Jun 282017
 
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James Dean in a photobooth 1949

 

All Companies Hit By Ransomware Attack Used Bootleg Or Unpatched Software (WS)
Yellen: Banks Very Much Stronger; No Financial Crisis In Our Lifetime (CNBC)
There Is No Excuse For Janet Yellen’s Complacency (Steve Keen)
Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime” (ZH)
Trio of Fed Speakers Warn on Valuations With Eyes on Tightening (BBG)
Car Loans, Credit Card Debt Push UK Back Towards Another Credit Crisis (Tel.)
UK Banks Ordered To Hold More Capital As Consumer Debt Surges (G.)
ECB VP: Slack In European Economy Looks Worse Than We Thought (CNBC)
Chinese Satellite Data Hint At Ominous Manufacturing Slowdown (ZH)
UK Government Refuses To Pay For Fireproof Cladding (Ind.)
Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)
Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)
The Human Tragedy Of Drug Abuse And Car Crashes (BBG)
Search Results Show Why Europe Is Mad at Google (BBG)
‘Google, Facebook Are Super Monopolies On The Scale Of Standard Oil’ (CNBC)
Greeks Work 203 Days Out Of The Year To Pay Taxes (K.)
Greek Garbage Collectors Reject Compromise As Trash Piles Up (AP)
At Least 24 Migrants Die Off Libya in 48 Hours, More Than 8,000 Rescued (R.)

 

 

Wolf Richter explains what happened yesterday. They’re all either thieves or extremely stupid/negligent.

Merck, Rosneft, Ukraine government, Ukraine International Airport, Maersk, WPP (world’s largest advertising agency), Mondelez etc. They’ve all been found to either use bootleg software or not having patched their systems with a readily available Microsoft patch.

All Companies Hit By Ransomware Attack Used Bootleg Or Unpatched Software (WS)

The Petya ransomware attack infected over 2,000 computer systems across the world as of midday today, according to Kaspersky Lab, cited by Reuters. Russia and Ukraine were most affected. Other victims were in Britain, France, Germany, Italy, Poland, and the US. When China starts up its computers, it will suffer the consequences for not staying in bed. The malware includes code known as “Eternal Blue,” which was also used in the WannaCry attack in May. Experts believe the code was purloined from NSA. The ransomware encrypts hard drives of infected machines and then demands $300 in bitcoin in order for the user to regain access. Petya takes advantage of the same vulnerability in Windows as WannaCry. But Microsoft released a patch to fix this vulnerability on March 14.

Patched computers were not affected by WannaCry, and are not affected today. The Windows Malicious Software Removal Tool detects and removes the malware automatically during the updating process. But that update isn’t available for bootleg copies of Windows – hence China’s disproportionate problems with the attack in May. And computers that are running legitimate versions of Windows but hadn’t been updated for whatever reason are vulnerable. Amazingly, when WannaCry hit, plenty of companies were mauled because some dude hadn’t updated their machines. Corporate and government networks were hit. You’d think after the hue and cry in May, all legit corporate systems would be updated, and bootleg copies of Windows would be replaced either by a legit copy of Windows or another operating system. But no. Rinse and repeat.

[..] These are big sophisticated companies, many of them with global operations, and therefore with global IT networks, not mom-and-pop operations. And yet the Windows machines in their networks hadn’t been updated and had remained vulnerable, or were using bootleg copies of Windows that couldn’t be updated, even after all the hoopla in May about this vulnerability. Just sitting here and shaking my head.

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Grandma goes nuts.

Yellen: Banks Very Much Stronger; No Financial Crisis In Our Lifetime (CNBC)

Fed Chair Janet Yellen said Tuesday that banks are “very much stronger” and another financial crisis is unlikely anytime soon. Speaking during an exchange in London with British Academy President Lord Nicholas Stern, the central bank chief said the Fed has learned lessons from the financial crisis and has brought stability to the banking system. Banks last week passed the first round of the Fed’s stress tests to see how they would perform under adverse conditions like a 10% unemployment rate and turbulence in commercial real estate and corporate debt. “I think the public can see the capital positions of the major banks are very much stronger this year,” Yellen said. “All of the firms passed the quantitative parts of the stress tests.”

She also made a bold prediction: that another financial crisis the likes of the one that exploded in 2008 was not likely “in our lifetime.” The crisis, which erupted in September 2008 with the implosion of Lehman Brothers but had been stewing for years, would have been “worse than the Great Depression” without the Fed’s intervention, Yellen said. Yellen added that the Fed learned lessons from the financial crisis and is being more vigilant to find risks to the system. “I think the system is much safer and much sounder,” she said. “We are doing a lot more to try to look for financial stability risks that may not be immediately apparent but to look in corners of the financial system that are not subject to regulation, outside those areas in order to try to detect threats to financial stability that may be emerging.”

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Steve explains that Yellen knows Minsky, but prefers to ignore him.

There Is No Excuse For Janet Yellen’s Complacency (Steve Keen)

Janet Yellen has been reported by Reuters as saying in London yesterday that “she does not believe that there will be a run on the banking system at least as long as she lives”: “Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be,” Yellen said at an event in London. The only word I can use to describe this belief is “delusional”. The only way in which her belief could be justified would be in financial crises were truly random events, caused by something outside the economy—or just by a very bad throw of the economic dice. This is indeed the perspective of mainstream “Neoclassical” economic theory, in which Yellen was trained, and because of which she was deemed eligible—and indeed eminently suitable—to Chair the Federal Reserve.

This is the theory that led the OECD to proclaim, two months before the crisis began in August 2007, that “the current economic situation is in many ways better than what we have experienced in years”, and that they expected that “sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.”. It is the theory that led her colleague David Stockton, then the Director of the Division of Research and Statistics at the Fed, to dismiss the possibility of a recession after the crisis had begun, in December 2007—the very month that the recession is now regarded as having commenced: “Overall, our forecast could admittedly be read as still painting a pretty benign picture: despite all the financial turmoil, the economy avoids recession and, even with steeply higher prices for food and energy and a lower exchange value of the dollar, we achieve some modest edging-off of inflation.” (FOMC, Dec 2007)

So what we are getting from her is not merely her own personal complacency, but the complacency of an approach to economics which has always been grounded in the beliefs that (a) capitalism is inherently stable, (b) that the financial sector can be ignored—yes that’s right, ignored—when doing macroeconomics, and (c) that the Great Depression was an anomaly that can also be ignored, because it can only have been caused either by an exogenous shock or bad government policy, both of which cannot be predicted in advance.

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It’s a really crazy thing to say. Does she expect to be fired soon?

Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime” (ZH)

If there was any confusion why the Fed intends to keep hiking rates, even in the face of negative economic data and disappearing inflation, it was put to rest over the past 2 days when not one, not two , not three, but four Fed speakers, including the three most important ones, made it clear that the Fed’s only intention at this point is to burst the asset bubble. First there was SF Fed president John Williams who said that “there seems to be a priced-to-perfection attitude out there” and that the stock market rally “still seems to be running very much on fumes.” Speaking to Australian TV, Williams added that “we are seeing some reach for yield, and some, maybe, excess risk-taking in the financial system with very low rates. As we move interest rates back to more-normal, I think that that will, people will pull back on that,

Then it was Fed vice chairman Stan Fischer’s turn, who while somewhat more diplomatic, delivered the same message: “the increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites…. Measures of earnings strength, such as the return on assets, continue to approach pre-crisis levels at most banks, although with interest rates being so low, the return on assets might be expected to have declined relative to their pre-crisis levels–and that fact is also a cause for concern.” Fischer then also said that the corporate sector is “notably leveraged”, that it would be foolish to think that all risks have been eliminated, and called for “close monitoring” of rising risk appetites.

All this followed the statement by Bill Dudley, who many perceive as the Fed’s shadow chairman, who yesterday warned that rates will keep rising as long as financial conditions remain loose: “when financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened. On the other hand, when financial conditions ease—as has been the case recently—this can provide additional impetus for the decision to continue to remove monetary policy accommodation.” And finally, it was Yellen herself, who speaking in London acknowledged that some asset prices had become “somewhat rich” although like Fischer, she hedged that prices are fine… if only assumes record low rates in perpetuity:

“Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” she said. It was not all doom and gloom. Responding to a question on financial system stability, Yellen said post-crisis regulations (and $2.5 trillion in excess reserves which just happen to be fungible and give the banks the impression that they are safe) had made financial institutions much “safer and sounder.” “Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”

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There were smokescreeens a-plenty too.

Trio of Fed Speakers Warn on Valuations With Eyes on Tightening (BBG)

When a trio of Federal Reserve officials delivered remarks on Tuesday, the state of U.S. financial markets came in for a little bit of criticism. When all was said and done, U.S. equities sank the most in six weeks, yields on 10-year Treasuries rose and the dollar weakened to the lowest level versus the euro in 10 months. Fed Chair Janet Yellen said that asset valuations, by some measures “look high, but there’s no certainty about that.” Earlier, San Francisco Fed President John Williams said the stock market “seems to be running very much on fumes” and that he was “somewhat concerned about the complacency in the market.” Fed Vice-Chair Stanley Fischer suggested that there had been a “notable uptick” in risk appetite that propelled valuation ratios to very elevated levels.

The Fed officials’ comments came amid a torrent of events that buffeted financial markets Tuesday, from an IMF cut to its U.S. growth forecast, Google suffering the biggest ever EU antitrust fine, a fresh blow to the Republican agenda in Washington and a global cyberattack. Still, selling in U.S shares accelerated around 1:30 p.m. as Yellen delivered her assessment of the market since the central bank raised interest rates June 14. “Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” Yellen said during a speech in London.

Investors are on guard for signs of a change in its economic outlook that could delay rate increases or when it will begin shrinking its $4.5 trillion balance sheet. Yellen said the Fed’s plans for the balance sheet were “well understood” by financial markets. Officials have said they intend to begin allowing the portfolio to roll off this year. In the end, Yellen made it pretty apparent that that her plans for continued monetary policy tightening haven’t shifted. “We’ve made very clear that we think it will be appropriate to the attainment of our goals to raise interest rates very gradually,” Yellen said.

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All the credit was the only thing that kept the country going.

Car Loans, Credit Card Debt Push UK Back Towards Another Credit Crisis (Tel.)

Banks are “forgetting the lessons” of the financial crisis, increasing the risk of reckless lending which could land them — and the wider economy — in trouble later, Mark Carney has warned. Credit card lending is booming and the Bank of England fears that banks are becoming complacent, assuming the relatively good economic times will continue indefinitely. As a result lenders are cutting down the amount of capital they put aside to keep them safe if those loans turn bad — something that could leave them in financial trouble if there is a recession and customers cannot pay back their debts. “I think it is forgetting some of the lessons of the past, or not fully learning the lessons of the past,” said Mr Carney, the Bank of England’s Governor. He said that the economy overall is performing well and total lending is not getting out of hand, but consumer credit is growing by more than 10pc per year, with credit cards and car loans growing particularly fast.

“Most financial stability indicators are neither particularly elevated nor subdued. Nevertheless, there are pockets of risk that warrant extra vigilance,” he said at the publication of the latest Financial Stability Report. “Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. And lenders may be placing undue weight on the recent performance of loans in benign conditions.” As well as holding more capital against credit card debt and consumer loans, banks have also been warned that next month the Financial Conduct Authority and the Prudential Regulation Authority will also publish new affordability rules to make sure customers are likely to be able to repay their debts.

The situation is deemed relatively urgent — one part of an annual assessment of the losses which banks could make in a hypothetical recession has been brought forwards this year. Instead of publishing the results in November, the consumer credit part of the so-called stress tests will be revealed in September. That decision reflects the short-term nature of consumer loans. Short-term loans can also pose a threat to financial stability because households take them less seriously than mortgages. Consumer debts only amount to one-seventh of the total of mortgage debt, but they account for 10-times the amount of bad loans which banks write off.

That also has implications for the wider economy — a household in financial trouble will cut spending deeply to make sure it can still pay the mortgage, but is less worried about credit cards. Mortgage lending standards are also under the spotlight. The Financial Policy Committee told banks in 2014 that they should assess whether borrowers could still afford their mortgages if the Bank of England’s base rate went up by three%age points. Most banks calculated this by adding 3%age points to their standard variable rates, but some lenders said that in this scenario they might not pass the full cost onto customers. Officials reject this interpretation and have ordered banks to add the full 3 points to their rates when judging the affordability.

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First you lower rates, then you take measures against the fully predictable consequences.

UK Banks Ordered To Hold More Capital As Consumer Debt Surges (G.)

The Bank of England is to force banks to strengthen their financial position in the face of a rapid growth in borrowing on credit cards, car finance and personal loans. The intervention by Threadneedle Street means banks will need to set aside as much as £11.4bn of extra capital in the next 18 months and is intended to protect the financial system from the 10% rise in consumer lending over the year. The Bank is also bringing forward the part of the annual stress tests on banks that scrutinises their exposure to consumer credit by two months to September. The Bank’s Prudential Regulation Authority and the City regulator, the Financial Conduct Authority, will also publish next month how they expect lenders to treat borrowers in the consumer credit market.

The Bank’s half-yearly assessment of risk to financial markets also set out measures to rein in the riskiest mortgage lending, highlighted the risks associated with the UK’s exit from the EU and said commercial property prices were “at the top end of sustainable valuations”. While the Bank found risks to financial stability were neither “particularly elevated nor subdued” it warned that there “pockets of risk that warrant vigilance”. “Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. And lenders may be placing undue weight on the recent performance of loans in benign conditions,” said Mark Carney, governor of the Bank of England.

Carney said the decision to call on banks to hold more capital – which is largely a rejig of their current resources rather than raising new funds – was taken after domestic risks returned to “standard” levels. A year ago, after the Brexit vote, the Bank had relaxed regulatory requirements on banks – using new tools it was given after the financial crisis – and is now reversing that decision.

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“..if we adopt, as in the U.S., a broader concept of unemployment (which in the U.S. they call U6) then unemployment in the euro area is at 18% whereas it is at 9% in the case of the U.S..”

ECB VP: Slack In European Economy Looks Worse Than We Thought (CNBC)

The difference between current and potential levels of output in the euro area economy could be greater than the ECB originally thought, its vice president, Vitor Constancio, warned on Tuesday. “What we see, what we observe is that domestic factors of inflation starting with wage and cost developments and then also price decisions are not responding the way we would expect in view of our more common estimates of this slack. So we have to ask ourselves – are these measures of the slack of the economy correct?,” explained Constancio, speaking to CNBC from the ECB Forum on central banking in Sintra. The board had therefore begun to ask themselves whether other variables should instead be considered to establish a more accurate view of the current economic situation.

“The unemployment rate now is 9.3% according to the normal international standard of measuring employment …. But if we adopt, as in the U.S., a broader concept of unemployment (which in the U.S. they call U6) then unemployment in the euro area is at 18% whereas it is at 9% in the case of the U.S. which would imply that the slack is then bigger than we could judge some time ago,” he noted. “That being the case it justifies fully what the president (Mario Draghi) said at the end of his speech (on Tuesday) that we need persistence. If we want to bring inflation to our target of below but close to 2% then we have to persist in the type of monetary policy that we been adopting,” he added.

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Earlier, we saw Yellen vs Minsky. Here’s China’s Minsky moment.

Chinese Satellite Data Hint At Ominous Manufacturing Slowdown (ZH)

A reading published by San Francisco-based SpaceKnow Inc. which uses commercial satellite imagery to monitor activity across thousands of industrial sites signaled deterioration in the country’s manufacturing sector for the first time since August. The gauge, known as the China Satellite Manufacturing Index, fell to 49.6, below the 50 break-even level. The index incorporates satellite data from thousands of industrial sites across China. Satellite imagery has often proved eerily presceint in the recent past: In the US, satellite data analyzing activity in retailers’ parking lots pointed to significant activity weakness at core US retail locations, even as sentiment indicators were suggesting an uptick in sales following the election. Meanwhile, small- and medium-sized enterprises showed the lowest level of confidence in 16 months, and conditions in the steel business remained lackluster, according to Bloomberg.

Some other indicators have been slightly more sanguine: sales-manager sentiment stayed positive, and outlook of financial experts recovered. Still, data suggest that output in China’s economy slowed during the second quarter after a strong start to the year, with investment slowing, some credit becoming tighter and signs that curbs on the country’s property market are starting to have an impact. Should growth continue to slow, China’s leaders would find themselves in an awkward position, with the country’s twice-a-decade leadership transition expected to occur this fall when the 19th Party Congress convenes to appoint its new senior leadership. It’s widely believed that China’s President Xi Jinping will begin serving his second five-year term.

[..] [That] could be the spark that ignites China’s “Minsky moment” – the financial cataclysm that Kyle Bass and other perma-china-bears have been waiting for when China’s overleveraged market crumbles to dust – might finally be in the offing. Indeed, though China’s markets have been relatively calm recently, the PBOC’s attempts to tighten liquidity have sparked some instability in recent months. Back in March, the central bank had to engage in mini bailouts when a jump in interbank rates caused some small regional lenders to default on their interbank loans after money market rates shot higher. Meanwhile, China’s weakening credit impulse should give any China bulls pause.

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Completely nuts. Feels like they’re looking to get tossed out.

UK Government Refuses To Pay For Fireproof Cladding (Ind.)

Councils face bills running to hundreds of millions of pounds to make tower blocks safe after the Government said it would not guarantee extra money to pay for vital work to prevent a repeat of the Grenfell disaster. Ninety-five high-rise buildings in 32 local authority areas have failed safety tests, the Department for Communities and Local Government (DCLG) said yesterday, with hundreds more blocks still to be tested. The findings prompted Theresa May to announce a “major national investigation” into the use of cladding on high-rise blocks, with every sample so far tested in the wake of the Grenfell found to be unsafe. But despite emergency fire safety checks being carried out nationwide under central government direction, councils will not be reimbursed for refurbishment work carried out.

A DCLG spokesperson said there was “no guarantee” of central government funding and that it would be “up to local authorities and housing associations to pay” for the work needed to ensure residents’ safety. The spokesperson said financial support would be considered on a “case by case” basis for those that could not afford to carry out the necessary work, but did not clarify what the criteria for that consideration would be. The announcement was met with severe criticism from some of the councils affected, with local authorities already having their budgets severely squeezed after years of austerity measures. Julie Dore, leader of Sheffield City Council, which is among the authorities to have discovered unsafe cladding, said “starved” councils would be forced to make cuts to other areas, including schooling, if central government did not help with costs.

“Local authorities have been starved of money over the past seven years. Our spending power has decreased,” she said. “There is no way we can afford to reclad our tower blocks. If we have to find that money, it will come from other projects, from investing in the fabric of our schools, capital investment in our infrastructure, the money has to come out of that. And it can’t really be done. “I say absolutely, categorically that the Government should pay. If they can find £1bn to send to Northern Ireland, that gets more spending per capita than anywhere else, to buy 10 votes, then these people, living in high-rise towers, deserve better.”

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There is no serious press left in the US to get to the bottom of this.

Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)

Nothing better illustrates the political bankruptcy of the Democratic Party—for all progressive intents and purposes—than California State Assembly Speaker Anthony Rendon’s announcement on Friday afternoon that he was going to put a “hold” on the single-payer health care bill (SB 562) for the state, effectively killing its passage for at least the year. The Democratic Party finds itself in a bind in California. They hold the governorship and a supermajority in both houses of the legislature, so they can pass any bill they want. SB 562 had passed the Senate 23-14. There was enormous enthusiasm among California progressive activists, who [..] were working tirelessly, and hopeful of success. After all, Bernie’s people were taking over the California party from the bottom since the election.

I recall a night of drinking last year with an old friend who has been spearheading that effort, as he rebuffed my skepticism, and insisted that this time there would be a really progressive takeover of the California party, and single-payer would prove it. After all, once enough progressive pressure was been put on the legislators, the bill would be going to super-progressive Democratic Governor, Jerry Brown, who had made advocacy of single-payer a centerpiece of his run for President in 1992, saying: “We treat health care not as a commodity to be played with for profit but rather the right of every American citizen when they’re born.” Bernie foretold. Unfortunately, today that Governor is, according to Paul Song, co-chair of the CHC, “doing everything he can to make sure this never gets on his desk.”

And it won’t. Unfortunately, all the Democrats like Rendon, who “claims to be a personal supporter of single-payer,” will make sure that their most progressive governor is not put in the embarrassing position of having to reject what he’s been ostensibly arguing for for twenty-five years, of demonstrating so blatantly what a fraud his, and his party’s, progressive pretensions are. Thus unfolds the typical Democratic strategy: Make all kinds of progressive noises and cast all kinds of progressive votes, while carefully managing the process so that the legislation the putatively progressives putatively support never gets enacted. Usually, they blame Republican obstructionism, and there certainly is enough of that, and where there is, it provides a convenient way for Democrat legislator to “support” legislation they know will be blocked and wouldn’t really enact themselves if they could.

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Phones are as addictive as opioids.

The Human Tragedy Of Drug Abuse And Car Crashes (BBG)

More than 130,000 Americans are killed annually by preventable causes, and the number has been climbing at a faster rate recently because of opioid abuse and car crashes involving drivers distracted by mobile devices. The death count jumped more than 7% in 2015 to about 146,600, according to a report by the National Safety Council Tuesday. The council said lawmakers often overlook simple solutions that could avoid deaths on the roads or in people’s homes, while public attention is focused on events that are relatively rare in the U.S., like terrorist attacks or plane crashes. Vehicle mishaps and poisonings, driven by opioid abuse, killed more than 80,000 people combined in 2015. Preventable accidents cost society about $850 billion a year, according to the group.

“Culturally, we’re numb to these things,” NSC President Deborah Hersman said in a phone interview. “Why are these deaths any less tragic or important? We should be talking about these things every day because they affect our families.” The toll from opioids is worsening, partly because so many patients become dependent on painkillers, often turning to street drugs like heroin. Almost one in four people on Medicaid, the U.S. health program for the poor, received powerful and addictive opioid pain medicines in 2015, Express Scripts Holding Co. said this month. The council said lawmakers should tighten oversight of the distribution of prescription medications and improve access to drugs that can reverse overdoses and treat addiction.

[..] “We need to make distracted driving socially unacceptable,” Tom Goeltz, whose daughter Megan was killed in a car crash last year, said at a news conference held by the NSC Tuesday. “This tragedy could have easily been prevented.” Goeltz, a Minnesotan who works to help industrial companies avoid accidents, said his daughter was pregnant when her car was struck by a distracted driver. “As a safety consultant with over 30 years of experience, I was powerless to save my daughter,” he said. “We all know people that have been killed on our roads. We all know somebody. How is this acceptable to us? We need to do more. You don’t want to be a part of this club.”

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“..Google has 90 days to come up with its own solution [..]. If it doesn’t do that, the EU will fine it up to 5% of the entire company’s daily global revenue.”

Search Results Show Why Europe Is Mad at Google (BBG)

Europe hit Alphabet’ Google with a $2.7 billion fine on Tuesday, saying it broke antitrust laws by favoring one of its search services over rival websites. The case centers around Google Shopping ads, which place color pictures, prices and links to products that consumers have typed into its search engine. The EU’s Competition Chief Margrethe Vestager said Google’s search algorithms should treat its own Shopping service the same way as other price-comparison sites. What exactly does this look like in practice? Here’s a walk-through of what the EU is so upset about. This is for desktop computer searches. On phones, there’s less digital real estate, leaving even less space for competitors. Before we start, it’s important to note that Google argues customers aren’t that interested in clicking through to other price comparison sites and want to go directly to retailers’ sites from Google. It denies any wrongdoing and is considering an appeal.

Google Shopping Today: The screenshot below shows results for a search in Germany for “gas grill.” Five Google Shopping ads take up the most valuable part of the page at the top. No other comparison shopping websites show up in the first couple of links. Scrolling down, you see the first result for a competing price comparison service – Idealo – come in at number six. There’s another at number 11, Moebel24. But that link is listed as an ad, meaning Moebel24 had to pay for that placement, even though it’s near the bottom of the page. The EU says this is bad because consumers click far more often on results appearing higher up in Google’s search results. Even on a desktop computer, the top ten results on page 1 generally get about 95% of all clicks on generic search results (with the top result receiving about 35% of all clicks), the European Commission said on Tuesday.

2014 Proposal: The EU’s Google investigation has been going for years. Vestager’s predecessor tentatively struck a deal with Google in 2014 for a hybrid model that set aside space in those top Shopping search boxes for other price comparison websites. But the agreement fell apart when competitors realized they had to pay for that placement. [..] What could Google do to satisfy Europe’s demands this time? Vestager said Google has 90 days to come up with its own solution, as long as it gives equal treatment to competing price comparison sites. If it doesn’t do that, the EU will fine it up to 5% of the entire company’s daily global revenue. [..] Google would have to sacrifice space currently occupied by its own Shopping ads to make the latter idea work, cutting into a highly profitably and growing revenue stream.

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US anti-trust laws are strong enough to counter this. But you need politicians to apply them.

‘Google, Facebook Are Super Monopolies On The Scale Of Standard Oil’ (CNBC)

Google shareholders won’t be phased by the EU’s $2.7 billion fine against the company for competition abuses related to its shopping business, Elevation Partners co-founder Roger McNamee told CNBC on Tuesday. “As a shareholder of Google you’re looking at this and saying: ‘We won again,'” McNamee said. The venture capitalist spoke hours after EU regulators fined Google a record €2.4 billion ($2.7 billion), ruling that the search-engine giant violated antitrust rules for its online shopping practices. Google said it will consider appealing the decision to the highest court in Europe. “Google, Facebook, Amazon are increasingly just super-monopolies, especially Google and Facebook. The share of the markets they operate in is literally on the same scale that Standard Oil had … more than 100 years ago – with the big differences that their reach is now global, not just within a single country,” he said on “Squawk Alley.”

The fine is not large enough to change Google’s behavior, he added. “The only thing that will change it is regulations that actually say you can or can’t do something.” McNamee said Google’s business model isn’t structured in a way that allows for competition. “The way that Google’s product works makes its anti-competitive behavior much more obvious — but do not underestimate how powerful Facebook’s monopoly has been to boosting Instagram and WhatsApp,” he said. The competition issue with the big tech companies extends beyond the EU into the U.S., he said. “They do stifle innovation. They stifle entrepreneurship. … You can see this even in Silicon Valley it’s very hard for any of the unicorn generation of companies to actually reach successful critical mass because, you know, one of their competitors gets acquired by Google and Facebook and then the category is over,” said McNamee. “I think it’s a big policy question the world is going to have to deal with over the next few years,” he said.

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The problem is not even the duration, France and Belgium are worse. The problem is what Greeks are left with after taxes are paid, which is much less than the others.

Greeks Work 203 Days Out Of The Year To Pay Taxes (K.)

Greeks will work an average of 203 days this year to pay taxes to the state and social insurance contributions, according to research conducted by the Dragoumis Center for Liberal Studies (KEFIM) to raise awareness about tax freedom day – the first day of the year in which a country has theoretically earned enough income to pay its taxes. In the case of Greece, this day will be on July 23, which means that Greeks will have worked 15 days more than last year, when tax freedom day arrived on July 7. The only two European Union countries in which tax freedom day will arrive after that in Greece are France and Belgium. Cyprus celebrated its tax freedom day on March 29, while Malta and Ireland did the same on April 18 and 30 respectively. Bulgaria was next on May 18 before Finland on June 22.

KEFIM, which conducted research into the topic for a third straight year, said citizens are working an increasing number of days each year to meet their tax obligations and, compared to 2006, Greeks now work two months more to this end. Referring to the results of the research, financial analyst and member of KEFIM’s scientific council Miranda Xafa said the “government managed to achieve a primary surplus by tax hikes and not through spending cuts.” Xafa also said that for every 100 euros a self-employed professional makes, 82 go toward tax and and other contributions. New Democracy vice president Adonis Georgiadis said that Greece had “lost another month because of overtaxation.” “Our aim when we become the government is to reverse the trend,” he said.

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Today is day 12 of the garbage strike. Weekend weather forecast up to 44ºC (111ºF). Some judge needs to declare a public health emergency, if Tsipras is too scared to do it.

Greek Garbage Collectors Reject Compromise As Trash Piles Up (AP)

Greece’s municipal garbage collectors on Tuesday rejected a government compromise offer and decided to continue an 11-day protest that has left mounds of festering refuse piled up across Athens amid high temperatures during the key summer tourism season. Municipal workers union head Nikos Trikas said the protest will go on as planned until Thursday at least, after an inconclusive meeting with Prime Minister Alexis Tsipras. The union is pressing the left-led government to honor a pledge to provide permanent jobs for long-term contract workers, and rejected Tsipras’ proposals as a “slight” but unsatisfactory improvement on past offers. Greek authorities have warned that the uncollected trash poses a public health risk ahead of a heat wave forecast for later this week.

Tourism Minister Elena Kountoura urged the union to reconsider, arguing that the protest “endangers public health, and is bad for tourism as well as the country’s international image.” The Athens Trade Association has also called on the two sides to reach a compromise, warning that piles of garbage would discourage tourists from traveling to the Greek capital. Tourism is a vital source of revenue for Greeces battered economy. Although not technically on strike most of the time, municipal workers have been blockading garages where municipal trash collection trucks operate from, as well as landfill sites across the country. Trikas said that unions will review their position Thursday, when they have called a 24-hour strike. He also pledged to increase emergency crews that the union has on duty to ensure that the garbage mounds do not mushroom out of all control.

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Where are Merkel and Macron? Why are their voters not demanding they tackle the issue?

At Least 24 Migrants Die Off Libya in 48 Hours, More Than 8,000 Rescued (R.)

Red Crescent volunteers recovered the bodies of 24 migrants on Tuesday that were washed up in an eastern suburb of the Libyan capital, Tripoli, as large-scale rescues were made in the Mediterranean. Residents in Tajoura district said the bodies had begun washing up at the end of last week. Several had been partially devoured by stray dogs, according to a local coast guard official. The toll was expected to increase as the flimsy boats used to carry migrants as far as international waters normally carry more than 100 people. Three migrants died in the Mediterranean on Monday night, a German aid group said, during Italian-led rescue operations in which thousands more were pulled to safety.

About 5,000 migrants were picked up off the Libyan coast by emergency services, Italy’s navy, aid groups and private boats on Monday, and rescues were continuing on Tuesday, according to an Italian coastguard spokesman. “Despite all efforts, three people died from a sinking rubber boat” and rescue boats in the area are struggling to cope, German humanitarian group Jugend Rettet said on Facebook. Jugend Rettet (Rescuing Youth) is one of about nine aid groups patrolling seas into which people traffickers have sent more than half a million refugees and migrants on highly dangerous voyages towards Europe over the past four years. “We reached the capacity limit of our ship, while our crew is seeing more boats on the horizon. Currently, all vessels are overloaded,” Jugend Rettet added.

About 72,000 migrants arrived in Italy on the perilous route from Libya between Jan. 1 and June 21, roughly 20% more than in 2016, and more than 2,000 died on the way, according to the International Organization for Migration.

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Jun 212017
 
 June 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »
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Fred Lyon Post&Powell Union Square San Francisco 1947

 

100% Chance of Recession Within 7 Months? (DR)
The Secret Source of Eternal Australian Growth (Steve Keen)
We Need A Public Inquiry Into The Economics Profession (Pettifor)
Where Are The Empty Homes In Kensington? (Whoownsengland)
Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)
Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)
House Republicans Block Russia Sanctions Bill (ZH)
We Are Inches From A New World War (Medium)
Iran Slams Tillerson Call For Regime Change (RT)
The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)
EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)
Europe’s Unserious Plan for Greece (BBG)
Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)
At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

 

 

The numbers say it.

100% Chance of Recession Within 7 Months? (DR)

We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”

Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.

But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.

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Tons of graphs from Steve. I find his use of ‘debt and ‘credit’ as seemingly separate terms a bit confusing.

The Secret Source of Eternal Australian Growth (Steve Keen)

Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).

Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).

Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.

Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.

 

Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).

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A valiant effort, and economics should be redefined for sure, but Ann shirks far too close to assuming Brexit was about economics only and purely. Tempting when you’re an economist, but…

We Need A Public Inquiry Into The Economics Profession (Pettifor)

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.

The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

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If you allow for homes to be speculative ‘assets’, you will end up with homeless people.

Where Are The Empty Homes In Kensington? (Whoownsengland)

As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.

In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.

The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.

The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:

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Science and technology will not enforce human rights. Moral values will.

Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.

“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”

Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”

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Wherever you live in the world, if you think things are a mess where you are, spare a thought for Brazil.

Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.

If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.

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They’ll pass at some point.

House Republicans Block Russia Sanctions Bill (ZH)

After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.

“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.

“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”

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We’re still not clued in to how dangerous ‘our own’ are.

We Are Inches From A New World War (Medium)

This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.

This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.

“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.

We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen

It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.

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The opposite of what America needs.

Iran Slams Tillerson Call For Regime Change (RT)

Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.

Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.

[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.

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No surprise here.

The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.

In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.

So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.

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Complete nonsense: “..The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060

EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”

Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.

[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.

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Bloomberg, too, will first have to understand that Greece does not have €326 billion in debt, and why it is people state that regardless.

Europe’s Unserious Plan for Greece (BBG)

The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.

In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.

It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.

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While taxes have risen. An endless hole.

Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.

The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.

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So fitting. Though, World Refugee Day is the most cynical expression possible of the disaster we’ve created.

At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.

The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.

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Jun 182017
 
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Fred Lyon Land’s End San Francisco 1953

 

Global Inequality Much Worse Than Previously Thought (Ind.)
The US Is Where the Rich Are the Richest (BBG)
UK Wealth Gap Rises As Home Ownership Falls (G.)
UK Debt Bubble Returns Millions To Days Of 2008 Crash (G.)
Macron Set To Dynamite Parties That Have Dominated For Half A Century (AFP)
Secret Plot To Oust Theresa May If She Fails To Deliver ‘Hard’ Brexit (Tel.)
Arrogance: The Greeks Had A Word For It (G.)
Illinois Finances In ‘Massive Crisis Mode’ (AP)
Metastability (Kocic)
Young Greeks Can’t Name EU Achievements (K.)
Abandoned and Abused: Syrian Refugee Children On Greek Detention Island (G.)

 

 

It’s like the mob rules the world.

Global Inequality Much Worse Than Previously Thought (Ind.)

The gap between rich and poor across the globe is even wider than we currently think, according to a new analysis. Official estimates of inequality only take into account the money that the tax man sees, according to a recent paper by economists, Annette Alstadsæter, Niels Johannesen and Gabriel Zucman. But recent leaks of vast caches of documents from secretive jurisdictions such as Panama and Switzerland have given a more accurate picture of the sheer scale of global tax evasion – most of it carried out by very wealthy people. The three economists have used this trove of data to make a new assessment of the true wealth of the planet’s richest people, and thus a potentially more accurate measure of just how much richer they are than those at the bottom.

Until now, most assessments of wealth have relied on random tax audits, which do not pick up hidden offshore assets. This would not impact measurements global inequality if the poor dodged paying their dues as much as the rich did. In fact the rich evade many multiples more than the poor, according to Alstadsæter, Johannesen and Zucman. They studied three sets of documents: the Panama Papers, leaked from a Central American law firm which helped people set up tax haven companies; the Swiss Leaks, which revealed the dealings of HSBC’s Swiss subsidiary; and Scandinavian tax records, which give an unusually detailed picture of the income of citizens of that region. By combining the data sets they were able to make an estimate of the true size and scope of tax evasion, and thus inequality.

They found the wealthiest 0.01% in Norway, Sweden and Denmark evaded 30% of their personal taxes on average, compared to just 3% in the total population. In Norway, which has particularly detailed data, the super-rich, ie the top 0.1% of the wealth pyramid, are 30% wealthier than previously thought, when their hidden offshore assets are taken into account. This means they actually own 10% of all wealth, not the 8% previously thought. The authors posit that the scale of tax evasion is likely to be even worse in many other countries which have far less stringent tax disclosure rules. Only when we can truly assess how much personal wealth is stashed offshore will the scale of global equality be known, the economists say.

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It’s also where this won’t last. You CAN go to far.

The US Is Where the Rich Are the Richest (BBG)

It’s an excellent time to be rich, especially in the U.S. Around the world, the number of millionaires and billionaires is surging right along with the value of their holdings. Even as economic growth has slowed, the rich have managed to gain a larger slice of the world’s wealth. Globally, almost 18 million households control more than $1 million in wealth, according to a new report from the Boston Consulting Group. These rich folk represent just 1% of the world’s population, but they hold 45% of the world’s $166.5 trillion in wealth. They will control more than half the world’s wealth by 2021, BCG said. Rising inequality is of course no surprise. Reams of data have shown that in recent decades the rich have been taking ever-larger shares of wealth and income—especially in the U.S., where corporate profits are nearing records while wages for the workforce remain stagnant.

In fact, while global inequality is simply accelerating, in America it’s gone into overdrive. The share of income going to the top 1% in the U.S. has more than doubled in the last 35 years, after dropping in the decades after World War II (when the rich were taxed at high double-digit rates). The tide shifted in the 1980s under Republican President Ronald Reagan, a decade when “trickle-down economics” saw tax rates for the rich fall, union membership shrink, and stock markets spike. Now, those policies and their progeny have helped put 63% of America’s private wealth in the hands of U.S. millionaires and billionaires, BCG said. By 2021, their share of the nation’s wealth will rise to an estimated 70%. The world’s wealth “gained momentum” last year, BCG concluded, rising 5.3% globally from 2015 to 2016.

The firm expects growth to accelerate to about 6% annually for the next five years, in both the U.S. and globally. But a lot of that can again be attributed to the rich. The wealth held by everyone else is just barely growing. Where is all this wealth coming from? The sources are slightly different in the U.S. compared with the rest of the world. Globally, about half of new wealth comes from existing financial assets—rising stock prices or yields on bonds and bank deposits—held predominately by the already well-off. The rest of the world’s new wealth comes from what BCG classifies as “new wealth creation,” from people saving money they’ve earned through labor or entrepreneurship. In the U.S., the creation of “new” wealth is a minor factor, making up just 28% of the nation’s wealth increase last year. It’s even lower in Japan, at 21%. In the rest of the Asia Pacific region, meanwhile, two-thirds of the rise is driven by new wealth creation.

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Whenever you see “rising pension wealth” anywhere these days, feel free to laugh out loud.

UK Wealth Gap Rises As Home Ownership Falls (G.)

A fall in home ownership is fuelling the return of rising wealth inequality across Britain, it has emerged. Booming house prices in the run-up to the financial crisis had led to a decade-long fall in the uneven distribution of the country’s wealth. However, comprehensive new analysis of the UK’s wealth divisions has now found that the trend has gone into reverse. The study by the Resolution Foundation thinktank found that just a tenth of adults own around half of the nation’s wealth. The top 1% own 14% of the total. It warned that even this figure may be an underestimate because of the difficulties in calculating the assets of the super-rich. By contrast, 15% of adults in Britain have either no share of the nation’s record £11.1 trillion of wealth, or have negative wealth. The study found that wealth is distributed far less evenly than earnings or household income.

The thinktank measured wealth inequality using the “Gini coefficient”, with 0 being perfect wealth equality and 1 representing a society where a single person has it all. Wealth inequality was almost twice as high as earnings inequality. Despite the perception that wealth inequality has been rising for decades, the research found that the inequality of net financial and property wealth fell steadily between 1995 and 2005, with the Gini coefficient falling from 0.71 to 0.64. The fall was driven by high and rising home ownership, with more households benefiting from the pre-crisis property price boom. As a result, the proportion of property wealth owned by the bottom four-fifths of adults grew from 35% in 1995 to 40% in 2005.

However, home ownership has been falling steadily since the mid-2000s, with the wealth held by the bottom four-fifths of the population dipping as a result. Since the financial crisis, home ownership among the least wealthy 50% of the population has fallen by about 12%. Meanwhile, it has risen by 1% for the wealthiest tenth. The shift in property ownership further towards the richest has contributed to the widening of wealth inequality. Including private pensions, the Gini coefficient rose from 0.67 to 0.69 from 2006-08 to 2012-14. Total wealth across Britain, which includes private pensions, property, financial and physical wealth, rose in the wake of the financial crisis from £9.9tn in 2006-08 to £11.1tn in 2012-14. This has been fuelled by rising pension wealth. [..] Private pensions account for 40% of the wealth total – the largest share at £4.5tn.

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Add this to all the other issues. A gutted society.

UK Debt Bubble Returns Millions To Days Of 2008 Crash (G.)

Charities and financial advisers are calling on the government to use the Queen’s speech to address the “bubble” of unmanageable debt that households are rapidly accumulating. Unsecured consumer credit – including credit cards, car loans and payday loans – is this year expected to hit levels not seen since the 2008 financial crash. There has been concern in the Bank of England that consumer spending is being underpinned by debt, amid comparisons to the run-up to the financial crash. In addition, figures published last week show inflation reached a four-year high in May, meaning shopping is getting increasingly expensive, further intensifying the squeeze on household budgets.

Debt advisers are urging the government to make good on fulfil a promise in the Conservative manifesto to introduce a scheme where those in serious debt are protected by law from further interest, charges and enforcement action for up to six weeks. Many campaigners would like to see this extended further, to up to a year. “It would be excellent if the government in the Queen’s speech committed to helping households who are struggling with debt. It really is one of the great problems of the time that politicians have to grapple with,” said Peter Tutton, head of policy at debt charity StepChange. “We are seeing more and more households struggling just to make basic ends meet – to pay their rent, to pay their council tax, to pay their gas bill. We would like to see the government say, ‘we need to do something about this’.”

The charity estimates that 2.9 million people in the UK are experiencing severe financial debt in the aftermath of the recession. One reason is that many who lost their jobs found new jobs that were less well paid. Sara Williams, the author of Debt Camel, a blog advising on money problems, said: “The recent large increases in consumer credit … look alarming to debt advisers – very much like a bubble building up.”

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I still want to see who paid for all this. It’s too fast and furious to be spontaneous.

Macron Set To Dynamite Parties That Have Dominated For Half A Century (AFP)

French voters went to the polls on Sunday for parliamentary elections set to hand a landslide victory to the centrist party of President Emmanuel Macron which would complete his stunning reset of national politics. The new assembly is due to be transformed with a new generation of lawmakers – younger, more female and more ethnically diverse – winning seats in the afterglow of Macron’s success in presidential elections last month. The scale of the change is forecast to be so large that some observers have compared the overhaul to 1958, the start of the present presidential system, or even the post-war rebirth of French democracy in 1945. It is also entirely unexpected: Macron was unknown three years ago and initially given little chance of emerging as president, but he and his 15-month-old Republic on the Move (REM) party have tapped into widespread desire for change.

“It’s like a science fiction movie for me,” REM candidate Beatrice Failles, a weapons inspector, writer and community activist, told AFP this week during campaigning in Paris. REM and its allies are forecast to win 400-470 seats in the 577-strong parliament, one of the biggest majorities post-war that would give the pro-EU Macron a free hand to implement his business-friendly programme. Sunday’s voting is the decisive second round of the election after a first round last weekend which was topped by REM. If confirmed, the victory will come at the expense of France’s traditional parties, the rightwing Republicans and Socialists, but also the far-right National Front which faces major disappointment. The Socialists are set to be the biggest victim of voters’ desire to reject establishment figures associated with years of high unemployment, terror attacks and lost national confidence.

Pollsters predict the party faces financial ruin with its strength in parliament falling from nearly 300 seats to around 20 after their five years in power under president Francois Hollande. The main concern for observers and critics is the likely absence of any political counterweight to Macron, leading some to forecast that opposition could be led through street protests or in the media. “Desperately seeking an opposition,” said the front page of Le Parisien newspaper on Saturday. [..] In the first round, REM won 32% of the total number of votes cast, but this represented only about 15% of the total number of registered voters. Around half of REM’s candidates are virtual unknowns drawn from diverse fields of academia, business or local activism. They include a mathematician, a bullfighter and a former Rwandan orphan. “You could take a goat and give it Macron’s endorsement and it would have good chance of being elected,” political analyst Christophe Barbier joked recently.

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Brexit negotiations will be insane. Multiple governments will fall over this.

Secret Plot To Oust Theresa May If She Fails To Deliver ‘Hard’ Brexit (Tel.)

Theresa May will face a “stalking horse” challenge to topple her as Prime Minister if she waters down Brexit, senior Tories have warned. Leading Eurosceptic MPs have told The Telegraph they are prepared to mount an immediate leadership challenge if Mrs May deviates from her original plan. The revelation comes after a torrid week for the Prime Minister in which she faced fierce criticism for her handling of the Grenfell Tower catastrophe. Conservative MPs – including Cabinet ministers – have concluded that Mrs May cannot lead them into the next election and they are now discussing when she could go. Eurosceptic MPs have warned that any attempt to keep Britain in the customs union and single market or any leeway for the European Court of Justice to retain an oversight function will trigger an “overnight” coup.

The plot has been likened to Sir Anthony Meyer’s 1989 challenge against Margaret Thatcher. One influential former minister said: “If we had a strong signal that she were backsliding I think she would be in major difficulty. The point is she is not a unifying figure any more. She has really hacked off the parliamentary party for obvious reasons. So I’m afraid to say there is no goodwill towards her.” They added: “What we would do is to put up a candidate to run against her, a stalking horse. You can imagine who would do it. It would be a rerun of the Margaret Thatcher scenario, with Anthony Meyer. Of course Meyer had no chance at all, but she lost support and she was gone. Bear in mind that she was a hell of a lot more popular than the current Prime Minister.” Another former minister said: “If she weakened on Brexit, the world would fall in… all hell would break loose.”

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Hubris. England.

Arrogance: The Greeks Had A Word For It (G.)

“I’m not absolutely certain of my facts, but I rather fancy it’s Shakespeare – or, if not, it’s some equally brainy lad – who says that it’s always just when a chappie is feeling particularly top-hole, and more than usually braced with things in general that Fate sneaks up behind him with a bit of lead piping.” So says the immortal Bertie Wooster at the start of the PG Wodehouse story Jeeves and the Unbidden Guest, and it is fairly certain that the hapless hero, in introducing his “fairly rummy” anecdote, is raking back through his sketchily absorbed education to reach for the word “hubris”, a word inherited from those brainy lads, the Greeks.

In the past week of political turmoil, “hubris” is a word that has been exercised rather more than usual. So have other Greek words, most notably “chaos” (the inchoate matter out of which the universe was formed, according to the poet Hesiod). And “crisis”, which began life meaning “a picking apart” or “a separation”; also a bringing to trial, or a moment of judgment. Though whether a universe will be formed from the current chaos, whether a judgment or a moment of clear-eyed seeing will drop neatly out of our present crisis, remains very much to be seen.

Bertie Wooster’s definition of hubris is a perfectly good one as far as our rather limited modern usage of the word goes. The lead piping came for the Tories, first in the shape of an exit poll on election night and, since then, perhaps in their slow, shocked and wholly inadequate reaction to the catastrophe at Grenfell Tower. But hubris, like chaos and crisis, began with a rather different meaning. For the Greeks, it did not simply signal that pride goes before a fall but, rather, something stronger and more morally freighted. Hubris described an act intentionally designed to dishonour its victim. Hubris was something expressly calculated to cause shame to the weak. Hubris was tinged with violence. Hubris was excessive and brutal.

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The first of many. I know I’ve said that before, but these things can be hidden, until they cannot.

Illinois Finances In ‘Massive Crisis Mode’ (AP)

It’s a new low, even for a state that’s seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to “junk” if there’s no budget before the next fiscal year begins July 1. Rauner on Thursday said he was calling lawmakers back to Springfield for a special session, after the Legislature adjourned May 31 without approving a state spending plan — the third straight year lawmakers have been unable to agree on a budget. Legislators are due at the Capitol on Wednesday, and Rauner said the session will continue through June 30 or until the two sides have a deal.

Lawmakers from both parties have acknowledged Illinois needs to raise taxes to make up for revenue lost when a previous tax hike expired, leaving the state on pace to take in $6 billion less than it is spending this year — even without a budget. Rauner, a former businessman who is seeking a second term in 2018, wants Democrats to approve changes he says are needed to improve Illinois’ long-term financial health before he’ll support a tax increase. Among them are term limits for lawmakers, a four-year property tax freeze and new workers’ compensation laws that would reduce costs for employers. Democrats say they’re willing to approve some items on Rauner’s list, but that what he’s demanding keeps changing or goes too far and would hurt working families. Senate Democrats also note that they approved a $37 billion budget with $3 billion in cuts and an income tax increase in May. The House has not taken up that plan.

In the absence of a budget, funding has been reduced or eliminated in areas such as social services and higher education. Many vendors have gone months without being paid. And increasingly, they’re filing lawsuits to try to get paid. The courts already have ruled in favor of state workers who want paychecks, as well as lottery winners whose payouts were put on hold. Transit agencies have sued, as has a coalition of social service agencies, including one that’s run by Rauner’s wife. Health care plans that administer the state’s Medicaid program also asked a federal judge to order Mendoza’s office to immediately pay $2 billion in unpaid bills. They argued that access to health care for the poor and other vulnerable groups was impaired or “at grave risk” because the state wasn’t paying providers, causing them to leave the program.

Judge Joan Lefkow ruled June 7 that Illinois isn’t complying with a previous agreement to pay the bills and gave attorneys for the providers and the state until Tuesday to work out a level of payment. Mendoza says whatever that amount will be, it will likely put Illinois at the point where 100% of revenues must be paid to one of the office’s “core priorities,” such as those required by court order. And if this lawsuit doesn’t do it, the next court ruling against the state will. Then, she’s not sure what will happen, other than more damage. “Once the money’s gone, the money’s gone, and I can’t print it,” Mendoza said.

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A very useful concept. Reference to Minsky would be in order, though.

Metastability (Kocic)

Big changes threaten to explode not when uncertainty begins to rise, but when it is withdrawn. Excessive determinism is almost always the biggest enemy of stability. This seeming contradiction is behind the concept of metastability which captures the mode of market functioning in the last years. Imagine you have to balance a long stick on your finger. By placing it vertically on your fingertip, the stick could fall either left or right from its initial position because standing upright is unstable. However, in trying to keep the stick vertical, you instinctively (and randomly) wiggle your finger. The added randomness (noise) acts as a stabilizer of an otherwise unstable equilibrium. So long as the noise is administered carefully, the stick remains vertical, or metastable. The withdrawal of noise becomes destabilizing.

In general, there are three types of equilibria to distinguish: stable, unstable and metastable. The bottom of the valley is stable; top of the hill is unstable; a dimple at the top of the hill is metastable. Metastability is what seems stable, but is not – a stable waiting for something to happen. Avalanche is a good example of metastability to keep in mind – a totally innocuous event can trigger a cataclysmic event (e.g. a skier’s scream, or simply continued snowfall until the snow cover is so massive that its own weight triggers an avalanche). Complacency is a source of metastability. It has a moral hazard inscribed into it. Complacency encourages bad behavior and penalizing dissent – there is a negative carry for not joining the crowd, which further reinforces bad behavior.

This is the source of the positive feedback that triggers occasional anxiety attacks, which, although episodic, have the potential to create liquidity problems. Complacency arises either when everyone agrees with everyone else or when no one agrees with anyone. In these situations, which capture the two modes of recent market trading, current and the QE period, the markets become calm and volatility selling and carry strategies define the trading landscape. But, calm makes us worry, and persistent worrying causes fear, and fear tends to be reinforcing. Persistence of low volatility causes misallocation of capital. This is how complacency leads to buildup of risk – it is the avalanche waiting to happen. For a given level of uncertainty, on the risk/reward curve investors settle at a point that corresponds to their risk limits. This position is determined by the volatility cone on the risk frontier, its width commensurate with volatility.

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Insanely positive still.

Young Greeks Can’t Name EU Achievements (K.)

An 84% majority of Greeks aged between 16-25 say that peace is the most important result of the country’s membership in the EU, according to an upcoming survey, which also found that 24% are unable to name three or more achievements of the 28-member club. The online survey, which will be published in full on Wednesday, was conducted by pro-European think tank To Diktio (The Network) with the help of MAD TV on a sample of 1,173 high-school and university students using a multiple-choice questionnaire. Asked if they think that Greece’s membership of the 28-member bloc improves their daily life, just over 37% gave a negative answer.

Whereas most of those who took part in the poll said they are in favor of closer European integration, only a minority said they consider the establishment of welfare states a significant contribution of the EU process. Meanwhile, 86% agreed it is “very significant” that they can travel, live, study or work freely across the EU, while 72% said it is positive that “we have a common strong currency which makes our transactions easier.” Finally, 83% said that the union can play a key role in “protecting fundamental rights regardless of gender, race, religion, disability or age.” Greece joined the EEC, the predecessor of today’s EU, in 1981.

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Just to add the proper insult, the picture below comes from Yuan Yang on Twitter: “Five min into this international property fair & I’ve already been offered to emigrate to the UK, Australia & get my kids into school in US”.

While Syrians kids face abuse, Greece offers passports and ‘Easy Living’ to wealthy Chinese. Mankind has fully lost its compass.

Abandoned and Abused: Syrian Refugee Children On Greek Detention Island (G.)

Rasha went missing late afternoon last Saturday. Her peers describe hanging out as normal with the 20-year-old Syrian in the Greek refugee detention camp. Then she vanished. Last Tuesday her friend Amira, 15, received a flurry of images on her phone. Rasha was lying naked in bed with a man. Superimposed upon his head were grotesque cartoon faces and an accompanying message from the anonymous caller: “I promise I will kidnap you also.” This was far from being the first threat that the teenage refugee from the Syrian city of Qamishli has received since arriving on the Aegean island of Chios six months ago. Existence in the razor-wire-fenced detention centre, a former factory known as Vial, deep within the island’s mountainous interior, is fraught for a child hoping for a fresh start in Europe, preferably the UK.

Fellow refugees intimidate her routinely. “Men say they will attack me, they try and trap us by saying don’t go to Souda [another refugee camp on the island] or go into the town. They say: ‘If I see you there, I will attack you. I will kidnap you and kill you.’” Amira is among scores of unaccompanied minors on Chios who are eligible to claim asylum in the UK under the so-called Dubs amendment. A year ago the UK government announced it would urgently offer sanctuary to a sizeable proportion of Europe’s vulnerable child refugees, a figure widely understood to be about 3,000 minors until, in February, the Home Office unexpectedly stopped the scheme after helping just 480, one child for every 130,000 UK residents. Not a single unaccompanied minor has been transferred from Greece to the UK under the Dubs scheme.

On Tuesday the last chance to reopen Dubs will be heard in the high court in London, a legal challenge that describes the Home Office’s premature closure of Dubs as unlawful and “seriously defective”. The three-day hearing holds potentially profound ramifications for Chios, which is separated by a slim strip of water from Turkey, so close that Amira can see its summer homes and factories from the island’s coast. Beyond lie the borders with Syria and Iraq from where each day people board a motley flotilla of rubber boats and dinghies to attempt the short but perilous crossing to Europe’s gateway. What those that successfully make the crossing quickly encounter could hardly be further from their aspirations of a civilised and safe world. The child refugees of Chios describe being stabbed by local people, police beatings, attacks by the far right, knife fights among drunken adult asylum seekers, and sleepless nights in flimsy tents on pebble beaches.


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Jun 162017
 
 June 16, 2017  Posted by at 10:02 am Finance Tagged with: , , , , , , , , , , ,  17 Responses »
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Pablo Picasso Dora Maar au chat 1941

 

‘It’s A ‘Scary’ Time With A Global Crisis On The Way’ (CNBC)
Angry Trump Decries Being Target Of Russia Probe (AFP)
Putin Comey Comment ‘Remark On Circus-like Russia Nonsense Gripping US’ (RT)
Theresa May Is Now Almost As Unpopular As Pre-Campaign Corbyn (YouGov)
UK Student Loan Debt Soars To More Than £100 Billion (G.)
UK Gov Still Hasn’t Submitted Brexit Papers For Talks Starting Monday (Ind.)
Germany, Austria Slam US Sanctions Against Russia (AP)
Debt Deal Gives Clarity To Markets – Greek FinMin Tsakalotos (AP)
Eurogroup Approves Greek Loans, Details Debt Relief, IMF To Join (K.)
IMF Won’t Fund Greek Bailout Until It Gets More Clarity On Debt Restructuring (CNBC)
Have The Greek Bailouts Worked? (BBC)
Greek Government Sabotages Its People With Water Privatization Scheme (Occupy)
Half of Athens’ Ambulances Are Out Of Action (AP)
Uptick In Migrant Arrivals Eyed With Concern By Greece’s Islanders (K.)

 

 

Louis Vuitton CEO knows it; where’s the rest?

‘It’s A ‘Scary’ Time With A Global Crisis On The Way’ (CNBC)

A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as “scary”. “For the economic climate, the present situation is…mid-term scary,” Bernard Arnault told CNBC Thursday. “I don’t think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode.”

Arnault, who is responsible for the world’s largest luxury goods company, couldn’t say whether the crash would be imminent or within the next few years, but he insisted that almost a decade on from the global financial crisis of 2008, one was due. “There has not been a big crisis for almost ten years now and since I’ve had a business I have seen crises more than every ten years, so be careful.” Longer term, however, Arnault said he was “optimistic”, pointing to advances in technology and innovation, which he said would stimulate the economy.

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The echo chamber expands.

Angry Trump Decries Being Target Of Russia Probe (AFP)

President Donald Trump responded angrily to reports he is under criminal investigation Thursday, deriding a “witch hunt” against him led by some “very bad” people. Trump responded to reports he is personally being investigated for obstruction of justice with a characteristic scorched earth defense: claiming mistreatment of historic proportions and calling into question the probity of his accusers. “You are witnessing the single greatest WITCH HUNT in American political history – led by some very bad and conflicted people!” Trump said in an early morning tweet. Trump did not directly address the allegations that he is being probed for possibly obstructing justice – a potentially impeachable offense. Nor did he deny he has entered the miniscule ranks of sitting presidents who have become the subject of a criminal investigation.

“They made up a phony collusion with the Russians story, found zero proof, so now they go for obstruction of justice on the phony story. Nice,” he wrote. Trump’s young presidency has been battered by allegations — under investigation both by Congress and the FBI — that Russia interfered to sway the 2016 election in his favor, in possible collusion with Trump’s campaign team. The FBI probe, now in the hands of special prosecutor Robert Mueller, shifted its focus to allegations of obstruction in the days after Trump fired the agency’s then director James Comey on May 9. The new allegations against Trump center on his own admission that he fired Comey because of the Russia investigation, and suggestions he asked several top intelligence officials for their help altering the direction of the inquiry.

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“..that sounds very strange when a special service chief records a conversation with the commander-in-chief and then gives it to the media via his friend.”

Putin Comey Comment ‘Remark On Circus-like Russia Nonsense Gripping US’ (RT)

Russia wants ties with the US improved, but the American domestic political situation is close to hopeless and while the Russian door is open, no one is going to lose their breath waiting to hold it open, political analyst Adam Garrie said, commenting on Putin’s statement. On Thursday, President Vladimir Putin held his annual live marathon Q&A session with the public, titled: “Direct Line with the president.” During the session, he said Russia was ready to grant former FBI director James Comey asylum. “[Comey] suddenly said that he had recorded a conversation with the president, and then gave the recording of this conversation to the media via his friend. Well, that sounds very strange when a special service chief records a conversation with the commander-in-chief and then gives it to the media via his friend. Then what’s the difference between the FBI director and Mr. [Edward] Snowden? Then he is not the head of the special services, but a human rights advocate who defends a certain position,” Putin said.

Political analyst Adam Garrie described the parallel between Comey and Snowden as “brilliant.” “It was a masterful moment for Vladimir Putin,” he told RT. “With all the lies and disinformation about the Russian president in Western mainstream media, people forget that, like most intelligent men, he’s got a wonderful sense of humor, he can be very cheeky, he can be sarcastic.” “Like Snowden, who thought he was doing a public good, Comey said that he thought he was doing the same. Should things get hairy for Comey, the doors to Russia are equally open to him.

I thought that was a very important remark by Putin on the whole sort of circus-like element of the whole Russia nonsense that’s gripping and probably will grip for some time the pundits in Washington. It just makes it clear that the entire tone of Putin’s statements about America is that we [Russia] want to get on with having good relations. It’s crucial not just bilaterally, but to the wider world, if the two of the three major superpowers do have improved relations, but that the situation domestically in America is close to hopeless – so that while the Russian door is open, no one in Russia is going to lose their breath or their cool waiting to hold it open,” Garrie said.

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She has no authority to negotiate anything anymore. That is a much bigger problem than people seem to think.

Theresa May Is Now Almost As Unpopular As Pre-Campaign Corbyn (YouGov)

New YouGov research highlights just how badly the election campaign and result damaged the public’s view of both the Prime Minister and the Conservative party and how much it boosted Labour and its leader. In April, Theresa May had a healthy net favourability rating of +10. At the end of May, following the campaign and negative reception of the Conservative manifesto, it fell to -5. Following the election result it has plummeted to -34. The Prime Minister is currently about as unpopular as Jeremy Corbyn was in November last year, when he scored -35. Meanwhile, the Labour leader has experienced a remarkable turnaround in public perception. Having experienced increasingly worse favourability ratings since Theresa May took office last summer, Jeremy Corbyn sank to a low of -42 in late April, just after the election was called.

However, the public’s view of the Labour leader improved markedly over the campaign, reaching -14 in the last YouGov favourability survey before election day. Now, following the result, his net favourability score is +0 – meaning that as many people now have a favourable view of him as have an unfavourable view. [..] It is remarkable that there has been such a sharp turnaround for the leaders of the two main political parties. When the election was called, Theresa May was secure in her position and many were speculating over the future of the Labour leader. Now, the roles are reversed, with Jeremy Corbyn having silenced his critics and won over large sections of the public while the Prime Minister faces criticism from across the board.

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Burden the young. An idea with future.

UK Student Loan Debt Soars To More Than £100 Billion (G.)

Student loan debt in the UK has risen to more than £100bn for the first time, underlining the rising costs young people face in order to get a university education. Outstanding debt on loans jumped by 16.6% to £100.5bn at the end of March, up from £86.2bn a year earlier, according to the Student Loans Company. England accounted for £89.3bn of the total. “Lots of prospective and current university students will see these figures and worry about being part of an increasing pool of graduate debt,” said Jake Butler of at money advice website Save the Student. “As fees increase this number will only go up, as more and more money is lent out each year. There is some cause for concern here, mainly for the government, as it is now widely accepted that the majority of graduates will never pay off their whole student loan debt before it is wiped off 30 years after their graduation.”

Sorana Vieru, the vice-president for higher education at the National Union of Students, said student debt had risen to “eye-watering levels”. The rise in student debt has been driven partly by rules introduced in 2012, allowing universities in England to charge up to £9,000 a year in tuition fees. In the year ending 31 March 2012, student debt was less than half the current level, at £45.9bn. Jeremy Corbyn made younger voters a key focus of Labour’s election campaign, promising to scrap tuition fees for new university students. A strong turnout among 18- to 24-year-olds at last week’s election helped the party to win 262 seats, an increase of 30. Sebastian Burnside, a senior economist at NatWest, said student debt was rising at a faster pace than any other form of debt, and eclipsed credit card debt of £68bn. “These latest figures show student debt is becoming of greater priority with every passing year. Student debt is the fastest growing type of borrowing and is rapidly becoming economically significant.”

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Maybe May intends to blame the EU and gather Brits together against them?

UK Gov Still Hasn’t Submitted Brexit Papers For Talks Starting Monday (Ind.)

The British Government has still not sent papers outlining its opening position for Brexit talks to the European Union, despite negotiations beginning on Monday. EU sources told The Independent Brussels had sent its “positioning papers” to London four days ago and while similar documents were expected in return, nothing has arrived as Theresa May’s administration struggles to get on its feet. Brexit Secretary David Davis confirmed on Thursday that talks to pull Britain out of the EU will begin on Monday regardless, despite cabinet splits over how to approach them and Ms May’s withdrawal plans not even being cemented in a Queen’s Speech.

Chancellor Philip Hammond cancelled a speaking event in which he was expected to signal new softer Brexit proposals focusing on jobs, amid fears it might spark an internal row with other Tories demanding Ms May stick to her immigration-centred approach. It came as the Prime Minister confirmed that a Queen’s Speech would go ahead, but only on 21 June – two days later than originally planned. It is still unclear if she has locked in the support of the Northern Irish DUP to prop her up in the House of Commons and give her the majority she needs to pass a vote approving the agenda set out in the Queen’s Speech. Conservatives signalled that talks with the unionists could even continue beyond the start of Brexit talks and the Queen’s Speech, as Sinn Fein’s Gerry Adams warned that any deal struck could breach the Good Friday Agreement that brought peace to Northern Ireland.

On Monday this week, the EU sent to London its positioning papers, officially outlining its negotiating stance ahead of talks, and had expected similar documents to come back in good time before discussions begin. But with the EU’s papers arriving as Ms May staved off a cabinet coup, convinced backbenchers to support her and held talks about realigning Brexit plans, nothing had been sent back to Brussels by Thursday night. One source across the Channel said it was “unbelievable” that the UK had still not sent the “basic” papers for the start of negotiations, with just over three days left before they begin. They added: “The talks are beginning on Monday. There are no positioning papers yet. It’s a basic thing that should happen beforehand. It doesn’t bode well.”

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Haha, Gazprom.

Germany, Austria Slam US Sanctions Against Russia (AP)

Germany and Austria voiced sharp criticism Thursday of the latest U.S. sanctions against Moscow, saying they could affect European businesses involved in piping in Russian natural gas. The United States Senate voted Wednesday to slap new sanctions on key sectors of Russia’s economy and individuals over its interference in the 2016 U.S. election campaign and its aggression in Syria and Ukraine. The measures were attached to a bill targeting Iran. In a joint statement, Austria’s Chancellor Christian Kern and Germany’s Foreign Minister Sigmar Gabriel said it was important for Europe and the United States to form a united front on the issue of Ukraine, where Russian-based separatists have been fighting government forces since 2014.

“However, we can’t accept the threat of illegal and extraterritorial sanctions against European companies,” the two officials said, citing a section of the bill that calls for the United States to continue to oppose the Nord Stream 2 pipeline that would pump Russian gas to Germany beneath the Baltic Sea. Half of the cost of the new pipeline is being paid for by Russian gas giant Gazprom, while the other half is being shouldered by a group including Anglo-Dutch group Royal Dutch Shell, French provider Engie, OMV of Austria and Germany’s Uniper and Wintershall. Some Eastern European countries, including Poland and Ukraine, fear the loss of transit revenue if Russian gas supplies don’t pass through their territory anymore once the new pipeline is built.

Gabriel and Kern accuse the U.S. of trying to help American natural gas suppliers at the expense of their Russian rivals. They said the possibility of fining European companies participating in the Nord Stream 2 project “introduces a completely new, very negative dimension into European-American relations,” they said. In their forceful appeal, the two officials urged the United States to back off from linking the situation in Ukraine to the question of who can sell gas to Europe. “Europe’s energy supply is a matter for Europe, and not for the United States of America,” Kern and Gabriel said.

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It’s getting close to outright lying.

Debt Deal Gives Clarity To Markets – Greek FinMin Tsakalotos (AP)

Greece’s finance minister says financial markets now have “much greater clarity” about the future of Greece’s debts, which will help the country regain market access when its current bailout program ends next year. Speaking after a meeting of the eurozone’s 19 finance ministers, Euclid Tsakalots said the country can “look forward with much greater confidence.” As well as securing €8.5 billion in bailout funds, which will help Greece meet a big summer repayment, Tsakalotos won a promise on future measures to ease the country’s debt burden and possible IMF financial involvement in the coming year. Greece has relied on bailout money for seven years and hopes that it will be able to stand on its own feet when the bailout ends. Tsakalotos said one big benefit from the deal Thursday was that future debt repayments could be linked to Greece’s growth. In essence, that could mean payments could be postponed in the event of an adverse shock.

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No , there are no details on debt relief, that’s the whole story.

Eurogroup Approves Greek Loans, Details Debt Relief, IMF To Join (K.)

Greece’s international creditors agreed on Thursday to approve the disbursement of €8.5 billion in bailout loans and to detail medium-term debt relief measures following talks in Luxembourg. Describing the agreement as “a major step forward,” Eurogroup President Jeroen Dijsselbloem said the deal aimed to get Greece standing “on its own feet again,” noting that debt relief would be linked to the country’s growth rates, in line with a proposal that had been promoted by French officials. The deal also outlined the participation of the IMF in Greece’s third bailout with the Fund’s chief Christine Lagarde saying she would formally recommend the IMF’s participation with $2 billion on a standby basis.

As regards the debt relief aspect of the agreement, Lagarde remarked that it was not the best solution for Greece as it was only an agreement in principle but the “second best” solution. European Commissioner for Economic and Monetary Affairs Pierre Moscovici sought to focus on the positive aspects of the deal. “Tonight, Greece can see the light at the end of its long tunnel of austerity,” he said. “From tonight, the watchwords are jobs, growth and investment.” His comments were echoed by Greek Finance Minister Euclid Tsakalotos who, in a separate press conference, said the deal provided greater clarity, for both citizens and investors, “more light at the end of the tunnel.” A spokesperson for the European Central Bank, whose bond buying program Greece wants to join, described the Eurogroup agreement as “a first step towards securing debt sustainability.”

However it remained unclear whether the deal was adequate to pave the way for the ECB to buy Greek bonds or not. The breakthrough last night came after Athens appeared to have shifted its stance slightly from earlier in the week when tensions between Greece and Germany had peaked and two top government ministers had said publicly that Athens mistrusts German Finance Minister Wolfgang Schaeuble. Speaking from Thessaloniki, where he met Israeli and Cypriot leaders for talks on energy cooperation, Prime Minister Alexis Tsipras remarked to reporters, “The good guys win in the end.” Greek officials have insisted over the past week that Greece has won the right to debt relief.

“Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief,” President Prokopis Pavlopoulos said in comments published in Germany’s Handelsblatt. He appealed to Schaeuble to abandon his persistent opposition to Greek debt relief. “Anything else would not be worthy of a great European politician,” he said. “It is important for us that our creditors secure the viability of the debt. Otherwise the ECB cannot buy Greek state bonds,” he said, referring to the European Central Bank.

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But the article above said “IMF to join”!

IMF Won’t Fund Greek Bailout Until It Gets More Clarity On Debt Restructuring (CNBC)

The IMF wants Greek debt to become more sustainable before it channels funds into the country’s bailout program, the organization’s managing director Christine Lagarde told CNBC. “For us to engage and for us to participate financially, more needs to be clarified, defined and approved in terms of restructuring,” she said late on Thursday. “What we believe will be needed is a deferral of interests, an extension of maturity, and a mechanism by which there is an adjustment based on growth … this is where further discussion and negotiation is needed.” Lagarde was speaking in Luxembourg after European finance ministers approved a €8.5 billion loan for Athens that will enable the cash-strapped nation to meet a major July repayment deadline.

European countries have been shouldering the burden of Greece’s current €86 billion rescue fund — its third bailout package since 2010. The IMF financially contributed to Athens’ previous bailouts but refused to join the current pact because it believes Greece needed debt relief — something that European creditors aren’t comfortable with. The organization’s absence has been a thorn in the sides of heavyweight European countries, particularly Germany, who view IMF participation as a key credibility factor. For Berlin to continue backing euro zone loans to Athens, Germany’s parliament is now insisting on IMF contribution. On Thursday, the IMF agreed to offer Athens a standby arrangement of less than $2 billion but won’t be disbursing any of the funds until euro zone countries offer more detail on potential debt relief measures in 2018.

“I’ve always said that the (bailout) program walks on two legs: the leg of policies and the leg of debt sustainability,” Lagarde told CNBC on Thursday. Athens has proved its commitment to key structural reforms, which cover pensions, tax, serial procedures, and labor markets, but the second leg of the bailout program — debt restructuring — needs to be further clarified, she continued. “Progress has been made today, no question about it but more is needed.” Lagarde praised Thursday’s loan agreement, stating that Athens would now be protected from future crisis moments because its financial needs in terms of debt service will be low.

“It (Athens) will actually produce a primary surplus and it should be, in terms of liquidity and stability, in a fairly solid situation to develop its economy to cultivate growth, generate investment , and proceed with the privatization that they have agreed to complete.” On the matter of Brexit negotiations, the IMF chief advised European and U.K. officials to adopt a risk-averse approach. “What is more predictable, more certain, can be calibrated, can be anticipated, can be transitioned into, is going to be more reliable and safer for the people and the economy.” Circumstances were still too premature for the IMF to forecast future economic developments, she added.

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They have for Germnay, yes.

Have The Greek Bailouts Worked? (BBC)

As eurozone finance ministers meet in Brussels for crucial talks on Greece, Reality Check looks at whether the bailouts the country has received have secured Greece’s economic survival or just created unsustainable debt. Neither Greece nor its creditors would say they are happy with how it has worked out. In 2010, when the Greek debt crisis started, Greece received €110bn in bailout money. And in 2012, the country received a second bailout of €130bn. These loans, from the eurozone and the International Monetary Fund (IMF), were deemed necessary to stop Greece going bankrupt. In exchange, Greece was required to make deep public spending cuts, raise taxes and introduce fundamental changes to the public sector and labour legislation. In August 2015, the eurozone countries agreed to give Greece a third bailout, of up to €86bn, on the condition of further changes.

The next tranche of that bailout, which Greece needs in order to honour repayments due in July, is being discussed at the eurozone finance ministers’ meeting on Thursday. In 2010, they managed to keep Greece in the euro and prevented the collapse of the common currency. So, from the perspective of the eurozone as a whole, a chaotic “Grexit” did not happen. But seven years on, and many more billions of euros later, was this price worth paying, both from the point of view of Greece’s creditors and of the Greek people? It is impossible to know what the situation would be like now had Greece not received the bailouts, but the consequences of receiving them have been painful. For the Greek people, the bailouts and the austerity measures implemented with them have come at a huge cost.

• Unemployment remains staggeringly high: 22.5% of Greeks were unemployed in March 2017. And almost half of people under the age of 25 were out of work
• Those who do work, earn less. The minimum monthly wage at the beginning of the crisis was €863. It has now fallen to €684
• Pensioners have been hit particularly hard. Pension changes since 2010 mean 43% of pensioners now live on less than €660 a month, according to the Greek government
• Government spending on health was almost halved between 2010 and 2015, while the education budget was cut by 20%

Greece’s creditors, strongly influenced by Germany, demanded that Greece start spending less than it earned. In 2016, for the first time, Greece achieved this. The surplus is small, at €1.3bn or 0.7% of GDP. But this can hardly be seen as a success – the economy has shrunk and the overall debt pile is still going up, not down.

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Tsipras is not going to grow a pair anymore. Rule 1 for every country and society should be: Never give up your water.

Greek Government Sabotages Its People With Water Privatization Scheme (Occupy)

The “fire sale” privatization of Greece started in 2015, following the infamous Syriza referendum in which more than three-fifths of the Greek people voted to reject Troika-imposed bailout conditions – and yet their government, led by Alexis Tsipras, chose to accept the deal anyway. The privatization process reached its peak the next year, when the Greek government sold the public transport giant TrainOSE to the Italian company Ferrovie dello Stato Italiane S.p.A for 45 million euros. This happened after a very brief bidding period and despite considerable employee pushback, including a 24-hour strike that paralyzed the country. Now, a second round of fire sales is taking place ahead of the upcoming third bailout negotiations for Greece, whose current bailout package will expire in August 2018.

Since last year, the sale of the country’s roads, rights to the use of its ports, and other public sector resources have only yielded around €4 billion – a far cry from the projected €50 billion that were promised when the privatization plan was put in motion. At best, it will result in a 6 billion euro profit, nowhere near enough to cover the ailing Greek economy’s massive overhead spending. In 2016, under the EYATH initiative (representing Thessaloniki’s public sector water workers) and activists, Save Greek Water was launched in an attempt to curb the Syriza administration’s efforts to privatize public water reserves. The initiative enjoyed enormous support from the public and media, and seemed to curbing further efforts to move the privatization talks forward. That was until last December, when an article published by Stavroula Symeonidou, president of the Workers Union of DEYA of Drama, revealed that Greece’s public water sector was being purposefully sabotaged by its own government.

“…DEYAs are not financially dependent on the State/Central Government, therefore they do not, in any way whatsoever, contribute to the public debt… however they are equally restricted in (actually barred from) recruiting any new personnel, which means that over time their already limited resources will reach zero,” Symeonidou wrote. The article also warned about the danger of further levies being imposed on Greek farmers using public water sources like ground- and rainwater wells. This dire prediction came to pass last month, when an “irregular water source charge” was imposed on the major rural regions of the country, directly targeting farmers and households in the affected areas. According to a statement released by the Syriza administration, 2.5% of the proceeds from this levy will be invested in the interest of supporting the Greek public sector – but not the DEYA initiative. This is being seen as an obvious attempt to further hobble any resistance to privatization.

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Let me guess, this is part of making the country competitive again? This is criminal.

Half of Athens’ Ambulances Are Out Of Action (AP)

Greece’s financial woes have clobbered spending on state-provided health services, even as demand has spiked because fewer Greeks can pay for private treatment. Some of Athens’ ambulances have up to 1 million kilometers (620,000 miles) — nearly three times the distance to the moon — on the clock, and about half are idle because of a lack of spare parts. At night, fewer than 40 vehicles cover a population of more than 4 million. Paramedic Dimitris Dimitriadis says the service is obliged to respond to every call it receives, even if the callers are just taking advantage of a rule that patients brought to hospitals by ambulance jump the line for treatment. “But then you also get elderly people who can’t afford a taxi fare to the hospital, so they call an ambulance,” he said, driving toward a reported suicide in central Athens. Upon arrival, the crew was told that the injured person had been taken to a hospital by relatives.

Unions say rescuers do their best against the odds, focusing on getting urgent cases to emergency treatment within minutes of receiving a call. But other patients, who may still require hospital treatment, can end up waiting well over an hour. Athens ambulance workers’ union leader Giorgos Mathiopoulos says about 70 of the capital’s 140 ambulances are out of action, and the fleet needs to be doubled in size. “Up to 30% of the immobilized ambulances can’t be repaired” and many are stripped for parts to keep others going, Mathiopoulos said. “When we’re trying to get to an incident as fast as possible … and the ambulance has that many kilometers on the clock, it’s a worry.”

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Something’s going to break.

Uptick In Migrant Arrivals Eyed With Concern By Greece’s Islanders (K.)

Official data on Thursday showed an uptick in refugee and migrant arrivals from Turkey to Greece’s shores, increasing concerns among residents on the Aegean islands that have borne the brunt of the refugee crisis. A total of 151 people were reported as entering Greece in 24 hours on Thursday, 74 of whom landed on Chios, 54 on Lesvos and 23 on other islands, slightly above the 146 arrivals in the previous 24-hour period. According to official figures, the number of migrants and refugees that reached Greece between June 8 and Thursday morning came to 538, a significant rise from May when daily arrivals were in the double digits.

The upsurge is stoking fears on islands such as Chios that are already struggling to cope with thousands of refugees and migrants stranded by slow processing and deportation procedures. Residents of Chios held a rally on Thursday night to protest plans for a pre-departure facility on the island, where authorities said they will temporarily detain dozens of migrants who are not eligible for asylum before they are deported. Protesters say that the official line in favor of the facility, pointing to a decrease in arrivals on Lesvos since a similar center was opened there, are disproved by the uptick observed in recent days. A similar rally was also held on the island of Samos on Thursday.

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Jun 142017
 
 June 14, 2017  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  17 Responses »
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Fred Lyon San Francisco cable car turnaround 1946

 

A Record 60% Of Americans Disapprove Of President Trump (ZH)
Age Is The New Dividing Line In British Politics (YouGov)
UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)
Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)
Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)
Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)
Are Public Pensions A Thing Of The Past? (CNN)
Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)
OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)
China Defaults Feared as Firms Confront Short Debt Addiction (BBG)
Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)
Schaeuble Promises Greece Deal With Lenders On Thursday (R.)
Foreign Buyers Snap Up Greek Property (K.)
State Of Emergency Declared On Lesvos As 800 Left Homeless (AP)
‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

 

 

A nation divided.

A Record 60% Of Americans Disapprove Of President Trump (ZH)

Despite record high stock prices, 43-year lows in jobless claims, and near record-high optimism among small business owners, Gallup reports the percentage of Americans who disapprove of the job President Trump has risen to a record 60% this week. As Gallup details, despite the president’s claim on Monday at a Cabinet meeting that “Never has there been a president, with few exceptions – in the case of F.D.R. he had a major Depression to handle – who’s passed more legislation, who’s done more things than what we’ve done,” his administration has been roiled by controversies. Most recently, Trump ran into a buzz saw of criticism with his decision, announced June 1, to withdraw the U.S. from participation in the Paris climate accord.

He has also been under significant political scrutiny over the June 8 testimony of former FBI Director James Comey before the Senate Intelligence Committee. Those events coincided with the lower averages seen in the past two weeks. But, given that his averages were almost as low in the weeks leading up to them, it is difficult to establish direct causality between specific events and the president’s ratings.

The highly polarized nature of Americans’ views of Trump (and Obama before him) have been well-documented, and that pattern continues: Trump’s 8% average approval rating among Democrats last week is right at his 9% average to date; His 83% approval among Republicans is three points lower than his average among that group; Among independents, his approval is 31%, five points lower than his average among that group; Notably the spread between Republican ‘confidence’ and Democrat ‘confidence’ (via Bloomberg) has not been this wide since before Barack Obama was elected…

Trump’s job approval ratings are the worst of his administration so far, and Trump continues to have the lowest ratings for a newly elected president in Gallup’s history of approval ratings. The previous low first-year approval rating in June for an elected president was Bill Clinton, with a 37% approval June 5-6, 1993. The approval ratings of all other presidents since 1953 in June (May in the case of Eisenhower) of their first year after being elected were above 50%.

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Another nation divided, but not along the same lines. Older people, especially pensioners, vote Conservative, and a much higher percentage of them actually vote.

Age Is The New Dividing Line In British Politics (YouGov)

Since last week’s election result YouGov has interview over 50,000 British adults to gather more information on how Britain voted. This is part of one of the biggest surveys ever undertaken into British voting behaviour, and is the largest yet that asks people how they actually cast their ballots in the 2017 election. The bigger sample size allows us to break the results down to a much more granular level and see how different groups and demographics voted on Thursday. In electoral terms, age seems to be the new dividing line in British politics. The starkest way to show this is to note that, amongst first time voters (those aged 18 and 19), Labour was forty seven percentage points ahead. Amongst those aged over 70, the Conservatives had a lead of fifty percentage points.

In fact, for every 10 years older a voter is, their chance of voting Tory increases by around nine points and the chance of them voting Labour decreases by nine points. The tipping point, that is the age at which a voter is more likely to have voted Conservative than Labour, is now 47 – up from 34 at the start of the campaign.

Despite an increase in in youth turnout, young people are still noticeably less likely to vote than older people. While 57% of 18 and 19 year-olds voted last week, for those aged 70+ the figure was 84%.

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Corbyn growth territory.

UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)

Low-income families are going without beds, cookers, meals, new clothes and other essential items as they struggle to cope with huge debts run up to pay domestic bills, according to a survey highlighting the cost-of-living crisis experienced by the UK’s poorest households. Clients of the debt charity Christians Against Poverty (CAP) had run up an average of £4,500 in debts on rent or utility bills, forcing them on to what the charity described as a “relentless financial tightrope” juggling repayments and basic living costs, leaving many acutely stressed and in deteriorating health. The pressure of coping with low income and debt frequently triggered mental illness or exacerbated existing conditions, with more than a third of clients reporting that they had considered suicide and three-quarters visiting a GP for debt-related problems.

More than half were subsequently prescribed medication or therapy. “The crippling reality of living in poverty and debt is still unashamedly evident in every home we visit, and year on year we see financial difficulty taking a tighter grip,” said Matt Barlow, the UK chief executive of CAP. Experts said the survey highlighted the extreme hardship faced by the “new destitute” – people on low incomes who might in the past have been able to rely on a welfare safety net to help them through financial shocks but who now were forced to go into debt to survive, leaving them struggling to afford even the basics. Debt had a crushing effect on living standards, the CAP survey found, with one in 10 clients unable to afford to buy or repair a bed, washing machine, TV, sofa or fridge. Roughly the same proportion could afford to acquire furniture only on punitive rent-to-buy terms, for example paying £6 a week to acquire a bed and mattress over a set three-year period.

The impact on family life was severe, with a quarter of clients saying debt caused relationship breakdowns, and more than two-thirds saying they felt unable to cater for their children’s needs. A sixth said they could not afford to feed their children three meals a day. A third feared eviction. A tiny handful of clients – predominantly single mothers – reported that they had turned to prostitution to make ends meet. Prof Suzanne Fitzpatrick, of Heriot Watt University, the co-author of groundbreaking research into destitution, told the Guardian: “The new destitute are citizens who would previously have managed to avoid absolute destitution with the help of the welfare safety net. But the level of working age benefits is now so low that people barely managing to get by can easily find themselves in a position where they can’t afford even the basic essentials to eat, stay warm and dry, and keep clean.”

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“If you’re a trader or a speculator, I think you should be raising cash today, literally today..”

Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)

DoubleLine Capital’s Jeffrey Gundlach said the establishment in Washington is trying to undermine President Donald Trump by running out the clock on his administration. “They’re really just trying to wait Trump out, trying to obstruct his agenda as much as possible,” Gundlach, one of the few money managers to predict Trump’s election, said during a webcast Tuesday. “Small change is what they’re looking for.” Gundlach, manager of the $53.9 billion DoubleLine Total Return Bond Fund, spoke during televised Senate testimony by Attorney General Jeff Sessions, which the money manager called “a sideshow or entertainment.” He called the U.S. political conflict “rope-a-dope,” a strategy used by boxer Muhammad Ali to wear out opponents.

Among Gundlach’s other observations:
• There’s a low probability of a recession.
• The days of low volatility markets are probably numbered.
• Expect higher bond yields and lower stock prices this summer.
• Yields on 10-year Treasuries are likely to end 2017 roughly in the 2.7% to 2.8% range, from about 2.2% currently.

The Dow Jones Industrial Average and the S&P 500 Index closed at record highs Tuesday prior to Gundlach’s talk. Futures trading implies a 98% probability the Federal Reserve will raise interest rates by 0.25% when it meets Wednesday. “If you’re a trader or a speculator, I think you should be raising cash today, literally today,” Gundlach said. “If you’re an investor, I think you can sit through a seasonally weak period.” The Total Return fund was up 2.7% this year through June 12, beating 84% of its peers, according to data compiled by Bloomberg.

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Yves Smith’s piece is too long and comprehensive to do justice here. Click the link.

Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)

After having promised banks to get rid of Dodd Frank, which was never a strong enough bill to have a significant impact on profits or industry structure, Trump didn’t even back the House version of the bill to crimp Dodd Frank. But you’d never know that from the cheerleading from bank lobbyists upon the release of a 147 page document by the Treasury yesterday, the first of a series describing the gimmies that the Administration seeks to lavish on banks. As we’ll touch on below, the document repeatedly asserts that limited bank lending post crisis to noble causes like small businesses was due to oppressive regulations. We wrote extensively at the time that small business surveys showed that small businesses then overwhelmingly weren’t interested in borrowing and hiring. Businessmen don’t expand operations because money is cheap, they expand because they see a commercial opportunity.

But the even bigger lie at the heart of this effort is the idea that the US will benefit from giving more breaks to its financial sector. As we’ve written, over the last few years, more and more economists have engaged in studies with different methodologies that come to the same conclusion: an oversized financial sector is bad for growth, and pretty much all advanced economies suffer from this condition. The IMF found that the optimal level of financial development was roughly that of Poland. The IMF said countries might get away with having a bigger banking sector and pay no growth cost if it was regulated well. Needless to say, with the banking sector already so heavily subsidized that it cannot properly be considered to be a private business, deregulating with an eye to increasing its profits is driving hard in the wrong direction.

[..] So if it wasn’t Dodd Frank, what was led the banks to focus so much on high FICO score borrowers? It was mortgage servicing reforms, which made it hard to foreclose due to stopping abuses, like dual tracking (continuing to foreclose even when supposedly considering a mortgage modification). To look at the bigger picture, it’s hard to take bank complaints about oppressive regulation seriously in light of this:

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But the domestic echo chamber makes that hard to do.

Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)

All of America’s allies and partners have been calling on Washington to improve its relations with Russia, Secretary of State Rex Tillerson acknowledged after the US Senate reached a bipartisan deal to boost sanctions against Moscow. “I have yet to have a bilateral, one-on-one, a poolside conversation with a single counterpart in any country: in Europe, Middle East, even South-East Asia, that has not said to me: please, address your relationship with Russia, it has to be improved,” Tillerson said on Tuesday during testimony before the Senate Appropriations Committee on Foreign Operations. Tillerson added that the countries urging the US to review its Russian policy “believe worsening this relationship will ultimately worsen theirsituation.” He added: “People have been imploring me to engage and try to improve the situation, so, that was our approach anyway.”

Earlier, Tillerson warned that the US Senate’s bipartisan deal on new set of restrictive measures against Moscow might further worsen relations with Russia and hinder existing efforts on joint US-Russia progress to fight terrorism in Syria. “There are efforts under way in Syria specifically, those are, I would say, progressing in a positive way,” America’s top diplomat said on Tuesday during testimony to the Senate Foreign Relations Committee. Despite the relationship between US and Russia being “at an all-time low,” according to Tillerson, the “objective is to stabilize that” rather than deteriorate it further. Washington is “engaged” and working with Moscow “in a couple of areas,” including on such issues of international importance as the Ukrainian and Syrian crises. “We have some channels that are open, where we are starting to talk, and I think what I wouldn’t want to do is close the channels off,” Tillerson told the Senate committee, warning that to establish “something new… will take time.”

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Yes, they are.

Are Public Pensions A Thing Of The Past? (CNN)

New teachers and state workers will no longer get a traditional pension in Pennsylvania. Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019. The new plan combines elements of a traditional pension and a 401(k)-style account. Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office. But Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support. “It’s a win for Pennsylvania taxpayers and fair to Pennsylvania’s workforce,” Wolf said at a press conference Monday.

The reform will build upon previous legislation to help fully fund the pension system and preserve a path to retirement for public workers, said Greg Mennis, a director at Pew Charitable Trusts. “Our research indicates that this would be one of the most – if not the most – comprehensive and impactful reforms any state has implemented,” he wrote in a letter urging state lawmakers to pass the bill. Over the past 10 years, Rhode Island, Virginia, Tennessee and Georgia have created plans similar to Pennsylvania’s. They require workers to contribute some of their salary to a pension-like plan that guarantees a certain payout based on their salary. Workers also contribute to a 401(k)-style plan that they can take with them if they leave public service. The state will make contributions to both plans on their behalf.

In Pennsylvania, workers will be defaulted into a hybrid plan, but there will be two other versions they could opt into. Under the default, workers will have to contribute a total of 8.25% of their salary. (Teachers currently contribute 7.5% and other public workers pay 6.25%.) Most will have to work until 67, instead of 65, in order to get their full payout in retirement. A state employee who works for 35 years and earns a final salary of $60,000, currently receives an estimated $40,000 a year in retirement. Under the reformed system, that same worker would receive $34,1048, according to the Independent Fiscal Office report. [..] Like pension plans in other states, Pennsylvania’s was badly hurt by the Great Recession. It also took a hit because of retroactive benefit increases made before the market took a dive. The pension fund went from a nearly $20 billion surplus in 2000 to a $70 billion deficit in 2015.

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ZIRP machines have taken over.

Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)

Quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets, according to a new report from JPMorgan. “While fundamental narratives explaining the price action abound, the majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” Marko Kolanovic, global head of quantitative and derivatives research at JPMorgan, said in a Tuesday note to clients. Kolanovic estimates “fundamental discretionary traders” account for only about 10% of trading volume in stocks. Passive and quantitative investing accounts for about 60%, more than double the share a decade ago, he said.

In fact, Kolanovic’s analysis attributes the sudden drop in big technology stocks between Friday and Monday to changing strategies by the quants, or the traders using computer algorithms. In the weeks heading into May 17, Kolanovic said funds bought bonds and bond proxies, sending low volatility stocks and large growth stocks higher. Value, high beta and smaller stocks began falling in a rotation labeled “an unwind of the ‘Trump reflation’ trade,” Kolanovic said. “Upward pressure on Low Vol and Growth, and downward pressure on Value and High Vol peaked in the first days of June (monthly rebalances), and then quickly snapped back, pulling down FANG stocks” — Facebook, Amazon.com, Netflix and Google parent Alphabet, the report said.

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Told you those output cuts wouldn’t go anywhere.

OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)

OPEC’s oil production jumped in May, despite the exporter group agreeing last month to extend its six-month deal to cap output into 2018. Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq. Output from Libya surged by more than 178,000 bpd to 730,000 bpd as the country’s rival factions moved toward reconciliation, and supplies disrupted throughout years of conflict remained on line. In Nigeria, production was up more than 174,000 bpd to 1.68 million bpd as supplies sidelined by militant attacks on energy infrastructure last year came back into operation. With the gain, Nigeria reclaimed the title of largest African producer in OPEC from Angola, where output fell by 54,000 bpd, the biggest drop among the 13 members in May.

Iraq, OPEC’s second-largest producer, contributed the third-biggest increase with a more than 44,000 bpd jump. Baghdad has yet to cut deeply enough to hit its quota of 4.35 million bpd under the output cut deal. In May, it produced 4.42 million bpd. Only four countries were producing at or below the levels they agreed to in November: Saudi Arabia, Angola, Kuwait, and Qatar. Last month, OPEC and other exporters extended an agreement to remove 1.8 million barrels a day from the market in order to shrink brimming global stockpiles of crude oil. In May, inventories in the OECD, a group of mostly wealthy countries, remained 251 million barrels above the five-year average.

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More ground for shadow banks to take over.

China Defaults Feared as Firms Confront Short Debt Addiction (BBG)

China’s leverage crackdown is forcing local companies to confront their addiction to short-term bond sales that they use to roll over debt. The shock therapy is worsening the outlook for corporate defaults in the second half of this year after borrowing costs jumped to a two-year high. With yields surging, Chinese non-banking firms sold 131 billion yuan ($19.3 billion) of bonds with a maturity of one year or less in May, the least since January 2014 and less than half of the same month last year, according to data compiled by Bloomberg. About 87% of the short note sales last month will be used for refinancing, according to Bloomberg data.

The habit of relying on borrowing short-term money to repay maturing debt has pushed up such liabilities to a total of 5.2 trillion yuan on China’s listed non-financial companies’ balance sheets as of March 31, the highest on record, according to data compiled by Bloomberg. With no sign of an end to the government’s campaign against leverage, the average coupon rate for bonds maturing in one year or less rose to 5.5% in June, deterring issuers from raising money to roll over debt. “Small issuance of short-term bonds will be a normal phenomenon in the coming six months because cash supply will probably remain tight,” said Ma Quansheng at Fullgoal Fund Management. “Both default risks and the number of corporate bond defaults may increase.”

The loose funding environment last year helped Chinese companies raise enough money to withstand repayment pressure so far in 2017. There have been 13 onshore defaults in the public bond market in 2017, compared with 16 in the same period of 2016. The yield on one-year AAA rated company bonds averaged 4.19% this year, up from 2.97% in 2016. HFT Investment Management said more note defaults may come as the economy doesn’t look good. In the second half of this year, Chinese non-banking firms must repay 2.36 trillion yuan of bonds. “The current rising borrowing costs may have a big impact on companies’ operations and finance,” said Lu Congfan at HFT Investment Management. “What can you do when you must refinance to repay maturing debt while facing such high borrowing costs? That would be a question challenging many local companies in the second half or next year.”

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Well, well… Let’s see it.

Schaeuble Promises Greece Deal With Lenders On Thursday (R.)

German Finance Minister Wolfgang Schaeuble said on Tuesday he was confident that Greece and its international lenders will reach a compromise deal this week, a step that would unleash more loans for Athens. “We’ll manage it on Thursday. You’ll see,” Schaeuble said during a panel discussion in Berlin. Officials have said eurozone finance ministers and the IMF are likely to strike a compromise on Greece on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later. IMF head Christine Lagarde suggested a plan last week under which the Fund would join the Greek bailout now, because Athens is delivering on agreed reforms, but would not disburse any IMF money until the euro zone clarifies what debt relief it can offer Greece.

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Greeks don’t believe you, Wolfie…

Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)

Alexis Tsipras has spent nearly two years telling Greeks that a debt deal and inclusion in the ECB’s quantitative-easing program will unleash an investment boom that salves the pain of austerity. The prime minister’s message hasn’t convinced Panagiotis Kouinis, a 60-year-old civil engineer in Corinth who says business has steadily dwindled through all of Greece’s eight-year crisis and has now ground almost to a halt. “What I know is they tell you pensions will be cut another 20%, wages down, and what is quantitative easing?” Kouinis said in an interview in his office near the city center. “Do we have to be economists so we can understand what they’re saying?” Across the country in places like Corinth, an industrial hub 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future.

In the meantime, as the ECB’s stimulus measures – including its asset-purchase program – buoy the rest of the euro-area economy, Greece’s output has been stagnant, leaving its people the most pessimistic in the region. Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That’s because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and IMF. That would leave Tsipras high and dry.

[..] Despite some signs of an improvement in industrial output, Greece has been heavily reliant on consumers and a booming tourist sector to keep GDP – which shrank by a quarter in the early years of the crisis – from continuing its slide. While the economy hasn’t been in a recession since 2015, and grew 0.4% at the start of the year, it hasn’t strung together more than two quarters of consecutive expansion in more than a decade. Accountancy firm PWC said in March that infrastructure investment plunged during the crisis, leaving a backlog of planned and in-progress projects amounting to more than 21 billion euros. Near Corinth, that includes rail, waste management, road and marina developments. “With taxation what it is, not only will no-one come to invest here, but they’d need to be mad to,” said Kouinis, the civil engineer. “Growth needs to start from public works, because the private sector has been killed.”

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Foreigners buy apartments in Athens to rent out to other foreigners on Airbnb. So wrong in so many ways.

Foreign Buyers Snap Up Greek Property (K.)

Property buyers from abroad are this year growing at the fastest pace in a decade, as booming Greek tourism has had a positive impact on the property market too. According to the latest data from the Bank of Greece, in the first quarter of the year the inflow of capital from abroad for real estate acquisitions increased by 61.7% on an annual basis. The March figures have signaled a further improvement, since in the first couple of months the yearly rise had come to 56.7%. If the existing growth rate is sustained throughout 2017, it is likely that by the end of the year more than 430 million euros will have been invested the Greek property market from other countries. The equivalent figure for the whole of 2016 had amounted to 270 million euros, up 45.3% on the 2015 inflow of 186 million euros.

The only time a similar growth rate had been recorded before was in the first quarter of 2007, when foreign investors spent 66.5% more money on property acquisitions than a year earlier. Real estate professionals say this uptick in foreign funds entering the local property market is particularly positive because it came during a period when transactions are usually sparse: Expressions of buying interest this year started in the winter months, not in the summer when demand typically peaks. This has bolstered optimism about an even better summer in terms of transactions, which may reach their high for the entire period since the outbreak of the financial crisis.

The major rise in inflows this year is due to the increase in demand for apartments in Athens, primarily in the city center and the southern suburbs. This mainly concerns flats eligible for short-term leasing through Internet platforms such as HomeAway, Airbnb and FlipKey. It also concerns luxury mansions that would fit the bill for the same type of online platforms as well as for the purpose of getting a Golden Visas (for buys of properties worth 250,000 euros or more by investors from outside the European Union). Besides those buyers aiming for the five-year residence permits, considerable buying interest is also coming from Italy, France, Switzerland, Germany and the Scandinavian countries.

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It’s a miracle there are not many more victims.

State Of Emergency Declared On Lesbos As 800 Left Homeless (AP)

Authorities in Greece have declared a state of emergency on the island of Lesvos after an earthquake left one woman dead and more than 800 people displaced. The 6.1 magnitude undersea quake on Monday occurred south of Lesvos but was felt as far as Istanbul, Turkey. Officials from the island’s regional government on Tuesday said homes in 12 villages in southern Lesvos had been seriously damaged or destroyed. The mostly elderly residents affected were being housed with relatives, in hotels or at an army-run shelter. The earthquake marked the second crisis to hit the island in the last two years, after hundreds of thousands of migrants and refugees, including many fleeing war in Syria and Iraq, crossed to Lesvos on boats from Turkey as they headed to Europe.

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Brussels should be forced to take in 100,000. In their new swanky buildings.

‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

Rome Mayor Virginia Raggi has asked the Italian Interior Ministry for stricter measures to be taken toward the influx of foreigners into the capital. A letter outlining the need for a “moratorium” on “the continued influx of foreign citizens” was sent by Raggi to Roman prefect Paola Basilone. “I find it impossible, as well as risky, to think up further accommodation structures,” she wrote in the letter, as quoted by La Repubblica on Tuesday. “This administration, given the high flows of unregistered migrants, hopes the assessments of new facilities take into account the evident migrant pressure on Roma Capitale [the City of Rome] and the possible devastating consequences in terms of social costs as well as for the protection of the beneficiaries themselves.”

In May, Raggi told RT that she was working to help accommodate refugees and asylum seekers in Rome, but also that she also has a responsibility to her constituents and other countries in the EU must do their part. “Let’s put it this way – Rome would be better off if European states didn’t build walls along their borders, but rather followed through on their obligations and respected the migrant quotas agreed upon by the EU,” she told RT’s Sophie Shevardnadze. “According to the law, the city of Rome must accept migrants, as Mayor – I have to follow the law and do everything in my power to make sure that people are granted a safe place to stay here. But if other European countries decide to finally follow through on their obligations, we will welcome that decision.” “As mayor of Rome, I have to accommodate migrants, but I am also responsible for the security of my city and its residents. We cannot ignore either issue.”

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Jun 122017
 
 June 12, 2017  Posted by at 9:42 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Adam West died last week. This was his phone book listing in Ketchum, ID where he lived.

 

New Economic Woes Put Theresa May Under Fresh Pressure (Tel.)
EU Threatens Year-Long Delay In Brexit Talks Over UK Negotiating Stance (G.)
Donald Trump’s State Visit To Britain Put On Hold (G.)
It’s The Calm Before A Gigantic, Horrendous Storm: David Stockman (CNBC)
The Risk To The “Bull” Thesis (Roberts)
Big Tech Stocks Under Pressure After Apple Shares Downgraded (CNBC)
China’s $5 Trillion Asset Pile Could Still Expand (BBG)
When Currencies Fall, Export Growth Is Supposed to Follow (WSJ)
Aldi Fires $3.4 Billion Shot In US Supermarket Wars (R.)
France’s Macron Set For Landslide Majority In Parliament (R.)
Naomi Klein: ‘Trump Is An Idiot, But He’s Good At That’ (G.)
Chelsea Manning Explains Why She Went to Prison for You (TAM)
Over 2,500 Migrants Rescued In Mediterranean In 2 Days, Over 50 Missing (RT)

 

 

Even the -Tory- Telegraph has turned on the ‘winner’: Another one of their headlines: “Theresa May arrogantly abandoned Thatcherism – this is her reward”.

New Economic Woes Put Theresa May Under Fresh Pressure (Tel.)

Theresa May has been hit by a series of economic blows, with consumers tightening their belts and businesses increasingly showing fears of a sharp slowdown as she attempts to cling on to power. The crucial services sector stands on the brink of a contraction, new data shows, and credit card spending has fallen for the first time in four years. High Street footfall has also gone sharply into reverse and manufacturing and construction companies in the English regions report a widespread slowdown in activity. Most of the gloomy figures published today were gathered prior to Mrs May’s disastrous snap election. It has further undermined confidence, according to the Institute of Directors (IoD). The hung parliament has triggered a massive swing towards negativity among the business leaders.

Before the election, IoD members’ net confidence, which offsets economic pessimism and optimism, was almost balanced at minus three. In the aftermath of the election it has plunged to minus 37. Businesses were increasingly ready to openly criticise Mrs May over the weekend after her interventionist manifesto failed to inspire strong public support. Stephen Martin, IoD director general, said last night: “It was disheartening that the only reference the Prime Minister made to prosperity in her Downing Street statement was to emphasise the need to share it, rather than create it in the first place.” Official figures later this week are expected to show a tightening squeeze on consumers. Economists estimate that wages grew by 2pc the year to April, down from 2.1pc a month earlier. Meanwhile inflation is expected to remain at 2.7pc, with rises to come.

Shoppers are curbing their spending in response, according to data from Visa. The credit card company said household expenditure in May was gown 0.8pc on last year, the first decline since 2013. Consumers cut back on clothing and household goods especially. Visa UK managing director Kevin Jenkins said the data “clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze”.

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All Jeremy Corbyn has to do is tell Europe that he won’t feel bound by anything they negotiate with May.

EU Threatens Year-Long Delay In Brexit Talks Over UK Negotiating Stance (G.)

Theresa May is to be told the EU will take a year to draft a new mandate for its chief negotiator, Michel Barnier, effectively killing the Brexit negotiations, if she insists on discussing a future trade relationship at the same time as the UK’s divorce bill. In a sign of growing impatience with the shambolic state of the British side of the talks, senior EU sources said that if London insisted on talking about a free trade deal before the issues of its divorce bill, citizens rights and the border in Ireland were sufficiently resolved, it would be met with a blunt response. “If they don’t accept the phased negotiations then we will take a year to draw up a new set of negotiating guidelines for Barnier,” one senior EU diplomat said, adding that the EU could not understand Britain’s continued claim that it would be able to discuss trade and the divorce terms in parallel.

The EU’s 27 leaders formally agreed to give Barnier a narrow set of tasks at a summit in April and they have no intention of rethinking the so-called phased approach when they meet May at a European summit on 22-23 June. Formal Brexit talks are due to begin on 19 June, the same day as the Queen’s speech, at which point it will be known whether May has secured the support of a majority of MPs for her policy agenda. The Department for Exiting the European Union (DExEU) sent a note to the European commission on Friday evening to signal that the government was operational and pre-negotiation talks about logistics should begin this week as planned. Olly Robbins, May’s EU adviser, told his European counterparts: “The prime minister has directed that the procedures for preparing the negotiations for the formal withdrawal from the European Union should start as soon as possible.” There is some scepticism in Brussels, however, about the ability of May’s minority administration to make effective decisions.

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But they keep all their own clowns in Parliament? Government, even?

Donald Trump’s State Visit To Britain Put On Hold (G.)

Donald Trump has told Theresa May in a phone call he does not want to go ahead with a state visit to Britain until the British public supports him coming. The US president said he did not want to come if there were large-scale protests and his remarks in effect put the visit on hold for some time. The call was made in recent weeks, according to a Downing Street adviser who was in the room. The statement surprised May, according to those present. The conversation in part explains why there has been little public discussion about a visit.

May invited Trump to Britain seven days after his inauguration when she became the first foreign leader to visit him in the White House. She told a joint press conference she had extended an invitation from the Queen to Trump and his wife Melania to make a state visit later in the year and was “delighted that the president has accepted that invitation”. Many senior diplomats, including Lord Ricketts, the former national security adviser, said the invitation was premature, but impossible to rescind once made.

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“Stockman believes the S&P 500 could easily fall to 1,600, about a 34% drop from current levels.”

It’s The Calm Before A Gigantic, Horrendous Storm: David Stockman (CNBC)

If David Stockman is right, Wall Street should hunker down. “This is one of the most dangerous market environments we’ve ever been in. It’s the calm before a gigantic, horrendous storm that I don’t think is too far down the road,” he recently said on “Futures Now.” Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, made his latest prediction after lawmakers grilled former FBI Director James Comey over whether President Donald Trump tried to influence the Russia investigation. “This is a huge nothing-burger, but you don’t take comfort from that. You get worried about that because the system is determined to unseat Donald Trump,” said Stockman. Stockman argues the latest drama on Capitol Hill is a distraction from the real problems facing the economy.

“If the Senate can involve itself in something this groundless, it’s just more hysteria about Russia-gate for which there is no evidence. If they can bog themselves down in this, then we have a dysfunctional, ungovernable situation in Washington,” he said, noting there are just seven weeks until lawmakers go home for the August recess. Stockman contends it’s unlikely tax reform and an infrastructure package will become reality in this environment — two business-friendly policies seen as a huge benefit to Wall Street. In fact, he warns, the country could see a government shutdown in a matter of months. A scenario like that could wipe out all of the stock market gains since the election and more, according to Stockman.

“I don’t know what Wall Street is smoking. They ought to be getting out of the casino while it’s still safe. Yet there’s this idea that since he [Trump] wasn’t incriminated, that proves that we can move on,” he said. “I think it’s crazy.” Stockman believes the S&P 500 could easily fall to 1,600, about a 34% drop from current levels. He’s made similar calls like this in the past, but they haven’t materialized. “There is nothing rational about this market. It’s just a machine-trading-driven bubble that’s nearing some kind of all-time craziness, mania,” he said.

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Buybacks again. And again.

The Risk To The “Bull” Thesis (Roberts)

Following the election, the markets began pricing in a strongly recovering economic environment driven by a wave of legislative policies. While the market has indeed advanced, the economic and fundamental realities HAVE NOT changed since the election. As noted on Friday: “Economic data is not buying it either. Headline after headline, as of late, has continued to disappoint from new and existing home sales to autos, inventories, and employment. This also puts the Fed at risk of further rate hikes this year. ‘It appears traders are losing faith in the rest of the year as the odds of a hike occurring in December is now above that of September (as both drop to around 25%). As economic data has crashed since The Fed hiked rates in March, so the markets expectations has dropped to just 1.44 rate-hikes this year (one in June guaranteed), well below The Fed’s guidance of 2 more rate-hikes minimum.’”

Another huge risk going forward, as well, is the risk to further stock buybacks to support higher EPS as the lack of legislative reforms to boost the bottom line fade. As noted by Goldman just after the election: “We expect tax reform legislation under the Trump administration will encourage firms to repatriate $200 billion of overseas cash next year. “A significant portion of returning funds will be directed to buybacks based on the pattern of the tax holiday in 2004.” – Goldman Sachs. But it is not just the repatriation but lower tax rates that will miraculously boost bottom line earnings, but as noted from Deutsche Bank tax cuts are the key. “Every 5pt cut in the US corporate tax rate from 35% boosts S&P EPS by $5. Assuming that the US adopts a new corporate tax rate between 20-30%, we expect S&P EPS of $130-140 in 2017 and $140-150 in 2018. We raise our 2017E S&P EPS to $130.”

Maybe not so fast. Here is the problem. While you may boost bottom line earnings from tax cuts, the top line revenue cuts caused by higher interest rates, inflationary pressures, and a stronger dollar (as expected would be the result of tax reform) will exceed the benefits companies receive at the bottom line. I am not discounting the rush by companies to buy back shares at the greatest clip in the last 20-years to offset the impact to earnings by the reduction in revenues. However, none of the actions above go to solving the two things currently plaguing the economy – real jobs and real wages. Economic realities and wishful fantasies eventually reconnect and generally in the worst possible way.

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Bubble? Hell, no.

Big Tech Stocks Under Pressure After Apple Shares Downgraded (CNBC)

After a drop in big technology stocks Friday caused the Nasdaq composite to post its worst week of the year, the shares were likely to come under pressure again on Monday after Apple shares were downgraded. Mizuho Securities’ Abhey Lamba downgraded the iPhone maker to neutral from buy on Sunday, saying the best case scenario is priced into the shares. The analyst echoed a common concern of investors taking profits in big technology stocks last week. “The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out,” wrote Lamba, who cut his 12-month price target to $150, which is about one dollar above where Apple closed Friday.

A Friday selloff pushed the Nasdaq down more than 1.5% last week, but the selling was worse among the biggest stocks. Apple, Alphabet, Microsoft, Facebook and Amazon lost nearly $100 billion in market value on Friday on no specific headlines, but rather investors questioning whether valuations for the names were getting ahead of themselves. Nasdaq-100 futures were lower Sunday evening following the Apple downgrade. [..] Apple, Facebook and Amazon are still up more than 27% so far in 2017. Alphabet is up 20% and Microsoft shares are 11% higher for the year. By comparison, the S&P 500 is up more than 7% year-to-date.

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The graph indicates balance sheet change, not total numbers. Bit misleading when a $5 trillion asset pile, with the Fed at $4.5 trillion, is the topic.

China’s $5 Trillion Asset Pile Could Still Expand (BBG)

Investors who fret about when and how global central banks will run down their crisis-era balance sheets can be relaxed about the biggest of them all – China’s. Whereas the Fed’s $4.5 trillion asset pile is set to be shrunk and the ECB’s should stop growing by the end of this year as the outlook brightens, China’s $5 trillion hoard is here to stay for the time being – and could even still expand, according to the majority of respondents in a Bloomberg survey. The PBOC balance sheet is a fundamentally different beast from its global peers – run up through years of capital inflows and trade surpluses rather than hoovering up government bonds – but it still matters for the global economy. Changes in the amount of base money in the world’s largest trading nation are having a bigger impact than ever, making the variable key for stability in a year when political transition in Beijing is in the cards.

“China is more than a couple of years away from balance-sheet contraction,” said Ding Shuang, chief China economist at Standard Chartered, pointing out that the growth in the broad money supply is still behind the government’s target. The balance sheet has broadly leveled off, and contracted in the first quarter of this year, though that was mostly through seasonal factors related to liquidity operations around the Lunar New Year, when the demand for cash surges. Now, with the Fed set to raise rates this year, the PBOC is still wary of accelerating cash outflows from China and may need to use reserves to support the currency even as trade surpluses keep piling up. Most economists said they predict that the balance sheet will be around the same size or bigger by the end of the year, in the survey of 21 institutions including Bank of China, Nomura and SocGen.

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No, you don’t get inflation from a falling currency. But you just might get higher prices.

When Currencies Fall, Export Growth Is Supposed to Follow (WSJ)

For decades, economics textbooks argued that suddenly weaker currencies are a boon to growth, because they make a country’s exports more competitive or profitable on the global stage, which in turn boosts domestic production and employment. What if that theory no longer holds? Economists and government officials are increasingly wondering if that effect is diminishing, especially among advanced Western economies with shrinking manufacturing capacity and supply chains increasingly interwoven with the rest of the world. The new idea is that much of the benefit from a falling currency is offset by the higher prices paid for components imported from overseas. The U.K. is emerging as a test case for whether globalization has diminished the effect.

Although its currency has been battered by the financial crisis, the Brexit vote to leave the European Union—which took place a year ago June 23—and the country’s fresh bout of political uncertainty, its exporting power hasn’t responded as textbooks might suggest. Chemicals made at Chemoxy’s factory in Middlesbrough are worth about 20% more in the export market after last June’s fall in sterling, given the beefed-up value of the currencies used to buy those goods overseas. Higher costs for imported materials, however, all but erased that advantage. “We have a huge interdependency on international markets,” says Chemoxy Chief Executive Ian Stark. The company exports more than 60% of its products and imports about 85% of its chemical raw materials. A weaker pound, he says, “isn’t revolutionary.”

British businesses ranging from car makers to food processors to lumber mills are discovering the same thing. Adam Posen, president of the Peterson Institute for International Economics, and a member of the Bank of England’s rate-setting monetary policy committee between 2009 and 2012, says the effects of currency moves on exports have faded over time. After the financial crisis in 2008, a big sterling depreciation didn’t result in the pickup in exports “we would have expected,” he says. “You just don’t get as much bang for your pound as you used to,” said Mr. Posen. Whether or how the relationship between a currency’s strength and economic growth still holds has ramifications for international politics.

In the U.S., manufacturers have long complained about the impact of a strong dollar. President Donald Trump has accused Japan and China of keeping their currencies artificially low, hampering U.S. exports. In 1992, the pound fell by around 11% between September and the end of that year after the U.K. crashed out of the European exchange rate mechanism—a precursor to the euro that required a stronger pound than the government could sustain. The U.K. economy then went on an export tear, which turned a trade deficit into a five-year surplus and jump-started a recovery.

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“Aldi’s prices were also up to 50% lower than traditional grocery chains, a move that appeared to follow rival Lidl’s announcement on prices.”

Aldi Fires $3.4 Billion Shot In US Supermarket Wars (R.)

German grocery chain Aldi said on Sunday it would invest $3.4 billion to expand its U.S. store base to 2,500 by 2022, raising the stakes for rivals caught in a price war. Aldi operates 1,600 U.S. stores and earlier this year said it would add another 400 by the end of 2018 and spend $1.6 billion to remodel 1,300 of them. The investment, which raises Aldi’s capital expenditure to at least $5 billion so far this year, comes at a time of intense competition and disruption in the industry. German rival Lidl will open the first of its 100 U.S. stores on June 15. In May, Lidl said it would price products up to 50% lower than rivals. Wal-Mart, the largest U.S. grocer, is testing lower prices in 11 U.S. states and pushing vendors to undercut rivals by 15%. Wal-Mart, the world’s biggest retailer, is expected to spend about $6 billion to regain its title as the low-price leader, analysts said.

The furious pace of expansion by Aldi and Lidl is likely to further disrupt the U.S. grocery market, which has seen 18 bankruptcies since 2014. The two chains are also upending established UK grocers like Tesco and Wal-Mart’s UK arm, ASDA. In May, Aldi CEO Jason Hart told Reuters the chain intended to have prices at least 21% lower than rivals and would focus on adding in-house brands to win over price-sensitive customers. “We’re growing at a time when other retailers are struggling,” Hart said in a statement. Hart added that Aldi’s prices were also up to 50% lower than traditional grocery chains, a move that appeared to follow rival Lidl’s announcement on prices. The latest store expansion will create 25,000 U.S. jobs and make Aldi the third-largest grocery chain operator in the country behind Wal-Mart and Kroger, the German chain said in a statement. Aldi’s 2,500 stores would equal about 53% of Wal-Mart’s U.S. outlets.

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As I said yesterday, highly curious. When he won on May 7, just 5 weeks ago, there were no candidates, no apparatus, and no money: word was the candidates even had to pay for their own campaigns. And look now.

Note: France is still under a state of emergency.

France’s Macron Set For Landslide Majority In Parliament (R.)

French President Emmanuel Macron’s party is set for a giant majority in parliament, opinion pollsters said on Sunday after a first round of voting. According to two pollsters, his Republic On the Move (LREM) party and its ally Modem were set to win well over 400 seats in the 577-seat National Assembly. The two organisations along with others forecast he had won well over 30% of first round votes as voting closed. A poll by Elabe put the number of seats at between 415 and 445, while a poll by Kantar Sofres put it at between 400 and 445. A second round of voting will determine the actual number of seats Macron wins. The first round for the most part eliminates eliminates candidates who have gathered less than 12.5% of registered voters.

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Long interview for Naomi’s new book “No Is Not Enough”.

Naomi Klein: ‘Trump Is An Idiot, But He’s Good At That’ (G.)

The fact that Naomi Klein predicted the forces that explain the rise to power of Donald Trump gives her no pleasure at all. It is 17 years since Klein, then aged 30, published her first book, No Logo – a seductive rage against the branding of public life by globalising corporations – and made herself, in the words of the New Yorker, “the most visible and influential figure on the American left” almost overnight. She ended the book with what sounded then like “this crazy idea that you could become your own personal global brand”. Speaking about that idea now, she can only laugh at her former innocence. No Logo was written before social media made personal branding second nature. Trump, she suggests in her new book, No Is Not Enough, exploited that phenomenon to become the first incarnation of president as a brand, doing to the US nation and to the planet what he had first practised on his big gold towers: plastering his name and everything it stands for all over them.

Klein has also charted the other force at work behind the victory of the 45th president. Her 2007 book, The Shock Doctrine, argued that neoliberal capitalism, the ideological love affair with free markets espoused by disciples of the late economist Milton Friedman, was so destructive of social bonds, and so beneficial to the 1% at the expense of the 99%, that a population would only countenance it when in a state of shock, following a crisis – a natural disaster, a terrorist attack, a war. Klein developed this theory first in 2004 when reporting from Baghdad and watching a brutally deregulated market state being imagined by agents of the Bush administration in the rubble of war and the fall of Saddam Hussein. She documented it too in the aftermath of the Boxing Day tsunami in Sri Lanka, when the inundated coastline of former fishing villages was parcelled up and sold off to global hotel chains in the name of regeneration.

And she saw it most of all in the fallout of Hurricane Katrina in New Orleans, when, she argued, disaster was first ignored and exacerbated by government and then exploited for the gain of consultants and developers. Friedmanites understood that in extreme circumstances bewildered populations longed above all for a sense of control. They would willingly grant exceptional powers to anyone who promised certainty. They understood too that the combination of social media and 24-hour cable news allowed them to manufacture such scenarios almost at will. The libertarian right of the Republican party, in Klein’s words, became “a movement that prays for crisis the way drought-struck farmers pray for rain”.

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Here’s hoping Chelsea has some peace and perhaps even fun.

Chelsea Manning Explains Why She Went to Prison for You (TAM)

Chelsea Manning has given her first interview since being released from prison last month in which she explains her motivations for making public thousands of military documents. Excerpts of her interview with ABC‘s “Nightline” co-anchor Juju Chang aired Friday on the network’s “Good Morning America.” Asked about why she leaked the trove of documents, she says, “I have a responsibility to the public … we all have a responsibility.” “We’re getting all this information from all these different sources and it’s just death, destruction, mayhem.” “We’re filtering it all through facts, statistics, reports, dates, times, locations, and eventually, you just stop,” she adds. “I stopped seeing just statistics and information, and I started seeing people.” Asked by Hing what she would tell President Obama, Manning, choking up, says, “I’ve been given a chance,” she says. “That’s all I asked for was a chance.”

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Stop bombing. Start rebuilding. There is no other solution.

Over 2,500 Migrants Rescued In Mediterranean In 2 Days, Over 50 Missing (RT)

More than 2,500 migrants were rescued off the Libyan coast in the past 48 hours while attempting to cross the Mediterranean in “flimsy dinghies,” the UN refugee agency has said. At least eight people have died and dozens are feared missing. “Eight corpses have been recovered so far and at least 52 people are feared missing from two incidents involving large numbers of people on flimsy dinghies off the coast of Libya on Saturday,” Director of Europe Bureau of the UN Refugee agency (UNHCR) Vincent Cochetel said in a statement, citing the Italian Coast Guard. In all, over a dozen search-and-rescue operations, coordinated by the Italian Coast Guard, were launched over the weekend. The rescued migrants are expected to be disembarked in Italy over the next few days, the agency added.

“UNHCR applauds the rescue efforts by European government authorities, the Italian Coast Guard and NGOs, but is deeply saddened that the death toll continues to rise,” the statement reads. Over 1,770 people are estimated to have perished or gone missing while trying to cross the Mediterranean so far this year, according to agency’s estimates, while more than 50,000 migrants reached Italian shores, most of them through Libya. The death toll among migrants trying to reach Europe is believed to be much higher, according to the UNHCR, though, as many of them presumably die in the Sahara desert without even making it to the Libyan coast. The migrant death toll is expected to spike in the next few months with the beginning of summer sailing season, the agency warns. While urging to strengthen international efforts to save people attempting to cross the Mediterranean, UNHCR stated that the “solutions cannot just be in Italy.” Italy has on numerous occasions said that it does not enough resources to deal with the migrant influx from Libya.

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Jun 112017
 
 June 11, 2017  Posted by at 9:30 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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Mondriaan Amaryllis 1910

 

US Weeks Away From A Recession According To Latest Loan Data (ZH)
This Super Bubble Is About to Pop (IM)
Another Spanish Bank about to Bite the Dust (DQ)
“Macron Is Shaping Up As Hyper-Presidency” (BBG)
George Osborne Says Theresa May Is A ‘Dead Woman Walking’ (G.)
Theresa May’s Premiership In Peril As Loose Alliance Agreed With DUP (G.)
UK’s May Isolated Ahead Of Brexit Talks As Key Aides Quit (R.)
The Inconvenient Truth of Consumer Debt (DDMB)
Tesla’s Market Value Zooms Past Another Car Maker (MW)
The Actual Lizard People (Connelly)
Refugee Rescue Ships Not ‘Colluding With People Smugglers’ (Ind.)
Fractal Planting Patterns Yield Optimal Harvests, No Central Control (PhysOrg)

 

 

A huge difference from the overarching narrative.

US Weeks Away From A Recession According To Latest Loan Data (ZH)

While many “conventional” indicators of US economic vibrancy and strength have lost their informational and predictive value over the past decade (GDP fluctuates erratically especially in Q1, employment is the lowest this century yet real wage growth is non-existent, inflation remains under the Fed’s target despite its $4.5 trillion balance sheet and so on), one indicator has remained a stubbornly fail-safe marker of economic contraction: since the 1960, every time Commercial & Industrial loan balances have declined (or simply stopped growing), whether due to tighter loan supply or declining demand, a recession was already either in progress or would start soon. This can be seen on both the linked chart, and the one zoomed in below, which shows the uncanny correlation between loan growth and economic recession.

And while we have repeatedly documented the sharp decline in US Commercial and Industrial loan growth over the past few months (most recently in “We Now Know “Who Hit The Brakes” As Loan Creation Crashes To Six Year Low“) as US loans have failed to post any material increase in over 30 consecutive weeks, suddenly the US finds itself on the verge of an ominous inflection point. After growing at a 7% Y/Y pace at the start of the year, which declined to 3% at the end of March and 2.6% at the end of April, the latest bank loan update from the Fed showed that the annual rate of increase in C&A loans is now down to just 1.6%, – the lowest since 2011 – after slowing to 2.3% and 1.8% in the previous two weeks.

Should the current rate of loan growth deceleration persist – and there is nothing to suggest otherwise – the US will post its first negative loan growth, or rather loan contraction since the financial crisis, in roughly 4 to 6 weeks. An interesting point on loan dynamics here from Wolf Richter, who recently wrote that a while after the 1990/1991 recession was over, the NBER determined that the recession began in July 1990, eight month after C&I loans began to stall. “As such, the current seven-month stall is a big red flag. These stalling C&I loans don’t fit at all into the rosy credit scenario. Something is seriously wrong.”

However, it wasn’t until loan growth actually contracted, that the 1990 recession was validated.  Well, the US economy is almost there again. And this time it’s not just C&I loan growth, or lack thereof, there is troubling. As the chart below shows, after peaking in late 2016, real-estate loan growth has also decelerated by nearly half, to 4.6%.

More troubling still, after flatlining at nearly double digit growth for much of 2016, starting last September there has been a sharp slowdown in commercial auto loans, whose growth is now down to just a third, or 3%, of what it was a year ago.

While it remains to be seen if C&I loans have preserved their uncanny “recession predictiveness” for yet another turn of the business cycle, the charts above confirm that the US economy is rapidly slowing, and validating the poor Q1 GDP print. Furthermore, one thing is clear: absent a substantial rebound in loan growth, whether for commercial, residential or auto loans, there is no reason to expect an imminent uptick in the US economy. We only note this, because next week the Fed plans to hike rates again. If it does so just as US loan growth contracts, it may be doing so smack in the middle of a recession.

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It’s more of a series of bubbles. But yes, Germany’s needs and demands are set to prevail over everyone else’s yet again. The EU’s inherent flaws will do it in.

This Super Bubble Is About to Pop (IM)

Right now, Italy is Europe’s weakest link. Italy has one of the most indebted governments in the world. It’s borrowed over $2.4 trillion. Its debt-to-GDP ratio is north of 130%. (For comparison, the US debt-to-GDP ratio is 104%.) But the situation is actually much worse. GDP measures a country’s economic output. However, it’s highly misleading. Mainstream economists count government spending as a positive when calculating GDP. A more honest approach would count it as a big negative. In Italy, government spending accounts for a whopping 50%-plus of GDP. Remove that from the calculation, and I suspect we’d see how hopelessly insolvent the Italian government truly is. In other words, Italy is flat broke. I don’t see how the Italian government could possibly extract enough in taxes from the productive part of the economy to ever pay back what it’s borrowed.

Meanwhile, Italian government bonds are in a super bubble. They’re currently trading near record-low yields. (When bond prices go up, bond yields do down.) Over $1 trillion worth of Italian bonds actually have negative yields. It’s a bizarre and perverse situation. Lending money to the bankrupt Italian government carries huge risks. So the yields on Italian government bonds should be near record highs, not record lows. Negative yields could not exist in a free market. They’re only possible in the current “Alice in Wonderland” economy created by central bankers. You see, the ECBhas been printing money to buy Italian government bonds hand over fist. Since 2008, the ECB and Italian banks have bought over 88% of Italian government debt, according to a recent study. This is stunning.

It means that Italy’s financial system depends completely on ECB money printing. Italian government bonds are, without a doubt, in super-bubble territory. It won’t be long before a pin pricks this bubble and… pop. That could happen soon. Earlier this month, the credit rating agency Fitch downgraded Italy’s credit rating from BBB+ to BBB. And Mario Draghi, the head of the ECB, recently announced that after five years of manic money printing, he’s finally achieved his wrongheaded goal of 2% inflation. [..] Now that the ECB has reached its 2% inflation target, Germany and other EU countries are pushing the central bank to stop printing so much money. This is the last thing the Italian government wants. Remember, the ECB buys a lot of Italian government bonds with those freshly printed euros.

If the ECB stops buying Italian government bonds, who will step up? The answer is nobody. Italian banks are already completely saturated with government bonds. Germany wants the money printing to stop. Italy wants it to continue. But, since the ECB has reached its stated inflation target and Germany has crucial elections later this year, I think Germany will get its way. This is very bad news for Italy’s government and banking system. Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar. Soon it will be impossible for the Italian government to finance itself. Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.

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Multiple banks. Zombies and dominoes.

Another Spanish Bank about to Bite the Dust (DQ)

After its most tumultuous week since the bailout days of 2012, Spain’s banking system is gripped by a climate of fear, uncertainty and distrust. Rather than allaying investor nerves, the shotgun bail-in and sale of Banco Popular to Santander on Tuesday has merely intensified them. For the first time since the Global Financial Crisis, shareholders and subordinate bondholders of a failing Spanish bank were not bailed out by taxpayers; they took risks in order to make a buck, and they bore the consequences. That’s how it should be. But bank investors don’t like not getting bailed out. Now they’re worrying it could happen again. As Popular’s final days showed, once confidence and trust in a bank vanishes, it’s almost impossible to restore them.

The fear has now spread to Spain’s eighth largest lender, Liberbank, a mini-Bankia that was spawned in 2011 from the forced marriage of three failed cajas (savings banks), Cajastur, Caja de Extremadura and Caja Cantabria. This creature’s shares were sold to the public in May 2013 at an IPO price of €0.40. By April 2014, they were trading above €2, a massive 400% gain. But by April 2015, shares started sinking. By May 2017, they were trading at around €1.20. But since the bail-in of Popular, Liberbank’s shares have seriously crashed as panicked investors fled. Scenting fresh blood, short sellers were piling in. On Friday alone, shares plunged another 17%. At one point, they were down 38% before bouncing at the close of trading, much of it driven by the bank’s own share buybacks:

In the last three weeks a whole year’s worth of steadily rising gains on the stock market have been completely wiped out. The main causes of concern are the bank’s high risk profile and low coverage rate. By the close of the first quarter of 2017, Liberbank’s default rate had reached 13%, over three%age points higher than the national average (9.8%), while its unproductive asset coverage rate was just 42.1%, compared to 47% for Banco Sabadell, 48% for Bankia, 50% for CaixaBank and 55% for Unicaja. Worse still, the vast bulk of the bank’s unproductive assets are real estate investments. After Popular, it is the Spanish entity with most exposure to toxic real estate assets, according to the financial daily El Confidencial — a remarkable feat given the bank already had the lion’s share of its impaired real estate assets transferred onto the balance sheets of Spain’s “bad bank,” Sareb.

[..] Banco Popular’s demise is a stark reminder that Europe’s banking woes are far from resolved, despite the trillions of euros thrown at them. “The message the market is sending is that you have to buy solvent banks and stay away from those that pose high risks,” said Rafael Alonso, an analyst at Bankinter, one of Spain’s more solvent banks. Another Spanish bank that could be considered to pose high risks is Unicaja, the product of another merger of failed cajas that is (or at least was) scheduled to launch its IPO some time in June or July. As things currently stand, the timing could not be worse. The greater the uncertainty over Liberbank’s future, the lower the projected valuation of Unicaja’s IPO falls. Before Popular’s forced bail-in and acquisition, the Unicaja was valued at around €2.3 billion; now, just days later, it’s valued at less than €1.9 billion. If the trend continues, the IPO will almost certainly be shelved.

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From literally zero to a comfortable majority in just weeks. Maybe someday we’ll learn how it was done. We may not like it. Follow the money.

“Macron Is Shaping Up As Hyper-Presidency” (BBG)

Polling stations opened across France on Sunday as voters begin electing a parliament that will determine how much power recently elected President Emmanuel Macron will actually have. If polls are to be believed, it will be a lot. The latest surveys suggest Macron’s Republic on the Move movement, or REM, will win a comfortable majority in the 577-seat National Assembly, allowing him to push through his plans to loosen French labor laws and simplify its tax system. The 39-year-old Macron was elected in May after creating a centrist political movement that took millions of votes away from the two parties that have dominated French politics for decades. During one month in office, he’s further weakened the Socialist Party and the center-right Republicans by poaching some of their leading members for cabinet positions.

“Macron is shaping up as hyper-presidency, with a very strong central authority,” said Dominique Reynie, a politics professor at Sciences Po institute in Paris. “He’s got a party that he founded and fully controls. He’s got opposition parties that risk fragmenting.” Sunday’s ballot is for 539 seats in France. Voting has already closed in 27 constituencies for France’s overseas territories and another 11 to represent French expats. Voting started at 8 a.m. Paris time and most polling booths will close at 6 p.m., though local prefects can allow voting to continue until 8 p.m. The interior ministry will release turnout figures at noon and at again at 5 p.m. In 2012, about 59% of registered voters went to the polls. Little will be settled Sunday night. Under France’s two-round system for the parliamentary elections, any candidate with more than 12.5% of the registered voters goes through to runoffs on June 18, so long as no one gets 50% on Sunday. In the previous election five years ago, only 36, or about 6%, of the constituencies were settled in the first round.

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And he’s right. I wrote that even before the election. But Osborne and Cameron have been as disastrous for the UK as May now is.

A new poll shows that elections today would see Labour at 45% and Tories at 39%.

When will people fully appreciate that Jeremy Corbyn is the one person around who does not smear and gossip and play personal petty politics?

George Osborne Says Theresa May Is A ‘Dead Woman Walking’ (G.)

George Osborne has called Theresa May “a dead woman walking” and suggested the prime minister would be forced to resign imminently. The former chancellor said the campaign had undone the work of himself and former prime minister David Cameron in winning socially liberal seats such as a Bath, Brighton Kemptown and Oxford East, now lost to Labour and the Lib Dems. “She is a dead woman walking and the only question is how long she remains on death row,” the editor of the Evening Standard said, defending his paper’s attacks on May as speaking from a “socially liberal, pro-business, economically liberal position” that he said had been consistent as editor and chancellor. Speaking on the BBC’s Andrew Marr show, Osborne said he and Cameron had spent “years getting back to office, winning in seats like Bath and Brighton and Oxford and I am angry when we go backwards and I am not afraid to say that”.

Political strategist Lynton Crosby, blamed by May’s advisers for an overly negative, presidential-style campaign with robotic slogans, had been undermined by the prime minister’s own flaws, Osborne said. “They are professionals,” he said, blaming May’s “failure to communicate and a disastrous manifesto”. Osborne said blame should be on the shoulders of May, though her advisers Nick Timothy and Fiona Hill resigned on Saturday. “You can’t just blame the advisers. The only person who decides to have an election is the prime minister, the person who decides what’s in the manifesto is the prime minister.” He said the party had been furious with May on her return to Downing Street when she gave a speech that failed to acknowledge party colleagues who had lost their seats, including ministers. “The Tory party was absolutely furious that Theresa May failed to acknowledge the loss and suffering of many MPs,” he said.

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The DUP is a fatally flawed option. May has signed her own political death warrant. Bloomberg: “Theresa May could reportedly face a leadership challenge as soon as Tuesday”

Theresa May’s Premiership In Peril As Loose Alliance Agreed With DUP (G.)

Theresa May’s plan for a loose alliance with the Democratic Unionists to prop up her government was thrown into confusion last night after the Northern Ireland party contradicted a No 10 announcement that a deal had been reached. A Downing Street statement on Saturday said a “confidence and supply” agreement had been reached with the DUP and would be put to the cabinet on Monday. But the DUP last night put the brakes on that announcement, saying talks were continuing, not finalised. The DUP leader, Arlene Foster, said “discussions will continue next week to work on the details and to reach agreement on arrangements for the new parliament”. Following talks between May and the DUP last night, a second statement from No 10 clarified that no final deal had been reached.

[..] The Observer has learned that the DUP was planning to dodge a row when negotiations began by avoiding the inclusion of any controversial social policies, such as opposition to gay marriage or abortion, in its so-called “shopping list” of demands to the Tories. Party sources said it would be seeking commitments from May that there would be no Irish unity referendum and no hard border imposed on the island of Ireland. However, some Tories remained concerned that a pact would damage a brand they have spent years trying to detoxify. “More and more colleagues are becoming distinctly uneasy about the idea of a formal pact with the DUP,” said one senior Conservative. “It is up to the DUP if they want to support a Conservative government and vote for various measures that we put through, but there is a feeling that we are damaged if we are seen to be entering into a formal agreement with a party whose views on a number of things we just don’t share.

“Why should we damage what we painstakingly built up through David Cameron’s work on personal issues, and indeed what the prime minister’s own instincts are, with any form of formal linkage with people who plainly have some views that the vast majority of Conservative MPs would not share?” Nicky Morgan, an education secretary under David Cameron, said: “As a former minister for women and equalities, any notion that the price for a deal with the DUP is to water down our equalities policies is a non-starter.” An online petition calling for May to resign rather than form a coalition with the DUP had attracted more than 500,000 signatures Saturday night. The DUP is opposed to abortion and same-sex marriage. It has also appointed climate change sceptics to senior posts within the party.

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The Tories need internal cleansing even more than Labour.

UK’s May Isolated Ahead Of Brexit Talks As Key Aides Quit (R.)

British Prime Minister Theresa May secured a deal on Saturday to prop up her minority government but looked increasingly isolated after a botched election gamble plunged Britain into crisis days before the start of talks on leaving the EU. Her Conservatives struck an outline deal with Northern Ireland’s Democratic Unionist Party (DUP) for support on key legislation. It was a humiliating outcome after an election that May had intended to strengthen her ahead of the Brexit push. Instead, voters stripped the Conservatives of their parliamentary majority. As May struggled to contain the fallout, her two closest aides resigned. Newspapers said foreign minister Boris Johnson and other leading party members were weighing leadership challenges. But Johnson said he backed May.

May called the early election in April, when opinion polls suggested she was set for a sweeping win. May’s aides, Nick Timothy and Fiona Hill quit on Saturday following sustained criticism within the party of the campaign. Gavin Barwell was named new chief of staff. The Conservative lawmaker who lost his seat on Thursday and has experience working as a party enforcer in parliament. The change was unlikely to significantly quell unrest within the party. Most of May’s cabinet members have kept quiet on the issue of her future, adding to speculation that her days as prime minister are numbered. A YouGov poll for the Sunday Times newspaper found 48% of people felt May should quit while 38% thought she should stay. [..] Britain’s largely pro-Conservative press questioned whether May could remain in power.

The Sun newspaper said senior members of the party had vowed to get rid of May, but would wait at least six months because they feared a leadership contest could propel the Labour party into power under Jeremy Corbyn, who supports renationalization of key industries and higher taxes for business and top earners. Survation, the opinion polling firm that came closest to predicting correctly the election’s outcome, said a new poll it conducted for the Mail on Sunday newspaper showed support for Labour now 6%age points ahead of the Conservatives. “She’s staying, for now,” one Conservative Party source told Reuters. Former Conservative cabinet minister Owen Paterson, asked about her future, said: “Let’s see how it pans out.”

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“Sometime between now and Armageddon, interest rates will go up..”

The Inconvenient Truth of Consumer Debt (DDMB)

Oh, but for the days the hawks had a hero in Sydney. Against the backdrop of a de facto currency war, the Reserve Bank of Australia stood as a steady pillar of strength. The RBA held the line on interest rates, maintaining a floor of 2.5%, even as its global central bank peers drove rates to the zero bound and beyond into negative territory. The abrupt end to the commodities supercycle drove the RBA to join the global currency war. The mining-dependent nation’s economy was so debilitated that policy makers felt they had no choice but to ease financial conditions. In February 2015, after an 18-month honeymoon, the RBA reduced its official rate to 2.25%, marking the start of a cycle that ended last August with the fourth cut to a record low of 1.5%. The Bank of Canada has taken a similar journey in recent years.

It embarked upon a mild tightening campaign in 2010 that raised the overnight loan rate from a record low of 0.25% to 1% in September 2010. The bank maintained that level until early 2015. Two weeks before the RBA’s first cut, the Bank of Canada lowered rates to 0.75%. The January move, which shocked the markets, was followed in July 2015 with an additional ease to 0.5%, where it remains today. Bank of Canada Governor Stephen Poloz, who replaced Mark Carney after he departed to head the Bank of England, explained the moves as necessary to counter the downside risks to inflation emanating from the oil price shock to the country’s economy. Two resource-rich economies reacting similarly to body blows is intuitive enough. They eased the pressure on their given economies. How they’ve landed in their current predicaments is less easy to explain.

Propelled by soaring home prices from Sydney to Toronto to Melbourne to Vancouver, Australia’s household debt-to-income has hit a record 190%, the highest among developed nations; it is trailed closely by Canada, which has a 167% ratio. To put this in perspective, at the peak of the housing bubble, debt-to-income in the U.S. peaked at 130%. Then, economists took perverse pleasure in squelching the alarm these frightening figures elicited. “It’s not the level of debt that matters, it’s the cost to service that debt.” Is it a surprise that economists today are equally dismissive of households’ heavy debt burdens? Mortgages take a lifetime to expunge; incomes flow in every year. That myopic mindset best captures the shackles that bind today’s global economy. Of course it’s acceptable to build infinitely high levels of debt – as long as rates never rise.

But then there’s the inconvenient truth that when the price of the collateral backing those millions of subprime mortgages cratered, those irrelevant debt loads became relevant overnight. The same can be said of today’s delicate dynamic. Australia and Canada will be just fine so long as they don’t suffer a shock in any form to their respective economies. Some policy makers have begun to push back against the conventional stupidity. “Sometime between now and Armageddon, interest rates will go up,” warned Australia’s Treasury Secretary John Fraser on May 30. “That’s something people need to be mindful of.” Bear in mind that household debt has been growing at multiples of income, a disconnect that can only exist in a wonderland of permanently low interest rates.

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Tesla sold less than 84,000 cars in 2016. VW sold 10 million. Guess which is worth more? Time to get free money out of the way, because it only serves to distort valuation, economies and societies.

Tesla’s Market Value Zooms Past Another Car Maker (MW)

Tesla on Friday became the world’s No. 3 car maker by market capitalization, surpassing Germany’s BMW and getting further ahead of U.S. competitors General Motors and Ford. Tesla’s market value now stands at $59.7 billion. The two car makers it has yet to surpass are Toyota, which is still a ways off at $172 billion, and Daimler at $78 billion. Tesla stock has hit a string of records in the past two months, and was slated to hit another closing all-time high on Friday. It reached a closing record of $370 on Thursday, and traded as high as $376.87 on Friday.

The meteoric stock rise pushed Tesla’s market cap to surpass Ford’s and GM’s in April. Tesla sold nearly 84,000 cars in 2016, up 64% from the previous year. The company has set a goal to be able to make cars at an annual rate of 500,000 a year by the end of 2018. The top auto makers by vehicles produced are Volkswagen and Toyota, each of which make about 10 million of the 90 million vehicles produced world-wide, according to the International Organization of Motor Vehicles Manufacturers. Tesla shares are up more than 73% so far this year. That compares with gains of approximately 9% for the S&P 500. The stock has gained more than 62% over the past 12 months, more than four times the gains for the benchmark.

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This is a history lesson that’s part of a longer piece on neo-liberalism and the Shock Doctrine.

The Actual Lizard People (Connelly)

The Mont Pelerin Society was created on 10 April 1947 at a conference organised by the economist Friedrich von Hayek and Swiss businessman Albert Hunold. (By the end of the conference, Hunold would be appointed secretary. He also became editor-in-chief of The Mont Pelerin Quarterly magazine). The Society was basically a union for the rich and powerful, which boasted Prime Ministers and Presidents, journalists, European and American aristocracy, economists, business people, authors and academics. It was backed and funded by The (New York) Foundation for Economic Education, and the William Volker Fund based in Kansas City which provided subsidies. Credit Suisse, then known as The Schweizerische Kreditanstalt, paid for almost all the conference costs.

As the cigar-smoke, whiskey and heady self-righteousness swilled around the ballroom lights, Hayek joined with Milton Friedman and their luminaries, including Austrian-American economist, Ludvig von Mises and noted Austrian-British philosopher, Karl Popper to form a small, exclusive club of free-marketeers, devoted to remaking the world in its image. That night began the systematic deconstruction of Roosevelt’s New Deal which, ironically, was responsible for the greatest expansion of the American middle class up until that point, according to historian Jason A Schwarz which in turn helped bolster middle-class wealth in allied nations. The wealth created during the New Deal endowed three generations with financial and social mobility, the riches that were still being spent and created in the 60s, 70s and 80s, at the cost of a fraction of the wealth of the world’s millionaires and billionaires.

The infrastructure built during the New Deal, cracking and creaking, is in use to this day. The Mont Pelerin group would draft a ten-point statement of aims which claimed “independent freedom can be preserved only in a society in which an effective competitive market is the main agency for the direction of economic activity.” The 10 point statement of aims concludes with: “Complete intellectual freedom is so essential to the fulfillment of our aims that no consideration of social expediency must ever be allowed to impair it”. The decisions made in that Swiss Hotel in 1947 was the formalisation of a long running class war that is still being fought today. Initially their progress was slow. They were in such a defensive mode, they achieved little that was tangible during the 50s and 60s, beyond an attack on the then dominant Neo-Keynesian economic management.

Their first opportunity to take back real power, and shift the world towards the capitalism of the 1920s and earlier decades, came with the US-inspired overthrow of the Allende Government in Chile on September 11th, 1973 which saw hundreds killed, 200,000 people exiled, and many more tortured, kidnapped and disappeared. It is often referred to as the first 9/11. It is estimated more than 10,000 people were killed under Pinochet’s regime. Mass Chilean unemployment persisted for years after Pinochet cut government spending by 27%, with education and health hit hardest, while adopting a “pro-business package” and a move towards “complete free trade” which removed “as many obstacles as possible that now hinder the private market”.

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Another crazy narrative that must be halted. The blame lies in Brussels, not with people trying to prevent other people from drowning.

Refugee Rescue Ships Not ‘Colluding With People Smugglers’ (Ind.)

Humanitarian ships rescuing refugees in the Mediterranean Sea are not acting as a “pull factor” driving increasing refugee boat crossings or “colluding” with smugglers, research has found. A report by the Forensic Oceanography department at Goldsmiths, University of London, rejected a “toxic narrative” seeking to blame NGOs for the worsening crisis. Experts dismantled allegations made by agencies such as Frontex and leading European politicians, who claimed charities were encouraging smugglers to use more dangerous tactics on the treacherous passage between Libya and Italy. The Blaming the Rescuers report’s author, Lorenzo Pezzani, said: “The evidence simply does not support the idea that rescues by NGOs are to blame for an increase in migrants crossing.

“The argument against NGOs deliberately ignores the worsening economic and political crisis across several regions in Africa that has driven up the numbers of crossings in 2016. “The violence against migrants in Libya is so extreme that they attempt the sea crossing with or without search and rescue being available.” The United Nations has documented “slave auctions” where African migrants are openly bought and sold in the war-torn country, as well as endemic rates of rape, abuse, torture and forced labour. Despite the dire situation, the EU has been giving funding, training and equipment to the Libyan coastguard in efforts to turn back migrant boats and prevent the crossings. Humanitarian groups, which have documented the coastguard abusing migrants and attacking their ships, say forcing refugees from international waters back into Libya is a violation of international law.

[..] The Goldsmiths report also placed partial blame on the EU’s Operation Sophia mission, which had a “major impact on smugglers’ tactics” by intercepting and destroying larger and safer wooden boats. “The Libyan coastguard’s use of violence when intercepting vessels also affected smugglers’ tactics and at times led to boats capsizing, endangering everyone on board,” it added. It concluded that those blaming NGOs are choosing to ignore the role other actors, including EU agencies and national governments, have played in making migrant crossings more dangerous. “We believe that the toxic narrative falsely claiming that NGO search and rescue is to blame for the migrant crossing situation is part of a worrying tendency to criminalise solidarity initiatives towards migrants,” Mr Pezzani said.

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Wonderful. I think, however, that saying it contradicts the Tragedy of the Commons is a bridge too far. Because these people do choose what’s best for themselves.

Fractal Planting Patterns Yield Optimal Harvests, No Central Control (PhysOrg)

Bali’s famous rice terraces, when seen from above, look like colorful mosaics because some farmers plant synchronously, while others plant at different times. The resulting fractal patterns are rare for man-made systems and lead to optimal harvests without global planning. To understand how Balinese rice farmers make their decisions for planting, a team of scientists led by Stephen Lansing (Nanyang Technological University) and Stefan Thurner (Medical University of Vienna, Complexity Science Hub Vienna, IIASA, SFI), both external faculty at the Santa Fe Institute, modeled two variables: water availability and pest damage. Farmers that live upstream have the advantage of always having water; while those downstream have to adapt their planning on the schedules of the upstream farmers.

Here, pests enter the scene. When farmers are planting at different times, pests can move from one field to another, but when farmers plant in synchrony, pests drown and the pest load is reduced. So upstream farmers have an incentive to share water so that synchronous planting can happen. However, water resources are limited and there is not enough water for everybody to plant at the same time. As a result of this constraint, fractal planting patterns emerge, which yield close to maximal harvests. “The remarkable finding is that this optimal situation arises without central planners or coordination. Farmers interact locally and take local individual free decisions, which they believe will optimize their own harvest. And yet the global system works optimally,” says Lansing.

“What is exciting scientifically is that this is in contrast to the tragedy of the commons, where the global optimum is not reached because everyone is maximizing his individual profit. This is what we are experiencing typically when egoistic people are using a limited resource on the planet, everyone optimizes the individual payoff and never reach an optimum for all,” he says. The scientists find that under these assumptions, the planting patterns become fractal, which is indeed the case as they confirm with satellite imagery. “Fractal patterns are abundant in natural systems but are relatively rare in man-made systems,” explains Thurner. These fractal patterns make the system more resilient than it would otherwise be. “The system becomes remarkably stable, again without any planning—stability is the outcome of a remarkably simple but efficient self-organized process. And it happens extremely fast. In reality, it does not even take ten years for the system to reach this state,” Thurner says.

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Jun 092017
 
 June 9, 2017  Posted by at 9:27 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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Labour Campaign Poster 1922

 

Trump Accuses Comey Of Lying About Leaked Memo (ZH)
Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)
Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)
This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)
UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)
The Myth of “Cash on The Sidelines” (Roberts)
US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)
Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)
Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)
Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)
European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)
The Shield of Law and Humanism (K.)

 

 

I know the echo chamber won’t agree, but after watching quite a bit of it, four things stood out for me in the Comey testimony, other than the somewhat too loud remarks about how the entire White House lied about him and the FBI:

1) He admitted to leaking information of his private talk with Trump in the Oval Office. Comey said he didn’t understand why Trump asked everyone to leave the room, but, well, perhaps it’s this: that if anything leaked, it would be clear whodunnit. And leaking info about a private talk with your president is not an obvious thing to do. Illegal? Borderline? Comey stated that he did it because he thought it would lead to a special counsel being appointed. But who is he to ‘promote’ such a thing?

2) He finally said in public that Trump himself had not been under investigation, something the president had asked him to do on three occasions. There was some excuse about not doing it because he might have to walk that back later, but the fact remains: no Trump investigation, and despite all other leaks, no public acknowledgement of that.

3) Comey insisted in no uncertain terms that the entire US intelligence community is convinced that Russia interfered in the 2016 elections, and Russia here means the Kremlin, re: Putin. Well, let’s finally see the proof.

4) He recounted how then-AG Loretta Lynch pushed him to relabel the criminal investigation into the Clinton server as a “matter”, a term the Clinton campaign used. But why would an AG do it too, and push the FBI to do the same? Very odd. And then Comey added that this was a reason to call the press conference in which he advised the Department of Justice not to indict Clinton.

Trump Accuses Comey Of Lying About Leaked Memo (ZH)

As we detailed earlier, during his testimony today, former FBI Director Comey testified that he only leaked the memo about his contact with the President AFTER he saw President Trump’s tweet…
COMEY: I asked — the president tweeted on Friday after I got fired that I better hope there’s not tapes. I woke up in the middle of the night on Monday night because it didn’t dawn on me originally, that there might be corroboration for our conversation. There might a tape. My judgement was, I need to get that out into the public square. I asked a friend of mine to share the content of the memo with a reporter. Didn’t do it myself for a variety of reasons. I asked him to because I thought that might prompt the appointment of a special counsel. I asked a close friend to do it. [..] A close friend who is a professor at Columbia law school.

Pretty clear – it was a response to a tweet. But, as President Trump’s personal lawyer Marc Kasowitz states: “Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President. The leaks of this privileged information began no later than March 2017 when friends of Mr. Comey have stated he disclosed to them the conversations he had with the President during their January 27, 2017 dinner and February 14, 2017 White House meeting. Today, Mr. Comey admitted that he leaked to friends his purported memos of these privileged conversations, one of which he testified was classified.

He also testified that immediately after he was terminated he authorized his friends to leak the contents of these memos to the press in order to “prompt the appointment of a special counsel.” Although Mr. Comey testified he only leaked the memos in response to a tweet, the public record reveals that the New York Times was quoting from these memos the day before the referenced tweet, which belies Mr. Comey’s excuse for this unauthorized disclosure of privileged information and appears to entirely retaliatory. We will leave it the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated”

So the question is – having called President Trump a liar, did Comey just get caught in an even bigger lie… ?

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At least on his personal involvement.

Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)

If you count yourself among the die-hard, disaffected Hillary supporters still holding out hope that President Trump will be impeached for conspiring with Russian spies to stage a coup in the United States, then you may want to sit down because earlier today one of your biggest cheerleaders just threw in the towel on that whole narrative. Yes, MSNBC’s very own Chris Matthews, the same man who confessed he “got a thrill up his leg” from simply watching Obama speak, admitted today that Comey’s testimony pretty much confirmed that “there’s no ‘there’ there” when it comes to Trump colluding with the Russians.

“The assumption of the critics of the President, of his pursuers, you might say, is that somewhere along the line in the last year is the President had something to do with colluding with the Russians … to affect the election in some way. Some conversation he had with Michael Flynn or Pual Manafort or somewhere.” “And yet what came apart this morning was that theory in two regards…the President said, according to the written testimony of Mr. Comey, go ahead and get any satellites of my operation and nail them. I’m with you on that…” “And then also, Comey said that basically Flynn wasn’t central to the Russian investigation.” “And I’ve always assumed that what Trump was afraid of was that he had said something to Flynn and Flynn could be flipped on that and Flynn would testify against the President that he’d had some conversation with Flynn in terms of dealing with the Russians affirmatively.” “And if that’s not the case, where’s the there-there?”

And when Chris Matthews throws in the towel on a liberal narrative, you know the gig is up. Oh, and by the way, this probably doesn’t help your case either… Burr: “Director Comey, did the President at any time ask you to stop the FBI investigation into Russian involvement in the 2016 U.S. elections?” Comey: “Not to my understanding, no.” Burr: “Did any individual working for this administration, including the Justice Department, ask you to stop the Russian investigation?” Comey: “No.”

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Theresa May can stay until the Tories throw her out; she’s proven to be an awful liability, not a leader. Far too risky. How much would she lose next time around? Their problem is there’s no-one else who’s obvious, there must be dirty fights in dark and rainy alleys first.

So: Tories will throw out May, while Corbyn will have to throw the Blairites out of Labour who made his position a living hell.

Most likely seems Corbyn as PM of a minority government. But that’s a big risk going into Brexit talks.

Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)

The UK faces the prospect of a hung parliament with the Conservatives as the largest party after the general election produced no overall winner. With nearly all results in, Theresa May faces having fewer seats than when she called the election. The Tories are projected to get 318 seats, Labour 261 and the SNP 35. Jeremy Corbyn has urged the PM to resign but the BBC understands she has no intention of doing so at this stage and will try to form a government. The prime minister has said the country needs stability after the inconclusive election result and the BBC’s political editor Laura Kuenssberg said Mrs May intended to try and govern on the basis that her party had won the largest number of votes and seats.

Labour is set to make 29 gains with the Tories losing 13 seats – and the SNP down by 22 seats in a bad night for Nicola Sturgeon, with her party losing seats to the Tories, Labour and Lib Dems. The Conservatives are forecast to win 42% of the vote, Labour 40%, the Lib Dems 7%, UKIP 2% and the Greens 2%. Turnout so far is 68.7% – up 2% up on 2015 – but it has been a return two party politics in many parts of the country, with Labour and the Conservatives both piling up votes in numbers not seen since the 1990s. UKIP’s vote slumped dramatically but rather than moving en masse to the Tories, as they had expected, their voters also switched to Labour.

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New elections? One positive for the former Empire: the threat of Scottish independence was wiped out.

This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)

Despite a lot of the good news streaming out of counts everywhere right now, make no mistake: this is going to be chaos. A deep and growing sense of frustration is about to ripple through the country, because what May has essentially done in her arrogance is take a gamble that could cost us decades of stability and prosperity. It is likely that what awaits us over the next few weeks is, to put it bluntly, a mess. Hung parliament. No clear majority. No willingness to form a coalition. A possible resignation from the Prime Minister (whether she’s pushed or jumps is yet to be seen) and then yet another leadership contest. Boris Johnson is said on the Westminster grapevine to already be positioning himself as a candidate, yet his reputation has turned increasingly sour over the last few years.

Many now regard him as a cynical power-grabber without much regard for the people he claims to represent. The Tories have spent the last two years playing Russian roulette with the electorate in the hope of cementing their credibility, and causing utter shambles along the way. Having barely recovered from a referendum result which caused deep divisions and painful rifts within our society, and as Europe watches us scramble for any sort of political legitimacy, who will now head into the talks that will determine our economic and political future? Theresa May has now shoved us off a cliff into political unknowns just when what we actually needed was, ironically enough, some strong and stable leadership.

Any reassurance from Westminster that the lives of ordinary people in this country mattered more than political point-scoring would be welcome. What we’ll get instead, despite the Labour surge, is yet another election, whether that be in two months’ or two years’ time. It feels inspiring and hopeful that we have so many progressive and wonderful MPs back in the Commons. But until we have a government and a plan of how to get ourselves through this, that hope is limited to a symbolic step in the right direction. In the words of one particularly concise campaign poster: strong and stable, my arse.

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It’s going to get terrible no matter what. But for now the EU has no-one to talk to. They’re not going to sit down with May if she may last only a few more weeks.

UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)

The EU will force a humiliated Theresa May to explain her intentions at a face-to-face meeting in Brussels as senior diplomats and politicians warned that the hung parliament resulting from the UK election was a “disaster” that hugely increases the chance of a breakdown in the Brexit negotiations. The result is likely to delay the point at which Michel Barnier, the EU’s chief negotiator, has someone with whom to negotiate. Sources said a meeting of the European council on 22 June was the deadline by which time the EU27 would want to know the prime minister’s plans. Guenther Oettinger, the German member of the European commission, said: “We need a government that can act. With a weak negotiating partner, there’s the danger than the negotiations will turn out badly for both sides … I expect more more uncertainty now.”

It had been hoped that officials from both sides would have informal talks next week over the logistics of the negotiations, before formal talks began on the week starting 19 June. With the prime minister needing to both seek to form a minority or coalition government, as well as potentially revise her goals for the talks in the light of the election result, the original timetable seems unrealistic to officials in Brussels. The EU had, until now, believed it understood that May wanted to take the UK out of both the single market and the customs union, but in the early hours of Friday morning the Brexit secretary, David Davis, had suggested the election result could prompt a rethink.

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All on red.

The Myth of “Cash on The Sidelines” (Roberts)

[..] despite 8-years of a bull market advance, one of the prevailing myths that seeming will not die is that of “cash on the sidelines.” To wit: “Underpinning gains in both stocks and bonds is $5 trillion of capital that is sitting on the sidelines and serving as a reservoir for buying on weakness. This excess cash acts as a backstop for financial assets, both bonds and equities, because any correction is quickly reversed by investors deploying their excess cash to buy the dip,” Nikolaos Panigirtzoglou, the managing director of global market strategy at JPMorgan, wrote in a client note. This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets.

However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and ongoing global Q.E., exactly what will that catalyst be? However, Clifford Asness previously wrote: “There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.” Every transaction in the market requires both a buyer and a seller with the only differentiating factor being at what PRICE the transaction occurs. Since this must be the case for there to be equilibrium to the markets there can be no “sidelines.”

Each month, the Investment Company Institute releases information related to the mutual fund industry. Included in this data is the total amount of assets invested in mutual funds, ETFs and money market funds. As a rough measure of investor sentiment, this indicator looks at the total assets invested in equity mutual funds and ETFs, and compares it to the total assets invested in the safety of money market funds. The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market. Currently, with the ratio at the highest level on record there is little fear of holding stocks. Negative free cash balances also suggest the same as investors have piled on the highest levels of leverage in market history.

Furthermore, with investors once again “fully invested” in equities, it is not surprising to see cash and bond allocations near historic lows. Cash on the sidelines? Not really. Everyone “all in the boat?” Absolutely. Historical outcomes from such situations? Not Great.

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The No Price Discovery Bubble.

US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)

In the Fed’s latest Flow of Funds report, today the Fed released the latest snapshot of the US “household” sector as of March 31, 2017. What it revealed is that with $110.0 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of the average US household rose to a new all time high of $94.835 trillion, up $2.4 trillion as a result of an estimated $500 billion increase in real estate values, but mostly $1.78 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, as the stock market continued to soar to all time highs . At the same time, household borrowing rose by only $36 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.8 trillion in home mortgages.

And the historical change of the US household balance sheet.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90thpercentiles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt In other words, roughly three-quarter of the $2.4 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America’s financial net worth,

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Trump and Congress had better go out and do something.

Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)

The opioid crisis that is ravaging urban and suburban communities across the US claimed an unprecedented 59,000 lives last year, according to preliminary data gathered by the New York Times. If accurate, that’s equivalent to a roughly 19% increase over the approximately 52,000 overdose deaths recorded in 2015, the NYT reported last year. Overdoses, made increasingly common by the introduction of fentanyl and other powerful synthetic opioids into the heroin supply, are now the leading cause of death for Americans under 50. And all evidence suggests the problem has continued to worsen in 2017. One coroner in Western Pennsylvania told a local newspaper that his office is literally running out of room to store the bodies, and that it was recently forced to buy a larger freezer. The initial data points to large increases in these types of deaths in states along the East Coast, particularly Maryland, Florida, Pennsylvania and Maine.

In Ohio, which filed a lawsuit last week accusing five drug companies of abetting the opioid epidemic, the Times estimated that overdose deaths increased by more than 25% in 2016. In some Ohio counties, deaths from heroin have virtually disappeared. Instead, the primary culprit is fentanyl or one of its many analogues. In Montgomery County, home to Dayton, of the 100 drug overdose deaths recorded in January and February, only three people tested positive for heroin; 97 tested positive for fentanyl or another analogue. In some states in the western half of the US, data suggest deaths may have leveled off for the time being – or even begun to decline. Experts believe that the heroin supply west of the Mississippi River, traditionally dominated by a variant of the drug known as black tar which is smuggled over the border from Mexico, isn’t as easily adulterated with lethal analogues as the powder that’s common on the East Coast.

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Fake News.

Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)

That $110 billion arms deal President Donald Trump signed with Saudi Arabia isn’t much of a deal at all, according to reports which found the majority of the agreement was based on memos, rather than contracts. On May 20, Trump negotiated an arms deal with Riyadh. The State Department said it was worth nearly $110 billion to support “the long-term security of Saudi Arabia and the Gulf region in the face of malign Iranian influence and Iranian related threat.” White House Press Secretary Sean Spicer hailed it the “largest single arms deal in US history.” The State Department then released a general list of the weapons that were included in the deal. However, many experts have said that most of the arms sales had not been cleared by the State Department, Congress or even the industries themselves.

On Thursday, Defense News released a more detailed list of the weapons included in the deal, according to documents they obtained from the White House. The ‘deal’ lists $84.8 billion under memos of intent (MOI) “to be offered at visit,” and $12.5 billion under letters of agreement (LOA), rather than contracts. NPR also obtained a list of commercial deals from a White House spokeswoman and found that it added up to $267 billion, but said most of the deals were listed as “memoranda of understanding” (MOU). “There is no $110 billion deal,” Brookings Institution Senior Fellow Bruce Riedel wrote in blog post Monday. “Instead, there are a bunch of letters of interest or intent, but not contracts,” Riedel said. “Even then the numbers don’t add up. It’s fake news.”

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So what did they do to prove that?

Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)

Washington is Greece’s only true international ally, Defense Minister Panos Kammenos insisted on Thursday, and accused the country’s European partners of showing a lack of respect. “The Greek people are well aware that the United States has been the country’s only genuine ally,” Kammenos said. “The others are allies, but they are [allies] only in the form of creditors, without [any sense of] respect and this is because some of them will never forget that they lost World War II to this country,” Kammenos, who is also leader of junior coalition partner Independent Greeks, added during a speech marking the 70th anniversary of the US Office of Defense Cooperation in Athens yesterday. “For this reason, we welcome US support at this very difficult moment for our country,” said Kammenos, who also called for the strengthening of the Hellenic Navy with US help so “that it can operate from Crete to the Suez.”

Bolstering the navy and the country’s military aviation capabilities are necessary, he said, to intercept the flow of drugs, weapons and fuel through which terrorism is funded. He also said that Greece is positively inclined to extend the time frame of the defense agreement between the two countries, adding that Prime Minister Alexis Tsipras and his government are working in that direction. He also referred to the latest developments in the Gulf states and stressed that he supports describing the Muslim Brotherhood as a terrorist organization. Aiming his fire at Turkey, he said that each country must choose “whose side they want to be on.” It is certain, he said, that “Greece will be on the side of the US.” For his part, US Ambassador to Greece Geoffrey Pyatt praised relations between Athens and Washington, adding that as Greece’s economy stabilizes, it will become even more active in its role as a bridge between countries of the region.

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Nobody cares unless you hold their feet to the fire.

European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)

Any countries in the European Union receiving asylum requests from refugees have an obligation to process them irrespective of where the applicants first entered into the bloc, an advocate general at the European Court of Justice said on Thursday. Eleanor Sharpston said in a non-binding opinion that under the “exceptional circumstances” of the refugee crisis, member states should not be bound by the Dublin Regulation’s requirement that first-entry states handle all asylum applications, even after a refugee or migrant has moved on to a different country. “The words ‘irregular crossing’ in the Dublin III Regulation do not cover a situation where, as a result of the mass inflow of people into border member states, those countries allowed third-country nationals to enter and transit through their territory in order to reach other member states,” she wrote.

Sharpston referred to the case of a Syrian national who traveled to Slovenia via Croatia and that of an Afghan family that entered Europe in Greece and then made its way to Austria. Slovenia and Austria should be responsible for examining their asylum applications, she said. “If border member states… are deemed to be responsible for accepting and processing exceptionally high numbers of asylum seekers, there is a real risk that they will simply be unable to cope with the situation,” Sharpston wrote. “This in turn could place member states in a position where they are unable to comply with their obligations under EU and international law,” she added.

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The last thing Greece has left is rumored to be on the way out.

The Shield of Law and Humanism (K.)

It is difficult to believe that after Greece’s judiciary offered protection to eight members of the Turkish military, rejecting Ankara’s request for their extradition, the government would agree to the illegal, secret and inhuman expulsion of people who requested asylum here. Yet unease grows. On Wednesday the government spokesman stated, “The Greek government does not engage in pushbacks.” Let us hope that is so. The Hellenic League for Human Rights cites two instances where groups of Turkish citizens who requested asylum in Greece appear to have been handed over illegally to Turkish authorities. The Council of Europe’s commissioner for human rights, Nils Muiznieks, the UN High Commissioner for Refugees and the head of the Alliance of Liberals and Democrats in the European Parliament, Guy Verhofstadt, have expressed concern at the possibility.

There is also the strange story of three Turkish military men who where arrested in Edirne last month, accused of being part of a group that intended to kidnap President Recep Tayyip Erdogan during the failed coup last July. Turkish media said the men were arrested while on their way to Greece; some Greek lawyers, however, claim that the three had crossed into Greece when they disappeared, only to turn up in Turkish custody. The Citizens’ Protection Ministry in Greece scoffed that the claims were “fairy tales.” The case of the eight servicemen who arrived in Alexandroupoli in a helicopter the day after the coup attempt shows how difficult it is for any country to withstand Ankara’s pressure. It is understandable that no government would like to open a new front with a neighbor who can cause problems at will. But it is of paramount importance that Greece withstand such pressures.

In the past few years, among our country’s very few victories were the welcome provided to refugees and the institutional way in which it dealt with the “Eight.” Our great wound, though, is the lack of strategy, of method, of goals – of follow-up. On the refugee issue, government incompetence undermined the initial, heroic efforts of citizens. In the case of Turkish asylum seekers, the difficulties of handling the case of the Eight should not lead to cynicism, to injustice, to the violation of international conventions. Greece has a responsibility toward its own people and toward the Turkish people, to serve the principles of humanism, to abide by the law. Strenuous defense of these principles is part of the identity we aspire to but also our shield. And it is the best thing that we can offer our neighbors – the hope that there is something better than that which they are now enduring.

Read more …

Jun 082017
 
 June 8, 2017  Posted by at 9:37 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Roy Lichtenstein Femme d’Alger 1963

 

UK Press Gang Up On Jeremy Corbyn In Election Day Coverage (G.)
US Market Risk Is Highest Since Pre-2008 Crisis – Bill Gross (BBG)
Global Financial System More Leveraged Than 2008 – Paul Singer (BBG)
UK Housing Weakens Further as Market Emits ‘Ominous’ Signals (BBG)
The Cost of Getting It Wrong (Claire Connelly)
The UAE Needs Qatar’s Gas to Keep Dubai’s Lights On (BBG)
Oil Prices Drop More Than 4% On Surge In Stockpiles (CNBC)
China’s Top Property-Bubble Prophet Says Prices Set to Soar 50% (BBG)
Banco Popular Wipeout Leaves CoCo Bonds On The Drawing Board (BV)
A Reform Beyond Macron’s Grip: The Revolving Door of French Politics (BBG)
OECD Puts Greek Growth At Just 1.1% This Year (K.)
Athens To Seek Growth Package At Eurogroup Meeting (K.)
Greece Says Colombian Gangs Plundering Hospitals Europe-Wide (AP)
Greek Room Owners Threaten To Return Permits in Airbnb Challenge (K.)
Bid For EU States To Stop Migrants, Refugees ‘Asylum Shopping’ (K.)

 

 

The Daily Mail ran 13 pages yesterday on the theme of Corbyn and Labour being terrorist apologists. No shame, no morals. In the same vein, I tried to find an objective piece on the Comey testimony, but couldn’t find one. The UK press has no faith in its voters, the US press has none in its Senate: the press draws the conclusions before anyone else can. The media cares little about credibility, it’s all echo chambers all the way down.

UK Press Gang Up On Jeremy Corbyn In Election Day Coverage (G.)

The Sun has urged its readers not to “chuck Britain in the Cor-bin” on its final front page before the country votes in the general election. The tabloid, owned by Rupert Murdoch’s News Corp, published an editorial on its front page under the headline “Don’t Chuck Britain in the Cor-bin” alongside 10 bullet points that described the Labour leader Jeremy Corbyn as a “terrorists’ friend”, “useless on Brexit”, “puppet of unions” and “Marxist extremist”. The article said readers could “rescue Britain from the catastrophe of a takeover by Labour’s hard-left extremists”. The Daily Mail front page roared, “Let’s reignite British spirit” on the back of a Theresa May speech and also promoted a feature inside called “Your tactical voting guide to boost the Tories and Brexit”.

The Daily Mirror reiterated its support for the Labour party with a front page headline of “Lies, damned lies, and Theresa May”, while the Daily Telegraph ran a story headlined “Your Country Needs You” based on an editorial by the prime minister that urged “patriotic” Labour supporters to vote Conservative. The Daily Express front page said: “Vote for May Today”. Meanwhile, the Times reported that the Conservatives had a seven-point in the final opinion poll before the election, and the Guardian covered May and Corbyn’s late attempts to win support from voters. Thursday’s front pages come after the Daily Mail devoted 13 pages to attacking Labour, Jeremy Corbyn, Diane Abbott and John McDonnell on Wednesday under the headline: “Apologists for terror”. The tabloid urged readers to support the Conservatives in an editorial on its first and second pages, but concentrated its fire on Labour’s leadership, compiling hostile anecdotes dating back to the 1970s.

Read more …

“Instead of buying low and selling high, you’re buying high and crossing your fingers…”

US Market Risk Is Highest Since Pre-2008 Crisis – Bill Gross (BBG)

U.S. markets are at their highest risk levels since before the 2008 financial crisis because investors are paying a high price for the chances they’re taking, according to Bill Gross, manager of the $2 billion Janus Henderson Global Unconstrained Bond Fund. “Instead of buying low and selling high, you’re buying high and crossing your fingers,” Gross, 73, said Wednesday at the Bloomberg Invest New York summit. Central bank policies for low-and negative-interest rates are artificially driving up asset prices while creating little growth in the real economy and punishing individual savers, banks and insurance companies, according to Gross. The U.S. economy is expected to grow 2.2% this year and 2.3% in 2018, according to forecasts compiled by Bloomberg. Trump administration officials have said their policies will boost annual growth to 3%.

Despite being concerned about high asset prices, Gross said he feels required to stay invested and sees value in some closed-end funds. Examples he gave are the Duff & Phelps Global Utility Income Fund and the Nuveen Preferred Income Opportunities Fund. He also said he has about 2% to 3% in exchange-traded funds to get yield and add diversification. “They’re appetizers, not entrees,” he said in an interview outside the conference. Gross’s fund has returned 3.1% in the year through June 6, outperforming 22% of its Bloomberg peers. It has posted a total return of 5.4% since Gross took over management in October 2014 after he was ousted from PIMCO. ”If there’s a common factor it’s the expansion of credit,” Gross said on Bloomberg TV Wednesday. “And the credit that’s being generated by central banks. Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced.”

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We know.

Global Financial System More Leveraged Than 2008 – Paul Singer (BBG)

Billionaire investor Paul Singer said “distorted” monetary and regulatory policies have increased risks for investors almost a decade after the financial crisis. “I am very concerned about where we are,” Singer said Wednesday at the Bloomberg Invest New York summit. “What we have today is a global financial system that’s just about as leveraged – and in many cases more leveraged – than before 2008, and I don’t think the financial system is more sound.” Years of low rates have eroded the effectiveness of central banks to contend with downturns, Singer said at the event in an interview with Carlyle Group co-founder David Rubenstein. “Suppressive” fiscal, regulatory and tax policies have also exacerbated income inequality and led to the rise of populist and fringe political movements, he added. Confidence “could be lost in a very abrupt fashion causing conceivably a ruckus in bond markets, stock markets and in financial institutions,” said Singer, founder of hedge fund Elliott Management, which is known for being an activist investor.

Read more …

Volatility is back.

UK Housing Weakens Further as Market Emits ‘Ominous’ Signals (BBG)

While the general election had an impact on activity in May, damping buyer demand and new sellers coming to the market, RICS used its latest monthly report to highlight broader, and more damaging, risks. That includes the dearth of homes for sale, which has pushed up values in recent years, cutting off many potential first-time buyers. RICS Chief Economist Simon Rubinsohn said the report shows the issue of affordability may even worsen further.“Perhaps the most ominous signal is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first-time buyers are clearly having,” he said. On the shortage, “it’s hard to see this as anything other a major obstacle to the efficient functioning of the housing market.”

In May, RICS’s monthly price index fell to 17 – the lowest since August – from 23 in April, indicating modest price gains. A gauge for London, where prime properties have been under pressure, remained below zero for a 14th month. Nationally, the supply-demand imbalance means it’s a sellers’ market and recent reports show that any uncertainty about the election had little effect on U.K. asking prices, which according to Rightmove jumped 1.2% to a record in May. For some, it’s reminiscent of the overheating seen before the financial crisis.“Prices are too expensive,” Josh Homans at surveyors Valunation said in the RICS report. “Excessive” valuations are increasing and “we are now in a 2007 situation,” he said.

Read more …

One of those must reads. Economics is all but dead, but not entirely yet.

The Cost of Getting It Wrong (Claire Connelly)

What most of us have long believed about how the economy works is based on a set of fundamental myths, supported by a series of inappropriate and misleading metaphors, from which it is difficult to escape. The emotional investment we have made in these myths has allowed for levels of unemployment, underemployment, inequality and relative poverty which would have seemed incredible a generation ago. Somehow we have convinced ourselves of the following:
– Governments need taxpayers’ money to pay for things.
– Governments, like households, need to at least balance their budgets.
– Deficits are bad and government surpluses are good.
– Deficits paid for by printing money causes inflation.
– Surpluses set aside savings which can be spent in the future.
– Lower wages promote full employment.

Wrong, wrong, all wrong. The federal government does not need taxpayers’ money. Actually, it is the other way around. The government issues the currency. We use it. Taxes help to control inflation and stop us spending too much. (It can also be used to control behaviour, as witnessed by taxes on cigarettes and alcohol). Professor Steve Keen says the government, and the public, have the most basic fundamentals of macroeconomics backwards. “Expenditure is what causes income,” he said. “Reducing expenditure also reduces income.” “Individuals can save (without a significant effect on national income), but if you extrapolate that to the whole economy, you are going to make a huge error.” Similarly, the economist says the idea that the government can save by paying down the national debt is misleading.

“Believing that government saving will increase employment or growth is like believing the Earth sits at the centre of the universe”, he says. All it does is destroy spending which would otherwise have created private sector incomes. “If you don’t understand where income comes from, then it means you don’t understand economics, or the economy.” “Individuals can save money by spending less than they earn but if everyone decides to do that, income falls by precisely as much as you try to save. If the government does the same thing, by saving money at a national level, you cause a recession.”

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As solid as the Saudi grip on OPEC cuts: “Abu Dhabi’s Petroleum Ports Authority removed the ban on Wednesday – just one day after announcing it.”

The UAE Needs Qatar’s Gas to Keep Dubai’s Lights On (BBG)

When it comes to natural gas shipments, the United Arab Emirates needs Qatar more than Qatar needs the U.A.E. The U.A.E. joined Saudi Arabia in cutting off air, sea and land links with Qatar on Monday, accusing the gas-rich sheikhdom of supporting extremist groups. But the U.A.E., which depends on imported gas to generate half its electricity, avoided shutting down the pipeline supplying it from Qatar, which has the world’s third-largest gas deposits. Without this energy artery, Dubai’s glittering skyscrapers would go dark for lack of power unless the emirate could replace Qatari fuel with more expensive liquefied natural gas. Qatari natural gas continues to flow normally to both the U.A.E. and Oman through a pipeline, with no indication that supplies will be cut, according to a person with knowledge of the matter who asked not to be identified because the information isn’t public.

Qatar sends about 2 billion cubic feet of gas a day through a 364-kilometer (226-mile) undersea pipeline. Dolphin Energy, the link’s operator, is a joint-venture between Mubadala Investment, which holds a 51% stake, and Occidental Petroleum and Total, each with a 24.5% share. Since 2007, the venture has been processing gas from Qatar’s North field and transporting it to the Taweelah terminal in Abu Dhabi, according to Mubadala’s website. Dolphin also distributes gas in Oman. Apart from preserving gas shipments from Qatar, the U.A.E. on Wednesday actually eased efforts to isolate its smaller neighbor. The oil-port authority in Abu Dhabi, the U.A.E. capital, lifted restrictions on international tankers that have sailed to Qatar or plan to do so. Abu Dhabi’s Petroleum Ports Authority removed the ban on Wednesday – just one day after announcing it.

Read more …

The Saudi-Qatar spat is growing and oil plunges? Huh?

Oil Prices Drop More Than 4% On Surge In Stockpiles (CNBC)

U.S. crude prices plunged toward $46 a barrel on Wednesday after weekly government data left the oil market with virtually nothing to cheer. West Texas Intermediate futures dropped more than 4% as stockpiles of oil in the US surged by 3.3 million barrels in the week ended June 2, according to the Energy Information Administration. That confounded analysts’ estimates for a 3.5 million-barrel decline. WTI prices fell as far as $45.92, a four-week low, following the report. The drop below $47 was a “big deal” said John Kilduff at energy hedge fund Again Capital. The next level to watch is the March low just below $44 a barrel, struck after oil prices fell through a number of key technical levels, culminating in a flash crash to $43.76. The bad news kept on coming below the headline figure. Gasoline stocks also jumped by 3.3 million barrels, more than five times the expected increase. Inventories of distillate fuels like diesel and heating oil rose by 4.4 million barrels, 15 times the anticipated rise.

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Author of “China’s Guaranteed Bubble”.

China’s Top Property-Bubble Prophet Says Prices Set to Soar 50% (BBG)

China’s home prices could rise by another 50% in the nation’s biggest cities, as the latest measures to rein them in are likely to be eased by policy makers seeking to support the broader economy. So says Zhu Ning, deputy director of the National Institute of Financial Research at Tsinghua University in Beijing and author of “China’s Guaranteed Bubble: How Implicit Government Support Has Propelled China’s Economy While Creating Systemic Risk.” As measures to curb housing prices drag on growth in the second half and early next year, he says, the government will resort to its old playbook of dialing them back again to shore up expansion. “We’re living through a bubble,” Zhu said. “If we don’t engage in more meaningful reform, which we haven’t, we’re very likely to have a financial crisis or a burst of the bubble. It’s a matter of sooner or later.”

Real estate prices in major cities will surge again “by another 50% or so” after measures to rein them in are eased, said Zhu, without specifying a time. Because policy makers have previously imposed curbs only to ease them again, people see them as a bluff, he said. Last year 45% of new loans went to mortgages. Local authorities have boosted down-payment requirements, restricted purchases by non-residents, and capped the number of dwellings that a household can own. Since March, at least 26 cities have imposed resale lock-up periods, with Hebei’s Baoding city slapping a decade-long ban on some homes, according to Shanghai-based Tospur Real Estate Consulting.

Zhu said he arrived at the 50 percent estimate based on the average price appreciation after past curbs were lifted, an ever-stronger belief among buyers that housing prices will rise, China’s humongous supply of credit, and tighter controls on capital outflows. Over the past year, however, Zhu, who earned his doctorate in finance at Yale, said he’s had more doubts over whether the thinking of western-trained economists applies to a nation that’s proven naysayers wrong “with its might and its determination” for three decades. “Over the past 12 months my confidence has really been shaken,” he said, adding that a crisis remains probable. “Could China be the black swan that we’ve never seen before?”

Read more …

Where would the EU be without creative accounting?

Banco Popular Wipeout Leaves CoCo Bonds On The Drawing Board (BV)

Banco Popular’s wipeout has left CoCo bonds on the drawing board. The Spanish lender’s failure and rescue by rival Santander did not provide the expected test for bonds which convert into equity under stress: the securities were wiped out before they could be triggered. It’s still not clear whether the bonds work as intended. The collapse of Spain’s sixth-largest bank by assets marked the first big loss for investors in so-called contingent convertible bonds. The securities were created after the 2008 financial crisis to provide an extra buffer when banks are struggling. They permit lenders to preserve capital by suspending dividends, and convert into ordinary shares when capital ratios run low.

The Popular trauma has eased one fear: that investors would panic when a CoCo bond went down, creating a spiral of contagion to other lenders. Similar securities issued by other Spanish banks actually rose in value on June 7, suggesting that investors see Popular as an isolated case. Yet in another way, Popular’s bonds fell short. The securities are supposed to provide extra capital before a bank fails, allowing it to absorb losses over time without failing or requiring a government bailout. But regulators deemed Popular non-viable before any of the triggers in its bonds could blow. The CoCo bonds suffered the same fate as other, more senior bonds that only suffer losses when a bank goes bust.

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Civil servants and jobs for life. It’s like talking about dinosaurs.

A Reform Beyond Macron’s Grip: The Revolving Door of French Politics (BBG)

French President Emmanuel Macron has promised to change how politics is done in France, starting with the parliament to be elected beginning Sunday. Half of the 500-plus candidates for his young party are women. Half have never held office. They all had to apply online. But he isn’t taking the biggest step: requiring that anyone running for parliament resign from his or her government job. Unlike many other other developed countries, France allows bureaucrats to hold political office—multiple offices, in fact—without having to quit the civil service. And they have a guaranteed right to return. Should the bureaucrat-candidate lose an election, there’s a job for life waiting back at the Agriculture Ministry or the Ministry for Overseas Territories. And a pension at retirement.

Having lawmakers remain part of the civil service creates conflicts of interest, said Dominique Reynie, head of Fondapol, a political research institute. “You have lawmakers making funding decisions about institutions such as universities and hospitals where they are still officially employed,” he said. “We have a parliament that’s inbred.” Among the many beneficiaries of the system: Macron’s prime minister, Edouard Philippe, several others in the cabinet and fully 55% of the parliament that just finished its five-year term. Macron himself, though he’s never been in parliament, kept bureaucrat status through several government and private jobs until he resigned last year to start his political party.

[..] “France is one of the rare countries in Europe where a civil servant can serve an elected mandate without resigning, and with the certainty of going back to their job in case of failure,” said Luc Rouban, a professor at Sciences Po in Lille who has compiled a database of all 2,857 French members of parliament back to 1958. “The absence of professional risk encourages employees from the public sector to run for office.”

Read more …

And that will make any agreements with the Troika impossible. All growth assumptions are wrong.

OECD Puts Greek Growth At Just 1.1% This Year (K.)

The OECD has further doused hopes regarding Greek growth this year, forecasting an expansion of 1.1%, and stresses the need to implement reforms and for the national debt to be lightened. The Organization for Economic Cooperation and Development wrote in its annual report on the global economy published on Wednesday that “delays in reform implementation and reaching an agreement on debt relief would weigh on confidence, hampering investment,” while adjusting its Greek GDP forecast. The 1.1% growth it expects contrasts with the 2.7% growth the budget provides for, the recent European Commission estimate for 2.1% and even the 1.8% forecast included in the midterm fiscal plan the government voted for last month.

Still, the OECD says in its Global Economic Outlook that the economy will expand by 2.5%. It anticipates the primary budget surplus to slide from last year’s 3.8% of GDP, but no lower than 2.5% of GDP for the next few years. The report notes that the Greek economy is beginning to recover although uncertainty remains over the country’s growth prospects. Further progress in reforms is necessary for productivity and exports to grow, the OECD argues. It makes special reference to the reforms in the products markets and in the reduction of nonperforming loans, which could lead to more exports and investments. It also warns that “the expansion of exports depends largely on the pace of world trade growth. Geopolitical tensions among Greece’s neighbors and a renewed large influx of refugees would pose additional risks.”

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Who does any of the parties involved think they’re fooling? A serious question.

Athens To Seek Growth Package At Eurogroup Meeting (K.)

Ahead of yet another crucial Eurogroup on June 15, the government has its mind set on seeking a package of growth-inducing measures which it hopes may, finally, pry open the door that will ultimately put Greece on the road to recovery. Athens believes that securing such a package could work to bridge the difference between the country’s EUpartners, and lead to an agreement which could pave the way for Greece to access international markets. Speaking to reporters on Wednesday, government spokesman Dimitris Tzanakopoulos outlined three basic principles that should govern any proposal that comes Greece’s way at the meeting of the eurozone finance ministers. Firstly, he insisted that the proposal must specify, in the clearest possible way, what midterm debt relief measures Greece should expect.

Secondly, these measures should also allow all the institutions, including the ECB, to proceed with positive sustainability studies of the Greek debt. Finally, he said, a proposal must include specific measures that will boost growth. The government reckons that a growth-oriented agreement will prompt the IMF to positively revise its projections on the Greek economy, reduce its demands with regard to the Greek program, and open the way for an agreement. Athens believes the formula that is being promoted to get the Fund to join the Greek bailout will stipulate that it will not have to provide immediate funding. Instead, the IMF’s contribution will be placed in a fund of sorts, which will be made available at a later date, on the condition that the midterm debt relief measures are implemented.

Read more …

Why have none of the other countries involved ever said a word?

Greece Says Colombian Gangs Plundering Hospitals Europe-Wide (AP)

Greek authorities say Colombian organized crime rings were behind a string of heists targeting costly medical diagnostic equipment from hospitals in Greece and another 11 European countries. Police say three Colombian suspects have been identified in connection with last month’s four thefts in Greece. Four out of about a dozen stolen pieces of equipment, worth more than half a million euros, have been recovered in Colombia. There were similar thefts in the past four years in France, Germany, Italy, Austria, the Netherlands, Spain, Poland, Lithuania, Luxembourg, Croatia and the Czech Republic, Major-General Christos Papazafeiris said. Papazafeiris, head of security police for the greater Athens region, said Wednesday the stolen equipment had been mailed to Colombia, and was seized in cooperation with local authorities.

Read more …

Airbnb is huge in Athens. Must cost the government a fortune in taxes. Why then liberalize laws even more?

Greek Room Owners Threaten To Return Permits in Airbnb Challenge (K.)

Owners of rooms for rent are threatening to return their operating licenses to the state unless the government withdraws legal clauses that fully liberalize the short-term urban lease market where accommodation is advertised through platforms such as Airbnb and Homeaway. According to a statement by the Confederation of Greek Tourism Accommodation Entrepreneurs (SETKE), if the room owners do hand in their licenses they will be able to enjoy the special privileges of the short-term rental market, which, it argues, has created unfair competition at the expense of legal accommodation. In its statement it claims this will lead to the elimination of the tourism accommodation sector’s 30,000 small entrepreneurs. “Instead of withdrawing the semi-liberal status of the short-term urban lease market under the 2016 law, the government is fully liberalizing it with a 2017 law abolishing the quantitative and qualitative limitations and permitting the rental for tourism purposes of all properties of all owners year round without any income limits,” SETKE says.

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The EU keeps thinking reality is whatever it wants it to be. The European Parliament President says: “The rules have to be the same for everybody.”. They’re not. They’re obviously different for Greece, and that’s not Greece’s doing.

Bid For EU States To Stop Migrants, Refugees ‘Asylum Shopping’ (K.)

As Greece continues to struggle to host thousands of migrants, European Parliament President Antonio Tajani on Wednesday called for a common agreement from all European Union member-states on the implementation of asylum procedures aimed at stopping migrants traveling from one country to another “shopping for asylum status.” “At the moment the rules are not properly harmonized,” Tajani told reporters. “The rules have to be the same for everybody. Otherwise we will end up with people shopping for asylum status, which undermines our credibility.” He noted that many refugees who have been accepted in European countries as part of an EU relocation program have continued their journeys to more prosperous nations such as Germany or Sweden.

Latvia welcomed 380 refugees as part of the relocation program but most of those – 313 – have already moved on to Sweden or Germany, according to Agnese Lace from Latvia’s Center for Public Policy. She said low salaries, a lack of jobs and language barriers meant asylum seekers had little incentive to remain in the country. Meanwhile Andras Kovats of the Hungarian Association for Migrants said Hungary’s failure to support integration was pushing new arrivals abroad. In a related development, Nils Muiznieks, the Council of Europe’s commissioner for human rights, expressed concern at reports of collective expulsions of asylum seekers from Greece to Turkey. “I urge the Greek authorities to cease immediately the pushback operations and uphold their human rights obligation to ensure that all people reaching Greece can effectively seek and enjoy asylum,” Muiznieks said in a statement.

Read more …

Jun 062017
 
 June 6, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , ,  1 Response »
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Pablo Picasso Les femmes d’Alger 1955

 

Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)
Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)
Contractor Charged With Leaking Document About US Election Hacking (R.)
How The Intercept Outed Reality Winner (ErrataS)
China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)
One Belt, One Road, and One Debt Hangover (Rickards)
Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)
Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)
Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)
Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)
Earnings vs. Profits & The Bull Market (Roberts)
US M&A: One Of The Scariest Charts To Look At – Citi (BI)
IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)
The Euro’s Future Demands Trust (K.)
An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

 

 

Well, it’ll be different alright. Given the Fed’s actions over the past decade, it can hardly get wrose.

Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)

President Donald Trump appears ready to remake the Federal Reserve in an image that will be considerably different than what investors have known for many years. The president is prepared to nominate Randal Quarles and Marvin Goodfriend to two of three vacancies at the central bank, according to multiple press accounts that have not been disputed by the administration. Quarles likely would assume the role vacated by Daniel Tarullo to oversee the nation’s banking system. White House officials did not respond to a CNBC request for comment. Should Trump nominate the two men and they receive confirmation, it will represent the first steps in a possible substantial remaking of a Fed that has practiced ultra-loose monetary policy for the past decade but has been tight on banking regulations.

Trump will have the opportunity to name one more person now, then can fill two even more critical vacancies in 2018 — that of Chair Janet Yellen and Vice Chair Stanley Fischer. If the Quarles and Goodfriend moves are indicators of what’s to come, things could start getting less comfortable for Yellen. Both are considered solidly conservative, in line with the Republican president and Congress but perhaps not with Yellen. “Clearly, these appointees are a significant departure from the crowd that we’ve had on the board,” said Christopher Whalen, head of Whalen Global Advisors and a former investment banker and long-time financial analyst. “Yellen is probably the most left-wing Fed chair we’ve ever had. I also think both Quarles and Goodfriend have much better grounding in the financial markets. That would be refreshing.”

Yellen, however, may not think so, particularly if the coalition she has carefully crafted since taking the chair’s seat in 2014 starts to unravel. “I welcome these additions,” Whalen said. “Hopefully they put a banker in the third slot. Then eventually Yellen’s going to leave because she’s going to start losing votes.”

Read more …

Kiwis flipping birds.

Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)

U.S. President Donald Trump told his top diplomat that the dispute over probes into links between his inner circle and Russia should not undermine U.S. efforts to rebuild relations with Moscow, Secretary of State Rex Tillerson said on Tuesday. Speaking in New Zealand after a trip to Australia, Tillerson reiterated the U.S. commitment to the Asia-Pacific region as global leaders have expressed growing mistrust over the Trump administration, which has withdrawn from key international agreements since taking office. At home, Trump’s administration has been plagued by questions over links to the Russian government. Tillerson said Trump told him to try to improve ties with Russia regardless of the U.S. political backdrop.

“I can’t really comment on any of that because I don’t have any direct knowledge,” Tillerson told a news conference in Wellington, when asked how worried he was that the U.S. political crisis could take down the Trump administration. “The president’s been clear to me: do not let what’s happened over here in the political realm prevent you from the work that you need to do on this relationship and he’s been quite clear with me… that we might make progress. I’m really not involved in any of these other issues,” he said after a meeting with New Zealand Prime Minister Bill English.

Read more …

This is another very curious story, and it’s not just the girl’s name, Reality Leigh Winner. Still, even The Intercept jumps to conclusions:

“Russian military intelligence executed a cyberattack on at least one U.S. voting software supplier and sent spear-phishing emails to more than 100 local election officials just days before last November’s presidential election, according to a highly classified intelligence report obtained by The Intercept.”

Even though they know that when signs point to Russia, it’s probably not Russial, the caveat only come later:

“While the document provides a rare window into the NSA’s understanding of the mechanics of Russian hacking, it does not show the underlying “raw” intelligence on which the analysis is based. A U.S. intelligence officer who declined to be identified cautioned against drawing too big a conclusion from the document because a single analysis is not necessarily definitive.”

If the raw intelligence is not available, how can one draw the Russia conclusions? The Intercept now blindly trusts US intelligence agents? And that’s not all, see next article…

Contractor Charged With Leaking Document About US Election Hacking (R.)

The U.S. Department of Justice on Monday charged a federal contractor with sending classified material to a news organization that sources identified to Reuters as The Intercept, marking one of the first concrete efforts by the Trump administration to crack down on leaks to the media. Reality Leigh Winner, 25, was charged with removing classified material from a government facility located in Georgia. She was arrested on June 3, the Justice Department said. The charges were announced less than an hour after The Intercept published a top-secret document from the U.S. National Security Agency that described Russian efforts to launch cyber attacks on at least one U.S. voting software supplier and send “spear-phishing” emails, or targeted emails that try to trick a recipient into clicking on a malicious link to steal data, to more than 100 local election officials days before the presidential election last November.

While the charges do not name the publication, a U.S. official with knowledge of the case said Winner was charged with leaking the NSA report to The Intercept. A second official confirmed The Intercept document was authentic and did not dispute that the charges against Winner were directly tied to it. The Intercept’s reporting reveals new details behind the conclusion of U.S. intelligence agencies that Russian intelligence services were seeking to infiltrate state voter registration systems as part of a broader effort to interfere in the election, discredit Democratic presidential candidate Hillary Clinton and help then Republican candidate Donald Trump win the election. The new material does not, however, suggest that actual votes were manipulated.

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… but it gets weirder. Soon after the Intercept published the story and docs, the leaker was arrested. How? She could easily be traced back to these docs. Was the Intercept not aware of this? That’s hard to believe, leaked documents is what they do. Was someone careless? We haven’t seen any excuses made. Did they knowingly give her up? Is this then the end of the Intercept?

How The Intercept Outed Reality Winner (ErrataS)

Today, The Intercept released documents on election tampering from an NSA leaker. Later, the arrest warrant request for an NSA contractor named “Reality Winner” was published, showing how they tracked her down because she had printed out the documents and sent them to The Intercept. The document posted by the Intercept isn’t the original PDF file, but a PDF containing the pictures of the printed version that was then later scanned in. The problem is that most new printers print nearly invisibly yellow dots that track down exactly when and where documents, any document, is printed. Because the NSA logs all printing jobs on its printers, it can use this to match up precisely who printed the document. In this post, I show how.

You can download the document from the original article here. You can then open it in a PDF viewer, such as the normal “Preview” app on macOS. Zoom into some whitespace on the document, and take a screenshot of this. On macOS, hit [Command-Shift-3] to take a screenshot of a window. There are yellow dots in this image, but you can barely see them, especially if your screen is dirty.

We need to highlight the yellow dots. Open the screenshot in an image editor, such as the “Paintbrush” program built into macOS. Now use the option to “Invert Colors” in the image, to get something like this. You should see a roughly rectangular pattern checkerboard in the whitespace.

It’s upside down, so we need to rotate it 180 degrees, or flip-horizontal and flip-vertical:

Now we go to the EFF page and manually click on the pattern so that their tool can decode the meaning:

This produces the following result:

The document leaked by the Intercept was from a printer with model number 54, serial number 29535218. The document was printed on May 9, 2017 at 6:20. The NSA almost certainly has a record of who used the printer at that time.

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“With 260-to-1 Leverage A Chinese Giant Takes On Goldman In US Repo”

China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)

High up in a New York City skyscraper, China’s biggest bank is playing in the shadows of American finance. The prize for Industrial & Commercial Bank of China isn’t stocks, bonds or currencies. It’s the grease in the wheels of all those markets: repurchase agreements. By exploiting a loophole in rules intended to keep U.S. banks from getting “too big to fail,” the state-owned ICBC has become a go-to dealer in repos in just a few short years, alongside longtime powerhouses like Goldman Sachs Group Inc. The short-term loans allow investors to borrow money by lending securities, serving a vital role in day-to-day trading on Wall Street. ICBC’s rise reflects not only China’s global ambitions in high finance, but also how post-crisis rules have let a whole host of new players profit from the murky world of shadow banking, largely beyond the reach of bank regulators.

As big banks face tougher standards, they’re being replaced by brokers, asset managers and foreign firms like ICBC, which can use more leverage and take greater risks. That has some regulators worried non-bank lenders are once again emerging as a threat to financial stability, less than a decade after panic in the repo market wiped out Lehman Brothers. “The concern is that non-bank dealers are becoming a larger part of the repo market,” said Benjamin Munyan, who specializes in shadow banking and regulation at Vanderbilt University’s Owen Graduate School of Management. “These intermediaries are outside the scope of our traditional Federal Reserve safety net.” In some ways, the development is emblematic of how steps taken to stamp out financial risk-taking in one area have created unforeseen risks in another. But it also highlights the willingness and ability of firms to jump through whatever holes regulators leave or create.

In a repo, firms borrow money by putting up securities like Treasuries as collateral. The cash can then be used to buy higher-yielding assets, something hedge funds often do. When the agreement expires, the borrower “repurchases” the collateral, paying interest to the lender. The process can be repeated over and over, boosting a firm’s leverage, as long as the assets backing the repo maintain their value. During the credit crisis, reliance on such short-term funding helped bankrupt Lehman and imperiled the financial system. Bailouts put the biggest securities firms under Fed supervision as banks, and Dodd-Frank regulations forced them to shrink their assets. A key provision has been the enhanced capital requirements, which made it prohibitively expensive for large U.S. banks to warehouse low-yielding Treasuries and finance repos.

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China runs out of collateral.

One Belt, One Road, and One Debt Hangover (Rickards)

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors. China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run. Just as Chinese state owned enterprises (SOEs) can’t repay debts to Chinese banks, China’s foreign partners will not be able to repay debts to China itself. These twin disasters-in-the-making may converge in such a way that China’s assets disappear or become illiquid at exactly the time they are most needed to bail-out its own banking system.

China has launched four major overseas investment initiatives in the past ten years. The oldest is their sovereign wealth fund, China Investment Corporation, or CIC, established in 2007. Sovereign wealth funds are a way for countries to invest their reserves in securities other than safe instruments such as U.S. Treasury notes. CIC today has assets of over $800 billion, spread among stocks, corporate bonds, hedge funds, private equity, commodities, and commercial real estate. Some of CIC’s investments are directly-owned enterprises, including gold mines in Zimbabwe. While these assets may outperform Treasury notes over time, they are also illiquid, and would tend to decline in value during a financial panic. This means that about 20%, of China’s reserves are unavailable for critical tasks such as bailing out the banking system or defending the currency.

[..] The problem with One Belt, One Road is that many of the potential recipients of development loans are not highly creditworthy or have a track record of defaulting on debts or requiring substantial debt restructuring in order to stay current. As with Chinese bank loans to SOEs, the NDB, AIIB, and One Belt, One Road efforts are not primarily economic but political. China is seeking to use its economic clout to create jobs and control critical infrastructure. [..] As with its other policies, China will turn liquid assets into illiquid assets in order to pursue its ambitions. This could make sense if nothing goes wrong. But, things will go wrong. China will face a monumental liquidity crisis sooner than later and find that its liquid assets have been turned into bridges to nowhere.

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This thing has been developing over decades.

Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)

Qatar’s stock market tumbled more than 7% on Monday as six of the Middle Eastern country’s neighbors reportedly severed diplomatic relations with Doha for allegedly supporting terrorism. The key stock index in Doha slipped shortly after Monday’s open – the benchmark’s sharpest fall in more than seven years – before paring some its losses to trade down 7.2% at around 3:00 p.m. local time. Six countries, including Saudi Arabia and Egypt, had all coordinated on Monday to accuse the wealthy Gulf state of supporting terrorism, which Qatar has denied. Investors viewed the diplomatic withdrawal as a major breakdown between powerful Gulf nations, who are also close U.S. allies. While Saudi Arabia – the world’s leading crude oil exporter – said Qatar had supported “Iranian-backed terrorist groups,” Qatar described the joint decision as having “no basis in fact” and was therefore “unjustified”.

Political tensions in the region had been building in recent weeks as Egypt, Saudi Arabia, Bahrain and the United Arab Emirates – all countries to have cut relations with Doha on Monday – had blocked Qatari-based news sites in May. However, Monday’s decision was reported to be based on Qatar’s alleged role in supporting Islamist groups and its stance concerning Iran – a regional rival to Saudi Arabia. Qatar, a member of the U.S. coalition against the so-called Islamic State, has frequently and consistently rejected accusations from Iraq’s Shia leaders that it has provided financial backing to ISIS. “Whilst Qatar is the member of the U.S. coalition against IS, wealthy individuals have reportedly made donations to extremist groups and the government is also accused of supporting extremists – allegations that Qatar vehemently deny,” Tamas Varga, oil associates analyst at PVM, said in an email on Monday.

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If I remember, the UK gets 90% of its LNG from Qatar.

Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)

Oil markets seem impervious to geopolitical risk. As four Arab neighbors imposed an unprecedented embargo on Qatar on Monday, oil prices briefly jumped 1.6 percent before falling back. The fuel to watch, though, is not oil, but gas. If this dispute is not resolved quickly, it may mean a hot summer in the Gulf. The problem has been simmering for a long time, with three of Qatar’s Gulf Cooperation Council colleagues blaming it for backing Islamist groups including the Muslim Brotherhood, and being too friendly with Iran. But in a dramatic escalation shortly after U.S. President Donald Trump’s visit to Saudi Arabia, the United Arab Emirates and Bahrain, along with Egypt, the shaky official government of Yemen and Libya’s contested eastern government broke relations with Doha and imposed a ban on air, land and sea travel.

Much of Qatar’s food and key equipment comes by land from Saudi Arabia, or reshipments through Dubai’s Jebel Ali port. Qatar is one of the smallest oil producers in OPEC, at 618,000 barrels per day, but condensate (light oil) and natural gas liquids – byproducts of its giant North Field – add about another 1.3 million barrels per day. It will stay in the OPEC production cuts deal, and even if it does not, its contribution is small. Its real power comes from being the world’s largest liquefied natural gas exporter. Qatar’s liquefied natural gas and oil exports should not be affected, even if Saudi and Emirati waters are barred to its ships. They can sail via Iranian waters and then pass the Strait of Hormuz via the usual shipping lane in Omani territory, or stay in the Iranian sector if Oman joins its GCC colleagues in the blockade. Any attempt to stop Qatari exports would be a major crisis, and would invite a serious response from major LNG customers Japan, South Korea, China and India.

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So is Britain’s political model.

Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)

Mayism could mean Brexit Britain renaming itself Poundland – cheap goods and cheap workers – or it might mean a reversion to some kind of one-nation Toryism. Her party just doesn’t know. Were it not for the Tories’ slim majority, their crisis would be far more exposed. The sofa class don’t do political economy, more’s the pity, but if they did they’d see the contradictions of Conservatism in 2017. The party of capital is now pursuing a policy – hard Brexit – hated by capital. The political arm of the City is about to rip a hole through the City. All these paradoxes are given almost physical representation on our tellies every night by May herself – a populist who doesn’t actually like people.

As a non-believer in New Labour, Corbyn has no such ideological awkwardness, while John McDonnell is one of the few people in the Labour party who didn’t subcontract out their economic thinking to Brown and Ed Balls. But still, their team admit they have a way to go in rethinking Britain’s economy – and they are having to do so against a famously hostile parliamentary party. The result is Corbyn’s manifesto, which is chiefly remarkable for its unabashed defence of basic social democratic values. It’s the programme you imagine Brown would like to have delivered – if only he hadn’t been so busy triangulating.

But behind the scenes, the party is doing much deeper thinking. I have seen an internal Labour report commissioned by McDonnell. It forms one part of what could be a far more radical programme after Thursday night. Some of the lines in it will give the Daily Mail stories for days – such as calling for a overhaul of the BBC trust (which is “dominated by appointees from the corporate and financial sectors”) and hundreds of millions in public money to be spent on establishing workers co-ops. For the sympathetic reader, however, it contains some of the most imaginative thinking around economic democracy to come out of the party in decades (not saying much, sadly). In that, it sits alongside the speeches made by Corbyn’s team last week about the need for “industrial patriotism”, and to give public backing to new sectors.

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More cuts are being prepared.

Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)

Police numbers, including the number of armed police officers, have fallen sharply under Theresa May’s watch first as home secretary between 2010 and 2016 and then as prime minister. The simple numbers tell the story. In 2010 May as home secretary made the mistake that Margaret Thatcher never made in the 1980s and agreed to a Treasury demand to cut police budgets by 18%. Over the next five years the number of police officers in England and Wales fell from a peak of 144,353 in 2009 to 122,859 in 2016. At the same time the number of specialist armed police officers has fallen from a peak of 6,796 in 2010 to 5,639 in 2016. As the graph shows it would appear to be an open and shut case that cuts in police officer numbers have had an impact on the capacity of the police to respond.

May was told in 2010 that in cutting police funding she was making a mistake that Thatcher never made when she instinctively realised that there would come a crucial moment when the country, and her premiership, would depend entirely on the resilience of the thin blue line. May took a different approach as home secretary that was not without foundation. She argued that with the big continuing falls in crime that had been seen since the mid-1990s it was not necessary to maintain such a large police force. Anyway, it was argued, there was no direct link between the number of officers and the level of crime.

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What you get after years of having zero price discovery. It gets worse as we go along.

Earnings vs. Profits & The Bull Market (Roberts)

As I have discussed previously, the operating and reported earnings per share are heavily manipulated by accounting gimmicks, share buybacks, and cost suppression. To wit: “The tricks are well-known: A difficult quarter can be made easier by releasing reserves set aside for a rainy day or recognizing revenues before sales are made, while a good quarter is often the time to hide a big ‘restructuring charge’ that would otherwise stand out like a sore thumb. What is more surprising though is CFOs’ belief that these practices leave a significant mark on companies’ reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study’s respondents said it was around 10% of earnings per share.“ However, if we analyze corporate profits (adjusted for taxes and inventory valuations) we find a very different story. Since the lows following the financial crisis, the S&P 500 has grown by 266% versus corporate profit growth of just 98%.

Important Note: The profits generated by the Federal Reserve’s balance sheet are included in the corporate profits discussed here. As shown below, actual corporate profitability is weaker if you extract the Fed’s profits from the analysis. As a comparison, in the first quarter of 2017, Apple reported a net income of just over $17 billion for the quarter. The Fed reported a $109 billion profit.

With corporate profits still at the same level as they were in 2011, there is little argument the market has gotten a bit ahead of itself. Sure, this time could be different, but it usually isn’t. The detachment of the stock market from underlying profitability suggests the reward for investors is grossly outweighed by the risk. But, as has always been the case, the markets can certainly seem to “remain irrational longer than logic would predict.” This was something Jeremy Grantham once noted: “Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.” Grantham is correct. As shown, when we look at inflation-adjusted profit margins as a percentage of inflation-adjusted GDP we see a clear process of mean reverting activity over time. Of course, those mean reverting events are always coupled with a recession, crisis, or stock market crash.

More importantly, corporate profit margins have physical constraints. Out of each dollar of revenue created there are costs such as infrastructure, R&D, wages, etc. Currently, one of the biggest beneficiaries to expanding profit margins has been the suppression of employment, wage growth, and artificially suppressed interest rates which have significantly lowered borrowing costs. Should either of the issues change in the future, the impact to profit margins will likely be significant. The chart below shows the ratio overlaid against the S&P 500 index.

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Well, if you don’t know what something’s worth, how are you going to justify purchasing it? At some point that stops.

US M&A: One Of The Scariest Charts To Look At – Citi (BI)

The slowdown in US dealmaking since 2015 is cause for concern, Citi’s equity strategists say. “In some respects, one of the scariest charts to look at currently is the number of announced mergers & acquisition deals over the past year or two,” Tobias Levkovich, the chief US equity strategist at Citi, said in a note on Friday. “M&A lawyers argue the ‘uncertainty’ factor, which has come about recently, given some unpredictable aspects of the new Trump administration, has been the issue. It only may explain the last six months, but the trend has been poor for about two years or more. In the past, there has been some correlation with the S&P 500 and thus it could generate more legitimate fears than some of the other excuses that are put forth for not wanting to buy American equities.”

This year through June 5, 7,561 deals were announced, the lowest count since 2013, according to S&P Global Market Intelligence. M&A volume reached a record $2.055 trillion that year, the firm’s data show, slipping in 2016 to $1.7 trillion. More dealmaking signals, in part, that companies are placing big bets on the long-term growth of certain pockets of the market. Levkovich said tough antitrust measures from European authorities and the Department of Justice antitrust division may be slowing dealmaking.

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Please let it stop.

IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)

IMF Managing Director Christine Lagarde has offered Greece’s European creditors a way out of their impasse over Athens’s debts that would allow the eurozone to release a tranche of aid later this month. The IMF believes Greece needs a debt haircut, which Germany rejects. Lagarde suggested agreeing a deal whereby the IMF would stay on board in the bailout, as Berlin wants, but not pay out further aid until debt relief measures are clarified. “There can therefore be a program in which the disbursement only takes place when the debt measures have been clearly outlined by the creditors,” she told Handelsblatt in pre-released comments to run in its Tuesday edition. The compromise could allow eurozone finance ministers to give the go-ahead for their next payment of their tranche of aid at their meeting on June 15, Handelsblatt said.

“It is a possibility for an agreement,” Lagarde said. Greece has about €7 billion of debt maturing in July, a sum it will not be able to repay unless it gets new loans out of its current bailout worth up to 86 billion euros, the third aid program since its debt crisis began. Eurozone finance ministers failed to agree with the IMF last month on debt relief terms for Greece. They did not release new loans to Athens but recognized it had made significant progress with reforms. Greece hopes that eurozone finance ministers will offer enough clarity in June on debt relief measures that could be carried out after its bailout ends in 2018, to show investors that its debt – now at 197% of GDP – will be sustainable and help it return to bond markets as early as this summer.

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Trust in the Troika has proven to be a very expensive mistake.

The Euro’s Future Demands Trust (K.)

The European Commission presented its proposal for possible ways to deepen Europe’s Economic and Monetary Union a few days ago, as part of the public debate on the EU’s future. It went unnoticed in Greece, which is a pity, because if all that is proposed is adopted, the Greek problem will be overcome; also, if the mechanisms and procedures now in place had existed from the start, our country would not have hit a dead end. The question now is how Greece will be part of a system that was established because of the Greek crisis but from which our country is still excluded.

For the Greeks – sinking in recession, insecurity and isolation – the ironies are many. Presenting the proposals in Brussels on Wednesday, Commission Vice President Valdis Dombrovskis said: “The euro is one of Europe’s most significant achievements. It is much more than just a currency. It was conceived as a promise of prosperity. To keep that promise for future generations, we need the political courage to work on strengthening and completing Europe’s Economic and Monetary Union now.” Pierre Moscovici, commissioner for economic and financial affairs, added: “The euro is already a symbol of unity and a guarantee of stability for Europeans. We now need to make it a vehicle for shared prosperity. Only by reversing economic and social divergence in the euro area will we be able to defeat the dangerous populism that this fuels.”

The indirect references to Greece are clear. This is where the euro’s weaknesses first appeared, this is where the political center was torn apart and fringe groups gained power, this is where confidence in the common currency and in solidarity is being tested. The Commission’s proposals focus on completing a genuine financial union, achieving a more integrated economic and fiscal union, on greater democratic accountability and strengthening euro-area institutions (including a full-time Eurogroup chair and a European Monetary Fund). The Commission noted the euro’s successes, adding, “And yet it is only 25 years since the Treaty of Maastricht paved the way for the single currency and only 15 years since the first coin was used.” So we ask: As the currency is so new, and as the necessary mechanisms and procedures are only now being instituted, why is Greece continually an outcast? How can we pretend all is well with the euro? .

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Nice thing is the City Plaza is not really occupied, nor a squat. The former employees own everyhting inside the building.

An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

It is almost summer in Europe. Temperatures are rising, and many are preparing for vacations somewhere in the Mediterranean, which means searching for accommodation online. “No pool, no minibar, no room service, and nonetheless: the best hotel in Europe” reads the City Plaza Hotel’s homepage. A joke? Yes. A lie? Not at all. While this hotel in Athens, Greece might not offer those conventional services, it provides something far better: Free housing, medical care and meals for hundreds of people who have had to flee their countries. [..] Over the course of the year, the hotel has provided decent housing for over 1,500 refugees — 400 at any one time — in times of undignified detention camps. It is a model of self-organization and solidarity with refugees — who share living quarters with locals — in times of rising racism and nationalism.

[..] Thousands of homeless refugees are living in the streets of Athens, including families with small children. In response to this crisis, the Greek state set up more than 49 detention centers and camps. Activists and refugees had another idea of how to respond. On April 22, 2016 they took over the City Plaza — which, like many businesses since the economic collapse, had been abandoned for six years. Along with eight other self-organized shelters occupied by refugees and activists around the city, the hotel offers displaced people a safe and dignified alternative to the miserable, unhygienic and cruel conditions of the detention facilities. When the City Plaza went bankrupt in 2010, the management failed to pay the employees their final salaries. According to a court ruling, since they were unable to pay the workers monetarily, everything that is inside the building belongs to the workers.

However, the owner prevented auctioning the hotel for years. When the seven-story building was finally occupied last year, the former hotel employees declared that they were happy to offer and share everything. And the activists running City Plaza now support the workers and are planning common efforts to meet the demands of both the former workers and the refugees. The refugees’ demands include access to housing, education and employment. By providing everything that is needed themselves, the project proves that decent living conditions for everyone is possible, even in a country as burdened by crisis as Greece. And the warm reception that the refugees have received by those living near the hotel demonstrate that poverty is not an obstacle to welcoming people with open arms. “The neighbors bring some clothes, some food — you know, they are warm. Although their lives are also ruined, they see in the ruins of their lives, the ruins of the lives of other people,” said Maria, one of the Greek activists running the hotel.

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