Jun 012018
 
 June 1, 2018  Posted by at 8:33 am Finance Tagged with: , , , , , , , , , , ,  


Edward Hopper Rooms by the sea 1951

 

Deutsche Bank Downgraded By S&P Over Restructuring Plans (MW)
ANZ, Deutsche Bank and Citigroup Face ‘Criminal Cartel’ Charges (BBC)
Deutsche Bank’s US Ops Deemed “Troubled” By Fed A Year Ago (R.)
Why Turkey And Argentina Are Doomed (ZH)
US On Brink Of Trade War With EU, Canada and Mexico (G.)
China To Slash Import Tariffs On Many Consumer Products By 60% From July 1 (R.)
Populist Government To Be Sworn In As Italy’s Political Deadlock Ends (G.)
Italians Back Euro But Rail Against EU’s Rules (G.)
Juncker: Italians Need To Work Harder And Be Less Corrupt (G.)
Spain’s Government Poised To Fall As Socialists Prepare For Power (Ind.)
UK’s “Bank of Mum & Dad” is Running Out of Liquidity (DQ)
Ecuador’s President Says Assange Can Stay In Embassy ‘With Conditions’ (G.)

 

 

Deutsche is enormous. Its derivatives portfolio is gigantic. This is a big story.

Deutsche Bank Downgraded By S&P Over Restructuring Plans (MW)

Deutsche Bank was downgraded Friday by S&P Global Ratings, which cited concerns over the German lender’s restructuring plans. The ratings agency cut the long-term issuer credit rating to ‘BBB+’ from ‘A-‘on the bank and its core operating subsidiaries. The troubled bank last week announced plans to cut thousands of jobs in a bid to overhaul its operations and cut costs, but S&P said they see “significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,” in a statement. Investors also demanded the resignation of the bank’s chairman, Paul Achleitner, at the Annual General Meeting last week.

Shares have tumbled 42% so far this year. The agency kept a stable rating on the bank’s outlook, saying that management will execute the plan over time and achieve longer-term objectives. Meanwhile, Australia’s consumer watchdog on Friday announced that it would be bringing criminal cartel charges against Deutsche Bank, Citigroup and Australia & New Zealand Banking. Shares of Deutsche Bank opened up 1.5%, bouncing off a 7% drop Thursday, which came after the Federal Reserve designated the German lender’s U.S. business in “troubled condition,” people familiar with the matter told The Wall Street Journal.

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Deutsche again. Insult and injury.

ANZ, Deutsche Bank and Citigroup Face ‘Criminal Cartel’ Charges (BBC)

Financial institutions ANZ, Deutsche Bank and Citigroup will be prosecuted on criminal cartel charges, Australia’s consumer watchdog says. The allegations concern arrangements for the sale of A$2.5bn (£1.4bn; $1.9bn) worth of ANZ shares in 2015. The three banks said they would fight the charges. ANZ said it would also defend allegations against an employee. Australia’s scandal-plagued financial sector is at the centre of a national inquiry into misconduct. Several “other individuals” are also expected to be charged by prosecutors, the Australian Competition and Consumer Commission (ACCC) said.

“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015,” chairman Rod Sims said in a statement. “It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.” ANZ, one of Australia’s so-called “big four” banks, said the charges related to a placement of 80.8 million shares. The deal was underwritten by global giants Deutsche Bank, Citigroup and JP Morgan, as part of a bid by ANZ to raise capital to meet regulatory requirements. ANZ said regulators were now investigating whether it should have stated that 25.5 million shares of the placement had been taken up by “joint lead managers”.

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And it’s OK to keep that from -potential- shareholders, bondholders for over a year?!

Deutsche Bank’s US Ops Deemed “Troubled” By Fed A Year Ago (R.)

The United States Federal Reserve last year designated Deutsche Bank U.S. operations to be in “troubled condition”, The Wall Street Journal reported on Thursday, citing people familiar with the matter. The Fed’s assessment has not previously been made public, it said, sending shares in the German lender down 7.2% to 9.16 euros, their lowest level in more than a year and a half. The “troubled condition” status is one of the lowest designations employed by the Fed, The WSJ said. The report comes a month after Deutsche Bank’s new Chief Executive Christian Sewing announced plans to cut back bond and equities trading, where it has been unable to compete with U.S. powerhouses such as Goldman Sachs and JP Morgan.

Deutsche Bank’s attempts to break into the U.S. markets, which are seen as an essential plank for delivering a global investment banking platform, proved to be costly as it ended up paying out billions of dollars to settle regulatory breaches, prompting speculation at one point of a bailout by Berlin. The WSJ said that the Fed downgrade of Deutsche Bank’s U.S. operations caused the U.S. Federal Deposit Insurance Corporation (FDIC) to put Deutsche Bank Trust Company Americas on its list of “Problem Banks”.

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Clear enough.

Why Turkey And Argentina Are Doomed (ZH)

It was all the rage in 2017. Not long after contrarians like Jeff Gundlach and Russell Clark said to go long Emerging Markets, suddenly everyone was doing it, either as a standalone trade or as part of a pair trade shorting one or more DMs. Of course, maybe all they were doing was indirectly shorting the USD, which was arguably the biggest driver behind EM outperformance. But, in no small part due to the recent surge in the dollar, after outperforming developed equity markets by 20% in 2016-2017, EM is underperforming by 2.5% so far this year. Of course, it’s not just the dollar, but also interest rates, which until the recent Italian fiasco, were at 4 year, or greater, highs.

And, as JPM’s Michael Cembalest writes in his latest “Eye on the market” note, investor fears are predictably focused on the impact of rising US interest rates and the rising US dollar on EM external debt, and on rising oil prices. And yet, despite the occasional scream of terror from EM longs who refuse to throw in the towel, a closer look shows that the market reaction has been orderly so far, with two exceptions: Argentina and Turkey, which are leading the way down. However, as the JPM Asset Management CIO shows below, the collapse in these two countries has been largely a function of state-specific/idiosyncratic reasons.

The chart below, courtesy of Cembalest, shows each country’s current account (x-axis), the recent change in its external borrowing (y-axis) and the return on a blended portfolio of its equity and fixed income markets (the larger the red bubble, the worse the returns have been). This outcome looks sensible given weaker Argentine and Turkish fundamentals. And while Cembalest admits that the rising dollar and rising US rates will be a challenge for the broader EM space, most will probably not face balance of payments crises similar to what is taking place in Turkey and Argentina, of which the latter is already getting an IMF bailout and the former, well… it’s only a matter of time.

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1: look if present conditions are fair. 2: adapt them.

US On Brink Of Trade War With EU, Canada and Mexico (G.)

The United States and its traditional allies are on the brink of a full-scale trade war after European and Canadian leaders reacted swiftly and angrily to Donald Trump’s decision to impose tariffs on steel and aluminium producers. The president of the European commission, Jean-Claude Juncker, promised immediate retaliation after the US commerce secretary, Wilbur Ross, said EU companies would face a 25% duty on steel and a 10% duty on aluminium from midnight on Thursday. Europe, along with Canada and Mexico, had been granted a temporary reprieve from the tariffs after they were unveiled by Donald Trump two months ago.

However, Ross sent shudders through global financial markets when he said insufficient progress had been made in talks with three of the US’s traditional allies to reduce America’s trade deficit and that the waiver was being lifted. Wall Street slumped as the Dow Jones Industrial Average closed down more than 250 points as investors sold off shares in manufacturers and corporations with global reach. Shares across Europe also declined. The move from Washington – which comes at a time when Trump is also threatening protectionist action against China – triggered an immediate and angry response from Canada, Brussels and from individual European capitals.

Juncker called the US move “unjustified” and said the EU had no choice but to hit back with tariffs on US goods and a case at the World Trade Organisation in Geneva. “We will defend the Union’s interests, in full compliance with international trade law,” he added. Brussels has already announced that it would target Levi’s jeans, Harley-Davidson motorbikes and bourbon whiskey.

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Something’s working.

China To Slash Import Tariffs On Many Consumer Products By 60% From July 1 (R.)

China will cut import tariffs on nearly 1,500 consumer products ranging from cosmetics to home appliances from July 1, in a bid to boost imports as part of efforts to open up the economy. The move would be in step with Beijing’s pledge to its trade partners – including the United States – that China will take steps to increase imports, and offers a boon to global brands looking to deepen their presence in China. The finance ministry published a detailed list of products affected and their new reduced tax rates on Thursday, following early announcements of the broader plan. Starting next month, the average tariff rate on 1,449 products imported from most favored nations will be reduced to 6.9% from 15.7%, which is equivalent to a cut of about 60%, the finance ministry said in a statement on its website.

That followed an announcement from the State Council, or the country’s Cabinet, on Wednesday that China will cut import tariffs on consumer items including apparel, cosmetics, home appliances, and drugs. The tariff cuts this time are more broad-ranging than previous reductions. Import tariffs for apparel, footwear and headgear, kitchen supplies and fitness products will be more than halved to an average of 7.1% from 15.9%, with those on washing machines and refrigerators slashed to just 8%, from 20.5%. Tariffs will also be cut on processed foods such as aquaculture and fishing products and mineral water, from 15.2% to 6.9%.

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Savona comes out strong. His replacement as finance minister is no fan of the euro, and he himself is EU minister.

Populist Government To Be Sworn In As Italy’s Political Deadlock Ends (G.)

A populist government will be sworn into power in Italy on Friday after president Sergio Mattarella agreed to a revised slate of ministers – just days after a bitter row over the incoming leaders’ stance on the euro ended their initial bid to assume power. A joint statement by the anti-establishment Five Star Movement (M5S) and the far-right League announced that political newcomer Giuseppe Conte, who had been seen as a controversial choice, would serve as prime minister. The relatively unknown law professor met Mattarella late on Thursday night to put forward a list of ministers, which the president has accepted.

“All the conditions have been fulfilled for a political, Five Star and League government,” said Luigi Di Maio, the Five Star chief, and Matteo Salvini, the League leader, in a joint statement after a day of talks in Rome. The deal will bring at least temporary calm to a political crisis that has embroiled Italy for weeks. The tumult raised questions – in Brussels and among investors around the world – about whether the rise in Italian populism and the collapse of traditional parties posed a fundamental threat to the country’s future in the eurozone.

The formation of the new government will at least temporarily allay those concerns, because it will remove for now the threat that snap elections will be called later this summer, a prospect which worried investors because it could have bolstered support for anti-EU parties. The populist leaders stepped back from their insistence that Paolo Savona, an 81-year-old Eurosceptic, should serve as finance minister. The choice had been vetoed by Mattarella, prompting the M5S and the League to call off their deal. Savona will now serve as EU minister instead. But there are still many unknowns about how the new administration – an uneasy alliance between two former political opponents, both jockeying for power – will govern Italy.

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If the EU doesn’t adapt to its new reality, it’s doomed.

Italians Back Euro But Rail Against EU’s Rules (G.)

Ever since the inception of the EU, Italians have been among the staunchest defenders of the European project. But the political crisis that engulfed the bloc’s third largest economy this week, centring on a debate over Italy’s commitment to the eurozone, has spooked investors and worried Brussels. It has raised a question that just a few years ago would have seemed unfathomable: are Italians ready to ditch the euro? The answer, like most aspects of Italian politics, is complicated. Opinion polls show that a majority of Italians – 59%, according to Eurobarometer – support the country’s continued inclusion in the eurozone. But that does not mean they want to continue to abide by the rules set by Brussels, which Italy agreed to when it adopted the currency.

Instead, more Italians are seeking a tougher and more antagonistic approach towards Brussels, after years of frustration over fiscal constraints set by the EU coupled with a feeling that Europe has abandoned Italy to cope on its own with the migration crisis. The latest Eurobarometer survey found that only 3 in 10 Italians believed their voices counted within the EU. While a full break from the EU – an “Italexit” – is not a matter of public debate (such a move is considered implausible even among the most hardline Eurosceptics), surveys show Italians generally have a dim view of the bloc. Eurobarometer found that 39% believed Italy’s inclusion in the EU was a “good thing” and 44% believed Italy benefited from being in the EU.

In March, stagnant economic growth and concerns about immigration drove voters across Italy to vote in large numbers for two populist parties – the Five Star Movement and the League, formerly the Northern League – while the most pro-EU party, the Democratic party (PD), suffered a humiliating defeat. Josef Janning, a senior policy fellow at the European Council on Foreign Relations, said: “There is no desire to exit. But there is a willingness to follow the League and the Five Star Movement and to say ‘we don’t want to follow the rules’. That seems to be the new consensus.”

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It’s like he’s talking about himself.

Juncker: Italians Need To Work Harder And Be Less Corrupt (G.)

Jean-Claude Juncker has said Italians need to work harder, be less corrupt and stop looking to the EU to rescue the country’s poor regions, in comments unlikely to ease the fraught political battle over Italy’s future relationship with Brussels. Days after the Italian president, Sergio Mattarella, defended Italy’s place in the eurozone against the country’s populist leaders, the president of the European commission said he was in “deep love” with “bella Italia”, but could not accept that all the country’s problems should be blamed on the EU or the commission. “Italians have to take care of the poor regions of Italy. That means more work; less corruption; seriousness,” Juncker said.

“We will help them as we always did. But don’t play this game of loading with responsibility the EU. A country is a country, a nation is a nation. Countries first, Europe second.” Officials in Brussels and markets around the world are awaiting the outcome of ongoing talks between Italy’s two populist leaders, Luigi Di Maio of the Five Star Movement (M5S) and Matteo Salvini of the far-right League, on forming a new government. After making the remarks during a question and answer session in Brussels, Juncker added it would be best to be “silent and prudent and cautious” this week, whenever he was asked about Italy. “I have full confidence in the genius of the Italian people,” he said.

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“..the PP’s former treasurer, as well as 28 others previously linked to the party, sentenced to jail for 33 years for fraud and money-laundering..”

Spain’s Government Poised To Fall As Socialists Prepare For Power (Ind.)

Mariano Rajoy’s chances of remaining Spanish Premier evaporated almost completely after the moderate Basque Nationalist Party (PNV) confirmed that its MPs would vote in favour of a parliamentary no-confidence motion against him if he did not resign. Despite its tiny number of MPs – five deputies in a 350 seater parliament – it is widely believed that the PNV’s decision will tip the balance against Mr Rajoy in a no-confidence motion, by a mere four votes. If successful, the Socialist party leader Pedro Sánchez, who tabled the no-confidence motion last week, would be automatically elected as Spanish PM, ending seven years of centre-right rule by the Partido Popular (PP) in Spain.

However, given that those voting in favour of the motion – ranging from Catalan Republican Nationalists, currently at daggers drawn with almost all Spain’s mainstream political parties, through to the left-wing Podemos coalition – have little in common beyond a desire to depose Mr Rajoy so a new government could prove highly unstable. Should Mr Rajoy lose the vote, he will be Spain’s first PM to leave office as a result of a no-confidence motion since democracy was restored to the country more than four decades ago.

[..] the impact of a court verdict last week in the so called Gurtel case, a cash-for-kickback scandal that saw the PP’s former treasurer, as well as 28 others previously linked to the party, sentenced to jail for 33 years for fraud and money-laundering, coupled with a €240,000 (£210,000) fine for the PP itself, left Mr Rajoy looking unexpectedly vulnerable.

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“Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends..” “It’s like a giant Ponzi scheme but where the victims are your children.”

UK’s “Bank of Mum & Dad” is Running Out of Liquidity (DQ)

Mortgages for 100% (or above) of the purchase price not only help fuel high-octane housing bubbles, they also make them a lot riskier when home prices decline, and when more and more borrowers end up with negative equity – where someone’s home is worth less than their debt. That, in turn, significantly raises the likelihood of borrowers defaulting on their loans. And that’s why these 100% mortgages are risky for banks. Today’s new breed of 100% mortgages has a twist in its tail: to provide the banks extra security, they are insisting on family members acting as guarantors for parts of the loans. In other words, if a borrower falls behind on repayments, a parent’s home can also be put at risk.

This kind of deal is becoming increasingly common in the UK, where property prices still remain close to their all-time high despite fears prompted by Brexit and the recent cooling of London’s property market. Underpaid and over-indebted, many young people cannot afford to put down even a 5% deposit on houses whose prices, after they’re adjusted for inflation, have almost doubled in the last 20 years. And a 10% or 15% down-payment is totally out of reach. Their only hope of getting onto the “property ladder” is to get a financial leg up from their parents.

So widespread is this phenomenon that in 2017 the so-called “Bank of Mum and Dad” became the ninth biggest mortgage lender in the UK shelling out some £6.5 billion in loans. Parents helped provide deposits for more than 298,000 mortgages last year — the equivalent of 26% of all transactions. “The Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder,” said Nigel Wilson, chief executive of the financial service company Legal & General.

It is not driven purely by altruism. The UK’s multi-decade property boom, propelled by artificially low interest rates and supportive government policies, has provided a huge source of wealth for baby boomers. If the Bank of Mum and Dad didn’t lend this money to the new generation, demand for new mortgages would dry up and the UK’s multi-decade housing bubble would have begun to deflate some time ago. As a result, the houses that mum and dad own would lose much of their “value” and their respective net worth would plummet. “Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends,” explained buyers agent Henry Pryor. “It’s like a giant Ponzi scheme but where the victims are your children.”

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A glimmer of hope.

Ecuador’s President Says Assange Can Stay In Embassy ‘With Conditions’ (G.)

Lenín Moreno, the president of Ecuador, has said Julian Assange’s asylum status in the country’s London embassy is not under threat – provided he complies with the conditions of his stay and avoids voicing his political opinions on Twitter. However, in an interview with Deutsche Welle on Wednesday, Moreno said his government would “take a decision” if Assange didn’t comply with the restrictions. “Let’s not forget the conditions of his asylum prevent him from speaking about politics or intervening in the politics of other countries. That’s why we cut his communication,” he said. Ecuador suspended Assange’s communication’s system in March.

Moreno’s statements come two weeks after an investigation by the Guardian and Focus Ecuador revealed the country had bankrolled a multimillion-dollar spy operation to protect and support Assange, employing an international security company and undercover agents to monitor his visitors, embassy staff and even the British police. Over more than five years, Ecuador put at least $5m (£3.7m) into a secret intelligence budget that protected him while he had visits from Nigel Farage, members of European nationalist groups and individuals linked to the Kremlin. Earlier this month, Moreno withdrew additional security assigned to the Ecuadorian embassy in London, where the WikiLeaks founder has remained for almost six years.

Moreno has previously described Assange’s situation as “a stone in his shoe” and repeatedly hinted that he wants to remove the Australian from the country’s London embassy. In an interview in Quito, the president said granting Assange Ecuadorian citizenship in December last year had not been his idea but that of the foreign minister, María Fernanda Espinosa. He had delegated all decisions related to the case to her, Moreno told Deutsche Welle.

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May 272018
 
 May 27, 2018  Posted by at 9:03 am Finance Tagged with: , , , , , , , , , , , , ,  


Edvard Munch Separation 1896

 

The ECB Is Preventing An Italian Rerun Of The Euro Crisis – For Now (MW)
Italy President Under Pressure To Accept Eurosceptic Minister (R.)
We’re Engaging In Self-Deception And Unsupported Hopefulness (Ron Paul)
Putin Warns “US Sanctions Hurt Trust In Dollar As Reserve Currency” (ZH)
Erdogan Calls On Turks To Convert Dollar, Euros Into Lira (R.)
Spain’s Ciudadanos Party Open To Alternative Candidate To Oust PM Rajoy (R.)
Daimler Threatened With Recall Of Over 600,000 Diesel Models (R.)
British Arms Exports To Israel Reach Record Level (G.)
Koreas Discuss Non-Aggression Pledge, Peace Treaty Ahead Of Summit (R.)
How Did The Swedish Matter End? (Justice4Assange)

 

 

Draghi must save Italy. Even if he doesn’t like its government.

The ECB Is Preventing An Italian Rerun Of The Euro Crisis – For Now (MW)

As a result of the ECB’s purchases, only 32% of Italian government bonds are still held by foreign investors, Solveen noted, and only a third of those are held outside the eurozone. That compares with more than 40% before the sovereign debt crisis. [..] The ECB’s deposit rate stands at negative 0.4%, while its key lending rate stands at 0%. Rates wont’ rise soon, Solveen notes, and that’s curbing the rise of short-term bond yields. It also means Italy will be able to issue new bonds with low coupons, at least in the two-to-three-year maturity range, he said, which should also anchor long-end yields.

And since the average duration of Italian bonds has risen significantly in recent years, Italy’s Treasury can shift its issuance back toward shorter-dater maturities if needed. But it’s weakness at the short end of the yield curve—the line plotting yields across all debt maturities—that might be most troubling for investors right now. “Strong selling pressure at the short end is noteworthy…, while there have been a few other such episodes since the start of QE, this is the strongest one,” said Luca Cazzulani, deputy head of fixed income at UniCredit, in Milan (see chart below).

An important near-term test looms Monday when the Treasury is due to sell 2-year zero-coupon notes and inflation-indexed BTPs. The auction round “will be closely watched and results are likely to drive BTPs more than usual,” Cazzulani said, in a note. “Considering the still fragile market environment, pressure ahead of the auction should not come as a surprise.” Both auctions are smaller than usual, which should help keep supply pressures low, he said. Solveen said that while the new government’s policies are unlikely to trigger a new sovereign debt crisis, the situation underlines the fundamental differences in economic policy thinking within the eurozone.

“The ECB’s very expansionary monetary policy and the resulting cyclical economic recovery can conceal this fact to some extent but, at the next recession at the latest, the difference could become very apparent again and prove a real test for the monetary union,” he said.

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Power games. The establishment protests.

Italy President Under Pressure To Accept Eurosceptic Minister (R.)

Italy’s would-be coalition parties turned up the pressure on President Sergio Mattarella on Saturday to endorse their eurosceptic pick as economy minister, saying the only other option may be a new election. Mattarella has held up formation of a government, which would end more than 80 days of political deadlock, over concern about the far-right League and anti-establishment 5-Star Movement’s desire to make the 81-year-old economist Paolo Savona economy minister. Savona has been a vocal critic of the euro and the European Union, but he has distinguished credentials, including in a former role as an industry minister. Formally, Prime Minister-designate Giuseppe Conte presents his cabinet to the president, who must endorse it.

Conte, a little-known law professor with no political experiences, met the president on Friday without resolving the deadlock. “I hope no one has already decided ‘no’,” League leader Matteo Salvini shouted to supporters in northern Italy. “Either the government gets off the ground and starts working in the coming hours, or we might as well go back to elections,” Salvini said. Later 5-Star leader Luigi Di Maio said he expected there to be a decision on whether the president would back the government within 24 hours. 5-Star also defended Savona’s nomination. “It is a political choice … Blocking a ministerial choice is beyond (the president’s) role,” Alessandro Di Battista, a top 5-Star politician, said.

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“Everybody’s practically euphoric and Trump is a good cheerleader. But, there is a lot of weakness behind the numbers..”

We’re Engaging In Self-Deception And Unsupported Hopefulness (Ron Paul)

When you think about it, I was born in 1935, in the middle of the Depression. I remember my early life. I remember when I was 3 years old and 5 years old and the Depression lasted through World War II and the conditions were such as I remember very clearly, but it wasn’t a big deal for me even though we lived in close quarters and we didn’t have a lot of shoes and were just skimping by. So, we went through a Depression and World War II. Those were pretty tough times and since that time — since the war issue’s always been a big issue with me — I remember the tragedies of World War II. We had relatives in Germany, so it always caught my attention. Then we had the Korean War. I could remember my mother saying, “another war this soon?”

We just got over one, so she was negative on that and then we had the Vietnam War and I knew that I probably would be drafted and that was one of the reasons that helped me move toward medicine. So, those were pretty bad times. Think of the people that were dying over those first 30 or 40 years. Things weren’t great economically either. In America, we were not even allowed to own gold. Those were conditions that existed that changed for the better to some degree. Philosophically, I think, we’re still on the wrong track overall, although some things have improved. Once again, we’re able to own gold. The United States government and I pushed it along when I was in Congress to mint gold coins again and talk about monetary policy.

Philosophically, we are making progress in some areas, though, and I give a lot of credit to the institutions that do this, like the Mises Institute and FEE. And of course, I want to participate in changing foreign policy and we keep working on that through the Ron Paul Institute. But, on the downside of all this, I see we’re on a disastrous course even though the official economic indicators look great and wonderful. Everybody’s practically euphoric and Trump is a good cheerleader. But, there is a lot of weakness behind the numbers, and we’re engaging in self-deception and unsupported hopefulness that things will be all good, there will be no inflation or high unemployment, and there’ll be no major war. I think when I look at the seeds that have been sown, the future looks rather bleak in many ways, even compared to what it was like as we finished World War II and Vietnam.

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“Breaking the rules is becoming the new rule..”

Putin Warns “US Sanctions Hurt Trust In Dollar As Reserve Currency” (ZH)

Despite his absence from Vladimir Putin’s annual economic showcase – which included such US allied luminaries as Japanese Prime Minister Shinzo Abe, French President Emmanuel Macron, China’s Vice President Wang Qishan and IMF chief Christine Lagarde – the conversation kept coming back to President Trump. Led by an unusually outspoken Putin, Macron – who seemed more enamored with Putin than the rest, agreed with the Russian president’s concerns over the erosion of trust and the specter of a global crisis brought on by Washington’s disruptions. “The free market and fair competition are being squeezed by confiscations, restrictions, sanctions,” Putin said. “There are various terms but the meaning is the same – they’ve become an official part of the trade policy of certain countries.”

The “spiral” of U.S. penalties is targeting “an ever larger number of countries and companies,” undermining “the current world order,” he said. Macron replied: “I fully share your point of view.” Such warnings only confirm Mr Putin’s world view. Without mentioning the US, he complained that the multilateral economic world order was being “crushed” by a proliferation of exceptions, restrictions and sanctions. The “darkest cloud” on the economic horizon is the “determination of some to actually rock the system,” Lagarde said, prompting Wang, a new point-man for Chinese foreign policy, to agree. “Politicizing economic and trade issues, and brandishing economic sanctions, are bound to damage the trust of others,” he said.

[..] The global economy is facing a threat of a spiraling protectionist measures that can lead to a devastating crisis, Vladimir Putin warned. Nations must find a way to prevent this and establish rules on how the economy should work. The Russian president spoke out against the growing trend of using unilateral restrictions to achieve economic advantage, as he addressed guests of the St. Petersburg International Economic Forum (SPIEF) on Friday. “The system of multilateral cooperation, which took years to build, is no longer allowed to evolve. It is being broken in a very crude way. Breaking the rules is becoming the new rule,” he said. Putin sharply criticized the sanctions, saying they signal “not just erosion but the dismantling of a system of multilateral cooperation that took decades to build.”

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Which will cause them to do the exact opposite.

Erdogan Calls On Turks To Convert Dollar, Euros Into Lira (R.)

Turkish President Tayyip Erdogan called on Turks on Saturday to convert their dollar and euro savings into lira, as he sought to bolster the ailing currency which has lost some 20 percent of its value against the U.S. currency this year. “My brothers who have dollars or euros under their pillow. Go and convert your money into lira. We will thwart this game together,” Erdogan said at a rally in the eastern city of Erzurum ahead of parliamentary and presidential elections on June 24.

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One moment they claim to have gotten it done, the next they start all over again..

Spain’s Ciudadanos Party Open To Alternative Candidate To Oust PM Rajoy (R.)

Spain’s center-right Ciudadanos party said on Saturday it would be willing to back an unspecified neutral candidate to oust Prime Minister Mariano Rajoy over a far-reaching graft case engulfing members of his People’s Party (PP). Jose Manuel Villegas, secretary-general of Ciudadanos, told a news conference his party could work with the opposition Socialists to support an alternative candidate in a no-confidence vote to unseat its former ally Rajoy, who leads a minority government beset by numerous corruption scandals. Rajoy said on Friday he would fight the no-confidence vote and finish his four-year term, ruling out early elections.

Pro-business Ciudadanos (meaning Citizens in English) declined to support the no-confidence motion put forward by Socialist leader Pedro Sanchez earlier that day. But Villegas said on Saturday his party could back a “practical candidate” who was neither Sanchez nor Ciudadanos leader Albert Rivera. To succeed, the two parties would need to agree a joint candidate to replace Rajoy and on other questions such as calling a snap election. They would also need the backing of leftist party Podemos. A no-confidence vote requires the candidate to gather 176 or more votes in Spain’s lower house, a difficult task in the fragmented parliament where nationalists, among them two Catalan separatist parties, could be decisive if the larger parties cannot reach an agreement.

Speaking to Cope radio on Saturday, Socialist Secretary General Jose Luis Abalos said the party would not work with Catalan separatist parties and called on Ciudadanos to support Sanchez’s bid to replace Rajoy as PM in exchange for a promise to call snap elections soon after taking office. [..] The graft case, which relates to the use of a slush fund by the PP in the 1990s and early 2000s to illegally finance campaigns, has plagued Rajoy since he took office in 2011. He has always denied wrongdoing. 29 people related to the PP, including a former treasurer and other senior members, were convicted on Thursday of offences including falsifying accounts, influence-peddling and tax crimes. They were sentenced to a combined 351 years behind bars.

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They just keep at it. Jail time is required.

Daimler Threatened With Recall Of Over 600,000 Diesel Models (R.)

Daimler faces a recall order for more than 600,000 diesel-engine vehicles including C-Class and G-Class models because of suspected emissions manipulation, German magazine Der Spiegel reported on Friday. Germany’s KBA vehicle authority is probing concrete suspicions that the affected cars were fitted with illicit defeat devices designed to manipulate emissions levels, the magazine said, without citing sources. Daimler said on Friday it had not received a formal summons from KBA regarding its C-Class and G-Class models, a precursor to a recall, but declined to comment in detail on the Spiegel report.

The report comes a day after the KBA ordered Daimler to recall the Mercedes Vito van model fitted with 1.6 liter diesel Euro-6 engines because of engine control features to reduce exhaust emissions which KBA said breached regulations. Daimler has said it is appealing the KBA findings on the Vito and will go to court if necessary. Since rival Volkswagen admitted in 2015 to cheating U.S. emissions tests, German carmakers including VW, Daimler and BMW have faced a backlash against diesel technology in which they have invested billions of euros.

Read more …

And that calls for a royal visit…

British Arms Exports To Israel Reach Record Level (G.)

British defence contractors are selling record amounts of arms to Israel, new figures reveal, just days after it was confirmed that Prince William will represent the UK government on a visit to the country next month. Figures from the Campaign Against Arms Trade reveal that last year the UK issued £221m worth of arms licences to defence companies exporting to Israel. This made Israel the UK’s eighth largest market for UK arms companies, a huge increase on the previous year’s figure of £86m, itself a substantial rise on the £20m worth of arms licensed in 2015. In total, over the past five years, Israel has bought more than £350m worth of UK military hardware.

Licences issued to UK defence contractors exporting to Israel last year include those for targeting equipment, small arms ammunition, missiles, weapon sights and sniper rifles. In 2016 the UK issued licences for anti-armour ammunition, gun mountings, components for air-to-air missiles, targeting equipment, components for assault rifles, components for grenade-launchers and anti-riot shields. Human rights groups have questioned the wisdom of sending a senior royal to a country whose use of lethal force last month has been the subject of concern from the UK government.

“After the appallingly excessive response of the Israeli security forces at the Gaza border, tensions in the occupied Palestinian territories are likely to be close to boiling point when Prince William makes this historic visit,” said Kerry Moscogiuri, Amnesty International UK’s campaigns director.

Read more …

Kim makes a call, and they meet less than 24 hours after. That is a big change all by itself.

Koreas Discuss Non-Aggression Pledge, Peace Treaty Ahead Of Summit (R.)

North and South Korea are discussing a possible non-aggression pledge by the United States to the North and a start of peace treaty talks to address Pyongyang’s security concerns before a North Korea-U.S. summit, a senior South Korean official said on Sunday. South Korean President Moon Jae-in and North Korean leader Kim Jong Un held a surprise second meeting on Saturday after U.S. President Donald Trump called off his talks, set for June 12 in Singapore, before floating a reinstatement of the plan.

“For the success of the North Korea-U.S. summit, we’re exploring various ways of clearing North Korea’s security concerns at the working level,” the senior South Korean presidential official told reporters. “That includes an end to hostile relations, mutual non-aggression pledge, a launch of peace treaty talks to replace the current armistice,” the official said. The two Koreas are also in talks over a three-way declaration of the end to 1950-53 Korean War but there has not been any agreement yet over a tripartite summit, the official said.

Read more …

Everyone’s deleting emails. The FBI is all over this. Assange was framed. If prosecutors are not independent, this is what you get. And she’s a lousy liar to boot.

How Did The Swedish Matter End? (Justice4Assange)

The extradition warrant from Sweden was revoked on 19 May 2017, when the prosecutor also closed the entire underlying investigation. Having obtained Mr. Assange’s testimony, the prosecutor decided it would be disproportionate to proceed. The investigation had already been found to be baseless by Stockholm’s senior prosecutor, Eva Finne, who found that the conduct alleged by the police “disclosed no crime at all”. SMS messages from the alleged complainant made public in 2015 showed that she “did not want to accuse Assange of anything”, that she felt “railroaded by police and others around her”, and “police made up the charges”.

The UK’s role in the Swedish affair was exposed in emails obtained under Freedom of Information Act which revealed that Sweden moved to drop the investigation in 2013, but the UK Crown Prosecution Service persuaded Sweden to keep it alive. Emails show the UK advised Sweden not to interview Mr. Assange in the UK in 2011 and 2012. UK prosecutors admitted to deleting key emails concerning Assange and engaged in elaborate attempts to keep correspondence from the public record. The Swedish prosecutor admitted to deleting an email from an FBI agent about Assange which she received in 2017, and claimed it could no longer be recovered (Video in English and Swedish):

Read more …

May 252018
 
 May 25, 2018  Posted by at 2:20 pm Finance Tagged with: , , , , , , , , , , , ,  


René Magritte The therapeutist 1937

 

The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Podemos in a non-confidence vote against PM Rajoy. Hmm, what would that mean for the Catalan politicians Rajoy is persecuting? The Spanish political crisis is inextricably linked to the Italian one, not even because they are so much alike, but because both combine to create huge financial uncertainty in the eurozone.

Sometimes it takes a little uproar to reveal the reality behind the curtain. Both countries, Italy perhaps some more than Spain, would long since have seen collapse if not for the ECB. In essence, Mario Draghi is buying up trillions in sovereign bonds to disguise the fact that the present construction of the euro makes it inevitable that the poorer south of Europe will lose against the north.

Club Med needs a mechanism to devalue their currencies from time to time to keep up. Signing up for the euro meant they lost that mechanism, and the currency itself doesn’t provide an alternative. The euro has become a cage, a prison for the poorer brethren, but if you look a bit further, it’s also a prison for Germany, which will be forced to either bail out Italy or crush it the way Greece was crushed.

Italy and Spain are much larger economies than Greece is, and therefore much larger problems. Problems that are about to become infinitely more painful then they would have been had the countries been able to devalue their currencies. If you want to define the main fault of the euro, it is that: it creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.

 

And if you think about it, today the need for a common currency has largely vanished anyway already. Anno 2018, people wouldn’t have to go to banks to exchange their deutschmarks or guilders or francs, they would either pay in plastic or get some local currency out of an ATM. All this could be done at automatically adjusting exchange rates without the use of all sorts of middlemen that existed when the euro was introduced.

Americans and British visiting Europe already use this exact same system. Governments can make strong deals that make it impossible for banks and credit card companies to charge more than, say, 1% or 0.5%, on exchange rate transactions. This would be good for all cross-border trade as well, it could be seamless.

Technology has eradicated the reason why the euro was introduced in the first place, and made it completely unnecessary. But the euro is here, and it is going to cause a lot more pain and mayhem. Any country that even thinks about leaving the system will be punished hard, even if that’s the by far more logical thing to do.

Europe is not ready to call for the end of the experiment. Because so much reputation and ego has been invested in it, and because the richer nations and their banks still benefit -hugely- from the problems the poorer face. The one country that got it right was Britain, when it decided to stay out of the eurozone.

But then they screwed up the next decision. And found themselves with the most incompetent ever group of ‘chosen few’ to handle the outcome. Still, anyone want to take out a bet on who’s going to be worse off when the euro whip comes down, Britain or for instance Italy or France? Not me. Close call is the best I can come up with.

 

The euro was devised and introduced, ostensibly, to solve problems. Problems with cross border trade between European nations, with exchange rates. But instead it has created a whole new set of problems that turn out to be much worse than the ones it was supposed to solve. That’s how and why M5S and the League got to form Italy’s government.

In Spain, if an election is called, and it looks that way, you will either get a left wing coalition or more of the Rajoy-style same. Left wing means problems with the EU, more of the same means domestic problems; the non-confidence vote comes on the heels of yet another corruption scandal for Rajoy’s party.

And let’s not forget that all economic numbers are being greatly embellished all over the continent. If you can claim with a straight face that the Greek economy is growing, anything goes. Same with Italy. It’s only been getting worse. And yeah, there’s a lot of corruption left in these countries, and yeah, Europe could have helped them solve that. Only, it hasn’t, that is not what Brussels focuses on.

Italy for now is the big Kahuna. The EU can’t save it if the new coalition is serious about its government program. But it also can’t NOT save it, because that would mean Italy leaving the euro. And perhaps the EU.

If Italian bonds are sufficiently downgraded by the markets, Mario Draghi’s ECB will no longer be permitted to purchase them. And access to other support programs would depend on doing the very opposite of what the M5S/League program spells out, which is to stimulate the domestic economy. Is that a bad idea? Hell no, it’s just that the eurozone rules forbid it.

 

The euro has entirely outlived its purpose, and then some. But it exists, and it will be incredibly painful to unravel. The new game for the north will be to unload as much of that pain as possible on the south.

Europe would have been much better off of it had never had the euro. But it does. The politicians and bankers will make sure they’re fine. But the people won’t be.

The euro will disappear because the reasons for it not to exist are much more pressing than for it to do. At least that bit is simple. The unwind will not be.

 

 

Oct 012017
 
 October 1, 2017  Posted by at 2:02 pm Finance Tagged with: , , , , , , , ,  


Catalunya October 1 2017

 

I’ve seen a lot of videos and photos of the Catalonia attempt to hold a referendum today (Tyler has a “nice” series of them), and what struck me most of all, apart from the senseless violence police forces were seen to engage in, is the lack of violence on the side of protesters.

So when I see the Interior Ministry claim that 11 policemen were injured, That is hard to take serious. Not that the Catalans had no reason to resist or even fight back. That hundreds of protesters, including scores of grandma’s, are injured is obvious from watching the videos. Since rubber bullets were used in large numbers, fatal injuries are quite possible.

Policemen hitting peaceful older ladies till they bleed is shocking, and we are all shocked. Many of us will be surprised too, but we shouldn’t be. Spain is still the land of Franco, and his followers continue to exert great influence in politics, police and military. And it’s not just them: one video from Madrid showed people singing a fascist theme from the Franco era.

 

 

That’s the shape the EU knowingly accepted Spain as a member in, and that shape has hardly changed since. The total silence from Brussels, and from all its capitals, speaks volumes. Belgian PM Michel said earlier today that he doesn’t want to talk about other countries’ politics, and that’s more than I’ve seen anyone else say. It’s of course a piece of gross cowardly nonsense, both Michel’s statement and the silence from all others.

Because this very much concerns the EU. As Julian Assange tweeted “Dear @JunckerEU. Is this “respect for human dignity, freedom and democracy”? Activate article 7 and suspend Spain from the European Union for its clear violation of Article 2.” (Article 7 of the European Union Treaty: “Suspension of any Member State that uses military force on its own population.”) Sure, technically the Guardia Civil is not military, but are Juncker, Michel and above all Merkel really going to try and hide behind that?

Assange also re-tweeted this: “Claude Taylor Breaking: contact with Ecuadorian Govt says they plan on removing Julian Assange from their Embassy in London. Expect his arrest to follow.” Assange’s reaction: “DC based ex-White House claims I’m to be arrested for reporting on Spain’s censorship & arrests in Catalonia. Dirty.”

But that should not be a surprise either. We know from the example of Greece, and the treatment of refugees, what the morals of Europe’s ‘leaders’ are. Their morals are bankrupt. In that sense, they fit in seamlessly with those of Mariano Rajoy’s governing PP party in Spain.

 

 

Still, this is not why people want to be part of the EU. So unless very strong statements come from the various capitals, and very soon, given that they’re already way too late, the EU as a whole will find itself in such a deep crisis it might as well pack its bags and go home. Wherever home may be for these career politicians.

If you’re void of any and all ethics and morals, which is what that silence shouts out very loudly, you can’t lay any claim at all to the right to make decisions for anyone at all. That is true for Rajoy and his party, and it’s just as true for all other deadly silent European leaders.

And this is by no means over, it hasn’t started yet. Here’s a map of close vs open polling stations in Catalonia, via Assange. ‘Nuff said. What will Rajoy’s next move be? Locking up everyone? The entire Catalan governing party that organized the referendum? Make no mistake: the Spanish military have long threatened they would destroy Catalonia before allowing it independence.

 


Catalan polling stations. Green=open. Red=closed

 

Philosopher Anna M. Hennessey, who has lived in both Spain and in Catalonia, put it this way:

Franco was victorious and did not lose his war, as Hitler and Mussolini lost theirs, but this must not mean that we should let the dictator’s toxic ideological infrastructure persist any further into the twenty-first century. Supporting Catalonia is a necessary step in putting an end to fascism in Europe.

When Fascism Won’t Die: Why We Need to Support Catalonia

People in the United States, especially those from the 1980s onward, know little of Spain’s Civil War (1936-1939) and the long dictatorship that followed. This knowledge is helpful in understanding the situation in Spain and Catalonia right now. The judge (Ismael Moreno) who is set to decide on sedition charges against Catalan activists for attempting to hold a democratic referendum on October 1st, for example, has roots that are deeply connected to Francisco Franco (1892-1975), the military leader who initiated the Civil War, won it, and then went on to rule as Head of State and dictator in Spain for almost forty years.

Franco is a major figure of twentieth-century fascism in Europe. A purge of Francoist government officials never took place when the dictatorship ended in the 1970s, and this leadership has had a lasting impact on how Spain’s government makes its decisions about Catalonia, a region traumatized during and after the war due to its resistance to Franco’s regime. The lingering effects of Franco’s legacy are at this point well-documented and need to be a part of the discourse that surrounds what is quickly unraveling in Barcelona.

[..] Like the Spanish government, the Spanish police force was never purged of its Francoist ties following the dictatorship. It is a deeply corrupt institution [..] Manuel Fraga Iribarne, one of Franco’s ministers during the dictatorship, founded Prime Minister Mariano Rajoy’s Popular Party. The party is currently enmeshed in a corruption scandal of its own. Spain’s royal family is similarly linked to Franco and has also been brought to trial for its own set of corruption charges. It is impossible to ignore the fascist bedrock upon which modern Spain is founded, or to ignore the reality that this foundation has to do with the way Spain treats Catalonia.

And so we can see the dream of a united Europe die. At least one that most people will feel comfortable living in. And if you can’t achieve that, why have a union to begin with? Democracy in Europe is dying in Brussels, it’s dying in Greece and the Mediterranean, and it died today in the streets of Barcelona and other Catalan locations.

Are all Europeans simply going to sit back and wait till it dies where they live, too? My bet is they will only do that until they no longer see the EU as economically beneficial to them. And as of today, because of Catalunya, economics will no longer be the only consideration. Because Spain will not be thrown out, not even suspended. There will be lots of empty strong words, but not all Europeans are all that stupid.

Barcelona mayor Ada Colau has called for Rajoy to resign, but she knows as well as anyone that that will not be enough, and it won’t change a thing. Rajoy is merely one representative of a fascist system that is the underbelly of Spain, waiting for its opportunity to raise its ugly head. It’s found that opportunity today, and the whole world is silent. Well, the ‘leaders’ are.

 

And while we’re talking disaster, I can’t help myself from briefly addressing Puerto Rico. The anti-Trump echo chamber is louder than ever, and it’s getting absurd. I can’t see what part of it is Trump’s doing, and what is due to other sources, but it simply seems not true that help is not moving forward. In a destruction as complete as Puerto Rico, there are limits to what can be done in a limited amount of time.

All the criticism of Trump at some point becomes criticism of other people involved as well. The mayor of San Juan gets lauded as a hero in certain circles, but is she really? How about the US military, how about FEMA? They look to be doing a good job, and FEMA seems to have learned a lot from Katrina 12 years ago.

Again, I don’t know how much of that is Trump, but if I may be cynical, he’s smart enough to know how his response could or would be used against him, so he would be really thick if he let the situation get worse than it should be. Earlier today Cate Long, an expert on Puerto Rico due to its debt fiasco, and hence with a lot of contacts there, tweeted:

“Federal govt has leapfrogged Puerto Rico govt & made direct connection with 78 municipalities. Central to powerful supply chain & relief.”

While the Huffington Post, not exactly Trump cheerleaders, posted this:

US Military On Puerto Rico: “The Problem Is Distribution”

Speaking today exclusively and live from Puerto Rico, is Puerto Rican born and raised, Colonel Michael A. Valle (”Torch”), Commander, 101st Air and Space Operations Group, and Director of the Joint Air Component Coordination Element, 1st Air Force, responsible for Hurricane Maria relief efforts in the U.S. commonwealth with a population of more than 3 million.

Since the ‘apocalyptic’ Cat 4 storm tore into the spine of Puerto Rico on September 20, Col. Valle has been both duty and blood bound to help. Col. Valle is a firsthand witness of the U.S. Department of Defense (DoD) response supporting FEMA in Puerto Rico, and as a Puerto Rican himself with family members living in the devastation, his passion for the people is second to none. “It’s just not true,” Col. Valle says of the major disconnect today between the perception of a lack of response from Washington verses what is really going on on the ground.

[..] some truck drivers from outside the island have been brought in, and more are coming, however it’s not a fix-all. “We get more and more offers to help, but there is no where to stay, we can’t take any more bodies, there’s no where to put them.” Col. Valle says, adding that their “air mobility” is good, and reiterating that getting more supplies or manpower is not the issue. When asked three times what else Washington can do to help, or anyone for that matter, three times Col. Valle answered, “It’s going to take time.”

Maybe it’s time to exit your echo chamber?

 

 

Sep 172014
 
 September 17, 2014  Posted by at 7:18 pm Finance Tagged with: , , ,  


Esther Bubley The gas behind the gun, Columbus, Ohio Sep 1943

I want to start off by expressing my deeply felt admiration and gratitude for the way the Scots and Brits alike have made the run-up to the September 18 referendum a peaceful and civil affair. It’s not at all hard to imagine how this could have been very different.

Hats off to y’all for that. And may it be an example for future independence referendums elsewhere. It should, the entire world should feel profoundly indebted to you for this. The reason why will soon become clear as other peoples pursue their rights to independence.

It’s precisely because there’s so much pressure from incumbent politicians and political-industrial power blocks to keep existing larger entities intact, that they should be broken. Because in the end that is all there is: the question(s) of power, and of losing – some of – it. Of power and money.

And those are simply and plainly the wrong questions. These are not the things that should guide our decisions. If you vote either Yes! or No! in Scotland tomorrow because you think your choice will make you richer, you’re on the wrong track. Not everything in life is about money.

Nobody should want their leaders to be driven by a desire, even hunger, for power. Our leaders should be motivated by the best interests of their people, their voters, not by their own personal interests. That may sound naive, given what our societies, and the international bonds and ties they have forged, have turned into, but that only means we must repair those societies, and the ties with others. And make sure we pick our leaders for the right reasons next time around.

As I write this, Obama is addressing US troops in Tampa, telling them how important they are to the nation and all that. And the first image that evokes is of how the US treats its army veterans. US troops are disposable, they’re cannon fodder, no matter what this or that president says. US soldiers are disposable pawns in a power game.

Earlier today Spanish PM Mariano Rajoy ‘threatened’ the Scots Yes! voters that it will take years before their independent nation could join the EU. Mr. Rajoy has no business talking about Scotland’s referendum. He does so anyway, solely to scare off the Catalans from holding their own referendum. Mr. Rajoy wants power. That’s why he is where he is.

The Catalans should break free from Spain if only because of that. The entire western world is stuck and lost in power bonds and systems that may once have been useful, but have been contorted into something entirely different from the ideals they once stood for, and now do unspeakable damage to us.

This is no longer the world of the 1960’s or 70’s or 80’s. And though it may be understandable that it’s hard for people to see that, and to leave behind the picture of the world they grew up in, it’s no less true. Clinging onto a picture, and a model, that’s died and gone, can be hugely destructive.

Our political and economic model is well and truly broken. All that’s been keeping our nation states, and the organizations they have signed up to, alive over the past 3 or 4 decades, is the – seemingly – never-ending growth of additional debt. This is a very crucial point I think you should lock into your memory and never forget as long as you live: in our growth driven and obsessed economic model there’s only one thing left that actually grows, and that is our debt.

The only way our present leaders can even imagine boosting economic growth – against the tides – is by heaping more debt upon the already, certainly by historical standards, flabbergasting levels of it.

Why would anyone want to remain part of that model, in which, moreover, many if not most of the important decisions affecting their lives are taken by distant others, if they have a choice not to? The only people who choose to do that are those who don’t understand what happens to them and the world around them.

Scottish friends and readers have been telling me over the past fortnight that Yes! leader Alex Salmond is not a fine guy, and that he may well bring a lot of destruction to the country if he gets his way. That he of all people is your typical money and power guy.

But I think of him as an instrument. Salmond can’t possibly be worse than David Cameron is for Scotland (and the UK as a whole). And once the vote is in, Salmond will be replaced soon enough if he screws up the job. And at least the Scots will be free to make their own decisions, which includes getting rid of Salmond. It’s called freedom, liberty. Something you should never take for granted.

The UK, US, EU, NATO, they’re all organizations that no longer serve any purpose other than to make sure their leaders retain the national and supra-national power they have accumulated. And these leaders have their finger on the trigger. Not just when it comes to guns, but also when it comes to economics.

The Scottish referendum shows all of us that there is a peaceful way to get rid of those fingers on the trigger. A potentially invaluable lesson. If we care to learn.

Because the economic model we built our world on and around has failed, gone bankrupt and died, we need another model. But instead all we do is try to resuscitate the corpse. As if change as a function of time passing is somehow inherently wrong, and we should instead cling and hang and hold on to what once was with all we can.

But if we choose to try and hold on what has gone, we choose to keep in place the very model that has already failed. Which is not in our interest, but in that of the leaders who’ve presided over the failed model and won’t give up.

Scotland should vote Yes! on September 18 to show us the way. It won’t be all smooth and pretty and hosannah from day 1 if Yes! wins, but Scotland will figure it all out down the line. By themselves. That is the key: they’ll do it by themselves. As every nation, people, culture should be able to do.

That’s why it’s important that the Scots vote Yes! Not just for themselves, though they have plenty reasons to, but to set an example for Europe – and the world – of how these things can and should be done. Because without such an example, Catalunya threatens to turn into a battlefield, and we shouldn’t allow it to. Let alone all the hundreds of other regions around the globe.

Scotland, you have much more to gain than you have to lose. And so do a billion people or so elsewhere.

When you’re in that voting booth tomorrow, think Braveheart and Robert the Bruce, and everyone who lost live and limbs fighting for Scotland in your proud past. The world needs you to pave the way. And you need that way yourselves.

It’s a new world out there, and even if you don’t fully see that, you can play a huge role in making others see it. Moreover, the old world no longer holds any promises for you.

We’re just getting started.

One In 10 Americans’ Paychecks Get Seized To Pay Off Debts (MarketWatch)

One in 10 Americans between the ages of 35 and 44 had money seized from a paycheck and sent off to pay a debt last year, a new report finds. More than one-third of those wage garnishments were for student and consumer loans, like credit card or medical bill debt, according to the payroll processor ADP, which analyzed data for 13 million employees for the first study of its kind. The data comes as American credit card debt hits post-recession highs, with the average household’s balance at about $6,802. And one in three Americans is dogged by collections, or debts more than 180 days past due, for credit card balances, child-support, medical or utility bills. For most people, garnished wages went toward child support (41.5%). After student and consumer loans (35.4%), workers’ pay was also docked to pay off tax debts (18.3%) and bankruptcies (4.9%).

Those who earned $25,000 to $40,000 had their wages garnished for consumer debts more often than child support. The data suggest a relationship between blue-collar jobs and pay seizures. “The employees living paycheck to paycheck are often hit with these garnishments,” says Julie Farraj, vice president of ADP wage garnishment services. [..] The wage-docking process was meant to curb cases where people would avoid paying off debts by transferring their assets to a third party and pleading poverty. Federal law limits the weekly amount that employers can withhold from someone’s paycheck, protecting 75% of someone’s disposable earnings or about 30 hours a week of pay at the federal minimum wage — whichever is greater. Disposable income is the money left after deductions like taxes, Social Security and retirement contributions.

Read more …

‘ … more government debt per capita than Greece, Portugal, Italy, Ireland or Spain”

US Debt Grows By More Than $1 Trillion In Past 12 Months (Snyder)

The idea that the Obama administration has the budget deficit under control is a complete and total lie. According to the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014. But this number is just for public consumption and it relies on accounting tricks which massively understate how much debt is actually being accumulated. If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt to the penny. On September 30th, 2013 the U.S. national debt was sitting at $16,738,183,526,697.32. As I write this, the U.S. national debt is sitting at $17,742,108,970,073.37. That means that the U.S. national debt has actually grown by more than a trillion dollars in less than 12 months. We continue to wildly run up debt as if there is no tomorrow, and by doing so we are destroying the future of this nation.

• The U.S. national debt has increased by more than $7 trillion dollars since Barack Obama has been in the White House. By the time Obama’s second term is over, we will have accumulated about as much new debt under his leadership than we did under all of the other U.S. presidents in all of U.S. history combined.

• The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

• In August, the average rate of interest on the government’s marketable debt was 2.028%. In January 2000, the average rate of interest on the government’s marketable debt was 6.620%. If we got back to that level today, we would be paying well over a trillion dollars a year just in interest on the national debt.

• At this point the U.S. government has accumulated more than $200 trillion of unfunded liabilities that will need to be paid in future years.

Read more …

Risk on. Get out!

Citigroup Embraces Derivatives as Deals Soar (Bloomberg)

Citigroup is diving deeper into derivatives. In the past five years, the firm that took the largest U.S. bank bailout of the financial crisis increased the total amount of derivatives on its books by 69%, surpassing most U.S. peers and closing the gap with the market leader, JPMorgan. At the end of June, Citigroup had $62 trillion of open contracts, up from $37 trillion in June 2009, company filings show. JPMorgan trimmed its holdings 14% to $68 trillion. Citigroup is expanding as regulators try to rein in instruments that helped fuel the 2008 credit contraction. The third-largest U.S. lender has amassed the largest stockpile of interest-rate swaps, a type of derivative that can swing in value when central banks raise rates. More than 92% of the bank’s derivatives don’t trade on exchanges, making it harder for regulators to spot dangers in the market.

“Risk-taking is in their DNA,” said Arthur Wilmarth, a law professor at George Washington University, who wrote a 2013 paper describing failures that led New York-based Citigroup to seek a $45 billion bailout and more than $300 billion in asset guarantees during the crisis. Even taking the winning side of a derivative carries a risk the other party can’t pay, he said. It’s “basically a speculative trading business.” Derivatives typically require parties to make payments to each other based on the value of underlying stocks, bonds, commodities or interest rates. Airlines and farmers use the contracts to offset price swings for fuel, vegetables and meat. Bond buyers rely on them to insure against defaults, and some investors use them to speculate.

Read more …

Swap swap swap.

Bill Gross Used $45 Billion Derivatives to Lift Fund Gain (Bloomberg)

Bill Gross is relying on derivatives rather than Janet Yellen to raise his returns on government bonds. The co-founder of Pacific Investment Management Co. sold most of the $48 billion of U.S. Treasuries held by his $221.6 billion Pimco Total Return Fund in the second quarter, replacing them with about $45 billion of futures, according to an August filing. The contracts require small up-front payments, freeing up money for Gross to invest in higher-yielding securities including Brazilian, Spanish and Italian debt.

“They are taking the cash and buying all these peripheral bonds that have a lot of spread on them relative to Treasuries,” said Erik Schiller, a Newark, New Jersey-based senior money manager at Prudential Fixed Income, referring to bonds issued by European countries other than France and Germany. “It is levering their fund.” Pimco in May said that interest rates in the U.S. will remain lower than they had been before the financial crisis, as the economy enters a “new neutral” characterized by global growth converging toward lower, more stable speeds. The Newport Beach, California-based firm is recommending that clients consider strategies implemented with futures, options and swaps to lift subpar returns.

Read more …

No, really!

High-Risk, High-Leverage Credit Suisse Loans Draw Fed Scrutiny (WSJ)

Credit Suisse is under fire from U.S. regulators over concerns the bank isn’t heeding warnings to stop making loans regulators see as risky, according to a person familiar with the matter. The Swiss bank in recent weeks received a letter from the Federal Reserve demanding the bank immediately address problems with its underwriting and sale of leveraged loans, or high-interest-rate loans used by private-equity firms and others to finance purchases of companies, among other uses. The letter to Credit Suisse, known as a Matters Requiring Immediate Attention, found problems with the bank’s adherence to guidance issued last year, warning banks to avoid deals that included too much debt or too few protections for the lenders in case of a default, according to the person familiar with the matter.

The Fed’s letter to Credit Suisse comes as regulators, some of whom have been taken aback by the lack of response to their guidance, are preparing to take tougher action against firms that don’t follow Washington’s marching orders, according to people familiar with the matter. It is unclear if other banks beyond Credit Suisse have received such a letter. Officials at the Fed and the Office of the Comptroller of the Currency are using private communications with banks to rein in relaxed underwriting and debt-laden deals, according to people familiar with the matter. People familiar with regulators’ thinking said they plan to take action on a firm-by-firm basis when they see compliance problems.

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Ha!

Investors Lose Big As Head Of Russia’s No.1 Holding Under House Arrest (RT)

Russia’s largest publicly traded holding company AFK Sistema has lost about 37% of its value in Moscow by midday, after boss Vladimir Yevtushenkov was put under house arrest for alleged money laundering late Tuesday. Investors have seen the price of their shares plummeting, with billions of dollars wiped off the company’s value. Shares in Sistema, a company which Yevtushenkov controls and manages, fell by 37% on the Moscow Exchange at 13.00, Moscow Time, which means the company has seen its capitalization lose an estimated $3.55 billion. In the first half hour of Wednesday trading it was down 28%. Sistema controls Russia’s largest mobile phone operator MTS, the oil company Bashneft as well as other lucrative assets. MTS was down 8% and Bashneft lost 23.5% on the Moscow Exchange.

Vladimir Yevtushenkov’s net worth is estimated by Russia’s Forbes magazine at $9 billion, making him the 15th richest man in the country. Russia’s investigative committee accused the billionaire of acquiring shares in oil producer Bashneft, in the Russian province of Bashkiria, by “criminal means.” Sistema insists the deal was “legal and transparent.” “The company is fully cooperating with the investigation and intends to use all legal means to defend its position,” an official press release said Wednesday. Dmitry Peskov, the press secretary to President Putin, denied any allegations that Yevtushenkov’s arrest was politically motivated. “Any attempts to add political context to this issue don’t have the right to exist,” as ITAR-TASS quotes Peskov denouncing attempts by some experts to draw a parallel with the Yukos case.

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It’ll keep on cutting.

Knife-Edge Scottish Vote Cuts Deep Divide (CNBC)

One of Scotland’s most influential chief executives, Martin Gilbert, says the debate over Scottish independence has become so bitter that whatever the outcome, either Scotland or the United Kingdom will become deeply divided. In Edinburgh, most people on the streets are in the “yes” camp as passions intensify ahead of Thursday’s vote. The polls remain as tight as ever. The latest survey carried out by the Scottish Daily Mail found 48% of Scots (excluding those who said they were undecided) would vote in favor of independence, while 52% would vote against. In one popular hair salon, women have apparently come to blows, leading stylists to refuse to admit their voting preference to customers. The problem, according to the Aberdeen Asset Management boss, is that people don’t know what to believe from the campaign, and that has fueled distrust and over-the-top behavior.

It seems the knives are also coming out in London, with growing criticism of the better together campaign. This could become particularly tricky for U.K. Prime Minister David Cameron. The head of the British business lobby group CBI, John Cridland, says business bosses were forced to speak out in recent days after politicians bungled the “no” campaign so much so that they have totally failed to connect with the Scottish people. On Tuesday night, First Minister of Scotland Alex Salmond seemed in ebullient mood in one of his final TV interviews, declaring that Scotland had invented the very idea of the modern world and after independence would become more influential on the global stage. He also played down Westminster’s last-ditch attempts to keep the union together by promising more devolution and powers for Scottish parliament. Although Gilbert claims to be neutral, he argues that there is little reality to fears that Scotland risks a flight of capital – up to £17 billion has already gone by some estimates.

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Selling England by the pound.

Millions Of Banknotes Sent To Scotland For Yes Win Bank Runs (Independent)

Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday’s independence referendum, it has emerged. Sources told The Independent the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote. There have been some suggestions that people will want to move their money to English banks in the event of an independence vote.

Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, stressing that there was no need because the Bank of England has pledged to stand behind all accounts for at least 18 months in the event of a “yes” vote. However, concerns about how safe is their cash still linger. It was this that led to RBS and Lloyds last week to reassure customers that they would be moving their registration addresses south of the border. As a result, part of the banks’ contingency plans has been to ship more cash to secure locations in Scotland in readiness to keep up with the potential increase in demand. Sources at major banks said they had been issuing clear instructions to their Scottish branches to reassure customers there was no reason to panic.

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Dominoes.

China Property Trusts Pull Support as Default Risks Rise (Bloomberg)

Property trusts are funneling the least amount of money into Chinese developers in almost five years as maturing debt balloons, escalating default concerns. Issuance of trusts for real-estate projects, which target wealthy individuals, slid to 30 billion yuan ($4.9 billion) this quarter from 67.8 billion yuan in the three months to June 30, the least since the start of 2010, data from research firm Use Trust show. Borrowing costs are rising as developers face $9.1 billion in bonds and loans maturing by year-end. Hubei Fuxin Science & Technology Co. sold AA rated securities with a 9.2% coupon Aug. 26, above the 6.38% average yield for similar-rated notes.

Cash from operations are also facing a squeeze as home sales fell 10.9% in the first eight months of the year in the world’s second-largest economy, which is forecast by the government to expand at the slowest pace in 24 years. Standard & Poor’s sees a risk that a developer may default in the coming 12 months, highlighting weak earnings at Renhe Commercial Holdings Co. and Glorious Property Holdings Ltd. “Given the bad housing sales, fewer trust companies are willing to help property companies raise money,” said Li Ning, a bond analyst in Shanghai at Haitong Securities Co., the nation’s second-biggest brokerage. “Default risks are rising rapidly before so much debt is due next quarter.”

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Stealth QE.

China Joins ECB in Adding Stimulus as Fed Scales Back (Bloomberg)

China’s central bank joined its European counterpart in boosting liquidity to address weakening growth, underscoring a divergence in direction among the world’s biggest economies as the U.S. reduces stimulus. The People’s Bank of China is injecting 500 billion yuan ($81 billion) into the nation’s largest banks, according to a government official familiar with the matter, signaling the deepest concern yet with an economic slowdown. Federal Reserve Chair Janet Yellen will announce another $10 billion cut to its monthly bond purchases after this week’s meeting, economists forecast, as she steers toward gradual interest-rate increases. China’s credit expansion builds on targeted measures to shore up growth while stopping short of broad-based stimulus seen in the U.S. in the wake of the global financial crisis and still being pushed in Europe and Japan. By attaching a three-month term to its injection, China is taking a step down that path while maintaining control of a process designed to fuel demand for credit in an already debt-laden economy.

“It’s like quantitative easing with Chinese characteristics,” said Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, who formerly worked at the World Bank. “The threat is that growth is slowing down below the comfort level of policy makers and that will then also warrant further easing steps.” The PBOC will funnel 100 billion yuan each to the five biggest banks for a three-month period, said the official, who asked not to be identified because the measure hasn’t been formally announced. “It shows China’s monetary policy is leaning toward easing, and the easing stance may last throughout next year,” said Hua Changchun, a China economist at Nomura Holdings Inc. in Hong Kong. The lack of an official announcement shows that the PBOC “doesn’t want to send a strong signal” of policy easing, Hua said.

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He needs to go.

Hollande’s Narrow Confidence Win Flags Looming Budget Battle (Bloomberg)

President Francois Hollande’s shrinking parliamentary backing suggests his government is losing control over economic policy and flags a looming battle over France’s 2015 budget. Prime Minister Manuel Valls won a confidence vote by 25 votes yesterday with the backing of just 269 lawmakers, robbed of an absolute majority of 289 by abstaining rebel members of parliament in his own camp. In a confidence vote on April 8, Valls obtained the support of 306 lawmakers. The result shows how Hollande’s authority has been weakened by a stalled economy and record-low popularity halfway into his five-year term. Socialist lawmakers who avoided bringing down the government yesterday also warned that they will keep the Hollande administration on a short leash.

“We didn’t give the government a blank check,” Socialist Karin Berger said after yesterday’s vote. “The push to change policy will come in the budget debate. What is crucial is that the government ensure investment.” The problem for Hollande and Valls is that they are squeezed between demands from their base to bolster the economy with stimulus spending and insistence from France’s European partners that the country stick to the bloc’s fiscal rules. Finance Minister Michel Sapin said last week that the budget deficit would rise in 2014 for the first time in five years and barely improve in 2015. The shortfall will be 4.4% of gross domestic product this year, instead of the 3.8% France had promised in April. Next year it will be 4.3%, instead of the 3% originally planned. Sapin will present an official budget to cabinet Oct. 1 and has a deadline of Oct. 15 of filing the tax and spending plans with the European Commission in Brussels.

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Mayhem in the streets of Paris.

Sarkozy Poised For Comeback As France’s Socialists Suffer (CNBC)

France’s former conservative president, Nicolas Sarkozy, is likely to announce his return to politics as early as this week following the very narrow victory for the struggling socialist government in a confidence vote, political analysts predict. Sarkozy now stands a decent chance in the 2017 presidential election, as the current French government’s popularity has reached record lows. However analysts have warned that corruption probes surrounding Sarkozy could stymie his chances.In a crucial confidence vote in parliament on Tuesday evening, French Prime Minister Manuel Valls scraped through after deputies in the National Assembly voted 269 to 244 in favor of the government’s policies. Valls urged parliament to embrace more business-friendly reforms, asking why France should be the only large country that doesn’t help businesses.

He has proposed a €50 billion ($64.8 billion) cut in public spending that will fund €40 billion in tax breaks for companies, with the unveiling of the government’s full 2015 budget set for October 1. Incoming European economic and financial commissioner and former French finance minister Pierre Moscovici said it was a “necessity” the pro-reform agenda found confidence. “It is up to this government to work at cutting public expenses because that is a necessity – to work on helping the businesses to invest because it’s the only way to create growth and jobs. And to enforce structural reforms that are needed for the French economy, that is a tough job,” he told CNBC. The government’s attempted shift to more pro-business policies follows the decision to oust far the leftwing economy minister Arnaud Montebourg, replacing him with former Rothschild banker Emmanuel Macron.

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IMF accuses Kiev, but zero follow-up.

Ukraine Currency At Record Low As IMF Blasts “Gross Abuses” (Zero Hedge)

Despite celebrations of de-escalations and truce in US equity markets (by asset-gathering commission-takers), the situation continues to go from bad to worse in the nation almost forgotten now that ISIS is stealing American headlines. The Hryvnia plunged 7.5% this morning – its biggest single-day drop on record – following the release of a scathing IMF letter and devaluation warnings from BofA. The IMF blasted Ukraine’s “premature emission of extra money,” and demanded it “immediately halt these gross abuses,” as BofA warns of risk of “10-20% devaluation” in the next year is high given reserves are at a “critical level.” UAH plunges 7.5% to record lows this morning…

BofA’s warning of the potential for a Hyrvnia devaluation: “Central bank may have to further deplete FX reserves, now near “critical level” of $15b, Bank of America Merrill Lynch economist Vadim Khramov says in report. Natural gas purchases for winter to widen current-account deficit. We see risks of 10%-20% hryvnia devaluation from the current level within a year”

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War coming up. Congrats, Victoria Nuland!

Luhansk Wants to Introduce Ruble as National Currency (RIA)

The self-proclaimed Luhansk People’s Republic (LPR) wants to switch from Ukrainian hryvna to Russian ruble as the local currency in the future, LPR leader Igor Plotnitsky said Tuesday. “Of course, we want ruble [as currency], but a lot of issues still remain, including political ones. So far, we are using hryvna. But I don’t think it will stay for long,” Plotnitsky told reporters, adding that the country has yet to solve a number of economic and financial problems, including the establishment of a banking system. On September 10, Ukrainian President Petro Poroshenko said he had introduced “a bill about temporary self-administration in separate districts of the Donetsk and Luhansk regions,” intended “to ensure the peaceful return of these regions under the sovereignty of Ukraine.” He ruled out “any kind of federalization or secession” for the two regions.

Prime Minister of the Donetsk People’s Republic (DPR) Alexander Zakharchenko said that the self-proclaimed republics will seek independence anyway, adding that the point of the Minsk talks protocol concerning the special status is not final. LPR spokesman said the self-proclaimed people’s republics of Donetsk and Luhansk have no interest in the presidential bill on their status within Ukraine. DPR and LPR announced their independence in May, refusing to acknowledge the legitimacy of the newly-instated Ukrainian government that came to power after the February 22 coup.

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What a useless fight this has become.

Argentina Slams US For Using ‘D’ Word (Reuters)

Argentina called in the United States’ top diplomat in the country on Tuesday to express its “deep indignation” over a local newspaper interview in which he made reference the South American country’s latest debt default. Argentina missed a coupon payment on its restructured sovereign bonds in July after a U.S. judge ordered that $539 million deposited by Buenos Aires with an intermediary bank and intended for bondholders not be paid out. Pointing to the fact that the government tried to make the payment, Argentina denies being in default. U.S. chargé d’affaires in Argentina Kevin Sullivan nonetheless told local newspaper Clarin that “it is important that Argentina get out of default” in an interview published on Monday. Outside of government circles, the term default is commonly used in Argentina to describe the missed July payment.

Sullivan was called into the office of Foreign Minister Hector Timerman on Tuesday after Timerman issued a statement expressing “deep indignation and energetic rejection” of Sullivan’s comments to Clarin. “If this kind of intrusion into the internal affairs of Argentina is repeated, severe measures will be taken,” Timerman’s statement said. Sullivan is Washington’s ranking diplomat in Buenos Aires, as no replacement has been named since its ambassador to Argentina left last year. The U.S. embassy had no comment on the spat with the Argentine government or the Sullivan-Timerman meeting. Debt is a touchy subject in Argentina after millions of people in the middle class were thrown into poverty in 2002 when the government defaulted on about $100 billion in bonds. More than 93% of the bad debt was swapped in 2005 and 2010 for paper offering less than 30 cents on the dollar.

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At least we know who to blame.

IS Seeks ‘Lone Wolves In America’ To Attack Times Square, Las Vegas (Yahoo)

Bomb-making instructions and potential targets for “lone wolves in America” to attack were recently posted to an online message board sympathetic to the Islamic State militant group, also known as ISIS or ISIL, Vocativ reports. The post — entitled “To the lone wolves in America: How to make a bomb in your kitchen, to create scenes of horror in tourist spots and other targets” — suggests targeting popular tourist destinations, such as New York’s Times Square and the Las Vegas Strip, as well as train and subway stations throughout the United States. The instructions appear to be similar to those previously published by the al-Qaida magazine Inspire and reportedly used by the Tsarnaev brothers to build pressure cooker bombs used in their attack on the 2013 Boston Marathon.

The posting appears to be similar to one that surfaced in an online publication last month calling for would-be terrorists to attack Times Square, Las Vegas casinos, oil tankers and military colleges with car bombs. “This is a new world, if you will, or the evolving world of terrorism, and we’re staying ahead of it,” NYPD commissioner Bill Bratton told reporters on Tuesday. “We’ve been focused on it, and I believe that we are as prepared as any entity could be to deal with the threats.” On Monday, New York City Mayor Bill de Blasio, New York Gov. Andrew Cuomo and New Jersey Gov. Chris Christie met with U.S. Homeland Security Secretary Jeh Johnson in Manhattan to discuss ways to secure the metropolitan region from a terror attack. “As New Yorkers, we know our city is the No. 1 terror target,” de Blasio said.

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Hi guys!

Governments Use Weaponized Malware To Spy On Journalists – WikiLeaks (RT)

Journalists and dissidents are under the microscope of intelligence agencies, Wikileaks revealed in its fourth SpyFiles series. A German software company that produces computer intrusion systems has supplied many secret agencies worldwide. The weaponized surveillance malware, popular among intelligence agencies for spying on “journalists, activists and political dissidents,” is produced by FinFisher, a German company. Until late 2013, FinFisher used to be part of the UK-based Gamma Group International, revealed WikiLeaks in the latest published batch of secret documents.

FinFisher’s spyware exploits and monitors systems remotely. It’s capable of intercepting communications and data from OS X, Windows and Linux computers, as well as Android, iOS, BlackBerry, Symbian and Windows Mobile portable devices. Three back-end programs are required for the spy program to operate. FinFisher Relay and FinSpy Proxy programs are FinFisher suite components that route and manage intercepted traffic, redirecting it to the FinSpy Master collection program. The spyware can steal keystrokes, Skype conversations, and even connect to your webcam and watch you in real time. The whistleblower has a list of FinFisher surveillance software buyers. Among the German malware developer’s clients are intelligence agencies and police forces from Australia, Bosnia, Estonia, Hungary, Italy, Mongolia, the Netherlands, Pakistan and Qatar.

According to WikiLeaks’ estimates, FinFisher has already earned about €50 million in sales. “FinFisher continues to operate brazenly from Germany selling weaponized surveillance malware to some of the most abusive regimes in the world,” the founder and editor-in-chief of Wikileaks, Julian Assange, said. Earlier this year, the tapping of Chancellor Angela Merkel’s mobile phone by the American National Security Agency (NSA) created a scandal that rocked the German political establishment: a revelation made thanks to documents exposed by the former NSA contractor and whistleblower Edward Snowden. Yet, despite all this, FinFisher continues its activities in Germany unhindered. “The Merkel government pretends to be concerned about privacy, but its actions speak otherwise. Why does the Merkel government continue to protect FinFisher?” Assange asked.

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Fun!

Chinese Shoe Firm Bosses Vanish With Tens of Millions in Cash (BBC)

Chinese footwear firm Ultrasonic has announced the disappearance of its chief executive and chief operating officer, along with most of its cash. The firm, which is listed in Germany, said that both the men, Qingyong Wu and Minghong Wu, had “apparently left their homes and are not traceable”. At the same time, its cash reserves in China and Hong Kong had been transferred and were “no longer in the company’s range of influence”. Ultrasonic shares immediately fell 79%. The Cologne-based firm said its German holding company still had a “relevant six-figure amount” of money under its control, so it was still able to meet its payment obligations as normal. Ultrasonic’s chief financial officer, Chi Kwong Clifford Chan, and the company’s supervisory board were in talks with authorities and business partners in an effort to clarify matters, the firm said. “As soon as new, reliable facts can be verified, they will be disclosed immediately,” Ultrasonic’s statement on its website concluded.

Ultrasonic specialises in the design, production and sale of shoe soles, sandals, slippers, urban footwear and high-end accessories. With several facilities in the People’s Republic of China, it targets the country’s burgeoning middle class. Ultrasonic had been enjoying steadily rising revenues and profits. Revenues had grown nearly 10% to 163.8m euros (£130.7m) over the last five years, while net income had risen nearly 14% to 35m euros. In 2013, the company had over €100 million of cash reserves. Tuesday’s share price collapse will have wiped about 57m euros off the company’s stock market value. Earlier this year, another Germany-listed Chinese manufacturer, Youbisheng Green Paper, said its chief executive had gone missing without explanation. It later initiated insolvency proceedings.

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