress Canada is open to refugees. “Every country has the right to determine their policies,” said Hussen. The Canadian Council for Refugees and the Canadian Civil Liberties Association, or CCLA, called on Ottawa to withdraw from a Safe Third Country agreement with the United States, under which Canada returns asylum seekers crossing the border. “There’s a danger that the U.S. is doing blanket detentions and deportations … and not honoring asylum claims,” said CCLA Executive Director Sukanya Pillay. Such a move would be diplomatically insulting and Hussen said the pact would remain unchanged for now.

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Many many lawsuits in the pipeline. Attorneys general are getting together to challenge this. Sharp edges are already being blunted.

Trump Immigration Order Restricted By More US Judges (R.)

U.S. judges in at least four states blocked federal authorities from enforcing President Donald Trump’s executive order restricting immigration from seven Muslim-majority countries. Judges in Massachusetts, Virginia and Washington state, each home to major international airports, issued their rulings late Saturday or early Sunday, following an order on Saturday night by U.S. District Judge Ann Donnelly in New York’s Brooklyn borough. Donnelly had ruled in a lawsuit by two men from Iraq being held at John F. Kennedy International Airport. While none of the rulings struck down the executive order, the growing number of orders could complicate the administration’s effort to enforce it. Trump’s order on Friday halted immigration from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen for 90 days, and stopped the resettlement of refugees for 120 days.

The new Republican president said these actions were needed “to protect the American people from terrorist attacks by foreign nationals admitted to the United States.” Condemnation of the order was swift and broad-based. Democratic politicians and civil rights groups weighed in, as well as U.S. allies who view the actions as discriminatory and divisive. Democratic attorneys general from California, New York and other states, meanwhile, were discussing whether to pursue their own legal challenges. The U.S. Department of Homeland Security on Sunday said it “will comply with judicial orders,” while enforcing Trump’s executive order in a manner that ensures those entering the United States “do not pose a threat to our country or the American people.”

Across the United States, lawyers worked overnight to help confused international travelers at airports. Activists and lawyers tracking the arrivals said some Border Patrol agents appeared to be disregarding the various court orders. “There is really no method to this madness,” Becca Heller, director of the New York-based International Refugee Assistance Project organization, told reporters on a conference call.

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Homeland Security Secretary John Kelly has confirmed this.

Priebus Says Trump’s Immigration Ban Doesn’t Include Green Card Holders (BBG)

The White House defended President Donald Trump’s executive order halting entry to the U.S. from seven predominantly Muslim Middle East countries after judges blocked parts of the plan. Republican lawmakers suggested the president’s action was too broad and potentially damaging to the U.S. Trump’s chief of staff said the immigration order doesn’t include holders of green cards, although those people could be subject to additional steps when they travel overseas. A federal judge in Boston became the latest to curb Trump’s immigration order, directing customs officials at the city’s Logan International Airport on Sunday to let passengers from the seven countries with valid visas disembark and go on their way. Trump told his almost 23 million Twitter followers on Sunday morning: “Our country needs strong borders and extreme vetting, NOW. Look what is happening all over Europe and, indeed, the world – a horrible mess!”

[..] The judges’ moves came at the end of a day when a number of students, refugees and dual citizens were stuck overseas or detained, and some businesses, including Google, warned employees from those countries not to risk leaving the U.S. Spontaneous protests erupted at a number of airports around the nation, and world leaders including London’s mayor and Canada’s prime minister joined U.S. lawmakers in crying foul. Although some U.S. visa and green-card holders were blocked from boarding flights to the U.S. on Saturday after the order was issued, “the executive order doesn’t affect green-card holders moving forward,” Reince Priebus, the White House chief of staff, said Sunday on NBC’s “Meet the Press” in what seemed to be an adjustment to the administration’s policy.

He added that green-card holders – legal permanent residents – may be subject to additional screening if they travel to one of the seven countries targeted by the order. Even U.S. citizens may be affected: “I would suspect that if you’re American citizen traveling back and forth to Libya you’re likely to be subjected to further questioning when you come into an airport.,” Priebus said.

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As is Canada.

Theresa May Confirms UK Exempt From Trump’s ‘Muslim Ban’ (Ind.)

Theresa May has confirmed most UK citizens will not be affected by Donald Trump’s “Muslim ban” in a frantic bid to prevent a broad backlash against the policy from damaging her government. Foreign Secretary Boris Johnson sought the clarification in anxious calls to senior figures in Mr Trump’s team, highlighting the political problems the ban was causing Ms May’s administration. The Prime Minister had finally told Mr Johnson and Home Secretary Amber Rudd to “make representations” to their US counterparts, after she initially refused to condemn the ban sparking an angry backlash from her own MPs and others. Her early reluctance to criticise it came after she was the first foreign leader to visit Mr Trump at the White House, where the pair were pictured holding hands and the President delighted Ms May by expressing a desire to sign a quick post-Brexit trade deal with the UK.

The clarification to Mr Trump’s plan to temporarily ban travellers coming into the US from a group of predominantly Muslim countries – Iraq, Iran, Libya, Somalia, Sudan, Syria and Yemen – confirms that the only people affected will be dual citizens of the UK and a listed country, going directly to the US from the listed country. But it is unclear if the move by ministers will be enough to quell anger over the ban, much of which was targeted at its discriminatory nature rather than the effect on Britons alone. As events unfolded on Sunday, Conservatives demanded Mr Trump be forbidden from addressing Parliament on his state visit, Labour and the Lib Dems called for the President to be banned from the country and champion athlete Sir Mo Farah launched an outspoken attack on the ban.

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“..as Lincoln put it, a perpetual story of “a rebirth of freedom”..”

A Clarifying Moment in American History (Eliot A. Cohen)

In an epic week beginning with a dark and divisive inaugural speech, extraordinary attacks on a free press, a visit to the CIA that dishonored a monument to anonymous heroes who paid the ultimate price, and now an attempt to ban selected groups of Muslims (including interpreters who served with our forces in Iraq and those with green cards, though not those from countries with Trump hotels, or from really indispensable states like Saudi Arabia), he has lived down to expectations. Precisely because the problem is one of temperament and character, it will not get better. It will get worse, as power intoxicates Trump and those around him. It will probably end in calamity—substantial domestic protest and violence, a breakdown of international economic relationships, the collapse of major alliances, or perhaps one or more new wars (even with China) on top of the ones we already have.

It will not be surprising in the slightest if his term ends not in four or in eight years, but sooner, with impeachment or removal under the 25th Amendment. The sooner Americans get used to these likelihoods, the better. The question is, what should Americans do about it? To friends still thinking of serving as political appointees in this administration, beware: When you sell your soul to the Devil, he prefers to collect his purchase on the installment plan. Trump’s disregard for either Secretary of Defense Mattis or Secretary-designate Tillerson in his disastrous policy salvos this week, in favor of his White House advisers, tells you all you need to know about who is really in charge. To be associated with these people is going to be, for all but the strongest characters, an exercise in moral self-destruction.

For the community of conservative thinkers and experts, and more importantly, conservative politicians, this is a testing time. Either you stand up for your principles and for what you know is decent behavior, or you go down, if not now, then years from now, as a coward or opportunist. Your reputation will never recover, nor should it. Rifts are opening up among friends that will not be healed. The conservative movement of Ronald Reagan and Jack Kemp, of William F. Buckley and Irving Kristol, was always heterogeneous, but it more or less hung together. No more. New currents of thought, new alliances, new political configurations will emerge. The biggest split will be between those who draw a line and the power-sick—whose longing to have access to power, or influence it, or indeed to wield it themselves—causes them to fatally compromise their values.

For many more it will be a split between those obsessed with anxiety, hatred, and resentment, and those who can hear Lincoln’s call to the better angels of our nature, whose America is not replete with carnage, but a city on a hill. This is one of those clarifying moments in American history, and like most such, it came upon us unawares, although historians in later years will be able to trace the deep and the contingent causes that brought us to this day. There is nothing to fear in this fact; rather, patriots should embrace it. The story of the United States is, as Lincoln put it, a perpetual story of “a rebirth of freedom” and not just its inheritance from the founding generation.

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Isn’t it simply the result of having the reserve currency, though?

US Became A Dumping Ground For The World. No More (CNBC)

America’s shift toward bilateral trade deals shows a total loss of faith in the ability of multilateral forums (G7 … G20) and U.N. agencies (IMF, etc.) to rebalance the world economy through effective international policy coordination. That was long time coming – a sad coda to the global economic (political) and financial order created at the Bretton Woods Conference in July 1944. It is at that time that the economic policy coordination was enshrined as one of the fundamental principles in the IMF’s Articles of Agreement, enjoining both surplus and deficit countries to balance out their external trade positions. What followed – to this day – has been an unending comedy of errors, recriminations and hypocrisy as policy coordination and rules of a sustainable free trade were shunned in pursuit of self-serving national interests.

Predictably, surplus countries refused to adjust (i.e., to reduce their surpluses by running stronger domestic demand to boost imports), extolled their “economic virtue” and continued to live off their trade partners. But deficit countries had no choice; they had to adjust (i.e., to reduce their deficits by shrinking their domestic demand and cutting down their imports) because they ran out of money and had to submit to foreign lenders demanding strict conditions with respect to the timing and magnitude of their trade adjustment. And here is the world we ended up with. Germany is currently running the world’s largest trade surplus of $300 billion. China is not very far behind with a $264 billion surplus. Japan’s $200 billion surplus is rapidly catching up with its large Asian neighbor, and a group of smaller export-driven East Asian countries is showing a steadily rising surplus of $300 billion.

These countries account for 40% of world GDP, but their combined trade surpluses of $1 trillion represent about 80% of the world’s total. In other words, nearly half of the world economy is a drag on the rest of the global demand, output and employment. Do you still wonder why the world economy is stuck in a hopelessly slow lane? With its systematic half-a-trillion dollars of quasi structural trade deficits, the U.S. accounts for 40% of the world’s total (trade deficits) and bears the brunt of what some would call beggar-thy-neighbor trade policies. In a more polished diplomatic “G something” language, you could also call that a “collateral damage” of uncoordinated global economic policies. Damage it is. Over the last two years, these trade deficits have taken an entire percentage point out of America’s sluggish economic growth.

Think also of the huge downward pressure on output and employment these deficits exerted, and continue to exert, in our import-competing industries. And think of this, too. While the surplus countries keep accumulating reserves and net foreign assets by recycling the money we pay for our imports, our trade deficits got us to a huge net foreign debt of $7.8 trillion during the first three quarters of last year – a $1 trillion increase from the same period in 2015. People carping about imaginary trade wars say that this is nothing to worry about. They believe that China, Japan and the rest of “dynamic Asia” will keep lending us the money we pay for their imports, and that they will be happy to hold $2.7 trillion of our IOUs – 46% of the total held by foreign investors – as they did at the end of last November. These, of course, are fairy tales. America’s trade problems are urgent and vitally important policy issues.

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I know people hate him, but he’s interesting.

The Persuasion Filter and Immigration (Adams)

[..] my starting point is the understanding that human brains did not evolve to show us reality. We aren’t that smart. Instead, our brains create little movies in our heads, and yours can be completely different from mine. We see that situation now. Half the country thinks President Trump is well on his way to becoming a Hitler-like dictator. But many other Americans think Trump is an effective business person with good intentions. They can’t both be right. I use the word “filter” to describe an optional way of looking at the world. A good filter is one that makes you happy and does a good job of predicting what happens next. Let’s use that standard to compare the Hitler Filter to what I call the Persuasion Filter. The Hitler filter clearly isn’t making people happy. The people watching that movie are protesting in the streets.

Meanwhile, the people who see Trump as a good negotiator looking out for the country are quite happy with the job he has done so far. The Persuasion Filter says Trump opens with a big first offer and negotiates back to something reasonable. If you don’t recognize the method, it looks crazy, random, and racist. But what about predictions? The Persuasion Filter predicting Trump would become president when the Hitler Filter thought he had no chance. Now we have another chance to test the predictive power of the Persuasion Filter. If Trump is a Master Persuader, as I have been telling you for over a year, he just solved his biggest problem with immigration and you didn’t notice. The biggest problem is that his supporters on the right want more immigration control than he can (or should) deliver while his many critics on the left want far less.

Normally when you negotiate there is only one party on the other side. But in this case, Trump is negotiating two extremes in two different directions. It’s the toughest possible situation. Best case scenario is that 40% of the country want you dead when it’s all over. Not good. So what does a President Trump do when he is in an impossible situation? According to the Hitler Filter, he does more Hitler stuff, such as being more extreme than anyone expected with his recent immigration declarations. That filter accurately predicted that he would be “worse” once elected. Sure enough, his temporary immigration ban is more extreme than most people expected. If things never get worse from this point on, we would have to question the Hitler Filter. But if things get worse still, the Hitler Filter is looking good.

Compare to the Persuasion Filter. This filter says Trump always opens with an extreme first offer so he has room to negotiate to the middle. The temporary ban fits that model perfectly. On the immigration topic alone, both the Hitler Filter and the Persuasion Filter predict that we get to exactly the point we are at today. Let’s call that a tie in terms of predictive power. The hard part is predicting what happens next. The Persuasion Filter says Trump is negotiating with his critics on the extreme right at the same time as he is negotiating with his critics on the left. He needed one “opening offer” that would set up both sides for the next level of persuasion. And he found it. You just saw it.

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Devolved: Scotland, Wales and Northern Ireland. What a mess this is going to be.

Theresa May To Warn Devolved Nations: You Have No Veto On Brexit (G.)

Theresa May is set for a bracing final round of Brexit talks with the leaders of the devolved nations before the likely triggering of article 50, with the prime minister warning her counterparts from Scotland, Wales and Northern Ireland that they can have no veto over the process. May is to see the other leaders in Cardiff on Monday at a meeting of the joint ministerial committee (JMC), the forum for soliciting views from around the UK on the process of leaving the UK. While the first ministers of Scotland and Wales, Nicola Sturgeon and Carwyn Jones, have stressed they cannot accept a hard Brexit without membership of or full access to the EU’s single market, May is set to tell them this will not be possible.

“We will not agree on everything, but that doesn’t mean we will shy away from the necessary conversations and I hope we will have further constructive discussions,” May said in comments released ahead of the meeting. Last week’s supreme court judgment on the need for MPs to vote on triggering article 50 “made clear beyond doubt that relations with the EU are a matter for the UK government and UK parliament”, May said. While the main element of the ruling was to oblige May to put the article 50 process, which will trigger departure from the EU, as a bill to parliament – a subsidiary element of the judge’s decision was that the devolved governments could not veto the process.

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Line of the day: “..We don’t need these kinds of tensions at this time of a geopolitical Jurassic Park..”

UK and EU Heading For Economic Cold War – Italian Foreign Minister (G.)

A senior Italian official has warned that the UK and the European Union are heading into an “economic cold war” over Brexit that could wreak havoc on the west and weaken the continent. Mario Giro, Italy’s deputy foreign minister, said that while many countries in the EU had said the UK’s vote to leave the EU represented a loss to the union, there were more hardliners in the EU against the UK than it appeared. “When we are among the 27 [countries within the EU, not including the UK], the hardliners are more numerous than it appears. I cannot quote a country in particular at the moment. We will see it at the beginning of the negotiation,” Giro said in an interview with the Guardian.

He added: “We are hearing more and more that there are people – economic interests – who are thinking they can inherit some economic position, thinking that they can take away from the UK some of the position of the City of London. Not Italy, of course, because we are not in that position. And this will be an economic war. Let’s say an economic cold war, and we are not in favour of it.” The statement followed remarks this month by the British prime minister, Theresa May, in which she said the UK was prepared for a “hard Brexit” if she could not negotiate a reasonable agreement with the EU over Britain’s departure. She said attempts by other EU countries to wreak vengeance on the UK would be an “act of calamitous self-harm” because the UK in turn would be prepared to radically cut taxes to attract businesses.

Italian officials have always said their top priority in Brexit negotiations would be to guarantee the rights of hundreds of thousands of Italians who lived in the UK. Giro suggested that a coming “battle of interests” – which he described as a competition between economic interests, not necessarily individual states – could have terrible consequences. “This will be a disgrace. To enter into a new era of hard competition on big money questions involving companies, this is very bad for the western world. We don’t need these kinds of tensions at this time of a geopolitical Jurassic Park,” he said, meaning that it was a world where every interest was out for itself.

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Creative destruction.

Eurozone ‘Destruction’ Necessary For Countries To Thrive Again – Stark (Tel.)

The eurozone must break up if its members are to thrive again, according to a former ECB official. Jürgen Stark, who served on the ECB’s executive board during the financial crisis, said it was time to “think the unthinkable” and work towards a “reset” of Europe that pulled power away from Brussels. The former vice-president of Germany’s Bundesbank said the creation of a two-speed eurozone, with France and Germany at its core, would help to ensure the smaller bloc’s survival. “We have to think the unthinkable. And it is already unthinkable to think about the restart of Europe, which means we have to be creative. But in order to be creative, you have to destruct [sic] something.” Mr Stark said countries such as Italy, which has seen its economy stagnate since the crisis, would be better off outside the single currency area.

“Italy was accustomed to this ongoing devaluation of the lira from the mid-Seventies until the late Nineties. Maybe they need devaluation and their own currency in order to become more competitive again,” he said. Speaking at an event organised by ETF Securities, Mr Stark said current accommodative ECB policy meant countries were likely to “muddle through” in the coming years and move closer “by coincidence”. However, he said the eurozone’s problems would resurface, regardless of the political landscape. “In the long run, in the context of a European reset, one has to discuss the issue of whether it is still appropriate to keep these countries with different economic structures and different economic performances together. There is no convergence anymore. “We have had divergence rather than convergence… from the very beginning.”

Mr Stark said Belgium, France, Luxembourg, the Netherlands and Germany “plus Austria and Finland” could form the core of a system with “staggered integration” for other countries such as Italy and Greece. While he described Marine Le Pen’s victory in French elections this year as “unlikely” due to the country’s voting system, Mr Stark said the Front National leader’s victory would also be the catalyst of a eurozone split. Mr Stark, who resigned from the ECB in 2011, said he “blamed” the central bank for allowing countries to drag their heels on reforms. “As long as the ECB gives a signal in its operations to governments that ‘we are the backstop’ and ‘we will prevent country ‘a’ or country ‘b’ from becoming insolvent’ – there will be no structural reforms,” he said.

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A correlation vs causation problem. Where the US was very strong, China is not.

The Dollar Will Die With a Whimper, Not a Bang (Rickards)

[..] the dollar and sterling seesawed over the 20 years following the First World War, with one taking the lead from the other as the leading reserve currency and in turn giving back the lead. In fact, the period from 1919–1939 was really one in which the world had two major reserve currencies — dollars and sterling — operating side by side. Finally, in 1939, England suspended gold shipments in order to fight the Second World War and the role of sterling as a reliable store of value was greatly diminished apart from the U.K.’s special trading zone of Australia, Canada and other Commonwealth nations. The 1944 Bretton Woods conference was merely recognition of a process of dollar reserve dominance that had started in 1914. The significance of the process by which the dollar replaced sterling over a 30-year period has huge implications for you today.

Slippage in the dollar’s role as the leading global reserve currency is not necessarily something that would happen overnight, but is more likely to be a slow, steady process. Signs of this are already visible. In 2000, dollar assets were about 70% of global reserves. Today, the comparable figure is about 62%. If this trend continues, one could easily see the dollar fall below 50% in the not-too-distant future. It is equally obvious that a major creditor nation is emerging to challenge the U.S. today just as the U.S. emerged to challenge the U.K. in 1914. That power is China. The U.S. had massive gold inflows from 1914-1944. Although China’s gold purchases may have fallen off recently, it has been experiencing massive gold inflows. Gold reserves at the People’s Bank of China increased to 1,842 tonnes at the end of 2016, according to the China Gold Association. That’s up 11% from the 1,658 tonnes it held in June, 2015.

But China has acquired thousands of metric tonnes since without reporting these acquisitions to the IMF or World Gold Council. Based on available data on imports and the output of Chinese mines, actual Chinese government and private gold holdings are likely much higher. It’s hard to pinpoint because China operates through secret channels and does not officially report its gold holdings except at rare intervals. China’s gold acquisition is not the result of a formal gold standard, but is happening by stealth acquisitions on the market. They’re using intelligence and military assets, covert operations and market manipulation. But the result is the same. Gold’s been flowing to China in recent years, just as gold flowed to the U.S. before Bretton Woods.

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Get your shades out. The future’s so bright.

Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (WS)

The Dow-20,000 hats have come out of the drawer after an agonizingly long wait that had commenced in early December with the Dow Jones Industrial Average tantalizingly close to the sacred number before the selling started all over again. What a ride it has been. From the beginning of 2011 through January 27, 2017, so a little more than six years, the DJIA has soared 73%, from 11,577 to 20,094. Glorious!! But when it comes to revenues of the 30 Dow component companies – a reality that is harder to doctor than ex-bad-items adjusted earnings-per-share hyped by Wall Street – the picture turns morose. The 30 Dow component companies represent the leaders of their industries. They’re among the largest, most valuable, most iconic American companies. And they’re periodically booted out to accommodate a changed world.

[..] Ah-ha, you say. It’s all the oil bust’s fault. Without the oil companies that have been ravaged by the oil bust, revenues are fine. OK, maybe not fine. Revenues without the oil bust companies are up 13% since 2011. That’s an average annual growth rate of 2.5%, barely above the rate of inflation! But the DJIA hit 20,000 with the oil majors in the average. So in looking at the relationship between aggregate revenues and stock price movements, we need to leave them in the mix. And reality looks even worse. Apple, whose revenues have skyrocketed by over 1,000% since 2006, from $19.3 billion to $216 billion, became a Dow component in 2015, replacing AT&T. And its revenues weren’t part of the 30 Dow components until 2015. So here’s what the aggregate revenues of the Dow components look like without Apple (blue columns) and without Apple but with AT&T (brown columns). A pure stagnation fest:

In both scenarios, revenues in 2016 were lower than they had been in 2008. Only 2009 and 2010 were lower. So in terms of revenues, 2016 was for the Dow components ex-Apple the worst year since 2010! And this despite the five-year binge in acquisitions! So how have the last two years been? Don’t even ask. Of the 30 companies in the Dow, 16 sported declining revenues in 2016. And 17 sported declining revenues over the two-year span since 2014! Only two of them are oil companies! This table shows that inglorious list in all its beauty:

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Deliberate torture in a sort of good cop bad cop routine.

Eurozone Bailout Fund Says Greek Public Debt Is ‘Manageable’ (R.)

Greece’s public debt can be manageable, the eurozone bailout fund said on Sunday, responding to a leaked report by the IMF that the country’s debt will explode to 275% of GDP by 2060. A spokesman for the bailout fund, the European Stability Mechanism (ESM), said the path for Greek public finances agreed between Athens and the eurozone was credible and backed by contingency measures in case of unforeseen events. “We believe that Greece’s debt burden can be manageable, if the agreed reforms are fully implemented, thanks to the ESM’s exceptionally favorable loan conditions over the long term and the recently adopted short-term debt relief measures,” the ESM said. In the document, seen by the Financial Times, the IMF calculated that Greece’s debt load would reach 170% of gross domestic product by 2020 and 164% by 2022.

But it would become explosive thereafter and grow to 275% of GDP by 2060, the paper quoted the report as saying. The spokesman said, however, that the eurozone had promised to offer Greece additional debt relief if Athens delivers on all its reform promises. “As a result, we see no reason for an alarmistic assessment of Greece’s debt situation”. The IMF has long been calling for substantial eurozone debt relief for Athens, but Germany, which faces elections this year, has been strongly opposed to such a move until after 2018, when Greece is to finish all its promised reforms. The IMF assessment of Greek debt developments may make it impossible for the Fund to join the current bailout for Greece, now shouldered only by eurozone governments, because the fund’s policy is to enter programs which in the end allow a country to cope on its own. Eurozone governments want the IMF on board, but do not seem to be ready to provide the debt relief to Greece that is necessary for the Fund to join.

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Incursions into Greek air space have become ‘normal’. Now this. Brussels better act. Or Greece will, at some point. It puts Theresa May’s fast trip to Ankara to sell more weaponry in a bleak light.

Turkish Gunboat With Army Chief Sails Into Greek Waters; High Alert (K.)

The Greek military was on high alert on Sunday after a Turkish gunboat carrying Chief of General Staff Hulusi Akar sailed into Greek waters and around the Imia islets at around 10.30 a.m. The Turkish gunboat was escorted by several assault craft carrying commandos, which also circled the islets that brought Greece and Turkey to the brink of war 21 years ago, almost to the day. Greek authorities responded to what is being viewed as Turkish provocation with warnings and dispatched the Hellenic Navy’s Krataios gunboat, which escorted the Turkish flotilla out of Greece’s territorial waters. Diplomatic officials believe the incident to be a response to a Greek Supreme Court ruling last week rejecting a request from Ankara for the extradition of eight Turkish servicemen accused of taking part in failed coup last summer. Turkish military authorities released photographs showing Akar on the gunboat, with Imia in the background.

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Bless their souls.

Greek Fishermen Who Brave The Seas To Rescue Refugees Now Need Saving (NBC)

At the height of the refugee crisis in Sept. 2015, the 63-year-old Marmarinos and the rest of the village’s fishermen gave up working to spend months saving families from the rough, cold waters. Many of them were seeking safety from the bombs falling on Syria. “Mothers, pregnant women, children,” Marmarinos recalled. “So many children, all in the waters, wet, in a horrible situation.” Pideris, 40, says the fishermen risked their own lives “because it was the humane thing to do.” He said refugees and migrants “would fall overboard, they didn’t know how to navigate, boats were left adrift, they’d lose their engines, they’d break apart and the sea would fill with people.” But today, it’s Pideris and Marmarinos who need help after a winter storm on January 9 dropped nearly two feet of snow in their village. The boat canopies couldn’t take the weight and capsized while tied up in the harbor.

The boats are the pair’s sole sources of income. Pideris said he was in shock. “I’ve been in danger at sea, fishing and helping refugees, and my boat sinks in the safety of the harbor,” he said. “My brain stopped. My heart stopped. I was the living dead.” Both vessels sat in the corrosive sea water for three days, until the roads cleared enough to bring in a crane. The electronics and engines on both vessels were destroyed and require thousands of dollars in repairs. The mayor of Lesbos says money from a humanitarian award — the Olof Palme prize, which given to the islanders for embracing migrants – will go toward the cost of repairs. Marmarinos says he’s proud “because I offered help and I see it’s coming back to me … Even if no one helped I’d still be proud and if it happens again, I’d do the same.” Marmarinos and Pideris hope to be fishing again by early next month.

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I think that’s the clearest picture of what has happened to Arctic sea ice that I’ve seen.

NASA – 30 Years Of Before And After Images Around The World (F.)

The Arctic’s sea ice has been in decline for decades as pictured above comparing September 1984 to September 2016. The total area of persistent (4 years or older) ice has declined from 718,000 square miles to 42,000 square miles in the time period above. In the above images blue/grey ice is younger whereas white ice is older.

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Dec 112016
 
 December 11, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , , , ,  


‘Daly’ Somewhere in the South, possibly Miami 1941

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)
Stocks Have Only Been This Expensive During Times Of Crisis (BI)
UK Government Faces New Brexit Court Case (R.)
Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)
Does Krugman Really Support The Working Class? (Dean Baker)
Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)
Quebec Paves Way For More Oil And Gas Exploration (BBG)
Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)
Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)
The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)
WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)
Russian Bombardment ‘Forces ISIS Out Of Palmyra’ Hours After Re-Entry (AFP)

 

 

“A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk..”

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)

Next year could turn out to be a make-or-break year for Europe. But unlike in 2008, neither the governments nor the central banks have sufficient means to deal with another crisis. And it’s not entirely clear whether their intervention last time actually made things better or worse. Take Mr. Draghi, for instance. By lowering interest rates in the euro zone and buying up debt en masse, he has been trying to give the European economy a much needed shot in the arm. Yet despite all of his efforts, the specter of deflation still looms over the bloc, the future of the common currency is uncertain and lenders in southern Europe are still fighting for their existence. At the same time, the negative effects of Mr. Draghi’s policies are becoming more apparent. The STOXX Europe 600 index may have closed at its highest level in more than two months earlier this week, but it’s still 65% lower than where it was before the financial crisis.

The IMF has even said it feared a third of European banks wouldn’t be able to become profitable again even if the economy were to recover. The weird thing about the way the European economy has fared after the financial crisis is that even though businesses have been struggling, not a lot of them are going under. Insolvencies have been below the historical average. In Germany, for instance, the%age of companies declaring bankruptcy was the same right before the Lehman Brothers crash as it was in the 1990s – between 1.5 and 2%. Since the crisis began, that metric has fallen steadily. In 2015, the last full year for which data is available, it stood at 0.6%. Insolvency rates have even dropped in the euro zone’s weakest members along its southern periphery. Common sense would have one believe that the number of bankruptcies increases in times of crisis – especially during crises as protracted as financial ones.

“With its zero interest rate policy and the massive purchasing of bonds, the ECB is undermining the process of creative destruction, which is so important to a market economy,” said Markus Krall at Goetz Partners in Frankfurt. The ECB, for its part, was willing to do anything to prevent the economy from tanking. The central bank flooded the banks with money, and that deluge reduced companies’ capital costs to practically nothing. Even the most inefficient businesses can survive in that environment. Mr. Krall did the math on what it would mean for the balance sheets of European banks if insolvency rates had been at the historical average all along. He discovered that the €1 trillion in bad loans the ECB identified in its latest report would be closer to the tune of €2.5 trillion in that hypothetical scenario. “A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk,” Mr. Krall said. “The ECB is creating a world of zombie banks and zombie companies,” he added.

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1929, 1999, 2007.

Stocks Have Only Been This Expensive During Times Of Crisis (BI)

Stocks are getting a bit pricey. All three major indexes break though their all-time highs on a seemingly daily basis, and this has pushed earnings multiples higher and higher. The current 12-month trailing price-to-earnings ratio of the S&P 500 sits at 25.95x, while the forward 12-month price-to-earnings is roughly 17.1x, according to FactSet data. Each of these is higher than its long-term average. In fact, based on one measure of valuation, the market hasn’t been this expensive anytime other than before a massive crash. The cyclical adjusted price-to-earnings ratio, better known as Shiller P/E, which adjusts the price-to-earnings ratio for cyclical factors such as inflation, stands at 27.86 as of Friday.

There have only been a few instances in history when stocks have been this expensive: just before the crash of 1929, the years leading up to the tech bubble and its bursting, and around the financial crisis of 2007-09. This does not necessarily mean that a crash is imminent — during the tech bubble, the Shiller P/E made it well into the 30s before coming back down. Additionally, there are some criticisms that Shiller P/E is generally more backward-looking since it adjusts for the cycle, so it may not be as accurate. Another caveat is that, during the three previous instances, investors have been incredibly bullish on stocks (there’s a reason Robert Shiller’s book is titled “Irrational Exuberance”) and most indicators of sentiment — from the American Association of Individual Investors to Bank of America Merrill Lynch’s sell-side sentiment indicator — are still depressed. Still, an elevated level for the Shiller P/E certainly isn’t going to make it any easier to sleep at night.

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As the EU descends into chaos, some of these people are going to remember something about a gift horse’s mouth.

UK Government Faces New Brexit Court Case (R.)

Opponents to Britain leaving the EU will launch a fresh legal action this week, which could further hamper Prime Minister Theresa May’s Brexit plans, The Sunday Times reported. The newspaper said campaigners will write to the UK government on Monday saying they are taking it to the High Court in an effort to keep Britain in the single market. It said the claimants will seek a judicial review in an attempt to give lawmakers a new power of veto over the terms on which Britain leaves the EU. They argue the government “has no mandate” to withdraw from the single market because it was not on the referendum ballot paper on June 23 and was not part of the ruling Conservative Party’s manifesto for the 2015 general election.

May has said she wants to invoke Article 50 of the EU’s Lisbon Treaty by the end of March, kicking off up to two years of exit negotiations. However the High Court ruled last month that Article 50 cannot be triggered without parliament’s assent. That ruling is being challenged by the government in Britain’s Supreme Court. The Sunday Times said the new court case hinges on whether the government would also have to trigger another legal measure — Article 127 of the European Economic Area agreement — in order to quit the single market. It said ministers argue Britain automatically exits the single market when it quits the EU. But, it said if the claimants win the new case, the government would have to gain the approval of lawmakers.

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Sanity evaporates in the US. And it’s not Trump.

Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)

While we wait to see if and when the Senate will pass (and president will sign) Bill “H.R. 6393, Intelligence Authorization Act for Fiscal Year 2017”, which was passed by the House at the end of November with an overwhelming majority and which seeks to crack down on websites suspected of conducting Russian propaganda and calling for the US government to “counter active measures by Russia to exert covert influence … carried out in coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly,” another, perhaps even more dangerous and limiting to civil rights and freedom of speech bill passed on December 8.

Recall that as we reported in early June, “a bill to implement the U.S.’ very own de facto Ministry of Truth has been quietly introduced in Congress. As with any legislation attempting to dodge the public spotlight the Countering Foreign Propaganda and Disinformation Act of 2016 marks a further curtailment of press freedom and another avenue to stultify avenues of accurate information. Introduced by Congressmen Adam Kinzinger and Ted Lieu, H.R. 5181 seeks a “whole-government approach without the bureaucratic restrictions” to counter “foreign disinformation and manipulation,” which they believe threaten the world’s “security and stability.” Also called the Countering Information Warfare Act of 2016 (S. 2692), when introduced in March by Sen. Rob Portman, the legislation represents a dramatic return to Cold War-era government propaganda battles.

“These countries spend vast sums of money on advanced broadcast and digital media capabilities, targeted campaigns, funding of foreign political movements, and other efforts to influence key audiences and populations,” Portman explained, adding that while the U.S. spends a relatively small amount on its Voice of America, the Kremlin provides enormous funding for its news organization, RT.“Surprisingly,” Portman continued, “there is currently no single U.S. governmental agency or department charged with the national level development, integration and synchronization of whole-of-government strategies to counter foreign propaganda and disinformation.”

Long before the “fake news” meme became a daily topic of extensive conversation on wuch mainstream fake news portals as CNN and WaPo, H.R. 5181 would rask the Secretary of State with coordinating the Secretary of Defense, the Director of National Intelligence, and the Broadcasting Board of Governors to “establish a Center for Information Analysis and Response,” which will pinpoint sources of disinformation, analyze data, and — in true dystopic manner — ‘develop and disseminate’ “fact-based narratives” to counter effrontery propaganda.

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I don’t really want to mention Krugman ever again, but maybe just this once…

Does Krugman Really Support The Working Class? (Dean Baker)

Paul Krugman told readers that intellectual types like him tend to vote for progressive taxes and other measures that benefit white working class people. This is only partly true. People with college and advanced degrees tend to be strong supporters of recent trade deals [I’m including China’s entry to the WTO] that have been a major factor in the loss of manufacturing jobs in the last quarter century, putting downward pressure on the pay of workers without college degrees. They also tend to support stronger and longer patent and copyright protections (partly in trade deals), which also redistribute income upward. (We will pay $430 billion for prescription drugs this year, which would cost 10-20% of this amount in a free market. The difference is equal to roughly five times annual spending on food stamps.)

Educated people also tended to support the deregulation of the financial sector, which has led to some of the largest fortunes in the country. They also overwhelmingly supported the 2008 bailout which threw a lifeline to the Wall Street banks at a time when the market was going to condemn them to the dustbin of history. (Sorry, the second Great Depression story as the alternative is nonsense — that would have required a decade of stupid policy, nothing about the financial collapse itself would have entailed a second Great Depression.)

His crew has also been at best lukewarm on defending unions. However they don’t seem to like free trade in professional services that would, for example, allow more foreign doctors to practice in the United States, bringing their pay in line with doctors in Europe and Canada. The lower pay for doctors alone could save us close to $100 billion a year in health care expenses.

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OPEC members cheat. What do you think non-members will do? Still, prices can remain ‘high-ish’ until we find out.

Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)

11 countries agreed on Saturday to cut their oil output, teaming up with the OPEC cartel in an exceptional bid to end the world’s glut of crude and reverse a dramatic fall in income. Russia and 10 other non-OPEC states will reduce their production by more than half a million barrels per day (bpd), OPEC announced. The deal will take effect from the start of 2017 and last for six months, though it may be extended depending on market conditions. “I am happy to announce that a historic agreement has been reached,” said Qatar’s Energy Minister Mohammed Bin Saleh Al-Sada, whose country holds the rotating presidency of the OPEC. The cut will contribute to OPEC’s own initiative to ease a saturated market and end a price slump that has brutally affected the economies of many oil producers.

On November 30 its members announced a slash in output by 1.2 million barrels per day (bpd) beginning in January, to 32.5 million bpd. Under that deal, OPEC called on non-member producer states to lower their output by 600,000 bpd. Saturday’s deal approves cuts totalling 558,000 bpd. Russia had already signalled it would provide half of that production cut in the first half of 2017. Among the other countries that will contribute cuts Kazakhstan agreed to reduce production by 20,000 bpd, Mexico 100,000 bpd, Oman 40,000 bpd and Azerbaijan 35,000 bpd, according to Bloomberg. The deal also includes Malaysia, Bahrain, Equatorial Guinea, Sudan, South Sudan and Brunei.

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Québec is powered by hydro. All this is just for export to the US. Turn ‘La Belle Province’ into a moonscape. It’s up to the First Nations again to stop the mess. You still like Justin?

Quebec Paves Way For More Oil And Gas Exploration (BBG)

Quebec’s legislature passed a bill that will pave the way for more oil and gas exploration, providing a boost to drillers such as Junex Inc. while drawing criticism from environmental, aboriginal and citizen groups. Bill 106 passed Quebec’s National Assembly in a 62-38 vote early Saturday after an overnight debate ahead of the holiday break. The legislation is meant to implement Quebec’s clean energy plan but also contains provisions allowing for energy exploration, potentially including fracking. “Quebec’s government just voted down an amendment to ban fracking in a triumph of science over ‘leave it in the ground’ lunacy,” Calgary-based Questerre Energy tweeted early Saturday morning. Shares of companies that hold exploration rights, including Questerre and Junex, based in Quebec City, surged last week as passage of the legislation looked likely.

Questerre holds about 1 million acres and has drilled test wells in the Utica shale formation along the St. Lawrence River, according to its website. Questerre’s shares rose the most in more than eight years on Thursday and inched up again on Friday. Junex’s stock increased 30%, the most in almost two years. Bill 106 creates a new agency to promote Quebec’s transition to cleaner energy yet also lays out a framework for oil and gas development in the Canadian province. Environmental, aboriginal and citizen groups argued that the bill’s mandate is contradictory, that debate was rushed and that it should have included a moratorium on fracking as well as greater protection for landowners. [..] Bill 106 strips power from landowners who will be powerless to stop exploration by companies with drilling claims, Carole Dupuis at Regroupement vigilance hydrocarbures Quebec, said by phone.

That, in turn, will hurt property values, especially if exploration leads to fracking. “If there was not the fracking issue, the landowner issue would not be a problem. It’s an access issue,” she said. “What’s the value of your land if someone has been drilling one kilometer from you and you don’t know if your drinking water is safe?” [..] Bill 106 goes against aboriginal rights to self-determination and to establish the best use of their lands, Mi’gmaq Chief Darcy Gray said in an e-mail Saturday. “The bill also opens up our lands to exploration that we feel could have long-lasting, detrimental and irreparable damage,” he wrote “especially with regards to hydraulic fracturing and or other types of well stimulation.” “Why this would even be considered, or how it could be construed as a favorable initiative, is beyond me,” he said.

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When will Modi’s support crash?

Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)

It’s 11 o’clock, and Laxman Chauhan still hasn’t sold any fish. His stall in the central market in the west Indian city of Panjim has been open for three hours, but none of his usual clients have come today. He checks his watch, and then takes a walk to see if other vendors have had any customers. “Sold anything yet?” he asks Ramila Pujjar, who has set her stall up with a glistening display of the morning’s catch. She hasn’t either. “I’m losing 2,000-3,000 rupees (£23-£35) a day,” says Chauhan. “I’m throwing fish away every day.” The low footfall at Panjim’s fish market is unusual; fish is a staple in Goan cuisine but, for the past month, since the prime minister, Narendra Modi, abolished the 500 and 1,000 rupee notes, business has suffered. “I’m losing money because of the government,” says Pujjar.

“The government only takes care of the rich, the poor will always be poor.” Modi’s surprise announcement wiped out 86% of the nation’s currency overnight, leaving the vendors at Panjim’s fish market to suffer heavy losses. “Nobody has cash, so they’re not buying fish.” Panjim is no different to the rest of India. Long queues wind around banks and ATMs in every city as people scramble to exchange their high-value banknotes. The cash crisis has hit millions of traders, as people tighten purse strings and save up precious banknotes. But now, this sleepy tourist town is going to become the laboratory for a radical new experiment. From January, Goa’s government has announced that the city will go “cashless”, meaning every street vendor, rickshaw driver and shopkeeper must offer their customers the option to pay using a debit card or mobile phone. The cash-free drive will attempt to close down India’s thriving parallel economy of untaxed cash transactions.

A government circular at the beginning of the month instructed traders: “Goa is likely to become the state in India to go for cashless transactions from 31 December. Even though cash transactions are not being banned, it is in the interest of the government to encourage cashless transactions.” The policy, announced by India’s defence minister, Manohar Parrikar, is in line with Modi’s vision for a cash-free India. Last week, the finance minister, Arun Jaitley, announced a series of discounts on digital transactions for petrol, railway tickets and insurance policies. Modi has urged young people to support his “less cash” economy in a radio broadcast: “I need the help of young people in India … There are many people in your families or neighbourhoods who may not know how to use technologies such as e-wallets and payments through mobiles. I urge you to spend some time … to teach this technology to at least 10 families who may not know it,” he said.

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Sure. Just get your most creative accountants out. A “landmark year”?

Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)

Greece’s Parliament has passed a budget of continued austerity as mandated by the country’s creditors, but which forecasts robust growth for 2017. Prime Minister Alexis Tsipras says it will mark Greece’s “final exit” from its nearly decade-long financial crisis. The budget adds more than €1 billion in new taxes, mostly indirect taxes on items from phone calls to alcohol. It also cuts spending by over €1 billion. The budget was backed by the left-dominated ruling coalition and opposed by all other parties. It passed by a vote of 152-146 on Saturday. Despite the continued austerity, Tsipras predicted that 2017 will be a “landmark year” with 2.7% economic growth. He said his government has achieved a higher-than-forecast 2016 primary surplus.

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Interesting long interview.

The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)

You are “the minister” who refused to cooperate with the FBI because you suspected their agents on mission in Iceland were of trying to frame Julian Assange. Do you confirm this? Yes. What happened was that in June 2011, US authorities made some approaches to us indicating they had knowledge of hackers wanting to destroy software systems in Iceland. I was a minister at the time. They offered help. I was suspicious, well aware that a helping hand might easily become a manipulating hand! Later in the summer, in August, they sent a planeload of FBI agents to Iceland seeking our cooperation in what I understood as an operation set up to frame Julian Assange and WikiLeaks.

Since they had not been authorised by the Icelandic authorities to carry out police work in Iceland and since a crack-down on WikiLeaks was not on my agenda, to say the least, I ordered that all cooperation with them be promptly terminated and I also made it clear that they should cease all activities in Iceland immediately. It was also made clear to them that they were to leave the country. They were unable to get permission to operate in Iceland as police agents, but I believe they went to other countries, at least to Denmark. I also made it clear at the time that if I had to take sides with either WikiLeaks or the FBI or CIA, I would have no difficulty in choosing: I would be on the side of WikiLeaks.

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Erdogan’s son-in-law, “groomed to be Mr Erdogan’s successor”. Parliament certain to vote to hand Erdogan much increased powers. Seen any false flags lately?

WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)

WikiLeaks has released a cache of thousands of personal emails allegedly from the account of senior Turkish government minister Berat Albayrak, son-in-law of the country’s president, Recep Tayyip Erdogan, which it says shows the extent of links between Mr Albayrak and a company implicated in deals with Isis-controlled oil fields. The 60,000 strong searchable cache, released on Monday, spans the time period between April 2000 – September 23 2016, and shows Mr Albayrak had intimate knowledge of staffing and salary issues at Powertrans, a company which was controversially given a monopoly on the road and rail transportation of oil into the country from Iraqi Kurdistan.

Turkish media reported in 2014 and 2015 that Powertrans has been accused of mixing in oil produced by Isis in neighbouring Syria and adding it to local shipments which eventually reached Turkey, although the charges have not been substantiated by any solid evidence. The emails were apparently obtained by Redhack, a Turkish hactivist collective. WikiLeaks founder Julian Assange said that they were published in response to the Turkish government’s widening crackdown on dissent. Mr Albayrak, one of the most powerful individuals in Turkey, is widely seen as being groomed to be Mr Erdogan’s successor. The hardline president has been consolidating his grip on power by implementing emergency powers and arresting thousands of journalists, activists and academics in the wake of a failed military coup in July.

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Reported without any added anti-Putin innuendo?!

Russian Bombardment Forces ISIS Out Of Palmyra Hours After Re-Entry (AFP)

A Russian aerial onslaught forced Islamic State fighters to withdraw from Palmyra at dawn on Sunday, only hours after the jihadis had re-entered the ancient Syrian city, a monitor said.“Intense Russian raids since last night forced IS out of Palmyra, hours after the jihadists retook control of the city,” said Rami Abdel Rahman of the Syrian Observatory for Human Rights.The raids killed a large number of militants in the desert city in central Syria, Abdel Rahman told AFP. “The army brought reinforcements into Palmyra last night, and the raids are continuing on jihadist positions around the city.”Isis began an offensive last week near Palmyra, which is on Unesco’s world heritage list. In May last year, the Sunni Muslim extremist group seized several towns in Homs province including Palmyra, where they caused extensive damage to many of its ancient sites. They were ousted from Palmyra in March by Syrian regime forces backed by Russia.

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May 192015
 
 May 19, 2015  Posted by at 10:04 am Finance Tagged with: , , , , , , , , , ,  


Harris&Ewing Car interior. Washington & Old Dominion R.R. 1930

We Are Now Entering The Terminal Phase Of The Global Financial System (Stockman)
Bank Of America Is Forecasting A ‘Scary Summer’ For Stock Market (MarketWatch)
Pay Bankers No More Than Civil Servants, Says Ex-Cameron Strategist (Guardian)
Fossil Fuel Companies Get $10 Million A Minute In Subsidies: IMF (Guardian)
UK Inflation Rate Below Zero for First Time Since 1960 (Bloomberg)
As The UK Has Discovered, There Is No Postindustrial Promised Land (Guardian)
The End of Meaningful Work: A World of Machines and Social Alienation (Drew)
Varoufakis: Deal With Creditors ‘A Matter Of One Week’ (Bloomberg)
Greece Sends Reform Proposals For Lenders’ Scrutiny (Kathimerini)
Juncker Steps In With Greek Rescue As Talks Reach ‘Final Stages’ (Telegraph)
Tsipras: Relaunch Of State Broadcaster ERT ‘Victory Of Democracy’ (Kathimerini)
Every Day Without A Deal Costs Greece €22.3 Million, 600 Jobs (Kathimerini)
China’s Lodestar Is Not Reform But Avoiding Chaos (Reuters)
China Corruption Purge Snares 115 State Owned Enterprise ‘Tigers’ (FT)
How China’s ‘Insane’ Rally Could Grind To A Halt (CNBC)
Ratings Agency Fitch To Downgrade Many European Banks (Reuters)
‘We Must Resist Corporations’: Le Pen Targets TTIP Deal In New Campaign (RT)
Debt-Choked Puerto Rico at Fiscal Brink as Bond Buyers Pull Back (Bloomberg)
Flamboyant Tycoon Ready To Revitalize Quebec’s Separatists (Guardian)
97% of Britain’s Wildflower Meadows Have Gone (Guardian)

“The financial inflation is obviously the great bubble that afflicts the entire financial system of the world. It’s becoming increasingly unstable and it will eventually collapse.”

We Are Now Entering The Terminal Phase Of The Global Financial System (Stockman)

Today David Stockman, the man President Ronald Reagan called upon along with Dr. Paul Craig Roberts to help save the United States from disaster in 1981, warned King World News that we are now entering the “terminal phase” of the global financial system that will end in total collapse. Eric King: “David, I wanted to get your thoughts on gold in the midst of this big deflation you think is in front of us. When you look at the collapse of 2008 – 2009, gold was one of the best performing asset classes. Gold went down but it went down much less relative to virtually everything else. Contrast that to 1973 – 1974, where we had a 47% stock market collapse. But during that time we had skyrocketing gold and silver. What’s in front of us because it looks like gold and silver may be ending a 4 year bear market and ready for a 1973 – 1974-style up-move?”

David Stockman: “Yes. I think the two periods are quite different. Although at the bottom it’s central bank errors that underlie each. But remember that in the 1970s we had just finally exited a semi-stable Bretton Woods Gold Exchange Standard system. There still was, at the end of the day, an anchor on the central banks that was thrown overboard by Nixon in 1971…. “So the first go-round was a rip-roaring price inflation because there had not yet been enough time under the fiat money and balance sheet expansion by the central banks to create excess capacity in the world industrial system. So as the boom in demand took off, commodity prices soared. That fed into domestic costs and labor wages in particular. There weren’t a million cheap workers coming out of the rice paddies in China yet because it was still in the Dark Ages of Mao and not part of the world economy.

And so you had a classic inflation blowoff and flight to gold in the 1970s as a result of that initial money printing cycle. Now, I think 40 years later central banks are erring to much greater extent but the cycle is different. We have now created massive excess industrial shipping, mining and manufacturing capacity in the world. Therefore we don’t have a short-run consumer price blowoff. We still have massive cheap labor in the world and so therefore we don’t have a wage price spiral. The result is that all of the massive stimulus from the central banks has gone into the financial inflation, not goods and services. The financial inflation is obviously the great bubble that afflicts the entire financial system of the world. It’s becoming increasingly unstable and it will eventually collapse. And when it does I think it will mark the complete failure of a monetary system that has basically been metastasizing since 1971.

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“.. investors are trapped in this “Twilight Zone”—the transition period between the end of quantitative easing and the first rate hike by the Fed..”

Bank Of America Is Forecasting A ‘Scary Summer’ For Stock Market (MarketWatch)

Investors might want to add a little cash and some gold to their portfolio’s summer outfit. So say analysts at Bank of America Merrill Lynch, who are forecasting a grim summer for stocks this year. In other words, it might be wise to apply ample dollops of market-correction block in addition to any sunscreen you might wear. While falling short of calling for an outright bear market, which needs a rise in interest rates and a decline in earnings per share, Bank of America is painting a pretty ugly picture for investors over the next several months. The Wall Street firm warns that the market will see a scary summer because investors are trapped in this “Twilight Zone”—the transition period between the end of quantitative easing and the first rate hike by the Fed, as it tries to normalize its fiscal policy.

In the interim, investors can expect mediocre returns, volatile trading, correlation breakdowns and flash crashes, says chief investment strategist Michael Hartnett. Harnett advises reducing risk rather than maximizing return for the midpoint of the year, saying it could be a “lose-lose” summer for risk assets. On the one hand, broad economic trends may improve and the Fed may get to raise rates for the first time in about a decade, which may cause volatility at least temporarily. On the other hand, “more ominously for consensus positioning, the macro doesn’t recover, in which case [earnings-per-share] downgrades drag risk-assets lower,” the Bank of America analyst says.

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Bright view: “The goal here is to create a much more secure financial system where you don’t have these giant companies that pose a threat to the whole economy.”

Pay Bankers No More Than Civil Servants, Says Ex-Cameron Strategist (Guardian)

David Cameron’s former strategy guru Steve Hilton has suggested bankers should be paid no more than senior civil servants as they rely on the implicit backing of the taxpayer. Hilton, who has been working as an academic in the US, floated the idea in an interview with the BBC. He is in the UK promoting his book, More Human, which argues that ordinary people feel shut out of policy-making and increasingly frustrated with the “obscene” pay of those at the very top of companies, which can lead to a dangerous anti-business mood. “We should all be pro-business because it is in all our interests that business succeeds,” he said. “The question is: what kind of business do we want to see?”

Capping pay could be an incentive for the banks to reform, meaning “they might decide to split themselves up or we could do that forcibly”, he said. “The goal here is to create a much more secure financial system where you don’t have these giant companies that pose a threat to the whole economy.” Hilton also called for the competition authorities to be much tougher in challenging dominant companies in a market. “I think the competition authorities need to be much more aggressive generally, and specifically where you have a concentration of power,” he said. “They should be using their powers to make the market more competitive. Now whether that is breaking them up or other means is for others to debate. The system ought to be geared to help the insurgents and not to protect the insiders.”

Hilton, who had a hippyish reputation for wandering around Downing Street in bare feet, is giving a talk this week expanding on his views. He is said to remain close to the prime minister but some of his remarks may be seen as a rebuke to Cameron’s membership of an elite Westminster class. In an article for the Sunday Times, Hilton launched a critique of an “insular ruling class” in which too many of the people who make decisions go to the same dinner parties and send their children to the same schools. “Our democracies are increasingly captured by a ruling class that seeks to perpetuate its privileges,” Hilton wrote. “Regardless of who’s in office, the same people are in power. It is a democracy in name only, operating on behalf of a tiny elite no matter the electoral outcome.”

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Incredible. But not surprising.

Fossil Fuel Companies Get $10 Million A Minute In Subsidies: IMF (Guardian)

Fossil fuel companies are benefitting from global subsidies of $5.3tn a year, equivalent to $10m every minute of every day, according to a startling new estimate by the International Monetary Fund. The IMF calls the revelation “shocking” and says the figure is an “extremely robust” estimate of the true cost of fossil fuels. The $5.3tn subsidy estimated for 2015 is greater than the total health spending of all the world’s governments. The vast subsidy derives largely from polluters not paying the costs imposed on governments by the burning of coal, oil and gas. These include the harm caused to local populations by air pollution as well as to people across the globe affected by the floods, droughts and storms being driven by climate change.

Lord Nicholas Stern, an eminent climate economist at the London School of Economics, said: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries. Stern said that even the IMF’s vast subsidy figure was a significant underestimate: “A more complete estimate of the costs due to climate change would show the implicit subsidies for fossil fuels are much bigger even than this report suggests.”

The IMF, one of the world’s most respected financial institutions, said that ending the subsidies to fossil fuels would cut global carbon emissions by 20%. That would be a giant step towards taming global warming, an issue on which the world has made little progress to date. Ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50% – about 1.6m lives a year. Furthermore, the IMF said the resources freed by ending fossil fuel subsidies could be an economic “game changer” for many countries, by driving economic growth and poverty reduction through greater investment in infrastructure, health and education and also by cutting taxes that restrict growth.

Another consequence would be that the need for subsidies for renewable energy – a relatively tiny $120bn a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts. “These [fossil fuel subsidy] estimates are shocking,” said Vitor Gaspar, the IMF’s head of fiscal affairs and former finance minister of Portugal. “Energy prices remain woefully below levels that reflect their true costs.” “When the [$5.3tn] number came out at first, we thought we had better double check this!” said David Coady, who heads the IMF’s fiscal affairs department. But the broad picture of huge global subsidies was “extremely robust”, he said. “It is the true cost associated with fossil fuel subsidies.”

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Amid the confusing use of the term ‘inflation’ for any and all pirce rises, the takeaway here is that the British people spend less.

UK Inflation Rate Below Zero for First Time Since 1960 (Bloomberg)

Britain’s inflation rate fell below zero for the first time in more than half a century, as the drop in food and energy prices depressed the cost of living. Consumer prices fell 0.1% from a year earlier, the Office for National Statistics said in London on Tuesday. Economists had forecast the rate to be zero, according to the median of 35 estimates in a Bloomberg News survey. Core inflation dropped to 0.8%, the lowest since 2001. With inflation so far below the Bank of England’s 2% target, policy makers are under little pressure now to raise the key interest rate from a record-low 0.5%.

Governor Mark Carney said last week that any period of falling prices will be temporary and an expected pickup in inflation at the end of the year means the next move in borrowing costs is likely to be an increase. “Inflation is likely to remain close to zero in the near term before starting to trend up gradually from the third quarter,” said Howard Archer, an economist at IHS Global Insight in London. “Nevertheless, inflation is still only seen reaching 1% by the end of 2015.”

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We are all discovering that.

As The UK Has Discovered, There Is No Postindustrial Promised Land (Guardian)

Anyone puzzled by Scotland’s increasing disaffection should take a look at a book called British Enterprise. Written by Alexander Howard and Ernest Newman, and published in 1952, the immediate afterglow of the festival of Britain, it consisted of short descriptions of each of more than 100 then world-beating British manufacturing companies. It strikingly illustrates how much more geographically balanced the British economy was in those days. In common with latter-day Germany, every region of 1950s Britain had plenty of industrial prowess to boast of. The Midlands had the British car industry, the world’s second-largest by total output and No 1 in exports.

Wales had toys, steel, and domestic appliances; Nottingham had bicycles; Newcastle and Belfast led the world in key areas of heavy engineering; and, of course, Lancashire had cotton. Then there was Scotland. Its roll-call of exporting titans included Renfrew-based Babcock and Wilcox, which made boilers for the world’s power stations. Other major Scottish exporters included North British Locomotive and the William Beardmore castings company. In Dundee there was National Cash Register’s major British subsidiary and in Kirkcaldy the Nairn linoleum company. The list went on and on, and at the top was the John Brown company. Although then one of the world’s most technically advanced manufacturers, John Brown is largely forgotten today.

Its products, however, are not. They included the Lusitania, HMS Repulse, the Queen Mary, the Queen Elizabeth, the QE2 and others. John Brown was the cornerstone of a Clydebank shipbuilding industry that built nearly a third of the world’s ships. All this was before the coming of postindustrialism, a superficially attractive but fundamentally disastrous intellectual fad. Espoused by London-based elites in the 1970s and powerfully championed by Margaret Thatcher in the 1980s, postindustrialism postulates that sophisticated states no longer need manufacturing. Instead they should promptly move to a new promised land of postindustrial services.

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And this is why there is no postindustrial promised land: meaningful work is disappearing. We don’t even know what gives work meaning anymore.

The End of Meaningful Work: A World of Machines and Social Alienation (Drew)

Many activists are clamoring for a higher minimum wage. That’s an admirable goal, but is that where the worst problem is? Even at the abysmally low wages of the present moment, we still have 938,000 people being turned away from McDonald’s because there aren’t enough McJobs. The real problem is the lack of meaningful work. In a world of machines and social alienation, meaningful work is as scarce as water in the drought-stricken California Central Valley. One cause of the employment crisis is relentless outsourcing to foreign countries. However, even more insidious has been the replacement of human workers by machines. For hundreds of years, the Protestant work ethic lauded hard work and efficiency as ideals to strive for. It’s not easy to object to those principles.

But what happens when efficiency means eliminating humans? It’s doubtful the early Protestants ever imagined that could be a possibility. Even up to the present day, many view new technology and efficiency as the main drivers of human progress. For awhile, it seemed like this was indisputable. In his book Rise of the Robots, Martin Ford describes the 25 years after World War II as the “golden age” of the American economy. Productivity, employment, and wages were increasing in synchrony. As with many trends, economists assumed they would continue indefinitely. It was the glorious free market at work. Then it all came crashing down at the turn of the century. This time, it really is different. The shift happened when machines transformed from mere tools to actual workers.

Martin Ford explained, “In 1998, workers in the US business sector put in a total of 194 billion hours of labor. A decade and a half later, in 2013, the value of the goods and services produced by American businesses had grown by about $3.5 trillion after adjusting for inflation – a 42% increase in output. The total amount of human labor required to accomplish that was…194 billion hours. Shawn Sprague, the BLS economist who prepared the report, noted that ‘this means that there was ultimately no growth at all in the number of hours worked over this 15-year-period, despite the fact that the US population gained over 40 million people during that time, and despite the fact that there were over thousands of new businesses established during that time.'”

If this trend continues a few more years, it will be two lost decades, which means an entire generation has gone by with no net new jobs created. This might be somewhat permissible if the population had stagnated or declined, but with 40 million new people, it sets the stage for a national disaster. It is truly a new era. Ford confirmed, “There has never been a postwar decade that produced less than a 20% increase in the number of available jobs. Even the 1970s, a decade associated with stagflation and an energy crisis, generated a 27% increase in jobs. This new reality is nothing less than the end of progress and the Protestant work ethic. Efficiency can no longer be held up as something that is unambiguously good. The Protestants were wrong. There is something much more important than efficiency: survival.

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Bold statement. And this morning, Labour Minister Panos Skourletis said on Greek TV: “De facto, in the coming days.”

Varoufakis: Deal With Creditors ‘A Matter Of One Week’ (Bloomberg)

Greek leaders expressed optimism a deal to unlock bailout funds is within reach, in the face of continuing warnings by creditors that the country has yet to comply with the terms of its emergency loans. “We are very close” to an agreement, Finance Minister Yanis Varoufakis said in an interview late Monday with Greece’s Star TV Channel. “I’d say it is a matter of one week.” Earlier Monday, Prime Minister Alexis Tsipras had told Greek industrialists that “we are now at the final stretch before striking a mutually beneficial agreement, after long and painful negotiations.” Greece’s anti-austerity government has repeatedly expressed confidence a deal was imminent, only to be rebuffed by creditors seeking more concrete actions in areas including labor market deregulation and pension-system overhaul.

Even though Greece has made some progress in meeting its bailout commitments, “we’re not there yet,” EU Economic Affairs Commissioner Pierre Moscovici said, just a few hours before Tsipras’s and Varoufakis’s assurances that an agreement is close. The country’s liquidity situation is “obviously tense,” and the time left to reach an agreement is “very limited,” Moscovici told reporters in Berlin. [.] The four-month standoff between Europe’s most indebted state and its lenders has triggered an unprecedented liquidity squeeze, which pulled the Mediterranean nation’s economy into a double-dip recession. Record deposit withdrawals, and the state’s increasing difficulty in meeting debt payments have sparked renewed doubts about the country’s place in the euro area.

Adopting a new currency is not “on our radar,” Varoufakis said in his Star TV interview, which started at 11:30 p.m. and was still dragging on at about 2 in the morning, in Athens. Euro-area member states haven’t made proposals to the Greek government to leave the currency bloc, according to Varoufakis. After months of brinkmanship, Varoufakis said Greece and its creditors still disagree on budget targets, labor market regulations and pension system reform. Negotiations continue, and Greece has suggested streamlining its sales tax by setting a 15% rate for most goods and a 6.5% rate for basic goods, according to Varoufakis.

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Note: there doesn’t seem to be agreement in the press on what the VAT rates will be. The Bloomberg piece above says 15% and 6.5%, this Kathimerini one says 18% and 9.5%. A curious difference.

Greece Sends Reform Proposals For Lenders’ Scrutiny (Kathimerini)

Athens sent its proposals to creditors on Monday for an overhaul of the value-added tax regime as Greek officials indicated that an agreement on a reforms-for-cash deal was close. In a bid to secure progress on the technical level of negotiations to enable a political decision that would unlock rescue loans, officials of the so-called Brussels Group were to hold a late-night teleconference on Monday that was expected to address these proposals. Greece’s VAT proposal is said to foresee two rates of value-added tax instead of the current three. The highest would be set at 18% and relate to virtually all services and commodities except food and medicines, with a discount of 3 percentage points for non-cash transactions. The lower rate would be set at 9.5% and would relate to food, drugs and books, with the same discount applying to cash-free transactions.

The proposals appear to be part of a broader bid by the government to boost non-cash transactions while curbing tax evasion. VAT evasion in Greece is estimated at 9.5 billion euros per year. The Greek proposal was sent to creditors at around the time that To Vima reported that European Commission President Jean-Claude Juncker had pitched a compromise proposal to Greece, foreseeing low primary surpluses and some 5 billion euros in reforms, chiefly tax measures. The report was quickly rebuffed by Greek and EC officials. Speaking generally and apparently not referring to a rumored Juncker proposal, European Economic and Monetary Affairs Commissioner Pierre Moscovici said Greece was quick to turn down proposals on reforms but slow to offer alternatives.

“They are more eager to say what they don’t want to keep in the program than to propose alternatives,” Moscovici told a news conference in Berlin, while noting that “some progress” had been made in recent days. In a speech at the annual general meeting of the Federation of Hellenic Enterprises (SEV) Alexis Tsipras was much more upbeat, claiming that Greece was “in final straight toward an agreement,” which, he said, “will come very soon.” “We are working, with absolute honesty and dedication, to reach a solution,” he said. He echoed the conditions he set out last Friday for a deal, saying it should include debt restructuring, no further cuts to wages and pensions, and an investment plan. He added that Greece is ready to compromise but that he wanted a deal that would allow Greece to return to markets soon.

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One detail from this much-denied plan: it says the government must address ‘the enormous problem of unemployment’. Well, so must the creditors. Athens just rehired 4000 civil workers, that’s a start.

Juncker Steps In With Greek Rescue As Talks Reach ‘Final Stages’ (Telegraph)

The president of the European Commission has reportedly intervened in Greece’s bail-out negotiations, proposing a reduction in Troika-imposed budget targets and a release of emergency cash to prevent Greece going bankrupt in the summer. According a blueprint leaked to Greek media, Jean-Claude Juncker’s “plan” to break Greece’s deadlock includes a relaxation of Athens’ primary budget surplus target to 0.75pc this year – half that previously sought by Greece’s paymasters. The proposals also include releasing €5bn to the government in June, and delaying a number of fiscal austerity measures until October. However, the blueprint maintained that Greece would have to retain a controversial property tax and push for flexible labour market reforms.

Despite refusing to confirm the plan, a spokesman for Mr Juncker said the EU chief was now “personally involved” in Greece’s talks. Speaking in Athens on Monday, Greek prime minister Alexis Tsipras said negotiations with creditors were reaching their “final stages”. He maintained the government would not agree to any plans to cut pensions and wages but said his government was willing to “accept compromises” to reach a deal should some form of bridging finance be agreed. The Leftist premier, who wrote to Mr Juncker earlier this month to say Greece would default to its creditors, added his country’s cash squeeze was being used as a “negotiating tactic”. Mr Tsipras also repeated calls for some form of debt restructuring as part of any agreement with Greece’s lenders.

Proposals from the Commission would represent an easing of the tough conditions demanded by Greece’s creditors over the last 110 days. Indicating a potential split among official creditors, the leaked memo highlighted objections to the plan from the IMF, and voiced concerns the Fund was willing to withdraw its support for Greece. The plan added that Athens’ Leftist government needed to “increase the competitiveness of the Greek economy and address the enormous problem of unemployment”. Greek markets rallied on the news of a potential compromise, jumping nearly 4pc in afternoon trading.

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Shut down by previous government on questionable grounds.

Tsipras: Relaunch Of State Broadcaster ERT ‘Victory Of Democracy’ (Kathimerini)

Public broadcaster ERT will reopen in a week, two years after it was shut down, leftist Prime Minister Alexis Tsipras said on Monday. Meeting with ERT chairman Dionysis Tsaknis and CEO Lambis Tagmatarchis, Tsipras urged the newly installed executives to work for a “pluralist and independent” network. “Your responsibility is to restore people’s bond with ERT, which was severed by the blackout,” he said. Tsipras added that June 11, the anniversary of ERT’s shutdown by the previous government and its replacement with NERIT, will be a day to celebrate “the victory of democracy.”

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They should urge Europe to strike a deal, not only Athens.

Every Day Without A Deal Costs Greece €22.3 Million, 600 Jobs (Kathimerini)

An average of 59 enterprises close every day of the working week and 613 jobs are lost, while every day, with the market facing a cash crunch, the economy loses 22.3 million euros from its gross domestic product, according to a report published by the Hellenic Confederation of Commerce and Enterprises (ESEE). A deal with the country’s creditors is more urgent than ever, ESEE stressed, but the economy would need as much as 25 billion euros in financing in order to restart, as losses from the first five months will be hard to cover over the rest of the year, argued ESEE. This uncertainty has hit the local economy after five years of crisis, during which retail commerce turnover shrank by 26.2%.

Things were worse for wholesale commerce, with turnover dropping 37.1%, while the car market crumbled by 61.9% in the same period, the confederation’s data show. Liquidity is becoming an unfamiliar term in the market as 95% of applications for loans are rejected every day by commercial banks, while only one in 10 enterprises dares to ask for funding from the country’s four systemic lenders, the ESEE report showed. The absorption of funding tools for business liquidity stands at 40%, while in the funding of commerce the rate does not exceed 12%. ESEE is urging the government in dramatic terms to reach a deal with Greece’s creditors even if it’s not a great deal.

“A final agreement, even if it is mediocre or below expectations, is certain to allow the Greek economy to feel free at last to operate for the remainder of 2015,” read Monday’s ESEE statement. “Financial and political time are running dangerously short, and reaching a sustainable agreement with our partners is vital as it is directly associated with the country’s capacity to draw liquidity from the European funding tools,” it added. “The official position of Greek commerce and small and medium-sized entrepreneurship is to end the market’s four months of stagnation caused by the ‘no deal, no Grexit’ situation, replacing the content of the original agreement offering ‘money for the debt and grace for the country’ with ‘money for the market and growth for the country’,” ESEE concluded.

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Which they can only do by keeping the spigot open.

China’s Lodestar Is Not Reform But Avoiding Chaos (Reuters)

China’s policymakers talk much of reform. What really drives them is something different: a fear of chaos. The treatment of the country’s local government debt pile is an example of risk aversion getting the upper hand. The strategy is imperfect, but also right. The ruling State Council on May 15 published an instruction to banks not to blindly “pull, pressure or stop” lending to borrowers linked to provincial governments, which have amassed an estimated 16 trillion ($2.6 trillion) of debt. Where creditors can’t pay, banks can extend lending. And where money has run out but construction continues, local governments can funnel in cash directly. That makes explicit what was already widely assumed.

The Chinese banking system’s suspiciously low reported bad loans, which rose to just 1.4% of total lending at the end of March, are due to the industry’s compulsive rolling over of doubtful debt. For a still-developing market, showing some mercy isn’t entirely foolish. Uncontrolled defaults would undermine confidence and real economic activity. Genuinely useful projects might be unable to find funding, to the dismay of the citizens who have to live among the ruins. The wider agenda may be to ring-fence those projects that deserve official support before identifying those that do not. Jiangsu and Xinjiang provinces will soon be the first to swap some safer government-backed credit into bonds. If failures can be kept at bay for a while, those trials are more likely to succeed.

Market-based debt restructurings are helpful in theory. But they are also messy, driven as much by bargaining and bullying as thoughtful analysis of assets and rights. Kaisa, a real estate developer in Shenzhen, is haggling with bondholders over a plan to delay repaying its existing loans by five years. Foreign creditors have almost no rights, but significant nuisance value. That situation replicated across a country with a fledgling legal system is a daunting prospect. Once a clear line has been drawn between what’s state-backed and what isn’t, other borrowers can be exposed to market forces. Hopefully the government’s latest largesse is part of that bigger plan. But if progress doesn’t come soon, a more dangerous kind of confidence crisis will emerge: the belief that the government hasn’t got a plan after all.

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How much of this is just politics? And how much is favoritism? What is the wealth accumulated by the current president and PM? And their families?

China Corruption Purge Snares 115 State Owned Enterprise ‘Tigers’ (FT)

More than 100 top executives from some of China’s largest state-owned enterprises have been detained on suspicion of corruption since the start of last year, according to official statistics. Since the beginning of 2014, China’s anti-corruption authorities have publicly named 115 C-suite officials from state groups including global giants such as PetroChina, China Southern Airlines, China Resources, FAW and Sinopec, who have been placed under investigation for graft. Because virtually all of them are also senior Communist party officials, they have mostly disappeared into the feared system of internal party discipline inspection , where they can be held indefinitely without trial and where torture is believed to be rife.

Since ascending to the top of the Chinese system in late 2012, Chinese President Xi Jinping has been engaged in a ferocious anti-corruption campaign that has already gone further and continued for longer than any other since the founding of the People’s Republic in 1949. Mr Xi has vowed to tackle high-ranking corrupt tigers as well as lowly flies in his quest to clean up the sprawling party bureaucracy. According to official announcements from China’s Central Commission for Discipline and Inspection, more than a fifth of the SOE tigers who have been toppled from their horses came from the energy sector. Executives at China’s enormous state energy monopolies command vast armies of employees and control budgets worth hundreds of billions of dollars.

They are often accused of acting like rulers over mini-states within the state. The enormous influence of companies such as Sinopec and PetroChina over government policy is sometimes blamed as one reason for weak enforcement of environmental standards and China’s shocking levels of pollution. But the energy sector is also the former power base of Zhou Yongkang, the most senior casualty of Mr Xi’s purge and the most senior party official to go on trial for corruption in the history of the People’s Republic. Until Mr Xi took power, Mr Zhou was a member of the all-powerful Politburo Standing Committee and controlled the Chinese courts, police, secret police, paramilitary and intelligence services. He is currently awaiting trial.

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“..Chinese stocks in general are looking “extremely” volatile and risky.”

How China’s ‘Insane’ Rally Could Grind To A Halt (CNBC)

Foreign flows, investors using borrowed money to buy equities and a taste for new public offerings have aided a mega-rally in Chinese stocks this year. But analysts are fretting that the good times could end in the blink of an eye. The blue-chip Shanghai Composite has seen gains of 32% year-to-date but has been outpaced by smaller domestic stocks, or A-share indexes, which have seen gains of over 70% so far in 2015. “They just treat their stock market like a casino, they just poor all the money in,” Dickie Wong, the executive director at Kingston Securities, told CNBC Monday, warning of the irrational exuberance of Chinese investors.

“And after the recent gains, they just pour the money into the IPOs,” he added. He called the Shenzhen index a “bubble” but stressed that Chinese stocks in general are looking “extremely” volatile and risky. Analysts have warned that investors are borrowing money from brokerage firms to buy more shares – known as margin trading. Despite a crackdown by the Chinese authorities, Wong believes that more regulation is on the horizon which could lead to a pullback. “(The authorities) will do something, they will say something to cool down the market,” he said.

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“The move would be a reaction to European governments having become less willing to prop up banks if they get into a crisis..”

Ratings Agency Fitch To Downgrade Many European Banks (Reuters)

Ratings agency Fitch will soon downgrade European banks en masse, possibly even at the start of the week, German newspaper Handelsblatt said, citing unnamed financial sources. In most cases the banks will be downgraded by between one and a maximum of four levels, according to an advance copy of an article due to be published on Monday. The move would be a reaction to European governments having become less willing to prop up banks if they get into a crisis, the newspaper said. The newspaper said dozens of banks would be affected by the downgrade, including Deutsche Bank, which would see its rating fall slightly, and Commerzbank, which would be hit much harder.

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It never feels good when the only people who share one’s views also have some really crazy ones. But sometimes it’s just like that.

‘We Must Resist Corporations’: Le Pen Targets TTIP Deal In New Campaign (RT)

Leader of France’s National Front party, Marine Le Pen, has launched a month-long blitz against the Transatlantic Trade and Investment Partnership (TTIP) – a proposed EU-US treaty, which has been criticized for secretiveness and lack of accountability. “It is vital that the French people know about TTIP’s content and its motivations in order to be able to fight it. Because our fellow countrymen must have the choice of their future, because they should impose a model for society that suits them, and not forced by multinational companies eager for profits, Brussels technocrats sold to the lobbies, politicians from the UMP [party of former president Nicolas Sarkozy], who are subservient to these technocrats,” Le Pen said during a press conference in Paris.

Since 2013, open-ended negotiations between Washington and Brussels have drawn up the framework for the agreement, intended to standardize legislation and bring down trade barriers between them. As per US practice, the contents of all economic treaties are classified. The EU has recently set up reading rooms throughout Europe for officials with clearance – but only a few thousand people have had access to the working documents. Le Pen hit out at the secrecy of the negotiations, which have featured mostly bureaucrats from the European Commission, the EU’s executive body, and nebulous “stakeholders” from businesses and public organizations. As a member of the European parliament, she forwarded a motion for greater transparency in negotiations last year. Le Pen’s motion was defeated.

She is now hoping for grassroots support. “I am convinced that we can push back the TTIP if the peoples are informed of its content, and if they decide themselves to join us in order to express their disagreement concerning this treaty,” Le Pen told journalists. Both of France’s leading parties have endorsed the treaty, but Le Pen is relying on strong the anti-European sentiment that propelled her party to first place in last year’s elections for the European parliament. While TTIP’s authors promise that the treaty will bring an extra 0.5% GDP to Europe and the US, figures across the political spectrum have expressed concern.

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Jacksonville, Detroit, Chicago, Puerto Rico.

Debt-Choked Puerto Rico at Fiscal Brink as Bond Buyers Pull Back (Bloomberg)

The sobering news arrived in San Juan via telephone from Washington. It was April 28, and U.S. Treasury Secretary Jacob J. Lew called to tell Puerto Rico officials they must confront one of the island’s gravest financial crises without a bailout. Saddled with $72 billion in debt, the commonwealth – a U.S. territory since the Spanish-American War – needs a “credible” plan, Lew said. The Caribbean island is hurtling toward the fiscal brink. After years of borrowing to paper over deficits, and with $630 million due to investors on July 1, Puerto Rico may confront the unthinkable: a default. The prospect has set Wall Street on edge as bond yields surpass those of Argentina and Greece; about half of municipal mutual funds hold commonwealth debt.

Puerto Ricans across the political spectrum are alarmed at the scale of the crisis, Rafael “Tatito” Hernandez, chair of the House Treasury Committee, said during a May 6 interview at the Capitol. Every mayor on the island will face angry constituents, he added, especially those whose work weeks may be cut to four days. “We used to have choices,” Hernandez said, a framed copy of his U.S. Navy honorable discharge on the wall behind him. Now “people have to realize where we’re really at. It may be late, but that’s the reality.”

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October 30 1995 was the last referendum, which the PQ lost 50.58% against 49.42%. I was with a bunch of friends in Montréal watching the drama unfold on TV, everyone was very nervous.

Flamboyant Tycoon Ready To Revitalize Quebec’s Separatists (Guardian)

Ice hockey is a religion in Quebec, but since the departure of the NHL’s Nordiques to Colorado in 1995, residents of the provincial capital, Quebec City, have had no icons to worship. So when Pierre Karl Péladeau – the CEO of Quebecor, Canada’s second biggest media group – announced in 2009 that he would invest C$33m to lease a new arena and bring a hockey club back to the city, he was hailed as a prophet. Now campaigners for Quebec independence hope that the media magnate can work miracles for their cause after Péladeau’s election as the new leader of the separatist Parti Québécois (PQ). Thousands of party delegates joined in chants of “PKP” even before victory was confirmed on Friday evening in Quebec City, home of the provincial parliament.

Visibly pleased with his 57.6% share of the vote, Péladeau hugged his wife, the television producer Julie Snyder with whom he forms the ultimate power couple in the province of 8 million people. “You have given me a clear and strong mandate: to make Quebec a country,” said the 53 year-old in a bilingual speech. Campaigners for independence have been starstruck ever since PKP joined the ranks of the Parti Québécois a mere 14 months ago, when he launched a successful bid for election to the provincial parliament (a vote which the Parti Libéral won by a landslide). Péladeau’s public embrace of independence had a galvanizing effect on the separatist cause. Separatists and federalists alike agree that PKP – dubbed “Citizen Péladeau” and often compared to the Italian media magnate-turned-politician Silvio Berlusconi – brought star quality to the PQ. “Is this the man who will break up Canada?” asked the national public affairs magazine Maclean’s.

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Only 3% of our living environment is left. We paved paradise.

97% of Britain’s Wildflower Meadows Have Gone (Guardian)

With its flower-rich meadows, woodland and ponds, Ash Common in the village of Ash Priors near Taunton is a lovely corner of unspoilt countryside. It is a local nature reserve and home to an endangered butterfly, the marsh fritillary. A local wildlife lover recently tweeted a photograph that suggests the common has undergone a close encounter with a scalpel: a wildflower meadow has been shaved like a football pitch. It wasn’t a vandal or a developer who did this, but Taunton Deane borough council, which has managed the common for more than 20 years. The decline of the marsh fritillary vividly demonstrates the drastic loss of 97% of UK wildflower meadows since the second world war.

And the fate of Ash Common reflects a much bigger, hidden story about the damage being done to precious, unprotected local nature reserves. There are 42,865 of these local wildlife sites in England, ranging from large commons to tiny treasures such as the old tennis court at Gresham’s school in Norfolk, which boasts more than 200 orchid spikes. Many are privately owned and there is almost nothing to protect them: when the Wildlife Trusts surveyed 6,590 local wildlife sites, they found that 717 were lost or damaged over five years to 2013. Wildflower meadows need cutting, but conservationists usually advise to do so in the autumn, after flowers have seeded and invertebrates are hunkered down for the winter.

Taunton Deane borough council’s ecologist, Barbara Collier, explained that staff restructuring and illness meant they failed to trim Ash Common last October and so cut it this spring to prevent it “scrubbing up” with trees. “I admit that this year we didn’t get it quite right. I’m really sorry about that,” she said. According to the Wildlife Trusts, which freely advises owners how to better manage their special sites, such mistakes are all too frequent. The only real solution is for local communities to get involved (if permitted by the landowner) as I saw when I visited a more inspirational local nature reserve, Hoe Common, in Norfolk, which residents are restoring. A few marsh fritillaries may yet have survived the scalpel at Ash Common; hopefully local vigilance will stop them being cut to pieces again.

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