Aug 122018
 
 August 12, 2018  Posted by at 9:06 am Finance Tagged with: , , , , , , , , , , , ,  


Salvador Dali Elephants 1948

 

Rand Paul Against the World (AC)
Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout (WS)
China Scrambles to Cool Overheated Real Estate Market (ET)
Beijing Struggles To Defuse Anger Over China’s P2P Lending Crisis (R.)
DNC Serves WikiLeaks With Lawsuit Via Twitter (CBS)
More Than 100 Constituencies That Backed Brexit Now Want To Stay In EU (G.)
Russia Defense Minister Warns Germany Against ‘Strength & Unity’ Strategy (RT)
New Zealand To Ban Foreigners From Buying Homes (SMH)
Crashed: How a Decade of Financial Crises Changed the World (Varoufakis)
Gene-Editing Startups Ignite The Next ‘Frankenfood’ Fight (R.)
UK Outlets Review Sale Of Monsanto’s Roundup After US Cancer Verdict (G.)
The Oceans’ Last Chance (G.)

 

 

’Rand Paul has persuaded the president that we are not for regime change in Iran..’

Rand Paul Against the World (AC)

President Trump has been known to be hawkish on Iran. Politico observed Wednesday: “Trump has drawn praise from the right-wing establishment for hammering the mullahs in Tehran, junking the Iran nuclear deal and responding to the regime’s saber rattling with aggressive rhetoric of his own….” There are also powerful factions in Congress and Washington with inroads to the president that have been itching for regime change for years. “The policy of the United States should be regime change in Iran,” says Senator Tom Cotton, once rumored to be Trump’s pick to head the CIA. So what, or who, is stopping the hawks?

Politico revealed Wednesday some interesting aspects of the relationship between Senator Rand Paul and the president, particularly on foreign policy: “While Trump tolerates his hawkish advisers, the [Trump] aide added, he shares a real bond with Paul: ‘He actually at gut level has the same instincts as Rand Paul…’.” On Iran, Politico notes, “Trump has stopped short of calling for regime change even though Secretary of State Mike Pompeo, Secretary of Defense James Mattis, and Bolton support it, aligning with Paul instead, according to a GOP foreign policy expert in frequent contact with the White House.”

But this part of the story was the most revelatory: “’Rand Paul has persuaded the president that we are not for regime change in Iran,’ this person said, because adopting that position would instigate another war in the Middle East.” This is significant, not because Trump couldn’t have arrived at the same position without Paul’s counsel, but because it’s easy to imagine him embracing regime change, what with virtually every major foreign policy advisor in his cabinet supporting something close to war with Iran. “Personnel is policy” is more than a cliché.

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Musk will have to clarify his ‘Funding Secured’, either to his board or the SEC. Preferably both.

Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout (WS)

The whole scheme kicked off when Tesla CEO Elon Musk tweeted during trading hours that he was “considering” taking Tesla private, “Funding secured,” which caused the already ludicrously overvalued shares to spike. Later he added, “Investor support is confirmed.” But no details, no names, no tidbits, not even a tease. Two days earlier, he’d tweeted that “even Hitler was shorting Tesla stock.” We can brush off the Hitler tweet as just one more Musk idiocy gone awry, but “Funding secured” and “Investor support is confirmed” are big-ass phrases for a public-company CEO discussing a buyout that would be valued at $72 billion. Now some folks, including those at the SEC’s San Francisco office, are wanting to know where exactly this money is going to come from – and if funding was even remotely “secured.”

The Tesla true believers instantly figured that a deal had already been worked out, either with SoftBank or with Saudi Arabia’s Public Investment Fund (PIF), or with both, or whatever. Turns out, it’s not going to be SoftBank, and it’s not going to be the Saudis, either. They’re not interested in creating the magic to pull this off. Reuters reported today that a source “familiar with PIF’s strategy,” said that the fund was not, as Reuters put it, “currently getting involved in any funding process for Tesla’s take-private deal.” PIF had made headlines recently when it came out that it had acquired a stake in Tesla of just below 5% by buying its shares (TSLA) in the market. None of this money went to Tesla. It went to Tesla shareholders that wanted to get out.

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They don’t seem to be getting it done.

China Scrambles to Cool Overheated Real Estate Market (ET)

The Chinese government went all out during the first half of 2018 to cool an overheated real estate market. Major cities in China have issued regulations for their local real estate markets more than 260 times through July of this year, according to data from Centaline Property Agency, one of the largest property agencies in Hong Kong. That’s an all-time high and marks an 80 percent increase in frequency compared to the same period in 2017. In July alone, more than 60 cities announced more than 70 revised sets of real estate regulatory policies. Chinese cities have sought to keep housing prices from skyrocketing by limiting the number of properties one can purchase and sell, raising the minimum down-payment ratio for homebuyers, and boosting the time period between a purchase and when a unit can be then listed on the market for resale.

The Chinese Communist Party has made it a political priority to “resolutely contain the rise of housing prices,” as discussed during a meeting of the Party’s powerful 25-member Politburo on July 31, according to state-run media Xinhua. While prices in the real estate markets of some first- and second-tier cities appear to have leveled off, prices in most third- and fourth-tier cities continue to soar. In June, among China’s designated 70 large and medium-sized cities, 63 experienced a price increase for newly built commodity housing units, or privately developed housing on leased land, compared with last year, according to official data released by China’s National Bureau of Statistics. Prices for new commodity housing and “second-hand housing”—units previously owned that are now on the market for sale—in 31 second-tier cities also increased, by 6.3 percent and 4.6 percent, respectively, in June.

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Shadow banks and P2P -there’s overlap- have been instrumental in China’s runaway growth.

Beijing Struggles To Defuse Anger Over China’s P2P Lending Crisis (R.)

Peter Wang was asleep at his home in Beijing last Monday when police officers arrived before dawn to detain him, saying he had helped organize a protest planned for later that day. Across the city, others who had lost money investing in China’s online peer-to-peer (P2P) lending platforms – including some who had traveled from as far away as Shandong and Shanxi provinces – got similar visits from police. By the time they were released, the demonstration they had planned using social media chat groups had fizzled amid a massive security response around the China Banking and Insurance Regulatory Commission (CBIRC) headquarters in the heart of Beijing’s financial district.

[..] The size of China’s P2P industry is far bigger than in the rest of the world combined, with outstanding loans of 1.49 trillion yuan ($217.96 billion), according to data tracker p2p001.com, run by the Shenzhen Qiancheng Internet Finance Research Institute. P2P, in which platforms gather funds from retail investors and loan the money to small corporate and individual borrowers, promising high returns, started flourishing nearly unregulated in China in 2011. At its peak in 2015, there were about 3,500 such businesses. But after Beijing began a campaign to defuse debt bubbles and reduce risks in the economy, including the country’s enormous non-bank lending sector, cracks began to appear as investors pulled their funds.

Since June, 243 online lending platforms have gone bust, according to wdzj.com, another P2P industry data provider. In that period, the industry saw its first monthly net fund outflows since at least 2014, the data provider said. The latest burst of anger, which led to the planned protests, flared up ahead of a June 30 deadline for companies to comply with new business practice standards, which are still being finalised but could include bank custodianship of investor funds and tougher disclosure requirements. Many of them shut down rather than do so, Zane Wang, chief executive of online micro-loan provider China Rapid Finance, told Reuters. That caused panic in the broader market. Investors tried to pull funds from P2P companies, causing liquidity problems for many smaller operators, Wang said, although larger ones are faring better.

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But who exactly has been served? Assange can’t read Twitter.

DNC Serves WikiLeaks With Lawsuit Via Twitter (CBS)

The Democratic National Committee on Friday officially served its lawsuit to WikiLeaks via Twitter, employing a rare method to serve its suit to the elusive group that has thus far been unresponsive. As CBS News first reported last month, the DNC filed a motion with a federal court in Manhattan requesting permission to serve its complaint to WikiLeaks on Twitter, a platform the DNC argued the website uses regularly. The DNC filed a lawsuit in April against the Trump campaign, Russian government and WikiLeaks, alleging a massive conspiracy to tilt the 2016 election in Donald Trump’s favor. All of the DNC’s attempts to serve the lawsuit via email failed, the DNC said in last month’s motion to the judge, which was ultimately approved.

The lawsuit was served through a tweet from a Twitter account established Friday by Cohen Milstein, the law firm representing the DNC in the suit, with the intent of serving the lawsuit. The DNC argued the unusual method of serving a lawsuit over Twitter was feasible because WikiLeaks, founded by Julian Assange, frequently uses Twitter and had even suggested it had read the DNC’s lawsuit. On April 21, the WikiLeaks Twitter account tweeted, “Democrats have gone all Scientology against @WikiLeaks. We read the DNC lawsuit. Its primary claim against @WikiLeaks is that we published their ‘trade secrets.’ Scientology infamously tried this trick when we published their secret bibles. Didn’t work out well for them.'”

The DNC also noted last month that there is some legal precedent for serving the lawsuit on Twitter. The U.S. District Court for the Northern District of California, the DNC notes, decided service by Twitter was a reasonable way to alert the defendant, who had an active Twitter account. “WikiLeaks seems to tweet daily,” the DNC said in the motion made to the judge last month.

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Cats in a sack.

More Than 100 Constituencies That Backed Brexit Now Want To Stay In EU (G.)

More than 100 Westminster constituencies that voted to leave the EU have now switched their support to Remain, according to a stark new analysis seen by the Observer. In findings that could have a significant impact on the parliamentary battle of Brexit later this year, the study concludes that most seats in Britain now contain a majority of voters who want to stay in the EU. The analysis, one of the most comprehensive assessments of Brexit sentiment since the referendum, suggests the shift has been driven by doubts among Labour voters who backed Leave. As a result, the trend is starkest in the north of England and Wales – Labour heartlands in which Brexit sentiment appears to be changing.

The development will heap further pressure on Jeremy Corbyn to soften the party’s opposition to reconsidering Britain’s EU departure. Researchers at the Focaldata consumer analytics company compiled the breakdown by modelling two YouGov polls of more than 15,000 people in total, conducted before and after Theresa May published her proposed Brexit deal on 6 July. It combined the polling with detailed census information and data from the Office for National Statistics. The study was jointly commissioned by Best for Britain, which is campaigning against Brexit, and the anti-racist Hope Not Hate group. The 632 seats in England, Scotland and Wales were examined for the study. It found that 112 had switched from Leave to Remain. The new analysis suggests there are now 341 seats with majority Remain support, up from 229 seats at the referendum.

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Russia remembers Germany 70 years ago.

Russia Defense Minister Warns Germany Against ‘Strength & Unity’ Strategy (RT)

The Russian defense minister has reminded his German counterpart that approaching Moscow from a “position of unity and strength” is not the wisest idea, citing the bitter history of WWII that should’ve made Berlin more prudent. “We are open for dialogue. We are ready for a normal cooperation, but not at all from a position of strength,” Sergey Shoigu told Rossiya 24 TV station. “I certainly hope that the time when we could be talked to, as someone once said, as a second- or third-class country has now irretrievably passed.”

Referring to the original question from the host, Yevgeniy Popov, who noted the recent call by the German Defense Minister, Ursula von der Leyen, to engage in dialogue with Moscow only from a “position of unity and strength,” Shoigu reminded his counterpart that, while Russia seeks peace, it will not tolerate being coerced. “After everything Germany has done to our country, I think, they should not talk on the issue for another two hundred years,” Shoigu said. “Ask your grandparents about their experience of talking to Russia from the position of strength. They will probably be able to tell you.” Shoigu explained that NATO, including Germany, cannot come to grips with the reality of seeing Russia return to the world stage as an independent actor with a strong and powerful military force.

“We are not going to threaten anyone. We’re not going to start a war with anyone,” Shoigu said, noting, however, that Russian President Vladimir Putin is taking unprecedented measures to make sure the military is fully ready for any untoward surprises. “We’re doing a massive job to restore our army. Yes, the time has passed when we had no funds or time for the army.” “We now have a totally different army. And if that frightens someone, do come visit to see how we live,” he added, in an interview recorded after the wrap-up of the Army Games in Russia, extending an invitation to the NATO militaries so far missing out on the biggest annual international military competition.

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But there are exceptions.

New Zealand To Ban Foreigners From Buying Homes (SMH)

Foreigners face a ban on buying homes in New Zealand after a spending splurge by millionaires seeking doomsday bolt-holes crowded out local buyers and pushed up property prices. Home purchases by tycoons such as tech billionaire Peter Thiel, the PayPal founder, and Matt Lauer, the former NBC host who lost his job after allegations of sexual misconduct, have led the New Zealand government to crack down on the trend. The country’s allure for the mega-rich planning a safe space to ride out the apocalypse has become almost a cliché in recent years. Reid Hoffman, LinkedIn co-founder, told The New Yorker last year: “Saying you’re buying a house in New Zealand is kind of a wink, wink, say no more”.

But the country’s centre-Left government, led by prime minister Jacinda Ardern, is blaming the apocalypse preppers for a major housing crisis, with rates of homelessness among the highest in the developed world. Ms Ardern’s Labour Party is adamant that a law change banning foreigners from buying most types of homes in the country – due to pass through parliament next week – will help damp down property prices. It also plans to build 100,000 affordable properties in a decade, resolve New Zealand’s zoning and infrastructure woes, and bolster its ailing construction industry. The bill will still allow foreigners to buy new apartments in large developments and multi-storey blocks. Existing homes remain off limits to non-residents, but people from Australia and Singapore will be exempt from the ban, due to free-trade rules.

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Yanis reviews a book by Adam Tooze.

Crashed: How a Decade of Financial Crises Changed the World (Varoufakis)

Every so often, humanity manages genuinely to surprise itself. Events to which we had previously assigned zero probability push us into what the ancient Greeks referred to as aporia: intense bafflement urgently demanding a new model of the world we live in. The financial crash of 2008 was such a moment. Suddenly the world ceased to make sense in terms of what, a few weeks before, passed as conventional wisdom – even McDonald’s, for goodness sake, could not secure an overdraft from Bank of America!

Moments of aporia produce collective efforts to respond to our bewilderment. In the late 18th century, the pains of the Industrial Revolution begat free-market economics. The crisis of 1848 brought us the Marxist tradition. The great depression produced both Keynes’s General Theory and Friedman’s monetarism. Over the past decade, the 2008 crash has given rise to a cottage industry of books, articles, documentaries, even films but not, so far, an overarching theory. Now, a compelling new book has arrived which deserves to be at the top of the reading list of anyone interested in the events of 2008 and eager to make sense of the aftermath .

Written by Adam Tooze, an English economic historian at Columbia University (and, in the interest of full disclosure, a colleague), Crashed: How a Decade of Financial Crisis Changed the World combines simple explanations of complex financial concepts with a majestic narrative tracing the prehistory and destructive path of the crisis across the planet (including long, apt and erudite chapters on Russia, the former Soviet satellites, China and south-east Asia). It also offers original insights into the nature of the wounded beast (financialised capitalism). Of the myriad unacknowledged truths that Tooze illuminates, some examples follow.

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Nowhere is mankind’s insanity more on display than here. If you can’t oversee the consequences of your actions, the precautionary principle applies. Not the profit principle.

Gene-Editing Startups Ignite The Next ‘Frankenfood’ Fight (R.)

In a suburban Minneapolis laboratory, a tiny company that has never turned a profit is poised to beat the world’s biggest agriculture firms to market with the next potential breakthrough in genetic engineering – a crop with “edited” DNA. Calyxt Inc, an eight-year-old firm co-founded by a genetics professor, altered the genes of a soybean plant to produce healthier oil using the cutting-edge editing technique rather than conventional genetic modification. Seventy-eight farmers planted those soybeans this spring across 17,000 acres in South Dakota and Minnesota, a crop expected to be the first gene-edited crop to sell commercially, beating out Fortune 500 companies.

Seed development giants such as Monsanto, Syngenta and DowDuPont have dominated genetically modified crop technology that emerged in the 1990s. But they face a wider field of competition from start-ups and other smaller competitors because gene-edited crops have drastically lower development costs and the U.S. Department of Agriculture (USDA) has decided not to regulate them. Relatively unknown firms including Calyxt, Cibus, and Benson Hill Biosystems are already advancing their own gene-edited projects in a race against Big Ag for dominance of the potentially transformational technology. “It’s a very exciting time for such a young company,” said Calyxt CEO Federico Tripodi, who oversees 45 people. “The fact a company so small and nimble can accomplish those things has picked up interest in the industry.”

Gene-editing technology involves targeting specific genes in a single organism and disrupting those linked to undesirable characteristics or altering them to make a positive change. Traditional genetic modification, by contrast, involves transferring a gene from one kind of organism to another, a process that still does not have full consumer acceptance. Gene-editing could mean bigger harvests of crops with a wide array of desirable traits – better-tasting tomatoes, low-gluten wheat, apples that don’t turn brown, drought-resistant soybeans or potatoes better suited for cold storage. The advances could also double the $15 billion global biotechnology seed market within a decade, said analyst Nick Anderson of investment bank Berenberg.

[..] Biotech firms hope the technology can avoid the “Frankenfood” label that critics have pinned on traditional genetically modified crops. But acceptance by regulators and the public globally remains uncertain. The Court of Justice of the European Union ruled on July 25 that gene-editing techniques are subject to regulations governing genetically modified crops. The ruling will limit gene-editing in Europe to research and make it illegal to grow commercial crops. The German chemical industry association called the decision “hostile to progress.”

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Afraid they’ll be sued too?

UK Outlets Review Sale Of Monsanto’s Roundup After US Cancer Verdict (G.)

One of the UK’s largest DIY retailers is reviewing the sale of Roundup weedkiller products amid mounting concerns about their use, after a US jury found that the herbicide had caused a terminally ill man’s cancer. The manufacturer of the weedkiller, Monsanto, has insisted that British consumers are safe to continue using Roundup products, which are widely sold at DIY stores and used by British farmers. But a spokesperson for Homebase said it would be reviewing its product range after the ruling in California. A spokesperson for B&Q said it had already been undertaking a broader review of all garden products in an attempt to manage the range responsibly.

[..] Monsanto’s vice-president, Scott Partridge, said on Friday that hundreds of studies had shown that glyphosate, one of the world’s most widely used herbicides and a key ingredient of Roundup, does not cause cancer. Monsanto would be appealing against the jury’s verdict, he added. “It is completely and totally safe, and the public should not be concerned about this verdict. It is one that we will work through the legal process to see if we can get the right result. The science is crystal-clear,” he said. “The jury made a decision, but the decision that a jury or a judge makes has to be based on the weight of the evidence, and the overwhelming weight of the evidence that went in the trial was that science demonstrates glyphosate is safe; there’s no credible evidence to the contrary.”

[..] The scientific world, however, has raised doubts about glyphosate. A ruling in 2015 by the World Health Organization’s international agency for research on cancer (IARC) classified glyphosate as “probably carcinogenic to humans”. Campaigners are now calling for a review of pesticide regulations in the UK after the case, saying that glyphosate poses a risk to public health, soils and the environment. More than 2m hectares (5m acres) of farmland across Britain are treated with glyphosate annually, according to a study of government data by Oxford Economics. Emma Hockridge, head of policy at the Soil Association, described the ruling as a “dramatic blow” to the pesticide industry. “This is a landmark case, which highlights not only the problems caused by glyphosate, but also the whole system of pesticide use. We need to urgently change our systems of weed control to stop relying on herbicides,” she said.

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“It has taken years of negotiations to set up this conference. If we miss this opportunity, we will probably not get another opportunity to save the high seas for another 40 years. By then, there will probably not be much left that is worth protecting.”

The Oceans’ Last Chance (G.)

The leatherback turtle is one of our planet’s most distinctive creatures. It can live for decades and grow to weigh up to two tonnes. It is the largest living reptile on Earth and its evolutionary roots reach back more than 100 million years. “Leatherbacks are living fossils,” says oceanographer Professor Callum Roberts, of York University. “But they are not flourishing. In fact, they are being wiped out at an extraordinary rate, particularly in the Pacific Ocean, where their numbers have declined by 97% over the past three decades. They are now critically endangered there.” Leatherbacks are suffering for several reasons. They have been hunted for their meat for centuries and the spread of tourist resorts disrupts turtles when they come ashore to lay their eggs on sandy beaches.

But the cause of the most recent, most massive decline in numbers of Dermochelys coriacea has a far more pernicious cause: long-line fishing in the high seas. Some trawlers now drag fishing lines that are more than 75 miles long, each bristling with hooks. Tens of thousands of sea turtles get snagged on these and drown every year. “It is tragic,” says Roberts. And this carnage goes unchecked – for the simple reason that there is no protection at all for species, endangered or otherwise, on seas outside national waters. The list includes fish and seabirds, plus fragile ecosystems such as deep-sea corals. “Outside national waters, in the high seas, it is essentially a no man’s land when it comes to protecting sensitive environments and their inhabitants,” says Paul Snelgrove, a deep-sea biologist at Memorial University in St John’s, Canada. “It is a highly unsatisfactory state of affairs.”

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Jul 082018
 
 July 8, 2018  Posted by at 8:06 am Finance Tagged with: , , , , , , , , , , ,  


Utagawa Hiroshige Sudden Evening Shower on the Great Bridge near Atake 1857

 

US Debt Explosion & Weimar II (von Greyerz)
China Threatened By “Vicious Circle Of Panic Selling” (ZH)
The Demise of Toys ‘R’ Us Is a Warning (Atlantic)
Why It’s Not Too Late To Step Back From The Brexit Brink (G.)
British MPs Should Be Ashamed Of Supporting Regime Change In Tehran (Oborne)
OPEC’s Dilemma (Lacalle)
Turkey Sacks Another 18,500 State Employees In New Decree (AFP)
Trump, the Dragonbear, and the Bipolar World Order 2.0 (M.)
Trump’s Existential Threat To The Empire (Stockman)
Are All Societies Destined To Destroy Themselves? (Wef)
Inventing the Weekend (Jacobin)

 

 

“Prosperity built on debt is short lived..”

US Debt Explosion & Weimar II (von Greyerz)

[..] change starts in the periphery where very few are looking. Look at China where the Shanghai composite is down 23% since January. And look at Brazil where the Bovespa is off 17% so far this year and Turkey which has lost 20%. What is important to understand is that most major markets are now looking extremely vulnerable, be it Japan, Germany or the US. Fundamentally most markets are overvalued with the help of central bank liquidity. Also, technically we are not far from crashes in most markets. Whilst there is always a possibility of a last hurrah, it looks like all markets have topped, including the US, and that later in 2018 we will see major falls. Once the bear markets start, they are likely to turn into secular trends that last many years and result in falls of 75% to 95%.

Difficult to believe for most investors today, but nobody in 1929 believed that the Dow would fall 90% in the ensuing years and take 25 years to recover. The investment world has been lulled into a permanent state of security and euphoria. Hard to deny that central banks and governments have been extremely skilful in telling the world constant lies. And why would anyone protest, as the rich are getting incredibly rich and many normal people in the West have a higher standard of living than ever. Very few of the “normal people” understand that their prosperity is built on personal debt and their government borrowing more than ever. Nor do they understand that they are responsible for this debt that they of course can never repay.

Even less do they understand that they will be on their own when debt implodes and they lose their jobs. Because the state will at that point have run out of money and there will be no social security or unemployment benefits. Nor will there be any pension for retirees as pension funds will go from extremely underfunded to totally unfunded.

When Trump was elected in November 2016, I forecast that US debt would continue to double every 8 years on average, as it has done since Reagan become president. That would lead to $28 trillion debt by 2021 and $40 trillion by 2025. Well, it seemed quite unrealistic back in 2016 that the US would average over $2.5 trillion deficit in the ensuing 8 years to 2025. Judging by current forecasts, it looks like debt will “only” be $25 trillion in 2021. But as tax revenues decline and spending increases, I would not be surprised to see $28 trillion debt in 2021. That would put the US on course for a $40 trillion debt in 2025.That would mean a doubling of the debt from 2017 which is in line with the historical trend of a 100% increase every 8 years.

A $40 trillion debt in 2025 would be bad enough but things are likely to get worse. With debt exploding, the Fed will lose control of interest rates as foreign investors dump US bonds. A rate of 10% at that point would not be unrealistic. That would lead to an interest bill of $4 trillion per year (10% on $40T). This would mean that just interest costs are likely to be higher than total tax revenue.

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“$1 trillion worth of stocks are being pledged as collateral for loans..”

China Threatened By “Vicious Circle Of Panic Selling” (ZH)

Small caps aside, the marketwide numbers are staggering: about $1 trillion worth of stocks listed in China’s two main markets, Shanghai or Shenzhen, are being pledged as collateral for loans, according to data from the China Securities Depository and ChinaClear. More ominously, this trends has exploded in the past three years, and according to Bank of America, some 23% of all market positions were leveraged in some way by the end of last year in China, double from the start of 2015.


Source: WSJ

As a result of the recent market rout which sent the Shanghai Composite into bear market territory, in June UBS warned that it sees a growing risk in China’s stock pledges; the bank calculated that the market cap of pledged stocks that have fallen below levels triggering liquidation amounts to 440 billion yuan with some 500 billion yuan below warning line, which translates to ~1% and 1.1% of China’s entire market value of $6.8 trillion. A separate analysis by TF Securities, as of Jun 19th, stock prices of 619 companies were close to levels where margin calls will be triggered. Since then, that number has increased.

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When Toys R Us went bankrupt, they got permission to give the executives that drove the company into bankruptcy $32 million in bonuses. Store employees, regular working people, got nothing.

The Demise of Toys ‘R’ Us Is a Warning (Atlantic)

Ann marie reinhart was one of the first people to learn that Toys “R” Us was shuttering her store. She was supervising the closing shift at the Babies “R” Us in Durham, North Carolina, when her manager gave her the news. “I was almost speechless,” she told me recently. Twenty-nine years ago, Reinhart was a new mother buying diapers in a Toys “R” Us when she saw a now hiring sign. She applied and was offered a job on the spot. She eventually became a human-resources manager and then a store supervisor. She stayed because the company treated her well, accommodating her schedule. She got good benefits: health insurance, a 401(k). But she noticed a difference after the private-equity firms Bain Capital and Kohlberg Kravis Roberts, along with the real-estate firm Vornado Realty Trust, took over Toys “R” Us in 2005.

“It changed the dynamic of how the store ran,” she said. The company eliminated positions, loading responsibilities onto other workers. Schedules became unpredictable. Employees had to pay more for fewer benefits, Reinhart recalled. Reinhart’s store closed for good on April 3. She was granted no severance—like the more than 30,000 other employees who are losing their job with the company. In March, Toys “R” Us announced that it was liquidating all of its U.S. stores as part of its bankruptcy process, which began last September. Observers pointed to the company’s struggle to fight off new competition. In its court filing, the company laid the blame at the feet of Amazon, Walmart, and Target, saying it “could not compete” when they priced toys so low.

Less attention was paid to the albatross that Bain, KKR, and Vornado had placed around the company’s neck. Toys “R” Us had a debt load of $1.86 billion before it was bought out. Immediately after the deal, it shouldered more than $5 billion in debt. And though sales had slumped before the deal, they held relatively steady after it, even when the Great Recession hit. The company generated $11.2 billion in sales in the 12 months before the deal; in the 12 months before November 2017, it generated $11.1 billion.

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The legal position.

Why It’s Not Too Late To Step Back From The Brexit Brink (G.)

Last week, in response to a petition seeking a referendum on the final deal, the government not only refused to allow “the people” to decide on the terms of Brexit, it categorically stated that parliament will not be allowed to do so either. Parliament will instead be given what it calls “a meaningful vote … either [to] accept the final agreement or leave the EU with no agreement”. This is the opposite of “meaningful”; the government intends to refuse parliament the chance to reject both options – it must accept what is offered or take nothing at all. And this is the government’s position, irrespective of the dire consequences for our country or “the will of its people” to avoid them. Even though the UK could before March 2019 change its mind, the government says that it will on no account let that happen.

The reason given for this is said to be the government’s “firm policy” that “there must be no attempts to [reverse the referendum and] remain inside the European Union”; the government does not deny that reversal is legally possible. Its position accords with advice, which I am told from two good sources the prime minister has received, namely that the article 50 notification can be withdrawn by the UK at any time before 29 March 2019, resulting in the UK remaining in the EU on its current favourable terms. Such advice would also accord with the view of Lord Kerr, who was involved in drafting article 50, of Jean-Claude Piris, former director general of the Council of the EU’s legal service and of Martin Selmayr, a lawyer and head of cabinet to the president of the European commission.

As a lawyer, I agree with them. Article 50 provides for the notification – not of withdrawal but of an “intention” to withdraw. In law, an “intention” is not a binding commitment; it can be changed or withdrawn. Article 50(5) is, moreover, clear that it is only after a member state has left that it has to reapply to join. Had the drafters intended that once a notification had taken place, a member state would have to request readmission (or seek the consent of the other member states to stay), then article 50(5) would have referred not just to the position following withdrawal, but also following notification. Such an interpretation is in line with the object and purpose of article 50.

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Britain’s empire days are over. Hard to accept?!

British MPs Should Be Ashamed Of Supporting Regime Change In Tehran (Oborne)

Britain’s prime minister has been fighting a valiant, losing battle to rescue British relations with Iran in the wake of US President Donald Trump’s reckless attempts to wreck them. But last week Theresa May was dealt a devastating blow to her authority after several Tory MPs defied her by going to Paris for a meeting designed to promote regime change inside Iran. This event is the latest sign that the prime minister and her foreign secretary, Boris Johnson, are facing a mutiny over Iran. Former cabinet minister Theresa Villiers was among senior Tories who travelled to Paris last week to hear Rudy Giuliani, former mayor of New York and Trump’s highly influential lawyer, call for the downfall of the Iranian government.

This meeting was a direct defiance of British government policy, which aims to save the Iran nuclear deal intact, and is against engineering a change of government in Iran. Indeed, Johnson assured Parliament in May that “I do not believe that regime change in Tehran is the objective that we should be seeking.” The overwhelming majority of Conservative MPs favoured Trump’s policy of dismantling the JCPOA – and condemned May’s policy of keeping it Three Tory MPs – along with one Labour MP – travelled to the event, organised by the National Council of Resistance of Iran, a front organisation for Mojahedin-e-Khalq Organisation (MEK), once listed by the US as a terror organisation. There is no question that these reflect a powerful and vocal body of sentiment inside the Conservative Party.

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Sanctions on Iran conflict with lower oil prices.

OPEC’s Dilemma (Lacalle)

The fundamental problem of the last OPEC meeting is the evidence of the division between two groups. One, led by Iran, which wants higher prices and deeper cuts, and the two largest producers, Saudi Arabia and Russia, who support a more diplomatic position. Iran wants to continue increasing its own production yet wants OPEC to maintain the group cuts. Iran also faces the backlash of sanctions on exports. Today, the US exports more oil than Iran. Saudi Arabia and Russia have the lowest production costs and stand as the ones to gain more from a moderate production increase. Oil prices will not collapse and they will sell more oil.

The agreed increase in production is a good political move from Saudi Arabia because it shows that it does not aim to harm the world economy or its customers, only to return to a stabilized oil market. With this, Saudi Arabia cements its position as the Central Bank of oil. The winners from this carefully designed agreement are Saudi Arabia, Russia, and the Gulf countries. Those who enjoy lower costs and can generate higher revenues from improved exports. The agreement sets production higher but no individual quotas, so improvement in output is left to the countries with the highest excess capacity. Iran, Venezuela, Ecuador and other countries that have production and geopolitical problems suffer the most. The commitment is likely to add 600,000-650,000 barrels per day to the market.

A figure of 32 million barrels per day is agreed, but the real increase will not be the optical one million barrels per day, but rather the aforementioned 650,000 one. This figure, at a time when oil inventories are in line with the average of the past five years, relieves inflationary pressures and eliminates the risk that the US Administration will take political measures against the OPEC countries. Trump had already alerted OPEC that it could not keep inflating prices artificially. In addition to showing the tension between these two sides, the OPEC summit also reveals that the cartel has much less market control than they would like to have. The fact that the price has only reached 80 dollars a barrel (compared to 100-130 dollars a few years ago) indicates that their ability to manipulate prices to 100 dollars per barrel is very low.

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How does that country still function?

Turkey Sacks Another 18,500 State Employees In New Decree (AFP)

Turkish authorities ordered the dismissal of more than 18,500 state employees including police officers, soldiers and academics, in a decree published on Sunday. The Official Gazette said 18,632 people had been sacked including 8,998 police officers in the emergency decree over suspected links to terror organisations and groups that “act against national security”. Some 3,077 army soldiers were also dismissed as well as 1,949 air force personnel and 1,126 from the naval forces. Another 1,052 civil servants from the justice ministry and linked institutions have been fired as well as 649 from the gendarmerie and 192 from the coast guard. Authorities also sacked 199 academics, according to the new decree, while 148 state employees from the military and ministries were reinstated.

Turkey has been under a state of emergency since the July 2016 attempted overthrow of President Recep Tayyip Erdogan. Turkish media dubbed the decree as the “last” with officials indicating the state of emergency could end as early as Monday. The emergency has been renewed seven times and the latest period is officially due to end on July 19. Over 110,000 public sector employees have been removed previously from their jobs via emergency decrees since July 2016 while tens of thousands more have been suspended in a crackdown criticised by Ankara’s Western allies. [..] Sunday’s decree shut down 12 associations across the country as well as three newspapers and a television channel.

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Recommended by Jim Rickards. The changing shapes of world order.

Trump, the Dragonbear, and the Bipolar World Order 2.0 (M.)

Just a few days ago, in an unexpected move, Ray Dalio, the founder of world’s largest hedge fund -Bridgewater Associates- announced on Social Media: “Today is the first day of the war with China.” And a day earlier, Trump made a statement about the upcoming summit in Helsinki, claiming that: “Putin’s fine. He’s fine.” One might wonder what the former message has to do with the latter, and how all these contradictory statements fit together. In fact, they make sense if seen through the prism of an emerging bipolar World Order 2.0, which is about the systemic rivalry between the USA and China, and the unique position of Russia in between.

It has become apparent that most of the decision-makers, experts and scholars mistook the end of the US-led unipolarity for the beginning of multipolarity and thus overlooked the emergence of the Global System bipolarity as well as the creation of the Dragonbear (an unique systemic bond between China and Russia as opposed to the USA). Furthermore, the Global System has become too unsustainable regarding its main (man-made) socio-economic components of global finance, monetary, economy, trade, and energy networks, and, as a consequence, is now being shaped by the unprecedented systemic rivalry between the USA and China, with Russia, the EU and India being the free riders, which leads to unexpected new alliances like the Dragonbear or the one between the USA and India, and might also result in the breakup of the NATO and the EU in the long term.

Back in 1975, the West and the Soviet Union bloc met in Helsinki to negotiate and sign a final act with ten principles that have been guiding their relations until now, among which the principle of sovereign equality, the refraining from the threat or use of force, inviolability of frontiers, the territorial integrity of states, and the non-intervention in internal affairs. Indeed, these principles were constantly deteriorated by the actions of single states or organisations over the last decades but were at least recognised by all actors of the global affairs.

However, Trump and Putin might declare new rules of the game, which will reflect the growing great powers competition and the flux of the global affairs. The meeting between Trump and Putin tête-à-tête will most likely address the broader picture of the geopolitical and geoeconomic interests of the two actors in the Middle East and beyond, particularly avoiding sensitive issues such as Ukraine, Syria (except for the sake of coordination efforts) or energy sanctions, and will specifically focus on North Korea, Iran and nuclear non-proliferation.

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The old world order no longer works.

Trump’s Existential Threat To The Empire (Stockman)

[..] the NATO subservient think tanks and establishment policy apparatchiks are harrumphing up a storm, but for crying out loud most of Europe’s elected politicians are in on the joke. They are fiscally swamped paying for their Welfare States and are not about to squeeze their budgets or taxpayers to fund military muscle against a nonexistent threat. As Justin Raimondo aptly notes, “Finally an American president has woken up to the fact that World War II, not to mention the cold war, is over: there’s no need for US troops to occupy Germany. Vladimir Putin isn’t going to march into Berlin in a reenactment of the Red Army taking the Fuehrer-bunker – but even if he were so inclined, why won’t Germany defend itself?”

Exactly. If their history proves anything, Germans are not a nation of pacifists, meekly willing to bend-over in the face of real aggressors. Yet they spent the paltry sum of $43 billion on defense during 2017, or barely 1.1% of Germany’s $3.8 trillion GDP, which happens to be roughly three times bigger than Russia’s. In short, the policy action of the German government tells you they don’t think Putin is about to invade the Rhineland or retake the Brandenburg Gate. And this live action testimonial also trumps, as it were, all of the risible alarms emanating from the beltway think tanks and the 4,000 NATO bureaucrats talking book in behalf of their own plush Brussels sinecures. But now comes the piece de resistance. The Donald is going to Helsinki to make peace with Vlad Putin, and just in the nick of time.

Hopefully, in one-fell swoop they can reach an agreement to get the US military out of Syria; normalize the return of Crimea and Moscow’s historic naval base at Sevastopol to the Russian motherland; stop the civil war in Ukraine via a mutually agreed de facto partition; stand-down from the incipient military clashes from the Baltic to the Black Sea; and pave the way for lifting of the absurd sanctions on Russian businessmen and citizens. Needless to say, time is of the essence. Every hour that the Donald wastes tweeting, bloviating about his beloved Mexican wall, sabotaging American exports and jobs and watching Fox & Friends reruns is just more opportunity for the vast apparatus of the Deep State (and most of his own top officials) to deep-six the Donald’s emerging and thoroughly welcome rendition of America First.

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It’s about energy.

Are All Societies Destined To Destroy Themselves? (Wef)

In order to illustrate how civilization-planet systems co-evolve, Frank and his collaborators developed a mathematical model to show ways in which a technologically advanced population and its planet might develop together. By thinking of civilizations and planets—even alien ones—as a whole, researchers can better predict what might be required for the human project of civilization to survive. “The point is to recognize that driving climate change may be something generic,” Frank says. “The laws of physics demand that any young population, building an energy-intensive civilization like ours, is going to have feedback on its planet. Seeing climate change in this cosmic context may give us better insight into what’s happening to us now and how to deal with it.” Using their mathematical model, the researchers found four potential scenarios that might occur in a civilization-planet system:

Die-off: The population and the planet’s state (indicated by something like its average temperature) rise very quickly. Eventually, the population peaks and then declines rapidly as the rising planetary temperature makes conditions harder to survive. A steady population level is achieved, but it’s only a fraction of the peak population. “Imagine if 7 out of 10 people you knew died quickly,” Frank says. “It’s not clear a complex technological civilization could survive that kind of change.” Sustainability: The population and the temperature rise but eventually both come to steady values without any catastrophic effects. This scenario occurs in the models when the population recognizes it is having a negative effect on the planet and switches from using high-impact resources, such as oil, to low-impact resources, such as solar energy.

Collapse without resource change: The population and temperature both rise rapidly until the population reaches a peak and drops precipitously. In these models civilization collapses, though it is not clear if the species itself completely dies outs. Collapse with resource change: The population and the temperature rise, but the population recognizes it is causing a problem and switches from high-impact resources to low-impact resources. Things appear to level off for a while, but the response turns out to have come too late, and the population collapses anyway. “The last scenario is the most frightening,” Frank says. “Even if you did the right thing, if you waited too long, you could still have your population collapse.”

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Lovely treatise on how capitalism shaped leisure time.

Inventing the Weekend (Jacobin)

Although “commemoration of the Resurrection” was the official reason early Christians began observing the day of rest on Sunday instead of Saturday, they were also eager to differentiate themselves from Jews, and by the fourth century this eagerness translated into the codification of the Sunday Sabbath in ecclesiastical and civil legislation. A millennium and a half later, the Sabbatarian movement pointed to this antisemitism, along with the undue influence of pagan sun worship among early Christians, as reason to reestablish Saturday as the Christian Sabbath day. Temporal, political concerns should not have affected the observance of the true day of rest, so their argument went.

There’s another reason Saturday was re-sanctified in the nineteenth century, which has to do with the “illegitimacy” not of Sunday but of Monday. In preindustrial England, according to a poem of George Davis’s, “people of all ranks, at times, obey[ed] / the festive orgies of this jocund day.” Not just skilled laborers but all classes of workers observed “Saint Monday” as a holiday from work, much to the chagrin of emergent entrepreneurs. While it’s true that many workers spent Saint Monday in the alehouse and at cock or dog fights, it was also a day of relaxation and sociability, a day when the public gardens would be “literally swarming with a well-dressed, happy and decorous body of the working classes.”

The fact that Monday was often taken as a day of rest was a consequence of the typical rhythm of preindustrial work, in which workers would assemble to complete a certain set of tasks, work intensely for a few days until those tasks were completed, and then be at play half the week. In E. P. Thompson’s portrayal, “the work pattern was one of alternate bouts of intense labour and of idleness, wherever men were in control of their own working lives.” The idea that work was to be done during a set amount of regularly apportioned time, time that was well demarcated from another time of “leisure,” was still rather foreign. In 1806, a committee appointed by the House of Commons to assess the state of woolen manufacture in England found an “utmost distaste on the part of the men, to any regular hours or regular habits.” Work was a set of tasks, and when those tasks were completed, play began.

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Feb 202017
 
 February 20, 2017  Posted by at 10:13 am Finance Tagged with: , , , , , , , , ,  


Henri Cartier Bresson Moscow Metro 1954

 

Seven Years of Demanding The Impossible in Greece (MP)
Cost Of Greece, Troika Impasse Over Numbers Is Adding Up (K.)
Pre-Departure Migrant Camps Planned For Greek Islands (K.)
Democrats Suggest Invoking The 25th Amendment Unless Trump “Gets A Grip” (ZH)
Greenspan Blames Productivity Decline For Political, Economic Crises (BI)
S&P 500 Earnings Stuck at 2011 Levels, Stocks up 87% Since (WS)
The Nasty Little Secret About Housing Affordability (ABC.au)
The Unthinkable Just Happened in Spain (DQ)
Kim Dotcom Loses New Zealand Extradition Case But Claims Major Victory (NZH)
UK Vegetable Shortage A Sign Of Things To Come (G.)
Fukushima Aborts Latest Robot Mission Radiation At “Unimaginable” Levels (ZH)
Tulsi Gabbard vs. ‘Regime Change’ Wars (Wright)
UN Envoy Questions US Engagement On Syria (AFP)
Kaziranga: The Park That Shoots People To Protect Rhinos (BBC)

 

 

A glimpse of the madness bestowed upon Greece. You might think this settles it, that the IMF is going to back off. You would be wrong.

Seven Years of Demanding The Impossible in Greece (MP)

In a recent presentation of his book, Laid Low, which examines the IMF’s role in the eurozone crisis, author and journalist Paul Blustein disclosed a memo dated May 4, 2010, from the IMF’s then head of research Olivier Blanchard, to Poul Thomsen, who headed the Greek mission at the time. In his missive, Blanchard warned that the cumulative fiscal adjustment of 16 %age points being demanded of Greece in such a short period of time and with such a high level of frontloading had never been achieved before. According to Blanchard, not only was the task unprecedented, but Greece was being asked to achieve the impossible in unfavourable external circumstances, when everyone was barely recovering from the 2008 global financial crisis and without any other policy levers (low interest rates or exchange rate adjustment).

Blanchard foresaw what became a reality only about a year later: Even with “perfect policy implementation” the programme will be thrown off track rather quickly and the recession will be deeper and longer than expected, he warned. Blanchard’s scepticism and warnings were ignored. Instead, political limitations took hold of the decision-making process and domestic-focussed calculations pushed Greece into trying to achieve the impossible. This week, the former IMF chief economist admitted on Twitter that although he was not the one that leaked the memo he was not unhappy that the truth has been revealed because “it is seven years and still there is no clear/realistic plan” for Greece.

Athens is currently under pressure to adopt another 2% of GDP in new fiscal measures, which relate to the tax-free threshold and pension spending. Since 2010, Greece has adopted revenue-raising measures and spending cuts that are equivalent to more than a third of its economy and more than double what Blanchard had described as unprecedented almost seven years ago.

The Greek economy has been burdened with €35.6 billion in all sorts of taxes on income, consumption, duties, stamps, corporate taxation and increases in social security contributions. When totting all this up, it is remarkable that the economy still manages to function. During the same period, the state has also found savings of €37.4 billion from cutting salaries, pensions, benefits and operational expenses. Discretionary spending is now so lean that even the IMF argues that in certain areas it needs to increase if Greece is to meet the minimum requirements in the provision of public services. When this misery started, Greece had to correct a primary deficit of €24 billion. But the painful fiscal adjustment Greeks have had to endure had turned out to be three times as much. The IMF’s Thomsen, now the director of its European Department, recently argued that Greece doesn’t need any more austerity but brave policy implementation. Somehow, though, the discussion has ended up being about finding another €3.5 billion in taxes and cuts to pension spending. Bravery is nowhere to be seen.

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The cuts have hit Greek consumer spending so severely that a recovery is no longer possible. And without a recovery, the Troika demands will get more severe, rinse and repeat.

Cost Of Greece, Troika Impasse Over Numbers Is Adding Up (K.)

Another week of back-and-forth between Greece and its lenders seems to have brought us no closer to an agreement between all the parties involved in the country’s bailout. Monday’s Eurogroup meeting may produce some progress, but the complexity of the situation facing Athens, the eurozone and the IMF means it is likely that any forward movement will involve inching, rather than hurtling, towards an agreement. One of the key areas of disagreement is Greece’s fiscal performance. The government insists that the primary surplus for 2016 provides all the evidence needed that there should be no concerns about Greece meeting its fiscal targets in the coming years. Finance Ministry estimates put the primary surplus for 2016 at 2% of gross domestic product, against a target of 0.5%.

In an interview with Germany’s Bild newspaper last week, Finance Minister Euclid Tsakalotos suggested that last year’s primary surplus is actually 1.7 %age points above the target, ie 2.2% of GDP in total. On Friday, reports indicated that government officials believe the final figure, which is not due to be announced until April, will be around 3% of GDP. There is skepticism on the creditors’ side. Even before we get to debating how large last year’s primary surplus was, some of those who are lending Greece money are not convinced that enough of the overperformance is structural and that much of it may be driven by one-off occurrences. It will require further scrutiny of the final data to come up with a definitive answer to this question. The director of the IMF’s European Department, Poul Thomsen, told another German newspaper, Handelsblatt, last week that the Fund may revise its fiscal forecasts for Greece once it has last year’s statistics at its disposal.

This is crucial because the volume of measures being demanded of Greece by the institutions has been set at 3.6 billion euros largely due to the fact that the IMF believes Greece will fall short of the 3.5% of GDP primary surplus target it has been set for an, as yet, unspecified period after 2018. Athens hopes that if the IMF rethinks its figures, this may lead to a lower volume of measures being demanded and the first step in the grand bargain between the government and the institutions being taken. However, there are several added layers of complexity that have to be addressed. For example, the IMF does not only have doubts about the structural nature of Greece’s primary surplus, it also has lingering reservations about the reliability of the fiscal data coming out of Athens.

“Lack of fiscal transparency was clearly one of the factors that led to Greece finding itself in a difficult spot in 2010,” IMF Managing Director Christine Lagarde said in response to a question when she spoke at the Atlantic Council on February 8. “A lot has been improved but I’m not sure that the job is entirely completed. We are still seeing frequent revisions of some of those numbers. Everybody revises, let’s face it… but it’s a fact that Greece revises quite often and with significant variations.”

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People or cattle?

Pre-Departure Migrant Camps Planned For Greek Islands (K.)

Greek authorities are planning the creation of pre-departure detention facilities on the eastern Aegean islands, where thousands of migrants and refugees remain stranded, so as to accelerate returns to Turkey. According to officials from the Citizens’ Protection Ministry, the biggest%age of new arrivals over the past few months are from countries without a refugee profile: Pakistan, Morocco, Afghanistan and Bangladesh. Significant numbers also arrived from Egypt, the Dominican Republic, Tunisia, Nigeria and Libya. Officials say that the creation of closed-structure facilities, each with a capacity of 150-200 people, is key to taking some of the pressure off the islands of Lesvos, Chios, Samos, Kos and Leros, which have borne the brunt of the influx.

The mayors of these five islands are expected to travel to Brussels in early March to meet with Europe’s Migration Commissioner Dimitris Avramopoulos to voice their concerns. During a tour of these islands last week, the EU’s special envoy on migration, Maarten Verwey, said that the aim was to cut current numbers by half by the end of April. According to official figures, some 14,600 migrants and refugees are currently accommodated at official facilities on the islands. In comments made during the visit, Verwey, who is also the coordinator for the implementation of the EU-Turkey agreement to stem migrant flows, repeated that these detention facilities would be “temporary.”

Sources suggest that authorities have almost finalized plans for facilities on Samos, Lesvos and Kos, while looking for spaces on Leros and Chios. The plans have met with resistance from locals. Since the beginning of 2017, authorities have reportedly deported 160 individuals from Pakistan, 150 from Iraq, 70 from Algeria, 30 from Afghanistan, 25 from Morocco and 20 from Bangladesh. Police said 60 Syrians had left Greece voluntarily.

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Regime change. Who’s crazy now?

Democrats Suggest Invoking The 25th Amendment Unless Trump “Gets A Grip” (ZH)

After questioning President Trump’s sanity earlier in the week, it appears Democrats have found another narrative to cling to – invoke the 25th Amendment unless Trump “gets a grip.” With a growing number of Democrats openly questioning President Trump’s mental health. Rep. Earl Blumenauer (D-Ore.) in a floor speech this week called for a review of the Constitution’s procedures for removing a president. He warned the 25th Amendment of the Constitution falls short when it comes to mental or emotional fitness for office. Sen. Al Franken (D-Minn.) during a weekend interview with CNN’s “State of the Union” said that “a few” Republican colleagues have expressed concern to him about Trump’s mental health. And Rep. Ted Lieu (D-Calif.) plans to introduce legislation that would require the presence of a psychiatrist or psychologist in the White House.

[..] So, what’s Article 4 to the 25th Amendment? In the abstract, the amendment itself is about presidential succession, and includes language about the power of the office when a president is incapacitated. But Digby recently highlighted the specific text of growing relevance: “Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.”

What does that mean exactly? Well, it means Congress isn’t the only institution that can remove a president from office between elections. Under the 25th Amendment, a sitting vice president and a majority of the executive branch’s cabinet could, on their own, agree to transfer power out of the hands of a sitting president. At that point, those officials would notify Congress, and the vice president would assume the office as the acting president. And what if the challenged president wasn’t on board with the plan to remove him/her from the office? According to a recent explainer, “If the president wants to dispute this move, he can, but then it would be up to Congress to settle the matter with a vote. A two-thirds majority in both houses would be necessary to keep the vice president in charge. If that threshold isn’t reached, the president would regain his powers.”

All of this comes up in fiction from time to time, and in all likelihood, Americans will probably never see this political crisis play out in real life. And that’s probably a good thing: by all appearances, the intended purpose of the constitutional provision was to address a president with a serious ailment – say, a stroke, for example – in which he or she is alive, but unable to fulfill the duties of the office. In other words, for the first time, the concept of a “soft palace coup” has been officially brought up on public media; we expect such speculation will only get louder. The ball is now in Trump’s court.

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“Populism is not a philosophy or a concept, like socialism or capitalism, for example. Rather it is a cry of pain, where people are saying: Do something. Help!”

Greenspan Blames Productivity Decline For Political, Economic Crises (BI)

Alan Greenspan, the former chairman of the US Federal Reserve whose low-interest policies (some say) helped inflate the dot-com and mortgage bubbles of 2000 and 2008, did a fascinating interview with Gold Investor recently. In it, Greenspan produced an incredibly cogent explanation of the role that reduced long-term productivity has had in fuelling populism, Brexit and Trump. Before we deliver Greenspan’s quote, some background: “Productivity” is one of the least-sexy areas of macroeconomics, even though right now it is one of the biggest issues bedevilling it. Here’s a chart from the Resolution Foundation showing the phenomena:

The “productivity puzzle” is this: The amount investors get in return, in aggregate, for investing in new workers is in long-term decline. Productivity growth is in decline globally and heading toward zero. This is counterintuitive because new technology ought to make workers more productive and more efficient. A single employee with a laptop can do more today than a roomful of secretaries, mathematicians, and writers could in the 1960s. We ought to be getting more bang for our bucks. Fix productivity, and you fix everything, economists believe – including GDP growth, workers’ pay, investment returns, and so on. But instead we’ve got stagnating incomes, low growth, and low productivity for money invested. The productivity decline isn’t a complete mystery, of course. We know it is a mixture of deflationary forces, an aging population, excessive debt, and increased inequality. But putting that all together in a simple, elegant way is tough. That’s why this answer from Greenspan is so good. He was asked whether he was concerned about Stagflation.

“We have been through a protracted period of stagnant productivity growth, particularly in the developed world, driven largely by the aging of the ‘baby boom’ generation. Social benefits (entitlements in the US) are crowding out gross domestic savings, the primary source for funding investment, dollar for dollar. The decline in gross domestic savings as a share of GDP has suppressed gross non-residential capital investment. It is the lessened investment that has suppressed the growth in output per hour globally. Output per hour has been growing at approximately 0.5% annually in the US and other developed countries over the past five years, compared with an earlier growth rate closer to 2%.

That is a huge difference, which is reflected proportionately in GDP and in people’s standard of living. As productivity growth slows down, the whole economic system slows down. That has provoked despair and a consequent rise in economic populism from Brexit to Trump. Populism is not a philosophy or a concept, like socialism or capitalism, for example. Rather it is a cry of pain, where people are saying: Do something. Help!”

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Seek shelter.

S&P 500 Earnings Stuck at 2011 Levels, Stocks up 87% Since (WS)

The S&P 500 stock index edged up to an all-time high of 2,351 on Friday. Total market capitalization of the companies in the index exceeds $20 trillion. That’s 106% of US GDP, for just 500 companies! At the end of 2011, the S&P 500 index was at 1,257. Over the five-plus years since then, it has ballooned by 87%! These are superlative numbers, and you’d expect superlative earnings performance from these companies. Turns out, reality is not that cooperative. Instead, net income of the S&P 500 companies is now back where it first had been at the end of 2011. Hype, financial engineering, and central banks hell-bent on inflating asset prices make a powerful fuel for stock prices. And there has been plenty of all of it, including financial engineering.

Share buybacks, often funded with borrowed money, have soared in recent years. But even that is now on the decline. Share buybacks by the S&P 500 companies plunged 28% year-over-year to $115.6 billion in the three-month period from August through October, according to the Buyback Quarterly that FactSet just released. It was the second three-month period in a row of sharp year-over-year declines. And it was the smallest buyback total since Q1 2013. Apple with $7.2 billion in buybacks in the quarter, GE with $4.3 billion, and Microsoft with $3.6 billion topped the list again. Still, despite the plunge in buybacks, 119 companies spent more on buybacks than they’d earned in the quarter. On a trailing 12-month basis, 66% of net income was blown on buybacks.

Alas, net income has been a problem. By now, with 82% of the S&P 500 companies having reported their results for Q4 2016, earnings rose 4.6% year-over-year, according to FactSet. It’s the second quarter in a row of year-over-year earnings growth, after six quarters in a row of earnings declines. For the entire year 2016, earnings edged up 0.4% from 2015. And revenue inched up 2.4% – in a year when inflation, as measured by the Consumer Price Index, rose 2.8%.

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“..Australians are in hock to the tune of more than $1.4 trillion on housing. That’s a hell of a lot of debt just to keep the wind and rain out.”

The Nasty Little Secret About Housing Affordability (ABC.au)

There’s a nasty little secret about housing affordability. For all the furrowed brows, the sombre looks and the public handwringing from policy makers, no-one is actually serious about fixing the problem because they all fear the potential fallout. The Government is running in circles on the issue while the Reserve Bank is praying the mess will slowly evaporate over time. It’s become a regular event; a politician conjures up an outlandish idea to again make housing affordable to the masses. If it’s not a cash splash to first home buyers, it’s a harebrained scheme to allow younger Australians to dip into their superannuation. Last week, it was a plan to force banks to lower lending standards. In each case, the net effect would be to lift demand and raise the cost of housing. Unfortunately, at this point in the economic cycle, there are only two mechanisms that could solve the social and political issue of our time.

The first is for housing prices to experience a dramatic fall. And the second is for wages to rise substantially. The first comes with a nasty side-effect: it would create economic chaos and send many of our banks to the wall. Achieving, or at least promising, the second might get you elected but ultimately would prove disastrous with spiralling inflation and, you guessed it, a probable spike in housing prices. Both are unthinkable. A crash could be catastrophic because our banks essentially have morphed into glorified building societies, with the bulk of their earnings geared towards residential mortgages. The two biggest lenders, Commonwealth and Westpac, have around 60% of their loan books devoted to housing.

Real estate is baked into the Australian psyche. We talk about it ad nauseam, owners obsess over upgrades and renovations and those outside the owners’ club fret about how to enter. All up, Australians are in hock to the tune of more than $1.4 trillion on housing. That’s a hell of a lot of debt just to keep the wind and rain out. Of that, more than half a trillion is on loan to property investors.

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Bankers going to court.

The Unthinkable Just Happened in Spain (DQ)

Untouchable. Inviolable. Immunity. Impunity. These are the sort of words and expressions that are often associated with senior central bankers, who are, by law, able to operate more or less above the law of the jurisdictions in which they operate. Rarely heard in association with senior central bankers are words or expressions like “accused”, “charged” or “under investigation.” But in Spain this week a court broke with that tradition, in emphatic style. As part of the epic, multi-year criminal investigation into the doomed IPO of Spain’s frankenbank Bankia – which had been assembled from the festering corpses of seven already defunct saving banks – Spain’s national court called to testify six current and former directors of the Bank of Spain, including its former governor, Miguel Ángel Fernández Ordóñez, and its former deputy governor (and current head of the Bank of International Settlements’ Financial Stability Institute), Fernando Restoy.

It also summoned for questioning Julio Segura, the former president of Spain’s financial markets regulator, the CNMV (the Spanish equivalent of the SEC in the US). The six central bankers and one financial regulator stand accused of authorizing the public launch of Bankia in 2011 despite repeated warnings from the Bank of Spain’s own team of inspectors that the banking group was “unviable.” Though they have so far only been called to testify, the evidence against the seven former public “servants” looks pretty conclusive. Testifying against them are two of Banco de España’s own inspectors who have spent the last two years investigating Bankia’s collapse on behalf of the trial’s presiding judge, Fernando Andreu.

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“We have won. We have won the major legal argument. This is the last five years of my life and it’s an embarrassment for New Zealand.”

Kim Dotcom Loses New Zealand Extradition Case But Claims Major Victory (NZH)

The evidence of the case has not been argued in New Zealand courts with the legal debate here being one of trying to match the crimes Dotcom and others are charged with to the crimes listed in the Extradition Act. In an interview with the Herald, Dotcom said the ruling was a “major victory” because it ruled that there was no New Zealand equivalent to the US criminal charges of copyright violation. “The major part of this litigation has been won by this judgment – that copyright is not extraditable. “They destroyed my family, destroyed my business, spied on me and raided my home and they did all of this on a civil copyright case. “We have won. We have won the major legal argument. This is the last five years of my life and it’s an embarrassment for New Zealand.”

He said it was effectively a statement from the court that neither he, his co-accused or Megaupload had broken any New Zealand laws. “Now they’re trying through the back door to say this was a fraud case. I’m confident going with this judgment to the Court of Appeal. The ruling today has created an unusual bureaucratic contradiction – the warrant which was served on Dotcom when he was arrested on January 20, 2012, stated he was being charged with “copyright” offences. Likewise, the charges Dotcom will face in the US are founded in an alleged act of criminal copyright violation. Dotcom said there were plans to take a separate court action over the arrest warrant, given it showed he had been arrested for a crime which effectively did not exist in New Zealand. “My arrest warrant, the document that kicked everything off in New Zealand, is not for fraud. In my arrest warrant, there is nothing about fraud.”

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Recognize this? “The shelves looked wonderful, perfect, almost clinical, as though invented in a lab in my absence; but there was no smell.”

UK Vegetable Shortage A Sign Of Things To Come (G.)

The UK’s clock has been set to Permanent Global Summer Time once more after a temporary blip. Courgettes, spinach and iceberg lettuce are back on the shelves, and the panic over the lack of imported fruit and vegetables has been contained. “As you were, everyone,” appears to be the message. But why would supermarkets – which are said to have lost sales worth as much as £8m in January thanks to record-breaking, crop-wrecking snow and rainfall in the usually mild winter regions of Spain and Italy – be so keen to fly in substitutes from the US at exorbitant cost? Why would they sell at a loss rather than let us go without, or put up prices to reflect the changing market? Why indeed would anyone air-freight watery lettuce across the whole of the American continent and the Atlantic when it takes 127 calories of fuel energy to fly just 1 food calorie of that lettuce to the UK from California?

The answer is that, in the past 40 years, a whole supermarket system has been built on the seductive illusion of this Permanent Global Summer Time. As a result, a cornucopia of perpetual harvest is one of the key selling points that big stores have over rival retailers. If the enticing fresh produce section placed near the front of each store to draw you in starts looking a bit empty, we might not bother to shop there at all. But when you take into account climate change, the shortages of early 2017 look more like a taste of things to come than just a blip, and that is almost impossible for supermarkets to admit. Add the impact of this winter’s weather on Mediterranean production, the inflationary pressures from a post-Brexit fall in the value of sterling against the euro, and the threat of tariffs as we exit the single market, and suddenly the model begins to look extraordinarily vulnerable.

I can remember the precise moment I first understood that we had been taken into this fantastical, nature-defying system without most of us really noticing. It was 1990 and I had been living and working with Afghan refugees in Pakistan’s North-West Frontier province for a long period. The bazaars where we bought our food were seasonal, and stocked from the immediate region. Back home on leave in the UK, I had that sense of dislocation that enables you to see your own culture as if from the outside. It was winter, but the supermarkets were full of fresh fruits and vegetables from around the world. The shelves looked wonderful, perfect, almost clinical, as though invented in a lab in my absence; but there was no smell. It was vaguely troubling in a way I couldn’t identify at the time.

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Excellent overview of the very scary latest on Fukushima from multiple sources at Zero Hedge.

Fukushima Aborts Latest Robot Mission Radiation At “Unimaginable” Levels (ZH)

Two years after sacrificing one robot, TEPCO officials have aborted their latest robot mission inside the Fukushima reactor after the ‘scorpion’ became unresponsive as it investigated the previously discovered hole where the core is believed to have melted. A “scorpion” robot sent into a Japanese nuclear reactor to learn about the damage suffered in a tsunami-induced meltdown had its mission aborted after the probe ran into trouble, Tokyo Electric Power company said Thursday. As Phys.org reports, TEPCO, the operator of the Fukushima nuclear plant, sent the remote-controlled device into the No. 2 reactor where radiation levels have recently hit record highs.

The “scorpion” robot, so-called because it can lift up its camera-mounted tail to achieve better viewing angles, is also designed to crawl over rubble inside the damaged facility. But it could not reach its target destination beneath a pressure vessel through which nuclear fuel is believed to have melted because the robot had difficulty moving, a company spokeswoman said. “It’s not immediately clear if that’s because of radiation or obstacles,” she said, adding that TEPCO is checking what data the robot was able to obtain, including images.

[..] The robot, 60 centimetres (24 inches) long, is made by Toshiba and equipped with two cameras and sensors to gauge radiation levels and temperatures. Scorpion’s mission is to take images of the situation and collect data inside the containment vessel,” TEPCO spokesman Shinichi Nakakuki said earlier. “Challenges include enduring high levels of radiation and moving on the rough surface,” he said. Radiation levels inside the reactor were estimated last week at 650 sieverts per hour at one spot, which can effectively shut down robots in hours.

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Ann Wright served 29 years in the US Army/Army Reserves and retired as a colonel. She also was a U.S. diplomat for 16 years and served in U.S. Embassies in Nicaragua, Grenada, Somalia, Uzbekistan, Kyrgyzstan, Sierra Leone, Micronesia, Afghanistan and Mongolia. She resigned in March 2003 in opposition to the war in Iraq. She has lived in Honolulu since 2003.

Tulsi Gabbard vs. ‘Regime Change’ Wars (Wright)

I support Rep. Tulsi Gabbard, D-Hawaii, going to Syria and meeting with President Bashar al-Assad because the congresswoman is a brave person willing to take criticism for challenging U.S. policies that she believes are wrong. It is important that we have representatives in our government who will go to countries where the United States is either killing citizens directly by U.S. intervention or indirectly by support of militia groups or by sanctions. We need representatives to sift through what the U.S. government says and what the media reports to find out for themselves the truth, the shades of truth and the untruths. We need representatives willing to take the heat from both their fellow members of Congress and from the media pundits who will not go to those areas and talk with those directly affected by U.S. actions.

We need representatives who will be our eyes and ears to go to places where most citizens cannot go. Tulsi Gabbard, an Iraq War veteran who has seen first-hand the chaos that can come from misguided “regime change” projects, is not the first international observer to come back with an assessment about the tragic effects of U.S. support for lethal “regime change” in Syria. Nobel Peace Laureate Mairead Maguire began traveling to Syria three years ago and now having made three trips to Syria. She has come back hearing many of the same comments from Syrians that Rep. Gabbard heard — that U.S. support for “regime change” against the secular government of Syria is contributing to the deaths of hundreds of thousands of Syrians and – if the “regime change” succeeded – might result in the takeover by armed religious-driven fanatics who would slaughter many more Syrians and cause a mass migration of millions fleeing the carnage.

[..] During the Obama administration, Rep. Gabbard spoke critically of the U.S. propensity to attempt “regime change” in countries and thus provoking chaos and loss of civilian life. On Dec. 8, 2016, she introduced a bill entitled the “Stop Arming Terrorists Act” which would prohibit the U.S. government from using U.S. funds to provide funding, weapons, training, and intelligence support to extremists groups, such as the ones fighting in Syria – or to countries that are providing direct or indirect support to those groups. In the first days of the Trump administration, Rep. Gabbard traveled to Syria to see the effects of the attempted “regime change” and to offer a solution to reduce the deaths of civilians and the end of the war in Syria. A national organization Veterans For Peace, to which I belong, has endorsed her trip as a step toward resolution to the Syrian conflict.

Not surprisingly, back in Washington, Rep. Gabbard came under attack for the trip and for her meeting with President Assad, similar to criticism that I have faced because of visits that I have made to countries where the U.S. government did not want me to go — to Cuba, Iran, Gaza, Yemen, Pakistan, North Korea, Russia and back to Afghanistan, where I was assigned as a U.S. diplomat.

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“How you square this circle, that I understand is what they are discussing in Washington..”

UN Envoy Questions US Engagement On Syria (AFP)

UN envoy Staffan de Mistura on Sunday questioned US President Donald Trump’s engagement in solving the Syrian war, just days ahead of a new round of peace talks in Geneva. “Where is the US in all this? I can’t tell you because I don’t know,” he said, adding that the new administration was still trying to work out its priorities on the conflict. The top three US priorities include fighting Islamic State jihadists, “how to limit the influence of some major regional players and how to not to damage one of their major allies in the region,” de Mistura told the Munich Security Conference. “How you square this circle, that I understand is what they are discussing in Washington,” he said. He did not say who the regional player or major ally were but the first reference appeared to be to Iran, with the second likely to be either Turkey or Saudi Arabia.

Mistura stressed that what was ultimately key was an inclusive political solution to end the six-year conflict. “Even a ceasefire with two guarantors can’t hold too long if there is no political horizon,” he said, referring to a fragile truce brokered by Russia and Turkey in December. Any political solution has to be inclusive to be credible, he said, stressing that peace talks in Astana last week organised by Russia, Turkey and Iran, and the ceasefire deal provided an opening that should be explored. The US envoy for the anti-IS coalition, Brett McGurk, acknowledged that Trump’s administration is “re-looking at everything, which is a very healthy process from top to bottom.” “We will be very selfish about protecting and advancing our interests,” he told the same forum.

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This will always remain controversial. But it’s the only way.

Kaziranga: The Park That Shoots People To Protect Rhinos (BBC)

Kaziranga National Park is an incredible story of conservation success. There were just a handful of Indian one-horned rhinoceros left when the park was set up a century ago in Assam, in India’s far east. Now there are more than 2,400 – two-thirds of the entire world population. This is where David Attenborough’s team came to film for Planet Earth II. William and Catherine, the Duke and Duchess of Cambridge, came here last year. But the way the park protects the animals is controversial. Its rangers have been given the kind of powers to shoot and kill normally only conferred on armed forces policing civil unrest. At one stage the park rangers were killing an average of two people every month – more than 20 people a year. Indeed, in 2015 more people were shot dead by park guards than rhinos were killed by poachers. Innocent villagers, mostly tribal people, have been caught up in the conflict.

Rhinos need protection. Rhino horn can fetch very high prices in Vietnam and China where it is sold as a miracle cure for everything from cancer to erectile dysfunction. Street vendors charge as much as $6,000 for 100g – making it considerably more expensive than gold. Indian rhinos have smaller horns than those of African rhinos, but reportedly they are marketed as being far more potent. But how far should we go to protect these endangered animals? I ask two guards what they were told to do if they encountered poachers in the park. “The instruction is whenever you see the poachers or hunters, we should start our guns and hunt them,” Avdesh explains without hesitation. “You shoot them?” I ask. “Yah, yah. Fully ordered to shoot them. Whenever you see the poachers or any people during night-time we are ordered to shoot them.” Avdesh says he has shot at people twice in the four years he has been a guard, but has never killed anybody. He knows, however, there are unlikely to be any consequences for him if he did.

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Jan 182017
 
 January 18, 2017  Posted by at 3:31 pm Finance Tagged with: , , , , , , , , ,  


René Magritte The Art of Conversation 1963

Sometimes you best fight fire with fire. This knowledge goes back to the advent of agriculture. Australian aboriginees have used it since as long as their stories of dream time can remember. For Native Americans it was an essential part of their lives. These days, we need Trump to fight the fire of an elite class world power that is a threat to all of us.

Be stirring as the time; be fire with fire;
Threaten the threatener and outface the brow
Of bragging horror

Shapespeare: King John, 1595

Been greatly enjoying Donald Trump’s pair of interviews with the European press this weekend, in the shape of German scandal paper Bild’s chief, very-right Kai Diekmann, and disgraced Brexiteer Michael Gove for the Sunday Times. What a pair of choices, by the way, what’s next, a Russian interview conducted by Zhirinovsky?. Who picked those clowns? Let’s just hope it was the Trump campaign.

Enjoying it not in the least because Trump is right in just about everything he says. At least, as per what we at the Automatic Earth have been saying about some of the topics involved all along. And we’re not Trump fans, we just think the others are more wrong than he is, and that it’s high time to abolish the EU, and NATO, and sure, the CIA too.

Speaking of which: Chuck Shumer has made it all the way to Senate leader for the Democrats, right? And then he says about Trump’s criticism of US intel and the Steele ‘report’:

“Let me tell you: You take on the intelligence community, they have six ways from Sunday at getting back at you. For a practical, supposedly hard-nosed businessman, he’s being really dumb to do this.”

Want to take any of that back, Chuck? While you still can? Because, you know, threatening the president-elect with the might of the CIA, what does that say about your view of who actually rules the country, Charlie? That’s not a gaffe, that’s what would in America’s better days have been a career buster, buster. But your own rudderless party won’t call you on it, and Trump would love for you to keep your seat; one less worry. Still, c’mon, you just can’t say sh*t like that. It’s beyond any pale. Or, you know, it once was.

What did Trump get right? Here’s what. First, NATO should not exist anymore, since as we’ve said 1000 times, and Ron Paul said 10 times more, it’s merely a hammer looking for a nail, having turned for the purpose, since the dissolution of the Soviet Union, from a defensive collaboration into the planet’s worst aggressor. The 1000s of additional US troops gathered at or close to the Russian border recently are more than plenty evidence of that.

Trump wants far fewer nukes on the planet, and proposes to negotiate a deal with Russia to achieve that goal. Ergo, 30 years after Reagan met Gorbachev in Reykjavik to accomplish just that, Trump must meet Putin in that same spot to do it all over again?! That’s the legacy of NATO. It would be mighty symbolic, though we might want to remember the 1972 Spasski-Bobby Fisher chess ‘world cup’ there, and the American’s paranoia at the time. Not a good example. But they’ll meet someplace, for sure.

Second, Trump likes Brexit. So do we. Beautiful Brexit. Because it is a preliminary step towards the dissolution of the EU, which, as Trump very correctly remarks, has degenerated into a “vehicle for Germany” to compete with the US as a global trading force.

And of course Germany would deny this. After all, didn’t the notorious FinMin Schäuble say -again- just a few days ago that Europe’s problem is not Germany’s surplus, but the weakness of other nations? This week, German foreign ministry spokesman Martin Schäfer added:“For the German government, Europe has never been a means to an end, but a community of fate which, in times of collapsing old orders, is more important than ever.” A community of ‘fate’? An ‘old order’ vs a ‘new order’? Are we taking notes?

Anyway, this is cheap quatsch as long as a huge part of Germany’s surplus comes from its trade with co-EU nations. Because in that scenario, there’s only so much surplus to go around, and the rest will all of necessity run deficits. If that is hard to understand, let’s dive up these stats again, and close that discussion once and for all:

 

 

The EU very much IS a vehicle for Germany, and it eats people alive. That has nothing to do with Germany taking in immigrants, it has to do with economic and power policies, with the destruction of Greece and Italy. The structure of the EU makes it possible, inevitable even, that the strongest partner forces all the others to do its will. That really is all you need to know about why the EU is doomed to failure. All the rest is just about describing the process of how that failure unfolds.

Setting and keeping the euro at a rate that is beneficial to Germany condemns poorer EU nations to ever deeper poverty. That’s what those numbers say. And if anyone thinks Schäuble is not aware of either the numbers or the principle itself, get help. Merkel and Schäuble have been elected to represent Germans, but then they wind up making decisions for 400 million other people, who are the victims of the very policies that benefit Germany. There’s nothing difficult about it.

‘Community of Fate’.. Let’s just hope something was lost in translation there. Point is, Trump is right on the money, and he’s about the first person to put it as simply and poignantly as that. The EU is a vehicle for trade domination. It’s a means for Germany and Holland to acquire access to a huge market for their products, free of just about any trade restrictions. Promoted with the flogged dead horse of the ‘tide that lifts all boats’. It does no such thing.

Other than times of open warfare, for countries like Greece and Italy the EU is the worst thing that ever happened to them in a long time. Brussels stands for economic warfare labeled as a unifying force for peace. It’s a blatant lie wrapped in sheep’s clothing. And of course more nations will want to get out, they’d be crazy not to.

Which is what’s so painfully missing from all the Brexit talk in the UK: everyone goes with the idea that the EU will continue to exist as is, just without Britain. The chance of others leaving, and the effect that will have on the ‘Union’, is never discussed. Though it might put the exit from it in a whole different light, politically and especially economically.

German Vice-Chancellor en Economy Minister Sigmar Gabriel puts his foot in his mouth in much the same way Schumer does, in a reaction to Trump’s interviews. As Tyler Durden describes Gabriel’s ‘Trump shock’:

Responding to Trump’s comments that Merkel had made an “utterly catastrophic mistake by letting all these illegals into the country”, Gabriel said the increase in the number of people fleeing the Middle East to seek asylum in Europe had partially been a result of US-led wars destabilising the region.

Slamming US foreign policy – and thus the Obama regime, not to mention Angela Merkel’s close friend Hillary Clinton – as a culprit for the European refugee crisis, Gabriel said that “there is a link between America’s flawed interventionist policy, especially the Iraq war, and the refugee crisis, that’s why my advice would be that we shouldn’t tell each other what we have done right or wrong, but that we look into establishing peace in that region and do everything to make sure people can find a home there again,” Gabriel said.

First, if you are against America’s deeply flawed and ‘deeply deadly’ regime change policies of the last few decades, as Gabriel pretends to be, you should be pro-Trump, because the man who will be the next US president a little over 50 hours from now is not only of the same opinion, he will be in a position to do something about it. And while you’re at it, why not tell us of all the heroics Merkel has performed over the past decade of her reign, to make it stop?

And do yourself one better: describe in detail the role your EU partners France and Britain have played in these failures. In which untold trillions were spent and untold millions of lives lost, but in which the arms industries of these nations, and certainly Germany’s too, have made mind-boggling profits. Once you’ve done all that, Mr. Gabriel, feel free to criticize the 45th president of the United States.

“In that area Germany and Europe are already making enormous achievements – and that’s why I also thought it wasn’t right to talk about defence spending, where Mr Trump says we are spending too little to finance Nato. We are making gigantic financial contributions to refugee shelters in the region, and these are also the results of US interventionist policy.” Gabriel, who will likely run as the centre-left candidate against Merkel in Germany’s federal elections in September, said Trump’s election should encourage Europeans to stand up for themselves.

Here is where Gabriel’s foot enters his mouth:

“On the one hand, Trump is an elected president. When he is in office, we will have to work with him and his government – respect for a democratic election alone demands that,” Gabriel said. “On the other hand, you need to have enough self-confidence. This isn’t about making ourselves submissive.

What he says about trade issues, how he might treat German carmakers, the question about Nato, his view on the European Union – all these require a self-confident position, not just on behalf of us Germans but all Europeans. We are not inferior to him, we have something to bring to the table too. “Especially in this phase in which Europe is rather weak, we will have to pull ourselves together and act with self-confidence and stand up for our own interests.”

If that is your idea of exuding confidence, of being and/or appearing strong, Trump will have you for breakfast. “in this phase in which Europe is rather weak, we will have to pull ourselves together” , “you need to have enough self-confidence. This isn’t about making ourselves submissive.” Or how about some genuine pouting: “We are not inferior to him, we have something to bring to the table too.”

No, Mr. Gabriel is not the horse you want to place your bets on. He’s a left wing leader sitting in a government with right wing Merkel, in the kind of flawed consensus model that haunts both the EU and its member states, leaving large groups of people without anyone addressing their issues. This is where ‘populists’ are born. In the US, it gave us Trump.

Gabriel is just one of many who are all wedded to the broken Obama/Merkel/Hillary ideal, financed by a deep state class that profits greatly from the fake notion that what is good for the rich is also good for the poor. Should have given them bread and circuses, guys.

Jul 022015
 
 July 2, 2015  Posted by at 9:49 am Finance Tagged with: , , , , , , , ,  


William Henry Jackson New Orleans, “Canal Street from the Clay monument” 1890

Varoufakis Says He Won’t Be Finance Minister After a ‘Yes’ Vote
Why We Recommend A NO In The Referendum – In 6 Short Bullet Points (Varoufakis)
Juncker, Draghi and Lagarde Should Hang Their Heads In Shame (Davis)
Syriza Can’t Just Cave In. Europe’s Elites Want Regime Change In Greece (Milne)
“US Should Have Stopped IMF From Sending Redlined Document To Greece” (HuffPo)
US Sen. Bernie Sanders Blasts Greece’s Creditors (HuffPo)
Europe Wants to Punish Greece With Exit (Crook)
Democracy And Monetary Union: How Not To Do It (Janssen)
Europe Has Suffered A Reputational Catastrophe In Greece (AEP)
Tsipras Refuses To Bow To Threats To Greek Banking System (Telegraph)
In Greek Crisis, Germany Should Learn From Its Fiscal Past (WaPo, Jan 28)
In Athens, Scavenging From Bins Has Become A Way To Survive (Telegraph)
The Hard Line on Greece (Sorkin)
Fear-Mongering Is The Enemy Of Democracy (Suzanne Moore)
How Varoufakis Saw The “Worst Case Scenario” Over A Year Ago (Zero Hedge)
Berlin Accuses Tsipras Of Seeking Scapegoats Outside Own Ranks (Guardian)
Greek Tourism Bookings Are Nosediving (Kathimerini)
China Eases Margin Lending Rules to Support Flagging Stock Market (FT)
China’s Fix for a Margin-Debt Boom Roiling Stocks? More Leverage (Bloomberg)
Normal Banks Are Helping Shadow Banks Grow, a Lot (Bloomberg)
Reaganomics Won’t Save Japan (Pesek)
Belgium Adopts Law Against ‘Vulture Funds’ (AFP)
China’s May Thermal Coal Imports Collapse 41% On-Year (HSN)

How and why could this surprise people? Of course he steps down. Fantastic interview on Bloomberg. Said he’d cut his arm off before signing a deal without debt restructuring.

Varoufakis Says He Won’t Be Finance Minister After a ‘Yes’ Vote

Greek Finance Minister Yanis Varoufakis said he would resign if Greece votes to accept European Union bailout proposals. In the event of a “yes” vote in Sunday’s referendum, “I will not” be finance minister on Monday evening, Varoufakis said in an interview in Athens with Bloomberg Television. “But I will help whoever is.” Varoufakis said that he expects Greeks to reject the bailout proposals.

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Straightforward. No use getting scared now.

Why We Recommend A NO In The Referendum – In 6 Short Bullet Points (Varoufakis)

1) Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren

2) The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.

3) The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure

4) Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.

5) Greece will stay in the euro. Deposits in Greece’s banks are safe. Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.

6) The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.

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And this is from the Conservative side in the US..

Juncker, Draghi and Lagarde Should Hang Their Heads In Shame (Davis)

The Euro-clique that is the Troika should be ashamed of itself. This organisation, comprising the European Commission, the ECB, and the IMF run by yet another member of the cold-hearted Euro-elite, Christine Lagarde, is inflicting on the Greek people a policy that is little short of barbarism. They have only themselves to blame if the Greeks reject their latest demands in the upcoming referendum. Not only is unemployment running at 25%, and at nearly 60% amongst the under 25s, but the Greek lower middle class, the traders that make any economy run, has been decimated. Suicide is up 45%. 30% of the Greek people are living in poverty. Nearly one in five of the population does not have enough to eat, with food purchases having fallen by 28.5%.

Pensioners, now the bread-winners in many households (pensions are now the main – and often only – source of income for almost half of Greek families), have seen a 61% fall in their pension payments. Greek pensions were, pre-crisis, extremely generous, sometimes ridiculously so. In some sectors pensions could be more than 100% of final salaries, with some public sector workers taking retirement in their early 50’. Coupled with an aging population – 20% of Greeks are over age 65, one of the highest%ages in the Eurozone – this was a major factor in Greece’s problems. But Greek pensions are no longer so generous. On top of the cut to monthly payments, the standard retirement age for men is being lifted to 67, one of the highest in Europe.

Almost half of pensioners live on less than the poverty line of €665 per month. Food poverty is worsening people’s health. The stillbirth rate is up by 21% and infant mortality rose by 40% between 2008 and 2011. TB rates have doubled. HIV infection is up. Malaria has re-emerged after nearly half a century. Health care is funded by insurance, so when people lose their jobs they lose their health care. Along with cuts in state funding and the subsequent hospital closures, the economy of the health service is being destroyed. Thousands of doctors have left the country. Those that remain work for about €12,000 a year. Some clinics now depend upon volunteers and doctors who work for nothing.

This destruction is repeated throughout Greece’s public sector. There is little doubt that it needed reform. It was rotten, with overpaid jobs and excessive pensions allocated by rousfeti (political patronage) and the distribution of its services often lubricated by fakelaki (bribes). But what was needed was modernising rationalisation, not the fit of devastation that has left much of Greece dependent on soup kitchens and charity clinics.

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“This is, after all, a system where unelected institutions and other states have the power to override elected governments..”

Syriza Can’t Just Cave In. Europe’s Elites Want Regime Change In Greece (Milne)

It’s now clear that Germany and Europe’s powers that be don’t just want the Greek government to bend the knee. They want regime change. Not by military force, of course – this operation is being directed from Berlin and Brussels, rather than Washington. But that the German chancellor Angela Merkel and the troika of Greece’s European and IMF creditors are out to remove the elected government in Athens now seems beyond serious doubt. Everything they have done in recent weeks in relation to the leftist Syriza administraton, elected to turn the tide of austerity, appears designed to divide or discredit Alexis Tsipras’s government. They were at it again today, when Tsipras offered what looked like almost complete acceptance of the austerity package he had called a referendum on this Sunday.

There could be no talks, Merkel responded, until the ballot had taken place. There’s no suggestion of genuine compromise. The aim is apparently to humiliate Tsipras and his government in preparation for its early replacement with a more pliable administration. We know from the IMF documents prepared for last week’s “final proposals” and reported in the Guardian that the creditors were fully aware they meant unsustainable levels of debt and self-defeating austerity for Greece until at least 2030, even on the most fancifully optimistic scenario. That’s because, just as the earlier bailouts went to the banks not the country, and troika-imposed austerity has brought penury and a debt explosion, these demands are really about power, not money.

If they are successful in forcing Tsipras out of office, a slightly less destructive package could then be offered to a more house-trained Greek leader who replaced him. Hence the ECB’s decision to switch off emergency funding of Greece’s banks after Tsipras called the referendum on an austerity scheme he had described as blackmail. That was what triggered the bank closures and capital controls, which have taken Greece’s crisis to a new level this week as it became the first developed country to default on an IMF loan. The EU authorities have a deep aversion to referendums, and countries are routinely persuaded to hold them again if they give the wrong answer. The vote planned in Greece is no exception. A barrage of threats and scaremongering was unleashed as soon as it was called.[..]

This is, after all, a system where unelected institutions and other states have the power to override elected governments – in fact to impose not only policies but effectively governments too, as we may be about to see in Greece. Anti-democratic firewalls are built into Europe’s institutions.

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Great angle. Nobody talks about Obama’s silence.

“US Should Have Stopped IMF From Sending Redlined Document To Greece” (HuffPo)

The United States should have intervened a week ago when the latest talks between Greece and its creditors began to fall apart, a former senior IMF official told The Huffington Post on Tuesday. Appeals for compromise over the Greek debt crisis come too late now, economist Peter Doyle said. [..] To really help the situation, Doyle, the former IMF senior manager, said the U.S. needed to step into the negotiations between Greece and its creditors at a crucial moment a week ago. As the largest single contributor to the IMF, the U.S. has the greatest say over its policies. Specifically, Doyle argues that the U.S. should have stopped the creditors from sending back Greece’s latest proposal covered with redlined changes on June 24 and then leaking it to the media.

The way the counterproposal was made was widely seen as humiliating to Greece. Moreover, it did not offer any new concessions on debt relief, pension reforms or increases in the value-added tax. Greece reacted furiously to the counterproposal, beginning a downward turn that culminated Saturday in Greece’s withdrawal from the talks and announcement of the referendum. “I was truly amazed that the U.S. allowed the IMF to send back to Greece that redlined document,” Doyle said. “It must have slipped through the cracks in the White House,” he added. “That redlined document was completely humiliating, and it says nothing about debt relief.”

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If Obama won’t speak, someone else will have to do it.

Bernie Sanders Blasts Greece’s Creditors (HuffPo)

Sen. Bernie Sanders (I-Vt.) attacked the IMF and European authorities on Wednesday for imposing what he called excessive austerity measures on Greece in negotiations over the country’s debt payments. “It is unacceptable that the IMF and European policymakers have refused to work with the Greek government on a sensible plan to improve its economy and pay back its debt,” Sanders said in an exclusive statement to The Huffington Post. “At a time of grotesque wealth inequality, the pensions of the people in Greece should not be cut even further to pay back some of the largest banks and wealthiest financiers in the world.”

Sanders, a 2016 Democratic presidential candidate and veteran progressive lawmaker, called the loans-for-austerity policies that the IMF and eurozone nations have imposed on Greece an “abysmal failure,” and demanded that the United States and other world powers grant Greece new debt-repayment terms that would allow its economy to recover from the damage it has sustained since 2008. “Instead of trying to force the Greek government and its people into even more economic pain and suffering, international leaders throughout the world, including the United States, should enable Greece to enact pro-growth policies that improve the lives of all of its people, not just the wealthy few,” Sanders said.

Sanders appeared to single out the IMF, the creditor over which the United States has the most direct influence. The U.S. controls more votes in IMF decisions than any other nation. “If Greece’s economy is going to succeed, these austerity policies must end,” Sanders said. “The IMF must give the Greek government the flexibility and time that it needs to grow its economy in a fair way.”[..]

It’s not clear what impact, if any, Sanders’ statement will have on the Greek crisis, since the United States – notwithstanding its controlling votes at the IMF – has remained largely on the sidelines during the current impasse. Treasury Secretary Jack Lew has been in close consultation with his eurozone and Greek counterparts throughout negotiations, but he’s refrained from specific prescriptions, instead making broad appeals for both sides to compromise. Peter Doyle, a former senior manager at the IMF, criticized the approach in an interview with HuffPost on Wednesday, arguing that the Obama administration should have vetoed a redlined document the creditors presented to Greece on June 26 that was viewed as especially humiliating.

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There’s more to this.

Europe Wants to Punish Greece With Exit (Crook)

In my more than 30 years writing about politics and economics, I have never before witnessed such an episode of sustained, self-righteous, ruinous and dissembling incompetence –and I’m not talking about Alexis Tsipras and Syriza. As the damage mounts, the effort to rewrite the history of the European Union’s abject failure over Greece is already underway. Pending a fuller postmortem, a little clarity on the immediate issues is in order. On Monday, European Commission President Jean-Claude Juncker said at a news conference that he’d been betrayed by the Greek government. The creditor institutions, he said, had shown flexibility and sought compromise. Their most recent offer involved no wage cuts, he emphasized, and no pension cuts; it was a package that created “more social fairness.”

Tsipras had misled Greeks about what the creditors were asking. The talks were getting somewhere. Agreement on this package could have been reached “easily” if Tsipras hadn’t collapsed the process early Saturday by calling a referendum. What an outrageous passel of distortion. Since these talks began five months ago, both sides have budged, but Tsipras has given vastly more ground than the creditors. In particular, he was ready to accede to more fiscal austerity — a huge climbdown on his part. True, the last offer requires a slightly milder profile of primary budget surpluses than the creditors initially demanded; nonetheless, it still calls for severely (and irrationally) tight fiscal policy. In contrast, the creditors have refused to climb down on the question of including debt relief in the current talks, absurdly insisting that this is an issue for later.

On Tuesday, Tsipras made his most desperate attempt yet to bring the issue forward. Far from expressing any desire to compromise, dominant voices among the creditors – notably German Finance Minister Wolfgang Schaeuble, who often seemed to be calling the shots – have maintained throughout that there is nothing to discuss. The program already in place had to be completed, and that was that. Yes, the program had failed. No, it wouldn’t achieve debt sustainability. Absolutely, it was pointlessly grinding down Greek living standards even further. What did that have to do with it? Juncker says the last offer made no demand for wage cuts. Really? The offer says the “wage grid” should be modernized, including “decompressing the [public sector] wage distribution.”

On the face of it, decompressing involves cuts. If the creditors were calling for public-sector wages to be decompressed upward perhaps they should have made this clear. Regardless, the increases in value-added taxes demanded by the creditors mean lower real wages, public and private alike. As for no pension cuts, the creditors called for phasing out new early-retirement penalties and the so-called social solidarity payment for the poorest pensioners. Those are cuts. The creditors called for a lot else, too. Remember that the Greek economy is on its knees. Living standards have collapsed and the unemployment rate is 25%. Now read the offer document, and see if you think the advance in “social fairness” that Juncker stressed at his news conference shines through.

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“..democracies are already well under way to be made “market conforming..”

Democracy And Monetary Union: How Not To Do It (Janssen)

There is not a shadow of a doubt that EMU is incomplete. The key problem is that sovereign debt of individual euro area member states is no longer backed by a central bank of their own. Indeed, when adopting the single currency, member states not only become members of EMU, they are also divorcing in some way from their national central bank. The Banca d’ Espana (just to name one) continues to exist but with its competence on monetary policy transferred to Frankfurt, the government in Madrid can no longer call upon the assistance of a money-creating institution in case of emergency. This peculiar combination of one supranational central bank together with 19 different sovereign debt stocks has made euro area member states extremely vulnerable in the event of a run on the bond market for their sovereign debt.

No longer able to resort to their own national central bank as a lender of last resort, governments inside EMU have no other choice but to adopt brutal austerity – or else default – in dealing with any liquidity crisis. In a sense, Eurozone member states can be compared to emerging economies that are issuing debt in a (foreign) currency they have no control over and get into serious trouble when market momentum changes and access to finance is completely cut off. Until 2010, this gap in the construction of monetary union in Europe went completely unnoticed. However, when the crisis in Greek public finances erupted back in 2009 and with central bankers openly declaring their increasing unwillingness to accept Greek debt as collateral, the fault-line in monetary union became painfully clear.

Financial markets reacted in a predictable way, by panicking and staging a self-fulfilling prophecy. Realising that, in the absence of the ECB backing up Spanish, Italian, French, or Belgium sovereign debt, a run on these bonds could trigger default, markets started running for the exit by massively dumping them. The rest of the story is well-known. Euro Area Member states, trying to calm down markets, embarked on the experiment of highly pro-cyclical austerity and topped this up with wage devaluation. Their hopes soon turned out to be vain as austerity and internal devaluation triggered a double dip recession, thus even stoking markets’ worst fears of default and/or the break-up of monetary union.

This vicious circle was only broken some years later (2012) when the ECB’s president, Mario Draghi, finally addressed market concerns about the absence of a lender of last resort by orally promising to do “anything it takes” to save the single currency. Europe has paid a high price for this. The price does not simply come in the form of economic stagnation, record high unemployment and rising inequalities. An even more worrying issue is that the principle of democracy is being hollowed out. Elected governments have repeatedly found themselves confronted with little choice but to abide by what the markets seem to be demanding or, alternatively, to obey the detailed “diktats” prescribed by the ECB in – not so – secret letters. [..]

A couple of years ago, at the height of the euro crisis, Chancellor Angela Merkel publicly stated that democracies in Europe needed to “conform to the markets”. With monetary policy in the hands of a supranational central bank, with fiscal policy enchained by the Stability Pact and the Fiscal Compact with its Fiscal Councils, democracies are already well under way to be made “market conforming” under the tutelage of these gatherings of independent professionals. The next step seems to be to also bring wages and wage bargaining under the discipline of experts’ councils and to do this on the basis of rules forcing workers across the Euro Area to compete with each other in poaching each other’s jobs. It is not a prospect that augurs well for a democratic Europe.

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“If you were of a suspicious mind, you might wonder whether Mr Tsipras has not in fact lured European leaders and officials into a legal trap..”

Europe Has Suffered A Reputational Catastrophe In Greece (AEP)

Oxi Day has totemic significance in Greece. It commemorates the defiant Greek “No” to Mussolini’s ultimatum in October 1940, and the heroic acceptance of war against a vastly bigger military machine. It is the same word that will top the ballot sheet when Greeks vote in a snap referendum this Sunday on creditor demands, and prime minister Alexis Tsipras is not shy in evoking the same spirit of wartime resistance. His speech to the nation on Wednesday night was peppered with talk of ultimata. He accused “extreme Right-wing circles” of forcing the closure of the Greek banks and the imposition of capital controls through liquidity asphyxiation. He lashed out at “authoritarians” in charge of the IMF and EU institutions. He spoke of attempts to blackmail the Greek people.

And he vowed to campaign against the creditor package – which, strictly speaking, is no longer on offer – deeming it the “destruction of Europe”. Where this will take him, and take Greece, is anybody’s guess. The latest Efimerida ton Syntakton poll shows the “No” side leading by 54pc against 33pc for “yes”. But that lead – if it really exists – may evaporate as the ghastly consequences of financial collapse become clearer by the day. Distraught pensioners have been gathering in small, tense crowds outside banks trying to withdraw their weekly allowance of €120 (£85). Many have not been paid. A throng of veterans protested outside the finance ministry on Wednesday morning, denouncing EU “dictatorship” and Mr Tsipras with equal fury.

Ambulances in parts of northern Greece have run out of fuel. The Greek Chamber of Commerce warns of “serious shortages” of basic goods and pharmaceutical supplies within days. The radical-Left Syriza government is skating on very thin ice. If Europe’s creditor powers have succeeded in bringing Greece to its knees, they have paid a fearful price themselves. As Pyrrhus said after the battle of Asculum: “Another such victory, and we will be utterly ruined.” We can already see that the EU itself has suffered a reputational catastrophe on several fronts. This is of far greater importance in the sweep of events than daily twists and turns in Athens. It has brought about a state of affairs where a member of its own eurozone family has become the first developed country in history to default to the IMF.

Let us be clear what this means. The currency union itself is delinquent. The rich countries of northern Europe are refusing to pay African, Asian and Latin American states. Blaming it on Greece alone does not wash. The eurozone has shown itself unable to manage its basic moral responsibilities. Russian president Vladimir Putin could hardly resist his own wicked dig, professing “great concern” over the EU’s vanishing credibility. This default is doubly shameful given that the original IMF-Troika loan in 2010 was not intended to save Greece. The extra debt was imposed on an already bankrupt Greek state to buy time for the euro, against Greek interests.

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And all the other stuff yesterday was just gossip.

Tsipras Refuses To Bow To Threats To Greek Banking System (Telegraph)

Greece’s embattled prime minister has refused to back down over a referendum on the country’s bail-out future, despite being threatened with imminent financial ruin and a banking collapse as early as Monday if he chooses to press ahead with the vote. In his third address on national television in the past five days, a defiant Alexis Tsipras vowed to let the Greek people have their say on the austerity terms they will need to sign up to in order to retain their 14-year membership of the single currency. Mr Tsipras is backing a “No” vote, a move that has drawn opprobrium from across the continent and been described as “dumb” by a senior ally of Germany’s Angela Merkel. “Come Monday, the Greek government will be at the negotiating table after the referendum, with better terms for the Greek people,” said Mr Tsipras.

Wednesday was the first day in five years that Greece has not been subject to a bail-out programme, freezing the bankrupt country out of €15bn in rescue funds. The government has been forced to impose draconian controls on cash withdrawals and shut down the banks for more than a week to prevent a devastating bank run. Branches are due to open again on July 7 after the referendum vote is held. But creditor powers are now threatening the country with the threat of an imminent financial collapse unless Mr Tsipras calls off the plebiscite. Slovakia’s finance minister, Peter Kazimir, made clear the ultimatum that was now facing Athens: “I’m afraid that Greece’s banks might not reopen with the euro as the currency in case the referendum on Sunday ends with a No,” he said.

The ECB decided to maintain the current €89bn cap on emergency funding that it is providing to keep the banking system afloat. The show of bullish resistance from Mr Tsipras is likely to further anger European leaders, who spent their third consecutive day refusing any dialogue with his government, pushing the country to the brink of a disorderly ejection from the eurozone. “We see no grounds for further talks at this point,” said Jeroen Dijsselbloem, the president of the Eurogroup of finance ministers. Greece became the first country since Robert Mugabe’s Zimbabwe to default to the International Monetary Fund on Tuesday night. The non-payment now places the country’s future in the hands of its creditors.

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Stunning how little intellectual progress has been made in 5 months. We leave it all up to the nutcases in charge: “The world will be a better place when Germans know their history – all of it.”

In Greek Crisis, Germany Should Learn From Its Fiscal Past (WaPo, Jan 28)

If you made a list of countries you hope have learned from their past hundred years of mistakes, Germany would have to be at the top. Happily, the staunch opposition to a nativist fringe that the nation’s government and citizenry have shown in recent weeks makes it clear, again, that Germany understands the costs of bigotry and the virtues of tolerance. Unhappily, it has not learned the costs of a mad adherence to fiscal orthodoxy, despite the fact that its prosperity is rooted in the decision of its World War II adversaries to allow West Germany’s postwar government to write off half of its debts. Indeed, the policies that Angela Merkel’s government have inflicted on the nations of Southern Europe could not be more different from those that European leaders and the United States devised in the early 1950s to enable West Germany to rebuild its damaged economy.

Since the crash of 2008, Germany, as Europe’s dominant economy and leading creditor, has compelled Mediterranean Europe, and Greece in particular, to sack their own economies to repay their debts. Germany’s insistence has reduced Greece to a condition like that of the United States at the bottom of the Great Depression. Unemployment has soared to 25%, and youth unemployment to more than 50% ; the economy has shrunk by 26% and consumption by 40%. Debt has risen to 175% of the nation’s gross domestic product. And the funds from the loans that Germany and other nations have extended to Greece have gone almost entirely either to cover interest payments or repay past loans; only 11% has actually gone to Greece’s government.

Stuck on a treadmill of debt repayment and anemic economic activity, Greece, as the Financial Times noted, has been reduced to a “quasi-slave economy” run “purely for the benefit of foreign creditors.”Not surprisingly, when Greek voters went to the polls Sunday, they elected a new government that is demanding a renegotiation of its debt. German and European Union officials have responded with adamant opposition to any such changes.

Fortunately for Germany, its own creditors took quite a different stance after World War II. In the London Debt Agreement of 1953, the 20 nations — including Greece — that had loaned money to Germany during the pre-Nazi Weimar Republic and in the years since 1945 agreed to reduce West Germany’s debts by half. Moreover, they agreed that its repayments could not come out of the government’s spending but only and explicitly from export income. They further agreed to undervalue the German mark, so that German export income could grow. By the consent of all parties, the London Agreement, and subsequent modifications, were crafted in proceedings that made West Germany an equal party to its creditors: It could, and sometimes did, reject the creditors’ terms and insist on new negotiations.

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The morally bankrput union.

In Athens, Scavenging From Bins Has Become A Way To Survive (Telegraph)

Piled high with rubbish congealing in the summer heat, municipal dustbin R21 on Athens’ Sofokleous Street does not look or smell like a treasure trove. But for Greece’s growing army of dustbin scavengers, its deposits of rubbish from nearby stores and grocery shops make it a regular point of call. “Sometimes I’ll find scrap metal that I can sell, although if I see something that looks reasonably safe to eat, I’ll take it,” said Nikos Polonos, 55, as he sifted through R21’s contents on Tuesday morning. “Other times you might find paper, cans, and bottles that you can get money for if you take them back to the shops for recycling.” One reason for R21’s popularity is because it is just down the road from a church soup kitchen, where the drug-addicted, the poor and homeless queue up for meals three times daily.

But many of those who now forage in such dustbins each day are simply ordinary working people – or were, at least, until Greece’s economic meltdown shot unemployment up to 25%. Mr Polonos, a quietly spoken man of 55, is typical of the new class of respectably destitute. He lost his job as a construction worker three years ago, when Greece’s building boom dried up, and in the current climate, cannot see himself finding paid work in the foreseeable future. Yet he dresses as smartly as he can in second-hand trousers and shirt, and does not see himself as any kind of vagrant. “I don’t want to ever look like him,” he said, gesturing to a tousle-haired drug addict slumped in a doorway near the soup kitchen.

“I never believed I would end up like this, but as long as Greece is in this terrible situation, my construction skills are not in demand. A lot of my friends are doing what I do now, and some people I know are even worse off. They have turned to drugs and have no hope at all.” The exact numbers of people who now scrape a living by rummaging through Athens’ bins is hard to estimate, since many only operate at night when their friends and neighbours will not see them. But according to Panos Karamanlikis, a volunteer at the soup kitchen, the numbers have increased by two or three times since 2011 alone. “A lot of them are normal people from normal homes,” said Mr Karamanlikis, who lost his job himself back in 2006 when the insurance company he worked for shed 60% of its work force. “They will go out and look for cigarette stubs on the streets, tin cans to recycle, anything.”

Stephen Graham, an anti-austerity campaigner from England who has spent the last three months travelling through Greece to study its economic problems, said that well-to-do scavengers were a common sight in the Athens suburb where he lived. “These are people who still have trappings of their old way of life, who still have clothes for work and smartphone contracts they can’t get out of,” he said. “They go to different neighbourhoods to scavenge so that people they know don’t see them. Seeing them is something I’ll never forget.”

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Schäuble’s been preparing this for years.

The Hard Line on Greece (Sorkin)

In July 2012, Timothy F. Geithner, the United States Treasury secretary at the time, traveled to Sylt, an island off Germany in the North Sea. Mr. Geithner was there for a meeting with Wolfgang Schäuble, Germany’s finance minister, who would spend his summers at his vacation home on the tiny island. The topic was Greece. In the home’s library, the two men spoke about Greece’s prospects and begun discussing ways for the European Union to keep the country in the eurozone. To Mr. Geithner’s dismay, however, Mr. Schäuble took the conversation in a different direction. “He told me there were many in Europe who still thought kicking the Greeks out of the eurozone was a plausible — even desirable — strategy,” Mr. Geithner later recounted in his memoir, “Stress Test: Reflections on Financial Crises.”

“The idea was that with Greece out, Germany would be more likely to provide the financial support the eurozone needed because the German people would no longer perceive aid to Europe as a bailout for the Greeks,” he says in the memoir. “At the same time, a Grexit would be traumatic enough that it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union,” Mr. Geithner wrote. “The argument was that letting Greece burn would make it easier to build a stronger Europe with a more credible firewall.” Fast-forward three years. What Mr. Schäuble articulated that summer afternoon to Mr. Geithner is finally taking shape.

Greece is in a harrowing last-minute standoff with the European Union over whether it will remain part of the eurozone, and Greek citizens are set to make the decision in a referendum vote on Sunday. That vote is happening against a backdrop of bank runs; citizens are camped outside of banks, where capital controls now restrict the amount of money that can be removed. Politicians and investors have been trying to “war game” the outcome. Who is bluffing? The Greeks or the European Union. The conversation between Mr. Geithner and Mr. Schäuble gives a strong indication. As Mr. Geithner said of another conversation he had with Mr. Schäuble: “He has a clear view: Greece had binged, so it needed to go on a strict diet.” [..]

It may seem counterintuitive, but rather than make a Greece exit easy and seamless to avoid dislocations in financial markets, the E.C.B. has the perverse incentive to make it messy and difficult to deter others.

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“Though Germany was allowed to grow its way out of recession in 1953, it will not let Greece do this, because it would set “a bad example””

Fear-Mongering Is The Enemy Of Democracy (Suzanne Moore)

Project Fear stalks Europe. In suits and ties and chaffeur-driven cars, in hurried meetings, in corridors blaring with strip lights, around the cabinet tables, in meetings where strategy is scrawled on whiteboards, in advertising agencies where earnest young people compete to unsettle us in the most effective ways. Perhaps I am too old and dreamy to think that politics was ever about anything other than fear; that hope is a necessity not a luxury. Surely I know, really, that when you want someone to vote a certain way you have to frighten them into thinking that any alternative is worse. We may not know what we like, but we sure as hell as know what we don’t like. Project Fear is not a paranoid delusion of mine. This phrase was used by the Conservatives in the last election and the pro-UK Better Together campaign. [..]

Of course, Project Fear reaches its apotheosis in Greece. If there is a referendum, the Greek people will be asked to vote for a hell they already know or one they can only imagine. They will continue to be lectured on profligacy and infantilised as lazy children, while their hospitals are running out of supplies, people are sleeping on the streets and unemployment soars. Those who stand in ATM queues are fearful, and who wouldn’t be? But from my last couple of visits to Greece, I would say that when a crisis is everyday, when you live on the brink, a strange calm sets in, a resilience that I can only compare to what I have seen in war zones, in that the need to get on with living overrides fear. No one can panic 24/7. “We will grow potatoes,” one man said to me. “We all watch out for each other,” said a woman.

For the thing about Project Fear is that when it becomes the weather, one learns to ignore it. As the Eurocrats huddle and speak of Greece, and then Spain and Italy, as some kind of totemic ethnic “other”, we should be disturbed. Does this huge south need to be dealt with differently? Is this all a place of unpaid tax and bribery and siestas? Be fearful of this. “They will take what is ours” is the subtext here. There is no respect for seasonal economies like Greece’s, but the fear is myopic. How can we not see that all of Europe will lose, too, if it continues to impoverish these places?

With migrants arriving in Kos and hordes of the dispossessed massing in Libya, why would we want to alienate a nation just one country away from Isis? Greece spends a lot on defence, this is true. Can we not see why? But the troika are the agents of Project Fear. Though Germany was allowed to grow its way out of recession in 1953, it will not let Greece do this, because it would set “a bad example”. The aim of all these dealings becomes clearer. It is to remove the democratic challenge of Syriza to these huge, undemocratic institutions of the EU and IMF. Even many rightwing economists argue that the conditional loans given to Greece have only enriched the financial intuitions. The aim is not growth but punishment.

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Berlin turns out to be even crazier than he thought.

How Varoufakis Saw The “Worst Case Scenario” Over A Year Ago (Zero Hedge)

Over a year ago, and long before he became the mascot for fraught negotiations between Greece and its creditors, Yanis Varoufakis penned a lengthy essay on what might happen should the Greek government decide to stand firm in the face of pressure from Brussels, Frankfurt, and Berlin. Earlier today we learned that in fact, Greece will stick to its negotiating position even in default and will remain defiant to the end, or at least until the voters who swept PM Tsipras and Varoufakis into office indicate at the ballot box that concedeing the Syriza campaign mandate is an acceptable outcome. With the government urging Greeks to vote “no”, the Tsipras and Varoufakis’ gambit will be put to the test next week, or perhaps even as early as this afternoon when the ECB could decide to effectively bring the Greek banking sector to its knees.

In this context, we bring you Yanis Varoufakis’ vision of the endgame, straight from the embattled FinMin himself:

That Greece has the right and the opportunity to deploy these bargaining cards there is no doubt. The important question is this: What if Berlin and Frankfurt do not budge? What if they tell Athens to ‘go jump of the tallest cliff’? The Greek government currently claims that it has a budget surplus. While I strongly doubt this claim, I suspect that a small primary surplus can be concocted through some additional cost cutting and a leximin squeeze of top public sector incomes downwards (without affecting the lowest incomes, pensions and benefits). That should suffice to allow the Athens government to meet its needs during any medium term standoff with Berlin and Frankfurt, as the Greek state will need no financing either from the official sector or from the money markets. In short, the answer to a German “Go jump” can be: “We shall not jump but we shall stay rock solid within the Eurozone and behind our demand for a debt conference. Just watch us.”

Berlin and Frankfurt will, undoubtedly, be furious. They will issue a variety of threats, including the suspension of structural fund flows from Brussels. But the real battleground will be the banks. As they did with Cyprus, where they threatened the government with an immediate suspension of the island nation’s ELA, so too in the case of Greece they will threaten to pull the plug on the Greek banks. Two points need to be made here. First, the Greek banks no longer hold any Greek government debt, which means that their collateral with the European System of Central Banks cannot be downgraded legally. Secondly, Frankfurt will have to think twice before it issues the threat of bending its own rules to close down Greek banks – since doing this would threaten to engulf the whole of the Periphery’s banking system into another cascading panic.

Confronted with such a reality, I have good cause to hope that Berlin will prefer to accommodate the Greek government and to look with a great deal more ‘kindness’ the ‘request’ for a debt relief conference. And if it does not, and wishes to bring the Eurozone down with it, let it do its worst, I say.

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What’s creeping into the discussion is a sense that it’s normal and legit for Berlin to move for regime change in a sovereign nation. That’s scary.

Berlin Accuses Tsipras Of Seeking Scapegoats Outside Own Ranks (Guardian)

Berlin has delivered a blistering attack on Greece’s beleaguered radical prime minister, Alexis Tsipras, accusing him of lying to his own people and seeking scapegoats for the country’s misery everywhere but in his own ranks. The German government dismissed desperate attempts by Athens to salvage some form of bailout, prompting Tsipras to hit back, accusing the country’s creditors of trying to “blackmail” Greek voters with dire warnings that a vote against austerity in this weekend’s referendum would be a vote to leave the euro. Tsipras referred to leaders of other eurozone nations as “extremist conservative forces” and blamed them for the capital controls that have forced the banks to shut down and ration cash.

With relations between Greece and Germany now at their lowest point in the crisis, divisions have also opened up among the main EU powers over what to do about Greece after five years of bailout closed down on Tuesday and the country became the EU’s first to default on loans to the IMF. The trenchant criticism of Tsipras from Berlin reinforced the view that the German government might refuse to negotiate with the leftwing Syriza administration on any new rescue package after Sunday’s referendum in Greece – which Berlin insists is a vote on whether to stay in the euro. The validity of the vote is now also being questioned. The Council of Europe said one week’s notice fell short of international standards and the wording was unclear, while Greece’s highest court has been asked to cancel the plebiscite on constitutional grounds.

A judgement will not be made until Friday. Syriza’s allies in the German parliament – die Linke, or the Left – accused the chancellor, Angela Merkel, of seeking to topple the Greek prime minister. It is an open secret in Berlin that Merkel, and especially her hawkish finance minister, Wolfgang Schäuble, would be happy to see Tsipras fall as a consequence of Sunday’s vote. At the very least, German government sources say privately, Berlin wants Greece’s flamboyant finance minister, Yanis Varoufakis, replaced. The rising tension over the Greek debacle surfaced at the very top of the EU on Wednesday when Schäuble rejected the latest Tsipras letter to his creditors accepting most of the austerity terms that last Saturday he had described as “humiliation” and “extortion”, while arguing for much more generous rescue funding over two years and including debt relief.

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Insult and injury.

Greek Tourism Bookings Are Nosediving (Kathimerini)

The government’s decision to call a referendum, shut banks and default on its payment to the International Monetary Fund are taking a toll on Greek tourism, professionals warned on Wednesday. Andreas Andreadis, the head of the Association of Hellenic Tourism Enterprises (SETE), said that hotel bookings are down 50,000 a day due to the recent developments in the country. Given that last-minute bookings account for 20% of the year’s tourism traffic, the blow is expected to be severe for Greek tourism, with knock-on effects on employment if those bookings are lost for good. Furthermore, there is a growing wave of cancellations at Athens hotels, while bookings from Greeks have dropped to almost zero.

Andreadis said the activation of Target 2 – an interbank payment system for the real-time processing of cross-border transfers throughout the EU – would be vital as it would facilitate transactions with other countries and allow for essential imports, meaning that catering facilities at accommodation units would be able to operate. He went on to warn that food and drink stocks will only suffice to cover hotels’ needs for one more week. Data released on Wednesday by the Travelplanet 24 and Airtickets websites showed that air ticket bookings by Greek travelers for the July-September period showed a decline of up to 50%. Air ticket cancellations rose from an average rate of 1.05% to 7.2% in the period from June 27 to yesterday. This peaked on Monday, when the cancellation rate amounted to 22%.

Similarly, ferry ticket bookings had posted an annual increase of 10% up until June 25, but since Prime Minister Alexis Tsipras called a referendum there has been a dip of 60%. Meanwhile, SETE informed the US Embassy in Athens that a major US-based tour operator had told the association that it had received orders to withhold money owed to Greek hoteliers from bookings last month. The embassy is investigating the claims, while the IMF yesterday issued a statement denying that it had given any such order.

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Use your home as collateral to buy hugely leveraged stocks. Yeah, that sounds good…

China Eases Margin Lending Rules to Support Flagging Stock Market (FT)

China’s securities regulator has moved to curb downward pressure on the country’s tumbling stock market by relaxing collateral rules on margin loans, in a bid to prevent a vicious cycle of price falls and forced selling. Margin finance has been a major driver of the rally that propelled China’s main stock index to a seven-year high on June 12, but the market has since tumbled more than 20% due in part to worries about a clampdown on leveraged bets. The China Securities Regulatory Commission said late on Wednesday that brokerages are free to set their own rules for demanding more collateral from clients when stocks bought with borrowed money fall in value. Previous rules required clients to add assets to their accounts when their collateral ratio dropped below 130%, or else liquidate their positions.

“The new CSRC rules to stop forced liquidation have hit the nail on the head and will calm the market for now,” Hao Hong, research director at Bocom International, wrote in a note. Nevertheless, the Shanghai Composite Index was down 0.9% in early trading on Thursday, deepening Wednesday’s 5.3% decline. Shenzhen was down 1.5%. Stock exchange data show that after surging to a high of Rmb2.27tn ($366bn) on June 18 — from Rmb401bn a year earlier — outstanding margin loans have fallen Rmb236bn. But Mr Hao also warned that the relaxation may sow the seeds for a future crisis.

“Beyond the short term, we believe margin call is a necessary risk management mechanism for brokers. The premise of margin trades is that asset prices will rise perpetually. It simply cannot be true,” he said. In addition to loosening collateral requirements, the new rules allow margin loans to be extended for longer than the previous six-month limit, and eliminate the requirement that margin clients must have assets in their securities account worth at least Rmb500,000. The CSRC first proposed the changes on June 12 in the form of draft rules open for a month-long public comment period. But in its statement on Wednesday the regulator said that “because the situation is special” the rules would now take effect immediately.

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Please borrow more!

China’s Fix for a Margin-Debt Boom Roiling Stocks? More Leverage (Bloomberg)

As China’s stock-market slump spurs margin traders to unwind record bullish bets, authorities have responded with a policy that analysts say could exacerbate the problem: make it easier to take on even more leverage. Hours after a one-day tumble of 5.2% in the Shanghai Composite Index, China’s securities regulator eased collateral requirements for leveraged investors and allowed brokerages to securitize margin loans – a move that frees up room to extend credit after a nine-fold surge in outstanding margin debt in two years. Brokerages have leeway to boost lending by about $300 billion, based on regulatory caps announced Wednesday.

While a surge in leverage helped fuel the longest-ever bull market in Chinese stocks, traders have been closing out those positions for a record eight straight days as the Shanghai Composite tumbled more than 20% from this year’s high. Even if relaxed rules help prevent a free-fall in share prices, the risk is that more leverage will expose amateur investors to even greater losses later and spur bigger price swings in the world’s most-volatile market. “Beyond the short term, risk taking with leverage underwritten by the state plants seeds for even greater market peril in the future,” Hao Hong, a China strategist at Bocom International, wrote in an e-mailed note.

The China Securities Regulatory Commission will allow brokerages to accept new forms of collateral, including real estate, from clients with insufficient value in their stock accounts. The regulator, which cut short a public consultation on the rules due to “market conditions,” said investors no longer need to supply extra collateral within two days when it falls below 1.3 times the amount of borrowed money. The new guidelines let brokerages give six-month extensions to clients’ margin trading and short selling contracts, instead of liquidating the positions.

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At home as in China.

Normal Banks Are Helping Shadow Banks Grow, a Lot (Bloomberg)

It’s no secret that financial companies without government-backed deposits—often dubbed shadow banks—have been growing as a result of post-financial crisis regulations imposed on actual banks. But what’s often overlooked is just how much the “normal” kind of banks are helping to power that growth. U.S. banks’ loans to nondepository financial companies, or shadow banks, have jumped more than 230% over the past three years, according to the semiannual risk perspective report released by the Office of the Comptroller of the Currency on Tuesday. They were the fifth-largest category of commercial-loan holdings at banks at the end of last year, up from the 11th spot at the end of 2011.

To be sure, banks being involved with shadow banks isn’t new. During the crisis, loans to subprime mortgage lenders, managers of collateralized debt obligations, and hedge funds created all sorts of trouble for banks, along with the sort of softer relationships they had with such things as the mortgage-backed securities they issued and SIVs. Yet banks never really backed away from being a key cog in the shadow-banking system, as Bloomberg News reporter Donal Griffin laid out in an article in 2012 about how Citigroup was involved with collateralized loan obligations, money-market funds, and mortgage real estate investment trusts, even as the bank’s then-chief executive officer, Vikram Pandit, was vocally criticizing how regulations were shifting risk toward exactly such things.

It’s not just banks that are offering nonbanks a helping hand. Another report released Tuesday, from the overseer of Fannie Mae and Freddie Mac, shows that those companies may also be playing a role, as they increase the fees they charge lenders to guarantee mortgages. Over the past two years, the mortgage giants have been charging small lenders less (on a risk-adjusted basis) to guarantee loans than they charge large ones, in a switch from the past, according to the report. And many of those small lenders are nonbanks.

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Abe should go.

Reaganomics Won’t Save Japan (Pesek)

Can Ronald Reagan save Japan from a debt crisis? We’re about to find out as Prime Minister Shinzo Abe bets the remaining years of his mandate on the former U.S. president’s economic philosophy. Abe’s new plan to curb Japan’s debt burden, the world’s heaviest at almost 250% of GDP, doesn’t mention Reagan. But it’s impossible not to notice the influence of his widely-touted theory that healthy government finances require, above all, a thriving corporate sector. That should worry investors, credit rating companies and the Japanese people alike. Abe did announce some vague intentions to cap spending and reach a budget surplus in fiscal 2020. But the heart of his strategy for dealing with government debt is stoking broader economic growth.

It’s a questionable strategy, one that’s even more dubious because of where Abe expects this debt-erasing output to come from: giant companies profiting from a weaker yen and a “productivity revolution.” Unfortunately, Abe’s plan is based on the discredited notion that more money for companies and the wealthy will mean more money for government coffers. Japanese companies have been earning more money since at least 2012, when the yen began dropping to the benefit of exports. But instead of sharing the wealth by fattening paychecks, executives hoarded it. The amount of cash and deposits corporate Japan has on hand jumped 3.6% in March to a record $1.96 trillion. In 26 of the 30 months Abe has been in office, CEOs have chosen to save extra cash rather than deploy it.

Abe shouldn’t expect much growth to trickle down from productivity gains either. Japan’s insular and outdated business practices have long made it a laggard among developed nations. That was less problematic before China’s ascendance in the region. Japan is now an aging, inefficient and wildly expensive property in a cheap neighborhood. In order to sustain its living standards, Japan needs to innovate and develop new job-creating industries (think renewable energy, not cars and televisions). But as Georges Desvaux of McKinsey argues in a recent report, Abe has done very little since taking office to invest in Japan’s vast human capital. [..] The bottom line is that there’s little “new” about a plan that relies on growth to pay down debt. Reagan never managed to pull it off in the 1980s – U.S. debt actually rose, belying the theory that tax cuts pay for themselves.

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All of Europe should.

Belgium Adopts Law Against ‘Vulture Funds’ (AFP)

Belgium has passed a law to cap how much so-called “vulture funds” can recoup from government debt bought at rock-bottom prices from countries teetering on the brink of default. Under the new law, approved overwhelmingly by the country’s main political parties, if a Belgian judge determines a fund is acting as a “vulture,” then it cannot claim more than the discounted price paid for the bonds, rather than their face value. The move comes after Belgium was dragged into a more than decade-long battle between a group of US hedge funds led by NML Capital Management and Argentina over some $1.3 billion of defaulted debt. In May, NML demanded Argentinian accounts be frozen in Brussels – a move no longer allowed under the new law, which means a Belgian judge can refuse legal decisions made in other countries.

The decision is particularly important as Belgium is home to giant clearing house Euroclear, which processes vast numbers of global financial transactions. In March, a US judge ordered Euroclear to block any payments concerning Argentine bonds and notify the hedge funds that are claiming the debt. Ahmed Laaouej, the Socialist MP who first put forward the law, hailed its passing as a “victory over the vultures of finance” that came about “despite strong pressure from several national and international lobby groups”. “These pressures came from representatives of American finance and law firms operating in Europe and defending the interests of some clients, in this case vulture funds,” he said to AFP. “This law is a strong signal to unscrupulous investment funds which speculate in a shameful manner on the back of people in difficulty,” he added.

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Not for environmental reasons.

China’s May Thermal Coal Imports Collapse 41% On-Year (HSN)

China’s thermal coal imports, including bituminous and sub-bituminous coal, dropped 41% on the year and were down 26% on the month in May at 6.48 million mt, according to the latest data from Beijing’s General Administration of Customs (GAC). Australia exported 3.8 million mt of bituminous and sub-bituminous coal to China in May, down 18% on month, and down 21% on the year. China’s imports of Indonesian thermal coal fell 40% from April and were down also 40% from a year ago at 1.84 million mt in May. Thermal coal imports from Russia slumped 52% on year and down 16% on month at 0.78 million mt last month.

Over January-May, China imported a total of 36.14 million mt of bituminous and sub-bituminous coal and down 44% from the corresponding five-month period last year, data showed. Top supplier Australia exported a total 18.61 million mt of thermal coal to China during January-May this year, down 22% from the year before. Meanwhile, total imports of lignite dropped 32% from the previous year to 20.85 million mt during the same period, with May imports decreasing 29% on month to 3.54 million mt. Imports from China’s top lignite coal supplier — Indonesia — stood at 19.48 million mt between January and May, down 32% on year.

Read more …

Jun 252015
 
 June 25, 2015  Posted by at 7:38 am Finance Tagged with: , , , , , , ,  


NPC KKK parade on Pennsylvania Avenue, Washington DC 1925

Today I fly to Athens, and boy, does time seem to fly along with me. I’ll be arriving in Athens apparently just in time for a big demo in Syntagma square (got a mail minutes ago saying people are on their way there as early as 9 AM local time). Something tells me there’ll be quite a few more of those during my stay. And I don’t think there’s any guarantee of all of them being peaceful as time goes on.

The negotiations, if they still warrant that title, are going nowhere, and even if they would, they’d be going nowhere good. So during my -provisional- 3 week stay, I wouldn’t be surprised to see capital controls, closed banks, empty ATMs, and quite a bit more.

But I am lucky enough to have a strong contingent of Automatic Earth readers in the city, who’ve been kind enough to not only offer me accommodation, but to also introduce me to a plethora of organizations and individuals, so much so that I’m going to have to be careful about claiming the time it takes to do the daily Automatic Earth posts.

If there’s a day or two when I can’t do a Debt Rattle or essay, please know that it won’t be for a lack of trying, but for an overabundance of gracious yet impoverished Greeks. Hey, in times of hardship people remember how to be people again. Most Americans and Germans are long overdue for a taste of that.

There’s that Seneca quote I used somewhere before, which captures it to a T:

We become wiser by adversity; prosperity destroys our appreciation of the right.

I’ve been feeling smothered here in Holland, and in Australia and New Zealand earlier this year, and in all the European countries save for Italy and the Czech Republic that we’ve visited over the past five years and change, smothered by the denial and techno-happy thinking that seems to be everywhere you go. People don’t seem to do wealth well. It blunts their senses: “prosperity destroys our appreciation of the right”.

Italy gets it. Maybe not in the major cities, but when we visited Beppe Grillo in late 2011, it was obvious that Italians saw the writing on the wall. Slovakia was in the eurozone and was just starting to receive all those big EU loans that are now haunting the PIIGS, who got them years earlier.

On the other hand, the Czech Republic, which had split from Bratislava only a few years before, but decided to keep the koruna, seemed fine, though with less new black top and fewer flashy government buildings. The big difference was that the euro had lifted prices in Slovakia much higher than those in Prague etc. Today, if you look behind the numbers, the Czech Republic is in a much better spot than Slovakia.

Anyway, different parts of Europe have had a different view of life for years. And of course Greece had been going down with a vengeance for a long time. I’m just trying to say that Europe is not one big happy entity with Greece as a black sheep.

But they’re all still, or seem to be, ganging up on Athens. That’s all just the effects of propaganda, and everyone should learn to see through that thin veil. But it’s so tempting, isn’t it, to think you’re superior to someone else, to ignore that you’re the same.

And that it’s beyond brainless to drive your brand new Beamer on the Autobahn at 200 miles an hour blabbing about them Greeks who deserve to be flogged for refusing to pay you back what they stole from you.

This cannot and will not ever be repaired. Europe is not a union. Which is fine, as long as no-one tries to make it one. The very moment anyone tries, you end up with where Greece is today.

Long story short, let’s talk about that Fund For Athens I innocently started recently. Last time I mentioned it, on June 19, it was already at an amazing $2217, much more than I ever could have dreamed.

Well, you guys are something else. Because the fund now stands at $5534.47. Can you believe it? I sure can’t. Seeing the amount go up has been, and hopefully will continue to be, very humbling, your generosity has made me feel small. Who am I to trigger this kind of kindness?

Please, please, keep the donations coming, and I’ll make sure, along with the TAE readers in Athens, that we get the money where it is needed most. Solid promise.

For the how and why, please refer to The Automatic Earth Moves To Athens and Update: Automatic Earth for Athens Fund.

I’m thinking the Greeks need all the help they can get, more than ever, more every single day. I find it deeply concerning to read just now that both ex-PM Samaras and To Potami leader Theodorakis were spotted talking to the troika yesterday. That reeks of regime change. Not surprising given the EU MO, but at the same time: not good.

Jun 162015
 
 June 16, 2015  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Crossroads grocery store and filling station, Yakima, Washington, Sumac Park 1939

Greece Accuses Europe Of Plotting Regime Change (AEP)
Starvation Is The Price Greeks Will Pay For Remaining In The EU (PC Roberts)
Not Just Greece, Everyone Should Leave The Euro -There’s No Point (Worstall)
Why Greece Should Choose Eurozone Exit Rather Than Dependence (Irish Times)
Contagion From Greek Crisis Engulfs Eurozone Bonds (Reuters)
Defiant Tsipras Accuses Creditors Of ‘Pillaging’ Greece (FT)
Why Can’t Greece Just Declare Bankruptcy? (Stiglitz/Guzman)
Greece Isn’t Any Old Troubled Debtor (BBC)
Ex-IMF Official Says ‘Errors’ By Lenders Worsened Greek Crisis (Kathimerini)
What Is Reform? The Strange Case Of Greece And Europe (James Galbraith)
3% of the World’s Top Scientists are Greek (Greek Reporter)
Sunday Times ‘Reporter’ ‘Defends’ Snowden ‘Article’ (CNN)
IMF: Inequality Hurts Economic Growth (Guardian)
1% Of Households In 2014 Made Up 42% Of Total Private Global Wealth (Forbes)
Foreign Investors Pose Threat To US Residential Real Estate (MarketWatch)
$112 Billion Fund Manager Worries Bond-Market Fire Doors Are Locked (Bloomberg)
Fast Track Hands the Money Monopoly to Private Banks, Permanently (Ellen Brown)
CIA Torture Has Broken Spy Agency Rule On Human Experimentation (Guardian)
How Pension Funds Face Huge Risk From Climate Change (Guardian)
Pope Warns Of Destruction Of World’s Ecosystem In Leaked Encyclical (Guardian)

Brussels has experince in this.

Greece Accuses Europe Of Plotting Regime Change (AEP)

Greek premier Alexis Tsipras has accused Europe’s creditor powers of trying to subvert Greece’s elected government after five years of “pillaging”, warning in solemn terms that his country will defend its sovereign dignity whatever the consequences. The defiant stand came as the European Commission lashed out at the Greeks and warned that the country would collapse into a “state of emergency” unless there is a deal to avert a financial crash. Germany’s EU Commissioner Guenther Oettinger said the creditor powers must draw up urgent plans to cope with social unrest in Greece and a break-down of energy supplies and medicine as soon as July. In a terse statement, Mr Tsipras called on the EU institutions and the IMF to “adhere to realism”.

He accused the creditors of “political motives” for demanding further pension cuts, hinting that their real goal is to destroy the credibility of his radical-Left Syriza government and force regime change. “We are not only carrying a historical past underlined with struggles. We are carrying our people’s dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It has to do with democracy,” he said. Germany’s Suddeutsche Zeitung reported that the creditors are drawing an ultimatum to the Greeks, threatening to cut off Greek access to the European payments system and forcing capital controls on the country as soon as this weekend. The plan would lead to the temporary closure of the banks, followed by a rationing of cash withdrawals.

Syriza sources have told the Telegraph that Greece may seek an injunction from the European Court of Justice to stop the creditors and the EU institutions acting in a way that breaches Greek treaty rights. This would be an unprecedented move, greatly complicating the picture. Equity markets fell across the Europe and bonds sold off sharply in the high-debt Latin states as investors start to think through the dramatic implications of a Greek default, followed by EMU rupture. “The Greek saga is finally reaching its climax, we think,” said Hans Redeker from Morgan Stanley. Yields on 10-year Portuguese bonds have jumped almost 170 basis points since their lows in March, reaching an eight-month high of 3.22pc. Spain’s yields have jumped by 120 points to 2.35pc.

While these levels are nothing like the panic spikes in past spasms of the EMU debt crisis, they are approaching levels that could soon tighten borrowing conditions for companies and mortgages. It may become harder for these countries to shake off deflation. Mario Draghi, the head of the European Central Bank, said the authorities could handle the immediate fall-out from a Greek default but refused to offer any further assurances. “The consequences in medium to long term to the Union is not something we are in a position to foresee,” he said.

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“Why will creating money for Greece create inflation but not for Goldman Sachs, Citibank, and JPMorganChase?”

Starvation Is The Price Greeks Will Pay For Remaining In The EU (PC Roberts)

Syriza, the new Greek government that intended to rescue Greece from austerity, has come a cropper. The government relied on the good will of its EU “partners,” only to find that its “partners” had no good will. The Greek government did not understand that the only concern was the bottom line, or profits, of those who held the Greek debt. The Greek people are as out to lunch as their government. The majority of Greeks want to remain in the EU even though it means that their pensions, their wages, their social services, and their employment opportunities will be reduced. Apparently for Greeks, being a part of Europe is worth being driven into the ground. The alleged “Greek crisis” makes no sense whatsoever.

It is obvious that Greece cannot with its devastated economy repay the debts that Goldman Sachs hid and then capitalized on the inside information, helping to cause the crisis. If the solvency of the holders of the Greek debt, apparently the NY hedge funds and German and Dutch banks, depends on being repaid, the ECB could just follow the example of the Federal Reserve and print the money to secure the Greek debt. The ECB is already printing 60 billion euros a month to save the European financial system, so why not include Greece? A conservative might say that such a course of action would cause inflation, but it hasn’t. The Fed has been creating money hands over fists for seven years, and according to the government there is no inflation.

We even have negative interest rates attesting to the absence of inflation. Why will creating money for Greece create inflation but not for Goldman Sachs, Citibank, and JPMorganChase? Obviously, the Western world doesn’t want to help Greece. The West wants to loot Greece. The deal is that Greece gets new loans with which to repay existing loans in exchange for selling municipal water companies to private investors (water rates will go up on the Greek people), for selling the state lottery to private investors (Greek government revenues drop, thus making debt repayment more difficult), and for other such “privatizations” such as selling the protected Greek islands to real estate developers. This is a good deal for everyone but Greece.

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The eurozone sinks all boats.

Not Just Greece, Everyone Should Leave The Euro -There’s No Point (Worstall)

If the 100,000 people of my native Bath all use different currencies then trade between the citizenry is going to be rather difficult. If we all use the same currency it will be easier and there will be more trade. Since trade is what gives us Smithian growth (from Adam Smith, the specialisation and division of labour and the trade in the resultant production), makes us all richer, this is a good idea. However, it’s possible to have too much of a good thing. If we’re using the same currency then we must, by definition, have the same monetary policy. And the larger the area we cover the more likely it is that we’ll have two more more areas within which it will react differently to an external or asymmetric shock (the definition of that second simply being a shock that hits different areas in different ways).

This is what Paul Krugman has been talking about with Finland and everyone has been talking about with respect to the property booms in Ireland and Spain a decade back. All of this is background: people have been chewing over how optimal the euro area is ever since the idea was first floated (hint: it’s not optimal). However, note that the size of that optimality depends upon the strength of the two effects. And if that increased trade effect is smaller then the optimal area becomes smaller. And what this most recent research seems to be showing is that there’s no extra trade effect at all:

“More importantly, we find that the trade effects of EMU are different from other currency unions. But, most disturbingly, we find that the precise econometric methodology used to estimate the currency effect on trade matters. A lot. In the large, we find no consistent evidence that EMU stimulated trade. Indeed, we are forced to conclude that econometric methodology matters so much that it undermines confidence in our ability to estimate the effect of currency union on trade.”

A reasonable rule of thumb is that if the effect you’re looking for varies a lot dependent upon the method you’re using to look for it (assuming that all the methods you are using are reasonable) then what you’re finding is not actually the effect, but variances due entirely to the measurement method. But even putting that aside they find that there’s a small through zero to possibly even negative effect upon trade of the currency union of the euro. Or, as we might put it, there’s no benefit and we’re left just with the costs. Things that cost us but have no benefit are things that we shouldn’t be doing. Thus, clearly, we shouldn’t be having the euro. Or, as we might put it, everyone should leave it, not just Greece.

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“One doesn’t have to agree with the politics of the far left in Greece to vindicate the integrity of their economic case.”

Why Greece Should Choose Eurozone Exit Rather Than Dependence (Irish Times)

The narrative of the euro zone crisis, the epicentre of which is Greece, has been airbrushed. Germany’s insistence that the 2012 bailout programme is a realistic reference point for current discussion is misconceived. Its assertion that debt relief can be discussed only after the completion of the current programme, rather than being the obvious starting point for a new agreement, is profoundly mistaken. The tenor of the euro zone’s criticism of the government of Alexis Tsipras has shifted from the patronising to the denunciatory, from faux long-suffering indulgence with a brash upstart to near visceral condemnation. The message is that the grown-ups are “exasperated” and “running out of patience” with Greece.

Germany’s minister for economic affairs, Sigmar Gabriel, argues that “Greece’s game theorists are gambling the future of their country. And Europe’s too.” This is revisionist rhetoric. Greece is more right than its critics. One doesn’t have to agree with the politics of the far left in Greece to vindicate the integrity of their economic case. What is true of a relationship is true also for a country: dependence is never healthy. Continued membership means continued dependence. Given the pressures being exerted on Greece, exit rather than dependence would be the better option. In February German finance minister Wolfgang Schäuble insisted that Greece complete the 2012 programme, regardless of the sea change in politics since then and the evidence that austerity was taking Greece further into recession.

He warned Athens not to question the framework of existing agreements or “everything is over”. It was a calamitous misjudgment. The “negotiations” have demonstrated how big countries behave when small countries step out of line and just how easily history can be rewritten. Tsipras, in an interview with Le Monde, said the euro zone’s dominant players were, by degrees, bringing about the “complete abolition of democracy in Europe” and were ushering in a technocratic monstrosity with powers to subjugate states that refuse to accept the “doctrines of extreme neoliberalism”.

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So much for ‘we have it under control’.

Contagion From Greek Crisis Engulfs Eurozone Bonds (Reuters)

Italian, Spanish and Portuguese bond yields leapt on Tuesday in one of the most serious episodes of contagion since the height of Europe’s debt crisis after the latest breakdown in talks between Greece and its creditors. Except for a jump in May during a global bond sell-off driven by improving inflation expectations, yields on bonds issued by the eurozone’s most vulnerable states were on track for their biggest three-day move since mid-2013. Similarly sharp moves were seen in 2012 as the crisis peaked, although yields on the three countries’ bonds remain far below the highs of above 7% hit in that period.

The moves, analysts say, could impact the dynamic of the negotiations between Greece and European leaders, who may have thought that the relative calm in markets during the protracted talks was a sign that investors thought a Grexit was manageable. “A lot of people, especially in Germany, have seemed relaxed about Greece. We’ve seen comments saying that if Greece exits it’s not such a big thing,” said Jean-Francois Robin, head of rates strategy at Natixis. “The market is just showing exactly the opposite of that.”

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Sociopaths.

Defiant Tsipras Accuses Creditors Of ‘Pillaging’ Greece (FT)

Alexis Tsipras, the Greek prime minister, vowed not to give in to demands made by his country’s international creditors, accusing them of “pillaging” Greece for the past five years and insisting it was now up to them to propose a new rescue plan to save Athens from bankruptcy. Mr Tsipras’ remarks came less than 24 hours after the collapse of last-ditch talks aimed at reaching agreement on the release of €7.2bn in desperately needed rescue funds. The comments were part of a chorus of defiance in Athens that left many senior EU officials convinced they can no longer clinch a deal with Greece to prevent it from crashing out of the eurozone.

Without a deal to release the final tranche of Greece’s current bailout, Athens is likely to default on a €1.5bn loan repayment due to be paid to the IMF in two weeks, an event officials fear would set off a financial chain reaction from which Greece would be unable to recover. “One can only suspect political motives behind the fact that [bailout negotiators] insist on further pension cuts, despite five years of pillaging,” Mr Tsipras said in a statement. “We are carrying our people’s dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It is not a matter of ideological stubbornness. It has to do with democracy.”

Reflecting the growing fears of a Greek default, Günther Oettinger, Germany’s European commissioner, called for an “emergency plan, a ‘Plan B’” in case Athens failed to reach a deal, saying this would lead to “a state of emergency” in Greece, including difficulties paying for energy, police services and medicines. The growing signs of breakdown sent the Athens stock exchange down nearly 5% and borrowing costs on Greek bonds sharply higher. The jitters appeared to spread to other peripheral eurozone bonds as well, with sell-offs in benchmark Italian, Spanish and Portuguese debt.

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It can. And should.

Why Can’t Greece Just Declare Bankruptcy? (Stiglitz/Guzman)

Governments sometimes need to restructure their debts. Otherwise, a country’s economic and political stability may be threatened. But, in the absence of an international rule of law for resolving sovereign defaults, the world pays a higher price than it should for such restructurings. The result is a poorly functioning sovereign-debt market, marked by unnecessary strife and costly delays in addressing problems when they arise. We are reminded of this time and again. In Argentina, the authorities’ battles with a small number of “investors” (so-called vulture funds) jeopardized an entire debt restructuring agreed to — voluntarily — by an overwhelming majority of the country’s creditors.

In Greece, most of the “rescue” funds in the temporary “assistance” programs are allocated for payments to existing creditors, while the country is forced into austerity policies that have contributed mightily to a 25% decline in gross domestic product and have left its population worse off. In Ukraine, the potential political ramifications of sovereign-debt distress are enormous. So the question of how to manage sovereign-debt restructuring — to reduce debt to levels that are sustainable — is more pressing than ever. The current system puts excessive faith in the “virtues” of markets. Disputes are generally resolved not on the basis of rules that ensure fair resolution, but by bargaining among unequals, with the rich and powerful usually imposing their will on others.

The resulting outcomes are generally not only inequitable, but also inefficient. Those who claim that the system works well frame cases like Argentina as exceptions. Most of the time, they claim, the system does a good job. What they mean, of course, is that weak countries usually knuckle under. But at what cost to their citizens? How well do the restructurings work? Has the country been put on a sustainable debt path? Too often, because the defenders of the status quo do not ask these questions, one debt crisis is followed by another. Greece’s debt restructuring in 2012 is a case in point. The country played according to the “rules” of financial markets and managed to finalize the restructuring rapidly; but the agreement was a bad one and did not help the economy recover.

Three years later, Greece is in desperate need of a new restructuring. Distressed debtors need a fresh start. Excessive penalties lead to negative-sum games, in which the debtor cannot recover and creditors do not benefit from the larger repayment capacity that recovery would entail.

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Note: Peston rarely has anything worth quoting. But even he can see something’s amiss in the Greece ‘debate’.

Greece Isn’t Any Old Troubled Debtor (BBC)

it is not just the quantum of austerity that divides Athens from its creditors, it is also the method of execution. So the eurozone and IMF want further pension cuts and an increase in VAT on electricity. These measures are toxic for the Greek Syriza government because they are regressive, they disproportionately hurt the poorer Greeks who elected Syriza. So “why insist on pensions?”, says Blanchard. His answer is that pension expenditure in Greece is 16% of GDP, and “transfers from the budget to the pension system are close to 10% of GDP”. Now here in Britain we would think that public spending on pensions of close to a tenth of GDP is incredibly lavish: the equivalent figure for the UK, and indeed for most anglophone countries like the US and Canada, is much lower (at around 6% of GDP in Britain).

But in the UK, US and Canada, private pension saving is much higher than on the continent of Europe. And Greece’s government spending on pensions, as a share of GDP, is very much in the ballpark of spending in the rest of the eurozone: on the basis of the last official OECD figures, which admittedly are five years old, Greece spent less than Italy, France and Austria on pensions and only a bit more than Germany. And there is another thing: in 2009 the OECD calculated that Greek government cash spending on old-age and survivors benefits was 13% of its GDP. If the equivalent figure today is 10%, which is what Blanchard seems to suggest, that implies the outlay on pensions has already been reduced by around 40%, given that Greece’s GDP has shrunk by a quarter.

That said, on the basis of the last Eurostat figures, which are for 2012, Greece’s old-age outlay – including disability and incapacity payments – was considerably higher than the euro area average. So the stats are murky. But it is worth pointing out that Greece has proportionately more old people than the eurozone average, and more poor people (thanks to five years of slump). In other words, it is not obvious that there is outrageous excess in the Greek pension system (and there certainly isn’t in comparison with provision in Blanchard’s French home).

To state the obvious, which seems however to be lost on the leaders of the eurozone, once the euro is not forever for any member, it is not forever for all members. And once that clonking penny drops for global investors, the notion that the whole project will fall apart – not tomorrow, but one day – will increasingly become the default view.

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“We should have fought for this from the start.”

Ex-IMF Official Says ‘Errors’ By Lenders Worsened Greek Crisis (Kathimerini)

Greece’s former representative at the IMF, Panayiotis Roumeliotis, appeared before the parliamentary inquiry into the country’s debt and argued that Greece’s lenders have contributed to worsening the Greek crisis through the policies they advocated. “The mistake made by lenders is that they placed emphasis on the fiscal side and high taxes, which they are continuing to do now,” he said. “This resulted in the recession.” Roumeliotis was Greece’s envoy to the IMF when the first bailout was signed in 2010 and he claimed at the hearing that there was contact at the time between German and French officials to ensure that there would not be a restructuring of Greece debt as much of it was held by German and French banks. “They took too long to restructure Greece’s debt,” he said. “We should have fought for this from the start.”

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Galbraith is Varoufakis’ friend and adviser he brought with him from texas.

What Is Reform? The Strange Case Of Greece And Europe (James Galbraith)

On our way back from Berlin on Tuesday, Greek Finance Minister Yanis Varoufakis remarked to me that current usage of the word “reform” has its origins in the middle period of the Soviet Union, notably under Khrushchev, when modernizing academics sought to introduce elements of decentralization and market process into a sclerotic planning system. In those years when the American struggle was for rights and some young Europeans still dreamed of revolution, “reform” was not much used in the West. Today, in an odd twist of convergence, it has become the watchword of the ruling class.[..]

What is missing from the creditors’ demands is, well, reform. Cuts in pensions and VAT increases are not reform; they add nothing to economic activity or to competitiveness. Fire-sale privatization can lead to predatory private monopolies as anyone living in Latin America or Texas knows. Labor market deregulation is in the nature of an unethical experiment, the imposition of pain as therapy, something the internal records of the IMF as far back as 2010 confirm. No one can suggest that wage cuts can bring Greece into effective competition for jobs in traded goods with either Germany or Asia. Instead, what will happen is that anyone with competitive skills will leave. Reform in any true sense is a process that requires time, patience, planning, and money.

Pension reform and social insurance, modern labor rights, sensible privatizations and effective tax collection are reforms. So are measures relating to public administration, the justice system, tax enforcement, statistical integrity and other matters, which are agreed in principle and which the Greeks would implement readily if the creditors would permit it – but for negotiating reasons they do not. So would be an investment program emphasizing the advanced services Greece is well-suited to provide, including in health care, elder-care, higher education, research, and the arts. It requires recognizing that Greece cannot succeed by being the same as other countries; it must be different – a country with small shops, small hotels, high culture, and open beaches. A debt restructuring that would bring Greece back to the markets (and yes, that could be done, and the Greeks have a proposal to do it) would also be, on any reasonable reckoning, a reform.

The plain object of the creditors’ program is therefore not reform. It is the doubling-down on debt collection in the face of disaster. Pension cuts, wage cuts, tax increases and fire sales are offered up on the magical thought that the economy will recover despite the burden of higher taxes, lower purchasing power, and external repatriation of profits from privatization. The magic has already been tested for five years, with no success in the Greek case. That is why, instead of recovering as predicted after the bailout of 2010, Greece has suffered a loss of over 25% of its income with no end in sight. That is why the debt burden has gone from about 100% of GDP to 180%, when measured in terms of face values. But to admit this failure, in the case of Greece, would be to undermine the entire European policy project and the authority of those who run it.

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Still a very well educated people.

3% of the World’s Top Scientists are Greek (Greek Reporter)

Greeks may be only 0.2% of the world population but 3% of top international scientists are of Greek nationality, says a survey. John Ioannidis, Professor of Medicine at Stanford University, conducted the research and presented it on Saturday at the Panhellenic Medical Conference in Athens. Ioannidis gave a lecture in memory of prominent Doctor and Professor Dimitris Trichopoulos who died in December 2014. The title was “The exodus of Greek scientists – a meta-analysis,” and the survey showed statistics for a total of 672 scientists with Greek names who have the most influence in the international scientific bibliography. The professor used statistical data from the Google Scholar database.

On average, the 672 Greek scientists have received 17,000 reports each in the international scientific bibliography. Only one in seven of them (14%) lived or live in Greece, 86% of them live abroad where several of them were born, and 33 of them have passed away. In the wider scientific community there are about 20 million authors who have made at least one scientific publication. Greek names represent about 1% of those, meaning 200,000, while Greek names represent 3% of all scientists. The most ancient Greek scientist, Aristotle, is constantly used as a reference in the scientific bibliography. Statistically, out of the 672 leading Greek scientists, only 95 (14%) are located in Greece.

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How one can not be speechless after this 4 minute video is beyond us.

Sunday Times ‘Reporter’ ‘Defends’ Snowden ‘Article’ (CNN)

CNN’s George Howell speaks with Sunday Times correspondent Tom Harper about reports that Russia and China have decrypted files stolen by NSA leaker Edward Snowden.

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As its leadership promotes more of it.

IMF: Inequality Hurts Economic Growth (Guardian)

The idea that increased income inequality makes economies more dynamic has been rejected by an IMF study, which shows that the widening income gap between rich and poor is bad for growth. A report by five IMF economists dismissed “trickle down” economics, and said that if governments want to increase the pace of growth they should concentrate on helping the poorest 20% of their citizens. The study, covering advanced, emerging and developing countries, said technological progress, weaker trade unions, globalisation and tax policies that favoured thewealthy had all played their part in making widening inequality “the defining challenge of our time”. The IMF report said the way income is distributed matters for growth.

“If the income share of the top 20% [the rich] increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% [the poor] is associated with higher GDP growth,” said the report. Echoing the frequent warnings about rising inequality from the Fund’s managing director Christine Lagarde, the report says governments around the world need to tackle the problem. It said: “Raising the income share of the poor, and ensuring that there is no hollowing-out of the middle class, is actually good for growth.” The study, however, reflects the tension between the IMF’s economic analysis and the harder-line policy advice given to individual countries, such as Greece, that need financial support.

During its negotiations with Athens, the IMF has been seeking to weaken worker rights, but the research paper found that the easing of labour market regulations was associated with greater inequality and a boost to the incomes of the richest 10%. “This result is consistent with forthcoming IMF work, which finds the weakening of unions is associated with a higher top 10% income share for a smaller sample of advanced economies,” said the study.

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Guillotines must follow.

1% Of Households In 2014 Made Up 42% Of Total Private Global Wealth (Forbes)

The total number of millionaire households around the world reached a record 17.4 million in 2014, up 13.7% from 15.3 million the year before. Meanwhile, the ultra high net worth set is expected to grow at an equally impressive rate over the next five years. According to the Boston Consulting Group, wealth for the richest global families worth more than $100 million is projected to cross the $18 trillion mark by 2019. Currently, private wealth held by families with a fortune of more than $100 million total a combined $10 trillion, or roughly 6% of global wealth. Those ultra rich fortunes grew by 11% in 2014. To get to $18 trillion by 2019, the report predicts that household wealth will grow at a compound annual rate of about 12% in the next five years.

The report, published Monday, says there are more than 5,000 U.S. households worth $100 million or more. China follows with more than 1,000 ultra rich households. “This top segment is expected to be the fastest growing, in both the number of households and total wealth,” the reports’ authors wrote. In addition, the research shows that the top 1% of households in 2014 made up 42% of total private global wealth. Keep in mind, the survey only analyzes cash deposits, securities and life and pension plans. That means other big drivers of wealth like real estate, business ownership and collections aren’t included in the estimates.

Forbes’ own billionaires list, which analyzes all assets an individual can hold, counts 1,826 individuals from across the world with personal 10-figure fortunes, according to the World Billionaires list released in March. They controled an estimated $7.05 trillion at the time of the report. In the U.S. alone, Forbes estimates that there’s nearing 450 American billionaires. Many investors are “benefiting from the markets going up,” senior partner and wealth management expert Bruce Holley said at a Monday briefing. The amount of wealth held in equities rose to 64.1 trillion, up 17.5% from 2013, according to the report.

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All over the Anglo world.

Foreign Investors Pose Threat To US Residential Real Estate (MarketWatch)

U.S. real estate purchases by foreign nationals over a recent 12-month period totaled $92 billion. The negative impact of foreign investments in American residential real estate might have been badly overlooked by some U.S. government officials — and the potential harm it might cause is largely unknown to the average American. Reports from a variety of sources suggest that a housing recovery is taking place, though not at the pace expected. As of last month, it was still some 16% below its peak in 2008. Yet at the same time, some U.S. cities are experiencing an unusually high demand for residential real estate, with buyers outbidding each other, often by tens, and sometimes hundreds of thousands of dollars.

The same kind of outbidding was going on just prior to the 2007 real-estate crash where wealthy buyers, mostly foreign, were buying homes by paying for them in cash. Average American home owners, of whom one in three is on the verge of financial ruin, aren’t fueling such buying frenzies. Skyrocketing real-estate prices in America’s selected urban centers are likely the result of a foreign influx of cash, more particularly mainland Chinese money, which is now flooding major American cities in the billions of dollars. Last year, Bloomberg revealed a secret path that allows wealthy Chinese to transfer billions overseas. Before that, The Wall Street Journal outlined the questionable mechanics of moving cash out of China, where wealthy mainland Chinese bring their funds to Hong Kong and from there to other parts of the world.

Most of it ends up invested in favorite foreign destinations — namely the U.S., Australia, and Canada. Despite some Chinese banks across the border from Hong Kong allowing for a trial program (introduced in 2011) for overseas property purchases and emigration, the Bloomberg report noted that, “China’s foreign-exchange rules cap the maximum amount of yuan that individuals are allowed to convert at $50,000 each year and ban them from transferring the currency abroad directly.” So it’s illegal for mainland Chinese to take more than $50,000 out of the country — but wealthy Chinese are smuggling out billions. You can bet your last dollar that a good chunk of that Chinese money (of dubious origin) was earmarked for residential real-estate purchases, that is, the roofs over American heads.

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Let ‘er rip.

$112 Billion Fund Manager Worries Bond-Market Fire Doors Are Locked (Bloomberg)

If you haven’t realized by now that a lot of people are worried about bond-market liquidity, then I’m not sure why you’re bothering to read me. But in the hope that you’ll at least start taking an interest in where your pension fund is hanging out these days, maybe you’ll listen when a guy who manages $112 billion tells you that if bad things happen in bond land, the fire doors might turn out to be locked. Martin Gilbert runs Aberdeen Asset Management which, as previously mentioned, manages rather a lot of money. On Monday, he explained why he’s lined up a $500 million overdraft facility and has a further $1 billion of cash: “It will get ugly. You want bank lines in place in case you have to meet a redemption and there is no market.”

Let’s pause for a second to parse that sentence. Gilbert was talking about the risk of either Greece leaving the euro or the U.S. starting to raise borrowing costs. Either or both could spook investors, who in turn might ask Aberdeen for their money back. Except Aberdeen is concerned it might not be able to sell the things it bought with their money – so it would either have to deplete its cash to make the repayments, or borrow money to meet those redemptions. Setting aside a rainy day fund of $1.5 billion, just in case, is “a substantial amount but you’ve got to be prepared,” Gilbert said.

With the benefit of hindsight, I decided a while ago that the starting gun for the credit crunch was fired on Aug. 9, 2007. That day, BNP Paribas told investors it was freezing redemptions from three of its investment funds because it had decided there was no reliable way to determine the value of the assets in the funds, which in turn would make it impossible to sell things to repay investors. In other words, to echo Aberdeen’s Gilbert, there was no market.

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Permanently.

Fast Track Hands the Money Monopoly to Private Banks, Permanently (Ellen Brown)

On June 3, 2015, WikiLeaks released 17 key documents related to TiSA, which is considered perhaps the most important of the three deals being negotiated for “fast track” trade authority. The documents were supposed to remain classified for five years after being signed, displaying a level of secrecy that outstrips even the TPP’s four-year classification. TiSA involves 51 countries, including every advanced economy except the BRICS. The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector.

Recall the secret plan devised by Wall Street and U.S. Treasury officials in the 1990s to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally, so that money would not flee to nations with safer banking laws. The vehicle used was the Financial Services Agreement concluded under the auspices of the World Trade Organization’s General Agreement on Trade in Services (GATS). The plan worked, and most countries were roped into this “liberalization” of their banking rules. The upshot was that the 2008 credit crisis took down not just the US economy but economies globally. TiSA picks up where the Financial Services Agreement left off, opening yet more doors for private banks and other commercial service industries, and slamming doors on governments that might consider opening their private banking sectors to public ownership.

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What the f*ck is this? How much Mengele literature have these bozos been reading?

CIA Torture Has Broken Spy Agency Rule On Human Experimentation (Guardian)

The Central Intelligence Agency had explicit guidelines for “human experimentation” before, during and after its post-9/11 torture of terrorism detainees, the Guardian has learned, which raise new questions about the limits on internal oversight over the agency’s in-house and contracted medical research. Sections of a previously classified CIA document, made public by the Guardian on Monday, empower the agency’s director to “approve, modify, or disapprove all proposals pertaining to human subject research”. The leeway provides the director, who has never in the agency’s history been a medical doctor, with significant influence over limitations the US government sets to preserve safe, humane and ethical procedures on people.

CIA director George Tenet approved abusive interrogation techniques, including waterboarding, designed by CIA contractor psychologists. He further instructed the agency’s health personnel to oversee the brutal interrogations – the beginning of years of controversy, still ongoing, about US torture as a violation of medical ethics. But the revelation of the guidelines has prompted critics of CIA torture to question how the agency could have ever implemented what it calls “enhanced interrogation techniques” – despite apparently having rules against “research on human subjects” without their informed consent.

Indeed, despite the lurid name, doctors, human-rights workers and intelligence experts consulted by the Guardian said the agency’s human-experimentation rules were consistent with responsible medical practices. The CIA, however, redacted one of the four subsections on human experimentation. “The more words you have, the more you can twist them, but it’s not a bad definition,” said Scott Allen, an internist and medical adviser to Physicians for Human Rights. The agency confirmed to the Guardian that the document was still in effect during the lifespan of the controversial rendition, detention and interrogation program.

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Just on of the risks to pension funds.

How Pension Funds Face Huge Risk From Climate Change (Guardian)

The pension funds of millions of people across the world, including teachers, public sector workers, health staff and academics in the UK and US, are heavily exposed to the plummeting coal sector, a Guardian analysis has revealed. It has also found that just a dozen people, including the owner of Chelsea FC, Roman Abramovich, own coal reserves equivalent to the annual carbon emissions of China, the world’s biggest polluter. The UN, which advocates a shift to clean energy, has more than $100m (£65m) invested in coal through its own pension fund. The Guardian examined the ownership of the biggest 50 publicly traded coal companies, ranked by the reserves held which in total are equivalent to more than 11 years of global emissions.

This alone could push the planet past beyond the 2C of climate change deemed dangerous by the world’s governments. A fast-growing, global fossil fuel divestment movement, backed by the Guardian’s Keep it in the Ground campaign, is having particular success in persuading investors to dump coal stocks. The world’s largest sovereign wealth fund, held by Norway, decided earlier this month to sell off more than $8bn of coal assets. The World Bank and the Bank of England have both warned that global action to cut carbon emissions could render fossil fuel reserves worthless, as analyses show most must remain in the ground. Coal, the most polluting fuel, is particularly at risk and investment bank Goldman Sachs declared in January the fuel had reached “retirement age”.

The coal price has crashed by 60% since 2011, as gas, renewable energy and climate policies have damaged demand. Tom Sanzillo, a former New York State comptroller who oversaw a $156bn pension fund, said: “Coal is arguably the worst performing sector in the whole world. Pension funds, which have a fiduciary duty to make money, have no business owning any of these companies. It is not a prospective risk, it is a now risk.” “The coal sector is falling into a financial death spiral,” said Mark Campanale, founder of the Carbon Tracker Initiative, which has pioneered analysis of the financial risks of fossil fuels. “The members of university, healthcare and UN pension funds are smart and informed people; they will be shocked to discover just how far exposed their funds are to coal investment risk.”

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How hostile will Washington be when he visits later this year?

Pope Warns Of Destruction Of World’s Ecosystem In Leaked Encyclical (Guardian)

Pope Francis will this week call for changes in lifestyles and energy consumption to avert the “unprecedented destruction of the ecosystem” before the end of this century, according to a leaked draft of a papal encyclical. In a document released by an Italian magazine on Monday, the pontiff will warn that failure to act would have “grave consequences for all of us”. Francis also called for a new global political authority tasked with “tackling … the reduction of pollution and the development of poor countries and regions”. His appeal echoed that of his predecessor, pope Benedict XVI, who in a 2009 encyclical proposed a kind of super-UN to deal with the world’s economic problems and injustices.

According to the lengthy draft, which was obtained and published by L’Espresso magazine, the Argentinean pope will align himself with the environmental movement and its objectives. While accepting that there may be some natural causes of global warming, the pope will also state that climate change is mostly a man-made problem. “Humanity is called to take note of the need for changes in lifestyle and changes in methods of production and consumption to combat this warming or at least the human causes that produce and accentuate it,” he wrote in the draft. “Numerous scientific studies indicate that the greater part of the global warming in recent decades is due to the great concentration of greenhouse gases … given off above all because of human activity.”

The pope will also single out those obstructing solutions. In an apparent reference to climate-change deniers, the draft states: “The attitudes that stand in the way of a solution, even among believers, range from negation of the problem, to indifference, to convenient resignation or blind faith in technical solutions.” The leak has frustrated the Vatican’s elaborate rollout of the encyclical on Thursday. Journalists were told they would be given an early copy on Thursday morning and that it would be released publicly at noon following a press conference. On Monday evening, the Vatican asked journalists not to publish details of the draft, emphasising that it was not the final text. A Vatican official said he believed the leak was an act of “sabotage against the pope”.

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