May 182017
 
 May 18, 2017  Posted by at 9:10 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Paul Klee Fire at Full Moon 1933

 

‘Bobby Three Sticks’ Mueller to Probe Russia-Trump imbroglio (R.)
Trump To Announce $350bn Saudi Arabia Arms Deal – One Of Largest Ever (Ind.)
America’s Reign of Terror: A Nation Reaps What It Sows (Whitehead)
Investors Supercharge Bet Amazon Will Destroy US Retail (BBG)
Fed’s Kashkari Says Don’t Use Rate Hikes To Fight Bubbles (R.)
US Banks Tighten Auto Lending as More Borrowers Fall Into Default (BBG)
Canadian Officials Say Housing Risks Are Contained (BBG)
Prosecutor To Label Deutsche Bank An International Criminal Association (BBG)
Germany Asks US For Classified Briefing On Lockheed’s F-35 Fighter (R.)
Brazil: Explosive Recordings Implicate President Michel Temer In Bribery (G.)
Get Ready For The Franco-German Revival (Pol.)
Greek Parliament Committee Finds Salary, Pension Cuts Unconstitutional (GR)
Deal On Greece Is Touch And Go (K.)
Traffickers, Smugglers Exploit Record Rise In Unaccompanied Child Refugees (G.)

 

 

The echo chamber expands. It’s ironic to see how everyone praises Mueller’s independence, yet many are sure he will be Trump’s undoing. What flack will he get when he doesn’t do what the MSM demand?

‘Bobby Three Sticks’ Mueller to Probe Russia-Trump imbroglio (R.)

Former FBI director and prosecutor Robert Mueller, known for his independence in high-profile government investigations, is taking on a new challenge in the midst of a crisis that threatens the presidency of the United States. Mueller, 72, was named on Wednesday by the Justice Department to probe alleged Russian efforts to sway November’s presidential election in favor of Donald Trump and to investigate whether there was any collusion between Trump’s campaign team and Moscow. President Trump said in a statement there was no collusion between his campaign and “any foreign entity.” Mueller is known by some as “Bobby Three Sticks” because of his full name – Robert Mueller III – a moniker that belies the formal bearing and no-nonsense style of the former Marine Corps officer who was decorated during the Vietnam War.

Democrats and Republicans alike praised his appointment and hailed his integrity and reputation. Mueller was named to the post by Deputy Attorney General Rod Rosenstein. His investigation will run in parallel to those being carried out by the FBI and the U.S. Congress. It would be difficult to fire Mueller, and past special counsel appointments have shown that the job comes with independence and autonomy. Chicago federal prosecutor Patrick Fitzgerald was appointed during the George W. Bush administration in 2003 to a similar role to investigate the leak of the identity of Valerie Plame, an undercover CIA officer whose husband had criticized Bush administration policies. Fitzgerald indicted I. Lewis “Scooter” Libby, a top aide to Vice President Dick Cheney. Bush granted Libby clemency from a prison sentence before he left office.

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If you want to protest Trump, protest this….

Trump To Announce $350bn Saudi Arabia Arms Deal – One Of Largest Ever (Ind.)

Donald Trump will use his upcoming Saudi Arabia trip to announce one of the largest arms sales deals in US history – somewhere in the neighbourhood of $98bn to $128bn worth of arms. That could add up to $350bn over ten years. The deal will be what the Washington Post said is a “cornerstone” of the proposal encouraging the Gulf states to form its own alliance like the NATO military alliance, dubbed “Arab Nato.” Nato is comprised of 28 countries including the US. Mr Trump been an outspoken critic of the organisation but after a face-to-face meeting with Nato Secretary General Jens Stollenberg, he said the alliance was “no longer obsolete.” The White House said the president will propose it as a template for an alliance that will fight terrorism and keep Iran in check.

Saudi Crown Prince Mohammed bin Salman began negotiations on this deal shortly after the 2016 US election when he sent a delegation to Trump Tower to meet with the president’s son-in-law Jared Kushner, who is serving as a senior advisor of sorts to Mr Trump. The idea of an Arab Nato is not new. There was talk in 2015 of a “response force” in Egypt, comprised of approximately 40,000 troops from Egypt, Jordan, Morocco, Saudi Arabia, Sudan, and a few other Gulf nations. The “response force” would have had a Nato-like command structure, with soldiers paid for by their own countries and the Gulf Cooperation Council made up of wealthy oil economies finance operations and management of the force.

President Barack Obama’s administration brokered more arms sales than any US administration since World War II – estimated at $200bn. They sold Saudi Arabia alone $60bn in arms, which sparked criticism by Democrats concerned with Saudi Arabia’s alleged human rights violations. Mr Trump benefits by bringing about a more “fair” deal; he has claimed several times that Nato is unfair to the US because of the amount of contributions and support provided by the US compared to countries like Germany. If Arab Nato succeeds, the White House official said the US could shift the responsibility for security to those in the region and create jobs at home through the arms sales.

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…because that Saudi arms deal is a further expansion of this long-term insanity. Military industrial complex.

America’s Reign of Terror: A Nation Reaps What It Sows (Whitehead)

Who designed the malware worm that is now wreaking havoc on tens of thousands of computers internationally by hackers demanding a king’s ransom? The US government. Who is the biggest black market buyer and stockpiler of cyberweapons (weaponized malware that can be used to hack into computer systems, spy on citizens, and destabilize vast computer networks)? The US government. What country has one the deadliest arsenals of weapons of mass destruction? The US government. Who is the largest weapons manufacturer and exporter in the world, such that they are literally arming the world? The US government. Which is the only country to ever use a nuclear weapon in wartime? The United States. How did Saddam Hussein build Iraq’s massive arsenal of tanks, planes, missiles, and chemical weapons during the 1980s? With help from the US government.

Who gave Osama bin Laden and al-Qaida “access to a fortune in covert funding and top-level combat weaponry”? The US government. What country has a pattern and practice of entrapment that involves targeting vulnerable individuals, feeding them with the propaganda, know-how and weapons intended to turn them into terrorists, and then arresting them as part of an elaborately orchestrated counterterrorism sting? The US government. Where did ISIS get many of their deadliest weapons, including assault rifles and tanks to anti-missile defenses? From the US government. Which country has a history of secretly testing out dangerous weapons and technologies on its own citizens? The US government. Are you getting the picture yet? The US government isn’t protecting us from terrorism. The US government is creating the terror. It is, in fact, the source of the terror.

Just think about it for a minute: almost every tyranny being perpetrated against the citizenry—purportedly to keep us safe and the nation secure—has come about as a result of some threat manufactured in one way or another by our own government. Cyberwarfare. Terrorism. Bio-chemical attacks. The nuclear arms race. Surveillance. The drug wars. In almost every instance, the US government has in its typical Machiavellian fashion sown the seeds of terror domestically and internationally in order to expand its own totalitarian powers.

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Let’s celebrate progress.

Investors Supercharge Bet Amazon Will Destroy US Retail (BBG)

Investors who think Amazon.com Inc. is about to destroy the retail industry as we know it have figured out a way to supercharge that bet – by buying the online giant’s stock and pairing it with a short position in the SPDR S&P Retail ETF, symbol XRT, a foundering fund that primarily holds bricks-and-mortar stores. “If you are long Amazon, wouldn’t it make sense to be short the stocks Amazon will look to decimate?” said Ihor Dusaniwsky, head of research for S3 Partners. “It’s going long the ‘best of the breed’ and shorting the ‘worst of the breed.’” Traders are building up short positions in anticipation of XRT dropping to $40 or $41, Dusaniwsky said. The fund, which is down more than 5% this year, closed at $41.74 on Tuesday.

XRT’s top holdings include furniture stores, supermarkets and groceries, electronics chains and media streaming, all areas where Amazon is spending heavily, Dusaniwsky said. “If Amazon succeeds, it will be at the expense of companies like Wayfair, Sprouts Farmers Market, Whole Foods, Best Buy and Netflix,” Dusaniwsky said. These five companies make up around 7% of XRT, which also holds $3.37 million of Amazon stock, making it 1.2% to the portfolio. So far Amazon is holding up its end of the bet. The world’s largest online retailer beat profit and revenue estimates in the first quarter and said sales may top projections in second quarter, according to an April 27 statement. The stock’s up 28% this year, as the company continues to add subscribers to its $99-a-year Prime program, locking in loyalty and building a moat against competitors.

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Is Kashkari denying the existence of bubbles?

Fed’s Kashkari Says Don’t Use Rate Hikes To Fight Bubbles (R.)

Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday warned against using interest-rate hikes to address unwanted asset bubbles, saying that bubbles are hard to identify and such hikes would likely do more harm than good. Kashkari is a voting member this year on the U.S. central bank’s policy committee, and in March was the lone dissenter on a Fed vote to raise rates for the third time since the Great Recession. He has previously said he opposed the rate hike because he felt keeping rates low would result in more jobs for Americans who want to work. Some Fed officials have worried that keeping rates too low for too long could create asset bubbles that could set the U.S. economy up for another recession.

But the main reason Fed chair Janet Yellen and others have given for raising rates is not to tamp down bubbles, but to keep a now nearly fully employed economy from going into overdrive. Kashkari’s latest essay argues that keeping a sharp eye out for potential bubbles and using supervisory powers to protect banks from failures are better options than raising rates. “Given the challenges of identifying bubbles with any confidence and the costs of making a policy mistake, I believe the odds of circumstances ever making sense to use monetary policy to try to slow asset prices down are very low,” he wrote. “I won’t say never but a whole lot of evidence would have to line up just right for it to be the prudent course of action.”

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Horse. Barn.

US Banks Tighten Auto Lending as More Borrowers Fall Into Default (BBG)

Lenders are tightening the spigot on new auto loans, making it harder for U.S. consumers with weak credit to buy a car, data from the Federal Reserve Bank of New York show. New car loans for subprime borrowers fell in the first quarter to $25.9 billion, the lowest in two years, according to the New York Fed’s quarterly report on household debt and credit. Drivers with credit scores below 620 now comprise less than 20% of new loans, down from almost 30% a decade ago. Borrowers with the highest credit scores – 760 or more – made up nearly a third of new auto loan originations in the first quarter as lenders target the safer deals. Banks including Fifth Third Bank have been trimming their loan books and cutting back on riskier credit as delinquent auto loan balances surge.

The share of auto debt more than 90 days overdue rose to 3.82% in the first quarter, the highest in four years. While caution may be good for banks’ balance sheets, it doesn’t offer much relief for automakers, who relied on cheap credit to fuel a seven-year stretch of booming sales. Now they’re boosting discounts and cutting production to address swelling inventory on dealer lots. Ford said Wednesday it’s cutting 1,400 jobs in North America and Asia to improve profits as the U.S. auto industry recorded a fourth straight drop in monthly sales in April, after eking out a record year in 2016. Tighter credit “is a big impediment to future strength in auto sales,” said Yelena Shulyatyeva, senior U.S. economist for Bloomberg Intelligence. “A lot of this demand was driven by loose lending standards.”

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Not helping.

Canadian Officials Say Housing Risks Are Contained (BBG)

Canadian government officials delivered a vote of confidence in the country’s housing sector and banking system, telling lawmakers that Vancouver and Toronto’s real estate markets are supported by fundamentals that leave risks well-contained. Senior officials from Canada’s Finance Department testified Wednesday evening to the Senate finance committee, fielding questions about the stability of the housing market, risks posed by high household debt levels in Canada and the recent downgrade of banks by Moody’s Investors Service Inc. The hearing came amid questions about the future of Home Capital and any knock-on effect that a potential failure there could have on Canada’s housing sector, particularly in Vancouver and Toronto.

The core message from the officials was Canada’s market was stable and, despite some risks, policy makers’ measures are taking effect. “We don’t think there’s any systemic risk across the country,” said Phil King, a director at the economic and fiscal policy branch at Finance Canada. “There are specific pockets of concern, which seem to have ameliorated somewhat in the very-near term but we’re keeping a very close eye on those.” Vancouver and Toronto have “very, very strong fundamentals” supporting prices including immigration, strong job creation, strong income gains and high wealth, he said. King described a national housing market with distinct regions — surging Toronto and Vancouver, soft markets in energy-producing regions such as Calgary, and other cities like Montreal and Ottawa where policy makers have “no concerns whatsoever.”

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As Goldman Sachs should be for its activities in Greece.

Prosecutor To Label Deutsche Bank An International Criminal Association (BBG)

Deutsche Bank, on trial in Milan for allegedly helping Banca Monte dei Paschi di Siena conceal losses, must face accusations that it was running an international criminal organization at the time. Prosecutors used internal Deutsche Bank documents and emails to persuade a three-judge panel to consider whether there were additional, aggravating circumstances to the charges the German lender already faces related to derivatives transactions. The material included a London trader’s “well done!” message to a banker who is now on trial, evidence seen by Bloomberg shows. Allowing prosecutors to argue that the alleged market manipulation crimes were committed by an organization operating in several countries could lead to higher penalties if they win a conviction.

Giuseppe Iannaccone, a lawyer for Deutsche Bank and some of the defendants, sought to block the move at Tuesday’s hearing, saying there wasn’t a clear connection between the original charge of market manipulation and the alleged aggravating circumstances. “The trial for Deutsche Bank managers becomes more problematic after the judge’s decision,” said Giampiero Biancolella, an attorney specializing in financial crime who isn’t involved in the case. “If proven, the aggravating circumstance may increase the eventual jail sentence for the market manipulation to a maximum of nine years.” The German bank and Nomura went on trial in Milan in December, accused of colluding with Monte Paschi to cover up losses that almost toppled the Italian lender before its current battle for survival. Thirteen former managers of Deutsche Bank, Nomura and Monte Paschi were charged for alleged false accounting and market manipulation.

Deutsche Bank and Nomura are accused of using complex derivative trades to hide losses at the Italian lender, leading to a misrepresentation of its finances between 2008 and 2012. After the deals came to light in a 2013 Bloomberg News report, Monte Paschi restated its accounts and tapped shareholders twice to replenish capital. Deutsche Bank and six current and former managers were indicted in Milan Oct. 1 for allegedly helping falsify the Siena-based lender’s accounts through a deal known as Santorini. The prosecution’s request to label Deutsche Bank an international criminal association hinged on events that occurred in other parts of the globe, including the possible manipulation of an index, which isn’t the subject of charges in the Milan case.

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History’s biggest ever financial boondoggle. And nobody dares stop it.

Germany Asks US For Classified Briefing On Lockheed’s F-35 Fighter (R.)

The German Air Force this month sent the U.S. military a written request for classified data on the Lockheed Martin F-35 fighter jet as it gears up to replace its current fleet of fighter jets from 2025 to 2035. The letter, sent by the Air Force’s planning command and seen by Reuters, makes clear that the German government has not yet authorized a procurement program and is not committed to any particular aircraft to replace its current warplanes. It said the defense ministry would carry out “an in-depth evaluation of market available solutions, including the F-35, later this year,” with a formal “letter of request” to be issued in coming months.

Germany’s interest in the F-35 – the Pentagon’s most advanced warplane and its costliest procurement program – may surprise some given that it is part of the four-nation consortium that developed the fourth-generation Eurofighter Typhoon, which continues to compete for new orders. The Eurofighter is built by Airbus as well as Britain’s BAE Systems and Leonardo of Italy. Germany will need to replace its current fleet of fourth-generation warplanes – Tornadoes in use since 1981 and Eurofighters – between 2025 and 2035. The F-35 is considered a fifth-generation fighter given stealth capabilities that allow it to evade enemy radars.

Berlin’s letter also comes amid growing tensions between the West and Russia over Moscow’s support for separatists in eastern Ukraine, with NATO officials saying that Russian naval activity now exceeds levels seen even during the Cold War. Britain, the Netherlands, Norway, Turkey and Italy – key NATO allies of Germany – are already buying the F-35 fighter jet to replace their current aircraft, and other European countries such as Switzerland, Belgium and Finland are also looking at purchasing the fifth-generation warplane. Germany’s gesture may be aimed at strengthening its hand in negotiations with its European partners over the scale and timing of development of a next generation of European fighters. Any moves to buy a U.S. built warplane could run into political resistance in Germany, which has strong labor unions.

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Just turn parliament into a prison building. Most effective solution.

Brazil: Explosive Recordings Implicate President Michel Temer In Bribery (G.)

Angry crowds and outraged members of Brazil’s congress have demanded the impeachment of President Michel Temer following reports he was secretly recorded discussing hush money pay-offs to a jailed associate. The tapes were presented to prosecutors as part of a plea bargain by Joesley and Wesley Batista, brothers who run the country’s biggest meat-packing firm JBS, according to O Globo newspaper. They are said to contain conversations that incriminate several leading politicians, including the former presidential candidate Aecio Neves and the former finance minister Guido Mantega. Temer is alleged to have talked with Joesley about cash payments to Eduardo Cunha, the former speaker of the House who has been jailed for his role in the sprawling Petrobras corruption scandal.

Cunha is in the same ruling Brazilian Democratic Movement party as Temer and initiated the impeachment of Dilma Rousseff that allowed him to take over the presidency. He has alluded to the many secrets he knows about his former colleagues. In covert recordings made during two conversations in March, Joesley tells Temer he is paying Cunha to keep him quiet, to which the president allegedly replies: “You have to keep it going, OK?” According to Globo, police also have audio and video evidence that Temer’s aide Rocha Loures negotiated bribes worth 500,000 reais (US$160,000) a week for 20 years in return for helping JBS overcome a problem with the fair trade office.

No audio or transcripts were released. The supreme court has refused to comment on the validity of the alleged leak – but the news has enraged the public. Shouts and pot-banging (a traditional form of protest in Latin America) could be heard when the allegations were aired on TV. Crowds also gathered outside the presidential palace chanting “Fora Temer” (Temer out). Two congressmen submitted impeachment motions in the lower house.

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Macron falls in line with what Berlin wants as much as Hollande did. Where’s the difference? Merkel and Schäuble like it, because now no-one will dare speak up anymore.

Get Ready For The Franco-German Revival (Pol.)

With none of the previous three presidents Merkel has sat across from in the past 12 years did the cautious chancellor achieve the deep mutual understanding and political serendipity that powered European integration in the eras of Konrad Adenauer and Charles de Gaulle, Helmut Schmidt and Valéry Giscard d’Estaing, or Helmut Kohl and François Mitterrand. Macron promised to be a “frank, direct and constructive partner” for Berlin. If he can convince Merkel to revive the frequent, unscripted, plain-speaking meetings between French and German leaders of the past, it will be a crucial step toward setting a joint agenda for Europe. July’s joint cabinet session — where both defense and the economy will be on the agenda — will be a first test of the promised Franco-German revival.

Macron has made it clear he intends to use France’s major contribution to European defense and security as a lever to help secure progress in the eurozone. But his influence in Berlin, as he acknowledged, will depend on his ability to break the rigidities in the French labor market and put the country’s young people to work. He will need to overcome deep-seated resistance to eurozone intervention in national budget policies. The last Socialist government was as defiant as its Gaullist predecessors when the European Commission repeatedly criticized France’s excessive deficits, high tax burden on business and employment, and generous welfare and pension systems. But Macron is committed to the right track. Honoring commitments to EU-supervised economic reforms are part of his vision for a more integrated eurozone, he said in Berlin.

[..] When it comes to the eurozone, Germany will have to end its resistance to further risk-sharing to complete the EU’s banking union. And here progress is likely to be difficult. Macron will need Berlin to lift its blockade on common deposit insurance and a joint fiscal backstop for the European bank resolution fund. Finance Minister Wolfgang Schäuble — who has expressed support for some of Macron’s ideas — will hold both steps hostage at least until after the German general election in September. Schäuble is holding out for a very different form of eurozone governance, in which an inter-governmental (i.e. German-controlled) European Monetary Fund, built on the existing European Stability Mechanism, would impose automatic debt restructuring and an austerity program on any eurozone country that needed assistance.

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Can Tsipras impose cuts when they violate his constitution? Can the Troika?

Greek Parliament Committee Finds Salary, Pension Cuts Unconstitutional (GR)

The Parliamentary Scientific Committee in its new report that accompanies the new omnibus bill expressed concern over the constitutionality of the provisions of Law 4387/2016 that calls for new cuts to pensions and special salaries. According to Professor and former SYRIZA lawmaker Alexis Mitropoulos, the report was posted on the parliament site shortly after midnight on Tuesday. Mitropoulos spoke on Ant1 television on Wednesday saying that, “After the recent Court of Audit decision, and following a long meeting, the committee found that the cuts in special wages, pensions and taxation were found to be unconstitutional.”

The new bill includes deep cuts in pensions and slashes in salaries of army and police personnel, sectors where special salary regulations apply. “The proposed reductions disrupt the balance that must exist between, on the one hand, the pension as a personal asset, which is protected by Article 1 and, on the other, of the public interest,” the report says regarding the pension cuts. As for cuts in special salaries, the report argues that, the cuts “are part of a wider fiscal adjustment program containing a package of measures to revive the Greek economy and consolidate public finances” but their implementation “is a necessary but not sufficient condition for the constitutionality of these cuts.”

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A child can tell that this is nonsense:

Growth predicted at “..2.1% this year and 2.5% in 2018, and continuing at a similar pace until 2060(!)..”. While the demanded budget surplus is 3.5% for the next 5 years. Which guarantees the growth predictions won’t be achieved.

Deal On Greece Is Touch And Go (K.)

A senior eurozone official put on Wednesday the chances of a complete agreement on Greece being reached at this Monday’s Eurogroup meeting at 50%, while many issues remain open and the negotiation battle at this stage is mainly between Berlin and the IMF. The official also reiterated that there will be no tranche disbursement without the IMF agreeing to participate in the Greek program. There are three scenarios on the negotiating table, according to two eurozone officials who took part in last Monday’s Euro Working Group. All three provide for the primary budget surplus to remain at 3.5% of GDP until 2022, showing that this is not negotiable anymore.

The main obstacle to an agreement among Greece’s creditors is that they disagree on the rate of Greek growth in the coming years, a key parameter for the extent of Greek debt easing. The first scenario provides for growth to match the European Commission’s estimates for 2.1% this year and 2.5% in 2018, and continuing at a similar pace until 2060. If there is a primary surplus of 2-2.6% of GDP, then the measures agreed last May will suffice to make the Greek debt sustainable. According to the second scenario, growth will be below even the IMF forecast and will not exceed 1% per year in the long term. That should take the primary surplus down to 1.5% of GDP from 2023, and more measures will be needed to render the debt sustainable. The third scenario is similar to the second, but the growth forecast is slightly higher, at 1.25%.

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Forget about hoping Brussels is looking for a solution NOT located in southern Libya. Just imagine what you would do if this was your child.

Traffickers, Smugglers Exploit Record Rise In Unaccompanied Child Refugees (G.)

A record increase in the number of refugee and migrant children travelling alone has left many exposed to sexual abuse and exploitation at the hands of traffickers and opportunists. At least 300,000 unaccompanied and separated children were recorded in 80 countries in 2015-16, a rise of almost 500% on the 66,000 documented in 2010-2011, according to a Unicef report published on Wednesday. The central Mediterranean passage is one of several migration routes identified as particularly dangerous for children. More than 75% of the 1,600 14- to 17-year-olds who arrived in Italy reported being held against their will or forced to work.

“One child moving alone is one too many and yet, today, there are a staggering number of children doing just that – we as adults are failing to protect them,” said Unicef’s deputy executive director, Justin Forsyth. “Ruthless smugglers and traffickers are exploiting their vulnerability for personal gain, helping children to cross borders, only to sell them into slavery and forced prostitution. It is unconscionable that we are not adequately defending children from these predators.” The sheer number of migrant and refugee arrivals has left states struggling to cope, with children often falling through the cracks.

Border closures, aggressive pushback measures, overcrowded shelters, makeshift camps and heavy-handed authorities have only served to exacerbate the risk of child exploitation, encouraging unaccompanied minors to take highly dangerous routes in a desperate bid to reach their destinations. One 17-year-old girl from Nigeria told Unicef that she was trapped in Libya for three months and sexually assaulted by her smuggler-turned-trafficker as she attempted to travel alone to Italy. “Everything [he] said – that we would be treated well and that we would be safe – it was all wrong. It was a lie,” she said of the man who offered to help her. “He said to me if I didn’t sleep with him, he would not bring me to Europe. He raped me.”

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May 092017
 
 May 9, 2017  Posted by at 8:13 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait 1938

 

Macron Is Not The Solution To Europe’s Top Existential Threat (CNBC)
“Europe’s Not Out Of The Woods With Macron Win” (ZH)
Commodities Send Ominous Signal On Global Economy (BBG)
Traders Are Fleeing the Options Market (WSJ)
The Debt-Bubble Landmine Obama Left For Trump (NYP)
Canadians Buy Record Number of New Cars With Record Amount of Financing (BD)
Majority of Consumers Now See Canadian Home Prices Rising (BBG)
Over 50% of Canadians $200 or Less Away From Not Being Able To Pay Bills (Gl.)
Quebec’s Finance Minister: Don’t Dawdle on NAFTA Overhaul (BBG)
Chinese Stocks Head For Longest Losing Streak In 3 Years (BBG)
How China Keeps Its Financial System From Collapsing (ZH)
Parts of Asia Will Grow Old Before Getting Rich, IMF Warns (BBG)
Italy Adds Bum Note To Macron’s Ode To Euro Zone Joy (R.)
The Rock-Star Appeal of Modern Monetary Theory (Nation)
To Bury Nuclear Waste, Dig Deeper Than Yucca Mountain (BBG)
Dangerous Times in the Aegean and Cyprus (K.)
New Refugee Center Planned On Chios As Tensions Simmer (K.)
Nearly 200 Missing, 11 Dead As Migrant Boats Sink Off Libya (AFP)
Hundreds Of Migrants Feared Dead In Mediterranean Over Weekend (R.)

 

 

Macron wants Eurobonds, anathema to Germany et al because they would allegedly “sharply reduce each euro zone government’s motivation to pursue sensible fiscal policies..”.

Many in Brussels want a banking union, anathema to quite a few countries. There is no democratic way that leads to such a union. It’s like handing the EU the keys to your country.

Macron Is Not The Solution To Europe’s Top Existential Threat (CNBC)

The future of the euro zone is dependent on a common commitment to solid government finances, says Commerzbank’s chief economist, and France’s new president-elect does not bring the bloc any closer to achieving this reality. The pro-EU and centrist candidate, Emmanuel Macron, stormed to victory against his far-right political rival, Marine Le Pen, on Sunday and is now poised to become France’s youngest ever premier. However, the former economy minister is in favor of joint bond issuance which, according to Jörg Krämer, would sharply reduce each euro zone government’s motivation to pursue sensible fiscal policies. “The EU can’t keep feeling its way from one election to the next. At some point an election might go the wrong way – and if that happens in a large country, the survival of the monetary union would be in jeopardy,” Krämer said in a note.

Commerzbank’s chief economist also warned the repeated near misses of anti-EU political leaders in several European elections in recent years would not last forever and suggested the monetary union’s survival now rests on the bloc’s ability to create a genuine banking union. “To lay these existential risks to rest, the euro zone at long last needs a common commitment to solid government finances. The monetary union’s long-term survival depends on it. But new French President Macron won’t bring this any closer to reality,” he added. Meanwhile, just one day after the pro-business and market-friendly candidate Macron secured his country’s presidential election, EC President Juncker publically lambasted high state spending in the euro zone’s second largest economy. “With France, we have a particular problem … The French spend too much money and they spend too much in the wrong places. This will not work over time,” Reuters reported him as saying in Berlin on Monday.

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Le Pen would have lost against anyone. But tons of Europeans still don’t like what the EU has become. All it takes is a candidate somewhere who’s not Le Pen or Wilders.

“Europe’s Not Out Of The Woods With Macron Win” (ZH)

It appears the chairmen of UBS have plenty to say on Europe.Following former UBS chairman Peter Kurer’s comments that “to the elites, the EU is a means to get rich quickly and export their problems,” UBS current chairman Axel Weber has warned bankers that Europe is not “out of the woods” from its political risks even after Emmanuel Macron’s reassuring victory in the French presidential election. Peter Kurer recently remarked on the end of the Euro…

“Following an unfortunate combination of wrong decisions at the top and the uncontrolled flourishing of a self-serving bureaucracy, the union has moved in a direction where it has become a prisoner of its own constructed reality. The EU was a great idea but it has been ridden to death. Back in 1992, almost half of Swiss voted to join the European Economic Area, including the traveller. If there was a vote today on joining the union, the latest polls say just 15% would vote yes. The EU had its chances. It squandered them, and maybe it will come to an end in the foreseeable future under the weight of its burdens: La messa e finita, andate in pace.”

And over the weekend speaking in Tokyo, as the FT reports, UBS Chairman Axel Weber said that political risk in Europe remained “actually quite high” even though “we’ve seen the centre hold in France” with Macron’s victory over far-right candidate Marine Le Pen, and even though all the signs were that the centre will also hold in the upcoming German location elections.

“That doesn’t mean Europe is out of the woods,” he told the International Institute of Finance’s spring meeting. “There is still Italy where it is very unclear that the centre will hold. And there is still Greece.” He continued: “Where you find some bright side….there are (also) some downside risks that are not really priced into the market but could derail (Europe).” “Brexit is a time bomb… and the countdown is on. It will be two years from now,” Mr Weber said. He added that “if the British really do leave the customs union and single market there could be a lot of volatility which could impact on the global economy”.

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How long can bubbles hold?

Commodities Send Ominous Signal On Global Economy (BBG)

By almost any measure last week was a bad one for commodities, as practically every part of the market lost value. West Texas Intermediate crude oil fell under $44 per barrel, Brent crude broke below $50 per barrel and copper tested $5,500 per metric ton. In China, coal and iron ore tumbled. Gold, the supposed ultimate haven, dropped to almost $1,225 per ounce. Last week’s purge capped a steady decline in prices since mid-April and, more broadly, since February based on the Bloomberg Commodities Index. Although much of the blame is being tied to rather high and growing inventory levels, a lack of real demand shouldn’t be discounted. The market is experiencing something greater than a technical correction or speculative positioning. It is signaling something ominous about the state of the global economy.

So while Friday saw a small recovery, it appears to be merely a “dead cat bounce” rather than a sign of any market bottom. Traders have reason to question global economic strength. They are concerned about fresh signs of an over-extended Chinese economy and an ongoing slowdown in developed markets faced with aging demographics. In the U.S., they question President Donald Trump’s infrastructure promises along with his administration’s relaxed standards in the mining and drilling sectors, whose commodities we already have too much of. OPEC’s output cuts have failed to do enough to stymie the global oil glut as U.S. drillers add to their rig counts. Such negative sentiment has carried through in the equity markets, particularly among commodity-producing nations such as Australia, Canada and Brazil.

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A liquidity problem. And a confidence one.

Traders Are Fleeing the Options Market (WSJ)

Falling volumes and spiraling costs are pushing trading firms out of U.S. options, raising concerns about fragility in a market that investors rely on to protect portfolios. Trading has dwindled in most areas of the market, and investors and traders are grappling with increasing fragmentation. Liquidity, the crucial ability to do trades without significantly moving prices, has deteriorated, according to interviews with market participants and data reviewed by The Wall Street Journal. Options on key indexes, exchange-traded funds and high-volume stocks dominate trading. Meanwhile, there is less activity in the rest of the listed U.S. options world. The stresses prompted at least six prominent options market makers to exit from the business since 2012. Market makers are firms willing to both buy and sell using automated programs.

Thomas Peterffy, a pioneer of electronic options trading, said in March that his firm, Interactive Brokers, would pull the plug on options market making. KCG Holdings announced its exit from retail options market making last year, while UBS and Credit Suisse have also left automated options market making. JP Morgan and Bank of America made similar decisions in 2014, according to people familiar with the matter. “Most market makers congregate in the highly traded products,” Mr. Peterffy said in an interview. “It’s difficult for a market maker to maintain hundreds of thousands of bids and offers all the time.” It is hard to pinpoint what triggered the trader exodus, but industry experts say as firms leave, liquidity gets further drained, which spurs more market makers to retrench.

The dangerous feedback loop could sap appetite for options, key derivative securities that investors use to manage risk in their portfolios. “We could ill afford to lose any more market makers at this junction,” said Alan Grigoletto, who previously worked at the Boston Options Exchange, and now runs Grigoletto Consulting while trading options in his retirement account. Data show the liquidity bifurcation. Index and ETF options volume rose in April by 28% and 4%, respectively, data from the Options Clearing Corporation show. Meanwhile, total equity options volume shrank by 10% from the prior year.

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The car loans issue keeps growing.

The Debt-Bubble Landmine Obama Left For Trump (NYP)

President Trump came in for much jeering when he told reporters he had “inherited a mess” from President Barack Obama. On the economy, though, Obama did indeed leave behind a hidden mess: a seemingly healthy jobs market dependent on cheap debt. When this debt bubble bursts, just as the last one did, the manufacturing jobs Trump wants to save will be in even greater peril. [..] who is borrowing for used cars – and at much higher interest rates – is a huge concern. People with not-great credit scores have always made up about a fifth of the auto-loan market. But the percentage of people borrowing even though they have really bad credit scores has surged, reports Bloomberg. It’s now a third of the subprime auto-bond market, up from just 5% seven years ago. A Standard & Poor’s analysis of just one big subprime auto bond tells the story.

Last week, a company called DriveTime, which sells used cars in 26 states to people with bad credit, was in the market to issue $442 million worth of bonds backed by auto loans. The average credit score of borrowers was 538 — indicating a history of serious default. And, as S&P notes, “today’s subprime customer appears to be . . . weaker . . . than that of several years ago,” because people who defaulted right after the housing crash at least had the excuse that they were caught up in a global bubble. These loans are for people who have no choice but to borrow to buy a car, and no bargaining power on the interest rate they pay: close to 20%. Even though the borrowers pay through the nose, they depend on cheap global credit. With interest rates still near record lows, lenders have to take ever more risk in a low-interest-rate environment to make a little money.

As for that risk: Delinquency rates are rising, with 4.32% of subprime borrowers in general at least 60 days late last year, up from 3.52 two years earlier, says S&P. The bigger risk here isn’t the risk to investors, though. The auto-loan market is still much smaller than the housing market, and the investment world hasn’t created trillions of dollars of derivative securities based on this market (at least not that we know of). And unlike with houses, no one ever expects the value of a car to increase with use. No, this bubble presents a much more direct risk to the economy — and manufacturing jobs. If people with terrible credit can’t borrow an average of nearly $18,000 to buy a used car (what the DriveTime customer pays), the market for used cars collapses. That, in turn, affects the market for new cars. Indeed, the US auto industry has seen sales decline this year, after clocking half a decade of record highs.

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Canadians do the subprime car thing too.

Canadians Buy Record Number of New Cars With Record Amount of Financing (BD)

Canadians aren’t just buying real estate, they’re also treating themselves to new cars. According to a new release from Statistics Canada, sales of new cars reached a record high for February. Great for automobile manufacturers, but not so great for the economy. Debt-fuelled financing makes this more of a warning sign than a boom-time trend. Sales of new motor vehicles across Canada rose to an all-time record for February. The month saw 125,284 sales – a 2.74% increase from the same time last year. The largest segment of sales were seen in Ontario, where 41% of them occurred. This is up slightly from 2016, where Ontario accounted for 39% of sales. Booming real estate prices, and massive numbers for car sales… Ontario better be facing the greatest economy its ever experienced, or it’s in trouble.

Consumers are purchasing more expensive vehicles too. Over $5 billion was spent on new vehicles for the month, bringing the average to $40,100 – up 3.4% from the same time last year. Ontario was below the average for the country, where the average price was $39,400. While prices are lower in Ontario, they’re not exactly budget vehicles either. The uptick in average sale price is due to longer financing terms for buyers. According to the Financial Consumer Agency of Canada (FCAC), Canadians are “increasingly purchasing more car than they can afford,” due to longer financing becoming fashionable. The agency notes that average leases have crept up 2 months, every year since 2010. According to the Bank of Canada (BoC), the average loan was 74 months as of 2015.

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The Canadian debt issue is turning into a total craze.

Majority of Consumers Now See Canadian Home Prices Rising (BBG)

Expectations for Canada’s housing market are heating up, with more than half of respondents in a weekly telephone survey predicting home prices will rise, the first time the measure has topped 50% in records dating back to 2008. The bullishness comes even as a run on deposits at Toronto-based mortgage lender Home Capital leads to heightened scrutiny of a market which policy makers have said is divorced from economic fundamentals. The broad Bloomberg Nanos Canadian Confidence Index fell to 59 in the week ended March 5. Some 50.1% of respondents said they expect local home prices to rise. The figure has climbed for six straight weeks and is higher than the average for the series of 37.1%. Thepercentage of people surveyed in the week ending May 5 who said local home prices will decline in the next six months slid to 10% from 10.7%.

“Consumer sentiment on real estate has gone from hot to hotter,” said Nanos Research Group Chairman Nik Nanos. Housing has led the world’s 10th largest economy over most of this decade as exporters have struggled. The latest burst of housing momentum has led policy makers to question whether it’s being led by supply and demand or by speculation. The Ontario Securities Commission opened hearings into whether Home Capital failed to properly disclose an internal probe into fraudulent mortgage applications, a shakeup in a nation lauded for having the world’s safest banks. The latest Toronto figures also showed prices up 25% in April from a year earlier, still close to the 30% March pace that Ontario Finance Minister Charles Sousa called unsustainable on April 20 when he imposed a foreign buyers tax. Those events haven’t led to more bets on a price decline either, and housing optimists now outnumber pessimists by a factor of five to one.

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So much in debt they can’t pay their bills. Maybe someone should take a look at Canadian inequality, too.

Over 50% of Canadians $200 or Less Away From Not Being Able To Pay Bills (Gl.)

More than half of Canadians are living within $200 per month of not being able to pay all their bills or meet their debt obligations, according to a recent Ipsos survey conducted on behalf of accounting firm MNP. “With such a small amount of wiggle room, any kind of unanticipated hardship, such as a job loss or even a car repair, could send an already struggling family into financial despair,” said Grant Bazian, president of MNP’s personal insolvency practice, which is one of the largest in Canada. For 10% of Canadians, the margin of error when it comes to household finances is even thinner, at $100 or less. But those with anything at all left at the end of the month were in better shape than many: A whopping 31% of respondents said they already don’t make enough to meet all their financial obligations.

Debt is causing Canadians a fair bit of stress, the polling suggests, but few appear to be on track to buff up their monthly financial cushion. Two-thirds of survey takers said they are “less than very confident” about their ability to create an emergency fund. Another hair-raising finding from the survey: Roughly 60% said they don’t have a firm grasp of how interest rates affect debt repayments. The statistic helps explain why many indebted Canadians end up taking on more debt and high-cost loans, said Bazian. “That’s how so many end up in an endless cycle of debt,” he noted. But the data also raises the question of whether Canadians understand the implications of an interest rate hike by the Bank of Canada (BoC). A decision by the BoC to start lifting its key policy rate from historic lows would raise the cost of carrying debt across the country.

The Bank uses interest rates, among other tools, to influence inflation and economic activity. Many economists believe it could start to raise rates in the first half of 2018, as economic growth picks up pace. Although the BoC will probably lift rates gradually and over time, the impact on Canadian wallets will be substantial. For example, as Global News has reported before, a onepercentage point rise in the BoC’s key interest rate would likely push up variable mortgage rates by a similar amount. A variable mortgage rate that’s currently set at 3%, for example, would go up to 4%, which represents a 33% increase in interest payments for the mortgage holder. That’s an extra $83 a month for every $100,000 in outstanding mortgage debt.

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Quebec has strong US trade ties.

Quebec’s Finance Minister: Don’t Dawdle on NAFTA Overhaul (BBG)

Quebec Finance Minister Carlos Leitao has a message for government officials considering a renegotiation of NAFTA: Time is of the essence. “If we are going to renegotiate Nafta, then let’s do it,” Leitao said in an interview Friday at Bloomberg headquarters in New York. “The worst case scenario would be if we spend years talking about renegotiating, but don’t actually do it and it just keeps hanging around and doesn’t get addressed. The longer it drags on, the bigger the real impact on investment.” Canadian Prime Minister Justin Trudeau is facing a lengthy trade battle with the U.S., which also includes calls for a new softwood lumber pact and Donald Trump’s complaints about Canada’s system of protectionist dairy quotas.

It’s all set to drag on as the president has yet to trigger a 90-day notice period to Congress to renegotiate Nafta. The last softwood lumber dispute lasted five years. “The problem with the uncertainty is we don’t know what kind of process we will have,” Leitao said. “Is this going to be along the same lines as the last Nafta negotiations? That was very systematic. There were panels on various issues. It’s that kind of certainty that we would like. The actual nuts and bolts will take time.” Leitao has good reason to be wary of protracted trade battles, with his most recent budget already predicting Quebec’s economic growth will lag behind the Canadian average. Output in Quebec will grow 1.7% this year before slowing to 1.6% in 2018, budget forecasts show. That’s less than the 2.2% and 2.3% forecast for all of Canada over the same period.

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Deleveraging.

Chinese Stocks Head For Longest Losing Streak In 3 Years (BBG)

Chinese stocks pared declines, with technical indicators signaling that a five-day slide may have been overdone. The Shanghai Composite Index was little changed at 3,077.78 as of 1:07 p.m. local time, after declining as much as 0.7% earlier in the day. Consumer shares were the worst performers on the CSI 300 gauge, while telecom companies led gains. The Hang Seng Index climbed 0.4%. An intensifying campaign to reduce leverage in the financial system pushed the Shanghai benchmark to a 2.4% loss in the five days through Monday. This drove the gauge’s relative strength index to below 30, a level that suggests to some traders that an asset is oversold.

The nation’s banking regulator said Monday that lenders should carry out collateral pressure tests at least once a year, while the Securities Times reported that some rural banks had suspended interbank businesses temporarily while officials conduct spot checks. “Some stocks appeared to be very cheap at current levels, and this triggered some bargain hunting,” said Banny Lam, head of research at CEB in Hong Kong. State-owned enterprises that dominate old growth industries, such as banks and commodity producers, have been among the hardest-hit by the deleveraging drive, while new-economy shares remain in favor among overseas investors. That’s led to a wide gap between the nation’s two main offshore gauges: the Hang Seng China Enterprises Index and the MSCI China Index.

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Much collateral doesn’t actually exist. Wealth management products, shadow banks, it’s all not much more than a mirage. It takes faith.

How China Keeps Its Financial System From Collapsing (ZH)

With “risk” in most of the developed world seemingly a long forgotten four-letter word, as seen by today’s plunge in the VIX to a level not seen in 34 years, traders hoping for some “risk event” have been confined to the recent turmoil in China, where overnight not only did trade data disappoint, with both imports and exports missing, but bond yields jumped to the highest level since 2015, dragging stocks lower even as the local commodity crash slammed iron ore and copper to new YTD lows.

While largely a “controlled” tightening, meant to contain China’s out-of-control shadow banking system, the recent gyrations in Chinese capital markets are starting to have a profound impact on local funding, resulting in a collapse in new bond issuance, and according to FT calculations, in April the number of aborted issues rose to 154, up from 94 in March, 32 in February and 31 in January.

As DB added, “local bond markets are practically shut for corporates. In fact, YTD issuance is down 40%+ yoy and net issuance has been negative in three out of the first four months this year. A number of issuers are being forced to cancel bond issuances (over RMB100 billion YTD) and there were reports (Bloomberg) of even CDB halting issuance (though subsequently denied). Some AA corporates are now issuing at north of 7%.” These signs of mounting stress in China’s $9.3 trillion bond market come less than a month after the country’s banking regulator, Guo Shuqing, was quoted as supporting a campaign to sort out chaotic practices, and threatening to resign if the banking system became “a complete mess”.

[..] whether or not China keels over and has a hard (or worse) landing, will depend on the PBOC; when (not if) the central bank gets involved, will depend on how soon China’s banks and various CD-funded financial institutions run out of collateral (whether it exists or not) to sell, such as iron ore, copper, precious metals, bonds and even stocks. This will hardly come as a surprise. As we showed last month, the only reason the Chinese banking system hasn’t imploded, is due to nearly CNY 10 trillion in central bank liquidity support for the local banks, just under 100% of China’s GDP.

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Europe too.

Parts of Asia Will Grow Old Before Getting Rich, IMF Warns (BBG)

Asia’s rapidly aging population means the region is shifting from being the biggest contributor to the global workforce to subtracting hundreds of millions of people from it, according to the International Monetary Fund. The reversal of the so-called “demographic dividend” will drag on global growth and also that in Asia, the world’s fastest growing region, the IMF warned in its annual outlook for the area. The population growth rate will fall to zero for Asia by 2050 – it’s already negative in Japan – and the share of the population who are working-age has already hit its peak, the IMF estimates. That means the ratio of the population aged 65 and older will be almost two and a half times the current level by 2050, and even higher in East Asia.

“The speed of aging is especially remarkable compared to the historical experience in Europe and the United States,” the IMF said. Per capita income in Asia relative to the U.S. remains at much lower levels than those achieved by mature advanced economies in the past. “Countries in Asia will have less time to adapt policies to a more aged society than many advanced economies had,” the fund wrote. “As such, parts of Asia risk becoming old before becoming rich.” For economic growth, the aging process could erode up to one percentage point from annual output over the next three decades in Japan, and between 0.5-0.75 percentage point in China, Hong Kong, South Korea and Thailand.

While some bright spots remain, such as India and Indonesia, demographics could subtract 0.1 of a percentage point from annual global growth over the next three decades, the IMF estimates. It also means Asia is at risk of falling into secular stagnation if an older population leads to excessive savings and low investment renders monetary policy ineffective. The demographic shift will also likely keep downward pressure on real interest rates and asset returns for most major countries in Asia, the IMF said. “Adapting to aging could be especially challenging for Asia, as populations living at relatively low per capita income levels in many parts of the region are rapidly becoming old,” the IMF said.

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It’s time to come clean on how bad Italy is really doing.

Italy Adds Bum Note To Macron’s Ode To Euro Zone Joy (R.)

Italy is adding a bum note to Emmanuel Macron’s ode to joy. While it’s encouraging that a Europhile will take the French presidency after Sunday’s vote, attention can now turn to Europe’s other crisis-in-waiting. Elections are coming in Italy, and there are more of the ingredients for a populist shock than in France. The economy has fared much worse since the creation of the euro zone, with growth averaging zero since 2001, according to the IMF. GDP per capita has fallen in that time. The IMF expects the unemployment rate to reach 11.7% this year, 2 percentage points higher than in France. Anti-EU forces are also spread widely across Italy’s messy political landscape. Stagnation has fuelled support for the 5-Star Movement, which could lead Italy out of the euro zone and currently polls just below 30%.

Mainstream parties are shaky. The left fragmented after former prime minister Matteo Renzi lost his referendum on constitutional reform in December. The right is an awkward alliance between ageing former premier Silvio Berlusconi and more radical anti-EU parties, like the Lega Nord. The risk is that 5-Star forms a coalition with the Lega after elections that must take place by May next year. The economy is picking up, but tighter monetary policy, as the European Central Bank reins in bond buying, could strangle the recovery, as could an overly stern fiscal policy. Italy needs to cut spending or increase taxes by 2percentage points to meet European targets through 2019. Job losses from the restructuring of banks and bankrupt national airline Alitalia could become a lightning rod for anti-EU sentiment.

Europe can help. Italy is likely to miss its fiscal targets anyway, but loosening bloc-wide budget rules to encourage investment and spread out cuts over a long period would cement the recovery. A strong France, aided by Macron’s victory, might persuade Germany to spend more, and give other countries freer rein. However, even if a political shock is avoided, the next election may produce a weak government with no mandate for taking tough decisions to boost growth. Italy could be bringing discord to the region for years.

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MMT must go mainstream.

The Rock-Star Appeal of Modern Monetary Theory (Nation)

To a layperson, MMT can seem dizzyingly complex, but at its core is the belief that most of us have the economy backward. Conventional wisdom holds that the government taxes individuals and companies in order to fund its own spending. But the government—which is ultimately the source of all dollars, taxed or untaxed—pays or spends first and taxes later. When it funds programs, it literally spends money into existence, injecting cash into the economy. Taxes exist in order to control inflation by reducing the money supply, and to ensure that dollars, as the only currency accepted for tax payments, remain in demand.

It follows that currency-issuing governments could (and, depending on how you lean politically, should) spend as much as they need to in order to guarantee full employment and other social goods. MMT’s adherents like to point out that the federal government never “runs out” of money to fund the military, but routinely invokes budget constraints to justify defunding social programs. Money, in other words, isn’t a scarce commodity like silver or gold. “To people who’ve worked in financial markets, who work at the Fed, this isn’t controversial at all,” says Galbraith, who, while not an adherent, can certainly be described as “MMT-friendly.”

The decisions about how to issue, lend, and spend money come down to politics, values, and convention, whether the goal is reducing inequality or boosting entrepreneurship. Inflation, MMT’s proponents contend, can be controlled through taxation, and only becomes a problem at full employment—and we’re a long way off from that, particularly if we include people who have given up looking for jobs or aren’t working as much as they’d like to among the officially “unemployed.” The point is that, once you shake off notions of artificial scarcity, MMT’s possibilities are endless. The state can guarantee a job to anyone who wants one, lowering unemployment and competing with the private sector for workers, raising standards and wages across the board.

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No matter how deep you dig, you can’t guarantee safety for a million years. That’s what’s halted Yucca Mountain. The Bloomberg editors don’t understand the issue either.

To Bury Nuclear Waste, Dig Deeper Than Yucca Mountain (BBG)

Energy Secretary Rick Perry is right to say the U.S. needs a long-term solution to its massive nuclear waste problem. It also makes sense for Perry and some members of Congress to see Yucca Mountain as part of that solution – though many Nevadans promise to make sure it won’t be. But even if Yucca can survive the political fight, it can’t be the only option for disposing of America’s spent nuclear fuel. More than 75,000 metric tons of the stuff are cooling in pools and casks at dozens of power-plant sites around the country. That’s already too much to fit in Yucca Mountain, and the total grows by more than 2,000 tons a year. Other strategies are needed, ideally ones that are less politically radioactive. Consider, for instance, the idea of sinking the waste into boreholes that reach three miles below ground – 15 times as deep as the proposed chambers inside Yucca. Such shafts could be drilled in states that, unlike Nevada, benefit from the use of clean, reliable nuclear power.

Boring into the Earth’s deep rock layers could provide the kind of bury-it-and-forget-it underground disposal necessary for material that will remain dangerous for hundreds of millennia. Local opposition can still be expected; in North and South Dakota, residents have shouted down some plans to dig test holes. That’s why a so-called consent-based strategy, identifying locations with both the appropriate geology and an agreeable population, is necessary. If hosting a waste site means more funding for local public works and services, more communities might be willing to accept one. (This proved to be the case in Carlsbad, New Mexico, home to a storage place for low-level waste from nuclear weapons.) A familiarity with nuclear power may also encourage acceptance, perhaps because there is a nuclear plant in the area employing people and providing power.

The same approach could also be used to locate six or seven centers where waste from several nuclear plants could be stored while it awaits burial. Such containment facilities could also include research centers – mini national laboratories where scientists could work out new ways of reprocessing fuel and perhaps conduct demonstration projects for reactors designed to use safer fuels. The one thing the U.S. should not do is continue to neglect the growing quantities of nuclear waste. Over the past few decades, electricity ratepayers have contributed more than $34 billion to a national fund to pay for a geologic disposal site. And because none yet exists, taxpayers are forking over billions more to enable nuclear-plant operators to manage interim storage. The political barriers to solving this problem may be high, but further delay – and an undue fixation on Yucca Mountain – won’t make them any easier to overcome.

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Turkey will provoke Greece at some point, and US and Europe had better prevent that from happening.

Dangerous Times in the Aegean and Cyprus (K.)

The concept of gray zones (the claim that the sovereignty of a number of islands and islets in the Aegean is undetermined) was a novel idea that Turkey came up with 20 years ago. At some point, Ankara reached the point of including the Greek island of Gavdos in its gray zones list. Whenever Athens made an official request regarding the islands or rocky outcrops that Turkey had on its list, the answer was always very vague: “Anything that is not clearly included the bilateral agreements that set out Greece’s borders with other countries.” At first, many people thought this was a bargaining chip that Ankara would trade as part of a grand bargain. They were wrong. The failure to settle differences between Greece and Turkey gave Ankara the opportunity to add more issues to the agenda.

Over time, these have become permanent and ever-expanding. Currently, Turkey considers significant parts of the Aegean to be gray zones. This includes islands that have been inhabited for decades. It is questioning Greek sovereignty through its actions, not just its words, by the frequent presence of naval vessels in Greek waters and overflights by fighter jets. Over the last few months, it has being doing this more systematically and openly. Greece’s approach has also changed. The doctrine that existed in the wake of the Imia crisis in 1996, when the two countries almost went to war, was based around not building up tension following various incidents and maintaining a low profile.

[..] A dangerous situation is also playing out in Cyprus. The Turks are trying to impose the concept of gray zones there as well. July (when a new round of drilling for hydrocarbons is due to begin off Cyprus) promises to be a difficult month. Ankara will attempt before then to intimidate the companies that plan to start drilling or try to obstruct them if they are not scared off by threats.

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Prison camps are no solution.

New Refugee Center Planned On Chios As Tensions Simmer (K.)

The exact site for the creation of a new so-called pre-departure camp for migrants and refugees on the island of Chios will be determined by May 20, authorities said on Monday. The new camp will come as tensions at overcrowded reception centers on the eastern Aegean island continue to simmer, with almost daily clashes between stranded migrants of different ethnicities. “The experience of Lesvos and Kos where such centers have been created is positive,” said Lieutenant General Zacharoula Tsirigoti of the Greek Police in a press briefing Monday on Chios. Pre-departure centers are deemed essential as they house refugees and migrants returning to Turkey. Tsirigoti added that building a new center on the island is a “one-way street” as locals – many of whom have campaigned for the immediate removal of all migrants and refugees from Chios – say the situation has reached breaking point and that the large police force on the island has been unable to cope.

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The season is just starting: “..the trend points to around 250,000 people arriving over the course of 2017”. There is no place for these people in Italy and Greece.

Nearly 200 Missing, 11 Dead As Migrant Boats Sink Off Libya (AFP)

Eleven migrants have died and nearly 200 are missing after two boats sank off the coast of Libya, UN agencies said Monday citing survivors, in the latest such tragedy. The first involved an inflatable craft which left Libya early Friday with 132 people on board, only to start deflating a few hours later, before overturning. Some 50 survivors were picked up by a Danish container ship, the Alexander Maersk, which was alerted to divert by Italian coastguards and dropped them off on Sunday in Pozzallo, southern Sicily. Representatives of the UN High Commissioner for Refugees (UNHCR) and the International Organization for Migration (IOM) were able to meet them on Monday to hear their accounts. Survivors told them that women and children were among those missing.

At the same time, the bodies of 10 women and one child were found Monday on a beach in Zawiya, 50 kilometres (31 miles) west of Tripoli, according to an official for the Libyan Red Crescent. Then on Sunday seven migrants – a woman and six men – were rescued by Libyan fishermen and coastguards off the coast of the Libyan capital. An IOM spokesman who met them said they had set out on a boat with at least 120 people on board, including about 30 women and nine children. In all more than 6,000 migrants were rescued Friday and Saturday in international waters off the coast of Libya and brought to Italy, while several hundred were rescued in Libyan waters and taken back to Libya.

The number of people leaving Libya in the hope of starting a new life in Europe is up nearly 50% this year compared with the opening months of 2016. With most departures coming in the warm summer months, the trend points to around 250,000 people arriving over the course of 2017. Some 500,000 migrants were registered in Italy in the three years spanning 2014-16.

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Europe’s reputation is tarnished for decades. But everyone thinks they can deflect responsibility. Time for skin in the game.

Hundreds Of Migrants Feared Dead In Mediterranean Over Weekend (R.)

More than 200 migrants are feared to have died in the Mediterranean over the weekend, according to testimony from survivors, and several bodies, including that of an infant, have washed up on a Libyan beach. About 7,500 people have been rescued off the coast of Libya since Thursday, the Italian and Libyan coastguards said. Two groups of survivors told the organizations that hundreds drowned when their rubber boats began to deflate before rescuers arrived. More than 60 are feared dead and three bodies were recovered on Saturday, survivors brought to Sicily on Sunday told Italian coastguards. The boat left Libya carrying about 120, they said. There was some discrepancy in the numbers. Based on its interviews with some of the survivors in Pozzallo, Italy, the U.N. refugee agency estimated the number of dead at more than 80.

Separately, Libya’s coastguard picked up seven survivors over the weekend who said they had been on a boat packed with 170 migrants. Aid agency International Medical Corps, which gave medical care to the survivors, also confirmed their account. “We rescued on Sunday seven illegal migrants – six men and a woman,” said Omar Koko, a coastguard commander in the western city of Zawiya. “According to these survivors, there were 170 on board the boat, which sank because of overloading.” Among those missing were more than 30 women and nine children, Koko said. Eleven bodies washed up on the shore west of Zawiya, said Mohanad Krima, a spokesman for the Red Crescent in Zawiya. “All the bodies are of female victims and there is a girl of less than one year old,” he said.

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May 082017
 
 May 8, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , ,  1 Response »
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RCA TV test pattern 1939

 

Macron Banks On De Gaulle’s ‘Majority Amplifier’ To Govern (R.)
In France, The Run Of Macron’s Life Starts Monday (Pol.)
Euro Gives Up Gains As Investors Look To Post-Election France (G.)
US Economy Can’t Even Match the “Sclerotic Statism” of France (CEPR)
Expect Dramatically Lower Stock Market Returns Over Next Decade (CNBC)
UK Consumer Spending Weakens With Sharp Slowdown in April (BBG)
Brexit Boom Gives Britain More Billionaires, Inequality Than Ever (G.)
China Tycoons Are Setting Up Shop In The US (BBG)
Hedge Funds Bail Just Before OPEC-Driven Oil Rally Vanishes (BBG)
Warning For Boomers: Your Gen X Kids Are Coming Back Home – For Good (MW)
Australia To Hold New Inquiry Into ‘Big Four’ Banks (R.)
How Zombie Companies Stop Productivity Growth (BBG)
German Army To Search All Barracks After Nazi Memorabilia Found (R.)
Greek PM Tsipras Rushes To Get Bailout Deal To Parliament With Eye On QE (K.)
1 Million Child Refugees Flee South Sudan’s Civil War (BBG)
Growing Numbers of Refugees In Northern Syria in Urgent Need of Aid (Kom)

 

 

Anyone would have won against Le Pen.

Macron Banks On De Gaulle’s ‘Majority Amplifier’ To Govern (R.)

Unknown just three years ago, and with a party only 12 months old, Emmanuel Macron has seized the presidency against all the odds. His challenge now is to govern. To do that he must build a parliamentary majority that supports his election pledges in June legislative elections, when France’s two established parties will put their huge machines to work. Macron has at least one thing in his favor: the “majority amplifier” effect of an electoral system designed by post-war leader Charles de Gaulle specifically to maximize presidential independence from parliament. Last week, the first opinion survey for the legislative elections showed Macron’s new movement “En Marche!” could win between 249 and 286 mainland France seats in the lower house. Even a figure at the bottom of that range would be a good outcome for him.

He only needs 289 for an absolute majority, and the poll excluded 42 seats in Corsica and overseas. It foresaw centrist and conservative parties winning around 200-210 mainland seats, the far-right National Front 15-25 and the Socialists 28-43. “In the lowest-case scenario, En Marche would still be the largest political grouping, which would be enough to try to constitute a majority. The question would then be how and with whom,” said OpinionWay’s Bruno Jeanbart, who directed the poll. En Marche is only a year old and has never fielded candidates before. Only 14 have been named so far, and at first glance a majority looks unlikely. But that reckons without de Gaulle’s amplifier – known as the “fait majoritaire” by French political scientists. [..] The last legislative vote in 2012 also showed the “fait majoritaire” in action.

Socialist Francois Hollande garnered less than 30% in the first rounds of both the presidentials and the legislatives, yet came away with over 40% of the second-round legislative vote and, with help from 17 Green party MPs, governed with a comfortable majority. “Macron can totally have an extremely solid majority of at least 350 MPs,” said Xavier Chinaud, an electoral expert. He added that to reach that number, the president would have to employ tactics like poaching popular MPs from other parties. The old parties will put up a fight, especially the conservative Republicans [..] Now led by Francois Baroin, they hope for enough seats to force Macron into France’s fourth “cohabitation” since 1958. Cohabitation does not have to mean paralysis, but rather that the prime minister and his camp in parliament have the upper hand over the president.

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“En Marche doesn’t have the money to finance a full-blown parliamentary run. It must ask its candidates to invest not only their time but also their money in the upcoming blitz campaign.”

In France, The Run Of Macron’s Life Starts Monday (Pol.)

Winning the presidency now looks like the easy bit. If Emmanuel Macron makes his way to the Élysée Palace, as expected, in the second round of France’s presidential election Sunday, another bruising political battle is looming. To be able to govern and not be sidelined by a hostile parliament, Macron’s nascent political movement En Marche will have to cobble together a majority in the National Assembly in an election beginning on June 11. And unlike in the second round of the presidential ballot — in which parties from across the political spectrum have urged their supporters to vote for him over his far-right opponent Marine Le Pen — Macron’s rivals will be devoting all their energies to defeating him.

The 39-year-old former economy minister will be counting on his army of 250,000 En Marche volunteers, and a crew made up mostly of political novices. And while Macron hopes that a victory in the presidential election will draw others to his banner, for a movement that was launched a little over a year ago, winning control of parliament looks like a tall order. The stakes are high. If Macron can’t clinch a majority, he won’t be able to appoint a prime minister of his liking. He’ll spend his term largely as a figurehead, his dreams of reforming France all but sunk. Macron needs 289 deputies to be ensured of an absolute majority in the lower house of parliament. So far, En Marche, the movement he still refuses to call a party, has endorsed 14.

True to form, Macron exudes a sense of confidence that the momentum of his election will carry over to the parliamentary polls, allowing him to clinch a majority just six weeks later. This may not be out of reach. A survey conducted this week by OpinionWay, although preliminary, indicated that En Marche could well obtain more than half the seats in the National Assembly. By weaving in electoral results from past elections with a recent poll, OpinionWay estimates that the next Parliament would be dominated by En Marche and the conservative Républicains party. The ruling Socialist Party would be decimated, and Le Pen’s National Front would obtain 25 MPs at most – due to France’s electoral system.

Sill, obstacles abound. En Marche will be facing an energized right. Both the mainstream center-right Républicains party and Le Pen’s National Front will emerge from the presidential election feeling that Macron has robbed them of a victory they at some point considered theirs. François Fillon’s failed campaign has left deep wounds in the Républicains, but one way to try to heal them could be to make Macron their common target in June. [..] En Marche doesn’t have the money to finance a full-blown parliamentary run. It must ask its candidates to invest not only their time but also their money in the upcoming blitz campaign. Political parties in France are provided with public funding according to their performance in previous elections. En Marche, founded a little over a year ago, has never put up a candidate for office before.

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Not THAT much trust perhaps.

Euro Gives Up Gains As Investors Look To Post-Election France (G.)

The euro rose to a six-month high in the wake of Emmanuel Macron’s convincing victory in the French election but the upside for the single currency could be short-lived, analysts warned. In Asian trading on Monday, the euro rose as high as $1.1024 , its highest since 9 November, and also jumped to a one-year high of 124.58 yen against its Japanese counterpart. But it had slipped almost 0.3% to $1.096 against the dollar by 5.30am GMT and lost a similar amount to the yen with traders remarking that gains had already been largely priced in thanks to Macron’s strong showing in the first round of voting two weeks ago. “The market already priced in the victory of Macron,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.

“We saw some additional rise of the euro this morning, but considering the difficulty for Macron’s party to get a majority in the national assembly election, he may not bring higher growth.” Looking at positioning in the euro, he said, “the market has squared its short positions, but there are no fresh reasons to take long positions, as there will likely be no new positive developments, and limited scope for upside for the euro”. The muted analysis was partly based on an acknowledgment of the problems facing Macron, a 39-year-old former banker who has never held elected office. He was economy minister under outgoing president François Hollande but failed to turn around the fortunes of the beleaguered government. He has pledged to reform the country’s rigid labour laws – long seen by pro-market economists as a hindrance to growth – but such change was beyond the Hollande administration, despite a lengthy struggle.

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Reality check.

US Economy Can’t Even Match the “Sclerotic Statism” of France (CEPR)

The Washington Post has long pushed the view that a dollar (or euro) that is in the pocket of a middle class person is a dollar that should be in the pockets of the rich. (They are okay with crumbs for the poor.) In keeping with this position, in its lead editorial today the Post complained about the “sclerotic statism” of the French economy. It then called for increasing employment, “through reforms of the labor code, not by protectionism or restriction of immigration.” It is worth bringing a little bit of data to the fact free zone of the Washington Post opinion pages. France actually has consistently had a higher employment rate for its prime age workers (ages 25 to 54) than the United States.

As can be seen, the employment rate for prime age workers in France was roughly 2 percentage points higher in 2003. The gap expanded to almost 7 percentage points following the downturn, but it has in more recent years narrowed again to just under 2 percentage points. France does have much lower employment rates among younger and older workers than the United States, but this is due to policy choices. College is largely free in France and students get stipends from the government. Therefore many fewer young people work. France also makes it much easier for people to retire in their early sixties than in the United States, with largely free health care and earlier pensions. The merits of these policies can be debated, but they are not evidence of a sclerotic economy.

It is also not clear that the Washington Post’s desire to weaken protections for workers (euphemistically described as “reforms of the labor code”) will have a significant effect in reducing unemployment or raising employment. Extensive research has shown there is little relationship between worker protections and employment. It is also worth noting that the Post denounced protectionism in this editorial, but it is fine with protectionism in the form of ever longer and stronger copyright and patent protection, which benefit people it likes.

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Expect losses.

Expect Dramatically Lower Stock Market Returns Over Next Decade (CNBC)

Enjoy the stock indexes riding at record highs for now, but get ready for much stingier markets in the years to come. That’s the message consistently conveyed these days by investment counselors and finance scholars, who argue that with today’s starting equity valuations and low interest rates, the coming decade should produce dramatically lower returns than the historical average. The leaders of Vanguard Group, overseers of some $4 trillion in client assets, have been advising investors to expect a typical 60% stocks/40% bonds portfolio to deliver two- to- three percentage points less in nominal annual returns than its long-term norm. (Since 1926, such an asset mix has returned better than 8.5% annualized.)

Other forecasts are even less generous. Research Affiliates, a quantitative and “smart beta” fund manager, projects that U.S. stocks might only offer one% a year for the next decade, after inflation. This is based largely on the so-called Shiller P/E, a ratio of the S&P 500 index to its trailing ten-year average earnings, which is now above 29 and higher than any period aside from the run-up to the 1929 and 2000 market peaks. Jeremy Grantham of institutional value manager GMO has, by his admission, been wrong for years in assuming that corporate profit margins and equity valuations would revert to their pre-1990s trend levels. Yet even accounting for some more permanent upward shift in these gauges, he sees real (after inflation) returns of 2-3% a year looking out two decades.

And a simple plot of the market’s forward P/E ratio against subsequent market returns shows that, since 1978, when starting at today’s multiple of around 17.5 forecast earnings, ensuing seven- and 15-year nominal returns (before inflation) have been clustered in the mid- to low-single digits. These forward-return calculations vary in their approach and assumptions, but all are anchored on today’s stock valuations, long-term norms in corporate-profit growth and current interest rates. Stocks, even during the depths of the last bear market, never got dramatically cheap compared to prior cycles and certainly didn’t stay inexpensive for very long. And with risk-free 10-year government debt yielding a skimpy 2.3% in the U.S. and far less elsewhere, all other financial assets have repriced for skimpier future returns as well.

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The consumer is toast.

UK Consumer Spending Weakens With Sharp Slowdown in April (BBG)

U.K. consumer-spending growth slowed in April and is forecast to remain weak in the coming months, according to a report from Visa. Its index showed spending rose an annual 0.5% in April, down from 1% in March and marking one of the slowest rates of growth in the past three years. Weaker household demand is also taking a toll on retailers. A separate report from the Institute for Chartered Accountants in England and Wales showed while there was a jump in business confidence this quarter, retailing was the laggard among nine sectors covered. “The trend of relatively modest expenditure growth is likely to extend in to the coming months, as consumers are squeezed by both rising living costs and relatively lackluster wage growth,” said Annabel Fiddes, an economist at IHS Markit, which compiles the consumer index.

Inflation was at 2.3% last month and is forecast to keep accelerating through this year, outpacing wage increases and leaving workers facing a drop in real incomes. The Bank of England may raise its forecast for consumer-price growth this week, which could indicate an even bigger squeeze on households. The overall business sentiment gauge by the ICAEW jumped the highest in almost a year this quarter. Yet despite firms being more confident, the report showed they are still reluctant to make long-term commitments. While Brexit is dominating the agenda in the buildup to the U.K. election on June 8, the institute said all parties must spell out how they will “address the problem of business investment head-on.”

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No wonder consumer spending’s down.

Brexit Boom Gives Britain More Billionaires, Inequality Than Ever (G.)

Britain has more billionaires than ever in what equality campaigners said was a clear sign the UK economy is only working for the few at the top. There are now 134 billionaires based in the UK according to this year’s Sunday Times Rich List, 14 more than the previous highest total, as the super-rich reap the benefits of a “Brexit boom”. Fifteen years ago, there were 21. The annual rich list showed that the wealthiest 1,000 individuals and families in Britain have combined wealth of £658bn, up from £575bn last year, despite fears that the Brexit vote last June would plunge the economy into a fresh turmoil. The Equality Trust said the £83bn increase in wealth among the richest 1,000 people over the past year could pay the energy bills of all UK households for two and a half years and would be enough for the grocery bills for all food bank users for 56 years.

Wanda Wyporska, the executive director of the trust, said that an elite was sitting on mountains of wealth in the fifth largest economy of the world. “The super-rich continue to streak away from the rest of us, while the poorest see their wealth shrink. This is an economy working for the few, not the many,” she said. “Record numbers of people visited food banks last year, millions are locked out of a decent home and two-thirds of children in poverty are in working households. “We know that inequality damages our economy and society, and makes it harder for ordinary people and their children to get on. With the general election fast approaching, our politicians need to decide the sort of country they want to build. One where we can all prosper or one where we’re picking crumbs from the super-rich’s table.”

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China Shadow Banking Assets Estimated at 64.5t Yuan or 87% of GDP: Moody’s.

China Tycoons Are Setting Up Shop In The US (BBG)

When a new hedge fund opened in Mountainside, New Jersey, a leafy suburb that still holds an annual little-league parade, few would have guessed where much of its funding came from: Chinese billionaire Cai Kui. The credit hedge fund, Westfield Investment, was founded by former Goldman Sachs Managing Director Renyuan Gao and managed $139 million as of January. It’s part of a new crop of asset management firms that are expanding China’s reach on Wall Street as money has poured into the U.S. from the world’s second-biggest economy. China’s marquee names are among those setting up shop in the U.S. Chen Feng, who controls the HNA Group airline and hotel conglomerate, has opened a U.S. money management firm. China Vanke, the mainland’s second-largest residential developer, has indirectly taken a major stake in a manager.

All told, about 324 firms with financial ties to the mainland and Hong Kong had registered with regulators by last year, more than double the number in 2012, filings show. They are riding the wave of capital that left China on concerns about bank debt, a real estate bubble and the yuan, which plummeted about 11% against the dollar in the last two years. The currency flight was reflected in balance of payments data where capital outflows tripled to $220 billion last year from $70 billion in 2014, according to Derek Scissors, a China economist at the American Enterprise Institute. “There is so much Chinese money floating around the U.S. now,” Scissors said. “If you’re a Chinese money manager, why wouldn’t you come here?” The migration comes amid a Chinese shopping spree for an array of U.S. companies, including financial firms like New York’s Cowen Group and the Chicago Stock Exchange.

Chongqing Casin Enterprise led the purchase of the exchange, which was founded in 1882. The deal was reviewed by a U.S. panel on national security grounds and eventually cleared in December. In another deal with political overtones, a subsidiary of Chen’s HNA Group agreed in January to buy a stake in Anthony Scaramucci’s SkyBridge Capital, a New York fund of hedge funds firm. The announcement came after reports that Scaramucci had been tapped for a top job in the White House, stirring speculation that HNA’s motives were partly political. The registration of the China-linked firms with the SEC hasn’t drawn such scrutiny. The SEC began requiring hedge funds and buyout firms to sign up with the agency in 2012 as a result of the Dodd-Frank Act. About 30% of the Chinese firms that registered by 2016 are full-fledged money managers. The rest filed as exempt advisers that operate in the U.S. on a more limited basis.

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OPEC is fast losing what remained of its credibility.

Hedge Funds Bail Just Before OPEC-Driven Oil Rally Vanishes (BBG)

Hedge funds jumped out of the oil market just in time. Before West Texas Intermediate crude nosedived on Thursday, wiping out the rally driven by OPEC’s deal, money managers slashed bets on rising prices by 20%, according to U.S. Commodity Futures Trading Commission data. Now they may soon be well poised to start betting on the next rally. “We are moving toward a positioning where these money managers are no longer over-invested,” Tim Evans at Citi Futures Perspective in New York, said. “This opens up the potential for them to start buying again.” Oil collapsed Thursday amid concerns that OPEC has failed to ease a supply glut as U.S. shale drillers ramp up output. Shares of U.S.-based producers got crushed as investors worry they might be repeating the same pattern that led to the market crash in 2014.

Earlier this year, billionaire wildcatter Harold Hamm urged colleagues to take a “measured” approach to lifting production, or risk a new glut. In a gamble that things could get worse, about $7 million worth of options changed hands Friday that will pay off if WTI falls beneath $39 a barrel by mid-July, according to data compiled by Bloomberg. Hedge funds decreased their net-long position, or the difference between bets on a price increase and wagers on a drop, to 203,104 futures and options in the week ended May 2, the CFTC data show. Longs fell about 7%, while shorts surged 37%, following a 26% jump a week earlier. [..] Oil’s tumble to a five-month low was driven purely by technical trading and supply is still getting tighter, according to Citigroup and Goldman Sachs. The current price plunge began when WTI broke through its 200-day moving average. Once that gave way, another key technical indicator called a Fibonacci retracement was breached, paving the way to the low of the year and then $45 a barrel.

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Multigenerational households are the model of the past and the future. Come look in Greece.

Warning For Boomers: Your Gen X Kids Are Coming Back Home – For Good (MW)

Remove the door knockers. Pull down the shutters. Pretend no one’s home. Your adult children are coming back – for good. One-in-nine baby boomer parents said their adult children returned home within the last year, according to a new report from financial services firm Fidelity Investments and Stanford Center on Longevity, which surveyed 9,000 employees.The adult children save money on rent and household goods, but their parents are the ones who appear to be suffering: 68% said they were more stressed, 53% said they were less happy and another 53% said they had less leisure time after the return of their “boomerang kids.” More than three-quarters (76%) said they took on higher expenses, too. Even people who are now in their 40s and 50s are considering mom and dad an option.

Older millennials are 2.7 times more likely to live in their parents’ home than people under 55 years old than in 1999, while Generation-Xers, who are now in their mid-30s to early 50s, were 2.2 times as likely to live with their parents, according to separate data released last week by real estate site Trulia. “No parent is going to want to say no to a child who needs help, but certainly being realistic about the financial situation is important,” said Katie Taylor at Fidelity. More American adults are living with their parents and grandparents than ever before — 19% of the U.S. population (or nearly 61 million people) lived in a multigenerational household, up from 17% (42 million) in 2009 and 12% (27.5 million) in 1980, according to the Pew Research Center, nonprofit think tank based in Washington, D.C.

But not all millennials are as “lazy” or “entitled,” as they are often accused of being. About one in four 25- to 34-year-olds who live at home and are not working or going to school do so because of a health-related reason or because they are acting as caregivers to their family members. And more than a third of Americans, including millennials, expect to financially help their parents within the next few years, another survey found. Some are even making efforts to help their parents save for retirement.

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Wow, great timing! We’re coming to you live from the barn, and there’s not a horse in sight.

Australia To Hold New Inquiry Into ‘Big Four’ Banks (R.)

Australia will hold an inquiry into competition in the country’s financial system, following a series of scandals in the banking sector and public allegations against the “Big Four” banks of abuse of market power. The latest inquiry is part of a number of government measures since last year aimed at alleviating public concerns about the power of the big banks, after revelations of misconduct in the industry. Australia’s four major lenders – Commonwealth Bank of Australia, Westpac, ANZ and National Australia Bank – have come under fire recently following several scams involving misleading financial advice, insurance fraud and interest-rate rigging, as well as for refusing to pass on official interest rate cuts in full. The four together control 80% of Australia’s lending market and have posted record profits for years.

Westpac, NAB and ANZ all reported a rise in half-yearly cash profits this month, taking their total to about A$8.5 billion. CBA will report limited third-quarter figures on Tuesday. “The high concentration and degree of vertical integration in some parts of the Australian financial system has the potential to limit the benefits of competition…and should be proactively monitored over time,” Treasurer Scott Morrison said in a statement on Monday. “The Government is committed to ensuring that Australia’s financial system is competitive and innovative. That is why I have tasked the Productivity Commission to hold an inquiry into competition in Australia’s financial system.” The inquiry will consider the degree of concentration in key segments of the financial system, examine barriers to innovation in the system and look into competition in personal deposits and mortgages for households and small businesses.

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The benefits of ZIRP.

How Zombie Companies Stop Productivity Growth (BBG)

The global economy is picking up steam, but that’s deceptive. The foundations of expansion are soft, marked by weak productivity growth and inequality. The two are related. The productivity problem confronting the world’s advanced economies predates the financial crisis more than a decade ago. When we look beyond the headline statistics, patterns emerge. Advanced economies have become less dynamic and are at risk of becoming sclerotic unless the ambition for reform is revived. It’s essential that we understand three sources of the current productivity slump in particular, and identify the key reforms necessary to address them. First, the productivity slowdown masks a widening performance gap between more productive and less productive firms, as the chart below shows (the picture for service sector firms is even worse).

This divergence is not just driven by firms at the frontiers of their industry, pushing the technological boundaries, but also by stagnating productivity growth at what can be called laggard companies that have failed to adopt the leaders’ best practices. This is also bad news for inclusiveness, since rising wage inequality can be largely traced to the growing differentials in average wages paid across companies, with high-productivity ones paying high wages and low-productivity businesses paying low wages. Second, in well-functioning markets we would expect strong incentives for productive companies to aggressively expand and drive out less productive ones. The opposite has happened. The propensity for high-productivity companies to expand and low-productivity companies to downsize or exit the market has declined over time.

This pattern is evident in the U. S. and is particularly stark in southern Europe, where scarce capital has been increasingly misallocated to low-productivity firms. Third, across the 35 countries in the OECD, we are seeing a drop in the dynamism of the business sector. Not only has the share of recent entrants into the market declined, but marginal companies, which would typically exit or be restructured in a competitive market, are more likely to remain. At the same time, the average productivity of these marginal businesses has fallen. In other words, it has become easier for weak companies that do not adopt the latest technologies to survive. The survival of weak companies drags down average productivity, but the consequences for growth are even worse. Since such firms take up scarce resources, their prolonged survival (or their delayed restructuring) inflates wages relative to productivity, depresses market prices and undermines investment – all of which deters the expansion of productive companies, particularly startups, and amplifies the mismatch of skills.

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They’ve known about this for decades.

German Army To Search All Barracks After Nazi Memorabilia Found (R.)

The head of Germany’s armed forces has called for an inspection of all army barracks after investigators discovered Nazi-era military memorabilia in a garrison, broadening a scandal about right-wing extremism among soldiers. The discovery at a barracks in Donaueschingen, in southwest Germany, was made in an investigation that began after similar Nazi-era items were found in the garrison of an army officer arrested on suspicion of planning a racially motivated attack. As a result, General Inspector Volker Wieker ordered a wider search of barracks. “The General Inspector has instructed that all properties be inspected to see whether rules on dealing with heritage with regard to the Wehrmacht and National Socialism are being observed,” a Defence Ministry spokesman said. Defence Minister Ursula von der Leyen said the military must root out right-wing extremism.

“We must now investigate with all due rigor and with all candor in the armed forces,” the minister told broadcaster ARD on Sunday evening. “The process is starting now, and more is sure to come out. We are not through the worst of it yet.” Displaying Nazi items such as swastikas is punishable under German law, although possession of regular Wehrmacht items is not. Von der Leyen said last week, however, she would not tolerate the veneration of the Wehrmacht in today’s army, the Bundeswehr. Von der Leyen said the arrested officer – who had falsely registered as a Syrian refugee – had likely worked with others to squirrel away 1,000 rounds of ammunition, but the chief federal prosecutor was still investigating the matter. The suspect’s goal, she said, had likely been to carry out an attack and then pin the blame on migrants.

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Don’t hold your breath.

Greek PM Tsipras Rushes To Get Bailout Deal To Parliament With Eye On QE (K.)

After rallying his ministers, Prime Minister Alexis Tsipras must now get coalition MPs behind him for a new multi-bill of austerity measures that is set to go to Parliament this coming week. Although some lawmakers have expressed reservations about the deal, which foresees further cuts to pensions and more tax increases, along with changes to the energy and labor markets, it is widely expected that Tsipras will get the support he needs to push the bill into law. A raft of so-called countermeasures – social welfare interventions that will come into effect in 2019 if the government meets budget targets – will be voted on separately and is sure to get the support of coalition MPs. The government has also appealed to the main political opposition New Democracy to back the offsetting measures but ND has refused to oblige.

According to government sources, Tsipras is already looking beyond the vote, expected on May 15 or 16, and beyond a scheduled Eurogroup summit on May 22 where the agreement between Greece and its creditors is expected to be rubber-stumped. Aides to the prime minister said he is considering a cabinet reshuffle to give his government a lift and inspire investors as talks on lightening Greece’s debt and the inclusion of Greek bonds in the ECB’s QE program are next on the agenda. It remains unclear whether Tsipras is considering a “cosmetic” shake-up or a radical overhaul, or whether key cabinet members such as Finance Minister Euclid Tsakalotos would keep their posts. But it appears that the government is keen to send out a message that it is turning a page following the completion of a tough bailout review that dragged on for months.

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Our times, and our very selves, are defined by refugees and famine more than anything else. But we don’t like to look at what defines us.

1 Million Child Refugees Flee South Sudan’s Civil War (BBG)

More than 1 million children have fled South Sudan’s civil war, two United Nations agencies said Monday, part of the world’s fastest growing refugee crisis. Another 1 million South Sudanese children are displaced within the country, having fled their homes due to the civil war, said the U.N.’s child and refugee agencies in a statement Monday. “The future of a generation is truly on the brink,” said Leila Pakkala, UNICEF’s Regional Director for Eastern and Southern Africa. “The horrifying fact that nearly one in five children in South Sudan has been forced to flee their home illustrates how devastating this conflict has been for the country’s most vulnerable.”

Roughly 62% of refugees from South Sudan are children, according to the U.N. statement, and more than 75,000 children are alone or without their families. Roughly 1.8 million people have fled South Sudan in total. “No refugee crisis today worries me more than South Sudan,” said Valentin Tapsoba, UNHCR’s Africa Bureau Director. “That refugee children are becoming the defining face of this emergency is incredibly troubling.” For children still living in South Sudan, the situation is still grim. Nearly three quarters of children are out of school, according to the U.N. statement, which is the highest out-of-school population in the world. An official famine was declared in two counties of South Sudan in February, and hundreds of thousands of children are at risk of starvation in the absence of food aid, according to the U.N.

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Why Russia’s safety zones make sense.

Growing Numbers of Refugees In Northern Syria in Urgent Need of Aid (Kom)

The co-chair of the Syrian Democratic Council (SDC), Ilham Ehmed, said that the operations to push out the Islamic State (IS) has resulted in refugee flows into the northern parts of Syria controlled by the Kurdish-led Syrian Democratic Forces (SDF) and that the displaced people are in urgent need of aid. “We have gathered the refugees that came recently in two camps,” Ehmed said to ANF. “In one of the camps, 50 thousand refugees are living. A number of aid organisations are present but there are no serious aid efforts. Many of the organisations receive funding from Europe but they still don’t help,” she said. “One can’t help wondering if they want Syrians to die, if there is a plan to kill them first with war and then with hunger. And if that fails from the heat and the cold. That’s the sad conclusion one draws from the situation.”

The SDC co-chair said they had discussed the urgent needs of food, housing and health with the US-led coalition without any results. “This is not acceptable, they should at least provide support for the refugee camps,” she said, stressing that preparations must be made as the operation to evict IS from Raqqa will give rise to many more refugees. “38 refugees coming from Raqqa have already died, some were children. It’s a tragedy. The European countries and the coalition must take their responsability.” Ehmad stressed the need of mediaction, clinics and doctors in the camps. “This is really urgent. Some will be able to return after the area has been liberated but those who lost their homes will stay, so we must make preparations.”

Ehmad also criticized Europe for giving in to what she called Turkey’s “blackmailing.” “There is an approach to the issue which goes something like this: ‘Let’s give them [Turkey] money so that no refugees will come here’. But everyone knows that the refugees are remaining in our region [Syria] at the moment.” Last year, the United Nations estimated that more than 6 million were internally displaced within Syria, and over 4,8 million were refugees outside of the country.

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May 052017
 
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Fred Stein Under the El New York 1949

 

Senate GOP to Snub House Obamacare Repeal Bill and Write Its Own (BBG)
Cost Of Interest On US Government Debt Tops Half A Trillion Dollars (ZH)
Oil Extends Slump Below $45 (BBG)
Emerging-Market Companies Binge On Dollar-Denominated Debt (BBG)
Chemchina Clinches Landmark $43 Billion Takeover of Syngenta (R.)
Brexit Talks Could Become ‘Impossible’: EU Council President Tusk (Ind.)
Italy’s Bankrupt National Airline Is Being Put Up For Sale (Ind.)
Italy’s Rescue Of Its Airline Comes At Great Cost To The Economy (BBG)
Baumol’s Cost Disease Explains A Lot About Our Economies (Vox)
Russia Set to Police Syria Safe Zones Backed by Iran, Turkey (BBG)
Syria Safe Zones To Be Shut For US, Coalition Planes (R.)
EU Wants China’s Help To Stop Boats Being Used By Migrants (R.)
EU Seeks to Ward Off New Refugee Crisis (Spiegel)
Tensions Boiling Over On Greece’s Chios Amid Absence Of Migrant Facility (K.)
Greece Paying Asylum Seekers To Reject Appeals (EUO)
Greece Says Has Done Its Bit, Now Wants Debt Relief (R.)
Greek Pensioners’ Network Lists 23 Cuts Inflicted On Benefits (K.)

 

 

This could take a while. And that’s a good thing.

Senate GOP to Snub House Obamacare Repeal Bill and Write Its Own (BBG)

Several key Senate Republicans said they will set aside the narrowly passed House health-care bill and write their own version instead, a sign of how difficult it will be to deliver on seven years of promises to repeal Obamacare. Lamar Alexander of Tennessee, who chairs the Senate health committee, and Roy Blunt of Missouri, a member of GOP leadership, both described the plan, even as the House was celebrating passing its repeal after weeks of back and forth. The decision will likely delay even further the prospect of any repeal bill reaching President Donald Trump’s desk. Hospital stocks dipped on the House vote, but quickly bounced back on the news the Senate would start over with its own version, with the BI North America Hospitals Index up 0.9% at 2:39 p.m. Hospitals fear the winding-down of Obamacare’s Medicaid expansion will leave them with more customers who can’t afford to pay.

Trump celebrated the House vote with a news conference at the White House, standing alongside dozens of Republican lawmakers. “This has really brought the Republican Party together,” he said. But in the wake of the House’s razor-thin 217-213 vote, the Senate made clear it was going in a different direction. Alaska’s Lisa Murkowski, who has been very critical of the House bill, said Thursday she hopes they start with “a clean slate” in the Senate. To get some kind of bill through his chamber, Majority Leader Mitch McConnell will need to unite moderate and conservative wings of the party that want to pull the measure in entirely different directions. The GOP controls the chamber 52-48, meaning he can lose no more than two Republicans and still pass it, given the united Democratic opposition.

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At ZIRP.

Cost Of Interest On US Government Debt Tops Half A Trillion Dollars (ZH)

With debt ceilings, spending plans, and tax reforms focusing all eyes on Washington, we thought it notable that for the first time in US history, the cost of interest on US government debt has risen above half a trillion dollars… One wonders, given the grandiose spending plans, if we will ever get back below half a trillion dollars?

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We’ve been saying all along OPEC cuts were fantasy. US shale is a minor factor. Lack of demand is a major one.

Oil Extends Slump Below $45 (BBG)

Oil slid below $45 a barrel for the first time since OPEC agreed to cut output in November as U.S. shale confounds the producer group’s attempts to prop up prices. Futures have collapsed 11% this week, slumping to the lowest since Nov. 15 – two weeks before OPEC agreed to production curbs to boost prices and ease a global glut. The decline is being driven by expanding U.S. output that’s countering the group’s curbs. Energy companies in Asia slumped on Friday, after their American counterparts were hammered in the previous session. While news of OPEC’s cuts drove prices in early January to the highest since July 2015, that increase encouraged U.S. drillers to pump more.

The result has been 11 straight weeks of expansion in American production in the longest run of gains since 2012. Prices are still more than 50% below their peak in 2014, when surging shale output triggered crude’s biggest collapse in a generation and left rival producers such as Saudi Arabia scrambling to protect market share. “There’s disappointment that the production cuts we’ve seen from OPEC and others has not had any impact at this stage on global inventory levels,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market seems to be much further away from a balanced situation than some had previously forecast. There is a possibility that oil could be headed to the low $40s range from here.”

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Expecting the dollar to fall. Doesn’t look all that wise.

Emerging-Market Companies Binge On Dollar-Denominated Debt (BBG)

Emerging-market companies are showing up to the U.S. debt market at the fastest pace ever, and finding plenty of appetite for their bonds. Sales of dollar-denominated notes have climbed to about $160 billion this year, more than double offerings at this point in 2016 and the fastest annual start on record, according to data compiled by Bloomberg going back to 1999. Emerging-market assets tanked after Donald Trump’s surprise election in November, but they’ve quickly recovered, with bonds returning 4% this year and outperforming U.S. investment-grade and high-yield debt. The deluge of issuance began when companies anticipating a surge in borrowing costs amid economic stimulus from Trump rushed to sell notes before his inauguration Jan. 20.

But the expected jump never materialized, extending the window for companies like Petroleo Brasileiro SA and Petroleos Mexicanos to pursue multi-billion-dollar deals. They found plenty of demand from investors keen to buy shorter-dated debt that’s better insulated against rising U.S. interest rates. Jean-Dominique Butikofer, the head of emerging markets for fixed income at Voya Investment Management in Atlanta, said he’s seen new interest in emerging markets from investors who already own U.S. high-yield bonds or emerging market sovereign debt that’s more vulnerable to rising interest rates. “You want to be less sensitive to U.S. rates, but you still want to diversify and you still want to play the EM catch-up growth story,” said Butikofer, whose firm manages $217 billion. “You’re going to gradually add emerging-market corporates.”

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There should never be something like a pesticides and seeds group. Break them up.

Chemchina Clinches Landmark $43 Billion Takeover of Syngenta (R.)

ChemChina has won more than enough support from Syngenta shareholders to clinch its $43 billion takeover of the Swiss pesticides and seeds group, the two companies said on Friday. The deal, announced in February 2016, was prompted by China’s desire to use Syngenta’s portfolio of top-tier chemicals and patent-protected seeds to improve domestic agricultural output. It is China’s biggest foreign takeover to date. It is one of several deals that are remaking the international market for agricultural chemicals, seeds and fertilisers. The other deals in the sector are a $130 billion proposed merger of Dow Chemical and DuPont, and Bayer’s plan to merge with Monsanto. The trend toward market consolidation has triggered fears among farmers that the pipeline for new herbicides and pesticides might slow.

Regulators have required some divestments as a condition for approving the Syngenta deal. Based on preliminary numbers, around 80.7% of Syngenta shares have been tendered, above the minimum threshold of 67% support, the partners said in a joint statement. [..] The transaction is set to close on May 18 after the start of an additional acceptance period for shareholders and payment of a special 5-franc dividend to holders of Swiss-listed shares on May 16. Holders of U.S.-listed depositor receipts will get the special dividend in July. Syngenta shares will be delisted from the Swiss bourse and its depository receipts from the New York Stock Exchange. Chief Executive Erik Fyrwald played down the transition from publicly listed group to becoming part of a Chinese state enterprise, stressing that Syngenta would remain a Swiss-based global company while under Chinese ownership.

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May has nothing, election or not. “..the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

Brexit Talks Could Become ‘Impossible’: EU Council President Tusk (Ind.)

The President of the EU’s ruling Council has intervened to calm Brexit tensions 24 hours after Theresa May launched a vicious attack on “Brussels bureaucrats” on the steps of No 10. Donald Tusk warned that talks would become “impossible” if emotions got out of hand between the UK and EU and called for “mutual respect” between the negotiating parties. The call for calm comes after Theresa May accused the EU’s bureaucracy of trying to influence the result of Britian’s general election by maliciously leaking the content of discussions to the media. In an aggressive speech on Wenesday she tore into officials, warning that her government would not let “the bureaucrats of Brussels run over us”.

The European Commission this morning reacted indignantly to Ms May’s conspiracy theory, with a spokesperson telling reporters that the organisation was “rather busy” and preoccupied with more important matters than trying to fix the poll. But Mr Tusk, a Polish national who represents the EU states’ heads of government in Brussels, said on Thursday afternoon: “Brexit talks [are] difficult enough. If emotions get out of hand, they’ll become impossible. Discretion, moderation and mutual respect needed. “At stake are the daily lives and interests of millions of people on both sides of the Channel.”

The call for calm contrasts with that of a Commission spokesperson earlier today, who said: “We are not naive, we know that there is an election taking place in the United Kingdom. People get excited whenever we have elections. “This election in the United Kingdom is mainly about Brexit. But we here in Brussels, we are very busy, rather busy, with our policy work. “We have too much to do on our plate. So, in a nutshell, we are very busy. And we will not Brexitise our work. “To put it in the words of an EU diplomat, the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.”

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10 years too late? 20?

Italy’s Bankrupt National Airline Is Being Put Up For Sale (Ind.)

Alitalia will be put up for sale in two weeks having earlier this week fallen into administration. In a radio interview cited by the Financial Times, Carlo Calenda, the country’s economic development minister, said that the priority is for the whole company to get bought. “Within 15 days the commissioners will be open to expressions of interest,” he said. On Tuesday, Alitalia started bankruptcy proceedings for the second time in a decade after employees rejected job cuts and concessions linked to a €2bn recapitalisation plan. Shareholders voted unanimously to file for special administration. According to the Financial Times, the government of Prime Minister Paolo Gentiloni has extended a bridge loan of €600m to keep Alitalia afloat for the next six months, but has ruled out nationalisation.

This loan should give the commissioners appointed by the government time to come up with a strategy that will ensure the airline’s fleet is not grounded. Speaking to the broadcaster, Mr Calenda said the €600m loan would be the “maximum” of state aid on offer. Speaking about possible buyers, Mr Calenda said “any idea is welcome”. He stressed, however, that “Alitalia needs an alliance with a big European group”. Alitalia, whose major shareholders are Abu-Dhabi based Etihad Airways and Italian banks, has about 12,500 employees. It has been struggling ever since a previous bankruptcy in 2008.

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Somone will buy it for pennies on the buck. China?

Italy’s Rescue Of Its Airline Comes At Great Cost To The Economy (BBG)

Given its rich history, Italy is rightly attached to its relics. Unfortunately, this affection for the past does not stop at the Colosseum: It applies to failing companies too. Take Alitalia, Italy’s loss-making flag carrier, which has survived for years thanks to a string of public and private rescues. On Tuesday, the airline went into administration, prompting the government to provide a fresh loan worth €600 million ($655 million) to guarantee another six months of operation. Surely the time has come for Italy to stop losses. Unless Alitalia can find a buyer, the government should allow it to go bust. Politically, that is a tall order, of course. Politicians want to protect workers, who stand to lose their jobs if a company shuts down. But every euro used in a bailout is one that can’t be spent elsewhere; what economists call “opportunity cost.” How many more jobs could have been created had the government invested €600 million into upgrading Italy’s digital infrastructure?

Keeping Alitalia alive is also a burden on productivity, since it takes resources that might be deployed by more efficient competitors. Last year, a study for the European Commission found that the misallocation of workers and capital in Italy has steadily worsened since 1995, accounting for a large fraction of Italy’s productivity slowdown. If the government is serious about Italy returning to sustainable growth, it should stop helping losers get in the way of productive companies. There are also questions of financial stability. Between 1974 and 2014, Italian taxpayers have spent €7.4 billion propping up Alitalia, according to Mediobanca. Italy’s addiction to helping companies in trouble has contributed to its huge government debt, which now stands at nearly 133% of GDP, exposing Rome to the risk of a financial crisis.

The same problem also applies to banks. From UniCredit to Intesa Sanpaolo, many of Italy’s big lenders have granted hundreds of millions in credit lines to Alitalia, only to see their loans go up in smoke. The list also includes Monte Dei Paschi di Siena, the troubled bank which in December had to apply for a multi-billion euro government bailout. The reason? It was struggling under the weight of non-performing loans, like those it provided to Alitalia. While European rules on state aid will make it difficult for Rome to help Alitalia beyond the initial six months, one should never underestimate the ability of the Italian government to find a way to stitch together another flawed rescue. But if Italy is to finally start focusing on future growth, it will have to stop dwelling on the ruins of the past.

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A great economist died.

Baumol’s Cost Disease Explains A Lot About Our Economies (Vox)

William Baumol — an economist who just died at the age of 95 — had a famous idea, commonly known as Baumol’s cost disease, that explains a lot about our modern world. It explains why barbers make more in San Francisco than in Cleveland and why services such as health care and education keep getting more expensive. And it provides a possible explanation for why rich countries like America are devoting more and more of their workforces to low-productivity services, dragging down the economy-wide rate of productivity growth. In the 1960s, Baumol was trying to understand the economics of the arts, and he noticed something surprising: Musicians weren’t getting any more productive — playing a piece written for a string quartet took four musicians the same amount of time in 1965 as it did in 1865 — yet musicians in 1965 made a lot more money than musicians in 1865.

The explanation wasn’t too hard to figure out. Rising worker productivity in other sectors of the economy, like manufacturing, was pushing up wages. An arts institution that insisted on paying musicians 1860s wages in a 1960s economy would find their musicians were constantly quitting to take other jobs. So arts institutions — at least those that could afford it — had to raise their wages in order to attract and retain the best musicians. The consequence is that rising productivity in the manufacturing sector of the economy inevitably pushes up the cost of labor-intensive services like live musical performances. Rising productivity allows factories to cut prices and raise wages at the same time. But when wages rise, music venues have no alternative but to raise ticket prices to cover the higher costs.

This became known as Baumol’s cost disease, and Baumol realized that it had implications far beyond the arts. It implies that in a world of rapid technological progress, we should expect the cost of manufactured goods — cars, smartphones, T-shirts, bananas, and so forth — to fall, while the cost of labor-intensive services — schooling, health care, child care, haircuts, fitness coaching, legal services, and so forth — to rise. And this is exactly what the data shows. Decade after decade, health care and education have gotten more expensive while the price of clothing, cars, furniture, toys, and other manufactured goods has gone down relative to the overall inflation rate — exactly the pattern Baumol predicted a half-century ago.

Baumol’s cost disease is a powerful tool for understanding the modern economic world. It suggests, for example, that the continually rising costs of education and health care isn’t necessarily a sign that anything has gone wrong with those sectors of the economy. At least until we invent robotic professors, teachers, doctors, and nurses, we should expect these low-productivity sectors of the economy to get more expensive. While some argue that prices keep rising because the government subsidizes health care through programs like Medicare and college educations through student loans and grants, you see the same basic pattern with services like summer camps, veterinary services, and Broadway shows that aren’t hamstrung by government regulations and subsidies.

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Putin keeps his enemies close.

Russia Set to Police Syria Safe Zones Backed by Iran, Turkey (BBG)

Russia said it’s ready to send peacekeepers to Syria as it won backing from Turkey and Iran for a plan to establish safe zones inside the war-torn country in an effort to shore up a shaky cease-fire brokered by the three powers. The three countries signed a memorandum on the creation of so-called de-escalation areas on Thursday after two days of talks in Kazakhstan that also included representatives of the Syrian government and rebel groups. Opposition leaders distanced themselves from the plan, saying they can’t accept Iran as a guarantor of the truce and that they want “clear and tangible” guarantees the deal will be enforced. The U.S. also expressed doubts. “Russia is ready to send its observers” to help enforce the safe zones, President Vladimir Putin’s envoy to Syria, Alexander Lavrentiev, told reporters in the Kazakh capital, Astana. “We believe the Syrian crisis can only be resolved through political methods.”

Putin said on Wednesday that he’d secured the backing of U.S. President Donald Trump for the proposal, which could include a ban on bombing raids. But State Department spokeswoman Heather Nauert said Thursday that the U.S. has “concerns” about the accord, “including the involvement of Iran as a so-called “guarantor,”’ and said Russia should do more to stop violence. [..] The latest initiative would establish four zones patrolled by foreign forces – possibly including Russian ones – in the northwestern Idlib province, Homs province in the west, the East Ghouta suburb of the capital Damascus and southern Syria. It will take a month to finalize the maps of the proposed safe zones, Iranian Deputy Foreign Minister Hossein Jaberi Ansari said. The United Nations’ Special Envoy for Syria, Staffan de Mistura, who also attended the Astana talks, described the agreement as a “step in the right direction.”

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That’ll go down well with Wolfowitz et al.

Syria Safe Zones To Be Shut For US, Coalition Planes (R.)

The safe zones which are being created in Syria will be closed for warplanes of the United States and those of the U.S.-led coalition, Russian news agencies quoted Russian envoy at Syria peace talks Alexander Lavrentyev as saying on Friday. Turkey and Iran agreed on Thursday to Russia’s proposal for “de-escalation zones” in Syria, a move welcomed by the United Nations but met with scepticism from the United States.

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Stop selling rubber boats, problem solved!

EU Wants China’s Help To Stop Boats Being Used By Migrants (R.)

The European Union wants China to help prevent migrants and refugees using Chinese-made inflatable boats to get into the bloc by stopping the boats reaching them, the European Commissioner for Migration said on Thursday. Dimitris Avramopoulos, speaking to reporters in Beijing after meeting Chinese Minister for Public Security Guo Shengkun, said the rubber boats used by people smugglers were made in China. “The rubber boats used by the smuggler networks in the Mediterranean are fabricated somewhere in China, they are exported to the countries in Asia and they are used by them,” Avramopoulos said.

“So I requested the support and cooperation from the Chinese authorities in order to track down this business and dismantle it, because what they produce is not serving the common good of the country. It is a very dangerous tool in the hands of ruthless smugglers.” He gave no further details, but said he and Guo had not discussed the possibility of China taking any of the refugees or migrants. More than a million people sought asylum in Europe’s rich north in 2015, mostly in Germany but also in large numbers in Sweden, straining the capacity of countries to cope. A contentious deal with Turkey to stop Syrian refugees from reaching Greece and the overland route to Germany, in return for EU funds, has reduced flows to a trickle, though thousands of migrants still try to reach Europe from Libya via sea routes.

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Who cares about the law? “..a more restrictive interpretation of asylum rights..”

EU Seeks to Ward Off New Refugee Crisis (Spiegel)

Merkel has promised that the refugee crisis seen two years ago will not be repeated: Never again will Europe see an uncontrolled inflow of millions of people. The refugee deal with Turkey is working, we are repeatedly told, and the crisis is over. That, though, could turn out to be wrong. With German voters set to go to the polls on Sept. 24, Merkel’s re-election campaign hinges on there not being a repeat of the refugee crisis, even if it’s not as substantial as the 2015 influx. But west of the closed Balkan route, a new migrant stream has been growing since the beginning of the year. From Jan. 1 to April 23, 36,851 migrants have followed the central Mediterranean route from North Africa to Italy. That represents a 45% increase over the same period last year, when a record 181,000 people crossed the Mediterranean on the route.

Even more concerning is the fact that summer hasn’t even begun. Experience has shown that most migrants only climb into the boats once the Mediterranean grows calmer. Italian authorities estimate that a quarter million people will arrive on its shores this year. “There are challenges ahead,” says a senior German security official. Berlin is particularly concerned because it’s not just Africans who are taking the Mediterranean route to Italy. An increasing number of South Asians are as well, which could mean that the route across the sea to Italy is now seen as a viable alternative to the defunct Balkan route. People from Bangladesh now represent the second largest group of migrants that have crossed over from Libya this year. From January to March 2016, by contrast, exactly one Bangladeshi was picked up on the route. Pakistanis have also chosen the Mediterranean route more often in recent months.

[..] The EU is currently working on an emergency plan in case a “serious crisis situation” develops. The discussions are focusing on a scenario under which more than 200,000 refugees would have to be redistributed each year. An unpublished report by Malta, which currently holds the rotating European Council presidency, calls for a more restrictive interpretation of asylum rights in such a case. In other words, should too many migrants begin arriving, the EU will increase efforts at deterrence. Controversial proposals for reception camps to be established in North Africa also remain under discussion. Most of those currently fleeing from countries like Nigeria, Guinea and the Ivory Coast are doing so to escape grinding poverty and in the hopes of finding better opportunities in Europe. Very few of them have much chance of being granted asylum. That reality has made redistribution within the EU even more difficult. According to current law, those with no chance at asylum are supposed to be sent back home as quickly as possible and not sent to other European countries.

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Now add a huge rise in arrival numbers.

Tensions Boiling Over On Greece’s Chios Amid Absence Of Migrant Facility (K.)

Tensions are rising on the eastern Aegean island of Chios, which is currently favored by human smugglers ferrying migrants over from neighboring Turkey, with an increasing number of brawls at overcrowded state reception centers and local residents’ tolerance wearing thin. Clashes between migrants of different ethnicities are an almost daily occurrence, residents said following a violent confrontation on Tuesday night between Afghan and Algerian nationals at the Vial reception facility. That incident started as a fight between two small groups throwing stones at each other and escalated into a full-blown brawl involving around 60 people. Riot police stationed nearby were eventually obliged to enter the facility and break up the fight.

According to sources at the Citizens’ Protection Ministry, migrants have been arriving in greater numbers on Chios as it still lacks a so-called pre-departure camp due to protests by local residents against the creation of new facilities on the island. As a result, migrants landing on Chios and deemed ineligible for asylum are not being deported to Turkey as foreseen in an agreement signed between Turkey and the EU in March last year. Around 200 migrants have arrived on Chios this week, according to government figures, compared to virtually none on other islands in the eastern Aegean. And, according to a top-ranking police official, the problem is unlikely to be resolved until a center is set up. “The message being sent to those deciding to make the journey is that if you get to Chios they won’t send you back,” he said.

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NGOs to be thrown off the islands this summer, Greek army and the Greek Red Cross to take over.

Greece Paying Asylum Seekers To Reject Appeals (EUO)

The Greek government is giving cash incentives for rejected asylum seekers on the islands to forgo their legal rights to appeal their cases. Some €1,000 and free plane tickets home are now part of a largely EU-financed package to send them packing as quickly as possible. “This is quite complicated and quite immoral,” a Greek lawyer working for Save the Children, an international NGO, told EUobserver on Tuesday (2 May). The move is part of a larger effort to return people to Turkey and free up administrative bottlenecks, but the plan has generated criticism from human rights defenders who say asylum seekers are being pushed into taking the money. People have five days to decide whether to take the cash, with reports emerging that even that short delay was not being respected by authorities. Previously, people were entitled to the assistance even if they appealed.

The scheme only applies to those in so-called eu hotspots on the Chios, Kos, Leros, Lesvos, and Samos islands, where arrivals are screened, given that Turkey does not accept people back from mainland Greece. Greek minister of migration Ioannis Mouzalas has said the financial bait was needed to prevent bogus claimants from abusing the asylum system. The new rules on excluding people who appeal their cases, imposed last month, also come after the European Commission pressured Athens into shortening its appeal process and removing administrative barriers to send more people home. The EU-Turkey deal last year was supposed to ensure that new asylum arrivals whose applications have been declared unfounded would be returned to the country. But only around 1,500 have been sent back since its launch, with the Greek appeals system consistently ruling in favour of initially rejected asylum seekers over broader concerns that Turkey was not safe.

[..] The whole appears to be part of bigger plan to squeeze asylum-seeker rights on the islands and get them out of Greece as fast as possible. It also comes on the heels of a new plan that aims to boot NGOs from the islands. “Many NGOs will longer be on the islands after July, it means there is going to be a lot less scrutiny and a lot less visibility on what is going on as well,” said Claire Whelan from the Norwegian Refugee Council, an independent humanitarian organisation. NGOs working in the medical field in the Vial hotspot in Chios island have already been replaced by the Greek army and the Greek Red Cross. All were informed earlier this year that DG ECHO, the EU Commission’s humanitarian branch, would no longer fund them. Instead, the money will be coming from the Commission’s interior and security department, DG Home. “One of the biggest gaps we see, that remains, is access to legal assistance and legal counseling. And I don’t know if that will be funded under DG Home and the government,” the Norwegian Refugee Council’s Whelan said.

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Europe doesn’t care what Greece wants.

Greece Says Has Done Its Bit, Now Wants Debt Relief (R.)

Prime Minister Alexis Tsipras called on Greece’s international lenders on Thursday to reach an agreement on easing its debt burden by May 22, when eurozone finance ministers meet in Brussels to discuss the country’s bailout progress. Athens and its creditors reached a long-awaited deal at staff-level this week on a series of bailout reforms Greece needs to unlock loans from its €86 billion rescue package, the country’s third since 2010. The EU and the IMF, which has yet to announce if it will participate in the bailout, have now started negotiations over Greece’s post-bailout fiscal targets, a key element for granting it further debt relief. Greece is being firm that it has done what was asked of it and now wants to see movement from the other side. “Medium-term debt relief measures must be clearly defined by the May 22 Eurogroup meeting,” Tsipras told his cabinet on Thursday.

“Greece has done its part and all parties must now fulfill their commitments.” The creditors have been not been quite as upbeat and there is no guarantee that the May 22 meeting will actually sign off on the new tranche of loans, let alone draft up debt relief. But Luxembourg Finance Minister Pierre Gramenga did cite progress when speaking to reporters on the sidelines of a conference in Luxembourg. “We’re one step closer. They [Greece] over-performed last year, they are on track this year, we have now an agreement looming that we will hopefully agree on in Eurogroup,” he said. “Those who have been pessimistic all the time have been proved wrong. I’m very pleased about that. The worst case is not always the scenario that plays out.” Greece’s economy and budget have improved markedly recently, although major problems of poverty and unemployment persist.

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Additional 18% cuts to come.

Greek Pensioners’ Network Lists 23 Cuts Inflicted On Benefits (K.)

At least 23 cuts have been inflicted on pensioners since 2010, with losses adding up to more than €50 billion. For some, their benefits have fallen by as much as 50%. The United Pensioners network has just added a 23rd cut to its list – the reduction of up to 18% of main and supplementary pensions agreed by the government this week. Network chief Nikos Hatzopoulos says the cuts have impoverished pensioners. The other 22 cuts on the list are as follows:

– In 2010, Christmas, Easter and holiday bonuses ended.

– In 2011, all pensioners under the age of 60 took a 6-10% cut.

– In the same year, pensioners were also slapped with a solidarity levy ranging from 3 to 13% for monthly pensions over €1,400. Also cuts to supplementary pensions started, from 3 to 10%.

– Main pensions to under-60s were slashed in 2011 and supplementary pensions of more than 150 euros a month fell by 15-30%.

– From January 2012, there were fresh cuts to any “high” pensions not affected until then.

– In 2012, monthly pensions over 1,000 euros were hit with a new cut.

– Summer 2014 saw a 5.2% cut to all supplementary pensions.

– In 2015, minimum pensions fell.

– In the same year, all early retirements incurred a 10% cut.

– From last May, all new pensioners were informed they would get up to 30% less.

– Some 250,000 supplementary pensions fell by up to 40%.

– The EKAS benefit to 160,000 low-income pensioners was ended.

– Civil servants’ share fund dividends were slashed 45%.

– High pensions took a retroactive cut from late 2016 to end-2018.

– Widows’ benefits fell and stricter criteria were introduced.

– The pensions of people with employment were slashed 60%.

– Early retirees took big cuts.

– Retirement lump sums shrank 15-20%.

– New disability pensions were slashed last May.

– The healthcare levy on main pensions rose.

– A similar 6% levy was imposed on supplementary pensions.

– Since January, 650,000 farmers have had to pay a 14% income levy.

Read more …

Apr 292017
 
 April 29, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Pablo Picasso Self portrait 1972

 

US Q1 Growth Weakest In Three Years As Consumer Spending Falters (R.)
Don’t Show President Trump This Chart (ZH)
Just Five Companies Account For 28% Of The S&P’s 2017 Returns (ZH)
Germany Knew Austerity Would Destroy Greece, Says Varoufakis (Tel.)
EU Deletes UK from Official Map – Two Years Before Brexit (BT)
These Americans Will Never Get Social Security Benefits (MW)
Julian Assange Speaks Out: The War On The Truth (Ron Paul)
US Spy Agency Abandons Controversial Surveillance Technique (R.)
Russian Economy Has Grown Immune to Western Sanctions – UN (Sp.)
California Enacts $52 Billion Fuel Tax Hike For Road, Bridge Repairs (R.)
Melenchon Attacks Macron as Le Pen Fights to Win His Supporters (BBG)
US Troops Deploy Along Syria-Turkish Border (AP)
Tensions Escalate Between Kurdish Forces, Turkish Troops in North Syria (ARA)
‘Europe’s Dirty Secret’: Officials On Chios Scramble To Cope With Rising Tensions (G.)

 

 

Consumption growth lowest since 2009.

US Q1 Growth Weakest In Three Years As Consumer Spending Falters (R.)

The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled, but a surge in business investment and wage growth suggested activity would regain momentum as the year progresses. The soft patch at the start of the year is bad news for the Trump administration’s ambitions to significantly boost growth. “It marks a rough start to the administration’s high hopes of achieving 3% or better growth; this is not the kind of news it was looking for to cap its first 100 days in office,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. GDP increased at a 0.7% annual rate also as the government further cut defense spending and businesses spent less on inventories, the Commerce Department said on Friday in its advance estimate.

That was the weakest performance since the first quarter of 2014. The pedestrian first-quarter growth pace is, however, not a true picture of the economy’s health. Wage growth in the first quarter was the fastest in 10 years as the labor market nears full employment and business investment on equipment was the strongest since the third quarter of 2015. Also underscoring the economy’s underlying strength, consumer and business confidence are near multi-year highs. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

[..] Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.3% rate, the slowest pace since the fourth quarter of 2009. That followed the fourth quarter’s robust 3.5% growth rate. A mild winter undercut demand for heating and utilities production. Higher inflation, with the personal consumption expenditures price index averaging 2.4% – the highest since the second quarter of 2011 – was also a drag.

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Anti-Trump rally?!

Don’t Show President Trump This Chart (ZH)

It's been (almost) 100 days and stocks are higher, hype is at its peak, hope remains higher-ish… there's just one problem, real economic data is collapsing…

 

As today's Q1 GDP proved, relying on 'hope' and 'soft' data to lift a 'real' economy is simply a false narrative…

 

How will that translate into Making America Great Again?

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Bubble. But their power is real. And scary.

Just Five Companies Account For 28% Of The S&P’s 2017 Returns (ZH)

On the last day of the busiest earnings week in a decade, here is a striking statistic from Goldman Sachs, showing just how dominant a handful of large cap companies have become in terms of both overall profitability and market impact: “Year to date the top 10 contributors have combined to account for 37% of the S&P 500 index return (more than double their market cap representation of 17%). The concentration among the top five is even greater, with those firms – AAPL, FB, AMZN, GOOGL, and MSFT – accounting for 28% of the return and 12% of market cap.” Some further perspective, courtesy of the WSJ, which notes that the combined market capitalization of AMZN, MSFT, INTC and GOOG makes up about 8% of the Index’s total.

Throwing in Apple and Facebook puts about 13% of the S&P 500’s combined market cap into the hands of just six companies. This wasn’t always the case. “Ten years ago, Apple, Amazon, Google, Microsoft and Intel made up just 5% of the S&P 500’s market cap, while Facebook was four years away from becoming a public company. The newfound prominence of big tech companies now can be chalked up to a few factors. One is that most big tech companies are profit machines—unlike many of their smaller peers that are still losing money. Alphabet, Microsoft, Intel and Amazon reported a combined $16.8 billion in operating income for the March quarter on Thursday. That is about 7% of the total projected for the S&P 500. ”

“Amazon looks like an outlier with a rather thin operating margin of 2.8% for the quarter, but even that is a notable gain from its average of just 1.5% over the last five years. But the other, even bigger factor is that demand for technology products and services keeps increasing, even as some market segments like PCs have declined. That has allowed several big tech companies to pivot into new segments with the help of strong cash flows generated by their original businesses. Amazon, Microsoft and Google have built large cloud services used by businesses shifting from more traditional computing setups.”

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New book, series in the Telegraph.

Germany Knew Austerity Would Destroy Greece, Says Varoufakis (Tel.)

Greece was forced to sign up to crippling austerity policies even though the German finance minister privately admitted he would not have endorsed the deal. The extraordinary admission by Wolfgang Schauble was made to Yanis Varoufakis, the former Greek finance minister, whose new memoir is serialised in The Telegraph all this weekend. In a frank private exchange, Mr Varoufakis asked Mr Schauble if he personally would sign up to the EU-ordered austerity plan which saw billions cut from Greek budgets and many Greeks lose their jobs. “As a patriot, no. It’s bad for your people,” the German minister replied. The Germans are also accused in the book of blocking a Chinese rescue deal for Greece and of repeatedly going back on promises and pledges made by other senior European figures as the EU battled to hold the eurozone together.

In a 500-page insider’s account of nearly six months of encounters with the leading political figures of Europe, Mr Varoufakis exposes the lengths to which Germany will go to maintain the EU and single currency. The minister secretly recorded many of his conversations with senior global figures and today exposes the gulf between private conversations and public pronouncements. In an interview today, Mr ≠Varoufakis says his experience contains dark warnings for Britain’s coming Brexit negotiations with a German-dominated EU. Angela Merkel warned this week that Britain should have no illusions about the coming talks and the EU yesterday put the ( issue of Irish reunification on the Brexit negotiating table. He warns that Theresa May must prepare an alternative deal as the EU will use dubious negotiating tactics to block reasonable discussion and potential solutions.

My advice to Theresa May is to avoid negotiation at all costs. If she doesn’t do that she will fall into the trap of [Greek prime minister] Alexis Tsipras, and it will end in capitulation, he told The Daily Telegraph. The parallel with Brexit is the tactic of stalling negotiations. They will get you on the sequencing. First there is the price of divorce to sort out before they will talk about free trade in the future, he added. In his book, Mr Varoufakis recounts how Germany used its political and financial muscle to impose austerity on Greece, despite widespread acknowledgement in other EU capitals that the policy was self-defeating and unsustainable. He reveals private encounters -many recorded secretly- with leading figures including Barack Obama, George Osborne and ( Emmanuel Macron, who polls say is almost certain to become the next president of France. In one conversation at the White House Mr Obama readily agrees that ‘austerity sucks’ but can do nothing to deflect the German agenda.

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Almost funny.

EU Deletes UK from Official Map – Two Years Before Brexit (BT)

This could be the first official map produced by the European Union to exclude the UK. But it is also an inaccurate one: the UK is still a member state of the EU. Brexit means Brexit: on 29 March, British Prime Minister Theresa May officially notified EU Council President Donald Tusk of Britain’s intention to leave the European Union. But Britain hasn’t left yet. By invoking Article 50 of the Treaty of Lisbon, May triggered a process that gives both sides two years to reach an agreement. Meaning that Britain is scheduled to leave the EU on 29 March 2019. Until that time, the United Kingdom remains a full member of the European Union.

It is no secret that hardline brexiteers would rather leave today than tomorrow, and ‘crash out’ of the EU, even if that means falling back on the most rudimentary of agreements for trade and cooperation with ‘EU27’ – shorthand for the EU minus the UK. Now it seems that sentiment is reciprocated in the highest circles of the EU bureaucracy in Brussels. The map shows the unemployment rates of the member states – and the stark differences for those rates between member states in the north and south of the Union. But the eye is immediately drawn to the land mass of the United Kingdom: coloured not in the blues or oranges that indicate unemployment rates in the EU, but the grey of the non-member states that dot the map.

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Giving the news to you bite size.

These Americans Will Never Get Social Security Benefits (MW)

Today’s young people fear that they will never see Social Security benefits. The reality is, 3% of elderly Americans already don’t. The three main groups of people who never receive Social Security benefits include infrequent workers (44.3%) who do not have sufficient earnings to qualify for the benefits, immigrants who arrived in the US at 50 or older (37.3%) and therefore haven’t worked long enough to qualify for the benefits, and non-covered workers (11.4%), such as state and local government employees. A little less than 7% of “never beneficiaries” were individuals who were expected to get Social Security benefits, but died before receiving them, according to a 2015 Social Security Administration report.

What’s worse, most Americans may not realize how much they will – or will not – receive in Social Security benefits, said Bill Meyer, chief executive of Social Security Solutions, a software provider that strategizes how to claim Social Security. Social Security benefits are based on earnings history from the past 35 years – “The onus is on the individual retiree that the Social Security Administration has the right information,” Meyer said. Social Security benefits are hotly contested, specifically how — or even whether — those benefits will be distributed in the future. Young Americans say they’re not confident they’ll ever collect Social Security benefits (81% of millennials didn’t think so, at least, according to a recent Investopedia survey) but current near retirees may also be at risk.

In December, the House Ways and Means Social Security Subcommittee introduced a bill that would “save” Social Security by cutting benefits for above-average earners, eliminating the cost-of-living adjustment for individuals who make more than $85,000 (and $170,000 for couples), and increasing the full retirement age to 69 from 66.

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Vault7 the largest ever publication?

Julian Assange Speaks Out: The War On The Truth (Ron Paul)

Wikileaks Founder and Editor-in-Chief Julian Assange joins the Liberty Report to discuss the latest push by the Trump Administration to bring charges against him and his organization for publishing US Government documents. How will they get around the First Amendment and the Espionage Act? The US government and the mainstream media – some of which gladly publish Wikileaks documents – are pushing to demonize Assange in the court of public opinion.

Tyler Durden: Having blasted the Trump administration for their hyprocritical flip-flop from “loving WikiLeaks” to “arrest Assange,” Ron Paul made his feelings very clear on what this signals: “If we allow this president to declare war on those who tell the truth, we have only ourselves to blame.” Today he sits down with WikiLeaks founder Julian Assange for a live interview…

“The CIA has been deeply humiliated as a result of our ongoing publications so this is a preemptive move by the CIA to try and discredit our publications and create a new category for Wikileaks and other national security reporters to strip them of First Amendment protections,” Assange said in a preview clip from the interview below…:

 

Full interview below… 

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US intelligence has gone bonkers, and it may well be too late to rein it in.

US Spy Agency Abandons Controversial Surveillance Technique (R.)

The U.S. National Security Agency said on Friday it had stopped a form of surveillance that allowed it to collect without a warrant the digital communications of Americans who mentioned a foreign intelligence target in their messages, marking an unexpected triumph for privacy advocates long critical of the practice. The decision to stop the once-secret activity, which involved messages sent to or received from people believed to be living overseas, came despite the insistence of U.S. officials in recent years that it was both lawful and vital to national security. The halt is among the most substantial changes to U.S. surveillance policy in years and comes as digital privacy remains a contentious issue across the globe following the 2013 disclosures of broad NSA spying activity by former intelligence contractor Edward Snowden.

“NSA will no longer collect certain internet communications that merely mention a foreign intelligence target,” the agency said in a statement. “Instead, NSA will limit such collection to internet communications that are sent directly to or from a foreign target.” NSA also said it would delete the “vast majority” of internet data collected under the surveillance program “to further protect the privacy of U.S. person communications.” The decision is an effort to remedy privacy compliance issues raised in 2011 by the Foreign Intelligence Surveillance Court, a secret tribunal that rules on the legality of intelligence operations. [..] The NSA is not permitted to conduct surveillance within the United States. The so-called “about” collection went after messages that mentioned a surveillance target, even if the message was neither to nor from that person. That type of collection sometimes resulted in surveillance of emails, texts and other communications that were wholly domestic.

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Unintended consequences.

Russian Economy Has Grown Immune to Western Sanctions – UN (Sp.)

Maintaining the sanctions imposed by Western states will not negatively affect Russia’s economy, which has adapted to these restrictive measures, UN Special Rapporteur on the negative impact of the unilateral coercive measures Idriss Jazairy said Thursday. Jazairy stressed that the economy is adaptive to sanctions and the policies of its main trade partners, and thus the introduction of sanctions mostly harms the effectiveness of international trade, but not the country itself for which the sanctions were aimed against. Jazairy expressed his view on the anti-Russian sanctions during a meeting with the Russian upper house Council of the Federation Committee on Constitutional Legislation and State-Building chairman Andrei Klishas in Moscow.

Since 2014, relations between Russia and the European Union and the United States, deteriorated amid the crisis in Ukraine. Brussels, Washington and their allies introduced several rounds of sanctions against Russia on the pretext of its alleged involvement in the Ukrainian conflict, which Moscow has repeatedly denied. In response to the restrictive measures, Russia has imposed a food embargo on some products originating in countries that have targeted it with sanctions. On April 18, the IMF said in its World Economic Outlook report that Russian economic growth is expected to pick up in 2017 – 2018 and will reach 1.4% for both years.

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There are too many cars. That’s the only real problem. But no-one dares touch it.

California Enacts $52 Billion Fuel Tax Hike For Road, Bridge Repairs (R.)

California Governor Jerry Brown signed into law on Friday a bill to raise gasoline taxes and other transportation-related fees for the first time in decades in an ambitious $52 billion plan to repair the state’s long-neglected roads and bridges. The measure, increasing excise taxes on gasoline by 12 cents per gallon, from the current rate of $0.28 a gallon, and on diesel fuel by 20 cents per gallon over the next 10 years, goes into effect in November. It cleared the state legislature three weeks ago, on the strength of a two-thirds super-majority the Democrats wield in both houses that allows them to pass new taxes with little or no Republican support. Republicans condemned the increases, saying the state’s transportation taxes and fees are already among the highest in the nation. They call the newly enacted measure the largest gasoline tax in California’s history.

The average motorist in California, a state renowned for its car culture, will see transportation costs rise by about $10 a month under the measure, according to Brown, a Democrat who has governed largely as a fiscal moderate. He has refused to back any transportation overall plans that involved borrowing money. Supporters say the measure is needed to address a mounting backlog of crumbling infrastructure projects, including more than 500 bridges statewide requiring major repair, most of them considered structurally deficient. The fuel tax increases, together with higher vehicle licensing fees and a new $100 annual fee on owners of electric-only vehicles, would raise $5.2 billion a year, all earmarked for road, highway and bridge repairs and anti-congestion projects.

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Too many people are too sure Le Pen has no chance.

Melenchon Attacks Macron as Le Pen Fights to Win His Supporters (BBG)

The left-wing populist Jean-Luc Melenchon, who was eliminated from France’s presidential election this week, declined to endorse centrist front-runner Emmanuel Macron as he looked to keep hold of his 7.1 million voters ahead of a parliamentary ballot in June. Melenchon, who came fourth in Sunday’s first-round vote, said he won’t vote for the anti-euro nationalist Marine Le Pen in the runoff on the May 7 in a 32-minute video posted on his official YouTube channel late Friday. But he also aimed criticism at the centrist Macron who has won endorsements from most of his mainstream rivals, as well as German Chancellor Angela Merkel. “We can’t really call this a choice,” Melenchon said. “The nature of the two candidates makes it impossible to come out of this with stability.”

“One because he’s the extreme of finance, the other because she’s the extreme right,” he added, saying his party, France Unbowed, will reach the second round in 450 of the 577 constituencies up for grabs in the lower chamber of parliament in June and Macron sees him as a “threat.” Politicians and observers across the European Union have been transfixed by the French election with Le Pen promising to pull out of the euro and erect barriers to trade with the rest of the bloc while Macron has vowed to revive the Franco-German partnership to begin a new era of continental cooperation. Le Pen is fighting to win over Melenchon’s supporters as she seeks to close a gap of some 20 %age points on her rival.

Despite the personal antipathy between Melenchon and Le Pen, their protectionist, anti-European platforms had lots in common. In a speech in Arras on Wednesday, Macron praised Melenchon’s “panache” and the wave of support he created in the campaign. Le Pen said on France 2 television on Monday that they had “very similar” economic ideas and her team acclaimed his “noble” act to hold back an endorsement. Surveys show that Melenchon voters are increasingly likely to abstain rather than back Macron on May 7. An OpinionWay polled Friday showed that 45% of Melenchon supporters plan to abstain in the second round, up from 23% at the start of the week. Macron’s support among that group fell to 40% from 55%, while Le Pen’s dropped to 15% from 22%.

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Looks like a positive development.

US Troops Deploy Along Syria-Turkish Border (AP)

US armoured vehicles are deploying in areas in northern Syria along the tense border with Turkey, a few days after a Turkish airstrike that killed 20 US-backed Kurdish fighters, a Syrian war monitor and Kurdish activists said Friday. Footage posted by Syrian activists online showed a convoy of US armoured vehicles driving on a rural road in the village of Darbasiyah, a few hundred meters from the Turkish border. Clashes in the area were reported between Turkish and Kurdish forces Wednesday a day after the Turkish airstrike which also destroyed a Kurdish command headquarters. The Turkish airstrikes, which also wounded 18 members of the US-backed People’s Protection Units, or YPG, in Syria were criticized by both the US and Russia.

The YPG is a close US ally in the fight against Daesh, also known as ISIS and ISIL, but is seen by Ankara as a terrorist group because of its ties to Turkey’s Kurdish rebels. Further clashes between Turkish and Kurdish forces in Syria could potentially undermine the US-led war on Daesh. A senior Kurdish official, Ilham Ahmad told AP that American forces began carrying out patrols along the border Thursday along with reconnaissance flights in the area. She said the deployment was in principle temporary, but may become more permanent. A Kurdish activist in the area, Mustafa Bali, said the deployment began Friday afternoon and is ongoing. He said deployment stretches from the Iraqi border to areas past Darbasiyah in the largely Kurdish part of eastern Syria.

“The US role has now become more like a buffer force between us and the Turks on all front lines,” he said. He said US forces will also deploy as a separation force in areas where the Turkish-backed Syrian fighting forces and the Kurdish forces meet. It is a message of reassurance for the Kurds and almost a “warning message” to the Turks, he said. Navy Capt. Jeff Davis, a Pentagon spokesman, did not dispute that U.S. troops are operating with elements of the Syrian Democratic Forces (SDF) along the Turkish border, but he would not get into specifics. The SDF is a Kurdish-dominated alliance fighting Daesh that includes Arab fighters. “We have U.S. forces that are there throughout the entirety of northern Syria that operate with our Syrian Democratic Force partners,” Davis said. “The border is among the areas where they operate.”

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Here’s why there are US tropps in the region.

Tensions Escalate Between Kurdish Forces, Turkish Troops in North Syria (ARA)

Clashes continued for the third consecutive day between Kurdish fighters of the People’s Protection Units (YPG) and Turkey’s military in several areas in northern Syria, military sources reported on Friday. The Turkish Army bombed several villages in the Kurdish Afrin district, including Panerak, Shankila, Midan Akbas and Rajo. “The Turkish artillery bombarded YPG security checkpoints and residential buildings in Afrin countryside, killing and wounding dozens, most of them civilians,” a spokesperson for the YPG told ARA News. The bombardment led to clashes between the Kurdish units and Turkish military forces in the sub-districts of Rajo and Shiya. “Our units responded to the Turkish offensive by hitting the positions of the Turkish troops near Susk hill in Afrin. At least three military vehicles were destroyed by YPG fire,” the Kurdish official said.

The YPG also released a video showing the destruction of a Turkish base in northwestern Aleppo. “At least 17 Turkish soldiers were killed and three others were wounded under heavy bombardment by the YPG,” a member of the YPG media office in Afrin told ARA News. The source added that the clashes between the YPG and Turkey’s military are still ongoing in the Shiya and Rajo sub-districts. Clashes broke out on Wednesday between the Syrian Kurdish forces and Turkish troops after the latter targeted the Kurdish town of Derbassiye in Syria’s northeastern Hasakah province with heavy artillery, shutting down the road between Derbassiye and Serikaniye. This coincided with similar clashes between the YPG and Turkish troops in Afrin. This comes after the Turkish jets killed over 25 Kurdish fighters in Iraq and Syria on Tuesday.

The US-led coalition expressed concerns over the Turkish attacks against the Kurdish fighters who are in war with ISIS in northern Syria. “We call on all forces to remain focused on the fight to defeat ISIS, which is the greatest threat to regional and worldwide peace, security,” said Air Force Col John L. Dorrian, Spokesman for the US-led coalition against ISIS. “Turkish strikes were conducted without proper coordination with the Coalition or the Government of Iraq,” he said. “Our partner forces have been killed by Turkey strike, they have made many sacrifices to defeat ISIS,” the American Colonel said. “We are troubled by Turkey airstrikes on SDF and Kurdish forces,” he added.

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This will not go quiet for much longer.

‘Europe’s Dirty Secret’: Officials On Chios Scramble To Cope With Rising Tensions (G.)

On a clear day the channel dividing Chios from the Turkish coast does not look like a channel at all. The nooks and crevices of Turkey’s western shores, its wind turbines and summer homes could, to the naked eye, be a promontory of the Greek island itself. For the men, women and children who almost daily make the crossing in dinghies and other smuggler craft, it is a God-given proximity, the gateway to Europe that continues to lure. Samuel Aneke crossed the sea almost a year ago on 1 June. Like those before him, and doubtless those who will follow, he saw the five-mile stretch as the last hurdle to freedom. “You could say geography brought me here,” said the Nigerian, a broad smile momentarily dousing his otherwise dour demeanour. “But it was not supposed to keep me prisoner.”

Refugee flows via Greece were meant to stop when the EU and Turkey announced what was seen as a pioneering agreement to stem the influx in March 2016. In Chios, like other Aegean isles, residents initially welcomed the accord. It was short-lived. The influx – one that saw more than 850,000 refugees arrive into the country in 2015 – was soon replaced by a steady flow, with asylum seekers arriving in groups that were sometimes small, sometimes large, but always propelled by the same ambition: to reach Europe by way of its southern shores. On Chios, more than 825 asylum seekers, the vast majority Syrians, arrived from Turkey in March. This month almost 600 have come. With at least 3,000, according to authorities, housed in two overcrowded camps – one makeshift, the other a razor-wire topped detention centre in a former factory known as Vial – it is anger that hangs in the air.

Greece’s Aegean isles have become de facto detention facilities – a dumpling ground for nearly 14,000 stranded souls, unable to move until permits are processed and fearful of what lies ahead. “Anything could happen because everything is hanging by a thread,” says Makis Mylonas, a policy adviser at the town hall. “Chios, Samos, Lesvos, Kos, Leros were sacrificed in the name of Europe’s fixation to keep immigrants out,” he claims, listing the isles that continue to bear the brunt of the flows.

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Apr 262017
 
 April 26, 2017  Posted by at 8:49 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Pablo Picasso Self portrait 1906

 

There’s a Huge Disagreement Between Bonds and Stocks (BBG)
Trump May Pick Gary Cohn To Replace Janet Yellen At The Fed (CNBC)
Trudeau’s Reward for Courting Trump Is a Trade War on Lumber (BBG)
Apartheid Without the Racism’: How China Keeps Rural Folks Down (WSJ)
Chinese Stock Market Roller Coaster Looks To Be Back In Full Force (CNBC)
Cataclysm (Robert Gore)
Currency Markets Suggest Traders Get Early Glimpse at UK Government Data (WSJ)
Draghi’s Stimulus Could Blunt Populism (BBG)
Juncker Against ‘Major Cuts’ To Greek Pensions (K.)
As Bailout Negotiations Resume, Tsipras Tries To Sweeten Pill (K.)
Trump On Greece: “They Are In Such A Terrible Situation There” (NM)
EU Auditors Say Refugee Centers In Greece, Italy Overwhelmed (AP)
Amnesty Calls For Shutdown Of Greece’s Elliniko Refugee Camp (K.)

 

 

“The rates market is pricing in the death of tax reform and dimming 2018 economic prospects..”

There’s a Huge Disagreement Between Bonds and Stocks (BBG)

Markets are taking sides when it comes to the direction of the U.S. economy. In the green corner are stocks. The Standard & Poor’s 500 index is just 0.2% away from a record high reached in March on bets that Donald Trump’s administration will push through tax-code changes to spark growth. In the red corner sit U.S. government bonds, where benchmark 10-year Treasury yields have unwound almost half of their post-election increase, suggesting a far more pessimistic view the economy. “The increasing divergence between global equity market performance and bond markets has raised questions as to whom is right,” Jefferies Group analysts led by Sean Darby wrote in a note.

Figuring out which market will be on the right side of history is a pressing issue for analysts, investors and traders. If government bonds prove correct, risk appetite may soon vanish; if the optimism displayed by stocks and corporate bonds is vindicated, then interest-rate markets are likely to sell off in coming months, according to strategists. The issue is gaining added urgency as Trump nears his 100th day as president with plans to unveil Wednesday a proposal to lower the corporate rate to 15%. Optimism that the new U.S. administration would deliver tax cuts and boost corporate earnings may account for the resilience of bullish equity sentiment, according to strategists at Rabobank.

“The post-election jump in stocks could at least in part have been due to this mechanistic response rather than an optimistic view of the future,” strategists led by Richard Macguire wrote in a note. A cut in the corporate tax rate would automatically boost earnings per share, justifying an advance in stock prices, they argue. Still, interest-rate markets are flashing warning signals. Money markets such as the London interbank offered rate and interest rate swaps, for instance, show some alarm over growth prospects next year, according to Bank of America. “The rates market is pricing in the death of tax reform and dimming 2018 economic prospects,” strategists led by Shyam Rajan wrote in a note to clients.

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Haven’t heard that term in a while: “He also has emphasized the need for a cheap dollar and low interest rates as the economy seeks escape velocity..”

Trump May Pick Gary Cohn To Replace Janet Yellen At The Fed (CNBC)

Should President Donald Trump choose to replace Fed Chair Janet Yellen when her term expires next year, he could well turn to someone close by to fill the void. Speculation is building on Wall Street that a likely replacement to run the central bank would be Gary Cohn, director of the National Economic Council and Trump’s closest economic advisor. Cohn also is a former chief operating officer of Goldman Sachs. “The buzz among those who claim Cohn confides in them is that he would like to eventually replace” Yellen, assuming Trump decides to move in a different direction when the chair’s term ends in early February, Beacon Policy Advisors said in its daily report for clients Tuesday.

“On paper, Cohn likely meets Trump’s expected top two requirements for a Fed chair candidate,” the Beacon analysis said, specifically citing Cohn’s advocacy for deregulation and his likelihood to keep interest rates low as Trump seeks to implement his pro-growth economic policies. Trump has had an awkward relationship with Yellen. During the campaign in 2016, he openly chided the central bank chief, accusing her of keeping interest rates low and using monetary stimulus to prop up the economy under former President Barack Obama. However, he’s been relatively mum about Yellen since taking office in January. He also has emphasized the need for a cheap dollar and low interest rates as the economy seeks escape velocity from an extended period of low growth.

“If Trump wants rates to be as low as possible, (Yellen’s) still the best choice,” said Greg Valliere, chief global strategist at Horizon Investments and a widely followed expert on the Wall Street-Washington connection. “In my career, I’ve never seen a president who favored higher interest rates. That’s pretty unusual.” Cohn, though, also would be more likely to endorse monetary policy that would fit the Trump agenda. [..] “He’s the leading contender,” said Christopher Whalen, an insider in the banking world and currently head of Whalen Global Advisors. “Every Fed chairman in recent memory going back even to (Paul) Volcker went through the White House in one way or the other. … It would certainly make sense.” A White House spokeswoman said the chatter was “entirely speculation” and called the Beacon report and any others “inaccurate.”

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Softwood lumber is a forever problem.

Trudeau’s Reward for Courting Trump Is a Trade War on Lumber (BBG)

Justin Trudeau has always played nice with Donald Trump. The refugee-hugging liberal bit his tongue, flooded Washington with envoys, feted Ivanka Trump on Broadway and relentlessly talked up Canada-U.S. ties. It hasn’t worked. On Monday, Trump teed off a fresh trade war by slapping tariffs of up to 24% on Canadian softwood lumber as battles brew over the North American Free Trade Agreement and the dairy industry. After winning praise for his Trump strategy, with Angela Merkel and others pressing the Canadian prime minister for advice, Trudeau finds himself a target – or an example. “Think of this as the violin Trump gets to play and set the mood of the place,” said Eric Miller, a former Canadian diplomat who is now with the Rideau Potomac Strategy Group.

“It’s a great way to underline America First to the Europeans, Japanese and others, if you actually take a hard line with Canada.” Canada is hardly a poster-child trade offender for Trump. It’s the number-one buyer of U.S. goods with a largely balanced trade relationship (totaling $635 billion in 2016, according to U.S. census data), a peaceful next-door neighbor and among the closest U.S. allies. Trudeau moderated his message, re-calibrated his domestic agenda to court Trump and even helped him dial back G-20 commitments on trade. Trump himself pledged only a “tweaking” of ties before turning on Canada this month.

[..] Canada looks set to stick to its play-nice strategy, and Trudeau had fair warnings on all this. His father, former prime minister Pierre Trudeau, famously described Canada-U.S. relations as “sleeping with an elephant,” with Canada “affected by every twitch and grunt.” This elephant is now wide awake, but Trump’s commerce chief says the softwood dispute is strictly business. Describing Canada as “generally a good neighbor,” Ross distanced Trump from the softwood decision during a White House briefing Tuesday. “I don’t think it has anything to do with the personal relationship between Mr. Trudeau and the president,” he said.

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A story full of craziness: “Over the past decade, housing prices have increased as much as 700% in cities like Beijing and Shanghai.”

Apartheid Without the Racism’: How China Keeps Rural Folks Down (WSJ)

An epic property boom restricted to city dwellers has opened a wealth gap that continues to widen in China, setting back a state campaign to ease poverty and shunting rural dwellers from the middle-class dream. China’s system of hukou, or household registration, a decades-old legacy of the planned economy, binds most Chinese to their place of birth, and denies those outside China’s booming megacities the right to buy property inside them. That has largely shut them out of one of history’s biggest wealth transfers: 98% of Chinese housing is now in private hands from virtually none a generation ago. Over the past decade, housing prices have increased as much as 700% in cities like Beijing and Shanghai. Property now accounts for 70% of personal wealth in the country.

“Housing is everything in China,” said Li Gan, a professor at Southwestern University of Finance and Economics. Unless the Communist Party privatizes land, which is unlikely, farmers will continue to lose ground, he said. Meanwhile, home prices keep rising at a faster pace, with March the quickest in the past five months. China has recently stepped up efforts to fight poverty, including extending medical insurance to the poor and resettling them from areas prone to landslides and other geological threats. It also said it is building a new megacity two hours from Beijing, bringing whirlwind growth to a dusty backwater. Both initiatives suggest leaders’ awareness of the deep inequities along rural-urban lines.

In 1978, when China embarked on economic overhauls, city dwellers earned about twice as much as rural residents; they now earn about 3.5 times as much, according to a study released in April by Paris School of Economics professor Thomas Piketty and World Bank consultant Li Yang. Studies by the Asian Development Bank and the University of Michigan suggest China’s rich-poor gap is even higher once property and hukou status are taken into account. “The urban-rural wealth divide is much greater than the income divide,” Southwestern University’s Mr. Gan said.

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Never left.

Chinese Stock Market Roller Coaster Looks To Be Back In Full Force (CNBC)

The roller coaster that is the Chinese stock market seems to be back in full force. Stocks in Shanghai had been in a period of relative calm so far this year, but a relatively precipitous drop of 2.7% this month has refocused attention on the markets. This year, investors have been buoyed by stronger economic data — first quarter GDP growth came in at 6.9%, which was better than expected. Specific sectors like property and construction also got a boost after Beijing announced the creation of a new special economic zone, dubbed Xiongan New Area, in Hebei province. But, as the saying goes, what goes up must come down. Since late last week, Shanghai stocks have been on a bit of a losing streak. Monday’s drop of more than 1% was the worst thus far this year, and Tuesday saw an uptick that left numbers little changed.

The Shanghai Composite was up about 0.3% by 11 a.m. SIN/HK. This recent volatility complicates government efforts to keep calm in the markets ahead of a major leadership change this fall. Only about 10 days ago, Liu Shiyu, the chairman of the China Securities Regulatory Commission, delivered a speech at the Shenzhen exchange, making an explicit call to maintain market stability, connecting the financial markets to politics directly. Consultancy Eurasia Group pointed out that Liu said, “today there is no finance without politics, and no politics that does not closely watch finance,” noting sensitivities around the coming change in top Communist Party brass and protecting the 100 million investors in China.

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” The costs of failure are borne by the victims.”

Cataclysm (Robert Gore)

Very few people foresaw its failure when it was imminent, even purported experts. The small group who said Soviet communism wouldn’t work because it couldn’t work were disparaged right up until it didn’t work. However, the deck is always stacked in favor of those predicting this or that government will fail. Ultimately they all do because they all come to rest on a foundation of coercion and fraud, which doesn’t work because it can’t work. There is both a quantitative and qualitative calculus for individuals subject to a government: what the government takes versus what individuals get back. Government is a protection racket: turn over your money and it promises physical security from invasion and crime, and adjudication and restitution in the event of civil or criminal wrongs. The quantitative calculus: am I getting more back than I put in? The qualitative calculus: what activities and people does the government help or hinder?

Protection rackets are often indistinguishable from extortion rackets, the “protector” a bigger threat to the “protected” than the threats against which they’re supposedly protected. Such is the case with the US government, as it was with the former Soviet government. Blessed with naturally defensive geographies and huge nuclear arsenals, the chances of the US being attacked are (or were, in the case of the former Soviet Union) remote. The cost for actual protection provided by those governments has been a tiny fraction of what’s been extracted by force or fraud from their citizenries, the very definition of an extortion racket. Freedom militates against stupidity; coercion compounds it. Competitive markets and a wide-open intellectual climate either kill the worst ideas or impel their improvement.

Power corrupts so completely because those who hold it rarely face negative feedback or consequences. Critics are mocked, stifled, imprisoned, or murdered. The costs of failure are borne by the victims. The perpetrators blame those failures on lack of funding or authority and receive more of the same. Nothing succeeds like failure in coercive systems. Just look at the US governments “wars” on poverty, drugs, and terrorism. For rational people in free, competitive systems an ever-expanding gap between shining intentions and dismal reality prompts psychological turmoil. The powerful salve outbreaks of cognitive dissonance with arrogance, which expands apace with their failing programs. Just look at Obamacare, which its progenitor hails as his greatest accomplishment.

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Bit of a problem?

Currency Markets Suggest Traders Get Early Glimpse at UK Government Data (WSJ)

A comparison of trading data for the Swedish krona and British pound may provide further evidence that some investors could be trading with knowledge of U.K. official statistics before they are published. Sweden and Britain, two European countries with widely traded currencies, have very different approaches when it comes to policy on who sees official economic data before it goes out. In Sweden, nobody outside the statistics office, not even the country’s prime minister, is allowed to see sensitive data before release, according to Statistics Sweden, the country’s official data provider. In Britain, over a hundred lawmakers, advisers and press officers get to see some numbers up to a day before it comes out.

The British pound often moves sharply in the hour before data is released, but the krona shows no signs of moving ahead of Swedish numbers, an analysis of trading data between January 2011 and March 2017 suggests. During the hour before unexpectedly strong or weak U.K. data is made public, the pound moved 0.065% versus the dollar on average in the same direction it subsequently did after those numbers came out, according to an analysis prepared for The Wall Street Journal by Alexander Kurov, associate professor of finance at West Virginia University. It showed that the average change in the pound’s value one hour before and after such economic data announcements is 0.127%, meaning around half the shift associated with the statistics came ahead of their official release.

The Swedish krona moved by an average of 0.163% versus the dollar over the same period before and after unexpectedly strong and weak data releases, according to the analysis. But in the hour ahead of public dissemination, the krona drifted only 0.003% in the direction it would end up going after publication. “The evidence of informed trading before U.K. macroeconomic news is very strong,” said Prof. Kurov. “The data offers no indication that informed trading is taking place before comparable Swedish announcements.” [..] Previous research by Prof. Kurov has also shown that traders in the U.S. aren’t anticipating government released statistics with the same precision as those in Britain appear to be. In the U.S., only the president and the chairman of the Council of Economic Advisers receive that data a day in advance.

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So what if the stimulus stops?

Draghi’s Stimulus Could Blunt Populism (BBG)

Mario Draghi’s stimulus didn’t prevent the rise of populists who want to reject the euro, but it might be taking the edge off the economic pain that fueled their support. The European Central Bank president has pushed through measures that have led the currency bloc out of a double-dip recession and cut unemployment, a key source of discontent among voters, by 4 million people in the past four years. Satisfaction with the single currency has been rising in most nations over the same period. Yet as the French presidential election shows, politicians calling for an exit from the bloc are far from out of touch. The National Front’s Marine Le Pen made it past the first round and is on track for a 40% share of the vote in May’s runoff — not enough to win, but still a reminder that an ECB-inspired economic upturn won’t sway everyone.

The recovery “will take away some fuel from populist parties but it is not sufficient to make them disappear,” said Joerg Kraemer, chief economist at Commerzbank in Frankfurt. “It would be wrong to follow a strategy saying: we only have to stimulate the economy enough, to create growth, to solve the problem.” Draghi, who will hold a press conference on Thursday after the Governing Council sets monetary policy, has previously called the ECB’s policies “socially progressive” because they boost consumption, investment and jobs. That addresses one of the key attractions of populism. Le Pen was bolstered by people out of work, winning nine of the 10 mainland French departments that have the highest jobless rates by anywhere from one-quarter to one-third of Sunday’s vote.

The country has barely managed to bring down unemployment since the financial crisis. While polls predict her defeat in the May 7 run-off, Le Pen’s chances of becoming president might hinge on how much voter disaffection reduces turnout, according to analysts who sifted through first-round results. Despite France’s woes, support for the euro there has been recovering. In Italy, where unemployment actually rose last year, it continues to languish and the anti-establishment Five Star Movement has a realistic chance of power.

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While his underlings demand a lot more of it.

Juncker Against ‘Major Cuts’ To Greek Pensions (K.)

European Commission President Jean-Claude Juncker has voiced skepticism over plans to impose further pension cuts in Greece while addressing the need to outline possible measures on debt relief next month. “No major cuts in the pension sector should be pursued by the institutions,” Juncker said in an interview with euro2day.gr financial website on the sidelines of the IMF spring meetings in Washington, adding that “the poor part of the Greek society – the pensioners and the retirees – are suffering.” “We have to acknowledge that Greece is making a huge progress and it will be a bad development if we insist on major cuts in pensions,” Juncker said.

Asked about the reaction of Christine Lagarde, the IMF’s managing director, Juncker said: “I did not get the impression that she was in total opposition to what I was telling her.” The head of the Commission also said EU governments should take steps toward securing a Greek debt relief. “I think that as far as debt relief is concerned, we don’t need other poems… Debt relief measures – reasonable ones – are heavily needed, Juncker said. “I don’t think that this can be done in May. But the eurogroup in May must give a design for future possible debt relief measures,” he said.

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Tsipras says no measures unless debt relief. Want to bet he’ll capitulate on that too?

As Bailout Negotiations Resume, Tsipras Tries To Sweeten Pill (K.)

As Finance Minister Euclid Tsakalotos resumed bailout negotiations in Athens with representatives of the country’s creditors, Prime Minister Alexis Tsipras declared on Tuesday that his government will legislate new tough measures in mid-May but will not enforce them if Greece does not get debt relief. “We entered a negotiation that does not relate strictly to the program itself but also has to do with the debt,” Tsipras told ANT1 channel. He said his government would approve a new raft of measures in Parliament in good faith, anticipating that creditors will follow suit by honoring pledges to offer medium-term debt relief, but will change course if those promises are not met. “A sovereign government can take back something it has voted if an agreement is not honored,” he said, noting that the only reason coalition MPs will approve a new agreement is to secure debt relief.

Tsipras defended his government’s performance in negotiations despite vehement criticism by the opposition, which, he insisted, has offered no viable alternative. “We won some things, we lost some things, but overall the negotiation ended with a positive score as the government secured the countermeasures and labor rights,” he said, referring to reforms that Athens has said will lighten the load of austerity. Noting that a “political agreement” is already in place, Tsipras said he was sure the technical details of the detail will be hammered out by a May 22 Eurogroup summit. He insisted that the new package of measures would be a “ticket out of the program,” referring to the austerity measures underpinning Greece’s bailout. Greek officials gave little detail about negotiations in Athens on Tuesday apart from saying they were “on a good course.”

The premier admitted to having “delusions” when his leftist SYRIZA was in opposition, hoping that a major change in Europe could be brought about by an uprising of the Greek people. “I didn’t hesitate to say that I had illusions,” he said. “We hit a wall,” he said, noting however, that “this battle was not in vain.” As for his one-time battle cry, “Go back Madame Merkel,” Tsipras said he still believed that German Chancellor Angela Merkel should not have championed such tough austerity across Europe but remarked that she showed herself to be a responsible politician in her response to the refugee crisis.

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Will he understand the importance of a stable Greece in the region? Don’t count on it.

Trump On Greece: “They Are In Such A Terrible Situation There” (NM)

Less than 24 hours after the International Monetary Fund closed its four-day meeting in Washington the president himself told Newsmax Monday night that he would soon reveal his policy toward the financial colossus. Although he offered no details, Mr. Trump nonetheless signaled — in announcing his IMF policy sooner rather than later — that he would most likely support keeping the current level of U.S. financial support for the IMF rather than ask Congress to rescind it. “We’ll have something on the IMF in a few days,” Trump said in response to a question from Newsmax, strongly hinting that he was aware of the questions about what the policy of the fund’s largest shareholder would be under its new president. The president spoke to us at a private meeting for conservative journalists in the West Wing of the White House.

Trump also made it clear he was sympathetic to the plight of Greece, now in its eighth year of grappling with a debt that is now at 323 billion euros. Along with the European Central Bank and Eurogroup (the 19 members of the Eurozone that exercise control over the Euro currency), the IMF is one of the members of the troika — the three creditors who provided loans to keep the Greek economy afloat since 2010. “Greece!” Trump exclaimed to us, “They are in such a terrible situation there. It’s awful. Are you Greek?” Trump’s statements came one month after he dealt a jolt to IMF supporters by naming David Malpass, a longtime critic of the fund, as the top U.S. Treasury official overseeing international finance. He subsequently named another IMF skeptic, former investment banker and American Enterprise Institute Visiting Scholar Adam Lerrick, as deputy to Malpass.

During the recent IMF/World Bank spring meeting in Washington, participants made it clear they had a nervous apprehension about how they would be treated by the Trump administration. “It is important that the IMF and the creditors reach an honorable compromise ensuring the sustainability of the Greek debt,” Greek Finance Minister Euclid Tsakalotos told me. “We are waiting to see what the new administration in the U.S. thinks. We don’t want this to drag on.”

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This is a solvable problem.

EU Auditors Say Refugee Centers In Greece, Italy Overwhelmed (AP)

European Union auditors say that centers set up in Greece and Italy to fast-track the registration of migrants are overwhelmed and urgently require more experts, particularly to help children. In a report released Tuesday, the auditors say that two more centers known as “hotspots” are needed to process migrants in Italy and that facilities on Greek islands where people arrive from Turkey must be improved. It says that in Greece “there are still more migrants arriving at the hotspots than leaving, and they are seriously overcrowded.” Some children have been held in “restrictive conditions” there for more than three months. The auditors say the hotspots in Greece and Italy are designed to process about 8,000 people but are routinely dealing with 15,000-16,000 migrants.

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No, transfer them to northern Europe, not to other camps in Greece.

Amnesty Calls For Shutdown Of Greece’s Elliniko Refugee Camp (K.)

Amnesty International has made an urgent appeal for the shutdown of the Elliniko migrant and refugee camp on Athens’s southern coast and is calling for the transfer of its 1,200 occupants to alternative shelters. The rights organization is decrying appalling living conditions at the facility and says that women and underage girls live in constant fear of sexual and verbal abuse. According to Amnesty, women at the camp feel that they might come under attack at any moment in their tents, toilets and showers. Many avoid leaving their tents altogether for fear of harassment. The camp at the site of Athens’s former airport is inhabited mainly by Afghans who have been living in squalor in tents for over a year, with an insufficient number of toilets and showers, and limited privacy.

The situation has reportedly led to increased rates of depression and anxiety, as well as suicide attempts. Meanwhile, European Union auditors said in a report released on Tuesday that the centers set up in Greece and Italy to fast-track the registration of migrants are in urgent need of more expert help – particularly with regard to children – as they are overcrowded. “There are still more migrants arriving at the hotspots than leaving, and they are seriously overcrowded,” the report said, adding that children are being held in “restrictive conditions” for more than three months. The auditors called for the improvement of facilities on the Greek islands and said two more hotspots are needed to process migrants in Italy. Hotspots in Greece and Italy, the report said, are designed to process some 8,000 people but routinely deal with 15,000-16,000 migrants.

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Apr 252017
 
 April 25, 2017  Posted by at 7:59 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait 1972

 

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)
Trump Summons Entire Senate To White House Briefing On North Korea (G.)
Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)
The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)
Canadians’ Confidence In Housing Hits Record High (HPoC)
Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)
Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)
Rising Defaults In China Reveal Hidden Debt (BBG)
China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)
Naked Selfies Used As Collateral For Chinese Loans (AFP)
Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)
Ontario To Pay Guaranteed Incomes To The Poor (AFP)
Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)
At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

 

 

They’ve been doing this forever: “..the fight is the “longest-running battle since the Trojan War.”

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)

U.S. President Donald Trump intensified a trade dispute with Canada, slapping tariffs of up to 24% on imported softwood lumber in a move that drew swift criticism from the Canadian government, which vowed to sue if needed. Trump announced the new tariff at a White House gathering of conservative journalists, shortly before the Commerce Department said it would impose countervailing duties ranging from 3% to 24.1% on Canadian lumber producers including West Fraser Timber. “We’re going to be putting a 20% tax on softwood lumber coming in – tariff on softwood coming into the United States from Canada,” Trump said Monday, according to a tweet by Charlie Spiering at Breitbart News. A White House official confirmed the comment.

The step escalates an economic battle among neighboring countries that normally have one of the friendliest international relationships in the world. U.S. Commerce Secretary Wilbur Ross amplified Trump’s remarks in a statement afterward that also referenced a fight over a new Canadian milk policy that U.S. producers say violates Nafta. “It has been a bad week for U.S.-Canada trade relations,” Ross said, adding “it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States.” He said the Commerce Department “determined a need” because of unfair Canadian subsidies to the lumber industry to impose “countervailing duties of roughly one billion dollars.” In a dig at NAFTA, which Trump has said he wants to renegotiate, Ross added, “This is not our idea of a properly functioning Free Trade Agreement.”

[..] The so-called countervailing duties, which counter what the U.S. considers Canadian subsidies, came in below some analyst expectations. CIBC analyst Hamir Patel forecast the initial combined countervailing and anti-dumping duties could reach 45 to 55%, he said in an April 23 note. The U.S. may also apply anti-dumping duties if it determines Canadian firms are selling for below costs. That decision is expected in June. “It definitely could’ve been a heck of a lot worse,” Kevin Mason at ERA Forest Products Research said by phone. “I think a lot of people were bracing for a higher duty.”

[..] Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that. Robert Lighthizer, Trump’s nominee to be the next U.S. Trade Representative, said at his confirmation hearing last month that he views the lumber dispute as the top trade issue between the U.S. and Canada. Oregon Democratic Senator Ron Wyden told Lighthizer the fight is the “longest-running battle since the Trojan War.”

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Huffin’-and-a-puffin’.

Trump Summons Entire Senate To White House Briefing On North Korea (G.)

The entire US Senate will go to the White House on Wednesday to be briefed by senior administration officials about the brewing confrontation with North Korea. The unusual briefing underlines the urgency with which the Trump administration is treating the threat posed by Pyongyang’s continuing development of nuclear weapons and missile technology. It follows a lunch meeting Trump held with ambassadors from UN member states on the security council on Monday where he emphasised US resolve to stop North Korea’s progress. “The status quo in North Korea is unacceptable and the council must be prepared to impose additional and stronger sanctions on North Korean nuclear and ballistic missile programs,” Trump said at the meeting. “North Korea is a big world problem, and it’s a problem we have to finally solve.”

On Friday the US secretary of state, Rex Tillerson, is due to chair a security council foreign ministers’ meeting on the issue in New York, at which the state department said he would call once more for the full implementation of existing UN sanctions or new measures in the event of further nuclear or missile tests. “This meeting will give the security council the opportunity to discuss ways to maximise the impact of existing security council measures and to show their resolve to response further provocations with appropriate new measures,” said Mark Toner, state department spokesman. Senators are to be briefed by the defence secretary, James Mattis, and Tillerson on Wednesday. Such briefings for the entire senate are not unprecedented but it is very rare for them to take place in the White House, which does not have large secure facilities for such classified sessions as Congress.

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Not going to be easy. Trump’s too desperate to get a deal done.

Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)

President Donald Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% to fulfill a promise he made during his campaign, according to a White House official. The president on Wednesday plans to make public the broad outlines of what he wants to change in the tax code, though the details likely will be left until later negotiations among congressional leaders and officials from Treasury. Trump’s top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin will brief House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the leaders of congressional tax-writing committees – House Ways and Means Committee Chairman Kevin Brady and Senate Finance Committee Chairman Orrin Hatch.

While Trump and Ryan broadly agree on sharply cutting individual income and corporate taxes, there are areas of disagreement between the two. On the campaign, Trump called for a corporate tax rate of 15%; Ryan wants 20%, and he has warned that cutting it an additional 5 percentage points could prevent the ultimate tax plan from being revenue neutral. Without Democratic support, a plan would have to be revenue neutral to meet the criteria set by lawmakers to make tax changes permanent. “I’m not sure he’s going to be able to get away with that,” Hatch told reporters Monday. “You can’t very well balance the budget that way.”

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Demand goes down because people have less money to spend. All the rest is humbug.

The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)

Lackluster gasoline demand is once again raising concerns that the oil market won’t be able to escape the doldrums. Demand for U.S. gasoline has recovered since January, but remained below 2016 levels throughout much of this year. Now, analysts are worried weak consumption will cause gasoline stockpiles to keep building and eventually result in weaker crude oil demand and pricing. U.S. gasoline futures were down more than 1% on Monday, reflecting demand concerns as refiners emerge from the winter maintenance season and prepare to turn out more fuel. Meanwhile, U.S. crude settled 39 cents lower at $49.23, extending last week’s deep losses. “As gas prices drop, that creates an undertow for the entire crude oil market,” said Tom Kloza, global head of energy analysis at Oil Price Information Service.

Part of the problem is a tough comparison with extraordinarily low gasoline prices last year. The national average gasoline price on Monday was nearly 28 cents above last year’s level, according to GasBuddy.com. “I’m in the camp that says last year was a little bit of the anomaly,” Kloza said. “Gas was so cheap that we drove a little bit more almost capriciously. This year, I just don’t think it’s going to happen.” In a troubling sign, the nation’s gasoline station operators have reported at industry conferences that their sales are down 1.5 to 2% this year, according to Andy Lipow, president of Lipow Oil Associates. “When you hear retailers telling you that their demand is down you’ve got to be a believer,” he told CNBC. Lipow said he fears that trend will carry through for the balance of 2017. Demand is certain to rise as the summer driving season ramps up, but Lipow sees stockpiles remaining relatively high.

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Stark raving madness. A housing market that is rising at ‘only’ 9.5% per year is labeled ‘rational’.

Canadians’ Confidence In Housing Hits Record High (HPoC)

The experts are getting louder in their warnings that a housing bubble has formed in some parts of Canada, but Canadians don’t seem worried. In fact, confidence in the housing market hit a record high in the latest weekly Bloomberg-Nanos index — even as respondents turned negative on their own personal finances. The survey found 48.5% of Canadians expect house prices to rise in the next six months, the highest level recorded in the survey since 2008. Fewer than 11% expect to see house prices decrease. “Bullish sentiment on real estate in Canada continues to drive consumer confidence,” pollster Nik Nanos said in a statement. “Household expectations have improved by roughly 10% since the start of the year as the effects of the oil price shock have stabilized and the focus has moved toward rising property values,” Bloomberg economist Robert Lawrie said.

“In recent weeks, however, consumer sentiment regarding personal finances began drifting lower, with extended household balance sheets perhaps the next focus of concern for policymakers.” High debt levels are precisely why many market observers are growing concerned about Canada’s priciest housing markets, namely the Toronto and Vancouver regions. House prices in Toronto jumped 33% in March from a year earlier, to an average of $916,567. While Vancouver’s house prices have moderated over the past six months, they remain elevated, with the benchmark price at $919,300 in March.

National Bank of Canada, which co-publishes the Teranet house price index, warned recently that “irrational exuberance” may be setting into some Canadian housing markets, noting that more than half of Canada’s regional markets are seeing price growth above 10% annually. With mortgages ballooning, Canadian household debt has repeatedly hit record highs in recent years, and now stands at $1.67 of debt for every dollar of disposable income. Those elevated debt levels are the main reason one why the Bank for International Settlements (BIS), a Geneva-based “central bank of central banks,” warned recently that Canada has the second-highest risk of a financial crisis, behind only China.

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Essential and repeated here a 1000 times: “Bubbles have a habit of overshooting on the downside when they finally burst.”

Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class. Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains. Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities. When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008. The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector. China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing. About 15% of China’s GDP is housing-related. This is extraordinarily high. In the 2003-08 housing bubble, housing’s share of U.S. GDP barely cracked 5%. Of even greater concern, local governments in China depend on land development sales for roughly 2/3 of their revenues.

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”

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“..we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops.”

Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)

Between autumn 1977 and Christmas 1979, interest rates rose from 5% to 17%. If you were a young boomer whose biggest cost was a variable rate mortgage, that would have hurt. In 2009, by contrast, interest rates were cut to a record low of 0.5%, and stayed there for the better part of a decade. When eventually they did move again, it was down. You don’t know you’re born. Except, of course, you do – because, if you’re reading this and you’re under 40, there’s a pretty good chance you’re still stuck paying rent. Yes, interest rates are low; no, this is not particularly helpful. Even if you do have a mortgage, it’s probably a fixed rate one because, let’s be honest, those rates are going up again one day. But not, it seems, today. The Yorkshire Building Society has just launched a new mortgage that charges an interest rate of just 0.89%. “We are very pleased to offer borrowers the lowest mortgage rate ever available,” said a spokesman.

“The cost of funding has fallen in recent weeks and, as a financially strong building society with no external shareholders to satisfy, we have the ability to pass this on to borrowers.” (“We used to dream of mortgages at under 1%,” say the boomers.) So does that means that owning a home is now cheaper than it’s ever been? Well, no, of course not. For one thing, this isn’t a fixed rate deal. It’s actually a (bear with me on this) two-year-long discount of 3.85% to the standard variable rate (SVR) of 4.74%. That means it’s very, very unfixed indeed: a normal tracker mortgage moves in response to Bank of England rates; an SVR one moves in response to the lender’s whims. Accepting this mortgage means placing a bet that the Yorkshire Building Society will be nice to you. It also comes with an unusually high arrangement fee of £1,495, but this shouldn’t bother you, because you probably can’t get that rate anyway. To even be considered, you need a deposit worth 35% of the value of your home.

[..] But there’s another, more sinister, reading of the recent rash of ultra-low mortgage rates: it suggests we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops. But bubbles tend to burst. Prices can’t rise forever: one day, interest rates must surely rise. When the inevitable happens, there is a danger that those who took advantage of this deal may find their equity wiped out – and the rate they’re paying will shoot through the roof.

That would obviously be very sad for those who are affected; for those shut out of home ownership, though, it may be no bad thing. That’s because nine years of record-low interest rates have probably contributed to the fact that house prices have soared out of reach; and higher prices have meant increasingly unattainable deposits. A rise in interest rates could, paradoxically, make housing more affordable.

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Companies guaranteeing each other’s crappy debt. What could go wrong? Problem is, Beijing had let them do it for years.

Rising Defaults In China Reveal Hidden Debt (BBG)

Rising defaults in China are unearthing hidden debt at companies across the country. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains. China’s banking regulator has ordered checks of such cross-guaranteed loans, Caixin reported Friday. Scrutiny is mounting after a corn oil producer in the eastern province of Shandong said last month it had guaranteed debt of a neighboring aluminum product manufacturer which is now stuck in a cash crunch.

Just days before that, a local government financing vehicle in China’s southwest had to repay an auto parts maker’s loans it had guaranteed after the latter defaulted. “Disclosure of such guarantees isn’t timely,” said Qiu Xinhong at Shenzhen-based First State Cinda. “Sometimes, it’s like a buried mine and you don’t know when the risks will explode.” This debt minefield could be big. The amount of loan guarantees at privately held firms in China is equivalent to 11% of their equity, and at LGFVs is 18%, according to Citic Securities. The load is even heavier at weaker borrowers. About 44% of issuers rated lower than AA- have a ratio of more than 30%, according to Everbright Securities. The phenomenon is less common in the U.S. because banks don’t require such guarantees to offer loans, according to Fitch Ratings.

“If companies in the same region offer a huge amount of guarantees for each other’s debt, it would form a guarantee web and deepen interconnections among the companies,” said Gang Meng, director of rating at Golden Credit Rating International Co. in Beijing. “If one company has to repay debt for its guaranteed company, risks would quickly ripple to other companies in the web, which will result in a butterfly effect.” [..] Guarantors don’t mark the pledges on their balance sheets and often disclose them only on an annual basis. Such shadow debts pose rising risks after central bank tightening pushed up onshore corporate bond yields to two-year highs and defaults on local notes surged to a record.

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The distinction between state banks and shadows has become very murky.

China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)

A $1.7 trillion source of inflows into Chinese markets has suddenly switched into reverse, roiling the nation’s money management industry and sending local bonds and stocks to their biggest losses of the year. The turbulence has centered on so-called entrusted investments – funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China’s financial system and reducing transparency.

The banks’ withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking predict the selloff will deepen this year. “We are seeing an exodus of funds,” said He Qian at HFT Investment Management, which oversaw about 189 billion yuan ($27.5 billion) as of last year. He was one of about half-a-dozen asset managers and analysts who said banks have started scaling back their entrusted investments.

The arrangements have become an important part of China’s shadow finance system. When banks sell wealth-management products – the ubiquitous savings vehicles that offer higher yields than deposits – the firms sometimes farm out client money to entrusted managers such as hedge funds and mutual funds. The managers invest the cash in bonds, stocks and other securities, hoping to generate enough income to cover the banks’ promised returns to WMP clients – plus some extra for themselves.

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You better look good than feel good.

Naked Selfies Used As Collateral For Chinese Loans (AFP)

Hundreds of photos and videos of naked women used as collateral for loans on a Chinese online lending service have leaked onto the web, highlighting regulatory problems in the fast-growing peer-to-peer marketplace. A 10-gigabyte file posted on the internet exposed the personal details of more than 160 young women who were asked to provide the explicit material to secure money through online lending platform Jiedaibao. Launched by JD Capital in 2015, Jiedaibao allows lenders to operate anonymously but requires borrowers to reveal their real names when making transactions. Loan amounts and interest rates can be customised to meet the needs of users – often people who have a hard time accessing loans through more traditional financial institutions, like banks.

Interest on the “nude loans” reached an astonishing 30% a week, according to the Global Times newspaper. Lenders told female borrowers that if they failed to repay the loans, their nude photos would be sent to their families and friends, whose information was also required for some transactions, the article said. Material in the file put on the web last Wednesday showed some borrowers also promised to repay loans with sexual favours, according to screen captures posted on social media websites. In a statement on its official Twitter-like Weibo account, Jiedaibao said it had tracked down the accounts of several borrowers through photos and ID information circulated online and had frozen the suspected lenders’ accounts. “The ‘nude loans’ deals were mainly initiated and completed offline, and Jiedaibao only played the role of a money transfer platform in the deals,” the statement said.

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Derivatives used this way are instruments of massive wealth destruction. Why use different rates for each side of the deal? “..the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate..”

Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)

Derivatives burdened Italy’s public debt again last year for a record amount of €8.3 billion ($9 billion), making the country the biggest swaps loser in the euro region. Losses related to swaps held by the nation added €4.25 billion to the country’s debt while net liabilities’ burden totaled €4.07 billion, based on data released Monday by EU statistics office Eurostat. In the 2012-2016 period, the burden totaled €29.6 billion, also a euro-area record. Italy’s derivative-related losses and net liabilities were higher than those for the whole euro region combined both in 2016 and in the five-year period as some countries actually saw the swaps helping to alleviate their debts. Governments across the euro region have used derivatives to manage their debt-financing costs and to hedge against sudden changes in rates and excessive exchange-rate volatility.

Those deals have sometimes backfired with the effect of pushing nations’ debts even higher. In the existing interest-rate swaps the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate,” the government said earlier this month in an annex to its annual Economic and Financial Document. Since starting from November 2015, the Euribor stayed negative and the impact on the flow indexed to that rate was that the Treasury had to pay money to its counterparts, instead of being paid by them, the document also said. Italy’s public debt rose last year to €2.2 trillion, or 132.6% of the country’s GDP, Eurostat said in a separate report on Monday.

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it’s important to get it right.

Ontario To Pay Guaranteed Incomes To The Poor (AFP)

Ontario has launched a pilot program to provide a guaranteed basic income to a few thousand people to test its effects on recipients and public finances, the Canadian province announced on Monday. Provincial premier Kathleen Wynne said the program would provide a “basic income” for three years to 4,000 people living under the poverty line. “We want to find out whether a basic income makes a positive impact in people’s lives,” Ms Wynne said, adding that “everyone should benefit from Ontario’s economic growth.” Income support payments will be as high as Can$16,989 (£9,800) a year for an individual, or Can$24,027 for a couple, plus an additional Can$6,000 for the disabled.

The figures will be reduced for those holding part-time jobs – they will receive 50 cents less for each dollar earned. As a concrete example, a single person with a yearly salary of Can$10,000 will receive an additional payment of Can$11,989. The 4,000 participants, aged 18 to 65, have been chosen at random in three cities: Hamilton and Lindsay in the Toronto suburbs and Thunder Bay in the province’s west. The province estimates the cost of the program at Can$50 million a year. Ontario is the most heavily populated Canadian province, with 38% of the country’s 36.5 million inhabitants. 13% of Ontario residents live below the poverty line, according to Statistics Canada.

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What the FBI did has already been declared illegal in New Zealand courts.

Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)

FBI Director James Comey is currently in New Zealand and if Kim Dotcom has his way, Comey could find himself being questioned by the New Zealand police. The internet entrepreneur, who is wanted by the United States on multiple charges including fraud and copyright infringement, filed a complaint with the police Tuesday against the FBI director for what Dotcom called theft of his data by the agency. The alleged theft happened when the police raided Dotcom’s home Jan. 20, 2012, as part of investigations instigated by the U.S. The charges against him are based on the now-defunct website Megaupload that he operated, where users could share content with each other.

Some of that content was illegal to share, but according to New Zealand laws, internet service providers are not held responsible for the actions of their users. In his complaint Tuesday, Dotcom’s lawyer urged the police to urgently question Comey, who is in New Zealand for a conference. The grounds for the complaint are that the FBI received copies of data that was taken from Dotcom’s home during the 2012 raid, an act which courts in the country have held to be illegal, according to the complaint.

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The value you put on someone else’s life inevitably becomes the value of your own life.

At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

At least 16 people, including two children, drowned after an inflatable boat carrying refugees and migrants sank off Greece’s Lesbos island, authorities said on Monday. They are believed to be the first confirmed deaths in Greek waters this year of migrants or refugees making the short but dangerous crossing from Turkey on overcrowded rubber dinghies. Nine bodies were recovered in Greek territory and another seven in Turkish waters, Greek and Turkish coastguard officials said. Two survivors have been rescued. The two women, one of whom is pregnant, told the United Nations refugee agency UNHCR that 20 to 25 people were on board when the dinghy capsized around 1900 GMT on Sunday. The women are from Cameroon and the Democratic Republic of Congo.

Though fewer than 10 nautical miles separate Lesbos from Turkish shores, hundreds of people have drowned trying to make the crossing since Europe’s refugee crisis began in 2015. In that year, Lesbos was the main gateway into the European Union for nearly a million Syrians, Iraqis and Afghans. But a deal in March 2016 between the EU and Ankara has largely closed that route. Just over 4,800 people have crossed to Greece from Turkey this year, according to UNHCR data. An average of 20 arrive on Greek islands each day. “The number of people crossing the Aegean to Greece has dropped drastically over the past year, but this tragic incident shows that the dangers and the risk of losing one’s life remains very real,” said Philippe Leclerc, UNHCR Greece representative.

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Apr 232017
 
 April 23, 2017  Posted by at 8:30 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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How we got here

 

Disintegrating Left-Right Divide Sets Stage For French Political Upheaval (G.)
The Main Issue in the French Presidential Election: National Sovereignty (CP)
ECB Stands Ready to Support Banks If Needed After France Vote (BBG)
It Is Time To Break Up The Fed (IFT)
China’s Credit Excess Is Unlike Anything The World Has Ever Seen (Brown)
The US Retail Bubble Has Now Burst (ZH)
UK Retail Sales Volumes Fall At Fastest Rate In Seven Years (Ind.)
BHS Crash Sets Trend For A Chain Of Store Closures On UK High Streets (G.)
German Intelligence Spied On Interpol In Dozens Of Countries (R.)
Pope Likens Refugee Holding Centers To ‘Concentration Camps’ (G.)

 

 

This is a global issue, the left has moved so far right it has no identity left. Nice detail: The Parti Socialiste of the current president could be bankrupted by its dismal campaign.

Disintegrating Left-Right Divide Sets Stage For French Political Upheaval (G.)

Do they vote for or against? Do they choose a candidate who represents their politics or one who, opinion polls suggest, is most likely to defeat the woman whose presence as one of two candidates in the second-round runoff in a fortnight seems a given, but whose name still provokes a frisson of fear for many: the far-right Front National leader Marine Le Pen, with her anti-Europe, anti-immigration, “French-first” programme? As election day has approached, and with the added complication of the terrorist threat following the shooting of a police officer on the Champs-Elysées in Paris, the dilemma has caused particular anguish for France’s mainstream leftwing voters, whose candidate is trailing in fifth place.

There are no certainties, but barring all other candidates “dropping from a nasty virus”, as one political analyst put it, Benoît Hamon is facing a crushing defeat in the first round, ending his leadership dreams and putting the future of the country’s Socialist party (PS) in question. In a decline that mirrors that of Britain’s Labour party, the PS is facing years in a political desert, if it survives. If Hamon finishes last among the leading candidates, as polls predict, the party’s only hope of salvaging a thread of power will lie in winning enough parliamentary seats in the legislative elections that follow to form an influential group in the national assembly. Even then it will most likely be part of a coalition rather than a fully functioning opposition.

Even worse, and even more unthinkable, if leftwing voters turn en masse to Jean-Luc Mélenchon as their best hope of a place in the second round against the frontrunners – independent centrist Emmanuel Macron, Le Pen or the conservative François Fillon – and Hamon polls less than 5%, none of Hamon’s campaign expenses will be reimbursed, bankrupting the PS. “Under 5% and the situation is really catastrophic,” Marc-Olivier Padis, of the Paris-based thinktank Terra Nova, told the Observer. “And it’s possible. We are hearing many socialists wondering if they should vote Mélenchon or Macron. The only thing that can save the party in this election is if enough socialists vote for Hamon out of loyalty.”

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It’s about the economy, guys. Too many people are left with too little. That’s when they choose to be their own boss -again-.

The Main Issue in the French Presidential Election: National Sovereignty (CP)

The 2017 French Presidential election marks a profound change in European political alignments. There is an ongoing shift from the traditional left-right rivalry to opposition between globalization, in the form of the European Union (EU), and national sovereignty. Standard media treatment sticks to a simple left-right dualism: “racist” rejection of immigrants is the main issue and that what matters most is to “stop Marine Le Pen!” Going from there to here is like walking through Alice’s looking glass. Almost everything is turned around. On this side of the glass, the left has turned into the right and part of the right is turning into the left. Fifty years ago, it was “the left” whose most ardent cause was passionate support for Third World national liberation struggles.

The left’s heroes were Ahmed Ben Bella, Sukarno, Amilcar Cabral, Patrice Lumumba, and above all Ho Chi Minh. What were these leaders fighting for? They were fighting to liberate their countries from Western imperialism. They were fighting for independence, for the right to determine their own way of life, preserve their own customs, decide their own future. They were fighting for national sovereignty, and the left supported that struggle. Today, it is all turned around. “Sovereignty” has become a bad word in the mainstream left. National sovereignty is an essentially defensive concept. It is about staying home and minding one’s own business. It is the opposite of the aggressive nationalism that inspired fascist Italy and Nazi Germany to conquer other countries, depriving them of their national sovereignty.

The confusion is due to the fact that most of what calls itself “the left” in the West has been totally won over to the current form of imperialism – aka “globalization”. It is an imperialism of a new type, centered on the use of military force and “soft” power to enable transnational finance to penetrate every corner of the earth and thus to reshape all societies in the endless quest for profitable return on capital investment. The left has been won over to this new imperialism because it advances under the banner of “human rights” and “antiracism” – abstractions which a whole generation has been indoctrinated to consider the central, if not the only, political issues of our times.

The fact that “sovereignism” is growing in Europe is interpreted by mainstream globalist media as proof that “Europe is moving to the right”– no doubt because Europeans are “racist”. This interpretation is biased and dangerous. People in more and more European nations are calling for national sovereignty precisely because they have lost it. They lost it to the European Union, and they want it back. That is why the British voted to leave the European Union. Not because they are “racist”, but primarily because they cherish their historic tradition of self-rule.

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French government debt could become ineligible as collateral if Le Pen and/or Melenchon do too well.

ECB Stands Ready to Support Banks If Needed After France Vote (BBG)

ECB officials signaled that their liquidity facilities remain available to counter any market tension that may arise in the aftermath of France’s presidential election, the first round of which takes place Sunday. “The central bank should be ready for any shocks that should materialize,” Governing Council member Ignazio Visco said at a press conference during the IMF spring meetings in Washington on Saturday. “And if there were to be such a shock, the instruments are the instruments that a central bank should use, which are liquidity provision, refinancing when needed. And intervening very quickly is really very easy now given the instruments we have.” Like the U.K.’s vote on whether to continue its membership of the EU in June, central bank readiness to support the banking system has been sought given the potential for such political events to create market turmoil.

In this case, a strong showing in the first round by anti-euro candidate Marine Le Pen could cast doubt over the future of the single currency. Visco argued that the presence of central bank facilities makes it less likely they’ll actually be needed. [..] The euro area has years of experience with banking freeze-ups and has multiple instruments to address liquidity shortages that strike otherwise solvent banks. In particular, in the event a sudden credit-rating downgrade made French government debt ineligible as collateral for normal ECB refinancing operations, so-called Emergency Liquidity Assistance may be available from the Bank of France. “If there should be problems for specific French banks, liquidity-wise, then the ECB has instruments to help solvent banks with liquidity problems,” Governing Council member Ewald Nowotny said on Saturday. “This is ELA, emergency liquidity assistance. That could be given of course. But we don’t expect any special movements.”

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“Donald Trump and the GOP need an easy, highly visible legislative victory. Breaking up the Fed meets this criteria.”

It Is Time To Break Up The Fed (IFT)

Donald Trump and the GOP need an easy, highly visible legislative victory. Breaking up the Fed meets this criteria. In the aftermath of the Great Financial Crisis, policymakers rushed out the Dodd-Frank Act. This Act increased the Fed’s responsibilities. However, policymakers did this without examining the Fed’s performance in the run-up to the financial crisis. Had they done so, they would have seen the Fed failed as a bank supervisor and regulator. This failure alone mandates breaking up the Fed. After all, why should the Fed be given a second chance given how much its failure hurt the global real economy and taxpayers? Furthermore, this failure strongly suggests policymakers shouldn’t have rewarded the Fed with additional responsibilities. After all, there is no reason to believe the Fed’s failure as a bank supervisor and regulator won’t be repeated with any new responsibilities.

To the extent these new responsibilities exist in the Dodd-Frank Act, they too should be stripped away. What the Fed should be left with is responsibility for monetary policy and the payment system. All of the Fed’s bank supervision and regulatory responsibility should be transferred to the FDIC. There are many significant benefits from doing this including it reinforces market discipline on the banks. Unlike the Fed, the FDIC is responsible for protecting the taxpayers and has the authority to close a bank. The FDIC’s primary responsibility is minimizing the risk of loss by the taxpayer backed deposit insurance fund. It achieves this initially through regulation and supervision, but more importantly by a willingness to step in and close a bank that threatens to cause a loss to the fund.

Shareholders and unsecured bank creditors are keenly aware they are likely to lose their entire investment should the FDIC step up and close the bank they are invested in. As a result, they have an incentive to exert discipline on bank management to limit its risk taking so the bank is never taken over by the FDIC. For those who would argue that it is important to keep bank supervision and regulation together with monetary policy, I would point out there is no evidence showing this produces a better outcome. In the run-up to the Great Financial Crisis, the Bank of England and the ECB did not have supervision and regulation responsibility. The Fed did. Talk about a perfect controlled experiment.

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China needs more than $13 to create $1 of growth.

China’s Credit Excess Is Unlike Anything The World Has Ever Seen (Brown)

From a global macroeconomic perspective, we encourage readers to consider that the world is experiencing an extended, rolling process of deflating its credit excesses. It is now simply China’s turn. For context, Japan started deflating their credit bubble in the early 1990s, and has now experienced more than 20 years of deflation and very little growth since. The US began its process in 2008, and after eight years has only recently been showing signs of sustainable recovery. The euro zone entered this process in 2011 and is still struggling six years onward. We believe China is now entering the early stages of this process. Having said that, we believe that Chinese authorities have a viable plan for deflating their credit excess in an orderly fashion.

Please stay posted as we will review this multi-pronged, market-based approach in our next column. For now, let’s turn our attention to the size of the credit excess that China created and why we estimate it to be the largest in the world. A credit excess is created by the speed and magnitude of credit that is created – if too much is created in too short a time period, excesses inevitably occur and non-performing loans (NPLs) emerge. To illustrate the credit excess that has been created in China, let’s review several key indicators, including the: 1) flow of new credit; 2) stock of outstanding credit; 3) credit deviation ratio (i.e., excess credit); 4) incremental capital output ratio (efficiency of credit allocation).

The US created 58% of GDP between 2002-07, and the global financial crisis followed. Japan created credit equivalent to the entire size of its economy between 1985-90 and subsequently experienced more than 20 years of deflation (admittedly reflecting the lack of restructuring). Thailand created a significant real estate bubble between 1992-97 and ended up with about 45% NPL ratios. Spain created credit equivalent to 116% of GDP between 2002-07 and still is trying to address a 20% unemployment rate. China created 139% of GDP in new credit between the first quarter of 2009 and the third quarter of 2014 (when GDP growth peaked), far greater than what was created in other major credit bubbles globally.

[..] Another important measure to assess the amount of credit in the economy which is “excessive” is the credit-to-GDP gap, as reported by the Bank of International Settlements. This ratio measures the difference between the current credit-to-GDP ratio in an economy against its long-term trend of what is necessary to optimally support long-term GDP growth. It is akin to measuring the amount of credit that is productively deployed into an economy. This metric is used by the Basel III framework in determining countercyclical capital buffers for a country’s banking system when credit creation becomes too fast (i.e., high credit growth requires higher capital ratios for banks).

Finally, to show that the pace of credit creation will necessarily slow, thereby exposing misallocated credit and driving the emergence of new NPL formation, we turn to the deterioration in China’s incremental capital output ratio. This ratio is the measure of the number of units of input required to produce one unit of GDP. For the 15 years prior to the credit impulse in 2009-14, China’s incremental capital output ratio has been consistently between two and four. Meaning that two to four yuan in fixed asset investment created one yuan in GDP. But as a result of the credit-driven economic growth model, and the excessive credit that has been created (and the subsequent excess capacity in the industrial economy), China’s investment efficiency has deteriorated to the point that its incremental capital output ratio is now over 13. Said another way, every 1 yuan in new fixed asset investment is now creating only 7 fen in GDP.

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Full employment, anyone?

The US Retail Bubble Has Now Burst (ZH)

The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures. While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:”Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008.”

According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

As the WSJ calculates, at least 10 retailers, including Limited Stores, electronics chain hhgregg and sporting-goods chain Gander Mountain have filed for bankruptcy protection so far this year. That compares with nine retailers that declared bankruptcy, with at least $50 million liabilities, for all of 2016. On Friday, women’s apparel chain Bebe Stores said it would close its remaining 170 shops and sell only online, while teen retailer Rue21 Inc. announced plans to close about 400 of its 1,100 locations. Another striking fact: on a square footage basis, approximately 49 million square feet of retail space has closed YTD. Should this pace persist by the end of the year, total square footage reductions could reach 147M square feet, another all time high, and surpassing the historical peak of 115M in 2001.

There are several key drivers behind the avalanche of “liquidation” signs on store fronts. The first is the glut of residual excess retail space. As the WSJ writes, the seeds of the industry’s current turmoil date back nearly three decades, when retailers, in the throes of a consumer-buying spree and flush with easy money, rushed to open new stores. The land grab wasn’t unlike the housing boom that was also under way at that time. “Thousands of new doors opened and rents soared,” Richard Hayne, chief executive of Urban Outfitters Inc., told analysts last month. “This created a bubble, and like housing, that bubble has now burst.”

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No matter how you try to explain it away, in the end it’s just people having less to spend.

UK Retail Sales Volumes Fall At Fastest Rate In Seven Years (Ind.)

Retail sale volumes slumped in March, seeming to confirm doubts about the robustness of the consumer-led economy in the wake of last summer’s Brexit vote. According to the Office for National Statistics, sales were down 1.8% in the month, against City expectations of a 0.2% decline. The monthly data can be volatile and March’s decline follows a 1.7% spike in February, but the ONS itself highlighted the weakening trend this year and noted that over the three months to March there was the first quarterly decline in volumes since 2013. In the first quarter of 2017 sales were down 1.4%, the biggest decline since the first three months of 2010 when they fell 2%.

Retail sales performed much better than expected in the immediate wake of last June’s Brexit vote, helping to boost overall GDP growth and confounding widespread expectations that the economy would fall into recession. But economists said the latest data suggested gravity was now asserting itself as inflation, stemming from the sharp depreciation of the pound since last June, eats into incomes and wage growth remains chronically weak. “We should see these retail sales figures as the start of a period of much weaker consumer spending growth – which will act as a drag on the overall progress of the UK economy over this year and next,” said Andrew Sentance, senior economic adviser at PwC.

“This is the clearest indication yet that the expected slowdown in the UK economy has begun, and we should expect to see this confirmed in other economic data over the next few months.” James Knightley, an economist at ING described the figures as “dreadful”. “The story for the household sector isn’t great right now. Inflation is eating into household spending power with wages once again failing to keep pace with the rising cost of living. There is also a growing sense of job insecurity highlighted in some surveys, which may also be making households a little nervous,” he said. The household saving ratio, the gap between the sector’s aggregate income and spending, fell to just 3.3% in the final quarter of 2016, the weakest on record, prompting questions about the sustainability of the rate of consumer spending. Retail sales account for around 30% of household consumption, which in turn accounts for 60% of UK GDP.

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“..1.5 million people work in low-paid UK retail jobs..” They can’t afford the products they sell. Henry Ford had a solution to that.

BHS Crash Sets Trend For A Chain Of Store Closures On UK High Streets (G.)

The fact that Britain’s unemployment rate has fallen to its joint lowest level since 1975 belies the experience of thousands of BHS staff, who have struggled to find an equivalent job with a contract and regular hours. The jobless rate may be just 4.7% but official records show the number of people on zero-hours contracts hit a record high of 905,000 in the final three months of 2016. That was an increase of 101,000, or 13%, compared with the same period a year earlier. Last year, research by industry trade body the British Retail Consortium (BRC) identified a “lost generation” of predominantly female shop workers who – as thousands of BHS staff would find out – risk losing their jobs as structural change chews up the high street. It estimated there were nearly 500,000 retail workers, aged between 26 and 45, many of whom have children and need to work close to their family home, who would find it hard to find alternative jobs.

Using the benchmark of those earning less than £8.05 an hour, the BRC says 1.5 million people work in low-paid UK retail jobs. About 70% are female and one in five receive means-tested working age tax credits. Norman Pickavance, chair of the Fabian Society taskforce on the future of retail, says the majority of companies in the sector are trying to save money by moving towards less secure employment models. “There are more and more zero-hours-type contracts and self employment,” he says. “A year on from the demise of BHS, most retailers are continuing down that route of flexibility but there is a risk to them from Brexit. They have only been able to use these methods because of the abundance of labour and might have to rethink.”

[..] This trend is writ larger in the US, where analysts are talking about a “retail apocalypse”, as main street veterans like Macy’s and Sears line up to announce major store closure programmes. With American Apparel, Abercrombie & Fitch and JCPenney also axing stores, hundreds of American shopping mall outlets are closing for good. The cost in job terms has been stark, with more than 89,000 retail positions eliminated over the last six months. New York-based Global Data analyst Neil Saunders says the US and UK retail markets are not mirror images, with the American woes resulting from the fallout from a belated move by store chiefs to address the threat posed by the internet.

With more than five times more retail square footage per person than the UK, American store chiefs have also got a bigger problem on their hands than their British counterparts. “In terms of online penetration, the US is where the UK was five or so years ago,” continues Saunders. “What we are seeing is large US retailers scrabbling to adjust.” He adds: “Generally, UK retail is at a much later evolutionary stage than the US. There has already been quite a lot of adjustment in terms of the closure and adaptation of physical space.

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Everyone spies on everyone. Growth industry.

German Intelligence Spied On Interpol In Dozens Of Countries (R.)

Germany’s BND foreign intelligence agency spied on the Interpol international police agency for years and on the group’s country liaison offices in dozens of countries such as Austria, Greece and the United States, a German magazine said. Der Spiegel magazine, citing documents it had seen, said the BND had added the email addresses, phone numbers and fax numbers of the police investigators to its sector surveillance list. In addition, the German spy agency also monitored the Europol police agency Europol which is based in The Hague, the magazine said. Der Spiegel reported in February that the BND also spied on the phones, faxes and emails of several news organizations, including the New York Times and Reuters.

The BND’s activities have come under intense scrutiny during a German parliamentary investigation into allegations that the US National Security Agency conducted mass surveillance outside of the United States, including a cellphone used by Chancellor Angela Merkel. Konstantin von Notz, a Greens party member who serves on the investigative committee, described the latest report about the BND’s spying activities as “scandalous and unfathomable.” “We now know that parliaments, various companies and even journalists and publishers have been targeted, as well as allied countries,” von Notz said in a statement. He said the latest reports showed how ineffective parliamentary controls had been thus far, despite new legislation aimed at reforming the BND. “It represents a danger to our rule of law,” he said.

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So what as the Pope done to alleviate the issue? How has he used the Vatican’s opulent riches to make life better for refugees?

Pope Likens Refugee Holding Centers To ‘Concentration Camps’ (G.)

Pope Francis urged governments on Saturday to get migrants and refugees out of holding centers, saying many had become “concentration camps”. During a visit to a Rome basilica, where he met migrants, Francis told of his visit to a camp on the Greek island of Lesbos last year. There he met a Muslim refugee from the Middle East who told him how “terrorists came to our country”. Islamists had slit the throat of the man’s Christian wife because she refused to throw her crucifix the ground. “I don’t know if he managed to leave that concentration camp, because refugee camps, many of them, are of concentration (type) because of the great number of people left there inside them,” the pope said.

Francis praised countries helping refugees and thanked them for “bearing this extra burden, because it seems that international accords are more important than human rights”. He did not elaborate but appeared to be referring to agreements that keep migrants from crossing borders. In February, the European Union pledged to finance migrant camps in Libya as part of a wider European Union drive to stem immigration from Africa. Humanitarian groups have criticized efforts to stop migrants in Libya, where – according to a U.N. report last December – they suffer arbitrary detention, forced labor, rape and torture.

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Apr 222017
 
 April 22, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Andrei Rublev Trinity 1411

 

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Everything Gets Worse – Pakistan vs. India (Bhandari)
Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)
Schaeuble Says Greece to Blame for Delays in Bailout Program
Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)
Greek Primary Surplus Chokes Market (K.)
On Neocons and their Mental Defects (Taleb)
28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

 

 

It could happen.

White House Orders Agencies to Prepare for Potential Government Shutdown (BBG)

The White House ordered federal agencies Friday to began preparations for a potential partial government shutdown after signaling President Donald Trump would demand money for key priorities in legislation to continue funding the government beyond April 29. But the president and his aides expressed confidence that Congress would work out a spending agreement and that there won’t be any halt in government operations. Administration officials portrayed the order as normal contingency planning, stressing that the previous administration had followed the same practice as funding deadlines approached. “I think we’re in good shape” on avoiding a deadlock on maintaining funding, Trump told reporters in the Oval Office on Friday. White House press secretary Sean Spicer said the administration is “confident” because negotiations are ongoing and “no one wants a shutdown.”

The push to reach an agreement on spending is complicated by White House efforts to try again for a House vote on replacing Obamacare next week, crowding the congressional schedule with two politically thorny measures the same week. House approval of an Obamacare repeal would give the president a legislative victory to boast about before his 100th day in office April 29. But failure to reach an agreement on spending legislation would risk marring the anniversary with a government shutdown. House Republicans plan a conference call Saturday with Ryan and other leaders to discuss the health-care bill as well as spending legislation. Republican Congressional leaders have pushed back against scheduling an Obamacare vote during the week, indicating there isn’t a clear strategy yet for achieving passage.

Mick Mulvaney, Trump’s director of Office of Management and Budget, said Thursday Democrats will need to agree to pay for some Trump’s top priorities, including a wall at the U.S.-Mexico border, in legislation to fund the government for the remainder of the fiscal year, which ends Oct. 1. Democrats responded harshly to Mulvaney’s remarks Thursday. “Everything had been moving smoothly until the administration moved in with a heavy hand,” said Matt House, spokesman for Senate Minority Leader Chuck Schumer of New York.

Read more …

“Constantly printing more money will not end in prosperity, but in ruin.”

Beware: The Next Financial Crisis Is Coming (Planet Ponzi)

There is more debt, credit, and leverage today than there was preceding the banking crisis of 2008. No lessons were learned from that catastrophe as trillions of taxpayer dollars were provided in the form of bank bailouts from the US Federal Reserve. Despite their name, US Federal Reserve Banks are not part of the federal government and they are not banks. For the past 11 years, the Federal Reserve has been run by non-elected officials, Ben Bernanke and Janet Yellen (career academics), alongside a host of X Goldman and JP Morgan bankers. Since 2007, these non-elected bankers have provided banks “temporary, emergency liquidity measures.” Since when is eight years temporary?

Banks have continued to lend trillions and trillions of dollars to fund the construction of grotesquely overpriced residential and commercial properties around the world. The trillions of dollars given in bank bailouts are a perfect example of government “pay-to-play.” When giving out this money, most bankers are making at least three flawed assumptions:
1. Real estate prices will always go up. Clearly, this is the denial phase of “a bubble mentality.”
2. Rents will always keep rising. Rents peaked a few years ago. There is a massive oversupply of high-end residential and commercial properties on the market while real wages have declined. This is a sign that a crash is imminent.
3. The Federal Reserve will always bail them out. With zero transparency or an audit the Federal Reserve’s balance sheet has ballooned from 500 billion to nearly 5 trillion in a short period. The Federal Reserve doesn’t have the money to keep bailing companies out.

The Federal Reserve has become nothing more than a rogue hedge fund taking leveraged, wildly speculative, gargantuan and high-risk positions in bonds and mortgages. Next up, the Fed will angle to dump these toxic real estate assets in your pension fund. There are several steps that need to be taken to address this situation and save your pensions:
1. The President and Congress need to order an immediate audit of the Fed.
2. The Fed’s positions need to be unwound.
3. No more taxpayer funded bailouts – save your pension!

Capitalism without bankruptcy is like Catholicism without hell. Constantly printing more money will not end in prosperity, but in ruin. The coming collapse will be much worse than in 2008-2009 because the debt is so much larger and the Federal Reserve has run out of bullets. Since the 1980s, we have seen real average wages decline, college tuition skyrocket nearly 2,000%, and housing prices hitting all-time new highs while high-paying jobs have disappeared. Rents have risen so much that many small businesses are no longer economically viable. The situation doesn’t look any better for graduates. Graduates entering the jobs market have nearly $250,000 in student debt. A graduate may get a job in Manhattan for $40,000 a year ($3,333 a month before tax) but rent on a studio apartment costs $3,000 a month. The numbers just don’t add up anymore.

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Social mood: “declining stock and property prices, contracting debt, angry and somber music, more intense horror movies..”

Robert Prechter Is Awaiting A Depression-Like Shock In The US (MW)

Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?

Robert Prechter: The true top for stocks in terms of real money (gold) occurred way back in 1999. Overall prosperity has waned subtly since then. Primary wave five in nominal terms started in March 2009, and wave B up in the Dow/gold ratio started in 2011. Their tops should be nearly coincident.

Gilburt: What do you foresee will set off this event?

Prechter: Triggers are a popular notion, borrowed from the physical sciences. But I don’t think there are any such things in financial markets. Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested.

Gilburt: You’ve said we will be mired in a “depression-type” event. How long could that last?

Prechter: I don’t know. All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s.

Gilburt: How are conditions going to change from what we have now?

Prechter: The increasingly positive trend in social mood over the past eight years has been manifesting in rising stock and property prices, expanding credit, buoyant pop music, lots of animated fairy tales and adventure movies, suppression of scandals, an improving economy and — despite much opinion — fairly moderate politics. This trend isn’t quite over yet. In the next wave of negative mood, we should see the opposite: declining stock and property prices, contracting debt, angry and somber music, more intense horror movies, eruption of scandals, a contracting economy and political upheaval. That’s been the pattern of history.

It’s all relative, though, and it’s never a permanent condition. Just as people give up on the future, its brightness will return. The financial contraction during the negative mood trend of 2006-2011 was the second worst in 150 years. Yet, thanks to the return of positive mood, many people have already forgotten about it. Investors again embrace stocks, ETFs, real estate, mortgage debt, auto-loan debt and all kinds of risky investments that they swore off just a few years ago.

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Because the Fed is doing such a great job of keeping banks in check.

Fed’s Fisher Warns Trump About Plans To ‘Do A Number’ On Dodd-Frank (BI)

Stanley Fischer, the vice chairman of the Federal Reserve, on Friday delivered an unusually sharp warning to President Donald Trump and his plan to “do a number” on post-crisis reforms aimed at reining in Wall Street. Fed officials usually go out of their way to not appear political, which makes the comments all the more startling. Fischer, a former Citigroup banker and respected policymaker who led the Bank of Israel for many years, appears truly concerned. “We seem to have forgotten that we had a financial crisis, which was caused by behavior in the banking and other parts of the financial system, and it did enormous damage to this economy,” Fischer told CNBC’s Sara Eisen in the lobby of the IMF, responding to a question about the potential rolling back of Dodd-Frank rules.

This happened just as the president was signing an executive order aimed at what he said was “reviewing” Dodd-Frank. “Millions of people lost their jobs. Millions of people lost their houses,” Fischer said. “This was not a small-time, regular recession. This was huge, and it affected the rest of the world, and it affected, to some extent, our standing in the world as well. We should not forget that. “The strength of the financial system is absolutely essential to the ability of the economy to continue to grow at a reasonable rate, and taking actions which remove the changes that were made to strengthen the structure of the financial system is very dangerous.”

Asked specifically about Trump’s vow to “do a number” on Dodd-Frank, Fischer shot back: “I’m not sure precisely what the president said and what a ‘number’ is, but there are aspects of Dodd-Frank, which if they were taken away would have very serious potential consequences for the economy — not immediately but when times get tough.” What provisions is he most worried about? The ability of the Fed and other regulators to wind down large banks, many of which are still seen as too big to fail. “I think it is very important that big banks be subject to the discipline of the possibility of going bankrupt. It is also very important that that discipline extends to not making those changes, the bankruptcy of a big bank, a huge shock and the source of crisis or damage to the overall economy,” Fischer said. “So we need the resolution mechanisms that have been put in place which will allow the authorities and the markets to wind up a big bank.”

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Beware the cascade.

Former FinMin Says China Should Let Local Governments Default on Debt (BBG)

Former Finance Minister Lou Jiwei said China should allow smaller local governments to default on debt because it would signal that central government bailouts aren’t assured. Such defaults would educate investors that their investments will be allowed to go bad, Lou said Friday at a public finance forum in Beijing. “They need to shoulder responsibility,” said Lou, who’s now chairman of the country’s social security fund. “Nobody will save them.” Lou’s comments reiterate those by Premier Li Keqiang and other central government officials such as current Finance Minister Xiao Jie that local government debt shouldn’t be bailed out, or benefit from assumptions it will be.

With economic growth accelerating for a second-straight quarter to 6.9% through March, policy makers have more room to cut leverage and rein in risks. A credit surge since 2014 that underpinned growth has also fueled a further buildup in borrowing. Total debt rose to 258% of economic output last year from 161% in 2008, Bloomberg Intelligence estimates show. Lou said government debt remains broadly safe, but borrowing levels are poised to keep climbing given increased investment in substandard public-private partnership projects.

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Great long read on India and its region.

Everything Gets Worse – Pakistan vs. India (Bhandari)

When Narendra Modi announced on 8th November 2016 that he was demonetizing 86% of the monetary value of all currency in circulation, he gave three major reasons for doing so: to end corruption, to end terrorism and to eliminate counterfeit currency. Ironically, all three are now in far worse condition than they were previously, and even worse than the predictions I made. Many ATMs in India still dispense no cash. The economy is in shatters. This had to happen, as any new cash is rapidly moving under the carpets of the financial powerful that hoard currency. Small businesses are traumatized by the lack of access to cash – many are closing for good. People continue to avoid making non-essential purchases. Even food demand has failed to recover. Poor people very likely are still forced to go to bed half-hungry.

No-one knows whether there are famines in parts of India, as none of the mainstream media are covering the issue. Not unlike North Koreans or the Chinese during the times of Mao, Indians today, particularly members of the so-called educated class, simply cannot see what Modi or their nationalistic paradigm does not want them to see. Indian banks and other financial institutions are extremely unethical. Since privatization was implemented in the 1990s, they have charged fees and commissions for accounts that were never agreed upon. Indians never fight, so this continues. After the demonetization exercise, these mysterious charges have started to appear more often. Then they deduct certain services and financial taxes, and most people don’t make the effort to try to understand them. Indians are getting very tired of the banks – not for moral, but simply for financial reasons.

Bank websites are extremely unwieldy. They require a sequence of passwords and OTPs (one time pad codes), which have an automatic expiry date. Getting the whole sequence right to make an online payment without having these websites freeze during the procedure leaves one with a sense of accomplishment. Most people prefer to walk down to their banks to get bank officials to perform such online transactions. India is simply not ready for the digital age. This experiment in going cashless will end in a disaster. Similar to every tyrant, Modi likes to think that tax collection should be at the heart of society. He imagines a society in which subjects dance around the state. The problem is, one can perfect the tax system or minimize corruption, but with a per capita GDP of $1,718, India simply does not have the required productivity.

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Anything you do can and will be used against you: The more such surplus it has, the less debt relief will be needed.

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF (BBG)

Discussions between Greece’s European creditors and the IMF on additional debt relief for the Mediterranean euro region member will be difficult because of political hurdles within the 19-nation bloc, though a solution is on the horizon, Eurogroup Chairman Jeroen Dijsselbloem said. “Greece: We’re very close, it’s really the last stretch,” he said in a Bloomberg Television interview on Friday in Washington with Francine Lacqua and Tom Keene. “We have a full agreement on the major reforms. How they are to be designed, when they are to be implemented, the size of them.”

IMF Managing Director Christine Lagarde said Friday she had “constructive discussions” with Greek Finance Minister Euclid Tsakalotos in preparation for the return of bailout auditors to Athens after euro-area finance ministers reached a tentative agreement on the measures Greece needs to implement to qualify for the next tranche of emergency loans. Dijsselbloem met Tsakalotos earlier on Friday in Washington. “That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

The Hellenic Statistical Authority on Friday unveiled data on last year’s primary surplus, which Eurostat is expected to validate on Monday. The surplus was 3.9% according to the European Union’s statistics office methodology, or 4.2% according to what has been agreed in the bailout program. The bailout target was for a primary surplus of 0.5% of GDP. In spite of its better-than-expected primary surplus last year, the IMF is not convinced Greece will be able to maintain that level of performance for 2018 and beyond. The fund estimates that at least half of the primarily surplus for 2016 came from one-off measures rather than structural changes that will continue delivering results in the years to come, according to a person familiar with its analysis. That has prompted the fund to demand more austerity measures.

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Groundhog man.

Schaeuble Says Greece to Blame for Delays in Bailout Program

German Finance Minister Wolfgang Schaeuble said the Greek government bore responsibility for current delays in the country’s bailout program. Greece is to blame that its creditors didn’t return to Athens during the Greek Easter break to finish negotiations on steps the nation must take to qualify for the next tranche of emergency loans, Schaeuble told reporters Friday on the sidelines of the IMF spring meetings. IMF European Department head Poul Thomsen said at a media briefing there’s been enough progress recently to send back a mission to Greece. Greece and its international creditors struck a tentative agreement at a meeting of euro-area finance ministers in Malta earlier this month, breaking the latest deadlock over the country’s rescue and paving the way for about €7 billion in aid for Athens.

Although the decision represents progress, the euro area won’t unlock the payout until their audit in Athens is concluded. “It would have been possible to continue the mission in Athens immediately in the week after Malta,” said Schaeuble. “This was not possible during the Greek Easter break.” In a statement on Friday, IMF Managing Director Christine Lagarde said she had a “constructive dialogue” with Greek Finance Minister Euclid Tsakalotos “in preparation for the return of the mission to discuss the two legs of the Greece program: policies and debt relief.” The IMF isn’t holding back progress, said Schaeuble. “The IMF isn’t delaying this process at all,” he said.

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The worst thing Greece could do.

Greece Blows EU-IMF Bailout Targets Away With Strong Budget Performance (R.)

Greece far exceeded its international lenders’ budget demands last year, official data showed on Friday, posting its first overall budget surplus in 21 years even when debt repayments are included. The primary surplus – the leftover before debt repayments that is the focus of IMF-EU creditors – was more than eight times what they had targeted. Data released by Greek statistics service ELSTAT – to be confirmed on Monday by the EU – showed the primary budget surplus at 3.9% of GDP last year versus a downwardly revised 2.3% deficit in 2015. This was calculated under European System of Accounts guidelines, which differ from the methodology used by Greece’s in bailout deliberations.

Under EU-IMF standards, the surplus was even larger. Government spokesman Dimitris Tzanakopoulos said the primary budget surplus under bailout terms reached 4.19% of GDP last year versus the 0.5% of GDP target. “It is more than eight times above target,” Tzanakopoulos said in a statement. “Therefore, the targets set under the bailout program for 2017 and 2018 will certainly be attained.” Debt-strapped Greece and its creditors have been at odds for months over the country’s fiscal performance, delaying the conclusion of a key bailout review which could unlock needed bailout funds. The IMF, which has reservations on whether Greece can meet high primary surplus targets, has yet to decide if it will fund Greece’s current bailout, which expires in 2018.

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The surplus kills the economy even more.

Greek Primary Surplus Chokes Market (K.)

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion. The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors.

There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure. The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor lightening the country’s debt load. It is no coincidence that German Finance Minister Wolfgang Schaeuble noted in Washington that over the last couple of years, Greek government deficit forecasts are more realistic than those of the IMF.

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Skin in the game.

On Neocons and their Mental Defects (Taleb)

So we tried that thing called regime change in Iraq, and failed miserably. We tried it in Libya, and now there are now active slave markets in the place. But we satisfied the objective of “removing a dictator”. By the exact same reasoning, a doctor would inject a patient with “moderate” cancer cells “to improve his cholesterol numbers”, and claim victory after the patient is dead, particularly if the post-mortem shows remarkable cholesterol readings. But we know that doctors don’t do that, or, don’t do it in such a crude format, and that there is a clear reason for it. Doctors usually have some skin in the game. And don’t give up on logic, intellect and education, because a tight but higher order logical reasoning would show that the logic of advocating regime changes implies also advocating slavery.

So these interventionistas not only lack practical sense, and never learn from history, but they even make mistakes at the pure reasoning level, which they drown in some form of semi-abstract discourse. The first flaw is that they are incapable in thinking in second steps and unaware of the need for it –and about every peasant in Mongolia, every waiter in Madrid, and every car service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single dimensional representations –like multidimensional health and its stripped, cholesterol-reading reduced representation. They can’t get the idea that, empirically, complex systems do not have obvious one dimensional cause and effects mechanisms, and that under opacity, you do not mess with such a system.

An extension of this defect: they compare the actions of the “dictator” to the prime minister of Norway or Sweden, not to those of the local alternative. And when a blow up happens, they invoke uncertainty, something called a Black Swan, not realizing that one should not mess with a system if the results are fraught with uncertainty, or, more generally, avoid engaging in an action if you have no idea of the outcomes. Imagine people with similar mental handicaps, who don’t understand asymmetry, piloting planes. Incompetent pilots, those who cannot learn from experience, or don’t mind taking risks they don’t understand, may kill many, but they will themselves end up at the bottom of, say, the Atlantic, and cease to represent a threat to others and mankind.

So we end up populating what we call the intelligentsia with people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth. In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and too little accountability. Now some innocent people, Yazidis, Christian minorities, Syrians, Iraqis, and Libyans had to pay a price for the mistakes of these interventionistas currently sitting in their comfortable air-conditioned offices. This, we will see, violates the very notion of justice from its pre-biblical, Babylonian inception. As well as the ethical structure of humanity.

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Just a week ago we commemorated a man on a cross whose image we remember but whose teachings we’ve forgotten.

28 Refugees Found Dead In Drifting Dinghy Off Libyan Coast (Ind.)

Almost 30 migrants have been found dead in a boat drifting off the coast of Libya as the number of refugees dying in attempts to reach Europe reach record highs. Fishermen found the bodies of 28 people, including four children, in waters near the smuggling hub of Sabratha after more than 8,300 asylum seekers were rescued over the Easter weekend. “Their boat stopped in the middle of the water because the engine was broken,” said Ahmaida Khalifa Amsalam, the interior ministry’s security commander. He said the victims appeared to have died of thirst and hunger after their vessel was left drifting in the Mediterranean.

They were buried in a cemetery dedicated to migrants whose bodies are regularly washed up on the coast of Libya, which remains embroiled in a bloody civil war six years after the UK helped overthrow Muammar Gaddafi. Smugglers have increasingly resorted to packing migrants into flimsy dinghies that are unable to survive the crossing to Europe, with some being intercepted and forced back by the Libyan coastguard, others being rescued by EU officials and aid agencies, and many sinking. Tuesday’s tragic discovery was the latest incident of refugees being found dead inside boats, with a worrying trend emerging suggesting engines are being removed or sabotaged at sea.

Read more …

Apr 182017
 
 April 18, 2017  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Albrecht Dürer Study of the left hand of an apostle (for the Heller Altar) c.1508

 

Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)
Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)
Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)
We’re Borrowing Our Way to Economic Disaster – Stockman (DR)
BMO Bundles Uninsured Mortgages in a Canadian Bond First
UK Will Never Build Enough Homes To Keep Prices Down (Tel.)
Greek Insurance Company Can Become a Weapon for China in Europe (GR)
Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)
Taxation is Theft (Napolitano)
Is America’s Alliance with Turkey Doomed? (SCF)
Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)
Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)
Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)
At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

 

 

And why not? He flip-flopped 5 times in one day last week, and his popularity rose.

Trump’s Next Big Policy Reversal Could Be On The TPP (CNBC)

From NATO to health care, President Donald Trump has evidenced he is comfortable making major policy flip-flops. His most recent reversal came last week, when a U.S. Treasury report declined to name China as a currency manipulator despite Trump’s repeated promises to formally accuse Beijing — a signature pledge during his campaign trail. So, what could Trump backtrack on next? One analyst said he hopes it will be the Trans-Pacific Partnership, the world’s largest trade deal that Trump withdrew from in January on the claim that it would hurt U.S. manufacturing. “Whoever thought that Trump would let China, a rival, off the hook on currency? If he can do that with a country that’s clearly not a friend, maybe he could reconsider reversing himself on TPP for a friend like Japan,” Sean King, senior vice president of Park Strategies, told CNBC on Tuesday.

Japan was set to be a major beneficiary of TPP, particularly the country’s auto sector that would have obtained cheaper access to U.S. markets. Tokyo, which has long lamented the trade pact would be “meaningless” without the U.S., has decided to forge ahead with the other remaining 10 participating nations to revive the deal but many are doubtful of whether the TPP will be a game-changer in Washington’s absence. Trump still has time to change his mind on TPP, King warned, noting that the treaty text remains valid until February 2018. “Trump said [TPP] was a disaster, but I’m sure the other members would be willing to make concessions to get the U.S. back in, just like South Korea was willing to make concessions to Obama for his endorsement of the U.S.-Korea [free trade agreement],” King said. “He’s certainly made greater reversals and claimed victory. Why not do this for our friends who want to stand with us against countries like China and North Korea? I’m all for it.”

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“There is no place to go but the dollar at this point.” “..you don’t collapse the core economy. It’s always the peripheral coming in.”

Strong Dollar Could Cause Bond Market Crash – Martin Armstrong (USAW)

Renowned financial expert Martin Armstrong says the biggest risk out there is the effect a strong U.S. dollar has on the global bond market. Armstrong explains, “There’s these people who keep saying the dollar is going to crash. If the dollar crashes, the world is happier and basically celebrating. You have half the U.S. debt equivalent in emerging market debt issued in dollars. If the dollar goes up, they are in trouble. Then you are going to see sovereign defaults .. The U.S. is not going to default, but as you start defaults elsewhere outside the country, it makes people begin to get concerned about sovereign debt. Sovereign debt is the worst of all. It’s not secured. If the U.S. government defaulted on its debt, what would happen? You cannot go down to the National Gallery and start lifting Picassos.”

So, a bond market crash is a distinct possibility? Armstrong says, “Yes. All these things are contagions .. The real risk is coming from Europe and Asia. That is the real risk .. There is no place to go but the dollar at this point.” If and when a global collapse comes, it will come from China or Europe. Armstrong says, “Yes, because you don’t collapse the core economy. It’s always the peripheral coming in. It was the same thing in the Great Depression. It wasn’t the fact that the U.S. defaulted. The problem was the first bank that went down was in Austria, and it happened to be owned in part by the Rothschilds. When people hear a bank owned by the Rothschilds went down, people started to sell off all other banks. Then all the countries defaulted.”

Armstrong says there is going to be a major “monetary reform” in the not so distant future, and the U.S. will end up with a dollar for domestic use and a dollar used for international trade, sort of like a “domestic dollar” and an “international trade dollar.” Armstrong says, “Yes. All it is doing is replacing the dollar as the reserve currency. That would satisfy China and Russia, and it would simply be maintained by an international board. I strongly advise against the IMF. It’s way, way too corrupt.” So, is gold a good asset to have with a coming currency reset? Armstrong says, “Yes, at that point, you are talking about a hedge against government. When you go through these monetary crises, effectively, all tangible assets rise in price, not just gold and silver. . . .

Tangible assets have a value to everybody globally. The downside is on real estate. I would never put 100% of my money in real estate because it is not moveable.” Fast-forward to now, and Armstrong predicts, “The economy is not going to come back. We are not going to see economic growth.” Where is all this taking the world? Armstrong, who is an expert on economic and political cycles, says, “You have to understand what makes war even take place? It does not unfold when everybody is fat and happy. Simple as that. You turn the economy down, and that’s when you get war. It’s the way politics works.”

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Are bonds the lesser bubble then?

Stocks, Bonds Diverge Over Trump Tax Reform, Stimulus Odds (CNBC)

Optimism that the Trump administration will be able to drive through a hefty pro-growth plan or tax package this year is fading by the day. Treasury Secretary Steve Mnuchin on Monday became the latest official to dial back expectations for a time table that included a tax plan by August. In an interview with the Financial Times, Mnuchin said getting tax reform by August was an “aggressive timeline” and would probably be delayed because of health care. In the bond market, there was little surprise. Bond yields, which move inversely to prices, have been falling for weeks as traders have become more skeptical that Washington will adopt any pro-growth policy this year. Stocks, meanwhile, have traded side ways recently, and the S&P 500 is still up 10% since election day, boosted by hope of fiscal stimulus and tax cuts.

Mnuchin’s remarks did not surprise markets, and, in fact, stocks rallied hard based on his comments that Treasury is looking at ways to raise funds to pay for the tax plan without the controversial border-adjustment tax. “That’s exactly why the [stock] market rallied. People hate the border-adjustment tax,” said Peter Boockvar at Lindsey Group. The tax is part of the Congressional tax reform plan and would slap a 20% tax on all imports but not tax exports. Opponents claim it could cause inflation and penalize consumers, while proponents say it would encourage more manufacturing in the U.S. and level the playing field for U.S. companies. The market was not surprised by the push back in the timeline for tax reform, since President Trump last week said health care would come ahead of taxes. Ever since Congress failed to vote on health care in March, the market has become increasingly doubtful a tax plan would get done any time soon.

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“Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.”

We’re Borrowing Our Way to Economic Disaster – Stockman (DR)

David Stockman joined the Fox Business and the show Mornings with Maria to discuss the tax reform highlights for the current White House and GOP platform and what he views as a real threat of economic disaster in the U.S. During the discussion Stockman highlights what to expect from a border adjustment tax possibility, the creation of jobs and the impact on Wall Street in the age of Donald Trump. Stockman takes to point the cause of tax reform in the current White House. He begins the segment noting, “I think the border adjustment tax will come out of the retailers margin – and it should. We do need revenue. We need to have a consumption tax, or a value added tax or a border adjustment tax – so that we may reduce taxation on wages and income. We desperately need more jobs in this country.

If you keep taxing the payroll at 15.5%, which we’re doing today, you’re not going to encourage the creation of jobs. You’re going to take what jobs there are and impact the take-home pay of those jobs.” David Stockman was then asked about his read on Donald Trump’s border tax proposals and the possibility of what the President described as a ‘reciprocal tax.’ “He has no idea what he’s talking about. He’s making it up as he goes along. Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.” “The border adjustment tax, or a value added tax is the way to get at the problem he’s talking about. Every other country in the world has a value added tax. You take it off the exports and put it on the imports. There is a proper way to do it and he ought to allow the republicans on the hill who understand that to move forward.

The idea that we can have a multi-trillion dollar tax cut and not pay for it with new revenue or spending cuts is dangerous. We are at $20 trillion in debt and it is headed to $30 trillion.” When asked about the pragmatic nature of a border adjustment tax, Stockman pressed “I think it’s basic math. If you want to cut the corporate tax rate to 20%, which I think would be wonderful, you’ve got to raise $2 trillion over the next ten years to pay for it. Where are you going to get the money? Are you going to close loopholes? I doubt that. The lobby effort will kill that. You need a new revenue source. If you don’t do that you’re stuck with the current tax system. You’re stuck with massive deficits that are going to kill this country. We are basically borrowing our way to economic disaster.”

[..] We are so “deep in the soup” debt wise and have such a massive, and building deficit that you have to have revenue neutral tax cuts. The border adjustment tax is dead. Without that you are not going to reduce the corporate tax rate down to 20% or 15%, etc.” “The Trump reflation fantasy is over. It is all downhill from here. The market it heading down 20 to 30% down, the 1600 on the S&P. We’re going to have negative shock after negative shock. It is about time they sober up. On April 28th the U.S government is going to shut down. That will be spring training on the continuing resolution until we get to MOAD in the summer.”

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Never been tried before.

BMO Bundles Uninsured Mortgages in a Canadian Bond First

Bank of Montreal is bundling uninsured residential mortgages into bonds in what could be the start of a new financing market for Canadian banks as the government scales back its support for home loans. The Toronto-based lender is planning to sell debt backed by nearly C$2 billion ($1.5 billion) of prime uninsured mortgages. That’s a new development in a country where big banks have historically packaged government-insured mortgages into bonds. If the Bank of Montreal deal is successful, other Canadian banks may follow its lead, providing banks with more financing to keep making mortgages, said Marc Goldfried, CIO at Canoe Financial. The net result may be that housing prices in Canada keep rising. “Right now the banks don’t have any other way to fund it, so there’s probably some form of internal limit on this kind of mortgage financing they’ll do,” Goldfried said by phone from Toronto.

But the Bank of Montreal deal may find headwinds, said Paul Gardner, partner and portfolio manager at Avenue Investment. Canada last year tightened access to the federal insurance to help tamp down rapid home price growth in areas like Toronto and Vancouver. The federal government or Ontario could craft more legislation to cool the housing market, Gardner said. The province’s finance minister is considering a foreign-buyers tax like the one that helped cool home prices in Vancouver. Canadian finance minister Bill Morneau, Ontario finance minister Charles Sousa, and Mayor John Tory are meeting in Toronto Tuesday to discuss the housing market in the Greater Toronto Area. “Residential mortgages, my God, it’s the last thing you want to invest in right now,” Gardner said by phone from Toronto. “When the capital markets are flush with cash, it makes sense that they would try at least to issue this stuff.”

[..] The bank will offer to renew the mortgage loans at the end of their term if the borrower is not in default, and if the borrowers satisfies the bank’s underwriting criteria at the time, which mitigates some of the risk of borrowers not being able to refinance. Canadian mortgage loans generally have a five-year term, and borrowers pay down their principal at a 25-to-30-year pace meaning they usually have to refinance a significant portion of their loan every five years.

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Oh boy. If these are the kind of people you rely on for advice, you’re in trouble.

UK Will Never Build Enough Homes To Keep Prices Down (Tel.)

Britain will never build enough houses to make property affordable for young people, according to research. A study presented to the Royal Economic Society’s annual conference said those hoping to get on the ladder may have to rely on windows of opportunity created by periodic slumps in the market. However, the overall trend will remain for residential property price rises to outpace salary growth, according to economists at the University of Reading. “The increases in housing supply required to improve affordability have to be very large and long-lasting; the step change would need to be much larger than has ever been experienced before on a permanent basis,” said Geoffrey Meen, Alexander Mihailov and Yehui Wang. The government has discussed moves to increase the supply of homes but the changes are on far too small a scale to act as a brake on price rises.

House prices in the UK stood at an average of £217,500 according to the Office for National Statistics. That is 7.7-times the average full-time salary in the UK of £28,200. By contrast in 2005 the average home cost £150,500, approximately 6.5-times the then-average full time salary of £22,888. Former Bank of England policymaker Kate Barker believes the country needs an additional 60,000 homes per year on top of those already being built. But the new paper argues there is little chance of this happening. “Although higher levels of house building are certainly desirable, the paper shows that there is a limit to what can be achieved by this route,” the report found. “The required increase in supply to stabilise the price to income ratio … is not feasible – permanent increases in construction would be required that have never been achieved in history.”

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The risks of garage-selling an entire country.

Greek Insurance Company Can Become a Weapon for China in Europe (GR)

It is no secret that the Chinese see Greece as a country that could help them get their foot (and saying) in the European Union. In GreekReporter’s recent documentary Athens Chinatown, it is the Cosco managing director in Greece who says the mediterranean country offers a strategic location and it was this factor that attracted Cosco to take over the Greek port of Piraeus. Furthermore, the editor of China-Greece times also states that the Chinese “see Greece as the gate to Europe.” The past few years, silently, China has looked into many Greek investments. After acquiring the Greek Port of Piraeus, now three Chinese companies are bidding for Greece’s biggest private insurer, Ethniki Asfalistiki. However what looks like a simple bidding, could possibly be of great importance to the future of Greece.

Established in 1891, Ethini Asfalistiki has invaluable contribution to the Greek economy for over a century. It is the largest insurance company in the country with total premiums of over €440 million and 18% market share, while it is in cooperation with the banking network for the sale of bank assurance products, provides access to a broad distribution network of about 500 offices. The estimated earnings for 2016 are €52 million. Ethniki Asfalistiki is also a sister company of Greece’s Ethniki Bank (National Bank), one of Greece’s four systemic banks. Whoever gets this bid will most likely acquire the bank as well. At the same time, another Chinese group has shown interest for Piraeus Bank. If they manage to close that deal then two out of Greece’s four main banks will be controlled by the Chinese. Eventually they will be able to have an important saying in the country’s economy, and maybe that’s what they are aiming for.

While the Chinese have done serious investments in Greece, this one, in combination with everything else they control can become a decisive factor on how much of a saying does Greece want the Chinese to have on the country’s future. Letting Ethniki Asfalistiki in the hands of China is probably allowing too much of their foothold in the Greek economy, which would mean a great political influence as well. China of course would like to be able to control and play with Greece’s economy in order to advance their interests. But it is dangerous for Greece when the country’s future becomes another argument on a geostrategic dialogue between the big powers. A forced Grexit threat, for example, could definitely be on the table and be directed to the EU or the U.S.A.

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That record is definitely broken beyond repair.

Greek Debt Must Be Sustainable For IMF To Join Bailout – Lagarde (R.)

The IMF will not take part in a bailout program for Greece if it deems the country’s debt is unsustainable, the international lender’s chief Christine Lagarde said in an interview published on Tuesday. Greece needs to implement reforms agreed by euro zone finance ministers earlier this month to secure a new loan under its €86 billion bailout programme, the third since 2010. The loan is needed to pay debt due in July, but talks continue and the IMF has not yet decided whether to join the bailout. The fund’s participation is seen as a condition for Germany to unblock new funds to Greece. “If Greek debts are not sustainable based on IMF rules and reasonable parameters, we will not take part in the program,” Lagarde told German newspaper Die Welt when asked if the IMF would take part in the plan if Greek debt is not restructured.

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Minor problem: so many people are dependent on Social Security. Highly relevant going forward.

Taxation is Theft (Napolitano)

With a tax code that exceeds 72,000 pages in length and consumes more than six billion person hours per year to determine taxpayers’ taxable income, with an IRS that has become a feared law unto itself, and with a government that continues to extract more wealth from every taxpaying American every year, is it any wonder that April 15th is a day of dread in America? Social Security taxes and income taxes have dogged us all since their institution during the last century, and few politicians have been willing to address these ploys for what they are: theft. During the 2012 election, then-Texas Gov. Rick Perry caused a firestorm among big-government types during the Republican presidential primaries last year when he called Social Security a Ponzi scheme. He was right. It’s been a scam from its inception, and it’s still a scam today.

When Social Security was established in 1935, it was intended to provide minimal financial assistance to those too old to work. It was also intended to cause voters to become dependent on Franklin Delano Roosevelt’s Democrats. FDR copied the idea from a system established in Italy by Mussolini. The plan was to have certain workers and their employers make small contributions to a fund that would be held in trust for the workers by the government. At the time, the average life expectancy of Americans was 61 years of age, but Social Security didn’t kick in until age 65. Thus, the system was geared to take money from the average American worker that he would never see returned.

Over time, life expectancy grew and surpassed 65, the so-called trust fund was raided and spent, and the system was paying out more money than it was taking in – just like a Ponzi scheme. FDR called Social Security an insurance policy. In reality, it has become forced savings. However, the custodian of the funds – Congress – has stolen the savings and spent it. And the value of the savings has been diminished by inflation. Today, the best one can hope to receive from Social Security is dollars with the buying power of 75 cents for every dollar contributed. That makes Social Security worse than a Ponzi scheme. You can get out of a Ponzi investment. You can’t get out of Social Security. Who would stay with a bank that returned only 75% of one’s savings?

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Essential reading on how the region came to be what it is.

Is America’s Alliance with Turkey Doomed? (SCF)

Shortly before his death in 1869, the pro-Western former Ottoman grand vizier and foreign minister Keçecizâde Mehmed Fuad Pasha commented, “It appeared preferable that . . . we should relinquish several of our provinces rather than see England abandon us.” In response to this commitment, the British made the territorial integrity of the Ottoman Empire against Russian aggression a key pillar of their foreign policy. Yet, in spite of the significance that Istanbul and London attached to their alliance in the 1850s, both sides were determined to eradicate each other by 1914. As Prime Minister Herbert Asquith put it, Britain was “determined to ring the death-knell of Ottoman dominion, not only in Europe, but in Asia as well.” In response, the Ottoman government described the British as “the greatest enemy” of not only the sultan’s empire but also of Islam itself.

The Anglo-Russian Great Game, waged across the vast lands stretching from Europe to Central Asia during the nineteenth century, rendered the Ottoman Empire an invaluable strategic asset in the eyes of British policymakers. Although the British public frowned upon the Ottoman Turks’ “peculiar Oriental ways,” and regarded them as “uncivilized Mohammedan barbarians” for their treatment of Christian subjects, Whitehall recognized that they could serve as a bulwark against Russia. The Ottomans, likewise, recognized the value of having Britain as an ally given the looming threats posed by their neighbors, Russia and Austria. Though the Ottomans previously regarded the British as an untrustworthy non-Muslim power, the cooperation was a win-win venture, and the two powers agreed to partner economically and militarily. The strategic collaboration between them reached its zenith in 1853 when, along with other allies, they successfully waged war against Russia in Crimea.

America’s relative indifference to the Ottoman Empire and the early Turkish Republic was reminiscent of Otto von Bismarck’s famous remark that European Turkey “was not worth the bones of a single Pomeranian grenadier.” The United States and the Ottoman Empire fought World War I on opposite sides, but did not clash with each other. Moreover, while President Woodrow Wilson discussed the future of the Ottoman Empire in his Fourteen Points, the United States did not actively participate in its partition. In 1922–23, Washington merely sent observers to the Conference of Lausanne, which produced the final peace treaty between the victors of World War I and Turkey.

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Only Trump has congratulated him.

Erdogan Says He Doesn’t Care What Europe Thinks About Turkey’s Vote (BBG)

Turkish President Recep Tayyip Erdogan treated a crowd of supporters gathered outside his presidential palace on Monday evening to a speech laced with invective against Europe, saying his victory in a referendum on Sunday took place under conditions that were democratic beyond compare. Erdogan belittled both domestic and foreign critics of the voting process, which culminated in a slim majority of Turks approving changes to 18 articles of the constitution that concentrate more power in his hands. A monitoring group from the Organization for Security and Cooperation in Europe – which said the referendum took place on an “unlevel playing field” – “should know its place,” he said. “We don’t care about the opinions of ‘Hans’ or ‘George,’” Erdogan said, using the names as stand-ins for his European critics. “All debates about the constitutional referendum are now over.”

The OSCE’s head of mission, Tana de Zulueta, said on Monday that freedom of expression was inhibited during the campaign, that the conditions of the vote fell “well short” of international standards, and that the OSCE was inhibited from the election monitoring that it was invited to do. The vote was held under a state of emergency that’s been in place since just after a failed coup last July, and which Turkey’s security council will meet tonight to consider extending. Since the coup attempt, some 40,000 of Erdogan’s alleged opponents have been jailed, and at least 100,000 more fired by decree. The European monitoring organization’s criticisms were echoed by opposition parties inside Turkey, which are asking for the result of the vote to be annulled, as well as by the U.S. state department, whose spokesman Mark Toner cited “observed irregularities” in the way the election was carried out.

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Wonder how redacted the files are.

Opening Of UN Files On Holocaust Will ‘Rewrite Chapters Of History’ (G.)

War crimes files revealing early evidence of Holocaust death camps that was smuggled out of eastern Europe are among tens of thousands of files to be made public for the first time this week. The once-inaccessible archive of the UN war crimes commission, dating back to 1943, is being opened by the Wiener Library in London with a catalogue that can be searched online. The files establish that some of the first demands for justice came from countries that had been invaded, such as Poland and China, rather than Britain, the US and Russia, which eventually coordinated the post-war Nuremberg trials. The archive, along with the UNWCC, was closed in the late 1940s as West Germany was transformed into a pivotal ally at the start of the cold war and use of the records was effectively suppressed.

Around the same time, many convicted Nazis were granted early release after the anti-communist US senator Joseph McCarthy lobbied to end war crimes trials. Access to the vast quantity of evidence and indictments is timed to coincide with the publication on Tuesday of Human Rights After Hitler: The Lost History of Prosecuting Axis War Crimes by Dan Plesch, a researcher who has been working on the documents for a decade. The documents record the gathering of evidence shortly after the UN was founded in January 1942. They demonstrate that rape and forced prostitution were being prosecuted as war crimes in tribunals as far apart as Greece, the Philippines and Poland in the late 1940s, despite more recent suggestions that this was a legal innovation following the 1990s Bosnian conflict.

[..] By the late 1940s, the US and British governments were winding down prosecutions of Nazis. President Harry Truman made anti-communism, rather than holding Nazis to account, a priority, Plesch says. “Even action against the perpetrators of the massacre of British RAF officers attempting to escape from prison camp Stalag Luft III, a flight made iconic by films such as The Great Escape, was curtailed.”

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One of the most important questions we can ask ourselves, said polio vaccine pioneer Dr Jonas Salke, is “Are we being good ancestors?”

Critically Endangered Species Poached In World’s Protected Natural Sites (AFP)

Illegal poaching, logging and fishing of sometimes critically endangered species is taking place in nearly half of the world’s most protected natural sites, environmental campaigners WWF warned Tuesday. Natural world heritage sites such as Australia’s Great Barrier Reef, Virunga National Park in the Democratic Republic of Congo and the Galapagos Islands support large populations of rare plant and animal species. But in a report WWF said species listed by the Convention on International Trade in Endangered Species (CITES) faced the threat of illegal harvesting and trafficking in 45% of the more than 200 natural world heritage sites on the planet. “Natural world heritage sites are among the most recognised natural sites for their universal value,” said Marco Lambertini, head of WWF International.

“Yet many are threatened by destructive industrial activities and… their often unique animals and plants are also affected by overexploitation and trafficking,” he added, stressing that “unless they are protected effectively, we will lose them forever.” Almost a third of the world’s remaining 3,890 wild tigers and 40% of all African elephants are found in UNESCO-listed sites, which are often a last refuge for critically endangered species such as the Javan rhino in Indonesia, the report said. Illegal poaching, logging and fishing inside such sites is therefore “driving endangered species to the brink of extinction”, WWF warned. The species most at risk because of illegal activity within natural world heritage sites is probably the vaquita, the world’s smallest porpoise, which is indigenous to Mexico’s Gulf of California, Colman O’Criodain, WWF’s wildlife policy manager, told AFP.

While the vaquita itself is not being fished illegally, it is being caught in nets used to poach the totoaba – a giant Mexican fish coveted in China for its swim bladder, which itself is considered a threatened species. “When I started working on the issue of vaquita two years ago, there were 96 left. Now it is less than 30,” O’Criodain said, adding that at the current rate the tiny porpoise could be extinct within a year. According to Tuesday’s report, poaching of vulnerable and endangered animal species such as elephants, rhinos and tigers occurs in 42 of the UNESCO-listed natural sites, while illegal logging of rosewood, ebony and other valuable plant species happens in 26 of them. Illegal fishing, including of sharks and rays occurs in 18 of 39 listed marine coastal world heritage sites, it said.

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Until the world finally has the emergency UN conference I’ve been calling for, I don’t see this change. It’s a global issue, and no-one wants to touch it because it’s so politically toxic.

At Least 8,500 Migrants Rescued From Mediterranean In Three Days (CNN)

Italian authorities were still bringing migrants and refugees to shore Monday after one of the busiest weekends ever for rescue services operating in the central Mediterranean sea. At least 8,500 refugees and migrants were plucked from small boats over the past three days in 73 separate rescue operations, the Italian Coastguard told CNN Monday. Thirteen bodies were recovered, including a pregnant woman and an eight-year-old boy. It is not known how many died before they were sighted. One 35-year-old woman from the Ivory Coast was giving birth as she was pulled aboard a rescue ship, Italian newspapers reported. The youngest migrant rescued over the weekend was just two weeks old. Asar was rescued along with her mother by the Migrant Offshore Aid Station (MOAS).

The Sea-Eye, a German charity boat that helped bring to safety hundreds of people stranded on rubber dinghies off the coast of Libya Sunday said in a statement it still had 210 on board “crowded closely together, exposed to the wind, the waves and the cold without protection. It said the Italian tanker La Donna and the coast guard ship CP920 was now accompanying the boat, whilst it waits for two smaller boats from the Italian island of Lampedusa, to bring the migrants to shore. The Italian Coastguard said 1004 migrants rescued on the board the ship the Panther would be disembarked in Messina in Sicily shortly. Frontex, the European Border and Coast Guard Agency, said in a statement it rescued more than 1,400 migrants in the central Mediterranean in 13 search and rescue operations from Friday to Sunday.

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