Mar 302017
 
 March 30, 2017  Posted by at 9:05 am Finance Tagged with: , , , , , , , , ,  1 Response »
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Carole Lombard 1926

 


Fed’s Williams Says Bank Lending Slowdown Doesn’t Worry Him Yet (YF)
Retailing in America: Game Theory in Reverse (DiMartinoBooth)
‘Deep Subprime’ Auto Loans Are Surging (BBG)
Margin Debt Hit All-Time High in February (WSJ)
US Oil Export Surge Steals More OPEC Share (CNBC)
Australia World’s Worst Money Laundering Property Market (TI)
Sydney, Melbourne House Price Gains Accelerate (AFR)
Auckland Housing Market Losing All Capital Gains Of The Last 12 Months (INZ)
House Panel Passes Bill To Audit The Fed (MW)
Hawaii Judge Places Indefinite Hold On Trump Travel Ban (BBC)
Paul Ryan Opposes Trump Working With Democrats On Healthcare (R.)
Democrats Against Single Payer (Jacobin)
American Empire Crumbling (Quinn)
The EU Cannot Survive If It Sticks To Business As Usual (Varoufakis)
Capitalism Inevitably Creates A ‘Sad’ Unfair World – Physicist (Ind.)
‘That Was Some Weird Shit’ (NYMag)
146 Feared Dead In Mediterranean, Boy The Sole Survivor (R.)

 

 

Today’s main theme just has to be W’s ‘That Was Some Weird Shit’. Here’s the graph to go with it.

Fed’s Williams Says Bank Lending Slowdown Doesn’t Worry Him Yet (YF)

A recent slowdown in bank lending has some observers concerned that the post-election pops in optimism are sending a false signal about the strength of the U.S. economy. To San Francisco Fed president John Williams, however, this decline is out of step with everything else credit markets are saying about the economy. “The big picture is: I don’t see any signs of a slowing either on the demand side or on the credit supply side,” Williams told Yahoo Finance on Wednesday. “Overall, the other indicators, everything we see, [says] economic conditions are good,” Williams added. “Confidence is good, and we’re not seeing any signs of bank lending standards changing fundamentally. So it’s hard to see anything, from my viewpoint, that [says] credit is less available.”

In recent months, the growth rate of commercial and industrial loans, as tracked by the Federal Reserve’s weekly H.8 report on assets and liability of U.S. banks, has been on the decline. This is viewed by many as a negative development in an economy where lending and borrowing activity serve as proxies for the economy’s overall health. But Williams also cautioned that lending data can reveal economic developments on a lag. For example, he noted to Yahoo Finance that in 2008 bank lending increased, which contradicted the notion that the financial markets were seizing up. Indeed, companies were unable to borrow by tapping the bond markets. However, the lending did increase because companies drew from existing lines of credit.

Right now, Williams noted that one story behind the drop in C&I loan growth going around is that oil and gas companies last year drew on lines of credit, boosting loan growth at the time. And thus the current decline in lending, which appears out of step with broader economic conditions, is occurring largely because of difficult year-over-year comparisons.

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Retail demise exposes banks.

Retailing in America: Game Theory in Reverse (DiMartinoBooth)

On March 21st, Sears Holding Corporation submitted a filing with its regulators that it has “substantial doubt” it can continue as a “going concern.” Don’t recall companies being charged with making their own death throes’ announcements from your Accounting coursework? You are correct. Meet the new and improved U.S. accounting rules that have just come into effect for public companies reporting annual periods that ended after December 15, 2016, Sears included. The change shifted the onus to disclose from a given company’s auditors to its management. It was telling that the Sears news fell on the very same day discount retailer Payless announced it could soon file for bankruptcy protection. That same day, the less ubiquitous Bebe female fashion chain said it too was ‘exploring strategic options,’ typically code for that same ill-fated Chapter in the court system.

[..] At the opposite end of the denial spectrum sits Boston Fed President Eric Rosengren, who is and has been publicly worried about an entirely different sort of challenge facing the real estate market. It’s no secret that apartment prices are soaring. Over the past year, prices have risen 11%, leading the broad market. While that increase may seem benign in and of itself, consider how the sector has fared over the course of the recovery: prices have recouped an eye-watering 240% of their peak-to-trough losses. In sharp contrast, retail has performed the worst; it’s only recovered 96% of its losses. Rosengren is rightly worried that the “sharp” increase in apartment prices could catalyze financial instability. He went on to say that, “Because real estate holdings are widespread, and the monetary and macro-prudential tools for handling valuation concerns are somewhat limited, I believe we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

If you would indulge a translation: The bubble in commercial real estate (CRE) could trigger systemic risk, which of course, no central bank can contain. The ‘macro-prudential’ tools to which Rosengren refers include rules and caps on banks’ exposure to CRE. Odds are, however, that the horse has already fled the barn. Over the past five years, CRE lending has been running at roughly double economic growth, a dangerous dynamic. The result: banks’ exposure to CRE has reached record levels. Last year alone, bank holdings of CRE and multifamily mortgages rose nine and 12%, respectively. More worrisome yet is that the most concentrated cohort – those with more than 300% of their risk-based capital at risk – is banks with less than $50 billion in assets; most have assets south of $10 billion. How exactly will small banks confront a systemic risk conflagration? That pesky potential presumably is what’s robbing Rosengren of sleep at night. He might just remember that small German lenders called Landesbanks were where subprime bombs detonated unexpectedly way back when.

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Anyone who can fog a mirror is back

‘Deep Subprime’ Auto Loans Are Surging (BBG)

About a third of the risky car loans that are bundled into bonds are considered “deep subprime,” a level that has surged since 2010 and is translating to higher delinquencies on the loans, according to Morgan Stanley. Consumers are falling behind on most subprime car loans, but deep subprime borrowers have deteriorated fastest, the analysts said. Sixty-day delinquencies for bonds backed by these loans have risen 3 percentage points since 2012, compared with just 0.89 percentage points on all other subprime auto securities, Morgan Stanley’s Vishwanath Tirupattur, James Egan and Jeen Ng said in a report dated March 24. “The securitization market has become more heavily weighted towards issuers that we would consider deep subprime,” the strategists wrote. “Auto loan fundamental performance, especially within ABS pools, continues to deteriorate.”

The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5% from 5.1% since 2010, Morgan Stanley said. The researchers define deep subprime as lenders with consumer credit grades known as FICO scores below 550. The scale from Fair Isaac Corp. ranges from 300 to 850 and while there’s no firm definition of subprime, borrower scores below 600 are in general considered high credit risks. As Wall Street banks have found it tougher to profit under new regulatory regimes born out of the last subprime crisis, they’ve become more willing to underwrite riskier auto-loan asset-backed security sales. Investors, starved for returns with about $8 trillion of debt globally carrying negative yields, have in turn proven to be insatiable, further facilitating higher levels of risk in the market for the securities.

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The casino’s open for business.

Margin Debt Hit All-Time High in February (WSJ)

Margin debt climbed to a record high in February, a fresh sign of bullishness for flummoxed investors trying to navigate the political and economic crosscurrents driving markets. The amount investors borrowed against their brokerage accounts climbed to $528.2 billion in February, according to the most recent data available from the New York Stock Exchange, released Wednesday. That is up 2.9% from $513.3 billion in January, which had been the first margin debt record in nearly two years. With margin debt, investors pledge securities, typically stocks or bonds, to obtain a loan from their brokerage firms. The money doesn’t have to be used to buy more investments, though it often is. The gauge tends to climb—and pull back—along with broader stock market gauges, which have been rising to fresh records in the wake of November’s presidential election.

Rising levels of margin debt are generally considered to be a measure of investor confidence. Investors are more willing to take out debt against investments when shares are rising and they have more value in their portfolios to borrow against. But experts say a steep rise can indicate that investors are losing sight of market risks and betting that stocks can only go up. Margin debt has a history of peaking right before financial collapses like the ones in 2000 and 2008. When stocks move lower, investors who are buying with borrowed money often must pull out of the market, exacerbating the decline. Before January, the previous record high for margin debt was $505 billion in the spring of 2015. Margin debt then started falling, months ahead of a summer swoon that sent major indexes down more than 10%.

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As demand falls.

US Oil Export Surge Steals More OPEC Share (CNBC)

As OPEC tries to keep oil off the world market, U.S. oil producers are pouring more onto it. The U.S. last week sent more than 1 million barrels a day of crude out of the country, the third biggest export week ever, and double the average amount exported in 2016. It is also the third time this year that U.S. exports exceeded a million barrels a day, an industry record. “It should be somewhat supportive of [U.S. oil prices] in the short run, particularly if the exports keep up. But it obviously is a challenge for the global market and a renewed threat to OPEC and their designs of keeping prices up,” said John Kilduff of Again Capital While the U.S. exported oil, it also exported fuel last week — a steadily growing business. The U.S. sold 1.1 million barrels of diesel fuel, in line with the recent average, but 608,000 barrels a day of gasoline, up from less than 400,000 barrels a day a year ago.

Analyst say the jump in exports means U.S. producers are grabbing more share at the expense of OPEC and its partners, at a time when the cartel and other producers are considering whether to extend their deal to hold 1.8 million barrels of oil off the market. But the U.S. may also be seeing the early signs of a potential rebalancing of its own supply picture, and that could ultimately help clear a logjam of domestic oil barrels. “What we’re now seeing in the U.S. is refinery utilization increasing, as the maintenance season draws to a close. At the same time, there’s good demand for gasoline and diesel which is helping get inventories under control. Those product inventories are less than they were this time last year,” said Andrew Lipow, president of Lipow Oil Associates. U.S. refineries supplied 9.5 million barrels a day of gasoline last week, up from 9.2 million the week earlier. Refinery runs increased by 425,000 barrels a day.

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Transparency International reports.

Australia World’s Worst Money Laundering Property Market (TI)

The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds… According to the Financial Action Task Force (FATF), real estate accounted for up to 30% of criminal assets confiscated worldwide between 2011 and 2013… In many such cases, property is purchased through anonymous shell companies or trusts without undergoing proper due diligence by the professionals involved in the deal. The ease with which such anonymous companies or trusts can acquire property and launder money is directly related to the insufficient rules and enforcement practices in attractive markets… This assessment identifies the following 10 main problems that have enabled corrupt individuals and other criminals to easily purchase luxurious properties anonymously and hide their stolen money in Australia, Canada, the UK and the US:

• Inadequate coverage of anti-money laundering provision
• Identification of the beneficial owners of legal entities, trusts and other legal arrangements is still not the norm
• Foreign companies have access to the real estate market with few requirements or checks
• Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed
• Insufficient rules on suspicious transaction reports and weak implementation
• Weak or no checks on politically exposed persons and their associates
• Limited control over professionals who can engage in real estate transactions: no “fit and proper” test
• Limited understanding of and action on money laundering risks in the sector
• Inconsistent supervision
• Lack of sanctions

Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums. In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates…

In Australia, Canada and the US, the current anti-money laundering framework shows a tendency to rely on financial institutions to conduct the necessary background checks on real estate transactions… there are no checks on cash transactions. In Australia, 70% of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

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How this does not scare very single person out of their socks, I can’t imagine.

Sydney, Melbourne House Price Gains Accelerate (AFR)

House price growth accelerated further in March, with gains in Sydney and Melbourne pushing higher than previous cyclical peaks, preliminary CoreLogic figures show. Data for the first 28 days of the month shows Sydney prices have risen 19% over the past year while Melbourne has posted a 16% gain, the company said on Thursday. The combined capital city average of 1.4% – the same pace of growth as February – suggests that the strengthening in the two largest cities offsets further weakness in other markets. “The early results come after a strong rebound in housing market conditions through the latter half of 2016 and into 2017,” CoreLogic head of research Asia Pacific Tim Lawless said. “The strong capital gain results are further evidenced by a continuation in low stock levels, high auction clearance rates and strong investment demand.”

In other data that will underpin property prices, official figures released on Thursday show Sydney’s population hit five million, and Melbourne is the country’s fastest-growing capital. Some caution is needed. A methodology change by CoreLogic last year exaggerated price growth in Sydney and Melbourne while also exacerbating the declines in the falling Perth market. CoreLogic has not yet revised the figures to account for the methodology and distortions will only drop out of the year-on-year comparison in June. It’s clear the market is buoyant, however. Even with lenders tightening loan conditions to investor borrowers, they are increasing discounts to owner owner occupiers to protect market share, Deloitte’s annual Australian mortgage report said on Thursday.

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Nice bubble you got there. Wouldn’t want anything to happen to it, would you?

Auckland Housing Market Losing All Capital Gains Of The Last 12 Months (INZ)

The Auckland housing market is on the verge of having all of the capital gains it made in the last 12 months wiped out. Prices of Auckland properties have fallen so much in the last few months that median prices are within a hair’s breadth of going into negative territory on an annual basis. They may already be there. In February the average price of Auckland homes sold by Harcourts, the country’s largest real estate agency, was $934,428, down 1.1% compared to where it was in February last year. While Harcourts’ average prices can be a bit choppy on a month by month basis, the figures do not appear to be an aberration. According to the Real Estate Institute of New Zealand, Auckland’s median selling price peaked at $868,000 in October last year and has declined every month since. In February it hit $800,000, down 7.8% from October’s peak.

But just as significantly, Auckland’s median price in March last year was $820,000. So even if the median price for March this year doesn’t fall any further from where it was in February, or if it increases by anything less than $20,000, Auckland’s median price will have declined to the point where it will be below where it was 12 months previously. Then it’s goodbye capital gains. The interesting thing about those numbers is that the downward trend they show is occurring at a time when Auckland’s migration-driven population growth is increasing at record levels and construction of new housing continues to fall miserably below the numbers that are required, exacerbating the region’s growing housing shortage. How can this be? As you might expect, the market is being influenced by forces converging from several different directions.

One of the biggest changes to affect the Auckland market over the last few months has been the relative absence of local ethnic Chinese buyers. It would be hard to underestimate the impact they were having on Auckland’s residential property market up until about the end of the third quarter of last year. They dominated some of what are often called the “big room” auctions where several dozen properties could be auctioned in a single day, and it wasn’t uncommon for them to account for around 70% of sales. Often they were competing amongst themselves for properties and their bidding could be fierce. Sometimes it seemed as if the prices they were prepared to pay knew no limits. Then late last year, just as the market geared up for the summer selling season, the Chinese tide went out.

Auckland now has a significant population of Chinese people, so there will always be some who are actively buying or selling properties. But the numbers are well down on where they were a year ago. Auctions that were packed with Chinese buyers this time last year are now much quieter and Chinese faces are often more notable by their absence rather than their presence. When they are buying, they are more likely to be buying a home for themselves or perhaps their children than a pure investment property, and their bidding has been far more cautious than it was just a few months ago. Often they will bid on a property only to let it be passed in, figuring that they may not face much competition from other buyers in post-auction negotiations. With the odd exception, the days of the bidding frenzy are over.

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All for it.

House Panel Passes Bill To Audit The Fed (MW)

A House panel on Tuesday approved legislation that would let a government watchdog audit the Federal Reserve’s monetary policy decisions, a move bitterly opposed by the central bank. The House Committee on oversight and government reform passed the measure by voice vote after roughly 30 minutes of debate. The bill was the brainchild of Ron Paul, the former House Republican and libertarian presidential candidate and sharp critic of the U.S. monetary policy. Versions of the bill have twice passed the House by wide margins but then stalled due to lack of support from Democrats in the Senate and the Obama administration. Analysts said the measure has a better chance to become law now that Republicans control both houses of Congress and the White House. Paul’s son, Rand, the Republican senator from Kentucky, has introduced a similar measure in the Senate.

Democrats in the committee were firmly against the bill. “This bill would open the floodgates to political interference in monetary-policy making,” said Del. Eleanor Holmes Norton, a Democrat from the District of Columbia. Rep. Carolyn Maloney, a Democrat from New York, said the measure would lead to higher interest rates because it would undermine the market’s confidence in the independence of the central bank. Republicans said the measure was needed to rein in the Fed. “It is ironic that the arsonists that caused the financial collapse are now being given credit…for putting out the fire. Almost every macroeconomist concedes in retrospect that [the Fed’s] extended period of easy money led to the financial crisis,” said Rep. Thomas Massie, a Republican from Kentucky.

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What good could it do to go to the Ninth Circuit Court at this point?

Hawaii Judge Places Indefinite Hold On Trump Travel Ban (BBC)

A US federal judge in Hawaii has indefinitely extended the suspension of President Trump’s new travel ban. Judge Derrick Watson’s ruling means Mr Trump will be barred from enforcing the ban on six mostly Muslim nations while it is contested in court. In a lawsuit, the US state says the ban would harm tourism and the ability to recruit foreign students and workers. President Trump says his revised travel ban seeks to prevent terrorists from entering the United States. Judge Watson made the ruling late on Wednesday after hearing arguments from attorneys for the state of Hawaii and the US Department of Justice. The judge turned his earlier temporary restraining order into a preliminary injunction that would have a more lasting effect.

President Trump’s executive order on 6 March would have placed a 90-day ban on people from Iran, Libya, Somalia, Sudan and Yemen and a 120-day ban on refugees. An earlier version of the order, issued in late January, sparked confusion and protests, and was blocked by a judge in Seattle. Other courts across the US have issued different rulings on Mr Trump’s revised ban, with a judge in Maryland halting a part of the ban earlier this month. Mr Trump has complained of “unprecedented judicial overreach”, pledging to take the case “as far as it needs to go”. An appeal against the Hawaii decision would be expected to go next to the Ninth Circuit Court of Appeals – the same court which in February said it would not block a ruling by a Seattle court to halt the original travel ban.

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Because working together is so last century?!

Paul Ryan Opposes Trump Working With Democrats On Healthcare (R.)

U.S. House of Representatives Speaker Paul Ryan, the top Republican in Congress, said he does not want President Donald Trump to work with Democrats on new legislation for revamping the country’s health insurance system, commonly called Obamacare. In an interview with “CBS This Morning” that will air on Thursday, Ryan said he fears the Republican Party, which failed last week to come together and agree on a healthcare overhaul, is pushing the president to the other side of the aisle so he can make good on campaign promises to redo Obamacare. “I don’t want that to happen,” Ryan said, referring to Trump’s offer to work with Democrats. Carrying out those reforms with Democrats is “hardly a conservative thing,” Ryan said, according to interview excerpts released on Wednesday.

“I don’t want government running health care. The government shouldn’t tell you what you must do with your life, with your healthcare,” he said. On Tuesday, Trump told senators attending a White House reception that he expected lawmakers to reach a deal “very quickly” on healthcare, but he did not offer specifics. “I think it’s going to happen because we’ve all been promising – Democrat, Republican – we’ve all been promising that to the American people,” he said. Trump said after the failure of the Republican plan last week that Democrats, none of whom supported the bill, would be willing to negotiate new healthcare legislation because Obamacare is destined to “explode.”

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Who’s left to represent actual Americans?

Democrats Against Single Payer (Jacobin)

Virginia Democratic senator Chuck Robb, one of the DLC’s founders, warned in 1989 that “policies forged in the economic crisis of the 1930s and the social and cultural schisms of the 1960s” were irrelevant to most Americans. Two years later, Bill Clinton’s issue director Bruce Reed, who doubled as policy director for the DLC, made sure to distance Clinton from single payer. The issue flared up again during the 2008 Democratic primary fight, where both Obama and Hillary Clinton tried hedging their bets. Clinton put forward a plan that was basically Obamacare while insisting that “Medicare for All” could still be on the cards under the right circumstances. Meanwhile Obama repeatedly flip-flopped, at one point telling an audience that “the Canadian model won’t work in the United States” and that “we’ve got to develop a uniquely American approach,” and nine days later hinting to a different audience that over time single payer may be on the table.

DLC leaders felt reassured however, telling the New York Times they were “pleased that none of the Democratic candidates supports a single-payer health-care system.” So Democrats’ attempts to quell their base’s clamoring for a comprehensive, public health-care system isn’t new. What is new is the open, public disparagement of such a goal — not just by Democratic leaders, but by leading liberal commentators, too. Ironically, this appears largely to have been due to the Sanders campaign — or rather, the challenge it posed to Hillary Clinton’s previously wide-open road to the White House. Needing to differentiate herself from Sanders’s unabashed progressivism, and to dampen popular enthusiasm for his message, Clinton began attacking his policies, despite her historic sympathy toward single payer.

Sanders’s proposals were “ideas that sound good on paper but will never make it in real life,” she told crowds; for good measure, she insisted that single-payer health care “will never, ever come to pass.” Two years earlier, she explained her opposition to the policy on the basis that “we don’t have a one size fits all; our country is quite diverse.” In January 2016, she warned breathlessly that Sanders’s plan would “end all the kinds of health care we know” and claimed it would “send health insurance to the states,” while her daughter warned that it would “dismantle Obamacare” and “strip millions and millions and millions of people off their health insurance.”

As late as October, Clinton’s team was still trying to distance herself from Trump’s accusation that she — heaven forbid! — “wants to go to a single-payer plan,” with her spokesman directing Politifact to an earlier fact-check confirming her lack of support for the policy. (Lest we mistake this for mere expediency, we can rest assured that at least some of the Clinton camp really felt this way: campaign manager John Podesta declared in an email to ThinkProgress editor-in-chief Judd Legum that Sanders’s “actual proposal sucks, but we live in a leftie alternative universe.”)

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Jim Quinn’s series on the similarities between Isaac Asimov’s Foundation Trilogy and Strauss & Howe’s Fourth Turning.

American Empire Crumbling (Quinn)

You can hear the creaking as the winds of this Fourth Turning winter howl through the branches of this dying empire. Trump may have forced the Deep State Second Foundation to reveal itself as they seek to destroy him, but the relentless decline of the American Empire continues unabated. Tinkering around the edges of a healthcare system designed to benefit mega-corporations and the Deep State will do nothing to reverse or even delay the decline. Slowing the growth of government when the national debt is already $20 trillion and headed to $30 trillion within the next decade won’t cure the rot in our tree trunk. Completely ignoring the $200 trillion of unfunded welfare state liabilities helps accelerate the inevitable collapse of this empire. Cutting taxes while expanding the war making machine known as the military industrial complex does nothing to reverse what is already in motion.

In addition to the absolutely quantifiable reasons why the American Empire will collapse, there are demographic, cultural, and societal trends which will contribute dramatically to the fall. The rapidly aging populace, with 10,000 Americans per day turning 65 years old, is the driving force towards national bankruptcy, as this inexorable demographic tsunami sweeps over the fraying fabric of welfare state promises. The onslaught of illegal immigrants and purposeful execution of a plan by the effete liberal elite to weaken our common American culture through the insertion of Muslim refugees into our communities, is undermining the shared values which built the country. The immigrants who built this country assimilated, learned the language, worked hard, and adopted our common culture. The hordes invading America at this time hate our values and refuse to assimilate. This Soros funded effort to create diversity havoc throughout the world is part of the globalization one world order plan.

As Europe disintegrates under the unrelenting wave of violent refugees creating upheaval, chaos, and spreading religious zealotry through viciousness, the next target is the mighty American Empire. Fighting in the streets between the normal law abiding Trump supporters and the Soros funded, draped in black, flag burning, social justice warrior criminals has begun. Widespread societal strife is just around the corner. When the next financial crisis, created by the Deep State to further their plans, destroys the remaining wealth of the barely surviving middle class, all hell will break loose in the streets. The 86% of the country occupied by red state, gun owning, Trump supporters will openly go to war against the condescending, left wing, violence provoking blue state liberals. Blood will be spilled in copious amounts. It always does during Fourth Turnings.

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It cannot survive, period.

The EU Cannot Survive If It Sticks To Business As Usual (Varoufakis)

Angela Merkel, the German Chancellor, had for years opposed the idea of a Europe that proceeds at different speeds – allowing some countries to be less integrated than others, due to their domestic political situation. But now – after the colossal economic mismanagement of the euro crisis has weakened the EU’s legitimacy, given Eurosceptics a major impetus, and caused the EU to shift to an advanced stage of disintegration – Mrs Merkel and her fellow EU leaders seem to think that a multi-speed Europe is essential to keeping the bloc together. At the weekend, as EU leaders gathered to celebrate the 60th anniversary of the Treaty of Rome, leaders of the remaining 27 member states signed the Rome Declaration, which says that they will “act together, at different paces and intensity where necessary, while moving in the same direction, as we have done in the past.”

The failure to keep the EU together along a single path toward common values, a common market and a common currency will come to be embraced and rebranded as a new start, leading to a Europe in which a coalition of the willing will proceed with the original ambition while the rest form outer circles, connected to the inner core by unspecified bonds. In principle, such a manifold EU will allow for the East’s self-proclaimed illiberal democracies to remain in the single market, refusing to relocate a single refugee or to adhere to standards of press freedom and judicial independence that other European countries consider essential. Countries like Austria will be able to put up electrified fences around their borders. It could even leave the door open for the UK to return as part of one of Europe’s outer circles. Whether one approves of this vision or not, the fact is that its chances depend on a major prerequisite: a consolidated, stable eurozone.

One only needs to state this to recognize the second paradox of our post-Brexit reality: In its current state, the eurozone cannot provide the stability that the EU – and Europe more broadly – needs to survive. The refusal to deal rationally with the bankruptcy of the Greek state is a useful litmus test for the European establishment’s capacity to stabilize the eurozone. As it stands, the prospects for a stabilized eurozone do not look good. Business as usual – the establishment’s favored option – could soon produce a major Italian crisis that the eurozone cannot survive. The only alternative under discussion is a eurozone federation-light, with a tiny common budget that Berlin will agree to in exchange for direct control of French, Italian and Spanish national budgets. Even if this were to happen, which is doubtful given the political climate, it will be too little, too late to stabilize the eurozone.

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“Professor Jeremy Baumberg, director of the NanoPhotonic Centres at Cambridge University, was distinctly unimpressed. “It seems to me an extremely poorly written paper, conflating many ideas in a rather unrigorous mishmash,” he said.”

Capitalism Inevitably Creates A ‘Sad’ Unfair World – Physicist (Ind.)

Capitalism is inherently unfair and will produce a world full of ‘sad’ and disgusting inequalities, but Communism is also “doomed to fail”, a leading scientist claims to have proved using the laws of physics. Professor Adrian Bejan told The Independent he was so excited by the “huge” implications of his theory that he kept having to pinch himself. A former member of the Romanian national basketball team, he is now an expert in thermodynamics and fluid mechanics at Duke University in the US, having written 30 books and more than 600 scientific papers. He now claims to have shown that physics can essentially explain economics. Inequality has been seen as a factor in the election of Donald Trump as US President and in the UK referendum vote in favour of Brexit.According to Oxfam, the richest eight men own the same wealth as the poorest 50% of the world’s population.

Professor Bejan said it was possible to explain how such inequality can develop by demonstrating that wealth moves around in a society like water in a river basin using the laws of physics. In a natural environment, water flows from small tributaries into larger and larger streams. And, according to Professor Bejan’s theory, the same is true of money. So, in a free market system, wealth will naturally flow from the poorest in the small tributaries to the richest in the wide rivers. Using this analogy, Communism is comparable to an attempt to restrict the flow of water to a network of equally sized concrete channels, which Professor Bejan said would inevitably be overcome by the forces of nature. But, just as humans do sometimes harness rivers to produce energy or divert them around cities, it is possible to alter the flow of money in society, he added.

And this is exactly what is being done by liberal democracies around the world with measures such as free education and healthcare, anti-trust regulations designed to prevent large corporations abusing their power, and the rule of law. “I want to see less inequality in the distribution of wealth. I get not just sad, but disgusted by it,” Professor Bejan said.

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Getting more popular by the day.

‘That Was Some Weird Shit’ (NYMag)

The inauguration of Donald Trump was a surreal experience for pretty much everyone who witnessed it, whether or not they were at the event and regardless of who they supported in the election. On the dais, the stoic presence of Hillary Clinton – whom candidate Trump had said he would send to prison if he took office – underlined the strangeness of the moment. George W. Bush, also savaged by Trump during the campaign, was there too. He gave the same reason for attending that Bill and Hillary Clinton did: to honor the peaceful transfer of power. Bush’s endearing struggle with his poncho at the event quickly became a meme, prompting many Democrats on social media to admit that they already pined for the relative normalcy of his administration. Following Trump’s short and dire speech, Bush departed the scene and never offered public comment on the ceremony. But, according to three people who were present, Bush gave a brief assessment of Trump’s inaugural after leaving the dais: “That was some weird shit.” All three heard him say it.

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On and on and on.

146 Feared Dead In Mediterranean, Boy The Sole Survivor (R.)

Dozens of people are feared to have drowned after a rubber boat carrying migrants and refugees from Libya sank in the Mediterranean. The sole survivor – a 16-year-old Gambian boy – told rescuers that 146 other people were on board when the boat sank. A Spanish frigate, the Canarias, found the boy hanging on to a piece of debris in the sea on Tuesday. He was transferred to an Italian Coast Guard ship and brought to the Sicilian island of Lampedusa early on Wednesday. “He was very tired when they found him. He’s resting now, so we’ll have more details later,” said the International Organisation for Migration (IOM) spokesman Flavio Di Giacomo in Rome, after speaking to staff in Lampedusa.

“The boy said they left Sabratha, Libya, a couple of days ago on a rubber boat with 147 sub-Saharan Africans on board, including five children and some pregnant women,” Di Giacomo said. In the past two days, rescuers have picked up more than 1,100 migrants at sea and recovered one body, Italy’s Coast Guard said. The Coast Guard did not comment on the latest shipwreck. So far this year nearly 600 migrants have died trying to reach Italy from North Africa, IOM estimates, after 4,600 deaths last year. Migrant arrivals to Italy are up more than 50% this year on the same period of last year. Early on Wednesday the Golfo Azzurro, a humanitarian vessel, rescued about 400 migrants – mainly from Morocco, Algeria, Libya, Gambia and Bangladesh – including 16 women and two children.

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Mar 292017
 
 March 29, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Dismantling clock outside Daily Telegraph building, Fleet Street, London, 1930

 


Jim Rogers Says Fed Has No Clue, Will ‘Ruin Us All’ (BBG)
Article 50: British PM May Signs Letter That Will Trigger Brexit (BBC)
Scottish Parliament Votes For Second Independence Referendum (G.)
Why Brexit Is Best for Britain: The Left-Wing Case (NYT)
ECB Needs Democratic Oversight If The Euro Is To Survive (TI)
12 People, Things That Ruined The EU (Pol.)
Le Pen Victory Five Times As Dangerous As Greek Meltdown – UBS (CNBC)
China Is Desperately Trying To Save A Too Big To Fail Dairy Company (Qz)
Huishan Dairy Turmoil Highlights China’s $8 Trillion Shadow Loan Risk (BBG)
Hong Kong Underground Banks Cash In On Flood Of Money Out Of China (BBG)
A World Without Retirement (G.)
Germany Questions Erdogan’s Turkey ‘Coup’ Narrative (BBC)
Central Europe’s Leaders Reject EU’s Relocation Of Refugees (AP)

 

 

Just so you know. Motorcycle Boy.

Jim Rogers Says Fed Has No Clue, Will ‘Ruin Us All’ (BBG)

Jim Rogers, chairman at Rogers Holdings, explains what the Federal Reserve did wrong in response to the financial crisis and how their mistakes spread to global central banks. Jane Foley, senior FX strategist at Rabobank, joins the conversation with Bloomberg’s Francine Lacqua on “Bloomberg Surveillance.”

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Nothing to fear but…

Article 50: British PM May Signs Letter That Will Trigger Brexit (BBC)

Theresa May has signed the letter that will formally begin the UK’s departure from the European Union. Giving official notice under Article 50 of the Lisbon Treaty, it will be delivered to European Council president Donald Tusk later. In a statement in the Commons, the prime minister will then tell MPs this marks “the moment for the country to come together”. It follows June’s referendum which resulted in a vote to leave the EU. Mrs May’s letter will be delivered at 12:30 BST on Wednesday by the British ambassador to the EU, Sir Tim Barrow. The prime minister, who will chair a cabinet meeting in the morning, will then make a statement to MPs confirming the countdown to the UK’s departure from the EU is under way.

She will promise to “represent every person in the whole United Kingdom” during the negotiations – including EU nationals, whose status after Brexit has yet to be settled. “It is my fierce determination to get the right deal for every single person in this country,” she will say. “For, as we face the opportunities ahead of us on this momentous journey, our shared values, interests and ambitions can – and must – bring us together.” Attempting to move on from the divisions of June’s referendum, Mrs May will add: “We are one great union of people and nations with a proud history and a bright future. “And, now that the decision has been made to leave the EU, it is time to come together.”


Guardian front page today. Got to wonder why they left off Greece.

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How many referendums will it take in the end?

Scottish Parliament Votes For Second Independence Referendum (G.)

Nicola Sturgeon has won a key Holyrood vote on her plans for a second independence referendum, triggering accusations from UK ministers that her demands are premature. Sturgeon won by a 10-vote majority after the Scottish Greens backed her proposals to formally request from the UK government the powers to stage a fresh independence vote at around the time Britain leaves the EU, in spring 2019. She is due to write to Theresa May later this week, asking for Westminster to hand Holyrood the temporary powers to stage the referendum under a section 30 order. She said she would avoid writing until the prime minister had invoked article 50 to trigger the Brexit process, which she is expected to do on Wednesday. “It is not my intention to do so confrontationally, instead I only seek sensible discussion,” Sturgeon told MSPs.

The vote, which split the Scottish parliament cleanly between pro- and anti-independence parties, deepened the dispute between the two governments over both the need for and the timing of the vote. David Mundell, the Scottish secretary, told the BBC the answer to Sturgeon’s request would be no. “We won’t be entering any negotiations at all until the Brexit process is complete,” he said. “Now is the time for the Scottish government to come together with the UK government, work together to get the best possible deal for the UK, and that means Scotland, as we leave the EU.” Mundell rejected Sturgeon’s claims that May had told her the terms of the UK’s departure from the EU and its new trade deal would be clear in about 18 months. Sturgeon said that timeframe matched her preference for a referendum just as the UK quits the EU in March 2019. He said it was too early to say how quickly a Brexit deal could be concluded or whether transitional arrangements were needed.

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“We don’t change our position according to elections..”

Why Brexit Is Best for Britain: The Left-Wing Case (NYT)

Ms. Watkins is a “Lexiteer,” as left-wing supporters of ‘Brexit’ like me are known. We were hardly a significant force among the 52% of Britons who voted to leave in the referendum of June 23. But we were an influence. A counterweight to the anti-immigrant fear mongering of the former leader of the right-wing U.K. Independence Party, Nigel Farage, Lexiteers argued a left-wing, democratic and internationalist case for Brexit. The position was expressed crisply by Perry Anderson, the former longtime editor of New Left Review: “The E.U. is now widely seen for what it has become: an oligarchic structure, riddled with corruption, built on a denial of any sort of popular sovereignty, enforcing a bitter economic regime of privilege for the few and duress for the many.”

Although Lexiteers have little patience for the national nihilism of “Davos Man,” the globalist elite, we are no xenophobes. We voted Leave because we believe it is essential to preserve the two things we value most: a democratic political system and a social-democratic society. We fear that the European Union’s authoritarian project of neoliberal integration is a breeding ground for the far right. By sealing off so much policy, including the imposition of long-term austerity measures and mass immigration, from the democratic process, the union has broken the contract between mainstream national politicians and their voters. This has opened the door to right-wing populists who claim to represent “the people,” already angry at austerity, against the immigrant.

It was the free-market economist Friedrich Hayek, the intellectual architect of neoliberalism, who called in 1939 for “interstate federalism” in Europe to prevent voters from using democracy to interfere with the operation of the free market. Simply put, as Jean-Claude Juncker, the president of the European Commission (the union’s executive body), did: “There can be no democratic choice against the European treaties.” The union’s structures and treaties are designed accordingly. The European Commission is appointed, not elected, and it is proudly unaccountable to any electorate. “We don’t change our position according to elections” was how the commission’s vice president Jyrki Katainen greeted the victory of the anti-austerity party Syriza in Greece in 2015.

The European Parliament is not a real parliament. It is not a legislature; its deputies neither offer manifestoes nor carry out the ideas they propose to voters. Elections in improbably large constituencies, with pitifully low turnouts, change nothing. As a Parliament staff member said at the European Research Seminar at the London School of Economics, “The only people who listen to M.E.P.s are the interpreters,” referring to the members of the Parliament. The European Council, an intergovernmental body where decisive legislative power actually lies, especially for Chancellor Angela Merkel of Germany, comprises member countries’ heads of state, who generally meet just four times a year. They are not directly elected by the inhabitants of the nations whose fate they decide. As for the union principle of “subsidiarity,” a supposed preference for decentralized governance, it is ignored in all practical matters.


Oh, those days of innocence …

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Fine, but who’s going to do it? The ECB is independent?!

ECB Needs Democratic Oversight If The Euro Is To Survive (TI)

The ECB urgently needs to increase democratic oversight and accountability if the euro is to survive the next crisis, according to a new report on the Bank’s governance by Transparency International EU entitled “Two sides of the same coin? Independence and accountability at the ECB”. The report finds that a lack of political leadership and decisive reform has led the ECB to stray into the area of political decision-making, without appropriate democratic scrutiny. This has been accompanied by a marked decline in public trust at a time when the ECB has been granted extensive new powers to supervise major European banks.

“While the ECB has saved the single currency more than once, the absence of a Eurozone finance ministry as counterpart to the ECB means that the Bank has had to stretch its mandate to breaking point,” said Leo Hoffmann-Axthelm, Research and Advocacy Coordinator at Transparency International EU. “If the euro is to survive the next crisis, then EU Member States need to stop hiding behind the technocrats at the ECB, overcome political inertia and get serious about reforming the Eurozone”, continued Hoffmann-Axthelm. The report finds that preserving the ECB’s independence limits its accountability to citizens, and recommends that the Bank should compensate this by increasing its transparency. The ECB should take immediate steps, such as automatically publishing its decisions and opinions and being more open about the political choices it faces, rather than insisting its decisions are purely technical.

For example, at the height of the Greece crisis in 2015 the ECB repeatedly limited the ceiling on Emergency Liquidity Assistance for the country’s banks without publicly announcing it. The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors. Similar dynamics could play out in the upcoming negotiations with Greece, and with the current recapitalisation of Italian lender Monte dei Paschi di Siena, which threaten the Eurozone’s current fragile stability, according to the group. “Clearly decisions which affect the fate of whole economies should have some kind of democratic oversight. The ECB should not be in a position to pull the plug on a country’s euro membership, a decision ultimately down to democratically elected politicians”, said Hoffmann-Axthelm.

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An entertaining and educational list.

12 People, Things That Ruined The EU (Pol.)

Last weekend, European leaders gathered in Rome for the 60th anniversary of the Treaty of Rome. They discussed, not for the first time, how to get the EU back on track. And they told each other they are still committed to the Union and believe in its future. (We’ve heard that one before, too.) But let’s just suppose that, when the European leaders sat down for lunch at the Quirinal Palace, some of them had a little too much of the pinot grigio and waxed nostalgic about the days when the idea of a united Europe was still young and promising and beautiful. And then they talked about this week and how British Prime Minister Theresa May would send her goodbye letter and they started slurring their words, saying Grexit, Brexit, Frexit, and they finally admitted to each other that something has gone horribly wrong. When they stood up and got ready to leave, they were devastated, saying to each other: “Good God, how did it come this and, more importantly, who is to blame?” We’ve gathered a dozen suggestions.

1. Zeus Whenever Europe is in trouble, its advocates claim the EU lacks a proper narrative. The whole idea of an “ever-closer union” is still a fine one, they argue, and the only thing that’s needed for people to understand it is a memorable story. The most memorable story about Europe, of course, is the one about Zeus. The Greek God disguised himself as a white bull in order to approach a beautiful girl called Europa. When Europa, perhaps naively, climbed on his back, the God-turned-bull abducted and ravished her. No need to take the story too literally when analyzing the EU’s current malaise (no white bulls there). But it is good to keep in mind that Europe’s founding myth doesn’t exactly bode well for its future. If negative narratives about the EU seem to resonate far more than positive ones, maybe it’s because the Greek gods loaded the dice.

2. Edith Cresson Going straight from Zeus, ruler of Mount Olympus, to good old Edith Cresson may seem a bit of a stretch. But as a strong contender for the title of worst European commissioner ever, the Frenchwoman does have a claim to fame, too. In the early 1990s, Cresson was a French prime minister who quickly fell out of favor and was forced to resign after less than a year in office. That apparently qualified her for a high-powered job in Brussels. As commissioner for science, research and development, Cresson famously paid her dentist to be a scientific adviser. In 1999, allegations of fraud intended to target Cresson ended up bringing down the entire Commission. To put it crudely: Cresson did to the EU what Zeus did to Europa.

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Le Pen won’t ruin the EU. That’s already been done.

Le Pen Victory Five Times As Dangerous As Greek Meltdown – UBS (CNBC)

Europe could be on track to encounter a shock wave up to five times as turbulent as the start of the euro zone debt crisis if French presidential candidate Marine Le Pen was able to secure victory in May, according to a team of UBS analysts. Strategists at the Swiss banking giant stressed the prominence of the anti-immigration and anti-European Union National Front leader meant France’s fast approaching general election would be the most serious political risk event in the region this year. Le Pen, who leads in the latest opinion polls, has vowed to renegotiate the terms of France’s membership of the EU and ditch the single currency if elected as the country’s new premier in just over two months’ time.

“The systemic importance of France for the European project is such that the margin for damage limitation may well be a lot thinner than has been the case in Greece in the past or could be the case for Spain or Italy even,” UBS analysts said in a note. The bank predicted the shock of a Le Pen victory on sovereign spreads could be as dramatic as when Spain and Italy appeared to be on the brink of financial collapse in 2012. UBS forecast a move of up to 500 basis points in sovereign spreads if Le Pen entered the Élysée Palace in early May. In comparison to a peripheral economy such as Greece, when Athens was on the brink of financial collapse in 2010, sovereign spreads widened by around 100 basis points. “It is certainly arguable that risks to the euro zone’s cohesion emanating from the core are by definition more severe and harder to diffuse than those emanating from the periphery,” UBS analysts added.

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A curious case. Shares fell 85% (indefinite trading halt) and nobody seems to know why.

China Is Desperately Trying To Save A Too Big To Fail Dairy Company (Qz)

A mysterious collapse in a Chinese dairy maker’s shares last week has renewed fears that China’s financial system is so shaky that authorities can do nothing but to muddle through a credit crunch. Shares of China Huishan Dairy Holdings plunged 85% in an hour on March 24, wiping more than $4 billion from its market value. The crash, the biggest-ever intraday fall in Hong Kong, prompted an indefinite trading halt. It also caused collateral damage to firms linked to the Liaoning-based company, which has more than 11,600 employees and operates the largest number of dairy farms in China. Market observers are still trying to figure out what exactly triggered the sudden sell-off. A company statement filed to the Hong Kong stock exchange March 28 unearthed at least part of the mystery.

In its first public comments since the stock crash, Huishan confirmed media reports that it had missed interest payments to its creditors, and that on March 23 the Liaoning provincial government held a meeting with the company and its 20-plus creditor banks to discuss remedies. According to the statement, the Liaoning government proposed an “action plan” to solve any overdue interest payments within two weeks and to help improve Huishan’s liquidity position within a month. Some creditors—including Bank of China and Jilin Jiutai Rural Commercial Bank—pledged in the meeting that they “would continue to have confidence in the Group [Huishan] which has over 60 years of operating history,” said the statement. The company also dismissed previous reports that it had issued fake invoices, and that chairman and controlling shareholder Yang Kai had misappropriated funds to invest in real estate in Shenyang, Liaoning’s capital.

The statement confirmed that Yang’s wife Ge Kun, who is also an executive director in charge of relationships with the company’s principal bankers, has been out of contact since March 21, the same day that Yang learned of the late payments. Financial news outlet Caixin revealed more details (link in Chinese) about the bailout package, based on an interview with creditor Hongling Capital head Zhou Shiping, who was at the March 23 meeting. The Liaoning government will pay over 90 million yuan ($13 million) for land owned by Huishan to inject cash into the company. It also ordered financial institutions involved not to downgrade the company’s credit rating or file lawsuits against it.

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Huishan is a bunch of highly leveraged shadow cows.

Huishan Dairy Turmoil Highlights China’s $8 Trillion Shadow Loan Risk (BBG)

Turmoil at a small Chinese dairy company is shedding rare light on the final destination for some of the country’s estimated $8 trillion of shadow banking loans. Jilin Jiutai Rural Commercial Bank, a major creditor to embattled China Huishan Dairy., said late Tuesday it has extended a total of 1.35 billion yuan ($196 million) in credit to the dairy producer, including 750 million yuan through the purchase of investment receivables from a finance lease company. Investment receivables – a category that can include using wealth-management products, asset-management plans and trust-beneficiary rights to disguise what are in effect loans – allow banks to reduce the amount of cash they need to set aside for capital and provisions for loan losses.

The practice of recording loan-type exposures on balance sheets under categories including investment receivables has allowed hundreds of smaller Chinese banks to boost assets and profits. At the same time, it has created opaque risks that could lead to failures, bailouts or liquidity shocks with the potential to jolt national and global markets. The external public relations agency for Jiutai didn’t immediately reply to an email seeking comment. The bank doesn’t appear to have broken any disclosure rules on its receivables. China’s shadow banking system could lead to losses of $375 billion, CLSA estimated in September. The brokerage said such financing expanded at an annual 30% pace from 2011 through 2015 to reach 54 trillion yuan, or 79% of the nation’s GDP. But details have rarely surfaced on the specifics of individual shadow banking arrangements.

“Chinese banks are lending more and more money to companies in recent years through investment receivables, partly to circumvent regulatory or internal rules,” said Yulia Wan, a Shanghai-based banking analyst at Moody’s Investors Service. Lenders don’t disclose enough information about where the money goes, according to Wan. In addition, the banks usually don’t provision enough for such exposures, and they fund the transactions through short-term borrowing from other financial institutions, Wan said. “This practice poses risks to both investors and banks themselves.”

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People will find a way. And then so will the money.

Hong Kong Underground Banks Cash In On Flood Of Money Out Of China (BBG)

Business is good, but Dickson Chan is worried. The Hong Kong money changer saw remittances from mainland China increase by 10% to 20% last month from the end of 2016, yet he is not sure how long the operation can last. The company he works for, Professional Foreign Currency Exchange, helps clients move cash between China and Hong Kong with a bank account in each place by squaring opposing transactions. “Now people feel that the Chinese government may tighten capital controls further and it wants more yuan depreciation, so many clients want to transfer money to Hong Kong more quickly,” Chan said from his store, located in the basement of a drab mall in Causeway Bay, the world’s second-priciest retail district. “We’re worried the Chinese government will introduce some regulations to ban this business, so now although we’re still doing it, we’re trying to raise revenues from other currencies.”

The fate of Hong Kong’s money changers shows both the reach of Chinese authorities, and the limits to their power. While a determined crackdown could kill the industry, such a response would risk spooking China’s citizens and exacerbating outflow pressures. The exodus of funds from Asia’s largest economy has spurred three years of yuan depreciation that at times roiled global markets and influenced monetary policies worldwide, and pushed up asset prices in cities from Hong Kong to Vancouver. An estimated $1.8 trillion has left Asia’s largest economy from the start of 2015 through January 2017, as the yuan lost almost 10% and returns on onshore assets dropped amid slowing economic growth. To stem the flows, the authorities have tightened capital curbs, stepping up scrutiny of residents’ foreign-currency purchases and limiting insurance buying in Hong Kong.Money changers in Hong Kong provide ways to sidestep such restrictions.

Once the cash reaches the semi-autonomous Chinese city, which has no capital controls, it can go almost anywhere. Hong Kong’s shopping districts are dotted with money changers advertising their remittance services and yuan conversion rates in simplified Chinese characters typically used on the mainland. There are 1,891 licensed money operators in the city, Hong Kong customs data show. Money changers or remittance firms need to obtain a license from the government, which requires the companies to conduct customer due diligence and keep records. As part of a sweeping effort to contain outflows, just before the new year, Chinese regulators boosted disclosure requirements for citizens converting yuan into foreign exchange — while retaining the $50,000 annual quota. Authorities busted at least 380 cases of major underground banking involving more than 900 billion yuan ($131 billion) of funds last year.

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A bit shaky in predictions etc., but this is very much is where we’re going. Retirement was an anomaly.

A World Without Retirement (G.)

We are entering the age of no retirement. The journey into that chilling reality is not a long one: the first generation who will experience it are now in their 40s and 50s. They grew up assuming they could expect the kind of retirement their parents enjoyed – stopping work in their mid-60s on a generous income, with time and good health enough to fulfil long-held dreams. For them, it may already be too late to make the changes necessary to retire at all. In 2010, British women got their state pension at 60 and men got theirs at 65. By October 2020, both sexes will have to wait until they are 66. By 2028, the age will rise again, to 67. And the creep will continue. By the early 2060s, people will still be working in their 70s, but according to research, we will all need to keep working into our 80s if we want to enjoy the same standard of retirement as our parents.

This is what a world without retirement looks like. Workers will be unable to down tools, even when they can barely hold them with hands gnarled by age-related arthritis. The raising of the state retirement age will create a new social inequality. Those living in areas in which the average life expectancy is lower than the state retirement age (south-east England has the highest average life expectancy, Scotland the lowest) will subsidise those better off by dying before they can claim the pension they have contributed to throughout their lives. In other words, wealthier people become beneficiaries of what remains of the welfare state. Retirement is likely to be sustained in recognisable form in the short and medium term. Looming on the horizon, however, is a complete dismantling of this safety net.

For those of pensionable age who cannot afford to retire, but cannot continue working – because of poor health, or ageing parents who need care, or because potential employers would rather hire younger workers – the great progress Britain has made in tackling poverty among the elderly over the last two decades will be reversed. This group is liable to suffer the sort of widespread poverty not seen in Britain for 30 to 40 years. Many now in their 20s will be unable to save throughout their youth and middle age because of increasingly casualised employment, student debt and rising property prices. By the time they are old, members of this new generation of poor pensioners are liable to be, on average, far worse off than the average poor pensioner today.

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The strongest wording I’ve seen to date.

Germany Questions Erdogan’s Turkey ‘Coup’ Narrative (BBC)

German Interior Minister Thomas De Maiziere has said Turkey will not be allowed to spy on Turks living in Germany. Reports say the head of Turkey’s intelligence service handed a list of people suspected of opposition sympathies to his German counterpart. The list is said to include surveillance photos and personal data. Germany and other EU states have banned local rallies in support of Turkish President Recep Tayyip Erdogan. Turkish ministers have been seeking to campaign among ethnic Turks in a referendum on 16 April on increasing his powers. Some 41,000 people have been arrested in Turkey since a coup was defeated in July of last year.

According to Germany’s Sueddeutsche Zeitung newspaper and several public broadcasters, the head of Turkey’s intelligence service MIT, Hakan Fidan, handed Bruno Kahl a list of 300 individuals and 200 organisations thought to be linked to the Gulen movement at a security conference in Munich in February The apparent aim was to persuade Germany’s authorities to help their Turkish counterparts but the result was that the individuals were warned not to travel to Turkey or visit Turkish diplomatic addresses within Germany, home to 1.4 million voters eligible to vote in the referendum. Mr De Maiziere said the reports were unsurprising.

“We have repeatedly told Turkey that something like this is unacceptable,” he said. “No matter what position someone may have on the Gulen movement, here German jurisdiction applies and citizens will not be spied on by foreign countries.” [..] “Outside Turkey I don’t think anyone believes that the Gulen movement was behind the attempted putsch,” said German spy chief Hans-Georg Maassen. “At any rate I don’t know anyone outside Turkey who has been convinced by the Turkish government.” And Lower Saxony Interior Minister Boris Pistorius went further, saying, “We have to say very clearly that it involves a fear of conspiracy you can class as paranoid.”

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And Brussels is toothless. But it will all come down on Greece anyway, so why bother?

Central Europe’s Leaders Reject EU’s Relocation Of Refugees (AP)

Leaders from Central Europe said Tuesday they reject a European Union policy that calls for all member states to receive migrants, protesting suggestions that the level of their compliance could be linked to the availability of EU funds to them. A meeting in Warsaw of the so-called Visegrad Group brought together Poland’s Prime Minister Beata Szydlo and her counterparts from Hungary, Slovakia and the Czech Republic for talks including EUs migrant policies and a plan of sharing some 160,000 migrants among member states to ease the migrant wave pressure on Greece and Italy.

The EU recently warned of financial consequences to those who do not comply. Central European leaders said they reject the relocation plan and will not yield under the financial pressure, which they called an attempt at blackmail. Hungary’s Prime Minister Viktor Orban said his country was further sealing its borders and tightening regulations to block access to any more migrants. The Visegrad Group aspires to have a greater role in EU policies while at the same time makes a point of criticizing the bloc’s decisions. [AP]

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Mar 272017
 
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Ray K. Metzker Chicago 1958

 


Sharpest Credit Plunge Since 2008 Could Spell Disaster For US Economy (AEP)
Paper Wealth In US Stocks Reaches $32 Trillion (Fed)
Rich Chinese Race to Apply for a US Golden Visa (BBG)
Russia’s Banking System Has SWIFT Alternative Ready (RT)
Erdogan Setting Back Integration In Germany By Years: Schaeuble (R.)
France’s Le Pen Says The EU ‘Will Die’, Globalists To Be Defeated (R.)
Populism Is The Result Of Global Economic Failure (G.)
The West is Becoming Irrelevant (Vltchek)
The US Will Lose Control Of The Global Internet (Morozov)
Circular Runways Proposed For Airport Efficiency (Curbed)
Trump Presidency “Opens Door” To Planet-Hacking Geoengineer Experiments (G.)
UN’s Famine Appeal Is Billions Shy of Goal (NYT)
‘We Reached Our Limits’: Greece To Stop Taking Back Refugees (RT)
Greek-US Ties Set To Strengthen Significantly (K.)
Greece Considers Capital Control Tightening (K.)

 

 

The Telegraph changed the title of this Ambrose article overnight to “Fading Trump Rally Threatened By Rare Contraction Of US Credit”.

Sharpest Credit Plunge Since 2008 Could Spell Disaster For US Economy (AEP)

Credit strategists are increasingly disturbed by a sudden and rare contraction of US bank lending, fearing a synchronised slowdown in the US and China this year that could catch euphoric markets badly off guard. One key measure of US corporate borrowing is falling at the fastest rate since the onset of the Lehman Brothers crisis. Money supply growth in the US has also slowed markedly. These monetary and credit signals tend to be leading indicators for the real economy. Data from the US Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December. The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4pc on annual basis, a pace of decline not seen since December 2008.

The deterioration in the broader $9 trillion market for loans and leases has been less dramatic but it too is shrinking, falling at a 1.6pc rate on a three-month basis. “Corporate lending has ground to a halt and I am staggered that the Fed is raising rates. They have made a very big mistake,” said Patrick Perret-Green from AD Macro. Credit experts at several big US banks have issued warnings over recent days, albeit sotto voce. “We’ve been surprised how little attention the slowdown in US bank lending has garnered,” said Matt King, global credit strategist at Citigroup.

While they are not yet alarmed, their concerns are worth heeding. Credit has tended to pick up signs of trouble several weeks before equity markets in recent episodes of financial stress. “Without another big dose of momentum, the cracks in the global reflationary consensus are liable to grow bigger. All around, existing trends are being called into question,” he said. Net corporate bond issuance has also stalled, indicating that borrowing by US firms as a whole is in decline. “So much for a Trump-driven expansion. Beneath the surface, we think a seismic battle is taking place,” he said.

Elga Bartsch and Chetan Ahya from Morgan Stanley said the credit squeeze is a warning sign and needs watching closely. “On our estimates, the credit impulse turned negative at the end of 2016. We have not seen such a sharp deceleration in bank lending to US corporates since the Great Financial Crisis,” they said. “Historically, credit downturns have led recessions. The plunge could reignite concerns that a highly leveraged US corporate sector may react strongly to even limited interest rates increases,” they said.

[..] Money and credit are certainly not flashing warnings of an imminent crisis, but they are hard to square with the exuberant view of investors that the world is on the cusp of an accelerating economic boom. That boom may already have peaked. The massive stimulus injected by the global authorities last year to counter the Chinese currency scare and any fall-out from Brexit is by now fading, and it is too early to tell whether business will pick up the baton. Any soft patch could all too easily combine with a slowdown in China as the country taps the brakes after an extreme episode of fiscal prime-pumping in 2016. Regulators are clamping down on property speculation and trying to rein in forms of pyramid lending, causing a sharp rise in Shibor lending rates. The worry in China is a maturity mismatch. Huge sums have been borrowed on the short-term markets. These debts have to be rolled over constantly to cover long-term liabilities. It was this sort of mismatch that brought down Northern Rock and Lehman Brothers.

[..] Weak US indicators are clearly at odds with the Trump rally on Wall Street, which has pushed equity valuations to nose-bleed levels. Kevin Gaynor from Nomura says his model of asset pricing suggests markets are in effect assuming global growth of 5pc and earnings increases of 30pc a year. These are heroic. “There is a time decay on this new temporary equilibrium,” he notes acidly. What is so disturbing is that each extra dollar of new debt now generates just $0.17 of extra GDP in the US, down from around $0.75 in the 1960s. Much of the corporate debt built up in this cycle has been to buy back stock or pay dividends.

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“Half could be erased and still exceed historical valuation norms.” Fall 50% and still be overvalued. But not a bubble?!

Paper Wealth In US Stocks Reaches $32 Trillion (Fed)

John Hussman comments: “Paper wealth in U.S. stocks reaches $32 trillion. Half could be erased and still exceed historical valuation norms.”

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They can take out $50,000 per year but need ten times that for a golden visa.

Rich Chinese Race to Apply for a US Golden Visa (BBG)

As members of Congress in Washington debate raising the minimum required to obtain a U.S. immigrant investor visa from $500,000 to $1.35 million, concern about the hike has set off a scramble among wealthy would-be participants in China. “Some clients are demanding that we make sure their applications are submitted before April 28,” the date the program expires unless extended or amended by Congress, said Judy Gao, director of the U.S. program at Can-Reach (Pacific), a Beijing-based agency that facilitates so-called EB-5 Immigrant Investor visas. “We’re working overtime to do that.” China’s wealthy, using not-always-legal means to skirt capital controls to get their money out and at the same time gain residency in the U.S., are continuing to dwarf all others as the largest participants in the EB-5 program, despite heightened measures by the Chinese government.

[..] Because Chinese individuals are limited to exchanging $50,000 worth of yuan a year, a 10th of what the EB-5 program requires, some agents are advising clients who don’t already have assets offshore to use a means nicknamed “smurfing” to move their money. “Our suggestion to the client is to open three to four personal accounts in the U.S. or line up three to four friends’ accounts, so they can split the money and wire it to different personal accounts without being put on a blacklist by the Chinese authorities,” said a Shanghai-based real estate agent who gave the surname Dong. “It may require a trip to the States to do so to facilitate the process.” [..] While the government in Beijing spent much of 2016 working to stop its citizens sending money abroad in order to stabilize its declining currency and foreign reserves, Chinese investors’ use of EB-5 continued anyway, totaling $3.8 billion in the fiscal year that ended Sept. 30.

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The sanctions and hysteria allow and force Russia to break the chains and be creative.

Russia’s Banking System Has SWIFT Alternative Ready (RT)

If the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is shut down in Russia, the country’s banking system will not crash, according to Central Bank Governor Elvira Nabiullina. Russia has a substitute. “There were threats that we can be disconnected from SWIFT. We have finished working on our own payment system, and if something happens, all operations in SWIFT format will work inside the country. We have created an alternative,” Nabiullina said at a meeting with President Vladimir Putin on Wednesday. She also added that 90% of ATMs in Russia are ready to accept the Mir payment system, a domestic version of Visa and MasterCard. Izvestia daily reported that as of January 2016, 330 Russian banks had been connected to the SWIFT alternative, the system for transfer of financial messages (SPFS).

In 2014 and 2015, when the crisis in relations between Russia and the West were at their peak over Crimea and eastern Ukraine, some Western politicians urged disconnecting Russia from SWIFT. In November 2015, Nabiullina said the SPFS was close to being completed. The central bank’s website says the system was established “as an alternative channel for interbank cooperation with the aim of ensuring the guaranteed and uninterrupted provision of services for the transmission of electronic messages on financial transactions.” At present, the system has some drawbacks. It doesn’t work from 9pm to 5am Moscow time and costs up to five cents per wire transfer, which is regarded expensive.

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Schäuble is not all stupidity.

Erdogan Setting Back Integration In Germany By Years: Schaeuble (R.)

Turkish President Tayyip Erdogan, who accuses Chancellor Angela Merkel of using “Nazi methods” against Turks in Germany, is setting back their integration by years, Finance Minister Wolfgang Schaeuble has said. Berlin is growing increasingly frustrated about Erdogan repeatedly accusing it of applying “Nazi methods” by banning rallies aimed at drumming up support among Turks in Germany for a referendum that would strengthen the power of his presidency. Turks workers began moving to Germany in the 1960s and the country now has about 3 million people of Turkish background. Some are fully integrated while others live in ethnic communities with less contact with the majority population.

“Erdogan’s rhetoric makes me stunned,” Schaeuble, a veteran member of Merkel’s Christian Democratic (CDU) party, told the Welt am Sonntag weekly newspaper. “In a short time, it wilfully destroys the integration that has grown over years in Germany. The repair of the damage will take years,” he said. Erdogan said in a speech in Istanbul on Sunday: “You call the president of the Turkish Republic a dictator. When we call them fascists, they get annoyed. When we call them Nazis, they get annoyed.” “You are fascists, you are. Be annoyed as much as you want with Nazi practices. If you draw swastikas on the walls of our mosques and don’t hold anyone accountable, you cannot take off this stain,” Erdogan said.

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According to Le Monde, one third of French (43% under 35) doesn’t know if they’re going to vote at all. And half still don’t know who to vote for. Beware the polls.

France’s Le Pen Says The EU ‘Will Die’, Globalists To Be Defeated (R.)

The European Union will disappear, French presidential candidate Marine Le Pen told a rally on Sunday, aiming to re-enthuse core supporters in the final four weeks before voting gets underway. Buoyed by the unexpected election of Donald Trump in the United States and by Britain’s vote to leave the EU, the leader of the anti-EU and anti-immigrant National Front (FN) party, told the rally in Lille that the French election would be the next step in what she called a global rebellion of the people. “The European Union will die because the people do not want it anymore,” Le Pen said to loud cheers and applause. “The time has come to defeat globalists,” she said, adding: “My message is one of emancipation, of liberation … a call for all the patriots to gather behind our flag.”

Opinion polls forecast that Le Pen will do well in the April 23 first round of the presidential election only to lose the May 7 run-off to centrist Emmanuel Macron. Its anti-EU, anti-euro stance is one of the FN’s standard-bearing policies, both a mark of its anti-establishment stance that pleases grass-roots supporters and attracts voters angry with globalization, and a likely obstacle to its quest for power in a country where a majority oppose a return to the franc. Le Pen has over the past few months tried to accommodate this opposition to leaving the euro by continuing to criticize the unpopular EU while telling voters she would not abruptly pull France out of the bloc or the euro but instead hold a referendum after six months of renegotiating the terms of France’s EU membership.

On Sunday she told the rally she would seek to replace the EU by “another Europe,” which she called “the Europe of the people,” based on a loose cooperative of nations. “It must be done in a rational, well-prepared way,” she told Le Parisien in an interview published earlier on Sunday. “I don’t want chaos. Within the negotiation calendar I want to carry out … the euro would be the last step because I want to wait for the outcome of elections in Germany in the fall before renegotiating it.”

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But is the economic failure caused only by wrong policies?

Populism Is The Result Of Global Economic Failure (G.)

The rise of populism has rattled the global political establishment. Brexit came as a shock, as did the victory of Donald Trump. Much head-scratching has resulted as leaders seek to work out why large chunks of their electorates are so cross. The answer seems pretty simple. Populism is the result of economic failure. The 10 years since the financial crisis have shown that the system of economic governance which has held sway for the past four decades is broken. Some call this approach neoliberalism. Perhaps a better description would be unpopulism. Unpopulism meant tilting the balance of power in the workplace in favour of management and treating people like wage slaves. Unpopulism was rigged to ensure that the fruits of growth went to the few not to the many.

Unpopulism decreed that those responsible for the global financial crisis got away with it while those who were innocent bore the brunt of austerity. Anybody seeking to understand why Trump won the US presidential election should take a look at what has been happening to the division of the economic spoils. The share of national income that went to the bottom 90% of the population held steady at around 66% from 1950 to 1980. It then began a steep decline, falling to just over 50% when the financial crisis broke in 2007. Similarly, it is no longer the case that everybody benefits when the US economy is doing well. During the business cycle upswing between 1961 and 1969, the bottom 90% of Americans took 67% of the income gains. During the Reagan expansion two decades later they took 20%.

During the Greenspan housing bubble of 2001 to 2007, they got just two cents in every extra dollar of national income generated while the richest 10% took the rest. The US economist Thomas Palley* says that up until the late 1970s countries operated a virtuous circle growth model in which wages were the engine of demand growth. “Productivity growth drove wage growth which fueled demand growth. That promoted full employment, which provided the incentive to invest, which drove further productivity growth,” he says.

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China doesn’t want war. Neither does Russia.

The West is Becoming Irrelevant (Vltchek)

China, one of the oldest and greatest civilizations on Earth, went through the terrible period of ‘humiliation’. Divided, occupied and plundered by the West, it has never forgotten nor forgiven. Now the Chinese Communist state and its mixed economy are helping countries in virtually all parts of the world, from Oceania and Latin America, to the Middle East and especially Africa, to survive and to finally stand on their own feet. Despite all the vitriolic propaganda regurgitated by the West (those people in Europe or North America who know close to zero about Africa or China,habitually passing ‘confident’ and highly cynical ‘judgments’ about China’s involvement in the poor world; judgments based exclusively on the lies and fabrications produced by the Western media), China has been gaining great respect and trust in virtually all corners of the globe.

The Chinese people and their government are now standing firmly against Western imperialism. They will not allow any recurrence of the disgraceful and dreary past. The West is provoking this mighty and optimistic nation, pushing it into a terrible confrontation. China doesn’t want any military conflict. It is the most peaceful, the most non-confrontational large nation on Earth. But it is becoming clear that if pushed against the wall, this time it will not compromise: it will fight. In the last years I have spoken to many Chinese people, as I traveled to all corners of the country, and I’m convinced that by now the nation is ready to meet strength with strength. Such determination gives hope to many other countries on our Planet. The message is clear: the West cannot do whatever it wants, anymore. If it tries, it will be stopped. By reason or by force!

Russia is ready again, too. It is standing next to China, enormous and indignant. Go to Novosibirsk or Tomsk, to Khabarovsk, Vladivostok or Petropavlovsk in Kamchatka. Talk to Russian people and you will soon understand: almost nobody there believes or respects the West, anymore. Throughout history, Russia was attacked and ransacked from the West. Millions, tens of millions of its people were murdered, literally exterminated. And now, the nation is facing what some consider to be yet another imminent attack. Like the Chinese people, Russians are unwilling to compromise, anymore. The old Russian forecast is once again alive, that very one professed by Alexander Nevsky: Go tell all in foreign lands that Russia lives! Those who come to us in peace will be welcome as a guest. But those who come to us sword in hand will die by the sword! On that Russia stands and forever will we stand!

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By dismantling domestic privacy laws, ….

The US Will Lose Control Of The Global Internet (Morozov)

The numerous paradoxes that will haunt Donald Trump in the coming months were on full display during the recent Senate vote to undo privacy legislation that was passed in the last few years of the Obama administration. As part of a broader effort to treat internet service providers and telecoms operators as utility companies, Obama imposed restrictions on what these companies could do with all the user data from browsers and apps. Emboldened by Trump, the Republicans have just allowed these businesses to collect, sell and manipulate such data without user permission. From the short-sighted domestic perspective, it seems like a boon to the likes of Verizon and AT&T, especially as they increasingly find themselves confronting their data-rich counterparts in Silicon Valley.

Telecoms companies have been complaining (not entirely without reason) that the Obama administration favoured the interests of Google and Facebook which, invoking the lofty rhetoric of “keeping the internet free” only to defend their own business agenda, have traditionally faced somewhat lighter regulation. The Democrats, always happy to attack Trump, have jumped on the issue, warning that the Senate vote would foster ubiquitous and extensive surveillance by the telecoms industry – and Silicon Valley, of course, would never commit such sins. Under the new rules, complained Bill Nelson, a senator from Florida, “your broadband provider may know more about your health – and your reaction to illness – than you are willing to share with your doctor”.

Never mind that Google and Facebook already know all this – and much more – and generate little outrage from the Democrats. The Democrats, of course, only have themselves to blame for such ineptitude. From the early 1980s onwards, centre-left movements on both sides of the Atlantic no longer discussed technology policy in terms of justice, fairness or inequality. Instead, they preferred to emulate their neoliberal opponents and frame choices – about technology policy, but also about many other domains – in terms of just one goal that rules supreme above all other: innovation. The problem with building a political programme on such flimsy economistic foundations is that it immediately opens the door to competing narratives of just what kind of policy produces more innovation.

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I watch the increase in global aviation with a very heavy heart. But this is smart.

Circular Runways Proposed For Airport Efficiency (Curbed)

While airport terminal architecture has a solid history of style and innovation, rarely is a proposal put forth to utterly redesign the runway. But that’s precisely the aim of Henk Hesselink, a Dutch scientist working with the Netherlands Aerospace Centre. Dubbed the “endless runway”, Hesselink’s brainchild is a 360-degree landing strip measuring more than two miles in diameter. Since airplanes would be able to approach and take off from any direction around the proposed circle, they wouldn’t have to fight against crosswinds.

And three planes would be able to take off or land at the same time. Hesselink’s team uses flight simulators and computerized calculations to test the unconventional design, and have determined that round airports would be more efficient than existing layouts. With a central terminal, the airport would only use about a third of the land of the typical airport with the same airplane capacity. And there’s an added benefit to those living near airports: Flight paths could be more distributed, and thereby making plane noise more tolerable. So far, there have been no plans to actually build a circular runway, but Hesselink’s research continues on.

 

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The Better Than God crowd is not done with you just yet.

Trump Presidency “Opens Door” To Planet-Hacking Geoengineer Experiments (G.)

Harvard engineers who launched the world’s biggest solar geoengineering research program may get a dangerous boost from Donald Trump, environmental organizations are warning. Under the Trump administration, enthusiasm appears to be growing for the controversial technology of solar geo-engineering, which aims to spray sulphate particles into the atmosphere to reflect the sun’s radiation back to space and decrease the temperature of Earth. Sometime in 2018, Harvard engineers David Keith and Frank Keutsch hope to test spraying from a high-altitude balloon over Arizona, in order to assess the risks and benefits of deployment on a larger scale. Keith cancelled a similar planned experiment in New Mexico in 2012, but announced he was ready for field testing at a geoengineering forum in Washington on Friday.

“The context for discussing solar geoengineering research has changed substantially since we planned and funded this forum nearly one year ago,” a forum briefing paper noted. While geoengineering received little favour under Obama, high-level officials within the Trump administration have been long-time advocates for planetary-scale manipulation of Earth systems. David Schnare, an architect of Trump’s Environmental Protection Agency transition, has lobbied the US government and testified to Senate in favour of federal support for geoengineering. He has called for a multi-phase plan to fund research and conduct real-world testing within 18 months, deploy massive stratospheric spraying three years after, and continue spraying for a century, a duration geoengineers believe would be necessary to dial back the planet’s temperature.

“Clearly parts of the Trump administration are very willing to open the door to reckless schemes like David Keith’s, and may well have quietly given the nod to open-air experiments,” said Silvia Riberio, with technology watchdog ETC Group. “Worryingly, geoengineering may emerge as this administration’s preferred approach to global warming. In their view, building a big beautiful wall of sulphate in the sky could be a perfect excuse to allow uncontrolled fossil fuel extraction. We need to be focussing on radical emissions cuts, not dangerous and unjust technofixes.” [.] “Geoengineering holds forth the promise of addressing global warming concerns for just a few billion dollars a year,” he said in 2008, before helping launch a geoengineering unit while he ran the right-wing think tank American Economic Enterprise. “We would have an option to address global warming by rewarding scientific innovation. Bring on American ingenuity. Stop the green pig.”

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We need to do Bob Geldof all over again? We are a disgrace.

UN’s Famine Appeal Is Billions Shy of Goal (NYT)

A month ago, the secretary general of the United Nations, António Guterres, warned that 20 million people would fall into famine if his aid agencies could not corral $4.4 billion by the end of March. It is almost the end of March, and so far, the United Nations has received less than a tenth of the money – $423 million, according to its Office for the Coordination of Humanitarian Affairs. The funding appeal, and the paltry response, comes as the Trump administration is poised to make sharp cuts to its foreign aid budget, including for the United Nations. Historically, the United States has been the agency’s largest single donor for humanitarian aid. For all four countries at risk — Nigeria, Somalia, South Sudan and Yemen – the United States has given $277 million so far this year, not all of it for famine relief.

The conditions for famine are specific and not easy to meet, which is why the last time a famine was declared was in Somalia in July 2011, after 260,000 had died of hunger and related complications. The three criteria for declaring a famine are when one in five households in a certain area face extreme food shortages; more than 30% of the population is acutely malnourished; and at least two people for every 10,000 die each day. A famine has already been declared in a swath of South Sudan. A similar risk looms over Somalia, still reeling from years of conflict, and Yemen, where Houthi insurgents are battling a Saudi-led coalition supported by the United States and Britain. In northern Nigeria, a famine could already be underway, according to an early warning system funded by the United States Agency for International Development.

But the security situation is so bad there that aid workers have been unable to assess levels of hunger. On Thursday, Somalia’s newly elected president, Mohamed Abdullahi Mohamed, told the Security Council by videolink from Mogadishu that half the population faces acute food shortages. The United Nations says it needs the $4.4 billion to deliver food, clean water and basic medicine like oral rehydration salts to avert diarrhea deaths among children. Only 8% of the money the agency needs for Yemen has been funded; for Nigeria, 9%; for South Sudan, 18%; and for Somalia, 32%. Of the 20 million who are at risk of famine are 1.4 million children, who are most vulnerable. To put the $4.4 billion appeal in perspective, Britain has made slightly less, $4.1 billion, from weapons sales to Saudi Arabia in the two years since the war began in Yemen.

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The most insane idea to come out of the EU yet. And there’s a lot of competition for that.

‘We Reached Our Limits’: Greece To Stop Taking Back Refugees (RT)

Greece will cease taking back refugees under the controversial Dublin Regulation, as the country’s limited capacities to host people are already on the brink of collapse, the Greek migration minister announced in an interview. As the European Commission pressures Athens to re-implement the Dublin Regulation – stipulating that refugees can be returned to the first EU state they arrived in – the Greek migration minister told Spiegel his country is not in a position to do so. The agreement was put on hold for Greece back in 2011 over problems in the country’s asylum system. “Greece is already shouldering a heavy burden,” Ioannis Mouzalas, the migration minister, said. “We accommodate 60,000 refugees… and it would be a mistake to make Greece’s burden heavier by the revival of the Dublin agreement,” he said, also adding that Germany, the primary destination for most refugees, “wants countries where refugees arrive first to bear a large portion of the burden.”

Under the Dublin Regulation, the European state where the asylum-seeker first arrives in the EU is responsible for examining an asylum claim. Refugees are fingerprinted in their first country of arrival to ensure irrefutable evidence of their entry. However, rights groups warn that imminent transfers from other EU countries back to Greece in line with the regulations are likely to cause more refugees than ever to go underground in western European countries, as many are desperate to stay there because of family links or successful attempts to start a new life. The scheme also adds even greater pressure to existing refugee facilities in Greece and beyond. Asked if Athens is ruling out implementation of the Dublin Regulation, Mouzalas answered in the affirmative, adding, “I want the Germans to understand that this is not because of political or ideological reasons, or failure to appreciate Germany’s assistance.” “Greece simply has no capacities to cope with additional arrival of refugees,” he said.

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Erdogan will not like this. And the US must realize that the EU squeezing Greece bone dry does not help such proposals. For good cooperation, you need strong and stable partners.

Greek-US Ties Set To Strengthen Significantly (K.)

Greece is examining US proposals for military cooperation which would widen ties to an extent not seen in the last three decades, Kathimerini understands. According to sources, Washington’s desire for stronger ties stems from its view that Greece has a significant geopolitical role to play as a pillar of stability in a volatile region. More specifically, Washington has proposed the participation of a Greek military vessel in a carrier battle group (CVBG), which consists of an aircraft carrier and a large number of escort vessels. According to the US proposals, the participation of a Greek vessel in the CVBG will be accompanied by the renewal of the Mutual Defense Cooperation Agreement (MDCA) between the two countries.

The MDCA is of utmost significance as it is through this pact that American military forces are permitted to use the Souda naval base on Crete. During a meeting last week US Secretary of Defense James Mattis and Defense Minister Panos Kammenos discussed the option of renewing the agreement for five to 10 years instead of each year, as has been the case to date. The Americans reportedly want to renew the deal every five years, as they want to expand the scope of their activities at the base. Sources have told Kathimerini that the only possible obstacle to the deal’s renewal on a five-year basis is that it must receive approval in Parliament, and the leftist-led coalition fears the possibility of dissent emanating from lawmakers of ruling SYRIZA.

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And why not: recovery is not possible anyway.

Greece Considers Capital Control Tightening (K.)

The capital controls were originally supposed to be a one-off measure that would be removed in a matter of months, with Prime Minister Alexis Tsipras stating in September 2015 that they would be lifted in early 2017. Today, 21 months since they were imposed, the capital controls are still here, and with the drop in bank deposits, it appears more likely they will be tightened than relaxed or lifted. The truth is that a full Greek recovery will not be possible as long as the capital controls remain, but the economy remains mired in uncertainty and the banks have not seen their CCC+ credit rating improve.

Bank officials note it will be a long time before the restrictions are removed, and this will require the consolidation of a basic sense of confidence among citizens that the worst is over. This is particularly difficult today given that few bailout reviews have been completed according to schedule in the last seven years – and the ongoing second review of the third bailout program was supposed to have finished 13 months ago, in February 2016. Banks therefore fear that if deposit outflow continues as it has done in the first quarter of the year, further controls are quite likely.

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Mar 242017
 
 March 24, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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DPC “Broad Street and curb market, New York” 1906

 


Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)
The US Has the Most Expensive Healthcare System in the World (Statista)
‘Deaths of Despair’ Surge in White US Middle Class (Vox)
The Retail Apocalypse Has Officially Descended On America (BI)
WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)
China’s Property Bubble Risks Youth Revolt (CNBC)
China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)
Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)
Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)
Greek Objections Mar Preparations For EU’s 60th Birthday (R.)
Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)
40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)
EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)
Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

 

 

This will attract some media attention. Better do it after the markets close.

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)

President Donald Trump reportedly laid down an ultimatum to House Republicans on Thursday night: Pass the health-care bill, as is, on Friday, or live with Obamacare. The hard line came after more than a day of frantic negotiations to win the support of conservative Republicans who oppose the bill, and could block its passage. A vote on the bill had been scheduled for Thursday night, but was postponed earlier in the day after the GOP couldn’t win over holdout lawmakers. White House budget director Mitch Mulvaney dropped Trump’s demand in a meeting with rank-and-file House Republicans, and said the administration and House Speaker Paul Ryan were done with negotiations, according to a report in The Wall Street Journal. If Friday’s bill fails, Trump is resigned to live with Obamacare and move on, he said.

CNN similarly reported that the closed-door meeting ended with an ultimatum, and Rep. Chris Collins (R-N.Y.) told the network that the vote is expected to be held Friday afternoon. The move is a gamble by the Trump administration, which has placed much political capital in its promise to repeal and replace the Affordable Care Act, also known as Obamacare. “They’re going to bring it up, pass or fail,” Rep. Mike Simpson (R-Idaho) told the Washington Post. The GOP can’t afford more than 21 dissenting votes, but CNN counted 26 “no” votes and four more “likely” no votes. Every House Democrat is expected to oppose the bill.

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And what’s worse, no way out.

The US Has the Most Expensive Healthcare System in the World (Statista)

If the American Healthcare Act, President Trump’s first major legislative effort, is going to a vote in the House of Representatives as scheduled on Thursday, it is by no means clear that it will receive the 215 votes it needs for passage. When the Republican healthcare plan was first presented to the public on March 6, it left people from both sides of the political spectrum dissatisfied. While Democrats fear that the suggested bill, which would repeal large portions of Obama’s Patient Protection and Affordable Care Act, would leave millions of Americans uninsured and hurt the poor and vulnerable, many Republicans think it doesn’t go far enough in erasing all traces of Obamacare.

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage. This chart shows health spending (public and private) per capita in selected countries.

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Not my original observation, but true: it looks a lot like Russia in the 1990s.

‘Deaths of Despair’ Surge in White US Middle Class (Vox)

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population. The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings. They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors. In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

[..] The US, particularly middle-aged white Americans, is an outlier in the developed world when it comes to this mid-life mortality uptick. “Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US,” Case and Deaton write. “In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.” If American wants to turn the trend around, then it has to become a little more like other countries with more generous safety nets and more accessible health care, the researchers said.

Introducing a single-payer health system, for example, or value-added or goods and services taxes that support a stronger safety net would be top of their policy wish list. (America right now is, of course, moving in the opposite direction under Trump, and shredding the safety net.) They also admit, though, that it’s taken decades to reverse the mortality progress in America, and it won’t be turned around quickly or easily. But there is one “no-brainer” change that could help, Case added. “The easy thing would be close the tap on prescription opioids for chronic pain.” Unlike health care and increasing taxes, opioids are actually a public health issue with bipartisan support. Deaton, for his part, was hopeful. Paraphrasing Milton Friedman, he said, “All policy seems impossible until it suddenly becomes inevitable.”

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“Visits declined by 50% between 2010 and 2013..” “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

The Retail Apocalypse Has Officially Descended On America (BI)

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model. For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, but it still sells merchandise online.

Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses. Sears is shutting down about 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down about 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar Credit Ratings report from October. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

[..] as longtime retail analyst Howard Davidowitz observed in 2014, “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

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This could be a huge blow to Apple. Who wants to buy something the CIA has already tinkered with in the factory? Expect giant lawsuits too. Apple knew.

WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)

Today, March 23rd 2017, WikiLeaks releases Vault 7 “Dark Matter”, which contains documentation for several CIA projects that infect Apple Mac Computer firmware (meaning the infection persists even if the operating system is re-installed) developed by the CIA’s Embedded Development Branch (EDB). These documents explain the techniques used by CIA to gain ‘persistence’ on Apple Mac devices, including Macs and iPhones and demonstrate their use of EFI/UEFI and firmware malware. Among others, these documents reveal the “Sonic Screwdriver” project which, as explained by the CIA, is a “mechanism for executing code on peripheral devices while a Mac laptop or desktop is booting” allowing an attacker to boot its attack software for example from a USB stick “even when a firmware password is enabled”. The CIA’s “Sonic Screwdriver” infector is stored on the modified firmware of an Apple Thunderbolt-to-Ethernet adapter.

“DarkSeaSkies” is “an implant that persists in the EFI firmware of an Apple MacBook Air computer” and consists of “DarkMatter”, “SeaPea” and “NightSkies”, respectively EFI, kernel-space and user-space implants. Documents on the “Triton” MacOSX malware, its infector “Dark Mallet” and its EFI-persistent version “DerStake” are also included in this release. While the DerStake1.4 manual released today dates to 2013, other Vault 7 documents show that as of 2016 the CIA continues to rely on and update these systems and is working on the production of DerStarke2.0.

Also included in this release is the manual for the CIA’s “NightSkies 1.2” a “beacon/loader/implant tool” for the Apple iPhone. Noteworthy is that NightSkies had reached 1.2 by 2008, and is expressly designed to be physically installed onto factory fresh iPhones. i.e the CIA has been infecting the iPhone supply chain of its targets since at least 2008. While CIA assets are sometimes used to physically infect systems in the custody of a target it is likely that many CIA physical access attacks have infected the targeted organization’s supply chain including by interdicting mail orders and other shipments (opening, infecting, and resending) leaving the United States or otherwise.

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A lot of cities around the world share that risk.

China’s Property Bubble Risks Youth Revolt (CNBC)

China faces the risk of youth disenchantment as property prices rise beyond their reach, a renowned Chinese economist said Friday. “In a regular country, wealth should be concentrated in the financial markets, not fixed assets,” said Renmin University of China Vice President Wu Xiaoqiu at a media interview at the Boao Forum in the province of Hainan. He highlighted the risks from the current property bubble in China, such as negative asset values if prices tank. More importantly, the social risks that come from the property bubble in the form of youth disenchantment with not being to afford a home will be damaging, he said. “If young people lose hope, the economy will suffer, as housing is a necessity,” he said.

Wu said he was hopeful the authorities would find a solution to constrain the froth in Chinese real estate, but admitted that repeated measures to curb speculation have so far only met with short-term success. Wu’s comments follow a People’s Bank of China survey published on Tuesday, which found that 52.2% of urban households perceived housing prices to be “unacceptably high” in the first quarter of the year, Reuters reported. In February, gains in Chinese home prices picked up pace after they slowed in the previous four months despite government efforts to curb speculation, Reuters reported on Sunday. Prices in the big cities of Beijing, Shanghai and Shenzhen rose 22.1%, 21.1% and 13.5%, respectively, from a year ago.

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Wow.

China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)

In December 2016, Muddy Waters’ Carson Block said China’s largest dairy farm operator, Hong-Kong listed China Huishan Dairy, is “worth close to zero” and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low. The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.

In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement.” The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen at RHB OSK Securities Hong Kong. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone. About 73% of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90% owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80% through a peak in June had made the shares expensive.

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“If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.”

Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)

For the last three years, the political establishment in Italy and beyond have had a field day attacking, ridiculing, and vilifying Beppe Grillo’s 5-star movement. Europe’s media have tarred him with the brush of populism. In 2013 The Economist labelled him a clown on its front cover. Yet his party still leads the polls. And that lead is growing. A new Ipsos poll in Corriere della Sera newspaper has put Beppe Grillo’s 5-Star Movement on 32.3% – its highest ever reading. It placed 5.5 points ahead of the governing PD, on 26.8%, after the PD dropped more than three%age points in a month, as former prime minister Matteo Renzi battles to reassert his authority following a walkout by a left-wing faction. Internal political battles are nothing new in Italy. The country enjoys a hard-earned reputation for political instability and paralysis, having seen 63 governments come and go since 1945.

The problem this time around is that internal weakness and strife in Italy’s traditional center-left and center-right parties could end up gifting the next election to a party that refuses to play by the book. If it wins the next elections, which could be brought forward to as early as June this year, 5-Star Movement has pledged to hold a referendum of its own – albeit a non-binding one – on Italy’s membership of the euro. As polls have shown, there is much broader public apathy toward the single currency than in just about any other euro zone nation. Grillo’s plan could also receive the backing of former prime minister Silvio Berlusconi who is determined to pull off a political comeback and is talking of restoring the Italian Lira.

As Reuters reports, such a scenario could spook financial markets “wary of both the 5-Star’s euroskepticism and the threat of prolonged political instability in Italy,” which boasts a public debt burden of over €2 trillion (133% of GDP). In any normal situation that would be a problem. But Italy is not in a normal situation; it is on the cusp of a potentially very large financial crisis that, if mishandled, could bring down Europe’s entire financial system. Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.

[..] Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability. From a Eurozone-stability point of view, and from a bondholder point of view, the best-case scenario would be the rescue of Italy’s banks, with taxpayers bearing most of the brunt. That should help steady investor nerves and put an end to the gathering exodus of funds out of Italian assets. But even then, the social, political and economic price to be paid in a country already with public debt of over €2 trillion, youth unemployment of almost 40%, and an economy that is 12% smaller than it was 10 years ago, will almost certainly be way too high. If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.

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He’s blowing up the EU without noticing a thing.

Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)

German Finance Minister Wolfgang Schaeuble on Friday criticised Foreign Minister Sigmar Gabriel for saying Germany should provide more money for Greece and the European Union overall. Schaueble told Deutschlandfunk radio he was annoyed by Gabriel’s suggestion because it “goes in the wrong direction completely” and sent the wrong message. He added that Europe’s problem was not primarily money but that its money needed to be used in the right way. On whether Greece can stay in the euro zone, Schaeuble said: “Greece can only do that if it has a competitive economy.” He said the country needed to carry out reforms and that would take time, adding: “But if the time is not used to carry out reforms because that’s uncomfortable, then that’s the wrong path.”

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Feels like a funeral party.

Greek Objections Mar Preparations For EU’s 60th Birthday (R.)

Greece has stuck to its objections to a declaration to mark the European Union’s 60th anniversary, officials in Brussels and Athens said on Thursday, a potentially embarrassing setback for the bloc as it seeks to rebuild unity ahead of Brexit. The leaders of the EU’s 27 remaining states will mark the anniversary on Saturday at a gathering in Rome overshadowed by Britain’s unprecedented decision to leave. London is due to formally trigger the divorce negotiations next week. Athens has threatened not to sign the Rome declaration charting the future of the post-Brexit EU, making a link between agreeing to the text and separate talks on reforms that lenders are seeking from Greece in exchange for new loans. “The negotiations on the draft Rome Declaration have ended as the text was finalized by the EU27,” an EU source said. “Only Greece has a general reservation on the text.”

Greece has said it wants the Rome text to spell out more clearly the protection of labor rights. Greece’s separate debt talks with international lenders are now stuck over this specific issue. One diplomat in Brussels said the issue may now only be resolved at the highest level with Greek Prime Minister Alexis Tsipras. Another EU diplomat said any attempt by Athens to win leverage on the international debt talks by holding off in Rome should not succeed: “We won’t be blackmailed by one member state which is linking one EU issue with a totally different one.” As well as Greece, Poland indicated on Thursday it might also refuse to endorse the declaration, though diplomats played down the threat. Warsaw is particularly opposed to a ‘multi-speed Europe,’ an idea promoted by Germany, France and Brussels, among others, to help improve decision-making in the post-Brexit EU.

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“Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)

Greece will support a declaration marking the EU’s 60th birthday but needs the bloc’s backing against IMF demands on labour reforms, Greek Prime Minister Alexis Tsipras said ahead of a Summit in Rome on Friday. In a letter addressed to EU Council President Donald Tusk and Commission President Jean Claude Juncker, Tsipras called for a clear statement on whether the declaration would apply to Greece, as talks over a key bailout review hit a snag again. “We intend to support the Rome Declaration, a document which moves in a positive direction,” Tsipras said. “Nevertheless, in order to be able to celebrate these achievements, it has to be made clear, on an official level, whether they apply also to Greece. Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Earlier this week, Greece threatened not to sign the Rome declaration, demanding a clearer commitment protecting workers’ rights – an issue on which it is at odds with its international lenders who demand more reforms in return for new loans. The disagreements among Athens, the EU and the IMF – which has yet to decide whether it will participate in the country’s current bailout – have delayed a crucial bailout review. As leaders prepared for the summit, Greek ministers were negotiating with lenders’ representatives in Brussels pension cuts and labour reforms, including freeing up mass layoffs and on collective bargaining. The latest round of talks ended inconclusively late on Thursday, according to Greek officials. [..] Greece has cut pensions 12 times since it signed up to its first bailout in 2010. It has also reduced wages and implemented labour reforms to make its market more flexible and competitive.

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Just imagine that. And then talk about recovery. No, all you need to do is reform!

40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)

Four in 10 Greek businesses (40.3%) consider it likely that they will have to close shop within the year, according to a survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), presented by the ANA-MPA news agency on Thursday. According to the survey, around 18,700 businesses will close in the first six months of the year, forcing thousands to join growing unemployment lines in the crisis-hit country. The majority of shutdowns, according to GSEVEE, will be in and around the capital and will concern the manufacturing sector, while some 34,000 jobs will be lost by the closure of companies that are currently considered high risk. 7 in 10 businesses have reported increasing liquidity problems and a shortage of capital from the market, with the number of firms indebted to the state and their suppliers growing by 10% compared to last year.

Over four in five small and medium-sized businesses (SMEs) admit to being exposed to credit risks, seeing a slump in economic activity and operating with the prospect of shrinking rather than expanding in the near future. In terms of employment, the forecasts for the first half of the year do not bode well, as for every two businesses (8.1% of the total) that plan to hire new staff, another three will be letting people go. GSEVEE estimates that 2,000 salaried jobs will be lost by June, without accounting for the impact on employment of the projected shutdowns. Moreover, 40% of those businesses that do plan to hire staff in the first half of 2017 said they won’t be offering payroll positions, but part-time or outsourced work.

Sentiment is also bleak, with 58.8% of respondents expecting conditions to deteriorate and just 11% seeing a possible improvement through June. As such, just 3.6% of businesses plan to make new investments and 6.4% have applied to investment funding programs for that period. “There needs to be a national plan for the country irrespective of who is in power, and politicians need to learn how to make decisions and give orders,” GSEVEE President Giorgos Kavvathas was quoted by the ANA-MPA news agency as saying. “Moreover, the uncertainty of the situation concerning the outcome of the negotiation [with foreign creditors] exacerbates fears and risks, which in turn make small businesses and the self-employed more vulnerable.”

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Could be another scary spring and summer.

EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)

European Commissioner for Migration Dimitris Avramopoulos on Thursday underlined the need to safeguard a deal between Brussels and Ankara to curb human smuggling in the Aegean, noting that some 3 million refugees were in Turkey waiting to cross into Greece in a bid to reach Western and Northern Europe. In comments during a visit to Athens, Avramopoulos said the deal signed last year between Turkey and the EU had reduced an influx of migrants toward Europe and curbed deaths at sea. Reception centers on the islands of the eastern Aegean, the first point of arrival for most migrants arriving in Greece from Turkey, are already overcrowded. A woman and a child were injured in clashes between Afghan and Algerian migrants on Chios on Wednesday night.

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We’re on track for multiple records.

Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

More than 250 African migrants were feared drowned in the Mediterranean Thursday after a charity’s rescue boat found five corpses close to two sinking rubber dinghies off Libya. The UN’s refugee agency (UNHCR) said it was “deeply alarmed” after the Golfo Azzuro, a boat operated by Spanish NGO Proactiva Open Arms, reported the recovery of the bodies close to the drifting, partially-submerged dinghies, 15 miles off the Libyan coast. “We don’t think there can be any other explanation than that these dinghies would have been full of people,” Proactiva spokeswoman Laura Lanuza told AFP. “It seems clear that they sunk.” She added that the inflatables, of a kind usually used by people traffickers, would typically have been carrying 120-140 migrants each.

“In over a year we have never seen any of these dinghies that were anything other than packed.” Lanuza said the bodies recovered were African men with estimated ages of between 16 and 25. They had drowned in the 24 hours prior to them being discovered shortly after dawn on Thursday in waters directly north of the Libyan port of Sabrata, according to the rescue boat’s medical staff. Vincent Cochetel, director of the UN refugee agency (UNHCR)’s Europe bureau, said NGO boats patrolling the area had been called to the aid of a third stricken boat on Thursday afternoon, raising fears others may have perished on what Proactiva called “a black day in the Mediterranean.”

Despite rough winter seas, migrant departures from Libya on boats chartered by people traffickers have accelerated in recent months from already-record levels. Nearly 6,000 people have been picked up by Italian-coordinated rescue boats since the end of last week, bringing the number brought to Italy since the start of 2017 to nearly 22,000, a significant rise on the same period in previous years. Aid groups say the accelerating exodus is being driven by worsening living conditions for migrants in Libya and by fears the sea route to Europe could soon be closed to traffickers. Prior to the latest fatal incident, the UN had estimated that at least 440 migrants had died trying to make the crossing from Libya to Italy since the start of 2017. Its refugee agency estimates total deaths crossing the Mediterranean at nearly 600.

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 March 23, 2017  Posted by at 5:38 pm Finance Tagged with: , , , , , , , , ,  3 Responses »
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Live cooking in Monastiraki Square, Athens

 

Every time I write about my ‘adventures’ in Greece for the Automatic Earth for Athens Fund, which I initiated in June 2015, I think it’s been way too long, but also every time I realize that I’ve already written so much about it (which makes every new article harder to write as well). Still, it’s been three months since the last one, and as always lots has happened; we’re not sitting still. As always, there’s a full list of previous articles at the bottom of this one.

To start with the latest development, I gave Konstantinos Polychronopoulos of O Allos Anthropos another €1,000 (the last funds I had) on March 15, which he needed to go to Lesbos, where he’s been asked to help set up a ‘Multi-Center’, to be jointly built by Greeks and refugees. It’s an initiative of a privately funded organization named Swisscross, to be located outside of the horrible Moria camp.

The center, which will have no sleeping facilities, is designed to make life more bearable for the refugees stuck inside Moria. It will provide shower rooms, laundry facilities, a kindergarten, a school (remedial teaching), a cinema, cafeteria and a restaurant.

O Allos Anthropos will be in charge of the restaurant, which will also be very much geared towards providing space, equipment, food and resources for the refugees themselves to cook. An often overlooked part of the refugee tragedy here in Greece is that preparing food is an important aspect of family- and community life, a source of dignity and pride, that has been taken away from them and replaced by real bad catering.

 


Thank you to the Texan girls who donated their Santa hat to me for Konstantinos on December 25. Perfect fit!

 

We’ve had the fifth anniversary of O Allos Anthropos in December, and of course Christmas. Then we had New Year’s, and on January 8 Greek New Year. February 16 was Tsikno Pempti (aka Charcoal Thursday or Greek Cholesterol Day), when everyone eats roasted meat – there’s a connection with carnival there-, and the Monday after that was Clean Monday, the end of carnival and the start of what is probably best compared to Lent, what once upon a time was a 40-day period of ‘fasting’ all the way to Easter. No Fat Tuesday or Ash Wednesday, as far as I could find.

Konstantinos and his people made sure that everyone, homeless and refugees, had a Christmas and New Year’s party like ‘normal’ people. Someone had donated a whole lot of turkey for Christmas, there was some meat to eat, and on Cholesterol Day there was even over 1000 kilos of meat to be spread to the Social Kitchens all over the country. It’s the kind of thing that makes people feel they do count, and they do belong, despite the misery they find themselves in.

Just as important, if not more, was the fact that all children who were present in the Big House in Athens, many of whom are homeless, received presents on Greek New Year. That means so much to them. Holidays without presents is cruel to children. I’ll sprinkle some pictures through this article.

 


Nobody gets left out at Christmas

 

Through all these events one thing that kept popping into my head was how close they brought joy and misery together. It’s pretty much priceless to see the happiness in people’s faces when they are served a real Christmas meal, a sign that they belong to the ‘human tribe’, that they ARE important, and there ARE people who care about them. Being able to do that for people is a very precious thing. As I said to someone also involved in refugee work a while ago: I’m sure that when we look back on this years from now, we’re going to say this is the best thing we’ve done in our lives, or right up there.

But at the same time, you can’t look at the joy without realizing where it comes from, why a simple meal or a Christmas present means so much; it comes from the every day misery so many people live in, in Greece these days. Looking at people knowing they’ll have no place to sleep that night, while it’s pretty cold outside too (colder than I thought Athens would be), it will never be easy. The misery is always close to the surface.

So I want to thank you once again, Automatic Earth readers, for having made much of this possible through your donations. You help make a lot of people feel better, help them eat, shower, give them a sense of dignity. In the process, you make me feel better too. Thank you. (Update: Saw a video the other day of a girl tattoo artist who set up a program to change self-mutilated arms into beautiful works of body art. Her reason to do this: “You don’t know what happiness is within yourself until you do something for another person.” That. You rock.

 


Happiness is a little girl’s face

 

That €1000 I gave Konstantinos was again the last money I had to donate to him, so I will call on you once more, and shamelessly so (which I allow myself to do because it’s for others, and it really helps). The Automatic Earth for Athens Fund has so far generated over $50,000(!) -one wonderful soul sent me a check for $10,000…-, and it’s a bit of a victim of its own success. The more there is, the more gets spent; we don’t want to not help people. And already the number of meals O Allos Anthropos can prepare and serve is dropping again, for monetary reasons; the number should be going up instead. We’re rowing against a strong current, which is awfully ironic, as you can see in the rest of this article.

 

I was reading an article earlier this week from AFP about an Italian program for refugees that shows everything that is wrong about how the crisis is being dealt with in Europe. Italy has started flying in Syrian refugees from Beirut, so they don’t have to spent a fortune on a risky sea voyage only to be locked up for months in camps. There are other ways. Kudos to Italy, and may many other countries follow their example:

Avoiding Risky Sea Journey, Syrian Refugees Head To Italy ‘Pronto’

Just before midnight in a sleepy district of Beirut, dozens of Syrian refugees huddle in small groups around bulging suitcases, clutching their pinging cellphones and one-way tickets to Italy. “Torino! Pronto! Cappuccino!” They practise random Italian words in a schoolyard in the Lebanese capital’s eastern Geitawi neighbourhood, waiting for the buses that will take them to the airport, and onwards to their new lives in Italy. Under an initiative introduced last year by the Italian government, nearly 700 Syrian refugees have been granted one-year humanitarian visas to begin their asylum process in Italy. The programme is the first of its kind in Europe: a speedy third way that both avoids the United Nations lengthy resettlement process and provides refugees with a safe alternative to crammed dinghies and perilous sea crossings.

[..] A country of just four million people, Lebanon hosts more than one million Syrian refugees. For members of Mediterranean Hope, the four-person team coordinating Italy’s resettlement efforts from Lebanon, “humanitarian corridors” are the future of resettlement. The group interviews refugees many times before recommending them to the Italian embassy, which issues humanitarian visas for a one-year stay during which they begin the asylum process for permanent resettlement. “It’s safe and legal. Safe for them, legal for us, says Mediterranean Hope officer Sara Manisera. “After people cross the Mediterranean on the journey of death, they are put into centres for months while they wait. But with this programme, there are no massive centres, it costs less, and refugees can keep their dignity,” she tells AFP.

Since March 20 was the 1st anniversary of the EU-Turkey refugee deal, many articles were published about what happened during the past year. And I haven’t seen one that was positive, which makes a lot of sense. There may be fewer refugees arriving in Greece now, but the situation of those who are in the country has gotten much worse. They are now prisoners, ‘housed’ in squalid conditions and with very little idea what will happen to them, how long their asylum applications will take to be heard, if they can or will be sent back to Turkey.

And now, with Erdogan getting ever more desperate in his quest to become the over-powerful president of Turkey, with just 4 weeks left till the referendum that should make him so, and with polls showing he’s behind, the EU-Turkey deal may well fall victim to petty politics. As it always looked to do. Who will suffer if that happens? The usual suspects, Greece and the refugees. The walls to fortress Europe are still shut tight. And it’s always election time somewhere.

 


Live cooking in Monastiraki Square, Athens

 

A friend recently translated something for me that Konstantinos had written on the O Allos Anthropos Facebook page. He said that every refugee who, before the EU-Turkey deal, passed through Greece on his/her way to Europe, cost the EU €800. For a family of 5 that adds up to €4,000, which would have been more than enough to pay for transport, stay at decent hotels and eat in normal restaurants for the duration of their trip (7-10 days). Suffice it to say, that was not what they got.

After the EU-Turkey deal made it impossible for refugees to leave Greece, €15,000 has been spent per capita. That is €75,000 per family of 5, more than enough to rent a villa on the beach, hire a butler and eat gourmet food for 8 months. Instead, the refugees are stuck in old abandoned factories with no facilities, in old tents in the freezing cold and in the rain, and forced to eat a dirt poor version of rice with chickpeas and lentil soup.

Then over the weekend I saw this confirmed in a graph issued by Refugees Deeply (with slightly lower numbers, but those are just margin errors). Note: March 16 2015 in the graph should of course read March 16 2016:

 

 

Refugees Deeply are a bit of a new kid on the block, they’re a year old, and I have no doubt they do care and have the best intentions. But since they operate throughout the world, not just in Greece, they run the same risk many international NGOs do, of spreading their resources too thin. Moreover, one thing that’s become obvious is that if you approach and treat Greece the same way as Somalia, for instance, you’re certain of making some major mistakes. Greece was a modern and prosperous country until Europe tried to turn it into Somalia.

I first heard of Refugees Deeply 2 weeks ago when they published a report called The Refugee Archipelago – The Inside Story Of What Went Wrong In Greece. A good piece, for sure, and I recommend it, but it comes up far short of naming everything that went -and is still going- wrong.

What’s good is that it focuses on the failures of the Greek government in the never-ending refugee tragedy, because that was a part that had largely been missing. But what’s not so good is that it focuses almost exclusively on that. And that’s far from the whole story.

 

You see, there are three separate parties involved in the saga that have access to serious funding, and all three have their own reasons NOT to solve the problems to the best of their abilities. There’s the EU, there’s Greece, and there are dozens of NGOs, many of whom are large and operate internationally (iNGOs).

The EU wants to use Greece as a deterrent. It aims to create an image to the world of Greece as a sordid inhumane place that no potential refugee should ever wish to flee to. Because it doesn’t want any more refugees. 1 million refugees is too much for a continent, and a political union, of 500 million people. Rich Europe is overwhelmed by 0.2% more people. (Note: I’m not advocation open borders or anything, I’m just saying we need to take care of people in need, which is basically what the Geneva Convention says. Until we decide to stop bombing countries like Syria, and start rebuilding them, people will come to our territory to seek help.)

The EU also wants to put Greece in an even harder predicament, for politico-economic reasons. Brussels hands out a lot of money, but it doesn’t- from what I’ve been reading- seem to keep proper tabs of where that money is going, or how it’s spent. That way its hands are always clean: we gave all this money, you can’t blame us! And their hands will remain clean until someone calls them on their lack of oversight of what happens to taxpayers’ money. But taxpayers don’t even know who to call on, Europe is faceless.

 

The Greek government, too, likes the deterrent idea, albeit for slightly different reasons. While the EU has money to burn, Greece has none. The country doesn’t have the means to handle the refugee influx; it doesn’t even have the means to deal with its own domestic austerity-driven misery. The last thing it wants to do is give the impression that it is able to deal with the whole thing.

That might give refugees the idea that Greece is a good place to go to, and it might give Brussels the idea that Greece can handle this, so it must be doing fine. Also, there are (party-) political issues, there is rampant corruption, and there are egos. Greece is a country that politically, socially and economically has been robbed of any and all certainties and confidence. Where the poor take care of each other and the rich only have eye for themselves. But it’s hardly a functioning society anymore, it’s a bankruptcy fire sale.

The only thing surprising about the letter bombs (parcels) for Dijsselbloem, the IMF and Schäuble sent from Greece is that it took so long. Punishing a country into paying more than they could possibly afford is Versailles redux. But sure, the Greek part in the refugee crisis needs serious scrutiny as well: how Mouzalas can still be migration minister after the Refugees Deeply piece is hard to see. Then again, sources on the ground tell me it’s not -only- him, it’s the overall chaos and infighting.

 


And there are protests

 

The third party, the NGOs, is a bit tricky to talk about. For one, because there are so many of them, and in many lots of people work with the best possible intentions. That coming to a country where you don’t know the language or culture is not a perfect plan may often get lost in translation, certainly for unpaid bright-eyed young volunteers looking for a holiday but with a meaning.

It’s tricky also because NGOs, as I’ve written before, have become an industry in their own right, institutionalized even. As someone phrased it: we now have a humanitarian-industrial complex. Which in Greece has received hundreds of millions of euros and somehow can’t manage to take proper care of 60,000 desolate souls with that.

I’ve even been warned that if I speak out too clearly about this, they may come after Konstantinos and his people and make their work hard and/or impossible. This is after all an industry that is worth a lot of money. Aid is big business. And big business protects itself.

Still, if we’re genuinely interested in finding out how and why it is possible that hundreds of millions of taxpayer euros change hands, and people still die in the cold and live in subhuman conditions, we’re going to have to break through some of the barriers that the EU, Greece and the iNGOs have built around themselves.

If only because European -and also American- taxpayers have a right to know what has made this ongoing epic failure possible. And of course the first concern should be that the refugees have the right, encapsulated in international law, to decent and humane treatment, and are not getting anything even remotely resembling it.

Refugees Deeply quotes ‘a senior aid official’ (they don’t say from what) anonymously saying that €70 out of every €100 in aid is wasted. I see little reason to question that; if anything, it could be worse. But on the sunny side that means it need not take much to improve things. If ‘only’ one third of the aid were wasted, the portion that actually helps could potentially be doubled.

 

Most importantly: how do you waste at least €560 million (7/10 of €800 million) when that was intended for people in misery, in peril, in desperate need? I find it hard to wrap my mind around this, can’t seem to understand how actual people in Brussels can allow that to happen, when it’s about taxpayers’ money supposed to help people in grave distress. And I can’t figure out how Greece can allow that people freeze to death on its territory, when that could obviously have been easily prevented.

Nor can I fathom how iNGOs, who together have received hundreds of millions, can fail to build a number of decent winter camps, having been warned and funded months in advance. A lot of money goes to contractors, to the caterers who provide the awful meals at ten times the cost that O Allos Anthropos does, to the builders who don’t build, to the ubiquitous wheeler-dealers who can smell a cheap profit from miles away. And NGO executives want their often hefty salaries to be paid in time.

But even then I keep on thinking: where has all the money gone? They could have built or rented great facilities for all 60,000 refugees, and fed them, and schooled their children, and still have plenty of profit left. Why must greed be so unbridled?

 

In view of all this wasted money, we, Konstantinos and his people, can do so much more and so much better. But then again, of course, we can’t, because we don’t have that kind of funding, not even to spend wisely. And we won‘t either since we don’t want to comply with rules that would force O Allos Anthropos to refuse a meal to a hungry person, Greek or refugee, who doesn’t have ‘the proper ID’.

That ID thing fits ‘wonderfully’ into the EU model that has turned so many refugees into de facto prisoners, and has made so many Greeks destitute. In the end, aid must come from the heart, not from a wallet. Once humanitarian aid becomes a profit-based industry, as it so clearly has here, situations like the ones I describe here become inevitable. It all must come from the desire to help fellow human beings, and that should never be something that someone gets rich off of.

And compromising that in order to let the same machine fund you that has created so much mayhem feels like a road to some place between hell and nowhere. It’s sort of the opposite of Sartre’s “L’enfer c’est les autres” (Hell is other people). O Allos Anthropos means ‘The Other Human’. In other words, heaven is other people too. I could make a good case arguing that this is the very meaning of life, that we are here to help others. But that of course is just me. And thankfully and hopefully, bless you, many of our readers.

I don’t want to spend too much time being angry over the whole thing. The best we can all do is be positive, work with we have, and help as many people as we can. Of course Konstantinos and I, and many others, talk about becoming an NGO. But in his view, that would mean becoming a part of the machine, the industry, that does so much harm, wastes so much money and precious resources, and hurts so many needy people in the process.

Konstantinos is very much opposed to that, and I agree with him (not everyone always does). For him, it’s about never forgetting the reason why you do what you do, and certainly not forgetting it for money. But at the same time, yes, with more money we could do so much more. The number of projects that don’t get done, the people who don’t get fed, because the money is simply not there, is for lack of a better term, embarrassing. Especially, obviously, because that same money does get wasted somewhere else.

So we ask you once again for your help:

 

 

For donations to Konstantinos and O Allos Anthropos, the Automatic Earth has a Paypal widget on our front page, top left hand corner. On our Sales and Donations page, there is an address to send money orders and checks if you don’t like Paypal. Our Bitcoin address is 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT. For other forms of payment, drop us a line at Contact • at • TheAutomaticEarth • com.

To tell donations for Kostantinos apart from those for the Automatic Earth (which badly needs them too!), any amounts that come in ending in either $0.99 or $0.37, will go to O Allos Anthropos. Every penny goes where it belongs, no overhead. Guaranteed. It’s a matter of honor.

 

Please give generously.

 

 

A list of the articles I wrote so far about Konstantinos and Athens.

June 16 2015

The Automatic Earth Moves To Athens

June 19 2015

Update: Automatic Earth for Athens Fund

June 25 2015

Off to Greece, and an Update on our Athens Fund

July 8 2015

Automatic Earth Fund for Athens Makes First Donation

July 11 2015

AE for Athens Fund 2nd Donation: The Man Who Cooks In The Street

July 22 2015

AE Fund for Athens: Update no. 3: Peristeri

Nov 24 2015

The Automatic Earth -Finally- Returns To Athens

Dec 25 2015

Help the Automatic Earth Help the Poorest Greeks and Refugees

Feb 1 2016

The Automatic Earth is Back in Athens, Again

Mar 2 2016

The Automatic Earth for Athens Fund Feeds Refugees (Too)

Aug 9 2016

Meanwhile in Greece..

Nov 28 2016

The Other Human Needs Your Help This Christmas

Dec 21 2016

The Automatic Earth in Greece: Big Dreams for 2017

 

 


Konstantinos and a happy refugee

 

 

Mar 232017
 
 March 23, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Unknown GMC truck Associated Oil fuel tanker, San Francisco 1935

 


I Don’t Think The US Should Remain As One Political Entity – Casey (IM)
Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)
The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)
US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)
Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)
China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)
Zombie Companies are China’s Real Problem (BBG)
China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)
A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC
Elite Economists: Often Wrong, Never In Doubt (720G)
Trump the Destroyer (Matt Taibbi)
Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)
Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)
Greek Consumption Slumps Further In 2017 (K.)
Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)
In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

 

 

So there.

I Don’t Think The US Should Remain As One Political Entity – Casey (IM)

What’s going on in the US now is a culture clash. The people that live in the so-called “red counties” that voted for Trump—which is the vast majority of the geographical area of the US, flyover country—are aligned against the people that live in the blue counties, the coasts and big cities. They don’t just dislike each other and disagree on politics; they can no longer even have a conversation. They hate each other on a visceral gut level. They have totally different world views. It’s a culture clash. I’ve never seen anything like this in my lifetime.

There hasn’t been anything like this since the War Between the States, which shouldn’t be called “The Civil War,” because it wasn’t a civil war. A civil war is where two groups try to take over the same government. It was a war of secession, where one group simply tries to leave. We might have something like that again, hopefully nonviolent this time. I don’t think the US should any longer remain as one political entity. It should break up so that people with one cultural view can join that group and the others join other groups. National unity is an anachronism.

Read more …

Credibility.

Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls (R.)

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth. Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell. “If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital. U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

The S&P 500 ended slightly higher on Wednesday, the day before a floor vote on Trump’s healthcare proposal scheduled in the House of Representatives. On Tuesday, stocks had the biggest one-day drop since before Trump won the election, on concerns about opposition to the bill. Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it. Any hint of further trouble for Trump’s agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners. “The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP,” Wien said. “Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable.”

Read more …

“This is particularly interesting because student loans essentially have no collateral.”

The US Student Debt Bubble Is Even Bigger Than The Subprime Fiasco (Black)

In 1988, a bank called Guardian Savings and Loan made financial history by issuing the first ever “subprime” mortgage bond. The idea was revolutionary. The bank essentially took all the mortgages they had loaned to borrowers with bad credit, and pooled everything together into a giant bond that they could then sell to other banks and investors. The idea caught on, and pretty soon, everyone was doing it. As Bethany McLean and Joe Nocera describe in their excellent history of the financial crisis (All the Devils are Here), the first subprime bubble hit in the 1990s. Early subprime lenders like First Alliance Mortgage Company (FAMCO) had spent years making aggressive loans to people with bad credit, and eventually the consequences caught up with them. FAMCO declared bankruptcy in 2000, and many of its competitors went bust as well.

Wall Street claimed that it had learned its lesson, and the government gave them all a slap on the wrist. But it didn’t take very long for the madness to start again. By 2002, banks were already loaning money to high-risk borrowers. And by 2005, all conservative lending standards had been abandoned. Borrowers with pitiful credit and no job could borrow vast sums of money to buy a house without putting down a single penny. It was madness. By 2007, the total value of these subprime loans hit a whopping $1.3 trillion. Remember that number. And of course, we know what happened the next year: the entire financial system came crashing down. Duh. It turned out that making $1.3 trillion worth of idiotic loans wasn’t such a good idea. By 2009, 50% of those subprime mortgages were “underwater”, meaning that borrowers owed more money on the mortgage than the home was worth.

In fact, delinquency rates for ALL mortgages across the country peaked at 11.5% in 2010, which only extended the crisis. But hey, at least that’s never going to happen again. Except… I was looking at some data the other day in a slightly different market: student loans. Over the last decade or so, there’s been an absolute explosion in student loans, growing from $260 billion in 2004 to $1.31 trillion last year. So, the total value of student loans in America today is LARGER than the total value of subprime loans at the peak of the financial bubble. And just like the subprime mortgages, many student loans are in default. According to the Fed’s most recent Household Debt and Credit Report, the student loan default rate is 11.2%, almost the same as the peak mortgage default rate in 2010. This is particularly interesting because student loans essentially have no collateral. Lenders make loans to students… but it’s not like the students have to pony up their iPhones as security.

Read more …

You have to wonder what exactly is keeping the US economy afloat.

US Auto-Loan Quality To Deteriorate Further, Forcing Tighter Underwriting (MW)

Auto loan and lease credit performance will continue to deteriorate in 2017, led by the vulnerable subprime sector, Fitch Ratings said in a report released Wednesday. “Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at the credit-ratings agency. Banks are starting to lose market share to captive auto finance companies and credit unions as they begin to tighten underwriting standards in response to deteriorating asset quality, Fitch said. According to the Federal Reserve’s January 2017 senior loan officer survey, 11.6% of respondents (net of those who eased) reported tightening standards, compared with the five-year average of 6.1%.

“This trend is consistent with comments made by several banks on earnings conference calls over the past couple of quarters,” Fitch said in the report. Fitch considers continued tightening by auto lenders as a credit-positive but it’s also paying attention to market nuances. The tightening, to date, primarily relates to pricing and loan-to-value (how much is still owed on the car compared to its resale value), but average loan terms continue to extend into the 72- to 84-month category. “The tightening of underwriting standards is likely a response to expected deterioration in used vehicle prices and the weaker credit performance experienced in the subprime segment,” added Taiano. Used-car price declines have accelerated more recently, which will likely pressure recovery values on defaulted loans and lease residuals, the analysts said.

Read more …

Might as well call off the theater.

Oil Price Drops Below $50 For First Time Since OPEC Deal (Tel.)

The oil price has fallen back below the key $50 a barrel mark for the first time since November after surging US oil supplies dealt a blow to OPEC’s plan to erode the global oversupply of crude. The flagging oil price bounded above $50 a barrel late last year after a historic co-operation deal between OPEC and the world’s largest oil producers outside of the cartel to limit output for the first half of this year. The November deal was the first action taken by the group to limit supply for over eight years but since then the quicker than expected return of fracking rigs across the US has punctured the buoyant market sentiment of recent months. Brent crude prices peaked at $56 a barrel earlier this year and were still above $52 this week.

But by Wednesday the price fell to just above $50 a barrel and briefly broke below the important psychological level to $49.86 on Wednesday afternoon. Market analysts fear that a more sustained period below $50 could trigger a sell-off from hedge funds which would drive even greater losses in the market. The price plunge was sparked by the latest weekly US stockpile data which revealed a bigger than expected increase of 5 million barrels a day compared to a forecast rise of 1.8 million barrels. The flood of US shale emerged a day after Libya announced that would increase its output to take advantage of higher revenues from its oil exports. “The market is increasingly worried that the continued overhang of supply is not being brought down fast enough,” said Ole Hansen, a commodities analyst with SaxoBank.

Read more …

Beijing forced to save the shadows.

China Shadow Banks Hit by Record Premium for One-Week Cash (ZH)

During the so-called Chinese Banking Liquidity Crisis of 2013, the relative cost of funds for non-bank institutions spiked to 100bps. So, the fact that the ‘shadow banking’ liquidity premium has exploded to almost 250 points – by far a record – in the last few days should indicate just how stressed Chinese money markets are. While interbank borrowing rates have climbed across the board, the surge has been unusually steep for non-bank institutions, including securities companies and investment firms. They’re now paying what amounts to a record premium for short-term funds relative to large Chinese banks, according to data compiled by Bloomberg.

The premium is reflected in the gap between China’s seven-day repurchase rate fixing and the weighted average rate, which, by Bloomberg notes, widened to as much as 2.47 percentage points on Wednesday after some small lenders were said to miss payments in the interbank market. Non-bank borrowers tend to have a greater influence on the fixing, while large banks have more sway over the weighted average. “It’s more expensive and difficult for non-bank financial institutions to get funding in the market,” said Becky Liu at Standard Chartered. “Bigger lenders who have access to regulatory funding are not lending much of the money out.” Without access to deposits or central bank liquidity facilities, many of China’s non-bank institutions must rely on volatile money markets. As Bloomberg points out, The People’s Bank of China has been guiding those rates higher in recent months to encourage a reduction of leverage, while also stepping in at times to prevent a liquidity crunch.

Read more …

State owned zombies.

Zombie Companies are China’s Real Problem (BBG)

China needs to take on its state-owned “zombie companies,” which keep borrowing even though they aren’t earning enough to repay loans or interest, says Nicholas Lardy of the Peterson Institute for International Economics. “That’s where the real problem is,” Lardy said Thursday in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “It’s a component of the run-up in debt that they really have to focus on.” While flagging this concern, Lardy, a senior fellow at Peterson in Washington and author of “Markets Over Mao: The Rise of Private Business in China,” said anxiety over China’s debt growth is overstated. Household deposits will continue to underpin the banking and financial system, which means the situation with zombie firms is unlikely to reach a critical point.

Household savings are “very sticky, they’re not going anywhere, and the central bank can come in to the rescue if there are problems,” he said. Chinese corporate profits will probably continue to recover this year and after-tax earnings needed to service the debt load is improving, Lardy said. Another positive sign is a slowdown in the buildup of debt outstanding to non-financial companies. The combination of that slackening and companies’ increasing earning power “is improving the overall situation,” he said. When it comes to U.S. President Donald Trump’s negative rhetoric on China, the country’s leaders deserve “very high marks so far” for their cool reaction. “They’ve been waiting to see what Mr. Trump is actually going to do as opposed to what he’s talked about, so they haven’t overreacted,” he said. “They’ve made very careful preparations for the worst case if Trump does move in a very strong protectionist direction.”

Read more …

Zombies and junk.

China Debt Risks Go Global Amid Record Junk Sales Abroad (BBG)

China’s riskiest corporate borrowers are raising an unprecedented amount of debt overseas, leaving global investors to shoulder more credit risks after onshore defaults quadrupled in 2016. Junk-rated firms, most of which are property developers, have sold $6.1 billion of dollar bonds since Dec. 31, a record quarter, data compiled by Bloomberg show. In contrast, such borrowers have slashed fundraising at home as the central bank pushes up borrowing costs and regulators curb real estate financing. Onshore yuan note offerings by companies with local ratings of AA, considered junk in China, fell this quarter to the least since 2011 at 31.3 billion yuan ($4.54 billion). Global investors desperate for yield have lapped up offerings from China. Rates on dollar junk notes from the nation have dropped 81 basis points this year to 6.11%, near a record low, according to a Bank of America Merrill Lynch index.

Some investors have warned of froth. Goldman Sachs Group Inc. said last month that it sees little value in the country’s high-yield property bonds. Hedge fund Double Haven Capital (Hong Kong) has said it is betting against Chinese junk securities. “Today’s market valuations are tight and investors are focusing on yields without taking into account credit risks,” said Raja Mukherji at PIMCO. “That’s where I see a lot of risk, where investors are not differentiating on credit quality on a risk-adjusted basis.” Lower-rated issuers turning to dollar debt after scrapping financing at home include Shandong Yuhuang Chemical on China’s east coast. The chemical firm canceled a 500 million yuan local bond sale in January citing “insufficient demand.” It then issued $300 million of three-year bonds at 6.625% this week. Some developers have grown desperate for cash as regulators tighten housing curbs and restrict their domestic fundraising. That’s raising concern among international investors in China’s real estate sector who have been burned before.

Read more …

Priceless humor: “Congress has already raised the alarm.” After three decades, that is.

A Fake $3.6 Trillion Deal Is Easy to Sneak Past the SEC

A few hours after the New York market close on Feb. 1, an obscure Chicago artist by the name of Antonio Lee told the world he had become the world’s richest man. The 32-year-old painter said Google’s parent, Alphabet Inc., had bought his art company in exchange for a chunk of stock that made him wealthier than Bill Gates, Warren Buffett and Jeff Bezos – combined. Of course, none of it was true. Yet, on that day, Lee managed to issue his fabricated report in the most authoritative of places: The U.S. Securities and Exchange Commission’s Edgar database – the foundation of hundreds of billions of dollars in financial transactions each day. For more than three decades, the SEC has accepted online submissions of regulatory filings – basically, no questions asked.

As many as 800,000 forms are filed each year, or about 3,000 per weekday. But, in a little known vulnerability at the heart of American capitalism, the government doesn’t vet them, and rarely even takes down those known to be shams. “The SEC can’t stop them,” said Lawrence West, a former SEC associate enforcement director. “They can only punish the filer afterward and remove the filing from the system. So, caveat lector – let the reader beware.” Congress has already raised the alarm. For its part, the SEC, which declined to comment, has said those who make filings are responsible for their truthfulness and that only a handful have been reported as bogus. Submitting false information exposes the culprit to SEC civil-fraud charges, or even federal criminal prosecution.

On May 14, 2015, Nedko Nedev, a dual citizen of the United States and Bulgaria, filed an SEC form indicating he was making a tender offer – an outright purchase – for Avon, the cosmetics company. Avon’s shares jumped 20% before trading was halted, and the company denied the news. (A federal grand jury later indicted Nedev on market manipulation and other charges.) After the fraudulent Avon filing, U.S. Senator Chuck Grassley, the Iowa Republican and former chairman of the Finance Committee, told the SEC it must review its posting standards. “This pattern of fraudulent conduct is troubling, especially in light of the relative ease in which a fake posting can be made,” Grassley wrote in a letter to the agency. In response, Mary Jo White, who then chaired the SEC, said it wouldn’t be feasible to check information. She noted that there were on average 125 first-time filers daily in 2014, and the agency was studying whether its authentication process could be strengthened without delaying disclosure of key information to investors.

Read more …

Only a major reset will do.

Elite Economists: Often Wrong, Never In Doubt (720G)

Since the U.S. economic recovery from the 2008 financial crisis, institutional economists began each subsequent year outlining their well-paid view of how things will transpire over the course of the coming 12-months. Like a broken record, they have continually over-estimated expectations for growth, inflation, consumer spending and capital expenditures. Their optimistic biases were based on the eventual success of the Federal Reserve’s (Fed) plan to restart the economy by encouraging the assumption of more debt by consumers and corporations alike. But in 2017, something important changed. For the first time since the financial crisis, there will be a new administration in power directing public policy, and the new regime could not be more different from the one that just departed. This is important because of the ubiquitous influence of politics.

The anxiety and uncertainties of those first few years following the worst recession since the Great Depression gradually gave way to an uncomfortable stability. The anxieties of losing jobs and homes subsided but yielded to the frustration of always remaining a step or two behind prosperity. While job prospects slowly improved, wages did not. Business did not boom as is normally the case within a few quarters of a recovery, and the cost of education and health care stole what little ground most Americans thought they were making. Politics was at work in ways with which many were pleased, but many more were not. If that were not the case, then Donald Trump probably would not be the 45th President of the United States. Within hours of Donald Trump’s victory, U.S. markets began to anticipate, for the first time since the financial crisis, an escape hatch out of financial repression and regulatory oppression.

As shown below, an element of economic and financial optimism that had been missing since at least 2008 began to re-emerge. What the Fed struggled to manufacture in eight years of extraordinary monetary policy actions, the election of Donald Trump accomplished quite literally overnight. Expectations for a dramatic change in public policy under a new administration radically improved sentiment. Whether or not these changes are durable will depend upon the economy’s ability to match expectations.

Read more …

I find the Trump bashing parade very tiresome, but Matt’s funny.

Trump the Destroyer (Matt Taibbi)

There is no other story in the world, no other show to watch. The first and most notable consequence of Trump’s administration is that his ability to generate celebrity has massively increased, his persona now turbocharged by the vast powers of the presidency. Trump has always been a reality star without peer, but now the most powerful man on Earth is prisoner to his talents as an attention-generation machine. Worse, he is leader of a society incapable of discouraging him. The numbers bear out that we are living through a severely amplified déjà vu of last year’s media-Trump codependent lunacies. TV-news viewership traditionally plummets after a presidential election, but under Trump, it’s soaring. Ratings since November for the major cable news networks are up an astonishing 50% in some cases, with CNN expecting to improve on its record 2016 to make a billion dollars – that’s billion with a “b” – in profits this year.

Even the long-suffering newspaper business is crawling off its deathbed, with The New York Times adding 132,000 subscribers in the first 18 days after the election. If Trump really hates the press, being the first person in decades to reverse the industry’s seemingly inexorable financial decline sure is a funny way of showing it. On the campaign trail, ballooning celebrity equaled victory. But as the country is finding out, fame and governance have nothing to do with one another. Trump! is bigger than ever. But the Trump presidency is fast withering on the vine in a bizarre, Dorian Gray-style inverse correlation. Which would be a problem for Trump, if he cared. But does he? During the election, Trump exploded every idea we ever had about how politics is supposed to work. The easiest marks in his con-artist conquest of the system were the people who kept trying to measure him according to conventional standards of candidate behavior.

You remember the Beltway priests who said no one could ever win the White House by insulting women, the disabled, veterans, Hispanics, “the blacks,” by using a Charlie Chan voice to talk about Asians, etc. Now he’s in office and we’re again facing the trap of conventional assumptions. Surely Trump wants to rule? It couldn’t be that the presidency is just a puppy Trump never intended to care for, could it? Toward the end of his CPAC speech, following a fusillade of anti-media tirades that will dominate the headlines for days, Trump, in an offhand voice, casually mentions what a chore the presidency can be. “I still don’t have my Cabinet approved,” he sighs. In truth, Trump does have much of his team approved. In the early days of his administration, while his Democratic opposition was still reeling from November’s defeat, Trump managed to stuff the top of his Cabinet with a jaw-dropping collection of perverts, tyrants and imbeciles, the likes of which Washington has never seen.

En route to taking this crucial first beachhead in his invasion of the capital, Trump did what he always does: stoked chaos, created hurricanes of misdirection, ignored rules and dared the system of checks and balances to stop him. By conventional standards, the system held up fairly well. But this is not a conventional president. He was a new kind of candidate and now is a new kind of leader: one who stumbles like a drunk up Capitol Hill, but manages even in defeat to continually pull the country in his direction, transforming not our laws but our consciousness, one shriveling brain cell at a time.

Read more …

Tourism is a very big source of income for Turkey. Erdogan’s killing it off with a vengeance.

Erdogan Warns Europeans ‘Will Not Walk Safely’ If Attitude Persists (R.)

President Tayyip Erdogan said on Wednesday that Europeans would not be able to walk safely on the streets if they kept up their current attitude toward Turkey, his latest salvo in a row over campaigning by Turkish politicians in Europe. Turkey has been embroiled in a dispute with Germany and the Netherlands over campaign appearances by Turkish officials seeking to drum up support for an April 16 referendum that could boost Erdogan’s powers. Ankara has accused its European allies of using “Nazi methods” by banning Turkish ministers from addressing rallies in Europe over security concerns. The comments have led to a sharp deterioration in ties with the European Union, which Turkey still aspires to join.

“Turkey is not a country you can pull and push around, not a country whose citizens you can drag on the ground,” Erdogan said at an event for Turkish journalists in Ankara, in comments broadcast live on national television. “If Europe continues this way, no European in any part of the world can walk safely on the streets. Europe will be damaged by this. We, as Turkey, call on Europe to respect human rights and democracy,” he said. Germany’s Frank-Walter Steinmeier used his first speech as president on Wednesday to warn Erdogan that he risked destroying everything his country had achieved in recent years, and that he risked damaging diplomatic ties. “The way we look (at Turkey) is characterized by worry, that everything that has been built up over years and decades is collapsing,” Steinmeier said in his inaugural speech in the largely ceremonial role. He called for an end to the “unspeakable Nazi comparisons.”

Read more …

Can’t let a little crisis get in the way of your champagne and caviar.

Lavish EU Rome Treaty Summit Will Skirt Issues in Stumbling Italy (BBG)

As leaders celebrate the European Union’s 60th birthday in Rome this weekend, the host nation may be hoping that a pomp-filled ceremony distracts from any probing questions. Overshadowed by the sting of Brexit and elections in the Netherlands, France and Germany, Italy’s lingering problems have left it as the weak link among Europe’s powerhouse economies. It’s stumbling through a stop-start slow recovery from a record-long recession, unemployment is twice that of Germany’s, and voters, weary of EU institutions, are flirting with the same kind of populism grabbing attention elsewhere. The gathering on Saturday on the city’s Capitol hill is to celebrate the Treaty of Rome, the bedrock agreement signed on March 25, 1957 for what is now the EU.

From its beginnings as the European Economic Community – with Italy among the six founding members – it has since grown to a union of 28 nations stretching 4,000 kilometers from Ireland in the northwest to Cyprus in the southeast. The U.K. is heading toward a lengthy exit from the EU known as Brexit, raising questions among the remaining 27 about the bloc’s long-term future. “Italy was until very recently at the forefront of the European integration process,” Luigi Zingales, professor of finance at University of Chicago Booth School of Business, said in an interview. “Today it’s undoubtedly Europe’s weakest link.” The economy grew just 0.9% last year, below the euro area’s 1.7%, and unemployment is at 11.9%. A recent EU poll put Italy as the monetary union’s second-most euro-skeptic state after Cyprus with only 41% saying the single currency is “a good thing.” The average in the 19-member euro area is 56%.

That widespread disenchantment may be felt at elections due in about one year. A poll published on Tuesday by Corriere della Sera put support for the Five Star Movement, which calls for a referendum to ditch the euro, at a record 32.3%, well ahead of the ruling Democratic Party. Summit host Prime Minister Paolo Gentiloni has only been in power since December, when Matteo Renzi resigned after losing a constitutional reform referendum. For Zingales, Italy has problems that European policy makers “would rather not talk about now as they don’t want to scare people.” That’s because across the bloc, politicians are still fighting voter resentment over the loss of wealth since the financial crisis, bitterness about bailouts and anger over a perceived increase in inequality. “Sixty years after the signing of the Treaties of Rome, the risk of political paralysis in Europe has never been greater,” Bank of Italy Governor Ignazio Visco told a conference in Rome this month.

Read more …

The EU can celebrate only because it’s murdering one of its members. Greece needs stimulus but gets the opposite.

Greek Consumption Slumps Further In 2017 (K.)

The year has started with some alarm bells regarding the course of consumer spending, generating concern not only about the impact on the supermarket sector and industry, but also on the economy in general. In the first week of March the year-on-year drop in supermarket turnover amounted to 15%, while in January the decline had come to 10%. Shrinking consumption is a sure sign that the economic contraction will be extended into another year, given its important role in the economy. The new indirect taxes on a number of commodities, the increased social security contributions, the persistently high unemployment and the ongoing uncertainty over the bailout review talks have hurt consumer confidence and eroded disposable incomes.

In this context, it will be exceptionally difficult to achieve the fiscal targets, especially if the uncertainty goes on or is ended with the imposition of additional austerity measures that would only see incomes shrink further. According to projections by IRI market researchers, supermarket sales in 2017 are expected to decline 3.6% from last year, with the worst-case scenario pointing to a 4.4% drop. Supermarket sales turnover dropped at the steepest rate seen in the crisis years in 2016, down 6.5%, after falling 2.1% in 2015, 1.4% in 2014, 3.5% in 2013 and 3.4% in 2012.

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“For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever.”

Nine Years Later, Greece Is Still In A Debt Crisis.. (Black)

Greece has had nine different governments since 2009. At least thirteen austerity measures. Multiple bailouts. Severe capital controls. And a full-out debt restructuring in which creditors accepted a 50% loss. Yet despite all these measures GREECE IS STILL IN A DEBT CRISIS. Right now, in fact, Greece is careening towards another major chapter in its never-ending debt drama. Just like the United States, the Greek government is set to run out of money (yet again) in a few months and is in need of a fresh bailout from the IMF and EU. (The EU is code for “Germany”…) Without another bailout, Greece will go bust in July– this is basic arithmetic, not some wild theory. And this matters. If Greece defaults, everyone dumb enough to have loaned them money will take a BIG hit. This includes a multitude of banks across Germany, Austria, France, and the rest of Europe.

Many of those banks already have extremely low levels of capital and simply cannot afford a major loss. (Last year, for example, the IMF specifically singled out Germany’s Deutsche Bank as being the top contributor to systemic risk in the global financial system.) So a Greek default poses as major risk to a number of those banks. More importantly, due to the interconnectedness of the financial system, a Greek default poses a major risk to anyone with exposure to those banks. Think about it like this: if Greece defaults and Bank A goes down, then Bank A will no longer be able to meet its obligations to Bank B. Bank B will suffer a loss as well. A single event can set off a chain reaction, what’s called ‘contagion’ in finance. And it’s possible that Greece could be that event. This is what European officials have been so desperate to prevent for the last nine years, and why they’ve always come to the rescue with a bailout.

It has nothing to do with community or generosity. They’re hopelessly trying to prevent another 2008-style meltdown of the financial system. But their measures have limits. How much longer do Greek citizens accept being vassals of Germany, suffering through debilitating capital controls and austerity measures? How much longer do German taxpayers continue forking over their hard-earned wages to bail out Greek retirees? After all, they’ve spent nine years trying to ‘fix’ Greece, and the situation has only become worse. For a continent that has been at war with itself for 10 centuries and only managed to play nice for the last 30 or so years, it’s foolish to expect these bailouts to last forever. And whether it’s this July or some date in the future, Greece could end up being the catalyst which sets off a chain reaction on both sides of the Atlantic.

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It’s time for lawyers to step in.

In Greece, Europe’s New Rules Strip Refugees Of Right To Seek Protection (K.)

EU leaders are celebrating a year since they carved out the agreement with Turkey that stemmed the flood of refugees seeking to escape war and strife on Europe’s doorstep. But the importance of the agreement goes far beyond the fact that it has contributed to deterring refugees from coming to Greece. At the Norwegian Refugee Council, we fear that the system Europe is putting in place in Greece is slowly stripping people of their right to seek international protection. Greece took the positive step to enshrine in law some key checks and balances to protect the vulnerable – a victim of torture, a disabled person, an unaccompanied child – so they could have their asylum case heard on the Greek mainland rather than remaining on the islands.

But a European Commission action plan is putting Greece under pressure to change safeguards enshrined in Greek law. NRC, along with other human rights and humanitarian organizations, wrote an open letter to the Greek Parliament this month urging lawmakers to keep that protection for those most in need. Importantly, this is just another quiet example of how what is happening in Greece is setting precedents that may irrevocably change the 1951 Refugee Convention. Europe is testing things out in Greece. [..] It was Europe and its postwar crisis that led to the 1951 convention that protects those displaced by war. Now that convention risks expiring on the doorstep of the same continent that gave birth to it – Europe is in danger of becoming, as NRC’s Secretary-General Jan Egeland has said, the convention’s “burial agent.”

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Mar 222017
 
 March 22, 2017  Posted by at 9:00 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Ray K. Metzker Philadelphia 1963

 


Vancouver Won’t Have A Middle Class Left In The Future (CBC)
Nomi Prins: Financial System Worse Now Than 2007 (EIR)
Kashkari: “A Market Drop Is Unlikely To Trigger A Crisis” (ZH)
Dijsselbloem Says Southern Europe Blew Cash On ‘Drinks And Women’ (Tel.)
Dijsselbloem Not Fit To Be Eurogroup President – Socialist MEP Leader (Pol.)
Dijsselbloem ‘Mail Bomb Target’ (AFP)
Greece Won’t Last In Eurozone In Long Run, Says Bavarian FinMin (R.)
IMF Wants Greek Opposition To Also Commit To Fiscal Targets, Measures (Naft.)
As Bailout Talks Drag, Greece Says May Not Sign EU Rome Treaty (K.)
Fresh Increase In Registered Greek Unemployed (K.)
Italy’s Populist ‘Mad Man’ Extremely Worrying For Eurozone Stability (CNBC)
Germany Rejects Arms Exports To Turkey (Kom)
Turkey Says EU Refugee Deal Near Collapse (BBG)
The Mechanical Turn in Economics and Its Consequences (Inet)
The Kagans Are Back; Wars to Follow (Robert Parry)
Ganges and Yamuna Rivers Granted Same Legal Rights As Human Beings (G.)
More Than 100 Chinese Cities Now Above 1 Million People (G.)
Access To Nature Reduces Depression And Obesity (G.)
The Man Who Planted A Tree And Grew A Whole Family Of Forests (G.)

 

 

How to Kill a City part 831. I should write the article I’ve long had in my head. But this is the trendline. Which will break, but then you have untold millions of ‘homeowners’ with properties worth much less than their mortgages -and a low interest rate is but a detail-, and a banking system threatening to topple. Again.

Vancouver Won’t Have A Middle Class Left In The Future (CBC)

A former city planner warns if Vancouver doesn’t start protecting dedicated housing for middle-income residents, there won’t be a middle class left in the city in the future. “The estimates are by 2030, if you’re a Millennial household with about $72,000 to $75,000 in your income, you won’t be able to be in this housing market at all. In fact, it would take all of your income to buy a very modest place,” explained Larry Beasley, who is currently a professor with the University of British Columbia’s School of Community and Regional Planning. Beasley says the solution to the problem is to create secure middle income housing. “We have a low-income sector that’s all owned by government and it’s basically rental and we have a market sector for all the rest,” he said.

“We need to protect a middle income sector of housing … It would be protected from being in the open market where it could sell at any price and rent at any price … It would be delivered, either rented or sold, time and time again to middle income people.” Although some middle income people get help from their parents, buy further away or buy smaller places, he said, this cushion won’t last forever and eventually middle income residents will be completely shut out of the city’s real estate market. “It doesn’t matter how much you save and it doesn’t matter how much you borrow from government, you still won’t be able to get into the market. People will face some pretty stark choices.” [..] “If you rule out the middle class, you rule out the potential of creativity. You rule out the people who are doing the jobs everyday and you rule out the people who are driving the day-to-day economy.”

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Private debt is much higher than 10 years ago, in far too many places, because of the housing bubbles.

Nomi Prins: Financial System Worse Now Than 2007 (EIR)

Financial analyst, Author and fmr. Goldman Sachs Managing Director, Nomi Prins sits down with EIR’s Paul Gallagher to discuss just how rotten the current financial system is, making a sobering case that we are far worse off today than we were before the 2007-08 crisis. Prins refers to her political and financial road map for 2017, (nomiprins.com) and discusses the important, combined role China and Japan can play in bringing the US back from the brink and into the new paradigm of investment in the real economy.

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Contradictions, Watson?

Kashkari: “A Market Drop Is Unlikely To Trigger A Crisis” (ZH)

Former Goldmanite and current Minneapolis Fed president, Neel Kashkari, conducted another #AskNeel session on Twitter where the dovish FOMC voter (he was the only one to dissent in last week’s rate hike decision) received numerous question. Among them was the following one from Zero Hedge:

His response:

At this point we would like to “timestamp” Kashkari’s claim that a “stock market drop is unlikely to trigger a crisis” It was not clear just how the Fed president separates a market crash from “financial instability”, but Kashkari’s response that the Fed is not concerned about the level of the S&P500, and instead is more focused on comprehensive market stability, is not being taken well by the market which has continued to sell off as Kashkari responds to further questions, among which the following exchanges:

In response to a question about rising inflation, Kashkari said he would tolerate 2.3% inflation for as long as U.S. has had below-target inflation, “if we really believe 2% is a target. That is what a target means” and adds that “Not sure if my colleagues wld really buy into that however.” We wonder how that question would look like if instead 2.3% inflation one used 3.6%, which is the current true level of inflation according to PriceStats. At least the Fed has been polite enough to advise America it will tolerate a material “overshoot” in its inflation target.

When asked about the two latest rate increases, he said that “data didn’t support a hike. Data basically hasn’t changed. Moving sideways rather than toward dual mandate.” He also said that he would like to see plan on balance sheet normalization soon, adding: “I would prefer to see it before we increase the federal funds rate again” and added that the balance sheet “needs to grow as economy and demand for dollars grows. We will shrink but not to 2006 levels.”

In short, Kashkarhi – who allegedly does not care about the level of the  S&P500 – is willing to risk a market crash and a Fed balance sheet-driven bond tantrum. Or, to paraphrase Richard Breslow, “The Fed Is Making This Up As They Go Along“”

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What a douche.

Dijsselbloem Says Southern Europe Blew Cash On ‘Drinks And Women’ (Tel.)

The head of the eurozone’s finance ministers has been criticised for stating that southern European countries blew their money on “drinks and women”. Jeroen Dijsselbloem, the Dutch finance minister who leads the group, made the comments in an interview on Monday with German newspaper Frankfurter Allgemeine Zeitung (FAZ). “During the crisis of the euro, the countries of the north have shown solidarity with countries affected by the crisis,” he said.“As a Social Democrat, I attribute exceptional importance to solidarity. “But you also have obligations. “You cannot spend all the money on drinks and women and then ask for help.” Inside the European parliament, MEPs turned on Mr Dijsselbloem on Tuesday, calling his remarks “insulting” and “vulgar”.

Gabriel Mato, a Spanish MEP, said the remarks were “absolutely unacceptable” and an “insult” to southern member states – claiming he had lost his neutrality as finance chief. Ernest Urtasun, another Spanish MEP, said: “Maybe this is funny for you, but I don’t think it is. I would like to know if this is your first statement as a candidate to renew your post as president of the eurogroup.” Mr Dijsselbloem’s term ends next year, and he is believed to be considering running for re-election. He attempted to brush off the criticism, telling the MEPs: “Don’t be offended.” He continued: “It is not about one country, but about all our countries.” He then attempted to dig himself out of the hole by saying all countries had failed to uphold the financial rules set by the EU. “The Netherlands also failed a number of years ago to comply with what was agreed,” he said. “I don’t see a conflict between regions of the eurogroup.”


If the money was spent on drinks and women, it wasn’t the Greeks

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He never was, because “..it was “not the first time” that Dijsselbloem has expressed opinions “which are openly in contradiction with the line of the European progressive family.”

MEP=Member of European Parliament.

Dijsselbloem Not Fit To Be Eurogroup President – Socialist MEP Leader (Pol.)

Jeroen Dijsselbloem is “not fit to be president of the Eurogroup,” Socialist MEP leader Gianni Pittella said Tuesday, accusing the Dutch finance minister of making “discriminatory comments” about southern EU countries in German media. Without naming names, Dijsselbloem told the Frankfurter Allgemeine on Monday that “countries in crisis” should stick to the deficit targets set by the European Commission and show the same solidarity as northern eurozone states during the financial crisis. “As a social democrat, for me solidarity is extremely important,” Djisselbloem said. “But those who call for it (solidarity) also have duties. I cannot spend all my money on liquor and women and plead for your support afterwards. This principle applies on the personal, local, national and also European level.” On Tuesday, Pittella described these comments as “shameful and shocking.”

“Dijsselbloem went far beyond by using discriminatory arguments against the countries of southern Europe,” he said. “There is no excuse or reason for using such language, especially from someone who is supposed to be a progressive.” Dijsselbloem has been Eurogroup president since January 2013 and was re-elected for a second term in July 2015. However, his Dutch Labor Party (PvdA) did badly in last week’s election and he will almost certainly not stay on as finance minister. Pittella said it was “not the first time” that Dijsselbloem has expressed opinions “which are openly in contradiction with the line of the European progressive family.” “I truly wonder whether a person who has these beliefs can still be considered fit to be president of the Eurogroup,” he added. Portuguese Foreign minister Augusto Santos Silva joined in the criticism, saying Dijsselbloem should not be able “to remain at the head of the Eurogroup and the Portuguese government shares this opinion.”

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Only surprise: What took them so long?

Dijsselbloem ‘Mail Bomb Target’ (AFP)

Eurogroup chief Jeroen Dijsselbloem was targeted by a mail bomb which had been “intercepted,” his spokesman said Tuesday, a day after Greek police found eight “suspect” packages addressed to European officials. “I can confirm that Minister Dijsselbloem was the target of a mail bomb,” Coen Gelinck told AFP. “It was however intercepted,” said Gelinck, declining to give any further information or to confirm whether it was one of the packages found in Athens. Police in the Greek capital found eight packages Monday at the postal service’s main sorting centre north of Athens. The news came after a domestic militant group last week sent mail bombs to the IMF and the German finance ministry.

Monday’s packages were intended for “officials at European countries,” Greek police said. A police source later said the packages were intended for officials at the Eurogroup and other global institutions. Last week, a mail bomb sent to the IMF’s offices in Paris exploded and injured a secretary. A second bomb sent to the German finance ministry was intercepted by security. The investigation so far suggests that both the IMF and the German finance ministry bombs were sent by a far-left group called the Conspiracy of Fire Nuclei, which police thought they had mostly dismantled in 2011.

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Why stay one day longer, then?

Greece Won’t Last In Eurozone In Long Run, Says Bavarian FinMin (R.)

Greece will not last in the eurozone in the long run and officials working on a review of its bailout package should prepare for such a possibility, a senior member of the Bavarian sister party of Chancellor Angela Merkel’s conservatives said. Greece has lost a quarter of its national output since it first sought financial aid in 2010. Its current bailout package is the third in seven years. “Greece is unlikely to survive in the eurozone over the long term,” Bavarian Finance Minister Markus Soeder told the Handelsblatt newspaper in an interview published on Tuesday. Soeder urged officials working on the bailout review to develop a “Plan B” or alternative plan. “We’ll see if Greece meets the conditions. I’m very skeptical,” Soeder said, adding that the participation of the International Monetary Fund was essential.

Soeder’s Christian Social Union is the Bavarian sister party of Merkel’s Christian Democrats and has long accused Greece of failing to implement reforms promised under its bailout packages. Germany faces national elections in September and the anti-euro Alternative for Germany party (AfD), which has been particularly critical of eurozone bailouts, is expected to perform well. Greek Finance Minister Euclid Tsakalotos said on Monday he planned to stay in Brussels for further consultations with his country’s creditors towards finalizing the latest bailout review. He said he hoped for a preliminary deal by April 7. Greece and its international lenders are still at odds over pension, labor and energy market reforms that are needed before new loans can be disbursed to Athens. The IMF has yet to decide whether to participate in Greece’s €86 billion bailout, expressing deep concerns over debt sustainability in the crisis-hit nation.

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And their grandchildren too, while we’re at it?!

IMF Wants Greek Opposition To Also Commit To Fiscal Targets, Measures (Naft.)

The IMF wants Greece’s political opposition to also approve any new agreement for fiscal measures and targets after 2019, French Finance Minister Michel Sapin maintained on Tuesday, an abrupt revelation that would further complicate ongoing negotiations between Athens and its institutional creditors if proved true. The French minister also expressed his surprise over the Fund’s latest demand vis-a-vis the Greek program. “Can you image if they asked us, the French, to ask for the opposition’s commitment,” he said, adding that such a demand is unrealistic. Moreover, he referred to the IMF’s “obsessions” with labor market liberalization and social security reform.

With fiscal targets dictating an annual primary budget surplus of 3.5% (as a percentage of GDP) in the “medium term” after 2019, the IMF has pressed for – and European creditors have accepted – that austerity measures are enacted now in order to ensure that targets are achieved after the third bailout ends in mid 2018. Sapin made the statement in Brussels, a day after yet another Eurogroup meeting ended without a staff-level agreement between creditors and the increasingly embattled leftist-rightist government in Athens. Finally, he said all parties should assume their responsibilities in concluding the now utterly delayed second review of the Greek program, which he said will have repercussions on others, and not just the Greek economy.

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Let’s see you do it, Alexis.

As Bailout Talks Drag, Greece Says May Not Sign EU Rome Treaty (K.)

With Greece’s international creditors indicating that insufficient progress has been achieved for bailout monitors to return to Athens, government sources have threatened to block the Rome Declaration, Kathimerini understands, connecting it to the negotiations on the second review. According to sources, the Greek official participating in preparatory talks ahead of the drafting of a common statement that EU leaders are expected to sign at a summit in Rome on Saturday, regarding the bloc’s common values and principles, told his interlocutors that Greece cannot agree to such a text while being pressed to implement unrealistic demands of the IMF.

Sources said that Greek officials aim to ensure that the joint declaration includes a paragraph referring to European regulations protecting citizens’ labor rights. It is the issue of labor rights — and the IMF’s demands for further liberalization of the sector — that has become the major sticking point in talks between Greece and its lenders. On Monday, finance ministers discussing Greek bailout negotiations deemed that inadequate progress had been achieved for foreign auditors to return to Athens. Finance Minister Euclid Tsakalotos commented that he and other Greek ministers would remain in Brussels for further negotiations in a bid to establish enough common ground for bailout monitors to return to the Greek capital and resume talks.

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Inevitable. All the recovery claims are bogus. The Greek economy CANNOT recover under present conditions.

Fresh Increase In Registered Greek Unemployed (K.)

The number of people registered as unemployed at Greece’s Manpower Organization (OAED) rose by about 6,000 in February to almost 1.1 million at the end of the month, a dramatic rate which is expected to continue until at least the end of 2017. This trend corresponds with the rise seen in the quarterly jobless rate late last year. The sum of OAED-registered unemployed who are seeking work amounted to 936,110 people, with more than half of them (503,431 people or 53.78%) having been registered for at least 12 months. There is a significant difference between men and women, as they break down into 576,491 women (61.58%) and 359,619 men (38.42%). Another 159,756 people were registered who are not seeking work, of whom 32,897 or 20.59% had been on the register for at least a year. The number of unemployment benefit recipients came to 178,105 people last month, of whom 73,205 (41.1%) were seasonal workers in the tourism industry.

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Shoddy journalism. The Party is named M5S, not 5SM. Common knowledge. (Corrected)

And you can’t claim that “Europe should be strong enough to manage a “mad man” like Grillo becoming Italy’s Prime Minister”, because Beppe is not a candidate -for any office-, and won’t be.

Italy’s Populist ‘Mad Man’ Extremely Worrying For Eurozone Stability (CNBC)

Italy’s anti-establishment and anti-euro party Five Star Movement (M5S) represent the greatest threat to euro area stability, analysts told CNBC on Tuesday, as the populist party surged ahead of its political rivals in the latest opinion poll, putting it on course to be the biggest party if elections were called. M5S leader Beppe Grillo has enjoyed a recent, and remarkable, uptick in support, buoyed in part by the divisions in the ruling Democratic Party (PD) as former Prime Minister Matteo Renzi attempts to regain support. Grillo, who has campaigned for Italy to hold a referendum on the single currency if elected, has overseen M5S’s support grow to 32.3%, according to an Ipsos poll published in daily newspaper Correa della Sera on Tuesday.

“If Five Star Movement could secure 30 or 40% of the vote then of course that would be extremely worrying for the euro area’s stability. Whether they can gain an absolute majority… we’ll have to wait and see,” Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics told CNBC via telephone. Italy is due to hold its next national election by early 2018 and, although Europe’s heavy political calendar has pushed the thought of Italy to the back of most investors’ minds, Deutsche Bank analysts argued it is Rome that poses the greatest threat to the euro area’s stability. The German lender suggested its base case scenario is for Renzi’s PD party, currently second in the polls, to fracture as a result of internal feuds. If this were to happen, it would then leave M5S in the driving seat ahead of the country’s general election.

[..] At the moment, parties in Italy are still looking to draw up a new electoral law, which most observers expect to result in a form of proportional representation that could reward a stable majority government to any party that can secure over 40% of the vote. M5S are significantly below the 40% threshold and have ruled out any desire to form a coalition government. However, Vistesen and Stringa both suggested with some confidence that Italy could expect weak economic growth throughout 2017 and therefore it would be conceivable for Grillo’s M5S to enjoy even greater support in the run up to a vote. Both France and Germany are due to elect new premiers before Italy and Vistesen concluded that, so long as the political favorites are able to win in each country, then Europe should be strong enough to manage a “mad man” like Grillo becoming Italy’s Prime Minister.

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The US will fill in. Or Britain, France.

Germany Rejects Arms Exports To Turkey (Kom)

Germany has rejected more requests for arms exports to Turkey during the past 5 months than in five years between 2010 and 2015, German newspaper Sueddeutsche Zeitung reported on Tuesday. The sharp increase in rejections, mainly handguns, ammunition and parts needed in weapons production, is due to “the risk of a deployment in the context of internal repression or the Kurdish conflict,” according to a written response by State Secretary Matthias Machnig to a question posed by lawmaker Jan van Aken. “Respect for human rights is a matter of particular importance for arms export decisions,” the answer from Machnig of the Federal Ministry for Economic Affairs and Energy also outlined.

“This is a first step,” van Aken told Sueddeutsche Zeitung, “And the next must be that Turkey does not get any weapons from Germany,” the Left Party (Die Linke) law maker said, adding that the Turkish government is waging a war both within its own borders and in Syria while fast becoming a dictatorship. Relations between Germany and Turkey are strained. Turkey’s plans to campaign in Germany ahead of the referendum were refused on several occasions and Turkish politicians, including President Recep Tayyip Erdogan, accused Germany of Nazi measures.

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EU membership is now linked to the death penalty?!

Turkey Says EU Refugee Deal Near Collapse (BBG)

Turkey’s agreement with the European Union to help stem the largest flow of refugees since World War II is inching closer to collapse, according to Turkey’s minister in charge of EU integration. By hosting about 3 million refugees – the most of any nation – and halting their migration to Europe, Turkey has saved the EU from a “racist” backlash that threatens the bloc’s democratic character, Omer Celik said in an interview on Tuesday in Ankara. Describing the deal as one-sided, he said Turkey is under no obligation to continue implementing it, adding that his country’s commitment to seeking EU membership wasn’t unconditional. “We won’t abandon these people to their deaths, but an agreement has two sides and if one side doesn’t abide by its obligations, neither will the other,” Celik said. “If the refugee agreement collapses, what we foresee is clear: we won’t cooperate with any mechanisms acting on behalf of the EU.”

The prospects of Turkey joining the union are dissipating as politicians lash out ahead of a series of votes that could define relations for decades. In Europe, populists are campaigning on anti-Muslim and anti-immigration sentiment, while in Turkey, President Recep Tayyip Erdogan has been appealing to nationalists ahead of an April referendum on endowing his office with full executive authority. European officials have voiced their disapproval of the plebiscite, saying it would undermine democracy in the NATO member. [..] While support in Turkey for EU membership remains high, belief that it will happen has collapsed, Celik said. Ultimately, the issue could be put to the public as part of a referendum on reintroducing the death penalty, he said. “This issue depends on whether relations with the EU are maintained or not.” he said. “It is up to the Turkish people whether to keep the EU process or halt it.”

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I’ve had this sitting in a tab for a while. It’s good that people are now picking it up, but it always seems weird that these things need to be explained this way. Economics truly is a blind field. Nature? Nature of man? Nah..

The Mechanical Turn in Economics and Its Consequences (Inet)

With Adam Smith, and hints before in Ricardo and others, economics took the path of treating the economy as a natural object that should not be interfered with by the state. This fit the Newtonian ethos of the age: science was great, science was mathematics; science was true, right and good. But along the way the discussion in, for example, Montaigne and Machiavelli — about the powers of imagination, myth, emotions, sentiment, human relations and community — was abandoned by the economists. (Adam Smith had written his Theory of Moral Sentiments 20 years earlier and sort of left it behind, though the Wealth of Nations is still concerned with human well-being.) Gibbon’s Decline and Fall of the Roman Empire was published in 1776, the same year as Smith’s Wealth, but hardly read today by most economists.

In philosophy and the arts (romanticism among others) there was great engagement in these issues economics was trying to avoid. But that philosophy and art criticism have not been widely read for many years. The effect of ignoring the human side of lives was to undermine the social perspective of the “political,” by merging it with the individually focused “interest.” So, instead of exploring the inner structure of interest (or later utility or preference), or community feeling and the impact of culture, these were assumed to be irrelevant to the mechanics of the market. Politics, having to do with interest groups and power arrangements, is more vague and harder to model than economic activity. Those who wanted economics to be a science were motivated by the perception that “being scientific” was appreciated by the society of the time, and was the path to rock-solid truth.

But the move towards economics as a science also happened to align with a view of the landed and the wealthy that the economy was working for them, so don’t touch it. We get the equation, embracing science = conservative. This is still with us because of the implication that the market is made by god or nature rather than being socially constructed. Since economics is the attempt at a description of the economy, it was more or less locked in to the naturalist approach, which ignores things like class and ownership and treated capital as part of economic flow rather than as a possession that was useable for social and political power. Even now, economics still continues as if it were part of the age of Descartes and avoids most social, historical and philosophical thought about the nature of man and society. Names like Shaftesbury and Puffendorf, very much read in their time, are far less known now than Hobbes, Descartes, Ricardo, Mill and Keynes.

Karl Polanyi is much less well known than Hayek. We do not learn of the social history such as the complex interplay in Viennese society among those who were classmates and colleagues such as Hayek, Gombrich, Popper and Drucker. The impact of Viennese culture is not known to many economists. The result is an economics that supports an economy that is out of control because the feedback loops through society and its impact of the quality of life – and resentment – are not recognized in a dehumanized economics, and so can’t have a feedback correcting effect. The solution, however, is not to look for simplicity, but to embrace a kind of complexity that honors nature, humans, politics, and the way they are dealt with in philosophy, arts, investigative reporting, anthropology and history. Because the way forward cannot be a simple projection of the past. We are in more danger than that.

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Parry is an authorative voice.

The Kagans Are Back; Wars to Follow (Robert Parry)

Back pontificating on prominent op-ed pages, the Family Kagan now is pushing for an expanded U.S. military invasion of Syria and baiting Republicans for not joining more enthusiastically in the anti-Russian witch hunt over Moscow’s alleged help in electing Donald Trump. In a Washington Post op-ed on March 7, Robert Kagan, a co-founder of the Project for the New American Century and a key architect of the Iraq War, jabbed at Republicans for serving as “Russia’s accomplices after the fact” by not investigating more aggressively. Then, Frederick Kagan, director of the Critical Threats Project at the neocon American Enterprise Institute, and his wife, Kimberly Kagan, president of her own think tank, Institute for the Study of War, touted the idea of a bigger U.S. invasion of Syria in a Wall Street Journal op-ed on March 15.

Yet, as much standing as the Kagans retain in Official Washington’s world of think tanks and op-ed placements, they remain mostly outside the new Trump-era power centers looking in, although they seem to have detected a door being forced open. Still, a year ago, their prospects looked much brighter. They could pick from a large field of neocon-oriented Republican presidential contenders or – like Robert Kagan – they could support the establishment Democratic candidate, Hillary Clinton, whose “liberal interventionism” matched closely with neoconservatism, differing only slightly in the rationalizations used for justifying wars and more wars. There was also hope that a President Hillary Clinton would recognize how sympatico the liberal hawks and the neocons were by promoting Robert Kagan’s neocon wife, Victoria Nuland, from Assistant Secretary of State for European Affairs to Secretary of State.

Then, there would have been a powerful momentum for both increasing the U.S. military intervention in Syria and escalating the New Cold War with Russia, putting “regime change” back on the agenda for those two countries. So, early last year, the possibilities seemed endless for the Family Kagan to flex their muscles and make lots of money. As I noted two years ago in an article entitled “A Family Business of Perpetual War”: “Neoconservative pundit Robert Kagan and his wife, Assistant Secretary of State Victoria Nuland, run a remarkable family business: she has sparked a hot war in Ukraine and helped launch Cold War II with Russia and he steps in to demand that Congress jack up military spending so America can meet these new security threats.

[..] But things didn’t quite turn out as the Kagans had drawn them up. The neocon Republicans stumbled through the GOP primaries losing out to Donald Trump and then – after Hillary Clinton muscled aside Sen. Bernie Sanders to claim the Democratic nomination – she fumbled away the general election to Trump. After his surprising victory, Trump – for all his many shortcomings – recognized that the neocons were not his friends and mostly left them out in the cold. Nuland not only lost her politically appointed job as Assistant Secretary but resigned from the Foreign Service, too. With Trump in the White House, Official Washington’s neocon-dominated foreign policy establishment was down but far from out. The neocons were tossed a lifeline by Democrats and liberals who detested Trump so much that they were happy to pick up Nuland’s fallen banner of the New Cold War with Russia.

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How about the Colorado river, or the Rhine? Can you see it happening?

Ganges and Yamuna Rivers Granted Same Legal Rights As Human Beings (G.)

The Ganges river, considered sacred by more than 1 billion Indians, has become the first non-human entity in India to be granted the same legal rights as people. A court in the northern Indian state of Uttarakhand ordered on Monday that the Ganges and its main tributary, the Yamuna, be accorded the status of living human entities. The decision, which was welcomed by environmentalists, means that polluting or damaging the rivers will be legally equivalent to harming a person. The judges cited the example of the Whanganui river, revered by the indigenous Maori people. people, which was declared a living entity with full legal rights by the New Zealand government last week. Judges Rajeev Sharma and Alok Singh said the Ganges and Yamuna rivers and their tributaries would be “legal and living entities having the status of a legal person with all corresponding rights, duties and liabilities”.

The court in the Himalayan resort town of Nainital appointed three officials to act as legal custodians responsible for conserving and protecting the rivers and their tributaries. It ordered that a management board be established within three months. The case arose after officials complained that the state governments of Uttarakhand and neighbouring Uttar Pradesh were not cooperating with federal government efforts to set up a panel to protect the Ganges. Himanshu Thakkar, an engineer who coordinates the South Asia Network on Dams, Rivers and People, said the practical implications of the decision were not clear. “There are already 1.5bn litres of untreated sewage entering the river each day, and 500m litres of industrial waste,” he said. “All of this will become illegal with immediate effect, but you can’t stop the discharge immediately. So how this decision pans out in terms of practical reality is very unclear.”

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I see slums in your future.

More Than 100 Chinese Cities Now Above 1 Million People (G.)

China now has more than 100 cities of over 1 million residents, a number that is likely to double in the next decade. According to the Demographia research group, the world’s most populous country boasts 102 cities bigger than 1 million people, many of which are little known outside the country – or even within its borders. Quanzhou, for example, on the south-east coast of China, was one of the most cosmopolitan cities in the world a millennium ago, when it served as a hub for traders from across Asia and the Middle East. It is now home to more than 7 million people, nearly 800,000 more than Madrid. But while Madrid is a cultural powerhouse and the centre of Spanish politics, Quanzhou, with its 1,000-year-old mosque and charming cafes, is rarely discussed even within Chinese media, whereas Beijing, Shanghai and Hong Kong continue to get most of the headlines.

Outside China, meanwhile, few will even have heard of Kaifeng, a former imperial capital that was once a terminus on the Silk Road, or Weihai, both cities bigger than Liverpool (estimated population of urban area 880,000). The scale of China’s urban ambitions is staggering: it now has 119 cities bigger than Liverpool. By 2025, according to a report by the McKinsey Global Institute, that number is predicted to have more than doubled. One reason is that the government is actively encouraging rural residents to urbanise. China aims to have 60% of its people living in cities by 2020, up from 56.1% currently, and the World Bank estimates a billion people – or 70% of the country’s population – will be living in cities by 2030. Thousands of government officials have campaigned across the country to convince farmers to move to newly built urban districts, turning centuries-old villages into ghost towns.

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Poorly argued but still true. The Chinese had better plant a zillion trees in those cities of them.

Access To Nature Reduces Depression And Obesity (G.)

People living close to trees and green spaces are less likely to be obese, inactive, or dependent on anti-depressants, according to a new report. Middle-aged Scottish men with homes in deprived but verdant areas were found to have a death rate 16% lower than their more urban counterparts. Pregnant women also received a health boost from a greener environment, recording lower blood pressures and giving birth to larger babies, research in Bradford found. Overall, nature is an under-recognised healer, the paper says, offering multiple health benefits from allergy reductions to increases in self-esteem and mental wellbeing.

A study team of 11 researchers at the Institute for European environmental policy (IEEP) spent a year reviewing more than 200 academic studies for the report, which is the most wide-ranging probe yet into the dynamics of health, nature and wellbeing. The project first appeared as an unpublicised 280-page European commission literature review last autumn, before being augmented for Friends of the Earth Europe with analysis of the links between nature-related health outcomes and deprivation. “The evidence is strong and growing that people and communities can only thrive when they have access to nature,” said Robbie Blake, a nature campaigner for Friends of the Earth Europe, which commissioned the analysis.

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Talking about planting trees:

This is a great story, which should have many people follow the example, for if we would all plant just one tree every day, we would never have a lack of trees again.

And of course I can’t post this without adding a famous French 1953 story by Jean Giono, The Man Who Planted Trees, which inspired Québec’s Frédérick Back to make his 1987 Oscar winning animation. What a masterpiece it still is. Please watch. It’ll make you feel so much better.

The Man Who Planted A Tree And Grew A Whole Family Of Forests (G.)

When Antonio Vicente bought a patch of land in São Paulo state and said he wanted to use it to plant a forest, people called him crazy. It was 1973 and forests were seen by many as an obstacle to progress and profit. Brazil’s then military government encouraged wealthy landowners to expand by offering them generously subsidised credit to invest in modern farming techniques, a move the ruling generals hoped would boost national agriculture. But water, or an impending lack of it, was Vicente’s concern as he worriedly watched the expansion of cattle grazing and industry, the destruction of local forests, and the growth of the population and the rapid urbanisation of the state. One of 14 children, Vicente grew up on a farm where his father worked. He’d watched him cut down the trees at the owners’ orders, for use in charcoal production and to clear more land for grazing cattle.

Eventually the farm’s water springs dried up and never returned. Maintaining forests are essential for water supplies because trees absorb and retain water in their roots and help to prevent soil erosion. So with some donkeys and a small team, he worked on his little patch – 31 hectares (77 acres) of land that had been razed for grazing cattle – and set about regenerating. “The area was totally stripped,” he says, demonstrating by pointing to a painting of the treeless land in 1976. “The water supplies had nearly dried up.” His neighbours, who were cattle and dairy farmers, used to tell him: “You are dumb. Planting trees is a waste of land. You won’t have income. If it’s full of trees, you won’t have room for cows or crops.” But what started off as a weekend gig has now become a full-time way of life. More than 40 years later, Vicente – now 84 – estimates he has replanted 50,000 trees on his 31 hectare Serra da Mantiqueira mountain range property.

“If you ask me who my family are, I would say all this right here, each one of these that I planted from a seed,” he says. [..] Vicente has seen first-hand the devastating effects of mass deforestation. He travelled at one point to Rondonia, now one of Brazil’s most deforested Amazon states, in 1986 during a drive by the Brazilian government to settle the region which proved disastrous as following mass deforestation, the land yielded poor results. “The government were giving the land away for cheap, but the land didn’t serve for anything,” he says. “People cut down the trees but after 3 to 4 years, the soil turned into sand and nothing grows.” Speaking of his own project in the Mantiqueira mountain range: “I didn’t do it for money, I did it because when I die, what’s here will remain for everyone.” He adds: “People don’t call me crazy any more.”

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Mar 212017
 
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Fred Stein Streetcrossing, Paris 1935

 


To Make America Great Again, Trump Will Have To Make the Dollar Weak Again (MW)
The Fed Gave Trump Just Enough Rope To Hang Himself With – Deutsche (ZH)
S&P 500 Companies Blow $1.7 Trillion On Making Earnings Look Less Bad (WS)
US “Too Big To Fail” Banks Top $1 Trillion – What Happens Next? (ZH)
Australia’s Central Bank Warns Of Growing Risks In Housing, Debt (CNBC)
Australia Bank Regulators To Unleash New Crackdown On Lenders (AFR)
Toronto Home Prices May Jump 25% This Year – TD (BBG)
Canada Real Estate: This Is Going To Blow Sky High (Bergin)
British Banks Handled Vast Sums Of Laundered Russian Money (G.)
What Central Banks Get Wrong About Economic Equilibrium (BBG)
Full Speed Ahead for Murphy’s Law (Jim Kunstler)
Earth Is A Planet In Upheaval Breaking Into ‘Uncharted Territory’ (G.)
Three-Quarters Of Older People In The UK Are Lonely (G.)
Greek Public Hospitals Stretched Further As Access Granted To Uninsured (K.)
Sharp Increase In Refugees Reaching Aegean Islands From Turkey (K.)

 

 

Currency manipulation?

To Make America Great Again, Trump Will Have To Make the Dollar Weak Again (MW)

If Donald Trump really wants to Make America Great Again, he’s going to have to Make the Dollar Weak Again first. So argued hedge fund manager Mathew Klody of MCN Capital Management at this week’s Grant’s investment conference in New York. He made an intriguing case. If Klody’s right, Trump may just be blowing smoke when he talks about tariffs and border-adjustment taxes. And, most importantly, if Klody is right, we should also buy foreign currencies, especially those issued by emerging markets. Sooner or later, the president will need to drive down the dollar, and for those based in the U.S. that will drive up foreign currencies. Mexican pesos, anyone? This is not far-fetched. Research Affiliates, the smart investment advisers in Newport Beach, Calif., argue that emerging market currencies are among the most attractive asset classes available to investors.

They’re expecting those currencies to produce returns in U.S. dollars of inflation plus about 3.5% a year over the next decade, with far less volatility than stocks. Incidentally, if Klody’s analysis is right, Trump should also, logically, be good for gold. The collapse of American manufacturing towns, and the old industrial middle class, has gone hand in hand with a staggering 40-year rise in the dollar, Klody observed. It is standard economics that as your currency rises, your exports become more expensive and less competitive in foreign markets. Meanwhile, the reverse happens at home: Imports from overseas get cheaper and cheaper compared with domestic production. Klody noted that since the mid-1970s, the U.S. dollar has quadrupled in price — yes, really — when measured against the Federal Reserve’s broad basket of foreign currencies.

It may be mere coincidence that during that same period, imports have surged, and the U.S. has lost its global dominance in many areas of manufacturing. MCN Capital’s Klody notes that during the period that the dollar soared, workers’ share of domestic income has plummeted.From the 1940s through the early 1970s, the working man and woman got a pretty consistent 50% of national domestic income.Since the mid-1970s, it’s collapsed to around 43%. And, yes, that’s happened under most political regimes (the Clinton-Gingrich-dot-com years in the 1990s being an exception).That, of course, is a big reason why Trump won. Klody himself came from a small town in Pennsylvania that used to be a classic American industrial boomtown. And now, according to the town’s mayor, it looks like a deserted bomb site.

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Tyler: “The above, simply summarized: the Fed has given Trump just enough rope to hang himself with; and since all that matters now is how effective the President will be in passing his political agenda – which is not looking good- should Trump fails, the one of two possible outcomes that is most likely is the one where the “curve bear flattens or inverts”, prompting the next, long overdue, recession. “

The Fed Gave Trump Just Enough Rope To Hang Himself With – Deutsche (ZH)

Aleksandar Kocic: “The subtext of the last week’s Fed “package” is a compromise motivated by a desire to extend the comfort zone and to hedge their position against possible fiscal irresponsibility, while, at the same time, not stand in the way to any possible fiscal stimulus (or its absence) by hiking too aggressively…. Depending on the interplay between degree of political resolve and the Fed actions we could see two distinct paths of resolution of the existing tensions in the mid- or long-run. Last week, the Fed delivered what appears as a dovish hike, in all likelihood to be followed with two hikes more in 2017 and three in 2018. Such a choice of the Fed action was a compromise driven by the developments in the labor market and the key events in Europe, on one side, combined with the risk associated with the approval of the fiscal stimulus, on the other.

The subtext of this compromise can be interpreted as being motivated by the Fed’s desire to extend the comfort zone and to hedge their position against possible fiscal irresponsibility, while, at the same time, not stand in the way to any possible fiscal stimulus by hiking too aggressively. Despite all the efforts not to create more uncertainty, this is likely to create at least mild ambiguity regarding the long-run. A Fed which is not in a standby position waiting for the fiscal package to arrive and kick in is going to be supportive for USD and higher real rates. The March FOMC “package” (in terms of rate hike, dots, rhetoric and Q&E) implies effectively a real rate rise and is most likely bearish for breakevens, which could diminish the effect of the border tax on the trade deficit and, as such, reduce the impact on growth potential.

In addition, having higher real rates increases the costs of borrowing and possibly creates political resistance against deficit expansions and structural steepening of the curve. On top of that, given what we saw in the last weeks, this suggests that the political process around the budget plan and the Legislative package already expected by the market is going to be anything but smooth, which is adding further doubts about its success and timing. Depending on the interplay of politics and policy – degree of political resolve and the Fed actions – we could see two distinct paths of resolution of the existing tensions in the mid- or long-run.

On one hand, it appears that the Fed is removing uncertainty around the terminal rate, while on the other, politics is creating a binary outcomes which could have a dramatically different effect on long rates. In that context, we are facing a future with bifurcating back end of the curve. Either political bottlenecks clear and the stimulus gets approved and goes full force leading to higher growth potential with subsequent rise in price levels and structural steepening of the curve, or political tensions effectively sabotage either its arrival or content (or both), and the curve initially bear flattens or even twists with rate shorts capitulation accelerating the rally of the back end.”

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Find a -nearly- deserted island to live on.

S&P 500 Companies Blow $1.7 Trillion On Making Earnings Look Less Bad (WS)

The S&P 500 index, closing today at 2,373, hovers near its all-time high. Total market capitalization of the 500 companies in the index exceeds $20 trillion, or 106% of US GDP. In the three-plus years since the end of January 2014, the index has soared 33%. And yet, over these three-plus years, even with financial engineering driven to the utmost state of perfection, including $1.7 trillion in share buybacks and despite “ex-bad-items” accounting schemes that are giving even the SEC goosebumps – despite all these efforts, the crucial and beautifully doctored “adjusted” earnings-per-share, perhaps the single most manipulated metric out there, has gone nowhere. “Adjusted” earnings per share are back where they’d been at the end of January 2014. It’s a sad sign when not even financial engineering can conjure up the appearance of earnings growth.

Companies report earnings in two ways: 1) All companies report as required under GAAP (our slightly inconvenient Generally Accepted Accounting Principles). These earnings are often a loss or way too small and shrinking, instead of growing, and hence not very palatable. 2) So most companies also report pro-forma, ex-bad-items, “adjusted” earnings, based on the companies’ own notions of what matters. Analysts and the media hype that metric. This is just a method of reporting the same results in a more glamorous manner. Then there’s financial engineering. Companies borrowed heavily over the past few years and used those funds to purchase their own shares. This hollowed out equity and left companies with piles of debt.

Over the past three years, companies blew $1.7 trillion on share buybacks. This money was not invested in productive activities that would have expanded the company and the economy, and generated cash flow to service this debt. All it did was reduce the number of shares outstanding. This has the effect of increasing earnings per share (EPS) though the company didn’t actually make more money. Add this system of share buybacks to the system of “adjusting” earnings per share via reporting schemes, and the result should be a miracle of soaring “adjusted” EPS. But no.

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“..surged 30% since Donald Trump was elected president..”

US “Too Big To Fail” Banks Top $1 Trillion – What Happens Next? (ZH)

For the first time ever, the market cap of America’s “Big Four” banks topped $1 trillion having surged 30% since Donald Trump was elected president. While to some this is cause for celebration, we note that the last time a nation’s “big four” banks topped $1 trillion in market cap did not end well… As Bloomberg notes, the four biggest U.S. banks were worth the most on record versus China’s “Big Four” this month, as JPMorgan, Wells Fargo, Bank of America, and Citigroup were worth over $250 billion more than Industrial & Commercial Bank, China Construction Bank, Bank of China, and Agricultural Bank of China combined. The four Chinese banks, the world’s most profitable, were worth about the same as the U.S. foursome as recently as June. However, as the chart shows, while the American quartet’s combined market value closed above $1 trillion for the first time last month, China achieved that goals in June 2015… and it did not end well.

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Too late now.

Australia’s Central Bank Warns Of Growing Risks In Housing, Debt (CNBC)

Australia’s central bank saw growing risks in the nation’s hot housing market when it left rates steady earlier this month, underlining the case against further easing in policy. Minutes of its March meeting showed the Reserve Bank of Australia (RBA) was generally optimistic about the economy as it transitioned away from a decade long boom in mining investment. However, board members felt there had been a “build-up of risks” in the housing market as borrowing for investment fueled brisk price rises in Sydney and Melbourne. Home prices accelerated at an annual pace of 11.7% in February, with Sydney running red-hot at 18.4%, data from property consultant CoreLogic showed. Governor Philip Lowe has repeatedly argued that cutting rates further could encourage a renewed borrowing binge by households who are already heavily indebted, outweighing any economic benefits.

With wages growing at record lows, debt was outpacing incomes and threatening to weigh on consumer spending. Data out recently showed retail sales grew at a tepid pace for a third straight month while the outlook for capital expenditure remained uninspiring. The RBA noted tighter supervision had contributed to “some” strengthening in lending standard by the banks, which has also been raising rates on some mortgage products recently. Analysts suspect even stricter standards are likely to be imposed by regulators in coming weeks. Housing affordability, or the lack of it, has become a hot-button issue for the conservative government of Malcolm Turnbull which has promised measures to ease the problem in its May budget. The RBA’s angst over housing has convinced financial markets there will be no more cuts in interest rates, already at all time lows of 1.5%.

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They’re too scared too crack down on anything. Housing can bring down the entire Oz economy by now.

“I don’t use the B-word. I refuse to use the B-word..”

Australia Bank Regulators To Unleash New Crackdown On Lenders (AFR)

Regulators are preparing to impose a fresh wave of constraints on the banks to slow investor lending growth, crack down on interest-only loans, and force buyers to stump up more equity on purchases as they scramble to manage a rampant property boom. Warning that financial and economic risks have grown in recent months, particularly across east coast property markets, the nation’s top financial regulators and Treasurer Scott Morrison unleashed co-ordinated calls for fresh restraint from banks. “Watch this space,” declared Australian Prudential Regulation Authority chairman Wayne Byres on Monday, speaking just hours after Mr Morrison urged APRA and the Australian Securities and Investments commission to use “the levers that they have”. Leaping house price growth over recent months in Sydney and Melbourne, as well as a tsunami of new apartment stock due to hit the market in coming months are creating a wall of uncertainty over the financial stability of the housing market.

That’s being exacerbated by concerns over heavily indebted households’ ability to withstand a rising global interest rate environment at a time of record-low wages growth. In a sign of growing tensions between members of the Council of Financial Regulators – which includes APRA, ASIC, Treasury and chaired by the Reserve Bank – Mr Byres pointedly refused to describe the property market as being in a “bubble”, saying use of the term was “superficial” and “binary”. “I don’t use the B-word. I refuse to use the B-word,” Mr Byres said. “We are in it – we are not in it. If we are in it we’re all going to be ruined – if we are not in it we’re going to be right. It’s too simplistic.” By contrast, Greg Medcraft, ASIC’s chairman, bluntly repeated his view that the market was in a bubble. “I have been saying for a while that I thought it was a bubble and other people are catching up now. “Clearly the issue is if you raise interest rates that’s a big tool but then you affect the whole economy.”

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Hike rates into this.

Toronto Home Prices May Jump 25% This Year – TD (BBG)

Toronto’s housing market is likely to stay strong for the rest of the year, with home prices jumping as much as 25%, amid hints that speculators are fueling demand and posing a potential risk to the economy, TD Economics Chief Economist Beata Caranci said. A “strong Toronto home-price forecast is not a vote of confidence in market fundamentals,” Caranci wrote Monday in a note to clients. “It’s getting harder to ignore warning signs that market demand pressures are increasingly reflecting speculative forces.” Residential prices in Canada’s largest metropolitan region are forecast to grow 20 to 25% this year, up from a previous estimate of 10 to 15%, according to the report by TD Economics, part of Toronto-Dominion Bank.

Toronto-area prices have climbed 19% in the past 12 months, the fastest clip since the 1980s, when a frenzied housing market resulted in year-over-year increases of 55%, Caranci said. “Evidence is building that speculative forces are growing deeper roots, which raises the risk that prices will move closer to the top end of that forecast in the absence of policy measures,” Caranci wrote. As for next year, higher mortgage rates and fewer affordable properties will likely cut the growth rate to 3 to 5%, though a lack of clarity on housing speculation makes predictions difficult, Caranci said. A housing market driven by speculators seeking a quick profit boosts the risk of rapidly unwinding price gains at the same time homebuyers are contending with larger debt burdens, she said.

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Seen this movie so many times before.

Canada Real Estate: This Is Going To Blow Sky High (Bergin)

Originally, I thought this would be a bit of a joke. There were billboards in all the Toronto subway cars advertising the Canadian Real Estate Wealth Expo – learn how to become a millionaire. I thought this was so ridiculous, it may be fun. What better way to experience the top of the housing market than watching Tony Robbins and Pitbull along with a bunch of US real estate professionals explain how Toronto real estate is the path to riches. Prices were originally $150 per ticket, but I was able to buy for $50. While it deeply bothers me that I paid $50 to these shameless (amoral) self-promoters, I thought it would be worth it to witness, in person, the top of the housing market. I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there! I was blown away. Bubbles are largely psychological. This crowd was tangible proof of that.

15k people in one spot listening to Americans explain why real estate in Toronto is an exceptional investment. The whole experience was horrifying. The crowd was very well-dressed, middle- to upper-middle class (from appearances), and super excited to hear how much money could be made if you just buy real estate (most of them clearly already owned). The first real segment of the expo was a panel of Canadian developers and real estate agents giving their views on the market. It actually started off a touch bearish, which surprised me. Two of the panelists were saying that prices are exceptionally high and no market goes up forever. With that slight bit of caution thrown out there, it became a real estate FOMO-building talk.

There are, apparently, two very important things to know when dealing with real estate. First, you have to face your fear; this fear is to be ignored and then you should ‘just do it’ and ‘buy now’. The next step is find what you can afford and then buy it. Ignore all ‘non-doers’, don’t overanalyze or focus on the numbers, just fucking buy. To allay fears the speakers are actually quite clever as they shift between a long to short term focus when it suits. For example, now is a great time to buy because short-term the market is on fire. If, however, markets cool then you just hold because it always goes up long-term – and you are a savvy long-term buyer, aren’t you? By showing no scenario where you can lose I can see how this pitch works on the susceptible.

The second important factor in real estate is financing. Not everyone has money, so what can they do? The answers were shocking. Be ‘creative’ was the first response. Pool your money, borrow from friends and family, own just 5% of a house, get the money however you can and just do it – remember, it only goes up. Other financing suggestions were get cozy with a lender and they will ‘bend the rules’ for you! The fact that the biggest condo developer in Canada (Brad Lamb) said lenders will bend (but not break, apparently) rules to get you financing in front of 15k people with most people smiling and nodding was shocking. So there you go – when it comes to Toronto real estate, just do it (using borrowed money any way you can get it).

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Well, actually, it’s HSBC again. And a few minor conspirators.

British Banks Handled Vast Sums Of Laundered Russian Money (G.)

Britain’s high street banks processed nearly $740m from a vast money-laundering operation run by Russian criminals with links to the Russian government and the KGB, the Guardian can reveal. HSBC, the Royal Bank of Scotland, Lloyds, Barclays and Coutts are among 17 banks based in the UK, or with branches here, that are facing questions over what they knew about the international scheme and why they did not turn away suspicious money transfers. Documents seen by the Guardian show that at least $20bn appears to have been moved out of Russia during a four-year period between 2010 and 2014. The true figure could be $80bn, detectives believe. One senior figure involved in the inquiry said the money from Russia was “obviously either stolen or with criminal origin”.

Investigators are still trying to identify some of the wealthy and politically influential Russians behind the operation, known as “the Global Laundromat”. They estimate a group of about 500 people were involved. These include oligarchs, Moscow bankers, and figures working for or connected to the FSB, the successor spy agency to the KGB. Igor Putin, the cousin of Russia’s president, Vladimir, sat on the board of a Moscow bank which held accounts involved in the fraud. British-registered companies played a prominent role in this extensive money-laundering network. The real owners of most of the firms used in the scheme remain secret, however, because of the anonymity provided by controversial offshore laws.

The Global Laundromat banking records were obtained by the Organized Crime and Corruption Reporting Project (OCCRP) and Novaya Gazeta from sources who wish to remain anonymous. OCCRP shared the data with the Guardian and media partners in 32 countries. The documents include details of about 70,000 banking transactions, including 1,920 that went through UK banks and 373 via US banks.

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More of this interview with Steve in a few days, hopefully.

What Central Banks Get Wrong About Economic Equilibrium (BBG)

In today’s “Morning Must Read,” Bloomberg’s Tom Keene highlights comments on economic equilibrium models. He speaks with Kingston University Economics Professor Steve Keen on “Bloomberg Surveillance.”

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“What can go wrong awaits in markets, banks, currencies, and the immense dark pools of counterparty obligations that amount to black holes where notions of value are sucked out of the universe.”

Full Speed Ahead for Murphy’s Law (Jim Kunstler)

In the 1950s, finance made up about 5% of the economy. It’s mission then was pretty simple and straightforward: to manage the accumulated wealth of the nation (capital) and then allocate it to those who proposed to generate greater wealth via new productive activities, mostly industrial, ad infinitum. It turned out that ad infinitum doesn’t work in a world of finite resources — but the ride had been so intoxicating that we couldn’t bring ourselves to believe it, and still can’t. With industry expiring, or moving elsewhere (also temporarily), we inflated finance to nearly 40% of the economy. The new financialization was, in effect, setting a matrix of rackets in motion.

What had worked as capital management before was allowed to mutate into various forms of swindling and fraud — such as the bundling of dishonestly acquired mortgages into giant bonds and then selling them to pension funds desperate for “yield,” or the orgy of merger and acquisition in health care that turned hospitals into cash registers, or the revenue streams on derivative “plays” that amounted to bets with no possibility of ever being paid off, or the three-card-monte games of interest rate arbitrage played by central banks and their “primary dealer” concubines. Some of what I’ve listed above may be incomprehensible to the blog reader, and that is because these rackets were crafted to be opaque and recondite.

The rackets continue without regulation or prosecution because there is an unstated appreciation in government, and in the corporate board rooms, that it’s all we’ve got left. What remains of the accustomed standard of living in America is supported by wishing and fakery and all that is now coming to a climax as we steam full speed ahead into Murphy’s law: if something can go wrong, it will. When all of America comes to realize that President Trump doesn’t know what he’s doing, it will make last November’s national nervous breakdown look like a momentary case of the vapors. What can go wrong awaits in markets, banks, currencies, and the immense dark pools of counterparty obligations that amount to black holes where notions of value are sucked out of the universe. There is so much that can go wrong. And then it will. And then maybe that will prompt us back to consider being a nation again.

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Sometimes I think we’re going to live to see Noah’s next ark.

Earth Is A Planet In Upheaval Breaking Into ‘Uncharted Territory’ (G.)

The record-breaking heat that made 2016 the hottest year ever recorded has continued into 2017, pushing the world into “truly uncharted territory”, according to the World Meteorological Organisation. The WMO’s assessment of the climate in 2016, published on Tuesday, reports unprecedented heat across the globe, exceptionally low ice at both poles and surging sea-level rise. Global warming is largely being driven by emissions from human activities, but a strong El Niño – a natural climate cycle – added to the heat in 2016. The El Niño is now waning, but the extremes continue to be seen, with temperature records tumbling in the US in February and polar heatwaves pushing ice cover to new lows.

“Even without a strong El Niño in 2017, we are seeing other remarkable changes across the planet that are challenging the limits of our understanding of the climate system. We are now in truly uncharted territory,” said David Carlson, director of the WMO’s world climate research programme. “Earth is a planet in upheaval due to human-caused changes in the atmosphere,” said Jeffrey Kargel, a glaciologist at the University of Arizona in the US. “In general, drastically changing conditions do not help civilisation, which thrives on stability.” The WMO report was “startling”, said Prof David Reay, an emissions expert at the University of Edinburgh: “The need for concerted action on climate change has never been so stark nor the stakes so high.”

[..] 2016 saw the hottest global average among thermometer measurements stretching back to 1880. But scientific research indicates the world was last this warm about 115,000 years ago and that the planet has not experienced such high levels of carbon dioxide in the atmosphere for 4m years. 2017 has seen temperature records continue to tumble, in the US where February was exceptionally warm, and in Australia, where prolonged and extreme heat struck many states. The consequences have been particularly stark at the poles. “Arctic ice conditions have been tracking at record low conditions since October, persisting for six consecutive months, something not seen before in the [four-decade] satellite data record,” said Prof Julienne Stroeve, at University College London in the UK. “Over in the southern hemisphere, the sea ice also broke new record lows in the seasonal maximum and minimum extents, leading to the least amount of global sea ice ever recorded.”

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Ah, look at all the lonely people
Where do they all come from?
All the lonely people
Where do they all belong?

Three-Quarters Of Older People In The UK Are Lonely (G.)

Almost three-quarters of older people in the UK are lonely and more than half of those have never spoken to anyone about how they feel, according to a survey carried out for the Jo Cox commision on loneliness. The poll by Gransnet, the over-50s social networking site, also found that about seven in 10 (71%) respondents – average age 63 – said their close friends and family would be surprised or astonished to hear that they felt lonely. Gransnet is one of nine organisations – including Age UK, the Alzheimer’s Society and the Silver Line helpline for older people – working to address the issue of loneliness in older people, which is the current focus of the commission, set up by Cox before her murder last June. They are urging individuals and businesses to look for signs of loneliness and refer people to organisations that can help.

But they also want people to take time to speak to neighbours, family, old friends or those they encounter randomly. The chairs of the cross-party commission, the Labour MP Rachel Reeves and Conservative MP Seema Kennedy, said there was a stigma around loneliness that must be tackled. “We all need to act and encourage older people to freely talk about their loneliness,” they said. “Everyone can play a part in ending loneliness among older people in their communities by simply starting a conversation with those around you. “How we care and act for those around us could mean the difference between an older person just coping, to them loving and enjoying later life.” Almost half (49%) of the 73% who described themselves as lonely in the online poll said they had been so for years, 11% said they had always felt lonely and 56% said they had never spoken about their loneliness to anyone.

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Pure Greek tragedy. But you can’t leave 2.5 million people untreated.

Greek Public Hospitals Stretched Further As Access Granted To Uninsured (K.)

A change in legislation last April has given access to the public health system to some 2.5 million Greeks who did not have social insurance but has also put a financial strain on hospitals, whose funding has not increased. Treating uninsured patients cost public hospitals in Athens €57.2 million last year. Across Greece, €23.5 million was spent on providing free lab tests to about 204,000 people. “Our experience shows that the number of uninsured people coming to the hospitals is increasing,” the vice president of the Athens-Piraeus Hospital Doctors’ Association, Ilias Sioras, told Kathimerini. “But the hospitals do not have adequate funds.” State funding is at €1.1 billion this year, the same as in 2016.

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If Erdogan gets desperate enough he’ll pull the plug and turn this into a Europe supports terrorism narrative. Woe Greece.

Sharp Increase In Refugees Reaching Aegean Islands From Turkey (K.)

New arrivals to the eastern Aegean islands of Lesvos, Chios and Samos have raised the number of migrants landing in Greece from neighboring Turkey since last Thursday to 566, government figures showed on Monday. The figure represents a significant increase compared to arrivals in the rest of March and for the whole of February. In the past four days, 195 migrants landed on Lesvos, 341 on Chios and 30 on Samos. More than 14,000 migrants remain stuck on the islands of the eastern Aegean awaiting the outcome of their applications for asylum or deportation. The majority are living in overcrowded reception facilities where conditions have been described as “unacceptable” and “inhumane” by human rights groups.

Read more …

Mar 202017
 
 March 20, 2017  Posted by at 8:26 am Finance Tagged with: , , , , , , , ,  4 Responses »
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Janine Niepce Paris ca. 1950

 


The Central Bank Shell Game (WS)
Using Superannuation For Deposit ‘Irresponsible’ – Keating (Nine)
Chinese Home Prices “Unexpectedly” Rebound (ZH)
The Fed’s Global Dollar Problem (BBG)
Oil Drops On Rising Us Drilling, Failing OPEC Cuts (R.)
Smile For The Auschwitz Selfie: Why Holocaust Memorials Have Failed (NS)
Spy Comments Proof Germany Supports Group Behind Attempted Coup: Erdogan (R.)
Erdogan Accused Merkel Of Using Nazi Methods (DW)
Dijsselbloem Calls For ESM To Be Turned Into A European IMF (R.)
Defeat in Victory (Jacobin)
Greece Edges Toward Another Bailout Crisis (BBG)
How Millions In Refugee Funds Were Wasted In Greece (K.)
Avoiding Risky Sea Journey, Syrian Refugees Head To Italy ‘Pronto’ (AFP)
3,000 Migrants Rescued Off Libya On Sunday (AFP)

 

 

Great example of why there is a housing bubble everywhere, from a guest writer at Wolfstreet. The second graph is priceless. “The very premise of Swedish society is under attack..”

The Central Bank Shell Game (WS)

Sweden’s welfare state supposedly allows for success while providing a safety net for those unable to keep up with the market. In principle, it is an ideal, utopian-like state. However, Sweden’s touted economic success has come at the expense of its currency, the Krone (SEK), and long-term sustainability. Riksbank, the Swedish Central Bank, like its European contemporaries, has undertaken experimental policy, driving real and nominal interest rates below zero. Since 2014, Swedish deposit rates have been negative. Not only has overall negative real interest rate policy affected housing, but it also drove Swedish consumers deeper into debt. Embarking on the dual mandate policy may have staved off recession, but it created greater problems for the future.

Although current deposit rates are at a record low of -1.25%, the latest GDP print came in at 2.3%, and the growth rate has been tapering since 2015. Sweden’s “hot” GDP growth – hot relative to the region – could be attributed, not to industrial growth, but rather increased government spending, funding social programs. Additionally, with no incentive to save, consumer debt has taken off, along with the housing prices, while disposable income lagged. Swedish household debt is now at a record high. Hence, the Swedish growth story is not organic but rather a borrow-and-spend one.

Swedes, like Norwegians, are victims of the “exchange rate versus housing price shell game.” The SEK received today for the sale of their inflated flats has fallen 30% against the US dollar (average USDSEK in 2014 was 6.86 vs. 8.95 on March 15, 2017). Stockholm housing rose 31% during the same period in SEK terms, negating the recent gains over the same period. The SEK fell 23% against gold in the same period. Hence, the “Swedish Model” is under attack. The egalitarian underpinnings, unwinding with the negative rates, are driving a wedge into Swedish society, creating extremes on both sides of the economic spectrum. The rampant consumerism, encouraged by artificially low rates, continues to widen the wealth gap. Coincidentally, the middle class deteriorated the most between 2014 and 2015: the same time that deposit rates took a dive. Furthermore, the negative savings rates are driving the average person to “gamble” on speculative investments instead of saving and building a future over the long term.

[..] instead of undertaking experimental rate policy, Riksbank and the Swedish government should be engineering a soft-landing or a “controlled crash”, adjusting taxes and policy to ensuring a smooth transition to sustainability for the general population. There is precedent from Iceland that already exists. It is clear that the negative rate experiment is neither sustainable nor helpful to economic growth. It only inflates bubbles while widening the wealth gap in Swedish society. A once prudent and financially conservative people are now getting drunk on debt, wrecking their future. The very premise of Swedish society is under attack.

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Everybody does it. When people start borrowing less from banks for housing, economies will collapse. Superannuation is sort of like Australia’s 401(K).

Using Superannuation For Deposit ‘Irresponsible’ – Keating (Nine)

Former prime minister Paul Keating has labelled as “scandalous” the Turnbull government’s suggestion it might allow young people to raid their superannuation for house deposits. Ahead of the May budget, Mr Keating argues the idea would rob younger Australians of a large block of savings at the end of their working lives. “As an economic idea, this is scandalous. But, of course, for the Liberal Party, this is an ideological proposal,” he writes in Fairfax Media today. Mr Keating, who spearheaded Australia’s superannuation sector in 1992, said if the government were to proceed with this “irresponsible” idea it would put at risk the financial future of generations.

“It would potentially destroy superannuation for those, in the main, under 40 years of age, while at the same time, driving up the cost of the housing they are seeking to purchase,” he said. The federal government earlier this month set up a taskforce to look at new ways to promote millions of dollars of investment in community housing that could benefit one in three Australians. The taskforce will be headed up by Stephen Knight, who has had extensive experience in debt capital markets as CEO of the Treasury Corporation in NSW and as a member of the Australian Office of Financial Management advisory board. The group will report back to the government by the middle of the year. Treasurer Scott Morrison said housing affordability issues were impacting on the 30% of Australians who live in rented homes, and those who relied on affordable and social housing.

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China is caught in the same bind as Sweden, Australia, and just about the entire western world. Without ever more mortgage lending, banking systems are gone.

Chinese Home Prices “Unexpectedly” Rebound (ZH)

“The government intends to pause the surging home prices, and let them walk steadily up later,” said Xia Dan, a Shanghai-based analyst at Bank of Communications Co., adding that if curbs on demand are lifted, prices will rise further. “The government doesn’t want the prices to run all the time and ferment bubbles.” As Bloomberg notes, China’s biggest cities have seen a round of home price surges in the past year. In Beijing, new home prices rose 24% in February from a year earlier, while Shanghai saw a 25% gain. Shenzhen prices increased 14% in the same period. “Beijing’s tightening will have a short-term effect to stabilize the market, but the power of policy has become increasingly weaker,” Zhang Hongwei at Tospur Real Estate Consulting, said Friday, adding more local tightening may follow.

Or maybe not, because one may ask: is the rebound really unexpected. Perhaps not: as the WSJ reported on Sunday, “this year it seemed China was finally going to make headway on an idea familiar to U.S. homeowners: a property tax. For many Chinese families, owning a home is one of few options to build wealth, driving buying frenzies as people rush to purchase before prices soar. Imposing costs on homeowners through a property tax is seen as a way to tame such speculation, while also helping fund local governments. Lu Kehua, China’s vice housing minister, last month said the government needed to “speed up” a property-tax law. Economists and academics have long recommended the move. Yet the annual National People’s Congress came and went this month with no discussion of the topic. An NPC spokeswoman said a property tax wouldn’t be on the legislative agenda for the rest of the year.

In short, China evaluted the risk of a potential housing bubble burst, and deciding that – at least for the time being – it is not worth the threat of losing a third of Chinese GDP in “wealth effect”, got cold feet. Expect the recent dip in home prices to promptly stabilize, with gains in the short-term more likely that not.

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Long predicted. Financial warfare.

The Fed’s Global Dollar Problem (BBG)

The Federal Reserve might be doing the right thing for the U.S. economy by moving to bring interest rates back up to normal. But for foreign companies and governments that have borrowed trillions of U.S. dollars, the adjustment could be painful. Thanks in large part to a prolonged period of extremely low U.S. interest rates, borrowers around the world have gone on a dollar binge over much of the past decade – making them more vulnerable to the Fed’s policy decisions than ever before. As of September, non-bank companies and governments outside the U.S. had some $10.5 trillion in dollar-denominated debt outstanding, according to the Bank for International Settlements. That’s more than triple the level of September 2004, the last time the Fed was about this far into a cycle of rate increases. Here’s a chart:

If the Fed sticks with its plan of raising rates more than a percentage point by the end of next year, the increased interest costs could stunt growth and weigh on borrowers’ finances in places as far flung as the U.K. and China. It could also mean losses for investors holding the debt, particularly given that the duration of dollar-denominated bonds – a measure of their price sensitivity to changes in interest rates – is close to its highest point in at least two decades. An increase of 1 percentage point, for example, would take $500 billion off the value of the bonds included in the Bank of America Merrill Lynch U.S. Dollar Global Corporate and High Yield Index. Here’s a chart showing how that number has changed over the years (thanks to a combination of increased dollar debt and increased duration):

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Next up: falling demand.

Oil Drops On Rising Us Drilling, Failing OPEC Cuts (R.)

Oil prices fell on Monday, with already-bloated markets pressured by rising U.S. drilling activity and steady supplies from OPEC countries despite touted production cuts. Prices for benchmark Brent crude futures were 35 cents, or 0.68%, below their last settlement at 0646 GMT, at $51.41 per barrel. U.S. West Texas Intermediate (WTI) crude futures were down 46 cents, or 0.94%, at $48.32 a barrel. Traders said that prices came under pressure from rising U.S. drilling and ongoing high supplies by OPEC despite its pledge to cut output by almost 1.8 million barrels per day (bpd) together with some other producers like Russia.

“There is good, strong momentum to the downside,” futures brokerage CMC Markets said in a note on Monday. U.S. drillers added 14 oil rigs in the week to March 17, bringing the total count up to 631, the most since September 2015, energy services firm Baker Hughes Inc said on Friday, extending a recovery that is expected to boost shale production by the most in six-months in April. Sukrit Vijayakar of energy consultancy Trifecta said the rising drilling activity was “reinforcing the expectation of higher U.S. production offsetting (OPEC’s) supply cuts”. U.S. oil output has risen to over 9.1 million bpd from below 8.5 million bpd in June last year.

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“..for the likes of Rudd, “Never forget” means “Don’t forget for two weeks” or, if politically expedient, “Don’t forget for three days”.

“The reason they can never answer the question, ‘How could it [the Holocaust] possibly happen?’ is that it’s the wrong question. Given what people are, the question is, ‘Why doesn’t it happen more often?’”

Smile For The Auschwitz Selfie: Why Holocaust Memorials Have Failed (NS)

It is time to say that attempts to memorialise the Holocaust have failed and may even be counterproductive. The dead are still dead; anti-Semitism still exists and sometimes thrives. Myths of Jewish power circulate, now with the added insult of “playing the Holocaust card (that you presumably picked up at a Holocaust memorial gift shop)”. A clutch of these memorials, all counselling kindness to the refugee, could not save Aylan Kurdi, a three-year-old Syrian boy, from drowning in the Mediterranean Sea in 2014. In January the Home Secretary, Amber Rudd, posted a picture of herself signing a Holocaust remembrance book on Twitter. “We must never forget,” she wrote. It reminded me of my favourite line from the 1986 Woody Allen film Hannah and Her Sisters: “The reason they can never answer the question, ‘How could it [the Holocaust] possibly happen?’ is that it’s the wrong question. Given what people are, the question is, ‘Why doesn’t it happen more often?’”

Two weeks later, Rudd announced that the “Dubs amendment” – which aimed to offer sanctuary to solitary child refugees and was sponsored by Lord Dubs, who came to the UK from Czechoslovakia on the Kindertransport in March 1939 – would be discontinued after resettling just 350 children. (Even the Cameron government, no friend to the vulnerable, suggested that it could take about 3,000.) I do not expect Rudd to know that, in response to the Évian Conference on Jewish refugees, held in France in 1938, Adolf Hitler offered German Jews to the world but the world did not want them. Britain took 10,000 children, sponsored privately, and left their parents to die. After 1945, Britain agreed to take another 1,000 Jewish children but it could not find 1,000 still alive. It took 732. I now see that, for the likes of Rudd, “Never forget” means “Don’t forget for two weeks” or, if politically expedient, “Don’t forget for three days”.

But if that’s what you think, you never knew anything to forget. Rudd couldn’t see the connection between the British government of 1938 leaving children to die in far-off lands and the British government of 2016 doing the same. Her signing of a Holocaust remembrance book was so meaningless that it was, at best, hand exercise and, at worst, a cynical PR gesture. This act of Holocaust memorialising was a failure. I hope that Rudd is prevented from approaching any Holocaust-related stationery in future. But that won’t happen. The orthodoxy in these circles is: let them all come to bear witness, no matter what they do with it. Some of them might learn something. This policy led to a friend hearing a young Polish boy, touring Auschwitz, describe a fellow visitor as “a rich Jewish bitch in all that jewellery”. The boy had learned nothing, but the man had. He punched him in the face, and that is the only cheerful anecdote in this article.

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Maybe Germany and the US should make this very clear: “..the head of the BND foreign intelligence agency, who said the Turkish government had failed to convince it that Muslim cleric Fethullah Gulen was responsible for the coup attempt.”

Spy Comments Proof Germany Supports Group Behind Attempted Coup: Erdogan (R.)

Doubts expressed by Germany’s spy agency regarding the role of a U.S.-based cleric in last year’s attempted coup in Turkey are proof that Berlin supports the organization behind the attempt, Turkish President Tayyip Erdogan’s spokesman said on Sunday. Ibrahim Kalin made the comment in a live interview with broadcaster CNN Turk. On Saturday, German news magazine Der Spiegel published an interview with the head of the BND foreign intelligence agency, who said the Turkish government had failed to convince it that Muslim cleric Fethullah Gulen was responsible for the coup attempt. “Turkey has tried to convince us of that at every level but so far it has not succeeded,” Bruno Kahl was quoted as saying. Kalin said those comments were proof that Berlin supported the coup. Germany and Turkey have been locked in a deepening diplomatic row after Berlin banned some Turkish ministers from speaking to rallies of expatriate Turks ahead of a referendum next month, citing public safety concerns.

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Erdogan needs an enemy to ‘protect’ his people from, or he won’t win the referendum.

Erdogan Accused Merkel Of Using Nazi Methods (DW)

Ankara launched a new wave of anti-German rhetoric on Sunday, with President Recep Tayyip Erdogan calling out the German chancellor in a televised speech. “When we call them Nazis, they (Europe) get uncomfortable. They rally together in solidarity. Especially Merkel,” Erdogan said. “But you are right now employing Nazi measures,” he said, addressing Merkel directly and using the unofficial, personal way of saying “you” in Turkish. Erdogan has previously accused both the Netherlands and Germany of acting like Nazis after the two countries prevented Turkish ministers from holding campaign rallies on their territory. In his Sunday speech, Erdogan accused Merkel personally of using Nazi methods against his “Turkish brother citizens in Germany and brother ministers.”

The row with Europe “showed that a new page had been opened in the ongoing fight against our country,” he added. Berlin was decidedly not amused, saying that the Turkish president had “gone too far.” Foreign Minister Sigmar Gabriel told the Passauer Neue Presse that he warned Ankara against continuing this “shocking” rhetoric. “We are tolerant but we’re not stupid,” Gabriel said. “That’s why I have let my Turkish counterpart know very clearly that a boundary has been crossed here.” Ankara also responded furiously to a Kurdish rally in Frankfurt yesterday, where participants carried flags and symbols of the outlawed Kurdistan Workers’ Party (PKK) and called for a ‘no’ on the upcoming referendum. The Turkish government said the rally showed Berlin’s hypocrisy after halting similar events for the ‘yes’ camp. They also summoned the German ambassador over the incident.

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Someone should shut up Dijsselbloem. When you lose as big as he did in last week’s elections, you need to pipe down, disappear.

Dijsselbloem Calls For ESM To Be Turned Into A European IMF (R.)

The European Stability Mechanism (ESM) – the euro zone’s bailout fund – should ultimately be turned into a European version of the International Monetary Fund, the head of euro zone finance ministers told a German newspaper. “I think it would make a lot of sense for the euro zone bailout fund ESM to be developed into a European IMF in the medium to long term,” Jeroen Dijsselbloem told Monday’s edition of Frankfurter Allgemeine Zeitung. He said that would also mean that Greece’s current “troika” of lenders – the European Commission, ECB and the IMF – would need to be broken up in the longer term. “The ECB feels increasingly uncomfortable in its troika role, and rightly so I think,” Dijsselbloem said, adding that the European Commission had other “important tasks” that it should concentrate on.He said the ESM should “build up the technical expertise that only the IMF has at the moment”.

German Finance Minister Wolfgang Schaeuble has also proposed turning the ESM into a European monetary fund to improve the management of crises in Europe. Dijsselbloem said the institutions should maintain their roles for Greece’s current bailout and said he still expected the IMF to decide on a new programme, adding that it would be “most welcome” if this happened by the summer. Germany, which holds elections in September, wants the IMF on board before new money is lent to Athens. But it disagrees with the IMF over debt relief and the fiscal targets that Greece should maintain after the bailout programme ends in 2018. Dijsselbloem said he did not expect the current review of Greece’s bailout programme to be concluded quickly, adding that he did not think the institutions will complete it before a Eurogroup meeting in Malta in April.

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From a Jacobin article on the Dutch elections. Yeah, as I said last week, they’re trying to find ways to allow Dijsselbloem to ‘finish the job’ of finishing off Greece.

Defeat in Victory (Jacobin)

Under the current government, the PvdA’s rightward shift took on a whole new meaning. The party gained significant ground during the 2012 elections by arguing that a vote for Labour was the only way to avoid a VVD-led austerity government. Immediately after the elections, the party turned around and started negotiating the formation of a coalition with those very opponents. This government launched a massive austerity program, entailing almost fifty billion euros in cutbacks. PvdA ministers prided themselves on taking some of the most difficult posts, including social affairs and employment (PvdA leader Lodewijk Asscher) and finance (Jeroen Dijsselbloem).

A PvdA minister of the interior loyally executed the VVD’s anti-refugee policies. And Dijsselbloem not only enthusiastically applied the European Union’s fiscal stringency to the Netherlands but, as chairman of the Eurogroup, became its main enforcer against the Syriza government. Nothing could more fully demonstrate the PvdA’s neoliberal drift than the fact that Alexander Pechtold, leader of the liberal-democratic party Democrats 66 (D66), repeatedly suggested Dijsselbloem could continue to represent the Netherlands in Brussels “so that he can finish the job.” [..] The same anger and anxieties that created violent shocks to the political system — of which the PvdA’s collapse is only the latest example — also continue to drive large numbers to vote for allegedly safe parties that they wrongly believe will at least not make things worse.

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Greece spends more on pensions because it is the only fallback the economy has, they play the role that in other countries is played by unemployment benefits. The Troika knows this very well. It’s hard not to conclude that the lenders are trying to create a civil war in Greece.

Greece Edges Toward Another Bailout Crisis (BBG)

Greece is set to miss yet another deadline for unlocking bailout funds this week, edging closer to a repeat of the 2015 drama that pushed Europe’s most indebted state to the edge of economic collapse. Euro-area finance ministers meeting in Brussels on Monday will reiterate that the government of Alexis Tsipras has yet to comply with the terms attached to the emergency loans that have kept the country afloat since 2010. While Tsipras had promised the long delayed review of the latest bailout would be completed by March 20, a European official said last week that reaching an agreement even in April is now considered a long shot. The two sides are still far apart on reforms demanded by creditors in the Greek energy market and the government in Athens is resisting calls for additional pension cuts. And while discussions continue on how to overhaul the labor market, a finance ministry official said in an email to reporters on Friday that the issue can’t be solved in talks with technocrats.

Stalled bailout reviews and acrimony between successive governments and auditors representing creditor institutions are all too familiar themes in the seven-year crisis that has reduced the Greek economy by a quarter. Failure to resolve the latest standoff before the summer could mean that Greece may not be able to meet debt payments due in mid-July. Even as Greek bonds have performed better than most of its euro-area peers this year on expectations that the government will capitulate, uncertainty has weighed on economic activity, raising the risk that an additional bailout may be needed. Unemployment rose in the last quarter of 2016, the economy unexpectedly contracted, and a bleeding of deposits from the nation’s battered lenders resumed.

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Daniel Howden is a senior editor at Refugees Deeply. Good piece, but very incomplete. I’ll get back to that.

How Millions In Refugee Funds Were Wasted In Greece (K.)

For a story of waste and suffering, it’s notable that some of the worst decisions in response to the refugee crisis in Greece were born of good intentions. An archipelago of some 50 small refugee camps was scattered over Greece in preference to concentrating asylum seekers in larger ghettos. As an idea it had merits. In practice it was disastrous. Authorities still struggle to say how many camps there are. The Ministry of Migration Policy lists 39 but the UN says there may be more than 50. Many of these sites, which are in various states of closure, were clearly unfit for human habitation in the first place. The choice to build so many of them multiplied infrastructure costs for things like sewage systems built on private property or remote sites that will serve no public purpose in the future. Meanwhile, the Public Power Corporation is building substations at sites that will likely face closure.

The European Commission and its humanitarian operations agency ECHO are expected to cease support for all but 10 of Greece’s mainland camps in the near future. As the main donor, this will be decisive. There is similar confusion over how many asylum seekers remain in Greece from the 1.03 million who entered in 2015-16. Again the ministry and the UN disagree, with the former saying 62,000 and the latter nearer 50,000. European officials say privately that both numbers are overestimates. This shroud of confusion has contributed to a mess that will be remembered as the most expensive humanitarian response in history. Some $803 million flowed into Greece from the beginning of 2015, according to an investigation by Refugees Deeply, an independent reporting platform. The bulk of these funds were meant to be spent on services for the 57,000 refugees and migrants stranded in Greece when the borders shut one year ago. That translates to a rough cost per beneficiary of $14,000.

Nobody believes this has been money well spent. One senior aid official admitted that as many as $70 out of every $100 spent had been wasted. As anyone who followed the response in Haiti or Kosovo would affirm, the aid industry is inherently wasteful but this was excessive. The scale of this became obvious from November onward when refugees were pictured in tents in the snow and it sparked a blame game. None of the actors emerge with much credit. The UN refugee agency played mute witness to failures in refugee protection for fear of offending its second largest donor, the EU. The European Commission was content to make grandiose statements that exaggerated the funding it had committed, while doing nothing to correct the mistakes it witnessed on the ground. It also made promises on asylum service assistance that were not kept. The bigger the mess in Greece, the greater the deterrent and the stronger the message to future asylum seekers not to come this way.

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Wonderful. There is still hope. There are still people, even in governments, who are still people.

Avoiding Risky Sea Journey, Syrian Refugees Head To Italy ‘Pronto’ (AFP)

Just before midnight in a sleepy district of Beirut, dozens of Syrian refugees huddle in small groups around bulging suitcases, clutching their pinging cellphones and one-way tickets to Italy. “Torino! Pronto! Cappuccino!” They practise random Italian words in a schoolyard in the Lebanese capital’s eastern Geitawi neighbourhood, waiting for the buses that will take them to the airport, and onwards to their new lives in Italy. Under an initiative introduced last year by the Italian government, nearly 700 Syrian refugees have been granted one-year humanitarian visas to begin their asylum process in Italy. The programme is the first of its kind in Europe: a speedy third way that both avoids the United Nations lengthy resettlement process and provides refugees with a safe alternative to crammed dinghies and perilous sea crossings.

[..] A country of just four million people, Lebanon hosts more than one million Syrian refugees. For members of Mediterranean Hope, the four-person team coordinating Italy’s resettlement efforts from Lebanon, “humanitarian corridors” are the future of resettlement. The group interviews refugees many times before recommending them to the Italian embassy, which issues humanitarian visas for a one-year stay during which they begin the asylum process for permanent resettlement. “It’s safe and legal. Safe for them, legal for us, says Mediterranean Hope officer Sara Manisera. “After people cross the Mediterranean on the journey of death, they are put into centres for months while they wait. But with this programme, there are no massive centres, it costs less, and refugees can keep their dignity,” she tells AFP.

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Beware better weather conditions.

3,000 Migrants Rescued Off Libya On Sunday (AFP)

Around 3,000 migrants were rescued off the coast of Libya on Sunday as they tried to cross the Mediterranean to Europe, the Italian coast guard told AFP. “After some calm days, migrants are arriving in large numbers, taking advantage of a window of favorable weather,” said a coast guard official. The rescue was undertaken in 22 separate operations coordinated by the Italian coast guard. One participant was the Aquarius, a humanitarian ship run by the NGO SOS Mediterranean and Doctors Without Borders (MSF), which said it saved 946 people, including 200 unaccompanied minors. An MSF video showed three young children smiling and dancing on the ship to the sound of drumming. The migrants rescued by the Aquarius had been found drifting on nine wooden and rubber boats. According to the Italian government, 16,206 people have been rescued in the sea by Friday — compared to 11,911 by the same time last year.

Read more …

Mar 192017
 
 March 19, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , ,  No Responses »
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DPC Broadway from Chambers Street, NYC 1910

 


More Proof of Janet Yellen’s Idiocy (David Stockman)
How The Bosses ‘Game’ Workers (Moore)
Oz Parliamentary Budget Office Costs Plan To Kill Off Stamp Duty (SMH)
Russian Parliament Backs Investigation Into US Media (R.)
German Foreign Minister: Turkey Further Away From EU Membership Than Ever (R.)
Turkey Furious As Kurds Rally In Frankfurt With PKK Insignia (AFP)
Fear Stalks Refugees Huddled Along Hungary’s Border (G.)
Dirty Deals Done Dirt Cheap (ECRE)
Desperate Conditions In Greece’s Migration Jails (AlA)
‘Exiles in the Aegean’: A Year After The EU–Turkey Deal (Christopoulos)

 

 

“..corporate America will desperately unload inventories, workers and assets to appease the robo-machines of Wall Street.”

More Proof of Janet Yellen’s Idiocy (David Stockman)

During the last 129 months, the Fed has held 86 meetings. On 83 of those occasions it either cut rates or left them unchanged. So you can perhaps understand why Wednesday’s completely expected (for the last three weeks!) 25 bips left the day traders nonplussed. The Dow rallied over 100 points that day. Traders understandably believe that this monetary farce can continue indefinitely, and that our Keynesian school marm’s post-meeting presser was evidence that the Fed is still their friend. No it isn’t! Janet Yellen’s sing-song gibberish was the equivalent of a monetary DEFCON 1, alerting all except the most addicted Kool-Aid drinkers to get out of the casino.

Our monetary politburo has expanded its balance sheet by a lunatic 22X during the last three decades and in the process has systematically falsified financial asset prices and birthed a mutant debt-fueled of simulacrum of prosperity. But once it begins to withdraw substantial amounts of cash from the canyons of Wall Street as per its newly reaffirmed “normalization” policy, the whole house of cards is destined to collapse. There will be a stock market implosion soon, and that will in turn generate panic in the C-suites as the value of stock options vanish. Like in the fall of 2008 — except on an even more sweeping and long-lasting scale — corporate America will desperately unload inventories, workers and assets to appease the robo-machines of Wall Street. But there is nothing left to brake the casino’s fall.

If the money market rate conforms to the Fed’s latest command and settles at 88 basis points, it is still effectively at the zero bound. Our monetary politburo is thus still out of dry powder — except for the nuclear option of QE4, which Yellen herself made quite clear would never happen until after the next recession is already underway. Yet by then it will be too late — way too late. That’s because the market is priced as if the business cycle has been outlawed and as if the feckless band of Keynesian pretenders who have seized control of financial markets have ushered in the Nirvana of permanent full-employment. World without end. Needless to say, they haven’t because they haven’t repealed the law of supply and demand. That is, if the Fed plans to keep raising until rates until they reach 3.0% by 2019, it will have to suck massive amounts of cash out of the financial markets.

So doing, it will drive long-term yields substantially higher and thereby obliterate the ultra-low cap rate delusion on which the entire regime of Bubble Finance is based. In fact, in a blathering response at her presser about the pace by which the Fed intends to shrink its bloated $4.4 trillion balance sheet, Yellen proved she is clueless about the financial firestorm our rogue central bank is about to unleash. She claimed that the Fed could implement 3-4 money market rate increases a year, while deferring the shrinkage of its balance sheet into the indefinite future. But that it most assuredly cannot do. With a staggering overhang of $2.1 trillion of excess reserves in the financial system, even our vaunted monetary politburo cannot command the tides to recede. If it wants the money rate to rise on its appointed path through 2019, it must drain loads of cash from Wall Street.

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“In Australia, the bottom 3.9 million people share the same level of wealth as the top 10 individuals. And the gap is growing.”

How The Bosses ‘Game’ Workers (Moore)

When was the last time we heard someone talking about economic sustainability? When was the last time an economist was heard talking about equitable sharing of the economic growth? Australia “averted a recession” with 1.1 per cent growth in the December quarter. Let’s celebrate! Good news. Well, good for some. Not so good for others. Increasing disparity! The good news: company profits are “at record levels”. In the December quarter company profits rose by a whopping 20.1 per cent. One of the big winners is mining. Mining! Those same companies who were crying doom and gloom a few years ago when they defeated the government’s attempt to apply some level of taxation on their “super profits”. The bad news: well, that is for wage earners. While profits grew by 20 per cent, average wages dropped.

Tom Kennedy, of JP Morgan, explained to the ABC: “Some of the support for profits in the non-mining economy seems to be from weaker wage payments, which fell 0.5 per cent quarter-on-quarter (annual run rate slowed further to 1 per cent year-on-year) on the precarious combination of weaker wage growth, fewer hours and elevated underemployment.” In simple language Kennedy could have said: business increased profits by cutting workers’ wages, reducing hours and by employing less people. Any number of economic inquiries or reports suggest good ideas about taxation, employment and economic growth. A much smaller number examines what is equitable sharing of wealth. Even in the current climate, where the government is constantly bombarding the community about living within our means, Turnbull’s government is determined to deliver a $50 billion tax break for the corporate sector.

They have a good return on investment for political party donations. In Australia, the bottom 3.9 million people share the same level of wealth as the top 10 individuals. And the gap is growing. Sensible taxation measures are just one method of reducing the disparity by applying straightforward rules that are not subject to exemptions. In a globalised environment, corporations avoid current tax measures by moving money around the world at a touch of a button. One alternative, to provide a fair way to levy the corporate sector and one that is difficult to “game”, is a tax on gross turnover within a country. Such a tax is simple. It is hard to avoid. Big business would pay their share and contribute to community infrastructure from which they draw significant advantage.

Personal income is also “gamed”. American tycoon Warren Buffett noted his secretary paid a higher percentage of income tax than him simply because he could afford better accounting advice. The answer is to apply a “floor level” for high-income earners. It would catch the 77 individuals, identified by the Australian Tax Office in 2015, who earned over $1 million and paid NO tax. With the “Buffett Rule”, this group of selfish leeches would not have been able to avoid their fair contribution to the education, health and infrastructure that they all use. The Australia Institute identifies an injection of $2.5 billion if a 35 per cent “Buffet Rule” level was applied to just the top 1 per cent of salary earners. Surely good government means finding ways to reduce disparity. Inequality is fodder for populist movements around the world. A disparity index is just one way to remind our politicians of their responsibilities.

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Thinking about land tax is not a bad thing. But using it to lure more people into mortgage debt is.

Oz Parliamentary Budget Office Costs Plan To Kill Off Stamp Duty (SMH)

The Parliamentary Budget Office has costed a proposal that would kill stamp duty and replace it with land tax, saving home buyers up to $40,000 in Sydney and $55,000 in Melbourne, while delivering billions of dollars to fund schools and hospitals. The costing will put land tax back up for debate when Parliament returns next week as the government looks to mark its authority on the housing affordability crisis less than two months out from the federal budget. Both the NSW and Victorian governments have thrown their weight behind broader stamp duty tax reform and Treasurer Scott Morrison has indicated his support for a transition to taxing land. “When you talk about tax reform, this is far and away the biggest prize on offer,” said John Daley, the chief executive of independent think tank the Grattan Institute.

Under current regulations, home buyers pay tens of thousands of dollars in stamp duty, creating an additional hurdle for people looking to enter the market amid soaring property prices in Sydney and Melbourne. Removing stamp duty and implementing an annual land tax on all newly purchased homes would help level the playing field and generate billions of dollars in annual returns to the NSW and Victorian budgets, while also relieving federal government spending over a 15-year-period. Under the policy submitted by the Greens and backed by the Grattan Institute and the Council of the Ageing, home buyers would no longer stump up to $40,000 in stamp duty when purchasing a property worth $1 million in Sydney. In Melbourne, a home buyer would save $55,000 stamp duty on a property of the same value.

Research from the Grattan Institute shows an annual tax of $1 per every $1000 of a home’s value would cost the median Sydney household $845 a year in tax and the median Melbourne home $623 a year. To offset the cost of losing lucrative stamp duty payments, the Commonwealth would have to loan money to the states. The loans would peak in 2020 when the hit to the budget bottom line would grow to $800 million. Rising land tax revenues would enable the states to pay back the loan by 2030. The Parliamentary Budget Office estimates that in the next four years alone the tax would generate $2.3 billion in revenue for the states, but warned the overall costings were of low reliability due to the variations in number of properties sold across Australia each year.

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“..the senator should have included a clause drawing up a list of books for burning..”

Russian Parliament Backs Investigation Into US Media (R.)

The Russian lower house of parliament, the State Duma, has approved a proposal to launch an investigation into U.S. media organizations that operate in Russia, it said in a statement posted on its web site late on Friday. The investigation, which will be conducted by the Duma’s information policy, technologies and communications committee, will check whether CNN, the Voice of America, Radio Liberty and “other American media” are complying with Russian law. The statement said the Duma backed the move on Friday evening after Konstantin Zatulin, an MP from the pro-Kremlin United Russia party, proposed an investigation to retaliate for what he called a “repressive” U.S. move against Russian state-funded broadcaster RT.

He said he was referring to an initiative by U.S. Senator Jeanne Shaheen, who has introduced a bill to empower the Justice Department to investigate possible violations of the Foreign Agents Registration Act by RT. Shaheen, a Democrat, cited a U.S. intelligence agency assessment that suggested RT was part of a Russian influence campaign to help Donald Trump win the White House last year. The Kremlin and RT have strongly rejected that allegation. Foreign media in Russia are overseen by the Russian Foreign Ministry, whose spokeswoman Maria Zakharova this week singled out Shaheen’s demarche for criticism, quipping ironically that the senator should have included a clause drawing up a list of books for burning. The U.S. move also solicited the ire of Margarita Simonyan, RT’s editor-in-chief, who on Wednesday told the daily Izvestia it had echoes of the activities of U.S. Senator Joseph McCarthy..

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EU nations would never have accepted a nation of 82 million muslims as a member. Turkey’s as far away as ever, not more, not less.

German Foreign Minister: Turkey Further Away From EU Membership Than Ever (R.)

German Foreign Minister Sigmar Gabriel said in an interview with news magazine Der Spiegel published on Saturday that Turkey has never been less likely to join the European Union than now, as relations between Ankara and Berlin hit a low point. “Today Turkey is definitely further away from becoming a member of the European Union than ever before,” Gabriel said in the interview. He also said that he always had doubts about whether Turkey should join the EU but found himself in the minority in his Social Democrat (SPD) party. Before taking power in Germany in 2005, Chancellor Angela Merkel was an outspoken opponent of Turkey’s membership and instead called for a “privileged partnership”.

Gabriel disliked that idea because he thought it would make Turks feel like second-class Europeans but he said his opinion had changed since Britain’s decision to leave the EU. “Today the situation is totally different due to Brexit. We’d be well advised to bring about a ‘special relationship’ with Great Britain after its exit from the EU,” Gabriel said. “That will be an important learning process for the EU and perhaps some of it can serve as a blueprint for other countries in the long term,” Gabriel said. Turkish President Tayyip Erdogan is courting Turks abroad for support in an April 16 referendum that would grant him sweeping new powers. He infuriated Germany and the Netherlands by describing bans on planned rallies by Turkish ministers as “fascist”. The arrest of a Turkish-German journalist in Ankara has also caused upset.

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EU and US still define PKK as a terrorist organization. That should be reconsidered.

Turkey Furious As Kurds Rally In Frankfurt With PKK Insignia (AFP)

Some 30,000 pro-Kurdish demonstrators rallied in the German city of Frankfurt on Saturday calling for “democracy in Turkey” and urging a “no” vote in an upcoming referendum on expanding Turkish President Recep Tayyip Erdogan’s powers. Turkey angrily denounced the demonstration as “unacceptable”. Many demonstrators carried symbols of the outlawed Kurdistan Workers Party (PKK) which has battled the Turkish state for over three decades in a continuing insurgency. Tensions are already running high between Berlin and Ankara after German authorities refused to allow some Turkish ministers to campaign in the country for a “yes” vote in the April 16 referendum that would hand Erdogan an executive presidency. Significantly more people turned up than organisers had been expecting for the rally, which took place ahead of the annual Newroz festival when Kurds mark the traditional New Year.

Saturday’s protest march in Frankfurt went off peacefully, a police spokesman said. Some of the participants carried flags and banners of the outlawed PKK, as well as portraits of the group’s jailed leader Abdullah Ocalan, who is serving a life sentence in Turkey, calling for his release. Police said no banners or flags were confiscated so as to not provoke the crowd, but added that photos had been taken which could lead to future prosecutions. Erdogan’s spokesman Ibrahim Kalin said in a statement that the presidency “condemned in the strongest terms” the fact that the rally had been allowed to go ahead. “It is unacceptable to see PKK symbols and slogans… when Turkish ministers and lawmakers are being prevented from meeting their own citizens,” he said. He said the “scandal” of the Frankfurt demonstration showed that some EU countries were actively working in favour of a “no” vote in the critical referendum.

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For those hailing Merkel for her dealings with Trump, and calling her the leader of the western world: this is what she produced in Europe, where she really is the leader.

Fear Stalks Refugees Huddled Along Hungary’s Border (G.)

Behind a high metal fence topped with loose curls of barbed wire, the newly positioned blue shipping containers lined neatly along Hungary’s southern border at Röszke provide a glimpse of the new plans of the prime minister, Viktor Orbán, to detain thousands of asylum seekers, including children. Construction on Hungary’s new detention camps and a second electrified fence, which stretches 108 miles along its border with Serbia, are now under way despite virulent opposition from the UN, human rights groups and a European court ruling which it was hoped might halt the country’s determination to imprison refugees. President János Áder signed the bill, which will allow all asylum seekers to be locked up in detention camps, and will also permit police to return asylum seekers from anywhere in the country back to Serbia.

Orbán, leader of the rightwing populist Fidesz party, has described migration as the “Trojan horse for terrorism” and considers Muslim migrants a threat to European identity and culture. More than 7,000 asylum seekers trying to reach western Europe are stuck in Serbia, outside the EU, following Hungary’s decision last summer to introduce strict limits on the number of refugees allowed to enter and began patrolling the borders with a controversial new wing of its police force known as Határvadász, or border hunters. At an open transit camp in Subotica, Serbia, 15 miles from the border crossing, where families and unaccompanied children wait to have their asylum claims processed in Hungary, officials say the new law will cause trouble for Serbia and more hardship for people here.

“We are like storage for the Hungarians,” said Nikola Ljubomirovic, coordinator at the camp, run by Serbia’s commissariat for refugees and migrants. [..] The majority of families at this camp are fleeing conflicts in Syria, Iraq and Afghanistan. They have made arduous journeys but are out of funds which would enable them to try other routes to Europe. Their only option is to claim asylum in Hungary. They face a long wait. Hungary has reduced the number of asylum seekers it accepts per day from Serbia from 200 in 2015 to 10 in January this year. The decision as to which 10 people can enter the country every weekday via two transit zones, Horgos and Kelebija, is arbitrary, far from transparent, and appears to be managed in part by refugee community leaders, leading to uncertainty and confusion among already desperate families.

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“..a legitimate objective for the EU Member States to pursue is undermining rather than ensuring the right to asylum..”

Dirty Deals Done Dirt Cheap (ECRE)

The impact of the EU Turkey – Deal is widely debated and often misrepresented. The triumphant progress reports of the Commission hail the drop in numbers of refugees arriving in Greece and people drowning in the Aegean, but ignore the wider devastating impact of Europe’s containment policy on the international protection regime and beyond. If anything, one-year into its existence the deal has “succeeded” in contributing to problematic developments in four inter-linked ways: It is a key factor in the transformation of the political debate at EU level, which moves towards a consensus that a legitimate objective for the EU Member States to pursue is undermining rather than ensuring the right to asylum (enshrined in the EU Charter of Fundamental Rights) is.

By endorsing this deal, the EU has jeopardized not only its own credibility as a global human rights actor but also the values of democracy, respect for fundamental rights and the rule of law upon which it is based. It has become the blueprint for outsourcing Europe’s protection responsibility to third countries often characterized by instability and with problematic human rights records in exchange for development aid or political favours as if refugees were tradable commodities. Finally, it has transferred substantial political capital from the EU to the regimes in question, leaving the EU beholden –with Turkey itself as the most obvious example of the increasing ability of these third countries to influence Europe rather than the other way around. No, for Europeans who believe in universal human rights there is nothing to celebrate but lots to regret at the one-year anniversary of the EU-Turkey Deal!

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There needs to be an EU summit on this, and a UN summit on the whole refugee issue. But I’ve been saying that for a long time, and it still has not happened. It will be done only when chaos rules and it’s too late.

Desperate Conditions In Greece’s Migration Jails (AlA)

Greece has struggled to implement the controversial EU-Turkey deal agreed last March, and many who arrived on the islands after March 19, 2016, ended up being held in closed detention facilities for months on end. This treatment of new arrivals is likely to only become even more strict. Greek authorities are building new detention facilities for irregular migrants on Samos, Lesvos and Kos, while looking for spaces in the islands of Leros and Chios. Maarten Verwey, coordinator for the implementation of the EU-Turkey agreement, said that new detention facilities in Greece would be temporary. But a year ago, the UN’s refugee agency decided not to back Greek authorities. “We will not provide support to mandatory ‘detention centers’ for refugees in Greece,” said an official announcement from the UNHCR.

Greece is using ex-military camps, police stations and specially built detention centres to house those seeking refuge in the medium term. These are different from the reception and identification centres at the hotspots where newly arrived refugees and migrants are initially held. There are currently six detention centres with a total of 5,215 places in Amygdaleza, Petrou Ralli, Corinth, Paranesti, Xanthi and Orestiada. A new report, titled Forgotten, by Aitima, an Athens-based NGO, says there are some 2,000 “irregular migrants” now detained in Greece – but this number might increase fast in the next few months as pre-departure facilities on the islands are completed. Officials believe that the creation of “closed-structure facilities”, each with a capacity of 150-200 people, will be the key to easing pressure on islands where more than 10,000 new arrivals are stranded.

Conditions inside existing detention facilities in Greece continue to be alarming. Most are without hot water, reports Aitima. They have no heating, there are no interpreters, no social workers and no psychologists. Detained migrants complain about inedible food. No provisions of clothes and shoes from the authorities are given. Doctors visit detention areas only in very urgent cases.

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History repeating.

‘Exiles in the Aegean’: A Year After The EU–Turkey Deal (Christopoulos)

Bert Birtles, an Australian journalist and poet, arrived in Athens in the fall of 1935 to meet Dora “at sunset under the Parthenon”. Very soon, the interest of the young devoted admirers of classical Greece shifted from the archaeological ruins to contemporary politics. In 1936, following a fascist coup, Bert and Dora started visiting islands of the Aegean that were used as destinations for exiles. In 1938, Birtles published Exiles in the Aegean, his “personal narrative of Greek politics and travel”. The book offers an exciting first-hand chronicle of the experiences and lives of the exiled leftists on the islands of Anafi and Gavdos, but also Leros, Karpathos and Lesvos. These islands continued to operate as spaces of “administrative displacement” throughout the twentieth century, and it was only in 1974, after the end of the colonels’ dictatorship, that this practice came to an end.

Even for my generation, born in the late 1960s, the phrase “to the dry islands” was the synonym of isolation, just as the phrase “to the mountains” was the synonym of resistance against the Axis forces in the 1940s. And then, in the 1980s, the “dry islands” became the ideal tourist resort, one of the must-see destinations of the world: a synonym of pleasure and relaxation. At the dawn of the 21st century, the islands of the eastern Aegean, close to the Turkish coast, became the first entry point to the EU for the thousands fleeing their countries, either for fear of being persecuted, or just in search of a decent life in Europe. Islands became the stepping stone to Athens, and, in turn, Athens a stepping stone to northern Europe. Islands offer a prototype for an exercise in control and biopolitics, as Foucault would put it.

The pre-1974 Greek state, which was not exactly famous for its democratic culture, knew this well. The European Union, on the other hand, only really realised this a year ago, with the infamous EU-Turkey statement addressing what the Europeans labelled a “migration crisis”, i.e. the arrival of a million refugees in a continent of half a billion inhabitants… Islands, both now and then, are regarded as the ideal quarantine zone: first it was for communists so they wouldn’t intoxicate their environment with their ideas, now for migrants and refugees, with a twofold objective. First, to send the message that this is what lies ahead for those who intend to make their way across the Aegean. Second, to send a message to European citizens and to address their primary fear: the buffer zone at the periphery of the EU ensures that no more refugees and immigrants can enter the ‘promised land’.

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