Mar 062017
 
 March 6, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Negro woman who has never been out of Mississippi July 1936

 

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)
In Praise Of Cash (Aeon)
Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)
Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)
China’s Credit Target Implies Adding Entire German GDP This Year (BBG)
Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)
Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)
Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)
Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)
The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)
Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)
Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)
US Asks Ankara For Steps To Ease Aegean Tension (K.)
Greece Desperate For Growth Strategy As Public Mood Darkens (G.)
Polluted Environments Kill 1.7 Million Children A Year (R.)

 

 

From Australia, but applicable worldwide. Mortgages in housing bubbles are the main engine of money (credit) creation in our economies. Boith governments and banks depend on them for profit, taxes and ultimately survival. Imagine if housing prices halved, the entire construct would collapse. They’ll do anything to keep the game going. And then they will fail.

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)

The federal government’s problem with making housing more affordable is that it becomes, by definition, cheaper. And that’s not something that the federal government wants to see happen for some very understandable reasons. Back in the Howard era Australians were encouraged to invest in housing as a form of wealth creation, partially as a way of addressing rental strain and mainly as a way to ensure people had assets and therefore didn’t go selfishly claiming pensions later on. That’s when the negative gearing and capital gains exemptions were introduced that made buying property such a sweet deal. So now there are a lot of Australians who have put their retirement eggs in the basket marked “leveraging the hell out of my mortgage to buy more investment properties” for the last couple of decades and who will be therefore disadvantaged if the value of housing drops.

And then there’s pure self interest at work too, since between a third and half of all our representatives have investment properties – the PM himself owns seven properties, for example. How keen would you say that our parliamentary representatives are to make their portfolios drop in value, especially for something as stupid as the greater good? Also, as well we know thanks to the efforts of the NSW Independent Commission Against Corruption, the NSW Liberals are so beloved by property developers that the party went to some effort to find a way of accepting donations from them despite those donations being completely illegal. If they suddenly become the party that makes property less lucrative, there’d be no donations to justify the creation of opaque entities like the Free Enterprise Foundation.

[..] Will housing become more affordable in Australia? Absolutely! And it could happen one of two ways. This complex web of legislation can be gently and strategically unpicked via careful bipartisan cooperation across our different spheres of government in concert with the private sector in an effort to create a sane, universally beneficial housing system at all levels. Alternatively, we can choose to leave things be until the housing bubble bursts and plunges Australia into a crippling recession. And since this is politics in 2017, we can assume that Plan A is already off the table.

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Using cash is fast becoming a revilutionary act.

In Praise Of Cash (Aeon)

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge. The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.

The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off. The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen.

This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending. Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.

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From Thomas Paine to Henry George, the reason for UBI has long been known. Call it ‘ground rent’ or ‘land value tax’. Tax the ownership class, not the workers. ‘Birthright’ may sound strange today, but is it really?

Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)

Every student learns about Magna Carta, the ancient scroll that enshrined the rights of barons against the arbitrary authority of England’s monarchs. But most have never heard of its arguably more important twin, the Charter of the Forest, issued two years later in 1217. This short but powerful document guaranteed the rights of commoners to common lands, which they could use for farming, grazing, water and wood. It gave official recognition to a right that humans nearly everywhere had long just presupposed: that no one should be debarred from the resources necessary for livelihood. But this right – the right of habitation – came under brutal attack beginning in the 15th century, when wealthy nobles began fencing off common lands for their own profit.

[..] the success of basic income – in both the north and south – all depends on how we frame it. Will it be cast as a form of charity by the rich? Or will it be cast as a right for all? Thomas Paine was among the first to argue that a basic income should be introduced as a kind of compensation for dispossession. In his brilliant 1797 pamphlet Agrarian Justice, he pointed out that “the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race”. It was unfair that a few should enclose it for their own benefit, leaving the vast majority without their rightful inheritance. As far as Paine was concerned, this violated the most basic principles of justice.

Knowing that land reform would be politically impossible (for it would “derange any present possessors”), Paine proposed that those with property should pay a “ground rent” – a small tax on the yields of their land – into a fund that would then be distributed to everyone as an unconditional basic income. For Paine, this would be a right: “justice, not charity”. It was a powerful idea, and it gained traction in the 19th century when American philosopher Henry George proposed a “land value tax” that would fund an annual dividend for every citizen. The beauty of this approach is that it functions as a kind of de-enclosure. It’s like bringing back the ancient Charter of the Forest and the right of access to the commons. It restores the right to livelihood – the right of habitation.

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Yeah, output cuts. Sure.

Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)

Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia’s compliance with a global deal to cut oil output. But worries over escalating violence in the Middle East put a floor under prices. Brent crude futures dropped 29 cents, or 0.5%, to $55.61 a barrel as of 0638 GMT after settling 1.5% higher in the previous session. U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.6%, to $53.03 a barrel after closing the previous session up 1.4%. “The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley at Oanda brokerage in Singapore.

China aims to expand its economy by around 6.5% this year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. That is lower than the 6.7% growth achieved last year. China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner said on Sunday, while China’s newly appointed banking regulator vowed on to strengthen supervision of the lending sector. Meanwhile, figures by Russia’s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on Russia’s moves to rein in output as part of a pact with oil producers last year. That came as oil prices rose on Friday as the dollar weakened modestly after a speech by Fed Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15.

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“China’s great ball of money.”

China’s Credit Target Implies Adding Entire German GDP This Year (BBG)

China’s credit engine will keep humming this year, adding the rough equivalent of Germany’s annual economic output to its already massive stock of total social financing (TSF), according to estimates derived from the nation’s 2017 targets. Adding higher equity market financing and about 5 trillion yuan ($725 billion) worth of local government bond swaps to the official credit growth target of 12%, analysts at UBS see TSF expansion of 14.8% this year. They calculate that’s equal to a whopping 23 trillion yuan, or $3.3 trillion, addition to the amount of total credit already swishing around the world’s second-largest economy. “China’s pace of leverage increase will be slowing, albeit not by that much,” economists led by Hong Kong-based Wang Tao wrote in a report.

“The government’s intention for a still strong pace of credit growth and recent notable tightening in China’s money market and bond market attest to the difficulties facing the PBC in balancing monetary policy.” China’s great ball of money creates a constant headache for policy makers as money flows from asset class to asset class, creating bubbles along the way. It’s a particular dilemma for the People’s Bank of China because it needs new credit to generate the kind of growth its leaders desire – around 6.5% or higher if possible this year. The M2 money supply target was cut to 12% this year from 13% in 2016, while still higher than the 11.3% actual expansion last year.

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So wrong so many times, and still taken serious. You’d almost admire them for it.

Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)

Federal Reserve officials say their decisions on interest rate policy hinge on the ebb and flow of economic data, not the whims of financial markets. They have repeatedly downplayed the effect of short-term market fluctuations in their policy moves, aimed at maintaining a strong labor market and 2% inflation over the medium term. But the thing about markets is, they don’t really matter until they suddenly do. That may be the case at the moment, with Fed officials suddenly signaling in unison, without major changes in the economic data, that an increase in interest rates is coming this month. Investors accordingly shifted from considering a March hike as rather a long shot to seeing it as a near sure possibility in just two weeks. What changed? The stock market continued to set new records without much underlying economic impetus.

When the Fed released minutes from its end of January meeting, they showed members “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook.” The Fed comments on the broad health of the financial markets all the time, but that kind of focus on stock volatility is less common. Fed Chair Janet Yellen and her Vice Chair Stanley Fischer, both speaking on March 3, appeared to seal the deal for a rate increase at the Fed’s upcoming March 14-15 meeting — with Yellen indicating that a hike is coming barring a drastic disappointment in next week’s February jobs report. Fischer was also was fairly unequivocal. “If there has been a conscious effort to move up our hike expectations I am going to join it,” he told a monetary policy conference in New York, sponsored by the University of Chicago’s Booth School of Business.

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Carswell is the only MP for Ukip. Farage hates him now. But he has some points: “Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve. “

Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)

What is Nigel Farage so cross about? We won the EU referendum, for goodness sake. Since 23 June, I’ve been walking on sunshine. My mood has been a state of Zen-like bliss. Alongside Boris Johnson, David Owen, Gisela Stuart and all of those involved in the official Vote Leave campaign, I spent the referendum arguing that leaving the EU would be an opportunity to make Britain more open, outward-looking and globally competitive. It is becoming increasingly clear to me that this is where Brexit is going to take us. [..] Brexit is often bracketed alongside the election of Donald Trump and the rise of the new radical populist movements in many western countries. But to me the EU referendum result was a safety valve. Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve.

Throughout history oligarchy has emerged in societies in which power was previously dispersed: in the late Roman republic, and in early modern times in the Venetian and then the Dutch republics. Each time, the emergence of oligarchy was always accompanied by an anti-oligarch insurgent reaction.Many of today’s new radical movements aren’t oligarchs, but an anti-oligarchy insurgency. Trump is no American Caesar about to cross some constitutional Rubicon. Yet such insurgents often ended up unwittingly assisting the oligarchs. In Rome the Gracchi brothers, with their Trump-like concern about cheap migrant labour, caused so much civil strife that an all-powerful emperor seemed a better bet. In Venice, the anti-oligarch rebel Bajamonte launched an unsuccessful coup – and in doing so gave the elite a pretext to create a new, superpowerful executive arm of government, the Council of Ten.

Created to respond to the crisis for six weeks, it ran the republic for the next 600 years. The Dutch anti-oligarch De Witt was so inept, he paved the way for the return of a strong stadtholder, or king. So, too, today. If chaotic, angry insurgents such as France’s Marine Le Pen and the rightwing populist Alternative for Germany party are the alternative, then being governed by remote, unaccountable elites sitting in central banks and Brussels doesn’t seem so unattractive after all. But Brexit isn’t anything like that. It is the beginning of a liberal insurgency. Brexit means that we take back control from the supranational elite. Power can be dispersed outward and downwards. Those who make public policy might once more answer to the public. Cheer up – it might even mean that there is less space for anger in our politics too.

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“Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015…”

Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)

Deutsche Bank CEO John Cryan tore up his own turnaround plan in an admission that the 17-month-old effort flopped. Germany’s largest bank late Sunday approved measures – most crucially, plans to raise about $8.5 billion in a share sale – that effectively restart what has already been the most turbulent transformation in its recent history. Among the moves: naming two deputy CEOs who may now be positioned to succeed Cryan; selling a piece of the asset-management business and abandoning the sale of the consumer-banking unit, which was the linchpin of the blueprint he scrapped. Speaking on Monday, Cryan said the deputies were installed at his request as the company will focus more on the German market with the reintegration of Postbank, which he said reflects a strong performance by the unit and a changed environment for banks.

Yet the developments underscore how, almost two years after he took over, Deutsche Bank has been unable to plot a course to a more profitable future while seeking to eliminate 9,000 jobs. “We want to move back into modest growth mode, controlled growth,” Cryan said in the interview. “The operating environment in the U.S. but also increasingly in the euro zone and especially in Germany looks strong. And so I’m reasonably confident about the future.” Deutsche Bank fell 5.4% at 9:16 a.m. in Frankfurt trading, the biggest drop more than four weeks. Before today, the shares had rallied 44% in the past six months. Even though they’re being tapped for a capital infusion for the fourth time since 2010, some investors welcomed the developments as a way to end questions about the firm’s financial strength. S

elling a minority stake in the asset-management unit within the next two years and unloading some assets at the investment bank will help raise another 2 billion euros ($2.1 billion) of capital. Deutsche Bank’s last three capital increases raised about €21.7 billion – compared to the current market value of €26.4 billion. Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015. “The shareholder dilution is enormous,” said Michael Huenseler, an investor at Assenagon Asset Management, which holds a stake in Deutsche Bank. “But at the same time, this package should end what has been hurting Deutsche Bank for so long: the discussion about the capital situation. Now the bank has to prove that it can be profitable.”

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A boiling cauldron that will keep festering a for a while longer. Italy has a long-standing ownership class that won’t give up easily. Corruption, the mob, the church, secret lodges.

Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)

Matteo Renzi’s comeback risks being undermined by a judicial investigation into the father of the Italian former prime minister and a government minister. Rome prosecutors on Friday were due to question Tiziano Renzi, 65, over an accusation of influence-peddling, his lawyer said. The elder Renzi is alleged to have obtained promises of monthly sums of money from Alfredo Romeo, a Naples entrepreneur, in return for mediating on his behalf for public works contracts, Italian news agency Ansa reported. The ex-premier’s father has denied any wrongdoing. [..] “If the investigation goes ahead, it will surely hurt Matteo Renzi’s prospects even if he has nothing to do with it,” said Sergio Fabbrini, director of the school of government at Luiss University in Rome. “This is the most critical moment of his political career, he has to find a new strategy.”

Tiziano Renzi’s lawyer Federico Bagattini said in a telephone interview that his client had done nothing illicit. “We deny that he ever asked for anything, that he ever promised he would intervene, and that he ever received any money or any other benefit,” Bagattini said. Tiziano Renzi said Thursday he had nothing to hide. “I have never asked for money. I never took any. Never,” he said in a statement reported by Ansa. [..] The anti-establishment Five Star Movement, which has made denunciations of political corruption one of its main platforms, has seized on the case. It submitted on Thursday a parliamentary vote of no confidence against Sports Minister Luca Lotti, a close ally of Matteo Renzi, which will test the government’s majority.

Lotti is also under investigation in the case for allegedly revealing confidential information, according to Italian news media, a charge he denied in a post on Facebook on Thursday. Five Star “talks of kick-backs, arrests, contracts – all things which I have nothing to do with,” Lotti wrote. The office of Franco Coppi, Lotti’s lawyer, did not respond to an emailed request for comment on Friday. The case is “an atomic bomb on Italian politics,” Five Star co-founder Beppe Grillo, who wants a referendum on Italy’s membership of the euro, wrote on his blog. “When it explodes, no one will be able to find shelter. Today more than ever we need honesty in institutions.”

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It didn’t start yesterday. Western media have been killing off their own credibility for propaganda reasons, for many years.

The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)

[..] with trust in the establishment at an all time low, the institutional heft of traditional media companies becomes a liability rather than an asset, enabling Trump to successfully turn the “fake news” label onto his opponents. Much of that goes back to Iraq. “The period of time between 9/11 and the invasion of Iraq represents one of the greatest collapses in the history of the American media,” says Gary Kamiya. “Every branch of the media failed, from daily newspapers, magazines and websites to television networks, cable channels and radio. “Bush administration lies and distortions went unchallenged, or were actively promoted. Fundamental and problematic assumptions about terrorism and the ‘war on terror’ were rarely debated or even discussed. Vital historical context was almost never provided. And it wasn’t just a failure of analysis. With some honourable exceptions, good old-fashioned reporting was also absent.”

Let’s look at the most famous example of how the media was used to make the Iraq war happen. On September 8 2002, the New York Times published a major story by Michael R Gordon and Judith Miller asserting that Iraq had “stepped up its quest for nuclear weapons and … embarked on a worldwide hunt for materials to make an atomic bomb”. The piece cited no named sources whatsoever. Rather, it attributed all its significant claims simply to anonymous US officials – and, by so doing, it helped launder the Bush administration’s talking points, lending a liberal imprimatur to unverified (and totally untrue) claims. When the key members of the Bush administration launched a publicity blitz to make the war happen, they were able to quote the New York Times as evidence: in effect, reacting to newspaper revelations for which they themselves were responsible.

For instance, during a CNN appearance, Condoleeza Rice urged the public to support an invasion on the basis that “we don’t want the smoking gun to be a mushroom cloud”. She’d lifted the phrase directly from Gordon and Miller – who’d taken it from the administration. Elsewhere, Gordon and Miller referred to Iraq’s supposed interest in acquiring high-strength aluminium tubes as an illustration of its nuclear ambitions. Again, the claims came from Bush officials. But when, at the UN General Assembly, Bush told the story, he sounded as if he were repeating a New York Times scoop. A similar circularity defined the propaganda campaign conducted in other countries.

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In case you were still wondering why an entire country and its people are being obliterated.

Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)

“63% of Yemen’s crude production is being stolen by Saudi Arabia in cooperation with Mansour Hadi, the fugitive Yemeni president, and his mercenaries,” Mohammad Abdolrahman Sharafeddin told FNA on Tuesday. “Saudi Arabia has set up an oil base in collaboration with the French Total company in the Southern parts of Kharkhir region near the Saudi border province of Najran and is exploiting oil from the wells in the region,” he added. Sharafeddin said that Riyadh is purchasing arms and weapons with the petro dollars stolen from the Yemeni people and supplies them to its mercenaries to kill the Yemenis. Late in last year, another economic expert said Washington and Riyadh had bribed the former Yemeni government to refrain from oil drilling and exploration activities, adding that Yemen has more oil reserves than the entire Persian Gulf region.

“Saudi Arabia has signed a secret agreement with the US to prevent Yemen from utilizing its oil reserves over the past 30 years,” Hassan Ali al-Sanaeri told FNA. “The scientific research and assessments conducted by international drilling companies show that Yemen’s oil reserves are more than the combined reserves of all the Persian Gulf states,” he added. Al-Sanaeri added that Yemen has abundant oil reserves in Ma’rib, al-Jawf, Shabwah and Hadhramaut regions. He noted that a series of secret documents by Wikileaks disclosed that the Riyadh government had set up a committee presided by former Saudi Defense Minister Crown Prince Sultan bin Abdel Aziz. “Former Saudi Foreign Minister Saud al-Faisal and the kingdom’s intelligence chief were also the committee’s members.”

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“If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet..”

Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)

Turkish President Tayyip Erdogan accused Germany on Sunday of “fascist actions” reminiscent of Nazi times in a growing row over the cancellation of political rallies aimed at drumming up support for him among 1.5 million Turkish citizens in Germany. German politicians reacted with shock and anger. German Justice Minister Heiko Maas told broadcaster ARD that Erdogan’s comments were “absurd, disgraceful and outlandish” and designed to provoke a reaction from Berlin. But he cautioned against banning Erdogan from visiting Germany or breaking off diplomatic ties, saying that such moves would push Ankara “straight into the arms of (Russian President Vladmir) Putin, which no one wants”.

The deputy leader of Chancellor Angela Merkel’s Christian Democratic Union (CDU) party said the Turkish president was “reacting like a wilful child that cannot have his way”, while a top leader of the CDU’s Bavarian sister party described Erdogan as the “despot of the Bosphorus” and demanded an apology. German authorities withdrew permission last week for two rallies by Turkish citizens in German cities at which Turkish ministers were to urge a “Yes” vote in a referendum next month on granting Erdogan sweeping new presidential powers. Berlin says the rallies were canceled on security grounds. However, Turkish Economy Minister Nihat Zeybekci spoke at large events in Leverkusen and Cologne on Sunday while protesters stood outside.

The row has further soured relations between the two NATO members amid mounting public outrage in Germany over the arrest in Turkey of a Turkish-German journalist. It has also spurred growing demands for Merkel to produce a more forceful response to Erdogan’s words and actions. A poll conducted for the Bild am Sonntag newspaper showed that 81% of Germans believe that Merkel’s government has been too accommodating with Ankara. Germany, under an agreement signed last year, relies on Turkey to prevent a further flood of migrants from pouring into Europe. The lead article in German news magazine Der Spiegel on Sunday urged Merkel to free herself from the “handcuffs of the migrant deal”.

[..] A defiant Erdogan said he could travel to Germany himself to rally support for the constitutional changes to grant him greater power. “Germany, you have no relation whatsoever to democracy and you should know that your current actions are no different to those of the Nazi period,” Erdogan said at a rally in Istanbul. “If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet,” he told a separate event.

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And Erdogan will want something in return.

US Asks Ankara For Steps To Ease Aegean Tension (K.)

American officials have urged Ankara to refrain from action that would further escalate tension with fellow NATO member Greece in the Aegean Sea, Kathimerini understands, adding that the issue was raised during the Munich Security Conference last month, as well as during private contacts in Ankara. Sources told Kathimerini that US Secretary of State Rex Tillerson raised the topic with Turkish Foreign Minister Mevlut Cavusoglu on the sidelines of the Munich gathering last month. Assistant Secretary of State John Heffern reportedly asked Turkish officials for steps that will help reduce the recent spike in tensions with Greece.

A few days later, the same sources said, US Ambassador to Ankara John Bass met with Turkey’s Foreign Ministry Undersecretary Umit Yalcin to put pressure in the same direction. Yalcin is said to have attributed the standoffish behavior of the Turkish military to the army’s damaged morale by developments following July’s failed coup attempt. Analysts however say that any autonomy of the Turkish armed forces has been heavily compromised in the wake of the coup. Greek Foreign Minister Nikos Kotzias is expected to travel to Washington for a meeting with Tillerson in the coming days. Talks are to be followed by a telephone conversation between Prime Minister Alexis Tsipras and US President Donald Trump.

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Growth is not possible in Greece today. The entire austerity edifice would have to be reversed.

Greece Desperate For Growth Strategy As Public Mood Darkens (G.)

In navigating the country’s economic collapse, every one of Athens’ post-crisis governments has at some point attempted to change the narrative by diverting attention to development and growth. But the latest shift comes amid evidence that prime minister Alexis Tsipras’s two-party administration has gone a step further, approaching the World Bank for a €3bn loan to finance employment policies and programmes.

The move would highlight the desperation of a government tackling ever-growing poverty rates. Last week, the Cologne Institute for Economic Research said poverty in thrice-bailed out Greece had jumped 40% between 2008 and 2015, by far the biggest leap of any European country. Tsipras has been told he will have to enforce labour market reforms and further pension and income tax cuts if Greece is to realistically achieve a primary surplus of 3.5% – before interest payments are taken into account – once its current rescue programme expires in August 2018. The country faces debt repayments of over €7bn in July and with its coffers near empty would be unable to avert default – and inevitable euro exit – if additional loans weren’t forthcoming.

The prospect of more cuts, when pensions have already been slashed 12 times and some retirees are surviving on little more than €300 a month, has exacerbated the sense of gloom in the eurozone’s weakest member state. “We will have to compromise,” Dragasakis admitted. “Even if such demands are totally irrational,” he said, adding that Greece’s real problem was that it was primarily caught up in an ugly dispute between its lenders over what to do with a debt load close to 180% of GDP. The IMF has projected the pile will reach an “explosive” 275% of output if not relieved – a move that Germany, the biggest provider of bailout funds, refuses steadfastly to agree to. “It is why we have not completed the review,” said Dragasakis of the progress report Athens must conclude to secure further assistance.

The Greek government has been accused of deliberately delaying implementation of reforms. “This government won’t deliver reforms because it doesn’t believe in them,” said the centre-right main opposition leader Kyriakos Mitsotakis at the Delphi forum. As in antiquity, when kings, warriors and philosophers descended on Delphi at times of uncertainty to consult the Pythia, or prophetess, about their future, politicians, policy gurus, economists and academics gather annually at the place once regarded as the centre of the world to debate Greece’s plight. “What we need is a masterplan and a vision to get out of this crisis,” said Nikos Xydakis, the former European affairs minister who is now parliamentary spokesman for the ruling Syriza party. “A masterplan in financial terms but also a vision for a new identity of Greeks once this crisis ends.”

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How mankind gets rid of itself, and can’t help doing it.

Polluted Environments Kill 1.7 Million Children A Year (R.)

A quarter of all global deaths of children under five are due to unhealthy or polluted environments including dirty water and air, second-hand smoke and a lack or adequate hygiene, the World Health Organization (WHO) said on Monday. Such unsanitary and polluted environments can lead to fatal cases of diarrhea, malaria and pneumonia, the WHO said in a report, and kill 1.7 million children a year. “A polluted environment is a deadly one – particularly for young children,” WHO Director-General Margaret Chan said in a statement. “Their developing organs and immune systems, and smaller bodies and airways, make them especially vulnerable to dirty air and water.” In the report – “Inheriting a sustainable world: Atlas on children’s health and the environment” – the WHO said harmful exposure can start in the womb, and then continue if infants and toddlers are exposed to indoor and outdoor air pollution and second-hand smoke.

This increases their childhood risk of pneumonia as well as their lifelong risk of chronic respiratory diseases such as asthma. Air pollution also increases the lifelong risk of heart disease, stroke and cancer, the report said. The report also noted that in households without access to safe water and sanitation, or that are polluted with smoke from unclean fuels such as coal or dung for cooking and heating, children are at higher risk of diarrhea and pneumonia. Children are also exposed to harmful chemicals through food, water, air and products around them, it said. Maria Neira, a WHO expert on public health, said this was a heavy toll, both in terms of deaths and long-term illness and disease rates. She urged governments to do more to make all places safe for children. “Investing in the removal of environmental risks to health, such as improving water quality or using cleaner fuels, will result in massive health benefits,” she said.

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Dec 062016
 
 December 6, 2016  Posted by at 10:01 am Finance Tagged with: , , , , , , , , , , ,  


John M. Fox Midtown Dealers Corp. and Hudson showroom, Broadway at W. 62nd Street, NY 1947

Mark Carney: World Is Facing The “First Lost Decade Since The 1860s” (BBG)
Trump Must Fire Janet Yellen – First Thing! (Stockman)
Matteo Renzi’s Resignation Temporarily ‘Frozen’ By Italian President (G.)
Italian Bank Shares Slump as Renzi Loss Adds to Uncertainty (BBG)
Italy Already Requested Monte Dei Paschi Bailout Before Referendum (R.)
Could Renzi’s Exit Lead To An Italian Bank Rescue? (G.)
How Italy Became This Century’s ‘Sick Man Of Europe’ (G.)
Standing Rock Is A Modern-Day Indian War. This Time Indians Are Winning (G.)
Trump Advisors Aim To Privatize Oil-Rich Indian Reservations (R.)
Naked Capitalism Demands Retraction, Apology Over WaPo Fake News Story (NC)
Russia Remains The Only Target Country Of NATO’s Nuclear Weapons (SC)
The Deepening Deep State (Jim Kunstler)
Eurozone Agrees Debt Relief For Greece Amid IMF Row (AFP)
Greek Home Sellers Getting Paid In Banks Abroad (Kath.)
Greek Court Rejects Extradition Of 3 Turkish Officers Accused Of Coup (AFP)

 

 

But he had nothing to do with it!

Mark Carney: World Is Facing The “First Lost Decade Since The 1860s” (BBG)

Mark Carney launched a defense of globalization and set out a manifesto for central bankers and governments to boost growth and make the world economy more equal. The Bank of England Governor said they must acknowledge that gains from trade and technology haven’t been felt by all, improve the balance of monetary and fiscal policy, and move to a more inclusive model where “everyone has a stake in globalization.” Carney’s speech in Liverpool, England, comes amid rising disquiet about the state of the world economy and political status quo that helped propel Donald Trump to victory in the U.S. presidential election and boost support for the U.K.’s exit from the European Union.

Trump isn’t right to favor more protectionist policies in response to globalization, Carney said in a television interview broadcast after his speech. The answer is to “redistribute some of the benefits of trade” and ensure that workers are able to acquire new skills. “Weak income growth has focused growing attention on its distribution,” Carney said in the speech. “Inequalities which might have been tolerated during generalized prosperity are felt more acutely when economies stagnate.” Describing the world as facing the “first lost decade since the 1860s,” the BOE governor said public support for open markets is under threat and rejecting them would be a “tragedy, but is a possibility.”

Carney also defended the central bank’s current policy stance. The BOE has faced criticism from politicians after officials took measures including cutting interest rates and expanding asset purchases in August to support the economy after Britain’s June vote to leave the EU. “Low rates are not the caprice of central bankers, but rather the consequence of powerful global forces, including debt, demographics and distribution,” he said, adding that they helped to prevent a deeper economic downturn.

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“Essentially, the United States is held to be a closed economy resembling a giant bathtub.” Stockman says the Trump team have contacted him.

Trump Must Fire Janet Yellen – First Thing! (Stockman)

The Keynesian statists at the Fed think the devastating financial busts we’ve suffered since 1987 were due to a mix of too much investor exuberance, too much deregulation, a one-time housing mania and a smattering of Wall Street greed and corruption, too. And that’s not to overlook some of the more far-fetched reasons for the two big financial meltdowns of this century. Foremost among these is the Greenspan-Bernanke fairy tale that Chinese workers making under $1 per hour were saving too much money, thereby causing low global mortgage rates and a runaway housing boom in America! Needless to say, not only are these rationalizations completely bogus; but so is the entire underlying rationale for Keynesian monetary central planning.

The claim that market capitalism is chronically and destructively unstable and that the business cycle needs constant management and stimulus by the state and its central banking branch is belied by the historical facts. Every economic setback of modern times, including the foundation events of the Great Depression — was caused by the state. The catalyst was either inflationary war finance or central bank fueled credit expansion, not the deficiencies or inherent instabilities’ of market capitalism. Nevertheless, the Fed’s model robs the millions of workers, entrepreneurs, investors and savers who comprise the ground level economy and the billions of supply-side prices for labor and capital through which they interact and ultimately generate output, income and wealth.

Instead, the Fed focuses on the macroeconomic aggregates as the key to achieving its so-called dual mandate of stable prices and maximum employment. Essentially, the United States is held to be a closed economy resembling a giant bathtub. In the pursuit of “full employment,” the central bank’s job is to keep it pumped full to the brim with “aggregate demand.” But the domestic macroeconomic aggregates of employment and inflation cannot be measured on an accurate and timely basis. Neither can they be reliably and directly influenced by the crude tools of the central bank, such as pegging the money market rate, manipulating the yield curve via QE, levitating Wall Street animal spirits via wealth-effects and various forms of open-mouth intervention such as “forward guidance.”

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The president picking favorites. Dangerous at this stage. Italy’s had technocrat ‘caretakers’ before, and that didn’t go well. But everything to keep M5S out of power, including new changes to election laws.

Matteo Renzi’s Resignation Temporarily ‘Frozen’ By Italian President (G.)

Matteo Renzi will remain in office for at least a week after Italy’s head of state asked the centre-left prime minister to “freeze” his resignation temporarily until the senate passed a 2017 budget. Renzi met Sergio Mattarella on Monday at the presidential palace – the Quirinale – in order to formally submit his resignation following a stunning defeat in a referendum on Sunday. Renzi was expected to step down immediately but his departure could now be delayed until Christmas. Mattarella signalled that he will not call snap elections in response to the referendum results, putting him on a collision course with populist and rightwing parties that want a new poll to be called right away.

The Sicilian head of state said he believed it was important for Italy’s institutions to respect “commitments and deadlines”, and that they worked hard to find solutions that were worthy of the “demands of the time”. While the president must always appear to be independent of political allegiances, his comments were taken as a clear sign that he believed the current government needed to fulfil its obligation to not only pass a budget but also make changes to an election law that has been put in flux by the referendum results. Renzi’s months-long campaign to convince Italians to vote yes and overhaul the constitution and parliament was roundly rejected by 59.1% of voters on Sunday, on a turnout of 68%.

The high interest in the plebiscite did not escape Mattarella, who said it was a “testament to a solid democracy [and] an impassioned country capable of active participation”. Mattarella’s call for “serenity” after Italy was plunged into political chaos by the vote may have assuaged worries in Europe about what Renzi’s defeat signified for Europe, Italy’s fragile banking system, and the future of the euro. Germany’s foreign minister, Frank-Walter Steinmeier, said the result was a “concern”, while finance minister Wolfgang Schäuble said Italy ought to continue on an economic path that had been adopted by Renzi. The results, however, were celebrated by French far-right candidate Marine Le Pen who said that, with the no win, Italians joined the British in turning their backs on “absurd European policies which are plunging the continent into poverty”.


Wikipedia

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Oh well, everything else went up…

Italian Bank Shares Slump as Renzi Loss Adds to Uncertainty (BBG)

UniCredit and Banca Monte dei Paschi di Siena fell along with most Italian bank shares after Prime Minister Matteo Renzi’s decision to resign added to uncertainty about their plans for shoring up their finances. Monte Paschi will decide within the next few days whether it will proceed with a planned capital increase, people with knowledge of the matter said. The underwriters, who met with the bank’s executives on Monday, are still waiting for a formal commitment from possible anchor investors, the people said, asking to not be identified because the matter is private. Potential investors are seeking more time to review the political situation after the referendum, according to the people. Italy’s political vacuum threatens to usher in a period of uncertainty that may weigh on plans to reduce a pile of bad loans estimated at €360 billion.

UniCredit and Monte Paschi are among banks looking to raise capital as part of overhauls to clean up their balance sheets and strengthen profitability. UniCredit CEO Jean Pierre Mustier said he’s not worried that market volatility will compromise a strategic plan due next week, just as Renzi prepares to step down. “The events overnight won’t change our strategy,” he said on Monday, without elaborating on the changes ahead. Mustier is trying to restore confidence in a systemically important lender after a slide in its share price eroded more than 60% of the company’s market value this year. Italy’s biggest bank was trading 2.9% lower at 5:24 p.m. in Milan, while Monte Paschi was down 4.2%, after falling as much as 7.5% earlier Monday. Italy’s biggest bank plans to raise as much as €13 billion through a combination of asset sales and a stock offering.

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Italy will have to bail out banks, but doesn’t want EU rules to force it to victimize its own citizens, who hold a huge amount of bank bonds. Maybe they should let Beppe have a go at this.

Italy Already Requested Monte Dei Paschi Bailout Before Referendum (R.)

Italy is discussing with the European Commission the terms of a state bailout of ailing bank Monte dei Paschi that has already been requested and could be launched next week if needed, Italian daily Corriere della Sera reported on Friday. Italy’s third-largest bank needs to raise €5 billion by the end of the year to plug a capital shortfall identified by ECB stress tests or face the risk of being wound down. Quoting sources with knowledge of the matter, Corriere said that Italy had already filed a request to launch a public recapitalization of Monte dei Paschi as early as next week. The newspaper reported that the Commission was willing to limit the burden on shareholders and subordinated bondholders and it was being discussed to what extent retail investors who held subordinated bonds could be spared.

The bank’s finance chief Francesco Mele said this week that the Commission was expected to agree that only shareholders and junior bondholders share the bank’s losses before Monte dei Paschi is given any state aid. New EU rules on state aid to banks require investors to take a hit before lenders tap public money, but a lighter version of the rules can apply in cases such as Monte dei Paschi’s. Sources told Reuters last week that authorities would apply EU rules with flexibility with regard to a Monte dei Paschi bailout to avoid damage to the entire Italian banking system. A debt-to-equity swap aimed at reducing the size of a share sale ends on Friday, with Monte dei Paschi planning to launch its share issue after Italy’s referendum on constitutional reform this Sunday.

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Yup, Draghi.

Could Renzi’s Exit Lead To An Italian Bank Rescue? (G.)

Investors’ ability to look on the bright side on political turmoil is remarkable. In the case of Italy, the departure of Matteo Renzi, the market-friendly centre-left prime minister, was followed quickly by the thought that the crisis in the country’s banking system may, counterintuitively, become easier to address. That wasn’t last week’s theory, of course. Back then, Renzi’s survival was seen as critical to encouraging private sector investors to cough up billions of euros of new capital to refinance the likes of Banca Monte dei Paschi di Siena and UniCredit. This week’s silver lining theory holds that a political vacuum isn’t so bad if it prods the ECBand the eurozone authorities to take a flexible approach to Italy’s banking mess.

Ireland’s finance minister, Michael Noonan, captured the new mood: “The president of the ECB, Mario Draghi, is Italian and I can’t envisage a situation in which the ECB under Mario Draghi will let the Italian banks get into difficulty.” He’s probably right. It seems quite possible that, if MPS struggles to get its required €5bn (£4.2bn) from big private sector investors such as Qatar’s sovereign wealth fund, the bank could be nationalised with ways found to compensate ordinary savers who hold bonds that would be wiped out. A wipeout of senior bondholders is meant to be an essential requirement of state bailouts in the eurozone these days. It causes problems in Italy because so many bondholders are retail savers.

But the eurozone’s capacity to bend its own rules is legendary: compensation for some bondholders, even if that is supposed to be a no-no, might be deemed a price worth paying after Renzi’s exit. Yet would that really be a cause for celebration? Only if the health of the Italian banking system is addressed once and for all. But it seems far more likely that a weak Italian government and reluctant eurozone authorities will serve up only half a solution – one big enough to get through the current crisis but insufficient to allow a proper cleansing of the bad loans in the system, which are estimated to stand at €360bn.

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Italy has a lot of small enterprises, often family owned. That doesn’t fit today’s globalization model (not competitive enough). But globalization is over anyway. The country had better save what’s left of its business model, because it’s ideal for a post-centralized world.

How Italy Became This Century’s ‘Sick Man Of Europe’ (G.)

On New Year’s Day in 2002, Italians gathered in Rome to throw their lire into the Trevi fountain. There were celebrations as Italians took possession of the new euro notes and coins that became legal tender as the clocks struck midnight. But hopes that the advent of the single currency would provide a fresh start for Italy’s economy were misplaced. The growth performance of the eurozone as a whole has been poor, but Italy’s has been dismal. Greece and Spain at least had booms before their painful busts; Germany and France have managed to claw back the ground lost in the deep recession of 2008-09. But national output per head in Italy is only 4% higher than it was 15 years ago. The economy is still smaller than it was in 2008.

Unemployment is at 11.6%, labour market participation is low, and its birthrate in 2014 was the lowest since the modern Italian state was founded in 1861. If there was a contest for the unwanted title of the sick man of Europe in the 21st century, Italy would walk it. The eurozone’s third biggest economy has one central problem: the goods and services it produces are more expensive than those of its rivals. This lack of competitiveness means that it has suffered the biggest drop in export market share of any developed country. There are three reasons for this. Firstly, Italy’s manufacturing sector has traditionally been dominated by small companies, many of them family-owned. These businesses have been reluctant to invest, poor at innovation, and were slow to take advantage of the the new information technology when it came on stream in the 1990s.

Productivity has increased less rapidly than in Germany or France. Secondly, Italy has tended to specialise in low-cost manufactured goods, a segment of the global economy that has been dominated by China since it gained membership of the World Trade Organisation in 2001. Italy’s competitiveness problem is not new. Since the second world war, it has tended to have higher costs and higher inflation than rival countries. But up until it joined the euro, Italy was able to restore competitiveness by devaluing the lire, which made exports cheaper. With that option no longer available, Matteo Renzi has been trying a different approach: structural reforms of Italy’s labour market.

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A bit overdone this, but not entirely.

Standing Rock Is A Modern-Day Indian War. This Time Indians Are Winning (G.)

As Indigenous peoples faced off against armed police and tanks near the Standing Rock Sioux reservation in Dakota, theirs wasn’t just a battle over a pipeline. It was a battle over a story that could define the future of America. The Obama administration’s decision yesterday to refuse the Dakota Access pipeline permission to complete its construction has now shaken up that story. Its old version was that Indigenous peoples have always been in the way of progress, their interests a nuisance or threat, their treaties a discardable artifact. In that story, the American heroes forged on these high plains of the west were never the Indians: they were the gold-diggers or gamblers, the cowboys or cavalry.

But over the past months, it became impossible to watch peaceful Indigenous people and supporters attacked by snarling dogs, maced, and shot with rubber bullets and water cannons in freezing conditions, and still see in them a threat. It was impossible to look upon these young Indigenous men and women, in jingle dresses or on horseback, and not observe the courage that America desperately needs. It was impossible to listen to the cry of their slogan and not hear a rallying vision for all of us: Water is Life. Along the snowy banks of the Missouri river, a new story is being painfully birthed. It tells us that frontiers must at some point close. That endless taking must become care-taking.

And that Indigenous rights, cast aside for too long, are a key to protecting land and water and preventing climate chaos. America is waking up to new heroes. This is not high-minded romanticism. It is hard-bitten reality. All over the world, there are massive pools of fossil fuels—and the infrastructure to rip and ship it—concentrated in the traditional territories of Indigenous peoples. This rush for extreme energy on their lands was never a new crisis for them—it was only the latest stage in a very old colonial pillage.

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Seems ridiculous, but he has support from various tribes and leaders.

Trump Advisors Aim To Privatize Oil-Rich Indian Reservations (R.)

Native American reservations cover just 2% of the United States, but they may contain about a fifth of the nation’s oil and gas, along with vast coal reserves. Now, a group of advisors to President-elect Donald Trump on Native American issues wants to free those resources from what they call a suffocating federal bureaucracy that holds title to 56 million acres of tribal lands, two chairmen of the coalition told Reuters in exclusive interviews. The group proposes to put those lands into private ownership – a politically explosive idea that could upend more than century of policy designed to preserve Indian tribes on U.S.-owned reservations, which are governed by tribal leaders as sovereign nations.

The tribes have rights to use the land, but they do not own it. They can drill it and reap the profits, but only under regulations that are far more burdensome than those applied to private property. “We should take tribal land away from public treatment,” said Markwayne Mullin, a Republican U.S. Representative from Oklahoma and a Cherokee tribe member who is co-chairing Trump’s Native American Affairs Coalition. “As long as we can do it without unintended consequences, I think we will have broad support around Indian country.” [..] The plan dovetails with Trump’s larger aim of slashing regulation to boost energy production. It could deeply divide Native American leaders, who hold a range of opinions on the proper balance between development and conservation.

The proposed path to deregulated drilling – privatizing reservations – could prove even more divisive. Many Native Americans view such efforts as a violation of tribal self-determination and culture. “Our spiritual leaders are opposed to the privatization of our lands, which means the commoditization of the nature, water, air we hold sacred,” said Tom Goldtooth, a member of both the Navajo and the Dakota tribes who runs the Indigenous Environmental Network. “Privatization has been the goal since colonization – to strip Native Nations of their sovereignty.” Reservations governed by the U.S. Bureau of Indian Affairs are intended in part to keep Native American lands off the private real estate market, preventing sales to non-Indians.

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Go Yves!

Naked Capitalism Demands Retraction, Apology Over WaPo Fake News Story (NC)

As the lawyers like to say, res ipsa loquitur. Please tweet and circulate this letter widely. You will notice that our attorney Jim Moody is a seasoned litigator who has won cases before the Supreme Court. He has considerable experience in First Amendment and defamation actions. Past high profile representations include Westomoreland v. CBS and defending Linda Tripp. I also hope, particularly for those of you who don’t regularly visit Naked Capitalism, that you’ll check out our related pieces that give more color to how the fact the Washington Post was taken for a ride by inept propagandists, particularly our introduction to our spoof PropOrNot.org site, which uses the PropOrNot project as an example of sorely deficient propaganda and shows where it went wrong, or the humor site itself. Be sure not to miss its FAQ.

We have another post today that describes how the few things that are verifiable on the PropOrNot site don’t pan out, as in the organization is not simply a group of inept propagandists but also appears to deal solely in fabrications. If the site is flagrantly false with respect to things that can be checked, why pray tell did the Washington Post and its fellow useful idiots in the mainstream media validate and amplify its message? Strong claims demand strong proofs, yet the Post appeared content to give a megaphone to people who make stuff up with abandon. No wonder the members of PropOrNot hide as much as they can about what they are up to; more transparency would expose their work to be a tissue of lies.

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NATO expands in multiple dimensions.

Russia Remains The Only Target Country Of NATO’s Nuclear Weapons (SC)

For many years before the 2016 Warsaw summit, NATO had been deploying aircraft all round Europe that were capable of delivering nuclear weapons against Russia. The only difference in recent times is that NATO, as recorded by Arms Control in June 2016, «is beefing up its nuclear posture. Polish F-16s participated for the first time on the sidelines of a NATO nuclear strike exercise at the end of 2014. As a clear signal to Russian President Vladimir Putin, four B-52 bombers flew a nuclear strike mission over the North Pole and the North Sea in a bomber exercise in April 2015. Although these planes did not have nuclear weapons on board, they were equipped to carry 80 nuclear air-launched cruise missiles».

It goes further than that, because NATO’s most recent nuclear-associated deployments to the Baltic have involved aircraft from Belgium’s 10th Tactical Wing which is based at Kleine Brogel Air Base and flies US-supplied F-16 nuclear-capable strike aircraft. NATO reported that four of them are currently conducting missions from Ämari Air Base in Estonia, in order «to guard the Baltic skies against unauthorised overflights» and that their duties included «intercepting Russian aircraft flying in international airspace at the Baltic borders». According to NATO, the Mission of the 10th Tactical Wing is «to generate air power effects in the full operational spectrum by putting into action the best combat ready people and equipment to execute or support both conventional and nuclear operations in a joint, national or multinational environment, anytime and anywhere, in the most proficient, safe and efficient manner».

So it sends four of 10 Wing’s nuclear-capable F-16s, flown by nuclear-delivery trained pilots to Estonia to guard the Baltic skies. In Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia the Alliance has established «NATO Force Integration Units» which are advanced military headquarters whose Mission is «to improve cooperation and coordination between NATO and national forces, and prepare and support exercises and any deployments needed». The relentless expansion of US-NATO forces right up to Russia’s borders continues apace, with formation of a «new standing Joint Logistic Support Group Headquarters, to support deployed forces».

NATO is on a war footing, and has made it clear that «nuclear weapons are a core component of the Alliance’s overall capabilities». The Belgian F-16 deployments, deliberately and provocatively in a most sensitive area on Russia’s borders, together with creation of advanced military control organisations in eight countries, have been authorised and greeted with approval by western governments whose citizens have little understanding that the west’s policy of confrontation is increasing tension day by day. Russia has no intention of invading any of the Baltic nations, or, indeed, any other country. It has no interest whatever in becoming engaged in conflict that could result only in vast expenditure, no territorial gain of any value, and destruction of much-valued trade and other commercial arrangements.

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“..these newspapers and their handmaidens on TV, were far less concerned as to whether the leaked information was true or not..”

The Deepening Deep State (Jim Kunstler)

Pretty obviously, the struggle between mainstream news and Web news climaxed over the election, with the mainstream overwhelmingly pimping for Hillary, and then having a nervous breakdown when she lost. Desperate to explain the loss, the two leading old-line newspapers, The New York Times and The Washington Post, ran with the Russia-Hacks-Election story — because only Satanic intervention could explain the fall of Ms. It’s-My-Turn / I’m-With-Her. Thus, the story went, Russia hacked the Democratic National Committee (DNC), gave the hacked emails to Wikileaks, and sabotaged not only Hillary herself but the livelihoods of every myrmidon in the American Deep State termite mound, an unforgivable act.

Also interestingly, these newspapers and their handmaidens on TV, were far less concerned as to whether the leaked information was true or not — e.g. the Clinton Foundation donors’ influence-peddling around arms deals made in the State Department; the DNC’s campaign to undermine Bernie Sanders in the primaries; DNC temporary chair (and CNN employee) Donna Brazille conveying debate questions to HRC; the content of HRC’s quarter-million-dollar speeches to Wall Street banks. All of that turned out to be true, of course. Then, a few weeks after the election, the US House of Representatives passed H.R. 6393, the Intelligence Authorization Act for Fiscal Year 2017. Blogger Ronald Thomas West reports:

“Section 501 calls for the government to “counter active measures by Russia to exert covert influence … carried out in coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly.”

The measure has not been passed by the Senate or signed into law yet, and the holiday recess may prevent that. But it is easy to see how it would empower the Deep State to shut down whichever websites they happened to not like. My reference to the Deep State might even imply to some readers that I’m infected by the paranoia virus. But I’m simply talking about the massive “security” and surveillance matrix that has unquestionably expanded since the 9/11 airplane attacks, creating a gigantic NSA superstructure above and beyond the Central Intelligence Agency, the Department of Defense’s DIA, and the hoary old FBI.

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They will continue to demand a full hand for every finger given. A road to nowhere for Greece.

Eurozone Agrees Debt Relief For Greece Amid IMF Row (AFP)

Eurozone finance ministers on Monday approved new debt relief measures to relieve Greece’s colossal debt mountain in the wake of its huge €86 billion bailout, but at levels far short of those demanded by the IMF. “The Eurogroup endorsed today the full set of short-term measures” including extending the repayment period and an adjustment to interest rates, the eurozone’s 19 finance ministers said in a statement. The ministers accorded Athens the small measures to reduce Greece’s debt as a reward for completing the latest round of reforms demanded in the country’s massive bailout programme – its third since 2010. “We will start implementing them in the next weeks,” said Klaus Regling, the head of the European Stability Mechanism, the eurozone’s bailout fund.

However the ministers refused to officially sign off on the bailout’s second review as expected, telling Athens that there still remained a few open questions on Greece’s reform efforts. The talks were marred by a row with the IMF, as Europe and the fund remain as far apart as ever on the level of need for debt relief measures. This is a crucial demand for the fund to back the bailout programme in which for now it plays only a technical role. The hardline stance on debt relief by the ministers, led by Germany’s powerful Wolfgang Schaeuble, comes as key elections approach next year in Germany and the Netherlands, where bailout fatigue is running rife with voters.

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Capital flight in thinly veiled disguise.

Greek Home Sellers Getting Paid In Banks Abroad (Kath.)

The bulk of transactions concerning Greek real estate acquired by foreign nationals are conducted outside the domestic banking system, making it even harder to get a clear idea of the situation in the Greek residential properties market, particularly as regards holiday homes. Estate agents who mainly work with foreign buyers say that the majority of sellers in agreed transactions ask for the money to be deposited in banks abroad. Sellers are even prepared to travel abroad themselves, with contracts in hand, in order to open a bank account.

“After the imposition of the capital controls [at end-June 2015], the cases of sellers requesting that money be deposited abroad have multiplied. Of course such transactions are entirely legitimate and taxed in Greece, but the revenues remain in other countries,” says Yiannis Ploumis, general director at the Ploumis-Sotiropoulos estate agency, which specializes in the luxury property market. That way, the funds paid by foreign property buyers do not enter the Greek credit system or the local economy in general. This trend concerns virtually the entire construction sector, as well as private owners, especially those selling houses of significant value, as transactions of €50,000-100,000 hardly ever lead sellers to open a new bank account abroad.

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More on this today.

Greek Court Rejects Extradition Of 3 Turkish Officers Accused Of Coup (AFP)

A Greek court on Monday rejected the extradition of three military officers demanded by Turkey over their alleged involvement in July’s failed coup, a judicial source said. The decision outraged Ankara, which has arrested tens of thousands of people as part of a wide-ranging crackdown since the attempted putsch. “Greece is in the NATO alliance with Turkey and is a NATO ally. Our expectation is that the Greek government make every effort to return” those individuals to Turkey, Defence Minister Fikri Isik said. The Greek court determined that the three men – out of a total eight officers seeking asylum in Greece – faced threats to their personal safety if returned to Turkey.

It also deemed that Turkish authorities have not provided sufficient evidence tying them to the coup attempt against President Recep Tayyip Erdogan, the source said. The court is expected to decide the fate of the other five officers on Tuesday. Turkey may still appeal the case, and any final decision to extradite rests with the Greek minister of justice. The two Turkish commanders, four captains and two sergeants requested asylum in Greece after landing a military helicopter in the northern city of Alexandroupoli shortly after the attempted government takeover in mid-July. The officers are currently appealing against a Greek refusal to grant them asylum in September.

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Dec 052016
 
 December 5, 2016  Posted by at 9:38 am Finance Tagged with: , , , , , , , , , ,  


Don’t let the door hit you on the way out..

Bloody Hell, John Key Just Quit As Prime Minister (Spinoff)
Trump Picks Twitter Fight With China (AFP)
Italy PM Renzi Quits After Crushing Referendum Defeat (AFP)
Italy Bank Recapitalizations A Harder Road After Referendum Flop (CNBC)
Austria Rejects Far-Right Candidate In Presidential Election (G.)
Greece Must Reform Or Leave Eurozone – Schäuble (G.)
Greece Sees Final Solution On Debt Crisis Amid Euro Uncertainty (R.)
Money-Laundering Networks Thrive Amid India’s Cash-Ban Chaos (BBG)
China Regulator Slams Leveraged Stock Acquirers as ‘Robbers’ (BBG)
Vancouver Housing Tax Pushes Chinese Into $1 Million Seattle Homes (BBG)
Pensions Time Bomb Spells Disaster For US Economy (RVTV)
US Reshaping Budget To Account For Russian Military Threat (R.)
Army Denies Dakota Pipeline Permit (R.)

 

 

“John Key took New Zealand, a nation of just 4.5m people, from almost no debt to $100 billion debt.” – Kim Dotcom

Bloody Hell, John Key Just Quit As Prime Minister (Spinoff)

It is one of the hoary rules of politics that leaders never – almost never – go of their own accord. But John Key, not for the first time, has proved his resistance to the forces of political gravity, announcing on Monday afternoon he will exit on his own terms. “For me this feels the right time to go,” the prime minister of New Zealand said. Already the conspiracy theorists are in full flight but there is no evidence to suggest he is doing anything but that: going on his own terms, sitting as strongly as ever, a year out from the next election. He’s only 55. A spring chicken in political terms.

Key said he “feels like I am going out on top”, that he had “never seen myself as a career politician” and “didn’t want to find myself in the position many leaders around the world find themselves, which is disgruntled and unhappy”. Some media are reporting he’s leaving “for family reasons”. But while he did say he’d made sacrifices on that front and family was “a factor”, this wasn’t a “spend more time with my family” exit, or not with that euphemistic freight. The National party under Key has been lauded, rightly, for its ability to renew, with underperforming MPs finding themselves nudged out or shouldered towards retirement. But now the prime minister has performed the biggest renewal of the lot. “To be blunt, I’ve taken the knife to some other people, and now I’ve taken the knife to myself.”

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Got to admit he’s way more entertaining in person than Saturday Night Live’s impression of him is. And these numbers are real:

“China charges an average 15.6% tariff on US agricultural imports and 9% on other goods [..] Chinese farm products pay 4.4% and other goods 3.6% when coming into the United States.”

Trump Picks Twitter Fight With China (AFP)

US President-elect Donald Trump fired a Twitter broadside at China on Sunday, accusing the Asian giant of currency manipulation and military expansionism in the South China Sea. The taunt came two days after Trump risked offending Beijing by accepting a call from the Taiwanese president, and heralded the prospect of a trade battle between the world’s largest economies. China was a frequent target of Trump’s during his presidential campaign and, as he prepares to take office next month, every sign points to his taking an aggressive line with Beijing. “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the US doesn’t tax them) or to build a massive military complex in the middle of the South China Sea?” he demanded, adding: “I don’t think so!”

China is the United States’ largest trading partner, but America ran a $366 billion deficit with Beijing in goods and services in 2015, up 6.6% on the year before. US politicians often accuse China of artificially depressing its currency, the renminbi, in order to boost its exports – its value has fallen by around 15% in the past two-and-half years. Trump has vowed to formally declare China a “currency manipulator” on the first day of his presidency, which would oblige the US Treasury to open negotiations with Beijing on allowing the renminbi to rise. With China holding about a trillion dollars in US government debt, Washington would have little leverage in such talks, but the declaration would harm ties and boost the prospect of a trade war. China charges an average 15.6% tariff on US agricultural imports and 9% on other goods, according to the WTO. Chinese farm products pay 4.4% and other goods 3.6% when coming into the United States.

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“Five Star founder and leader Beppe Grillo called for an election to be called “within a week”..” Not going to happen say the tea leaves.

Italy PM Renzi Quits After Crushing Referendum Defeat (AFP)

Italian Prime Minister Matteo Renzi announced his resignation on Monday, hours after it was confirmed he had suffered a crushing defeat in a referendum on constitutional reform. “My experience of government finishes here,” Renzi told a press conference, acknowledging that the No campaign had won an “extraordinarily clear” victory in a vote on which he had staked his future. Interior Ministry projections suggested the No camp, led by the populist Five Star Movement, had carried the vote by a margin of almost 60-40 with a near 70% turnout underlining the high stakes and the intensity of the debate. Markets seemed to take Renzi’s departure in their stride. Stocks and the euro fell in early trading in Asia but there were no signs of panic with the possibility of his resignation having already been largely factored in.

Renzi said he would be visiting President Sergio Mattarella on Monday to hand in his resignation following a final meeting of his cabinet. Mattarella will then be charged with brokering the appointment of a new government or, if he can’t do that, ordering early elections. Five Star founder and leader Beppe Grillo called for an election to be called “within a week” on the basis of a recently adopted electoral law which is designed to ensure the leading party has a parliamentary majority – a position Five Star could well find themselves in at the next election. [..] Most analysts see early elections as unlikely with the most probable scenario involving Renzi’s administration being replaced by a caretaker one dominated by his Democratic Party which will carry on until an election due to take place by the spring of 2018. Finance Minister Pier Carlo Padoan is the favourite to succeed Renzi as prime minister and the outgoing leader may stay on as head of his party – which would leave him well-placed for a potential comeback to frontline politics at the next election, whenever it is.

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Monte dei Paschi down 7.5% this morning. “Monte Paschi’s shares are trading at a 94% discount to the value of its assets.” “Italian households have highest share of wealth invested in bank bonds in the developed world..”

But Draghi to the rescue!

Italy Bank Recapitalizations A Harder Road After Referendum Flop (CNBC)

Recapitalization of Italy’s troubled banks will be harder following the failure of a referendum pushed by Prime Minister Matteo Renzi, with ratings agencies among key actors to watch as delays may loom as the country likely heads to early polls next year. Renzi resigned after failing to win a mandate to curb the powers of the upper house legislature, throwing into questions steps such as plans by Banca Monte dei Paschi di Siena to conduct a €5 billion capital increase this week, a solution backed by the outgoing premier. Barclays Economics Research, in a note to clients following the defeat, suggested that concerns surrounding Italian banks are growing.

“This outcome is likely to exacerbate concerns about the Italian banking sector and increase downgrade risks from rating agencies such as DBRS, although we do not expect rating agencies to act anytime soon, as they are likely to wait for political developments before taking any rating decision,” Barclays said in the Dec. 5 note. Italy’s banking sector has struggled with toxic debts as 14 of the largest banks sit on €286 billion of bad loans, debt securities and off-balance sheet items. Asset managers, insurers and banks had agreed earlier this year to set up a euro fund to bail out the weaker Italian lenders.

But other analysts suggest after the referendum result, investors might pull out. “[Investors] are now drawing back, they think the situation is too volatile both in Italy and in the European Union,” said Mark Grant, chief strategist at Hilltop Holdings, in a Squawk Box interview. “It’s going to be very difficult to do a raise of capital for Monte Paschi and the regional investment banks, and I think then what happens is Italy is going to be at loggerheads with the EU and the ECB,” Grant said.

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“.. a “small global turning of the tide in these uncertain, not to say hysterical and even stupid times..”

Austria Rejects Far-Right Candidate In Presidential Election (G.)

Austria has decisively rejected the possibility of the EU getting its first far-right head of state, instead electing a former leader of the Green party who said he would be an “open-minded, liberal-minded and above all a pro-European president”. Alexander Van der Bellen, who ran as an independent, increased his lead over the far-right Freedom party candidate, Norbert Hofer, by a considerable margin from the original vote in May, which was annulled by the constitutional court due to voting irregularities. Hofer conceded his defeat within less than half an hour of the first exit polls on Sunday, writing on Facebook: “I congratulate Alexander Van der Bellen for his success and ask all Austrians to pull together and work together.”

The 45-year-old, who said he was “endlessly sad” and “would have liked to look after Austria”, confirmed that he would like to run again for the presidency in six years’ time. The Freedom party secretary, Herbert Kickl, who has acted as Hofer’s campaign manager, said: “The bottom line is it didn’t quite work out. In this case the establishment – which pitched in once again to block, to stonewall and to prevent renewal – has won.” Speaking in front of international press at the end of the evening, a visibly emboldened Van der Bellen said the election had not just been a repeat, “but a new election after the world around us has changed” with the Brexit vote in June and Donald Trump’s win in November.

Referring to the colours of the Austrian flag, he described the result as “a red-white-and-red signal of hope and change to all the capitals in Europe”. Werner Kogler, a Green party politician, described the result as a “small global turning of the tide in these uncertain, not to say hysterical and even stupid times”. The endorsement of the retired economics professor was particularly emphatic in urban areas, with all of Vienna’s 23 districts showing up in Van der Bellen’s green than Hofer’s blue at the end of the night.

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The kind of headline where you really have to check the date of the article. But this is why Renzi lost, and this is why the EU will soon fall to bits.

Greece Must Reform Or Leave Eurozone – Schäuble (G.)

Greece must implement economic reforms if it is to keep its place in the eurozone, Germany’s finance minister has insisted, ruling out debt relief for the country ahead of a crucial euro group meeting on Monday. As the finance ministers of member states using the single currency prepared to discuss fiscal plans for the coming year, Wolfgang Schäuble in effect presented Greece with an ultimatum: either it must enforce unpopular structural reforms or exit the bloc. “Athens must finally implement the needed reforms,” he told the newspaper Bild am Sonntag in an interview published on Sunday. “If Greece wants to stay in the euro, there is no way around it – in fact completely regardless of the debt level.” Asked if German voters should be prepared for the inevitability of debt relief in the run-up to national elections next year, Schäuble quipped: “That would not help Greece.”

Schäuble, who also asserted the Greek budget was not burdened by debt servicing because interest rates were now so low, made the comments as speculation mounted over how best to put the thrice-bailed-out nation back on the road to economic recovery. On Friday the German finance ministry announced that short-term measures to lighten Greece’s debt load would be among the proposals up for discussion at the euro group meeting. Athens’s leftist-led government has long argued that the country’s staggering €330bn debt load is the single biggest impediment to sustainable growth. It is an argument that has won backing from the IMF. Time is of the essence. The economic crisis enveloping Greece is far from over despite more than €300bn of emergency loans since 2010 when, after its first brush with bankruptcy, it received its first EU-IMF sponsored bailout.

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Never let a good crisis go to waste.

Greece Sees Final Solution On Debt Crisis Amid Euro Uncertainty (R.)

Political uncertainty in Europe has created fresh momentum for a “comprehensive and permanent” solution to the Greek debt crisis before the year ends, a government spokesman said on Sunday. Eurozone finance ministers will meet in Brussels on Monday to discuss short-term debt relief for Greece, and Germany’s Wolfgang Schaeuble said it must implement reforms instead of hoping for further debt forgiveness. Greece remained optimistic for a final debt deal, however, just as Italians were voting on a constitutional referendum on Sunday and a victory for the opposition “No” camp may push the eurozone toward fresh crisis.

“Everyone realizes that Europe cannot stand a rekindling of the Greek crisis, when there are issues with Italy and amid a pre-election period in many European countries,” Dimitris Tzanakopoulos told Athens 9,84 radio. “The general uncertainty which prevails in Europe – which is both political and financial – creates … a momentum for a comprehensive and permanent solution for the Greek issue.” Bank of Greece Governor Yannis Stournaras said new measures were needed to lighten Athens’s debt burden. One option would be to extend the maturity of already granted long-term aid loans by some 20 years. “Greece needs debt sustainability and more realistic fiscal targets after the completion of the current adjustment program [in 2018],” Stournaras told German business daily Handelsblatt in an interview to be published on Monday.

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China and India, the world’s most populous countries, are both ruled by megalomaniacs. Thinking they are in full control.

Money-Laundering Networks Thrive Amid India’s Cash-Ban Chaos (BBG)

As Indians struggle with the chaos caused by last month’s sudden banning of their 500 and 1,000 rupee notes, money-laundering networks are spreading across the country, seizing on a new market in helping people turn their cash hoards into legal tender. While people have until year-end to deposit old notes in their bank accounts, the government has said it will scrutinize large cash deposits and money with undeclared origins — and will tax or penalize depositors. That’s created a scramble for ways to turn so-called black money, the local term for cash that has evaded taxation, into white.

Agents offering to launder money are using creative means, including flying banned cash by the planeload to northeastern states exempt from restrictions as well as connecting people to high-turnover businesses that can deem old cash as revenue, keep a portion of it, and return the rest, according to people involved in the networks. Premiums range from 10% to 50%, depending on the difficulty, they say. At least one property brokerage is offering to arrange the sale of apartments using banned money in an upscale suburb of Mumbai that’s popular with Bollywood movie stars.

While the government has been working to close loopholes – which Prime Minister Narendra Modi decried as people’s “illegal means to save their ill-gotten wealth” in a radio address last week – new ones are opening even faster. So far, the policy aimed at reducing the scale of the black economy and bringing more people into the tax net is, in the short term, leading to just the reverse: money-laundering, tax-avoidance, and new opportunities for existing organized crime, the evolution of the long-standing hawala money-transfer system, and the start of new illicit networks.

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“..you’ve gone from strangers at the gate, to barbarians and eventually robbers of the industry..”

China Regulator Slams Leveraged Stock Acquirers as ‘Robbers’ (BBG)

China’s top securities regulator resorted to unusually harsh language to denounce leveraged acquisitions of listed companies, as officials move to rein in financial risks associated with a surge in dealmaking. China Securities Regulatory Commission Chairman Liu Shiyu also questioned the legitimacy of the funding sources at acquirers that he didn’t identify, saying their behavior challenges the nation’s rules, as well as their own professional ethics. Such acquisitions show “retrogress and decay in humanity and commercial morals, and is by no means financial innovation,” Liu said. “By using improperly obtained money to conduct leveraged acquisitions, you’ve gone from strangers at the gate, to barbarians and eventually robbers of the industry, ” he said at a meeting of the Asset Management Association of China in Beijing on Saturday, a transcript of which was posted on the regulator’s website. “That’s not allowed.”

The comments came after China Evergrande Group, the country’s largest property developer, last month stepped up a buying spree of shares in rival China Vanke in the weeks after a warning from the Shenzhen stock exchange that it is closely monitoring Evergrande’s investments in listed companies. The bourse said it strengthened supervision after finding “abnormal trading behaviors” that affected share prices of Vanke and others. [..] Evergrande joined the fray in a tussle for control at Vanke, which has been trying to fend off advances from the Baoneng Group. Vanke labeled Baoneng “hostile” after it emerged last year as the developer’s largest shareholder, amassing a 24% stake by borrowing from brokers and fund managers who raise the money selling private high-yield instruments to wealthy clients.

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There once was a time when homes were places that offered shelter.

Vancouver Housing Tax Pushes Chinese Into $1 Million Seattle Homes (BBG)

Just a few days after Vancouver announced a tax on foreign property investors, Seattle real estate broker Lili Shang received a WeChat message from a wealthy Chinese businessman who wanted to sell a home in Canada and buy in her area. After a week of showings, he purchased a $1 million property in Bellevue, across Lake Washington from Seattle. He soon returned to buy two more, including a $2.2 million house in Clyde Hill paid for with a single cashier’s check. Shang says she’s been inundated with similar requests from China and Hong Kong after Vancouver’s provincial government enacted a 15% tax on foreign homebuyers in August to help cool soaring real estate values.

With Chinese investors – the largest pool of foreign capital – looking for a place to put their cash, the unintended consequence of the fee has been to push demand to cities such as Seattle and Toronto. “The tax was the trigger of this new wave of investment now coming to Seattle,” Shang said. “Why pay more for the same thing?” Vancouver, which has seen detached-home prices double in a decade, joined areas including Australia and Hong Kong in taking steps to slow housing demand after an unprecedented surge of foreign investment. Chinese buyers, in particular, are accelerating purchases overseas, spurred by a weakening yuan, rising prices at home and the perceived safety of real estate. They’re also venturing farther afield as costs soar in some of their favored markets.

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“..the physiological decision to stay in the workforce won’t work for much longer….”

Pensions Time Bomb Spells Disaster For US Economy (RVTV)

The $1.3 trillion pensions deficit just takes into account state and municipal obligations and with promised returns of 8% and funds compounding at 3% for decades it will take nothing short of an economic miracle to recover. “The average state pension in the last fiscal year returned something south of 1%. You cannot fill that gap with a bulldozer, impossible,” DiMartino Booth said. “Anyone who knows their compounding tables knows you don’t make that up. You don’t get that back unless you get some miracle.” The last time we saw significant market weakness, the baby boomers pretty much accepted that they would be retiring at 70 instead of 65, she added. “Well, guess what? They’re turning 71. And the physiological decision to stay in the workforce won’t work for much longer. And that means that these pensions are going to come under tremendous amounts of pressure.”

“And the idea that we can escape what’s to come, given demographically what we’re staring at is naive at best. And it’s reckless at worst,” DiMartino Booth said. “And when you throw private equity and all of the dry powder that they have – that they’re sitting on – still waiting to deploy on pensions’ behalf, at really egregious valuations, yeah, it’s hard to sleep at night.” “This is where the smile comes off my face. We are an angry country. We’re an angry world. The wealth effect is dead. The inequality divide is unlike anything we’ve seen since the years that preceded the Great Depression,” she told Real Vision TV. “Where’s the money going to come from? And the answer is, for now, they cut services. I’ve just written about the Winter of Discontent and the rubbish piled up in central London streets in 1979, as Thatcher was coming in. I worry about the ambulance not getting there in time. I worry about firefighters being cut to the bone and policemen.”

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Russia is not the no. 1 threat. These people are.

US Reshaping Budget To Account For Russian Military Threat (R.)

Russia’s increasing military activities around the world have unsettled top U.S. military officials, who say they are reshaping their budget plans to better address what they now consider to be the most pressing threat to U.S. security. “Russia is the No. 1 threat to the United States. We have a number of threats that we’re dealing with, but Russia could be, because of the nuclear aspect, an existential threat to the United States,” Air Force Secretary Deborah James told Reuters in an interview at the annual Reagan National Defense Forum. James, Chief of Naval Operations Admiral John Richardson and Pentagon chief arms buyer Frank Kendall, all voiced growing concern about Russia’s increasingly aggressive behavior in interviews late on Saturday.

Their comments come as the Pentagon finalizes a classified security assessment for President-elect Donald Trump, who has promised to both pump up U.S. defense spending and build closer ties to Russian President Vladimir Putin. European diplomats fear Moscow could use the time before Trump’s inauguration to launch more offensives in Ukraine and Syria, betting that President Barack Obama will be loathe to response forcefully so soon before he hands off power on Jan. 20. Kendall said U.S. policy had been centered on threats in the Asia-Pacific region and Middle East, but was now focused more on Russia. “Their behavior has caused us … to rethink the balance of capabilities that we’re going to need,” he said.

None of the officials gave details about how the concerns would affect the fiscal 2018 budget request, but defense officials have pointed to the need to focus on areas such as cyber security, space, nuclear capabilities and missile defense, where Russia has developed new capabilities in recent years.

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Washington better back down. Trump can’t afford this fight either.

Army Denies Dakota Pipeline Permit (R.)

The U.S. Army Corps of Engineers said on Sunday it turned down a permit for a controversial pipeline project running through North Dakota, in a victory for Native Americans and climate activists who have protested against the project for several months. A celebration erupted at the main protest camp in Cannon Ball, North Dakota, where the Standing Rock Sioux tribe and others have been protesting the 1,172-mile Dakota Access Pipeline for months. It may prove to be a short-lived victory, however, because Republican President-elect Donald Trump has stated that he supports the project. Trump takes over from Democratic President Barack Obama on Jan. 20 and policy experts believe he could reverse the decision if he wanted to.

The line, owned by Texas-based Energy Transfer Partners, had been complete except for a segment planned to run under Lake Oahe, a reservoir formed by a dam on the Missouri River. That stretch required an easement from federal authorities. The Obama administration delayed a decision on the permit twice in an effort to consult further with the tribe. “The Army will not grant an easement to cross Lake Oahe at the proposed location based on the current record,” a statement from the U.S. Army said. Jo-Ellen Darcy, the Army’s Assistant Secretary for Civil Works, said in a statement the decision was based on a need to explore alternate routes for the pipeline, although it remains unclear what those alternatives will be. Protesters have said the $3.8 billion project could contaminate the water supply and damage sacred tribal lands.

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Dec 022016
 
 December 2, 2016  Posted by at 10:34 am Finance Tagged with: , , , , , , , , , ,  


Harris&Ewing Washington, DC, Storm damage..” Between 1913 and 1918

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (BBG)
What’s Causing The Fire Sale In The Bond Market (CNBC)
Donald Trump Promises to Usher In New ‘Industrial Revolution’ (WSJ)
Trump Will End Growth-Zapping Fiscal Austerity – McCulley (CNBC)
China’s Central Bank Is Facing a Major New Headache (BBG)
Rural China Banks With $4 Trillion Assets Face Debt Test (BBG)
Obama Set To Block Chinese Takeover Of German Semiconductor Supplier (BBG)
QE Infinity Eyed In Europe If Renzi Loses Crucial Italian Referendum (CNBC)
December 4 Could Trigger the “Most Violent Economic Shock in History” (IM)
How Putin, Khamenei And Saudi Prince Got OPEC Deal Done (R.)
Russian Oil Output Near Post-Soviet Record as It Prepares to Cut (BBG)
US Veterans Arrive At Pipeline Protest Camp In North Dakota (R.)
Joy As China Shelves Plans To Dam ‘Angry River’ (G.)
World’s Growing Inequality Is ‘Ticking Time Bomb’: Nobel Laureate Yunus (R.)
This Is The Most Dangerous Time For Our Planet (Stephen Hawking)

 

 

Things get crowded, it’s inevitable. And much more so in manipulated markets.

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (BBG)

The 30-year-old bull market in bonds looks to be ending with a bang. The Bloomberg Barclays Global Aggregate Total Return Index lost 4% in November, the deepest slump since the gauge’s inception in 1990. Treasuries extended declines Thursday along with European bonds on speculation that the ECB will consider sending a signal that stimulus will eventually end. The reflation trade has been driving markets since Donald Trump’s election victory due to his promises of tax cuts and $1 trillion in infrastructure spending. Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to raise interest rates again – and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may buy less sovereign debt going forward.

Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to records. “The market has moved with remarkable swiftness to price in the anticipated reflationary impact of a Trump administration,” said Matthew Cairns, a strategist at Rabobank International in London. “This has, in turn, prompted a notable rotation out of fixed income and into equities.” Still, Cairns cautioned the moves are “remarkable given the distinct lack of clarity as regards what policies the president-elect will actually pursue.” November’s rout wiped a record $1.7 trillion from the global index’s value in a month that saw world equity markets’ capitalization climb $635 billion.

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Eevrybody’s been on the same side of the boat for too long.

What’s Causing The Fire Sale In The Bond Market (CNBC)

There’s a fire sale in the bond market, and the November jobs report could make it burn even hotter. The wild move came amid speculation that Friday’s employment report could be better-than-expected and drive interest rates even higher. Interest rates surged Thursday, with the 10-year yield spiking as much as 12 basis points at its peak, to 2.49%, the highest yield since June 2015. Yields move inversely to prices and rates snapped higher across the whole yield curve. The 2-year pressed up against 1.17% and the 30-year rose to as high as 3.15%. In afternoon trading, some of the selling subsided, and the 10-year yield slipped back to just under 2.44%, but 2.50 is being watched as the next psychological line in the sand.

“In order to stay above 2.50, it’s got to be a really good number. The way we’re going, it’s like an unhinged market. It’s also going to be counterproductive for things down the road. This is not a healthy adjustment in rates. There’s going to be some losses on this,” said George Goncalves at Nomura. The 10-year yield affects consumer loans especially home mortgage rates, which have already risen near 4%, slowing borrowing activity. The 2-year is the rate most closely watched as a signal about the market’s expectation for Fed rate activity. The Fed is expected to hike rates Dec. 14 but traders have been speculating a stronger economy could force it into a faster hiking cycle next year.

Strategists say Thursday’s rate spike was driven by a combination of factors and at the same time inexplicable in its scope. The overriding themes are that the world is moving to a higher interest rate environment and for the first time in years, there could be inflation. OPEC’s deal to cut production Wednesday, drove oil prices 15% higher in just two days, ramping up inflation expectations that already had been on the rise.

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“There is no global anthem, no global currency..”

Donald Trump Promises to Usher In New ‘Industrial Revolution’ (WSJ)

President-elect Donald Trump on Thursday said his administration would usher in a new “Industrial Revolution,” one of numerous promises he made in Cincinnati as he began a nationwide “Thank You” tour following his Nov. 8 election. Mr. Trump used the 53-minute speech, the first of its kind since he became president-elect, to reflect on his victory but also to outline a number of goals, many of them lofty, for his term as president. The speech was more than just thematic, however. He said for the first time that on Monday he would announce that he was nominating Ret. Gen. James Mattis as his first secretary of defense. Mr. Trump promised sweeping changes to trade policy, national security, infrastructure, military spending and immigration. He said he wanted to work with Democrats but said he could get the work done without them, even without his supporters.

“Now that you put me in this position, even if you don’t help me one bit, I’m going to get it done,” he said. “Don’t worry.” The Cincinnati rally resembled, in some ways, the campaign rallies he held for months as his candidacy gained steam during the year. There were chants of “U.S.A.,” and vendors sold Trump campaign memorabilia. But there was one notable difference: with the election over, the crowd was far smaller[..] During his speech, he stuck to many of his campaign promises. He said a wall would be built along the U.S.-Mexico border. He said his administration would “repeal and replace” the Affordable Care Act. He said the Trump administration would seek plans and deals that benefited Americans first and not get duped into deals with other countries. “There is no global anthem, no global currency,” he said. “We pledge allegiance to one flag, and that flag is the American flag.”

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It’ll fail. You can’t ‘make’ growth.

Trump Will End Growth-Zapping Fiscal Austerity – McCulley (CNBC)

Economist Paul McCulley told CNBC on Thursday he’s had a “big ax to grind” with Washington for years over the need for more deficit spending, and it appears Republican Donald Trump may actually be the one to deliver. The stock market rally since Trump won the presidential election has been reflecting that notion, argued McCulley, who said he voted for Democrat Hillary Clinton. “The market is essentially celebrating the end of fiscal austerity. And it just happens to be a vehicle of Mr. Trump. But the end of fiscal austerity is the key economic issue.” “My big ax to grind in recent years — not months but years — is that we needed to have more fiscal policy expansion, because we’re in a liquidity trap,” said McCulley, former chief economist at Pimco. He said too much responsibility has fallen on the Federal Reserve for growing the economy.

“We needed some help with larger budget deficits.” “I’ve never had an issue with increasing the size of the budget deficit. I think it’s been too small. I have zero problem with increased public investment and funding it with deficits,” he said. “To the extent that Mr. Trump wants to do that, I think that is the right Keynesian policy.” McCulley was referring to the British economist John Maynard Keynes, who is often credited with the concept of deficit spending as a means of fiscal policy. “My biggest complaints for the person I voted for, Mrs. Clinton, is that she said, ‘I will not add a penny to the national debt.’ That was basically putting you in a straightjacket of fiscal austerity forever,” said McCulley, senior fellow in financial macroeconomics at Cornell Law School.

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Mundell: “..nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time..”

China’s Central Bank Is Facing a Major New Headache (BBG)

People’s Bank of China Governor Zhou Xiaochuan already has one policy headache with the currency falling to near an eight-year low. He could have an even bigger one next month. That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital outflow pressures that are already on the rise. If just 1% of China’s almost 1.4 billion people max out those limits, that’s an outflow of about $700 billion – more than the estimated $620 billion that Bloomberg Intelligence estimates indicate has already flowed out in the first 10 months of this year. Middle class and wealthy Chinese have been converting money into other currencies to protect themselves from devaluation, exacerbating downward pressure on the yuan.

Outflows could intensify if Federal Reserve interest-rate hikes fuel further dollar appreciation. That leaves Zhou in a bind identified by Nobel-prize winning economist Robert Mundell as the “impossible trinity” – a principle that dictates nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time. “At a moment like this, you have to compare two evils and pick the less-worse one,” said George Wu, who worked as a PBOC monetary policy official for 12 years. “Capital free flow may have to be abandoned in order to maintain a relatively stable currency rate.” China is moving further away from balance among trinity variables, at least temporarily, and “it may take a while before the situation stabilizes” for the yuan and capital outflows, said Wu, who’s now chief economist at Huarong Securities in Beijing.

[..] rather than raise borrowing costs to try to make domestic returns more attractive – China has added new restrictions on the flow of money across its borders. They include a pause on some foreign acquisitions and bigger administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News. China should cut intervention in foreign exchange markets while stepping up capital control, Yu Yongding, a former academic member of the PBOC’s monetary policy committee, said Friday at a conference in Beijing. Yuan internationalization shouldn’t be promoted too aggressively, said Yu, a senior research fellow at the Chinese Academy of Social Sciences.

About $1.5 trillion has exited the country since the beginning of 2015. While China still has the world’s largest foreign exchange stockpile, the hoard shrank in October to a five-year low of $3.12 trillion, PBOC data show. That means there’s less in the armory to battle depreciation if China’s famously frugal savers park more cash abroad. The outflow pressure rose in January as individuals socked away a record amount in domestic bank accounts denominated in other currencies. Household foreign deposits surged 8.1% to $97.4 billion, according to the central bank, for the biggest jump since it began tracking the data in 2011. Those holdings stood at $113.1 billion in October.

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The correct way to write this is: “Assets”.

Rural China Banks With $4 Trillion Assets Face Debt Test (BBG)

Bond investors are weighing rising risks that smaller Chinese banks will fail against growing signs the government will do anything to avoid a financial meltdown. A lender called Guiyang Rural Commercial Bank in the southwestern province of Guizhou sparked concern that risks among smaller lenders are spreading after its rating outlook was cut last month following a jump in overdue loans to 30% of the total. That compares with just 3% at the nation’s biggest lender. Short-term borrowing costs surged for the riskiest lenders including rural commercial banks, which hold 29 trillion yuan ($4.2 trillion) of assets, 13.4% of the total amount in China’s banking system.

Yet confidence in the government’s readiness to step in and offer support to struggling borrowers is rising as authorities allow a credit-fueled recovery of manufacturing activity, helping an official factory gauge match a post-2012 high last month. While 17 onshore public bonds defaulted in the first half of the year, there have since been only seven. The combination of government support and desperation for yield helps explain why Guiyang Rural was able to sell a junior bond at 4.7% last month, 1.7 %age points less than a similar offering last year. “Investors have yet to suffer losses from any bank capital securities, which adds to their confidence,” said He Xuanlai at Commerzbank.

“Smaller banks have a less diversified business profile and will likely get less support from the central government compared with bigger banks. Still, the base case is the government is still not ready to let any bank fail in a disorderly way.” That assumption has helped cut the extra yield investors demand to hold AA- rated five-year bank subordinated notes over AAA rated peers to a record low of 81 basis points, from 113 at the start of the year. There are some positive fundamentals. Rural banks are tied with the big five state-owned banks for the best Tier 1 capital ratio at 12%, according to an analysis by Natixis.

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And Germany says what?

Obama Set To Block Chinese Takeover Of German Semiconductor Supplier (BBG)

U.S. President Barack Obama is poised to block a Chinese company from buying Germany’s Aixtron, people familiar with the matter said, which would mark only the third time in more than a quarter century that the White House has rejected an investment by an overseas buyer as a national security risk. The president is expected Friday to uphold a recommendation by the Committee on Foreign Investment in the U.S. that the sale of the semiconductor-equipment supplier to China’s Grand Chip Investment should be stopped, according to the people, who asked not to be identified as the details aren’t public. Blocking the €670 million ($714 million) acquisition would mark the second time Obama has rejected a deal on national security grounds. The first was in 2012 when he stopped Chinese-owned Ralls Corp. from developing a wind farm near a Navy base in Oregon.

Before that, in 1990 then-president George H.W. Bush stopped a Chinese acquisition of MAMCO, an aircraft-parts maker. CFIUS reviews purchases of U.S. companies by foreign buyers and pays particular attention to purchases of technology, especially when it has defense applications. It has a say in the Aixtron deal because the company has a subsidiary in California and employs about 100 people in the U.S., where it generates about 20% of its sales. Aixtron technology can be used to produce light-emitting diodes, lasers, transistors, solar cells, among other products, and can have military applications in satellite communications and radar. Northrop Grumman, a major U.S. defense contractor, is among its customers, according to a Bloomberg supply chain analysis. “It will be extremely difficult for China’s state owned enterprises to do deals in the semiconductor industry looking forward,” said He Weiwen at the Center for China and Globalization.

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A No vote is also a vote against the ECB.

QE Infinity Eyed In Europe If Renzi Loses Crucial Italian Referendum (CNBC)

Dovish words from the ECB this week have fueled speculation of more accommodative monetary policy if Italians reject constitutional reforms this weekend, but one economist has told CNBC that it might not be that simple. “The market believes that we are basically in for QE infinity in Europe and that might be a stretch of the imagination,” said Elga Bartsch, Morgan Stanley’s global co-head of economics. While the Morgan Stanley economist acknowledged the rhetoric emanating from ECB President Mario Draghi this week arguably did imply there could be a so-called “Draghi put” in the case of a “no” vote in the referendum, she also posited that this view was somewhat simplistic.

“There was strong communication from him (Draghi) and a number of executive board members at the ECB, but at the same time, the views of the broader council and among the national central bank governors seem to be a little bit more mixed,” she explained. “For instance, the debate as to whether instead of extending by six months at €80 billion, just to do nine months of €60 billion doesn’t really want to go away,” Bartsch noted.

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“December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses.”

December 4 Could Trigger the “Most Violent Economic Shock in History” (IM)

The Five Star Movement (M5S) is Italy’s new populist political party. It’s anti-globalist, anti-euro, and vehemently anti-establishment. It doesn’t neatly fall into the left–right political paradigm. M5S has become the most popular political party in Italy. It blames the country’s chronic lack of growth on the euro currency. A large plurality of Italians agrees. M5S has promised to hold a vote to leave the euro and reinstate Italy’s old currency, the lira, as soon as it’s in power. That could be very soon. Given the chance, Italians probably would vote to return to the lira. If that happens, it would awaken a monetary volcano. The Financial Times recently put it this way: “An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.”

If the FT is even partially right, it means a stock market crash of historic proportions could be imminent. It could devastate anyone with a brokerage account. Here’s how it could all happen… On December 4, Italian Prime Minister Matteo Renzi’s current pro-EU government is holding a referendum on changing Italy’s constitution. In effect, a “Yes” vote is a vote of approval for Renzi’s government. A “No” vote is a chance for the average Italian to give the finger to EU bureaucrats in Brussels. Given the intense anger Italians feel right now, it’s very likely they’ll do just that. According to the latest polls, the “No” camp has 54% support and all of the momentum. Even prominent members of Renzi’s own party are defecting to the “No” side.

If the December 4 referendum fails, Renzi has promised to resign. Even if he doesn’t, the loss would politically castrate him. In all likelihood his government would collapse. (Italian governments have a short shelf life. There have been 63 since 1945. That’s almost a rate of a new government each year.) One way or another, M5S will come to power. It’s just a matter of when. If Renzi’s December 4 referendum fails—and it looks like it will—M5S will likely take over within months. Once it’s in power, M5S will hold a referendum on leaving the euro and returning to the lira. Italians will likely vote to leave. [..] December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses.

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Don’t be fooled: it’s all Putin, the one non-OPEC voice. And he’s playing the rest like so many fiddles.

How Putin, Khamenei And Saudi Prince Got OPEC Deal Done (R.)

[..] Heading into the meeting, the signs were not good. Oil markets went into reverse. Saudi Prince Mohammed had repeatedly demanded Iran participate in supply cuts. Saudi and Iranian OPEC negotiators had argued in circles in the run-up to the meeting. And, then, just a few days beforehand, Riyadh appeared back away from a deal, threatening to boost production if Iran failed to contribute cuts. But Putin established that the Saudis would shoulder the lion’s share of cuts, as long as Riyadh wasn’t seen to be making too large a concession to Iran. A deal was possible if Iran didn’t celebrate victory over the Saudis. A phone call between Putin and Iranian President Rouhani smoothed the way.

After the call, Rouhani and oil minister Bijan Zanganeh went to their supreme leader for approval, a source close to the Ayatollah said. “During the meeting, the leader Khamenei underlined the importance of sticking to Iran’s red line, which was not yielding to political pressures and not to accept any cut in Vienna,” the source said. “Zanganeh thoroughly explained his strategy … and got the leader’s approval. Also it was agreed that political lobbying was important, especially with Mr. Putin, and again the Leader approved it,” said the source. On Wednesday, the Saudis agreed to cut production heavily, taking “a big hit” in the words of energy minister Khalid al-Falih – while Iran was allowed to slightly boost output. Iran’s Zanganeh kept a low profile during the meeting, OPEC delegates said.

Zanganeh had already agreed the deal the night before, with Algeria helping mediate, and he was careful not to make a fuss about it. After the meeting, the usually combative Zanganeh avoided any comment that might be read as claiming victory over Riyadh. “We were firm,” he told state television. “The call between Rouhani and Putin played a major role … After the call, Russia backed the cut.”

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As you can see here, Putin even prepared for the cuts: all Russia needs to cut is that 2016 production surge. Which may have been untenable to begin with. And it catches out those who haven’t created a surge, but will have to cut anyway.

Russian Oil Output Near Post-Soviet Record as It Prepares to Cut (BBG)

Russia, the world’s largest energy exporter, held November output near a post-Soviet record , which is likely to remain a high-water mark in the near term after a pledge to cut production. Russian crude and condensate production averaged 11.21 million barrels a day in November, compared with a record 11.23 million barrels a day in October, according to the Energy Ministry’s CDU-TEK statistics unit. Russia promised to support a push by OPEC to reduce a global oil oversupply after the group agreed to cut production by 1.2 million barrels a day on Wednesday.

Energy Minister Alexander Novak pledged Russia would cut its own output by as much as 300,000 barrels a day, a stronger move than the previously preferred position of a freeze. Russia will make a gradual reduction over the first half of the year starting in January, Novak said Thursday. The reduction, supported by Russian oil producers, would be spread proportionally among companies, he said without providing further detail. Gazprom Neft and Novatek led Russian output growth in November compared with a year earlier, although both companies posted lower oil production than October, according to the data.

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“I bought a one-way ticket [..] Hopefully we can shut this down before Christmas.”

US Veterans Arrive At Pipeline Protest Camp In North Dakota (R.)

U.S. military veterans were arriving on Thursday at a camp to join thousands of activists braving snow and freezing temperatures to protest a pipeline project near a Native American reservation in North Dakota. However, other veterans in the state took exception to the efforts of the group organizing veterans to act as human shields for the protesters, saying the nature of the protests reflected poorly on the participants. Protesters have spent months rallying against plans to route the $3.8 billion Dakota Access Pipeline beneath a lake near the Standing Rock Sioux reservation, saying it poses a threat to water resources and sacred Native American sites.

State officials on Monday ordered activists to vacate the Oceti Sakowin camp, located on U.S. Army Corps of Engineers land near Cannon Ball, North Dakota, citing harsh weather conditions. Officials said on Wednesday however that they will not actively enforce the order. Matthew Crane, a 32-year-old Navy veteran who arrived three days ago, said the veterans joining the protest were “standing on the shoulders of Martin Luther King Jr and Gandhi” with the their plans to shield protesters. “I bought a one-way ticket,” he told Reuters as he worked to build a wooden shelter at the main camp. “Hopefully we can shut this down before Christmas.”

[..]Veterans Stand for Standing Rock, a contingent of more than 2,000 U.S. military veterans, intends to reach North Dakota by this weekend and form a human wall in front of police, protest organizers said on a Facebook page. The commissioner of the state’s Department of Veterans Affairs, who appeared at the West Fargo event, said he was worried about the involvement of individuals who have been in war situations. “We’re going to have veterans that we don’t know anything about coming to the state, war time veterans possibly with PTSD and other issues,” Lonnie Wangen told Reuters. “They’re going to be standing on the other side of concertina fence looking at our law enforcement and our (National) Guard, many of whom have served in war zones also,” he added. “We don’t want to see veterans facing down veterans.”

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“Thirty years ago there were 50,000 rivers in China; today there are less than 23,000.”

Joy As China Shelves Plans To Dam ‘Angry River’ (G.)

Environmentalists in China are celebrating after controversial plans to build a series of giant hydroelectric dams on the country’s last free-flowing river were shelved. Activists have spent more than a decade campaigning to protect the Nujiang, or “angry river”, from a cascade of dams, fearing they would displace tens of thousands of people and irreparably damage one of China’s most spectacular and bio-diverse regions. Since the start of this year, hopes had been building that Beijing would finally abandon plans to dam the 1,750-mile waterway, which snakes down from the Tibetan plateau through some of China’s most breathtaking scenery before entering Myanmar, Thailand and eventually flowing into the Andaman Sea.

On Friday, campaigners said that appears to have happened after China’s State Energy Administration published a policy roadmap for the next five years that contained no mention of building any hydroelectric dams on the Nu. “I am absolutely thrilled,” said Wang Yongchen, a Chinese conservationist and one of the most vocal opponents of the plans, which first surfaced in 2003. Wang, who has made 17 trips to the Nu region as part of her crusade to protect the river, said geologists, ecologists, sociologists and members of the public who had been part of the campaign could all take credit for halting the dams. “I think this is a triumph for Chinese civil society,” the Beijing-based activist said. Stephanie Jensen-Cormier, the China programme director for International Rivers, said environmentalists were “very happy and very excited” at what was a rare piece of good news for China’s notoriously stressed waterways.

“The state of rivers in China is so dismal. Thirty years ago there were 50,000 rivers in China; today there are less than 23,000. Rivers have completely disappeared. They have become polluted, they have become overused for agriculture and manufacturing,” she said. “So it is so exciting when a major river – which is a major river for Asia – is protected, at least where it flows in China.” Jensen-Cormier said the shelving of plans to dam the Nu – which is known as the Salween in Thailand and the Thanlwin in parts of Myanmar – represented “a great turning point for the efforts to preserve China’s rivers”. “It is a really good indication that China is starting to look at other ways of developing energy, and renewable energies especially, that mean they don’t have to sacrifice their remaining healthy river.”

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I don’t know, I think perhaps many people are born followers: “People are not born to be job seekers – they are entrepreneurs by nature..”

World’s Growing Inequality Is ‘Ticking Time Bomb’: Nobel Laureate Yunus (R.)

The widening gap between rich and poor around the world is a “ticking time bomb” threatening to explode into social and economic unrest if left unchecked, Nobel Peace laureate Muhammad Yunus said on Thursday. The banking and financial system has created a world of “the more money you have, the more I give you” while depriving the majority of the world’s population of wealth and an adequate standard of living, Yunus told the Thomson Reuters Foundation. “Wealth has become concentrated in just a few places in the world … It’s a ticking time bomb and a great danger to the world,” said the founder of the microfinance movement that provides small loans to people unable to access mainstream finance.

Yunus cited Donald Trump’s victory in the U.S. presidential election on Nov. 8 and Britain’s vote to leave the EU on June 23 as expressions of popular anger with ruling elites who have failed to stem the widening global wealth gap. A 2016 report by charity Oxfam showed that the wealth of the world’s richest 62 people has risen by 44% since 2010, with almost half of the super-rich living in the United States, while the wealth of the poorest 3.5 billion fell 41%. “This creates tension among people at the bottom (of the income ladder). They blame refugees and minorities – and unscrupulous politicians exploit this,” said Yunus [..]

To break free from an unequal financial system that disadvantages the poor, people should use their creative energy to become entrepreneurs themselves and spread wealth among a broader base of citizens, said Yunus. “People are not born to be job seekers – they are entrepreneurs by nature,” he said, adding that businesses that are focused more on doing social good than generating maximum profit can help to rectify economic and gender inequality. “If wealth comes to billions of people, this wealth will not come to the top one percent (of rich people), and it will not be easy to concentrate all the wealth in a few hands,” he said.

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It’s a little painful to see Hawking lose himself in a field of logic that is not his. He claims we should go to Mars, but then he says earth is our only planet. Isn’t it true that the time and energy dispensed in efforts to get to Mars might be better used in saving earth? Or are we going to claim we can do both?

This Is The Most Dangerous Time For Our Planet (Stephen Hawking)

As a theoretical physicist based in Cambridge, I have lived my life in an extraordinarily privileged bubble. Cambridge is an unusual town, centred around one of the world’s great universities. Within that town, the scientific community that I became part of in my 20s is even more rarefied. And within that scientific community, the small group of international theoretical physicists with whom I have spent my working life might sometimes be tempted to regard themselves as the pinnacle. In addition to this, with the celebrity that has come with my books, and the isolation imposed by my illness, I feel as though my ivory tower is getting taller. So the recent apparent rejection of the elites in both America and Britain is surely aimed at me, as much as anyone.

Whatever we might think about the decision by the British electorate to reject membership of the EU and by the American public to embrace Donald Trump as their next president, there is no doubt in the minds of commentators that this was a cry of anger by people who felt they had been abandoned by their leaders. It was, everyone seems to agree, the moment when the forgotten spoke, finding their voices to reject the advice and guidance of experts and the elite everywhere. I am no exception to this rule. I warned before the Brexit vote that it would damage scientific research in Britain, that a vote to leave would be a step backward, and the electorate – or at least a sufficiently significant proportion of it – took no more notice of me than any of the other political leaders, trade unionists, artists, scientists, businessmen and celebrities who all gave the same unheeded advice to the rest of the country. What matters now, far more than the choices made by these two electorates, is how the elites react.

Should we, in turn, reject these votes as outpourings of crude populism that fail to take account of the facts, and attempt to circumvent or circumscribe the choices that they represent? I would argue that this would be a terrible mistake. The concerns underlying these votes about the economic consequences of globalisation and accelerating technological change are absolutely understandable. The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining. This in turn will accelerate the already widening economic inequality around the world. The internet and the platforms that it makes possible allow very small groups of individuals to make enormous profits while employing very few people. This is inevitable, it is progress, but it is also socially destructive.

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Nov 282016
 
 November 28, 2016  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , , ,  Comments Off on Debt Rattle November 28 2016


NPC Hendrick Motor Co., Carroll Avenue, Takoma Park, Maryland 1928

US Shoppers Spend 3.5% Less Over Holiday Weekend (R.)
Some Of The Biggest UK Banks May Not Clear New Public Stress Tests (BBG)
China’s Bad Banks Serve Zombies, Not Investors (BBG)
PBOC Deputy Governor Talks Up Yuan Strength (CNBC)
Modi’s Rural Supporters May Not Hang On Much Longer (BBG)
India’s Modi Calls For Move Towards Cashless Society (R.)
Greek Banks Call For Taxing Cash Withdrawals (Kath.)
Trump Faces Dilemma As US Oil Reels From Record Biofuels Targets (R.)
Oil Trades Near $46 Amid Skepticism OPEC to Reach Output Deal (BBG)
Fillon Would Beat Le Pen in Both Rounds of Election – Polls (BBG)
Renzi Faces Pressure To Stay In Office As Italy Referendum Defeat Looms (R.)
Recount: Losers Who Won’t Lose (Mehta)

 

 

There’ll be a deluge of data on this coming out where everyone can find their favorite numbers. Everybody happy!

US Shoppers Spend 3.5% Less Over Holiday Weekend (R.)

Early holiday promotions and a belief that deals will always be available took a toll on consumer spending over the Thanksgiving weekend as shoppers spent an average of 3.5% less than a year ago, the National Retail Federation said on Sunday. The NRF said its survey of 4,330 consumers, conducted on Friday and Saturday by research firm Prosper Insights & Analytics, showed that shoppers spent $289.19 over the four-day weekend through Sunday compared to $299.60 over the same period a year earlier. The survey found that 154 million people made purchases over the four days, up from 151 million a year ago. However, there was a 4.2% rise in consumers who shopped online and a 3.7% drop in shoppers who purchased in a store.

The U.S. holiday shopping season is expanding, and Black Friday is no longer the kickoff for the period it once was, with more retailers starting holiday promotions as early as October and running them until Christmas Eve. NRF Chief Executive Officer Matt Shay said the drop in spending is a direct result of the early promotions and deeper discounts offered throughout the season. “Consumers know they can get good deals throughout the season and these opportunities are not a one-day or one-weekend phenomenon and that has showed up in shopping plans,” he said. Shay said more 23% of consumers this year have not even started shopping for the season, which is up 4% from last year and indicates those sales are yet to come. The NRF stuck to its forecast for retail sales to rise 3.6% this holiday season, on the back of strong jobs and wage growth.

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That graph is full-tard baseless and ridiculous.

Some Of The Biggest UK Banks May Not Clear New Public Stress Tests (BBG)

The Bank of England added a new, higher bar to its third round of public stress tests. Some of the U.K.’s biggest banks will scrape through; others may not clear it. The seven major British lenders tested will probably beat the lowest measures of strength required to pass the annual BOE health check when it is released Wednesday, Autonomous Research aid in a note this month. RBS and Barclays risk a “soft fail” of tougher thresholds set for lenders deemed to be integral to the global banking system, they said. HSBC and Standard Chartered’s results may be rattled by a Chinese recession scenario.

Each bank now must top its individual hurdle rate and a new threshold, called the systemic reference point, that takes into account the potential global repercussions if the lender collapses. Firms that fall short of either measure will have to boost their capital ratios, though the BOE will force them to take “less intensive” action if they only miss the SRP. “With bank investing these days, you need to be more cognizant of the economy, the rate environment and crucially of the regulator,” especially if one bank does much worse than its peers in a stress test, said Barrington Pitt Miller at Janus Capital in Denver.

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It’s what they’re for.

China’s Bad Banks Serve Zombies, Not Investors (BBG)

China’s zombie companies can rest easy. It’s a shame the same can’t be said for investors in the nation’s banks.The big five lenders, starting with Agricultural Bank of China, plan to set up bad banks that will convert soured debt to equity. Agricultural Bank, Industrial & Commercial Bank of China, Bank of China, China Construction Bank and Bank of Communications will fork out 10 billion yuan ($1.5 billion) each to establish the asset-management companies, Caixin magazine reported. That banks are forging ahead with debt-to-equity swap plans, albeit via asset-management firms they happen to own, is great news for all those struggling steel and construction companies facing potential closure.

State Council guidelines issued last month indicate that zombie corporations – those ailing state firms plagued by overcapacity – can’t count on bailouts, but it’s difficult to determine which ones are actually destined for the scrapheap.The nation’s top lenders, also all backed by Beijing, are unlikely to want to be seen as responsible for mass unemployment by refusing to rescue companies, no matter how dire their situation. In fact, those companies may have an even better chance of getting capital infusions, considering financial institutions will probably be keen to use their investment-banking units to help monetize equity assets.On the face of it, bank investors might also feel relieved that lenders are farming out bad debt to distinct vehicles.

Using an asset-management company should ensure that the equity resulting from the bad-debt switch doesn’t sit on a bank’s balance sheet. That will help lenders conserve precious capital: Had the equity been on their books, they would have had to apply a risk weighting of 400%, and get special approval from the State Council. Structuring it this way will also allow banks to maintain their much-coveted dividends. But dig a bit deeper and you realize this isn’t a scenario that will necessarily play out well, and not just because equity stakes, even those held at arm’s length, are inherently riskier than loans.For one, how will these asset-management firms be funded long term?

The answer is probably by the banks themselves.According to the State Council, the debt-to-equity swaps can be financed by “social capital,” a catch-all phrase that generally includes high-yielding wealth-management products. Those investment structures come with an implicit guarantee from the banks that issue them, as lenders have found in the past when they’ve had to rescue funds in trouble. It’s ironic that just as authorities have been trying to rein in shadow banking, the debt-to-equity swap plan provides an added reason to gorge.

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They even push up the yuan a tad to coincide with the publication of the remarks. All under control.

PBOC Deputy Governor Talks Up Yuan Strength (CNBC)

Comparing the yuan’s recent moves against the dollar misses the currency’s underlying strength of the against a more appropriately watched basket, People’s Bank of China (PBOC) Deputy Governor Yi Gang said in remarks released on Chinese state-run media at the weekend. In a question-and-answer format interview with Xinhua news agency that was posted on the central bank’s website, Yi said the yuan remained a strong and stable currency in the global monetary system, while noting concerns about a slide against the dollar after Donald Trump’s victory in the Nov. 8 presidential election. The yuan plunged to eight-and-a-half year lows versus the dollar last week.

On Monday, the PBOC set the yuan’s central parity rate against the dollar at 6.9042, stronger than the 6.9168 level set on Friday. “Referencing the yuan against a basket of currencies can better reflect the overall competitiveness of a country’s goods and services,” Yi said. Given that economic structures, cycles and interest rate policies differed in various countries, fixating on a single currency was not suitable and may cause the yen to be “over-managed,” he added. Yi said the yuan’s movements were due to domestic factors in the U.S., as they reflected the rise of the greenback on the back of improvements in the U.S. economy and inflation, alongside expectations of a quickening in the pace of Federal Reserve interest rate hikes.

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By now it’s time to wonder how massive the protests will be, and where Modi’s reaction will lead.

Modi’s Rural Supporters May Not Hang On Much Longer (BBG)

The most ardent supporters of Prime Minister Narendra Modi’s surprise currency withdrawal are those you’d least expect: India’s rural poor, who are suffering the most with the prolonged cash shortages. But the backing of many from India’s villages – based on a belief that Modi’s actions will even out the scale of inequality and reduce corruption – may be short-lived. The jury is still out on the political and economic impact of the decision to target unaccounted cash. And it will be another two months before the government releases inflation, industrial production and growth figures – key areas that may be affected by the prime minister’s shock move on Nov. 8 to ban high-denomination notes, taking out 86% of circulating currency.

Meanwhile, five states, including the most populous state of Uttar Pradesh, will go to elections, leaving the ruling Bharatiya Janata Party vulnerable to a voter backlash if one of its major support bases sees no benefit from the demonetization process. To intensify the campaign against the note ban, several opposition parties called for nationwide protests on Monday, saying the process is a political move dressed up as a fight against corruption. It is not clear whether demonetization will eliminate so-called black money, or who will pay the price if it fails, said Arati Jerath, a New Delhi-based author who has written about Indian politics for about four decades. It will take at least another three weeks to gauge the economic and political impact, she said.

Jerath points to the public reaction to Indira Gandhi’s decision to impose a state of emergency in 1975 as an example of how quickly the tide of public opinion can change. Initially people supported the emergency, welcoming improvements in law and order and the punctuality of government officials. Later they turned against Gandhi when they realized its negative effects, particularity arbitrary abuse of power by bureaucrats, she said. If the Modi government fails to address concerns around cash withdrawals and the situation worsens, there could be food shortages, farmers’ distress, layoffs, rising unemployment and a slowdown of the economy. “At the moment people are patient, they are really giving it a chance, waiting and watching,” said Jerath. “If the situation does not improve by the middle of next month, there will be a backlash against demonetization.”

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Yeah. Have them all drive Teslas too, right?

India’s Modi Calls For Move Towards Cashless Society (R.)

Indian Prime Minister Narendra Modi on Sunday urged the nation’s small traders and daily wage earners to embrace digital payment channels, as a cash crunch following the government’s surprise ban on high-value bank notes drags on. Modi, speaking in his monthly address on national radio, said the government understands that millions have been affected by the ban on 500-rupee and 1000-rupees notes, but defended the action. The government says the bank-note ban announced on Nov. 8 is aimed at cracking down on corruption, people with unaccounted wealth, and counterfeiting of notes.

“I want to tell my small merchant brothers and sisters, this is the chance for you to enter the digital world,” Modi said speaking in Hindi, urging them to use mobile banking applications and credit-card swipe machines. “It’s correct that a 100% cashless society is not possible. But why don’t we make a beginning for a less-cash society in India?,” Modi said. “We can gradually move from a less-cash society to a cashless society.” More than 90% of consumer purchases in India are transacted in cash, Credit Suisse estimates. While a smartphone boom and falling mobile data prices have led to a surge in digital payments in recent years, the base still remains low. Modi urged technology-savvy young people to spare some time teaching others how to use digital payment platforms.

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Pushing plastic. A new global sport.

Greek Banks Call For Taxing Cash Withdrawals (Kath.)

Banks are proposing that the government take a series of measures to combat tax evasion, which are centered around reducing the use of cash in favor of increasing online transactions. The proposal that stands out concerns the taxing of cash withdrawals. As bank executives say, cash is easily channeled to the so-called shadow economy, so imposing a tax on withdrawals would drastically reduce transactions in cash and therefore the illegal economy as well.

Lenders are also asking for the compulsory use of cards or other online means for all transactions concerning professions where there are strong indications of tax evasion or cash is used as the main means of payment. Credit and debit cards as well as the new technologies that allow for contactless transactions, such as cell phone apps, should be possible to use even for the smallest transactions, from the purchase of a newspaper to buying a bus ticket, banks argue. The illegal economy in Greece is estimated at some €40 billion every year, with state coffers losing out on tax revenues of around €15 billion per annum.

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Pitting real bad policy vs really really bad.

Trump Faces Dilemma As US Oil Reels From Record Biofuels Targets (R.)

The Obama administration signed its final plan for renewable fuel use in the United States last week, leaving an oil industry reeling from the most aggressive biofuel targets yet as President-elect Donald Trump takes over. The Renewable Fuel Standard (RFS) program, signed into law by President George W. Bush, is one of the country’s most controversial energy policies. It requires energy firms to blend ethanol and biodiesel into gasoline and diesel. The policy was designed to cut greenhouse gas emissions, reduce U.S. reliance on oil imports and boost rural economies that provide the crops for biofuels. It has pitted two of Trump’s support bases against each other: Big Oil and Big Corn.

The farming sector has lobbied hard for the maximum biofuel volumes laid out in the law to be blended into gasoline motor fuels, while the oil industry argues that the program creates additional costs. Balancing oil and farm interests is likely to prove a challenge for Trump, who has promised to curtail regulations on the oil industry but is already being reminded by biofuels advocates of the importance of the program to the American Midwest, where he received strong support from voters on Nov. 8. Oil groups are renewing their calls to change or repeal the program following Wednesday’s announcement, when the Environmental Protection Agency (EPA) set record mandates for renewable fuels – for the first time hitting levels targeted by Congress nearly a decade ago.

The EPA plan is “completely detached from market realities and confirms once again that Congress must take immediate action to remedy this broken program,” said Chet Thompson, President of the American Fuel and Petrochemical Manufacturers, in a statement. It is unclear what Trump’s plans for the program will be and his transition team did not respond to Reuters’ requests for comment. Both camps are expecting an administration receptive to their demands, though both have expressed concern and uncertainty over Trump’s plans for the program, according to experts, industry and political sources.

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Pump baby pump.

Oil Trades Near $46 Amid Skepticism OPEC to Reach Output Deal (BBG)

Oil halted declines near $46 amid skepticism over OPEC’s ability to reach an agreement to cut output and as representatives prepare to meet Monday amid last-minute negotiations over the deal the group aims to formalize Wednesday. Futures were little changed in New York after earlier falling as much as 2% and dropping 4% on Friday. Saudi Arabia for the first time on Sunday suggested OPEC doesn’t necessarily need to curb output and pulled out of a scheduled meeting with non-member producers, including Russia. OPEC will hold an internal meeting in Vienna Monday to resolve its differences, and as part of the final push to reach an agreement, oil ministers from Algeria and Venezuela are heading to Moscow to get the group’s biggest rival on board.

OPEC is heading into the final stretch before its November 30 meeting to adopt a deal first floated in September to collectively reduce output. Saudi Arabia, the group’s de facto leader, is seeking to reverse the pump-at-will policy it supported in 2014 and is now pushing members to agree how they will individually shoulder the first production cuts in eight years. Saudi oil minister Khalid Al-Falih said the oil market will recover in 2017 even without cuts. “The market is currently quite pressured by the uncertainties raised from various reports, including Saudi Arabia pulling out of Monday’s talks with non-OPEC nations,” Seo Sang-young at Kiwoom Securities said by phone. “It’s also highly suspicious whether OPEC will keep its promises even if it achieves an accord because the members are constantly raising production.”

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Wanna bet?

Fillon Would Beat Le Pen in Both Rounds of Election – Polls (BBG)

Francois Fillon, the former prime minister who won the French Republican presidential nomination Sunday, would beat National Front leader Marine Le Pen in both rounds of a presidential election, two polls showed. In a scenario where incumbent Francois Hollande is running along with former Economy Minister Emmanuel Macron, Fillon would win the first round with 32% of the vote against 22% for Le Pen and 8% for Hollande, according to a poll by Odoxa for France 2 television. In the run-off two weeks later, he would defeat Le Pen 71% to 20%. A Harris Interactive poll showed Fillon winning the first round with 26% support compared with 24% for Le Pen and 9% for either Hollande or Manuel Valls as leader of the Socialists. The same survey showed him winning against Le Pen in the second round 67% to 33%.

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“What needs to be considered… is what is good for the country.” Translation: what is good for the incumbent class.

Renzi Faces Pressure To Stay In Office As Italy Referendum Defeat Looms (R.)

When a handful of European leaders met Barack Obama in Berlin this month to say their goodbyes, Italian Prime Minister Matteo Renzi informed the group that he may well lose power before the U.S. president. While Obama leaves office on Jan. 20, Renzi has promised to resign if he does not win a Dec. 4 referendum on constitutional reform, opening the way for renewed political instability in the eurozone’s third largest economy. “I have no desire to hang around if I lose,” Renzi told the gathering, according to a diplomatic source who was at the low-key Nov. 18 meeting. Opinion polls now predict Renzi’s defeat, in what would be the third big anti-establishment revolt by voters this year in a major Western country, following Brexit and the U.S. election of Donald Trump.

Pressure is mounting on Renzi to drop his threat and instead agree to remain in power to deal with the fallout from a ‘No’ vote, including the risk of a fullblown banking crisis. Obama himself said in October that Renzi should “hang around for a while no matter what” and a number of businessmen and senior government officials contacted by Reuters said they feared the worst if the prime minister abandoned his post. “My personal opinion is that Renzi should stay,” Industry Minister Carlo Calenda said in an interview on Friday. “What needs to be considered… is what is good for the country.” The Italian president could appeal to Renzi’s sense of responsibility and ask him to seek a new mandate from parliament. His response might depend on the size of any defeat, with one advisor saying the 41-year-old premier could quit politics altogether if he suffers a huge snub next Sunday.

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Is it really that hard to throw out Soros?

Recount: Losers Who Won’t Lose (Mehta)

President-elect Trump won 306 electoral votes versus Hillary Clinton’s 232 (24% less electoral votes). Similar to 2000, the surrendering party then reversed course and put the nation through a recount, just for the sake of it. What are the odds that such an exercise here would yield successful for Ms. Clinton? Based on statistical randomness of re-assessing voter intent, the chance of Hillary emerging as the victor is far less than 10%. Anything can happen, but these lean odds do not rise to the level of putting our peaceful democracy into the hands of a temptuous recount scheme every time a stung party loses (let alone misleadingly blame it on something else from Russia’s Putin, to sexism, to “in hindsight the popular vote would be reasonable”, to FBI Director Comey).

All Americans should instead focus on how the 6 states that flipped this election, were all economically ignored and all flipped to Donald Trump. The only viable path for a Hillary Clinton victory at this stage is to astoundingly uncover a wide-spread (across three states) fraud. And that’s equally unlikely, since the basis for the voting aberrations occurred in less populated counties and anyway the three states employ three different voting mechanisms, so the fraud would have had to somehow occur through different transmission vehicles (paper voting, and electronic voting) and we would require a speedy judicial resolution for states such as Pennsylvania that sidestepped back-up recordings from their direct voting equipment.

We should note the following statistical facts about the electoral vote in the three recount states:
10 votes, Wisconsin (Trump leads by 0.9 %age points)
20 votes, Pennsylvania (Trump leads by 1.1 %age points)
16 votes, Michigan (Trump leads by 0.2 %age points)

Given that Mr. Trump won by 74 electoral votes, Ms. Clinton would need to flip all three states noted above, in order to liquidate this deficit (i.e., >74/2 = >37 votes). The leads described above however, among 4.4 million voters from these three states, is highly statistically significant on a state-level (and certainly when all three states are combined). It would be remarkably unlikely that we would arbitrarily second-guess every one of these millions of voters’ intents and, convert any (certainly let alone all) of these three states.

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Nov 272016
 
 November 27, 2016  Posted by at 10:14 am Finance Tagged with: , , , , , , , , , ,  


Unknown Paris 1900

This Is The Greatest Suckers’ Rally Of All Time: David Stockman (CNBC)
More Than Half Of New Yorkers One Paycheck Away From Homelessness (Gothamist)
US Thanksgiving, Black Friday Store Sales Fall 10.4%, Online Rises (R.)
Dollar to Benefit if $2.5 Trillion in Cash Stashed Abroad Is Repatriated (WSJ)
China’s Property Frenzy And Surging Debt Raises Red Flag For Economy (AFP)
India’s Rural Economy Hit Hard As Informal Lending Breaks Down (R.)
UK MPs Launch New Attempt To Interrogate Tony Blair Over Iraq (G.)
First Brexit then Trump. Is Italy Next For The West’s Populist Wave? (G.)
Clinton Camp Splits From White House On Jill Stein Recount Push (G.)
Justin Trudeau Ridiculed Over Praise Of ‘Remarkable’ Fidel Castro (G.)
Military Veterans Seek New Role In South Africa Poaching War (AFP)

 

 

Sell everything!

This Is The Greatest Suckers’ Rally Of All Time: David Stockman (CNBC)

The Trump rally raged on this week with all major U.S. indexes hitting record highs, but despite the historic run, David Stockman is doubling down on his call for investors to sell everything. “This 5% eruption is meaningless. It’s some robo machine trying to tag new highs,” Stockman said Tuesday on CNBC’s “Fast Money,” in a dismissal of the S&P 500 rally. “I see a recession coming down the pike in 2017. The stock market is going to go down and it’s going to stay down long and hard because, for the first time in 25 years, there’s nothing to bail it out.” This echoed the initial call Stockman made Nov. 3, when he urged investors to sell stocks and bonds before the presidential election. However, since the Nov. 8 election, the Dow Jones industrial average has gained 4% en route to surpassing 19,000.

Additionally, the S&P 500 and Nasdaq also hit record highs in the same time period, gaining 3% and 4%, respectively. Yet Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, reaffirmed that markets are heading for disaster. “My call stands. Sell the stocks, sell the bonds, get out of the casino,” Stockman explained to CNBC in an off-camera interview. “Bonds have already cratered by nearly $2 trillion worldwide and have miles to go. This isn’t a rotation into stocks, either. It’s the greatest sucker’s rally ever.” Stockman, author of “Trumped: A Nation on the Brink of Ruin… And How to Bring It Back,” lamented that there will be no Trump stimulus or Reagan-style boom.

He further added that he expects “an unprecedented fiscal bloodbath” resulting from the $20 trillion worth of debt that the U.S. currently has on the books. “This isn’t Ronald Reagan with a clean $1 trillion balance sheet and with a fluke GOP and a Southern Democratic coalition that only materialized because he got shot,” Stockman said in reference to John Hinkley Jr. attempting to assassinate Reagan in Washington, D.C., in 1981. “Nor is it LBJ in 1965 with a thundering electoral mandate and a massive congressional majority for the Great Society.” On the contrary, Stockman, who initially predicted that Trump would win the election, added that Washington will be in chaos by June. This is because he anticipates ongoing disruptions from the tea party, which Stockman doesn’t foresee as allowing additional deficit increases.

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“..landlords are increasingly claiming “chronic rent delinquency” after just a single late payment..”

More Than Half Of New Yorkers One Paycheck Away From Homelessness (Gothamist)

More than half of all New Yorkers don’t have enough money saved to cover them in the event of a lost job, medical emergency, or other disaster, according to a new report by the Association for Neighborhood & Housing Development. Nearly 60% of New Yorkers lack the emergency savings necessary to cover at least three months’ worth of household expenses including food, housing, and rent, but that statistic isn’t spread evenly across the five boroughs. The Bronx has the highest rate of families without adequate emergency savings: in Mott Haven, Melrose, Hunts Point, Longwood, Highbridge, South Concourse, University Heights, Fordham, Belmont, and East Tremont, 75% of families have inadequate emergency savings.

The Staten Island neighborhoods of Tottenville and Great Kills have the lowest rate, with just 41% of families lacking the funds necessary to cover three months’ worth of expenses. Without these savings, families who face emergencies could be at risk of eviction, foreclosure, damaged credit, and even homelessness. In Brooklyn, families in Brownsville (70%), Bed-Stuy (67%), Bushwick (68%), East New York (67%), and South Crown Heights/Prospect Heights (67%) are the most at-risk—in Manhattan, an average of 67% of families in Harlem, Washington Heights, and Inwood lack necessary savings. In Queens, the neighborhoods with the highest%age of these households were Elmhurst/Corona (64%), Rockaway/Broad Channel (60%), Sunnyside/Woodside (59%), and Jackson Heights (59%).

As DNAinfo notes, advocates say that rental assistance is crucial in preventing homelessness citywide, especially in neighborhoods where rents rise faster than incomes—many of which overlap with the neighborhoods where families lack adequate savings. And although an increase in rental assistance services like the one proposed by Queens Assemblyman Andrew Hevesi could cost the cost $450 million in state and federal funding, it would be more cost-effective than allowing more families to enter the chronically underfunded shelter system. Many tenants don’t know where to get emergency rental assistance, which can prevent them from falling behind on their rent. And landlords are increasingly claiming “chronic rent delinquency” after just a single late payment, which allows them to begin eviction proceedings earlier on than they would otherwise.

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“Net sales on Black Friday slid 10.4% for brick-and-mortar chains..”

US Thanksgiving, Black Friday Store Sales Fall 10.4%, Online Rises (R.)

Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online. Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday. Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0% over the two days, while the number of transactions fell 7.9%. Preliminary data from retail research firm ShopperTrak showed that shopper visits to such stores fell a combined 1% during Thanksgiving and Black Friday when compared with the same days in 2015.

The data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day. “We knew it (holiday season) was going to be off to a slow start,” Shelley Kohan, vice president of retail consulting at RetailNext, said. “The first couple of weeks with the election were a complete distracter from the normal course of business and…a warmer climate in November may have made the sales more stubborn,” she said, adding that she saw sales picking up in December.

Net sales on Black Friday slid 10.4% for brick-and-mortar chains, according to RetailNext. “Stores that opened on Thursday were not very busy on Black Friday,… and while the Thanksgiving Day opt-outs were busier on Black Friday, they didn’t see the crowds they saw in previous years,” NPD group’s Chief Industry analyst Marshal Cohen said. Still, total holiday season sales are expected to jump 3.6% to $655.8 billion this year, according to the National Retail Federation, due to a tightening job market.

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Only if buybacks are banned.

Dollar to Benefit if $2.5 Trillion in Cash Stashed Abroad Is Repatriated (WSJ)

Part of $2.5 trillion in profits held overseas by companies such as Apple and Microsoft could be heading back to the U.S., a move analysts say could further fuel the U.S. dollar’s powerful rally. U.S. corporations have been holding billions in earnings and cash abroad to avoid paying a 35% tax that would be levied whenever the money is brought home. President-elect Donald Trump has said he would propose a one-time cut of the repatriation tax to 10% to lure money back to the U.S. that can be spent on hiring, business development and funding Mr. Trump’s fiscal stimulus proposals. Market optimism that the stimulus plan can generate U.S. economic growth and push the Federal Reserve to raise interest rates has buoyed the dollar against a basket of major trading partners toward 14-year-highs since the Nov. 8 presidential election.

Now, some say the prospect of companies repatriating perhaps hundreds of billions of dollars could offer more impetus to the U.S. currency’s rally. “However small, however big this flow of money will be, it will be positive for the case of dollar strength,” said Daragh Maher at HSBC. “There will most likely be an inflow into dollars.” When a company repatriates earnings from abroad, it may have to exchange the local currency for the U.S. dollar. The $2.5 trillion hoard of overseas earnings is highly concentrated in the technology and pharmaceutical sectors, according to Capital Economics. Microsoft held about $108 billion in earnings overseas as of 2015, while pharmaceutical giant Pfizer had $80 billion. General Electric had $104 billion overseas, according to Capital Economics. Analysts note that many companies already hold their overseas earnings in U.S. dollar assets, which would mute the demand for dollars.

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Famous last words: “The notion that Chinese people do not like to borrow is clearly outdated..”

China’s Property Frenzy And Surging Debt Raises Red Flag For Economy (AFP)

Chinese household debt has risen at an “alarming” pace as property values have soared, analysts have said, raising the risk that a real estate downturn could wreak havoc on the world’s second largest economy. Loose credit and changing habits have rapidly transformed the country’s famously loan-averse consumers into enthusiastic borrowers. Rocketing real estate prices in major Chinese cities in recent years have seen families’ wealth surge. But at the same time they have fuelled a historic boom in mortgage lending, as buyers race to get on the property ladder, or invest to profit from the phenomenon. Now the debt owed by households in the world’s second largest economy has surged from 28% of GDP to more than 40% in the past five years.

“The notion that Chinese people do not like to borrow is clearly outdated,” said Chen Long of Gavekal Dragonomics. The share of household loans to overall lending hit 67.5% in the third quarter of 2016, more than twice the share of the year before. But this surge has raised fears that a sharp drop in property prices would cause many new loans to go bad, causing a domino effect on interest rates, exchange rates and commodity prices that “could turn out to be a global macro event”, ANZ analysts said in a note. While China’s household debt ratio is still lower than advanced countries such as the US (nearly 80% of GDP) and Japan (more than 60%), it has already exceeded that of emerging markets Brazil and India, and if it keeps growing at its current pace will hit 70% of GDP in a few years.

It still has some way to go before it outstrips Australia, however, which has the world’s most indebted households at 125% of GDP. The ruling Communist party has set a target of 6.5-7% economic growth for 2017, and the country is on track to hit it thanks partly to a property frenzy in major cities and a flood of easy credit. But keeping loans flowing at such a pace creates such “substantial risks” that it could be a “self-defeating strategy”, Chen said. China’s total debt – including housing, financial and government sector debt – hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249% of national GDP, according to estimates by the Chinese Academy of Social Sciences, a top government think tank.

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“..the informal sector accounts for [..] 80% of employment..”

India’s Rural Economy Hit Hard As Informal Lending Breaks Down (R.)

Life was good for Mitharam Patil, a wealthy money lender from a small village in the Indian state of Maharashtra. Small-time financiers like Patil would typically lend cash to farmers and traders every day, providing a vital source of funding for a rural economy largely shut out of the banking sector, albeit at interest rates of about 24%. All that came crashing down on Nov. 8, when Prime Minister Narendra Modi banned 500 and 1,000 rupee ($7.30-$14.60) banknotes, which accounted for 86% of currency in circulation. The action was intended to target wealthy tax evaders and end India’s “shadow economy”, but it has also exposed the dependency of poor farmers and small businesses on informal credit systems in a country where half the population has no access to formal banking.

Patil was stuck with 700,000 rupees ($10,144) of worthless cash. He can also only withdraw up to 24,000 rupees from his account every week, barely enough for his own personal needs given he also works as a farmer. That is bad news for farmers and traders who had come to depend on Patil, despite his high interest rates, given that bank branches are located far from the village, while the process to obtain loans is long and cumbersome. It may also hurt India’s economy, as the informal sector accounts for 20% of GDP and 80% of employment. The country is due to report July-September GDP on Wednesday. “Sowing of winter crops has been started and farmers badly need money. But I couldn’t lend (to) them due to restrictions on withdrawal,” Patil said.

Some farmers and small businesses say India’s informal credit system has ground to a virtual halt, despite government measures to steer more funds to them, including 230 billion rupees in crop loans. Not only are money lenders struggling to lend, they are also struggling to get paid. Saumya Roy, CEO of Vandana Foundation, a micro finance firm, said it has encountered difficulties in collecting payments from borrowers, which will have a knock-on effect on how much they can lend to others. “We can’t go on lending and suffer losses,” she said. “How can we force people to pay back when they don’t have money to buy food. How will they pay us?”

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That should be fun.

UK MPs Launch New Attempt To Interrogate Tony Blair Over Iraq (G.)

A cross-party group of MPs will make a fresh effort to hold Tony Blair to account for allegedly misleading parliament and the public over the Iraq war. The move, which could see Blair stripped of membership of the privy council, comes as the former prime minister tries to re-enter the political fray, promising to champion the “politically homeless” who are alienated from Jeremy Corbyn’s Labour and the Brexit-promoting government of Theresa May. The group, which includes MPs from six parties, will put down a Commons motion on Monday calling for a parliamentary committee to investigate the difference between what Blair said publicly to the Chilcot inquiry into the war and privately, including assurances to then US president George W Bush.

Backing the motion are Alex Salmond, the SNP MP and former first minister of Scotland; Hywel Williams, Westminster leader of Plaid Cymru; and Green party co-leader Caroline Lucas. Senior Tory and Labour MPs are also backing the move, which reflects widespread frustration that the publication of the Chilcot report in July, after a seven-year inquiry, did not result in any government action or accountability for Blair. Salmond said some MPs believe that senior civil servants were “preoccupied with preventing previous and future prime ministers being held accountable”. He said: “An example should be set, not just of improving government but holding people to account.”

He pointed to last week’s Observer story revealing that, according to documents released under the Freedom of Information Act, the inquiry was designed by senior civil servants to “avoid blame” and reduce the risk that individuals and the government could face legal proceedings. Salmond also noted that documents show many officials involved in planning the inquiry, including current cabinet secretary Sir Jeremy Heywood, were involved in the events that led to war. The new motion will be debated on Wednesday in Commons time allotted to the SNP.

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What Renzi’s Dec. 4 constitutional referendum tries to achieve: “They’re sealing the system off so it can’t be changed in the future.”

First Brexit then Trump. Is Italy Next For The West’s Populist Wave? (G.)

On a bitterly cold evening, MPs and senators representing the Five Star Movement (M5S), launched by Beppe Grillo, the comedian-turned-political rabble rouser, implored a packed piazza to use a referendum on the constitution on Sunday 4 December to send the prime minister, Matteo Renzi, packing. Renzi, the telegenic, youthful leader of the centre-left Democratic party (PD), has placed his authority behind proposals to limit the powers of the senate, Italy’s second chamber. His plan involves cutting the number of senators from 315 to 100, all of whom would be appointed – rather than elected, as at present – and restricting their power to influence legislation.

Since 1948 the Italian constitution has preserved a perfect balance of powers between the two houses of parliament, frequently leading to legislative gridlock in Rome. Renzi claims that slimming down the role of the senate will, along with other reforms to strengthen executive power, finally free governments to govern. Crucially, he has indicated he will step down if the vote goes against him. In other eras, a dry and technical debate might have preoccupied a few constitutional cognoscenti. But these are not ordinary times in western democracies. In Ferrara’s Piazza Trento e Trieste, Alessandro Di Battista, a rising star of Grillo’s movement, issued a populist call to arms. Renzi’s referendum, he told the crowd, was just the latest gambit by a political class determined to insulate itself from the people it should serve.

“This unelected senate will be constituted by the arselickers of the various parties”, said Di Battista, “and by those who are in trouble with the courts and need parliamentary immunity. They’re sealing the system off so it can’t be changed in the future.” Such a devious manoeuvre should, he said, come as no surprise: “There are two Italys: on the one side the very wealthy few who look after themselves, and on the other the masses who live every day with problems of transport and public health.” As his audience launched into a favourite Five Star chant, “A casa! A casa!” (“Send them home”), Di Battista referenced the political earthquake that was in everyone’s mind. “The election of Donald Trump is the American people’s business,” he said. “But what that election does show is that so many citizens are simply not taking the establishment’s bait any more.”

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Did Stein really raise more money for this than for her entire 2016 campaign?

Clinton Camp Splits From White House On Jill Stein Recount Push (G.)

Hillary Clinton’s presidential campaign said on Saturday it would help with efforts to secure recounts in several states, even as the White House defended the declared results as “the will of the American people”. The campaign’s general counsel, Marc Elias, said in an online post that while it had found no evidence of sabotage, the campaign felt “an obligation to the more than 64 million Americans who cast ballots for Hillary Clinton”. “We certainly understand the heartbreak felt by so many who worked so hard to elect Hillary Clinton,” Elias wrote, “and it is a fundamental principle of our democracy to ensure that every vote is properly counted.”

In response, President-elect Donald Trump said in a statement: “The people have spoken and the election is over, and as Hillary Clinton herself said on election night, in addition to her conceding by congratulating me, ‘We must accept this result and then look to the future.’” Wisconsin began recount proceedings late on Friday after receiving a petition from Jill Stein, the Green party candidate. Stein claims there are irregularities in results reported by Wisconsin as well as Michigan and Pennsylvania, where she plans to request recounts next week, having raised millions of dollars from supporters. Trump called Stein’s effort a “scam” and said it was “just a way … to fill her coffers with money, most of which she will never even spend on this ridiculous recount”. “The results of this election should be respected instead of being challenged and abused,” he added, “which is exactly what Jill Stein is doing.”

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I bet you there’s hardly a single American -or European- who knows Cuba has been one of Canada’s most popular holiday destinations for many years.

Justin Trudeau Ridiculed Over Praise Of ‘Remarkable’ Fidel Castro (G.)

Justin Trudeau, the Canadian prime minister, has been mocked and criticised over his praise of the late Cuban leader Fidel Castro. Following the death of Castro, Trudeau, whose father had a close relationship with the revolutionary, released a statement mourning the loss of a “remarkable leader”. Castro, who died on Friday aged 90, won support for bringing schools and hospitals to the poor but also created legions of enemies for his ruthless suppression of dissent. Trudeau’s comments were markedly more positive than most western leaders, who either condemned Castro’s human rights record or tip-toed around the subject. Instead, Trudeau warmly recalled his late father’s friendship with Castro and his own meeting with Castro’s three sons and brother – Raul, Cuba’s current president – during a visit to the island nation earlier this month.

“While a controversial figure, both Mr Castro’s supporters and detractors recognized his tremendous dedication and love for the Cuban people who had a deep and lasting affection for ‘el Comandante’,” Trudeau said in the statement. He called Castro “larger than life” and “a legendary revolutionary and orator”. Fidel Castro was an honorary pall bearer at the 2000 funeral of Trudeau’s father, former prime minister Pierre Trudeau. In 1976, the senior Trudeau became the first Nato leader to visit Cuba under Castro’s rule, at one point exhorting “Viva Castro!”. “I know my father was very proud to call him a friend and I had the opportunity to meet Fidel when my father passed away,” Trudeau said.

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Better be careful with private armies getting involved.

Military Veterans Seek New Role In South Africa Poaching War (AFP)

In another life, Lynn was a sniper in Afghanistan, Damien trained paramilitary forces in Iraq, and John worked undercover infiltrating drug cartels in central America. Now all three are back in action, this time fighting what they describe as a “war” against poachers in southern Africa as the killing of rhinos escalates into a crisis that threatens the survival of the species. In 2008, less than 100 rhinos were poached in South Africa, but in recent years numbers have rocketed with nearly 1,200 killed in 2015 alone. Faced with such slaughter, conservationists and government authorities have been desperately searching for ways to protect the animals.

Many ideas have been tried, including drones, tracking dogs, satellite imagery, DNA analysis, hidden cameras and even cutting horns off live animals before poachers can get to them. But the killing has continued, and now military veterans from the United States, Australia and elsewhere have been drafted to bring their expertise to the uphill battle to save the rhinos. “You have animals who are targeted by people using automatic weapons,” Damien Mander, a former Australian Navy special forces officer, told AFP. “You can not go to the communities and ask them nicely to stop. This is a war. We are fighting a war out there.”

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Nov 232016
 
 November 23, 2016  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  


Cyclone, Oklahoma, 1898

Dow 19,000 Is No Cause For Celebration (MW)
Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth (ZH)
We Could Be In A ‘Lost Decade’ Of Global Wealth Growth (CNBC)
Willing To Oppose Trump, Some Senate Republicans Gain Leverage (R.)
EU Draft Plan Eyes New Bank Creditor Class To Bear Losses (R.)
Economists Need To Get Into The Real World, Says BOE’s Haldane (Tel.)
Of Dunces, Fools, Drones and Heroes (Dmitry Orlov)
Renzi’s Party Wants Early Election in Italy If Referendum Lost (BBG)
Erdogan Says EU Lawmakers’ Vote On Turkish Membership ‘Has No Value’ (R.)
EU Finance Ministers To Discuss IMF, Greek Debt (Kath.)
Trump: ‘Open Mind’ On Quitting Climate Accords (AFP)
Sea Ice Reaches A New Low (Economist)

 

 

Arbitrary numbers.

Dow 19,000 Is No Cause For Celebration (MW)

The Dow Jones Industrial Average closed above 19,000 on Tuesday for the first time. How is this news? I’m sure you remember the spell-binding chase for the Dow to break 18,000, or those thrilling days when the Dow crossed 17,000, or hunted for 15,000. If you don’t remember those benchmark days – which occurred in December 2014 and July 2014 respectively, the latter being 14 months after the Dow had crossed 15,000 – then you also recognize that Dow 19,000 is equally no big deal, post-election rally notwithstanding. In fact, the Dow itself is no big deal. The Dow is the Kardashian of indexes – a celebrity benchmark, famous because it’s known rather than because of what it does.

Every round number on the index hits the news cycle hard, largely because there is so little real news out there. In early November, for example, people were talking about nine straight down days on the S&P 500 – the first nine-day losing streak in 36 years – as if that was somehow meaningful, even though the total decline on the index amounted to just 3.1%. (By comparison, the S&P 500’s last nine-day skid – which ended in December 1980 – shaved 9.4% off the index, according to FactSet). Tuesday’s headlines included a 13-day winning streak for the Russell 2000, its longest win streak in more than 20 years. The Russell benchmark gained roughly 15% during that stretch – an achievement largely unnoticed because it wasn’t the Dow or S&P 500.

Round numbers and little factoids are amusing and interesting, and are obvious fodder for the talking heads. Currently, the talk is whether the post-election rally can continue and if the Dow can roar on to 20,000, or if the quick rebound since the election has pushed us closer to a point of go-no-further. Focusing on the meaning of the Dow passing a landmark, however, misses the bigger point, which is that the Dow is a virtually meaningless benchmark. The Dow is important to people because it’s what they know, the staple of every market-oriented website, every radio-station market update, every newspaper’s daily business section, and the centerpiece of the 20 seconds of coverage that every national newscast guarantees the investing world each day.

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Criminal. And deadly. The ultimate pyramid scheme.

Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth (ZH)

Today Credit Suisse released its latest annual global wealth report, which traditionally lays out what is perhaps the biggest reason for the recent “anti-establishment” revulsion: an unprecedented concentration of wealth among a handful of people, as shown in its infamous global wealth pyramid, an arrangement which as observed by the “shocking” political backlash of the past few months suggests that the lower ‘levels’ of the pyramid are increasingly unhappy about.

As Credit Suisse tantalizingly shows year after year, the number of people who control just shy of a majority of global net worth, or 45.6% of the roughly $255 trillion in household wealth, is declining progressively relative to the total population of the world, and in 2016 the number of people who are worth more than $1 million was just 33 million, roughly 0.7% of the world’s population of adults. On the other end of the pyramid, some 3.5 billion adults had a net worth of less than $10,000, accounting for just about $6 trillion in household wealth. And inbetween is the so-called global middle class – those 1 billion people who rising anger at the status quo made Brexit and Trump possible.

[..] How about the very top? Things here are even more nuanced, with 28.9 million people whose net worth is between $1 and $5 million gradually tapering off to just 140,900 Ultra High Net Worth individuals who control more than $50 million in assets each. Of these, 50,800 are worth at least USD 100 million, and 5,200 have assets above USD 500 million. The total number of UHNW adults is about 3% higher than a year ago (4,100 individuals), and the increase has been relatively uniform across regions, except for the higher than average rise in Asia- Pacific countries (10%)

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How about a lost century?

We Could Be In A ‘Lost Decade’ Of Global Wealth Growth (CNBC)

Concerns that we are in a “lost decade” for global wealth growth have been given further credence by the latest “Global Wealth Report” released by the Credit Suisse Research Institute on Tuesday. According to the researchers, “In recent years, there has been a growing sense that the economic recovery is shallow, and has not reached all layers of society. Evidence from our global wealth database supports this view.” “While exchange rate movements sometimes obscure trends, wealth per adult and median wealth have grown well below their potential during the last nine years, compounding fears that we are in the midst of a lost decade for global wealth growth,” the paper continues.

The 1.4% rise in global wealth over the 12 month period to June 30 has only kept in line with population growth, meaning that for the first time since 2008 the wealth per adult measure has remained flat, according to the research. The paper burrows down into country level data which show that exchange rate fluctuations were the biggest drivers of changes in wealth for different nations over the period. Most notably, the 15% plunge in the British pound driven by Brexit translated to a $1.5 trillion loss for the U.K.. Meanwhile Japan’s 19% jump – which added $3.9 trillion to its wealth pile – was exactly aligned with gains in the yen as the Japanese currency bounced back from earlier weakness as its central bank was increasingly seen as running out of tools with which to force its depreciation.

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Trump will listen. But these folks must recognize why he won and they did not: they can’t command the room like he can.

Willing To Oppose Trump, Some Senate Republicans Gain Leverage (R.)

It is no surprise that Democrats in the U.S. Congress will oppose Donald Trump but the most important resistance to fulfilling the president-elect’s agenda is beginning to emerge from Republicans on Capitol Hill. A small number of influential Republicans in the Senate are threatening to block appointments to Trump’s administration, derail his thaw with Russia and prevent the planned wall on the border with Mexico. The party held onto control of the Senate at the Nov. 8 election but by only a thin margin, putting powerful swing votes in just a few hands. That empowers Republican Senate mavericks such as Rand Paul of Kentucky and Ted Cruz of Texas. Both were bitter rivals to Trump in the 2016 Republican presidential primary.

Paul, a libertarian lone wolf, says he will block Senate confirmations if Trump nominates either former New York Mayor Rudy Giuliani or former U.N. Ambassador John Bolton to be secretary of state. South Carolina’s Lindsay Graham has started publicly outlining places he might be willing to oppose Trump. He is against the Mexican border wall and is delivering warnings against Trump’s intention to revoke legal status for undocumented immigrants brought here as children – although that would not require congressional approval. Graham, a traditional Republican foreign policy hawk, strongly disagrees with Trump’s attempt to improve ties with Russia. “I am going to be kind of a hard ass” on Russia, Graham told reporters recently. “We can’t sit on the sidelines” and let cyber attacks blamed on Russia “go unanswered.”

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Accounting tricks are supposed to keep zombies alive.

EU Draft Plan Eyes New Bank Creditor Class To Bear Losses (R.)

European banks would be able to issue a new category of debt that could be wiped out in a crisis only after shares and bonds, but before more secured instruments, such as covered deposits, under a draft EU law seen by Reuters on Tuesday. The proposal aims at facilitating the building up of capital buffers for banks against losses at time when shares and bonds are losing value, forcing lenders to pay more to build the required cushions. The draft law, to be published by the European Commission on Wednesday, would create a new category of “non-preferred” debt instruments that would be bailed-in -suffer losses- only during a bank resolution, the draft text said.

The document is part of a wider legislative package aimed at reviewing EU rules on capital requirements for banks. Only debt instruments with a maturity of one year, and that are not derivatives, can be included in the new class. Lenders issuing such instruments will have to stress in contracts their ranking, which will be lower than secured debt such as covered deposits, derivatives or tax liabilities. The law is also aimed at creating a uniform ranking of bail-in-able liabilities across EU countries, which have so far applied in divergent ways new bail-in rules in force since the beginning of this year. The bail-in regime is meant to reduce costs to taxpayers in the event of a bank crisis, while increasing losses for the lenders’ creditors.

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The field is still very slow to wake up, even if more of them raise their -timid- voices.

Economists Need To Get Into The Real World, Says BOE’s Haldane (Tel.)

Economists are too detached from the real world and have failed to learn from the financial crisis, insisting on using mathematical models which do not reflect reality, according to the Bank of England’s chief economist Andy Haldane. The public has lost faith in economists since the credit crunch, he said, but the profession has failed to thoroughly re-examine its failings to come up with a new model of operating. Instead, he fears, it is still using the same failed analyses, and is still failing to speak effectively to the public. This applies to an all manner of areas, from studies of the financial meltdown to analysis of the Brexit vote. “The various reports into the economic costs of the UK leaving the EU most likely fell at the same hurdle. They are written, in the main, by the elite for the elite,” said Mr Haldane, writing the foreword to a new book, called ‘The Econocracy: the perils of leaving economics to the experts’.

The chief economist said that the Great Depression of the 1930s resulted in a major overhaul of economic thinking, led by John Maynard Keynes, who emerged “as the most influential economist of the twentieth century”. But the recent financial crisis and slow recovery has not yet prompted this great re-thinking. “Thus far at least, the present crisis has yet to spawn a Keynes for the twenty-first century. And nor have we witnessed any great leap forward analytically. Perhaps it is simply early days,” he said. “Salvation for the economics profession probably lies not among existing academic and policymaking dinosaurs, like me, but among the new generation of students of the discipline.” For now, economists need to focus on reviewing their models, accepting a diversify of thought rather than one solid orthodoxy, and on communicating more clearly.

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A bit hard to convey what Dmitry means in a news overview, you’ll have to read the article.

Of Dunces, Fools, Drones and Heroes (Dmitry Orlov)

Some time ago I posted three T-shirt designs, with no explanation as to why. “Here are some shirts,” I wrote, “reasonably priced, in all styles and colors, free shipping on orders over 100 USD, yadda-yadda.” Just as I expected, a few people got it, and a few of those ordered some shirts. The rest had no idea; some even confessed to that in the comments. That was a test. It was a success. Now that all eight of the planned designs are available, I offer the full explanation and rationale behind this, my latest humanitarian intervention/fundraising effort.

In all my travels and conversations, I have proven to myself beyond all doubt that the decision on who to talk to should have nothing to do with race, age, class, gender, ethnicity, nationality, IQ, profession/trade, educational level, criminal record, party affiliation, gang/militia membership, religious persuasion, military training/rank, drinking/drug habits and whatever else you might try to use to categorize people. Categorizing people based on their public attributes just doesn’t work. So, in determining who is worth talking to, all we have to go on is gut feeling, first impressions and happy accidents. But is this, I ask you, in any way optimal? No, it is not!

That is why I decided to step in and help. The eight designs may have some artistic merit, but they are not exactly art; in fact, they should be regarded as precision mental calibration instruments. Each design features a simple nautical motif consisting of a circle and the 16 compass points. Around the circle is a tag line. Inside the circle is a fish. The tag line is a pun about the fish. Confused? Read on! Each of the designs is a cognitive test. As you walk around wearing one of these shirts, looking for people worth talking to, you can apply specific methods, explained below, to interpret the way they react to your shirt. You can then make an objective determination as to whether a particular person is worth talking to. The determination is based on that staple of business consultants, Four-Quadrant Analysis.

In this case, the two dimensions being mapped are:
x-axis: Did the person get it? (No | Yes)
y-axis: Did the person laugh? (No | Yes)

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Yeah, bring in the old guard. The return of Monti. That’ll work miracles.

Renzi’s Party Wants Early Election in Italy If Referendum Lost (BBG)

Prime Minister Matteo Renzi’s party would seek early elections in Italy by the summer of 2017 if he loses a referendum on constitutional reform, according to a senior official. Lorenzo Guerini, deputy-secretary of Renzi’s Democratic Party, said in an interview that the group would try to reform the electoral system and then push for a fresh ballot if the “No” campaign wins on Dec. 4. He declined to say whether the premier would stay on to lead that effort or honor his promise to resign after a defeat, but he insisted Renzi would remain leader of the biggest party in parliament. “If there is the political will, we can work over a brief period on a new electoral law, and have elections with a new electoral law soon, by the summer of 2017,” Guerini said in his Rome office.

“If there are not the political conditions and the electoral reform is used as an excuse for a weak government surviving, we’re not interested.” Both the euro and Italian bonds have fallen this month amid concern that a rising populist mood will derail Renzi’s plans for reform and put another crack in the European project. The insurgent Five Star Movement is aiming to capitalize on a “No” vote to force Renzi out and wants another referendum, this time on Italy’s membership of the euro area. With Five Star just behind the Democratic Party in the polls, part of the Italian establishment is looking to hold off another vote until the current parliamentary term ends in February 2018.

Mario Monti, who headed a technocratic government between 2011 and 2013, said he expected there to be no early ballot whatever happens and said Italy should prioritize stability rather than rushing into another vote. “In case the ‘No’ were to win, I would expect first of all Mr Renzi to stay on after all,” Monti said Tuesday in an interview with Bloomberg Television’s Francine Lacqua. “If he at all costs wanted to leave, I would expect the president of the republic to form a new government with a new prime minister, but very much from the same center-left political spectrum which is now the Renzi majority.”

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I’m waiting till Putin takes revenge for the Russian jet downed last year. The West is too weak to take on Erdogan.

Erdogan Says EU Lawmakers’ Vote On Turkish Membership ‘Has No Value’ (R.)

Turkish President Tayyip Erdogan said on Wednesday that a vote by the European Parliament on whether to halt EU membership talks with Ankara “has no value in our eyes” and again accused Europe of siding with terrorist organizations. “We have made clear time and time again that we take care of European values more than many EU countries, but we could not see concrete support from Western friends … None of the promises were kept,” he told an Organisation of Islamic Cooperation (OIC) conference in Istanbul. “There will be a meeting at the European Parliament tomorrow, and they will vote on EU talks with Turkey … whatever the result, this vote has no value in our eyes.”

Leading members of the European Parliament on Tuesday called for a halt to EU membership talks with Turkey because of its broad purges in the wake of a failed July coup. More than 125,000 people – including soldiers, academics, judges, journalists and Kurdish leaders – have been detained or dismissed over their alleged backing for the putsch, in what opponents, rights groups and some Western allies say is an attempt to crush all dissent.

Erdogan said on Tuesday the measures had significantly weakened the network of U.S.-based cleric Fethullah Gulen, whose followers are accused of infiltrating state institutions over several decades and carrying out the coup attempt. Erdogan, and many Turks, were angered by the Western response to the putsch, viewing it as more concerned about the rights of the plotters than the gravity of the events themselves, in which more than 240 people were killed as rogue soldiers commandeered fighter jets and tanks. He has also repeatedly accused Europe of harboring members of the Kurdistan Workers Party (PKK) militant group, which has waged a three-decade insurgency against the Turkish state and is deemed a terrorist organization by the EU and United States.

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Get so sick of this. More reforms will be called for. Rinse and repeat.

EU Finance Ministers To Discuss IMF, Greek Debt (Kath.)

Finance ministers of core European Union countries are expected to meet later this week in Berlin to discuss the possible concessions Brussels could offer to secure the participation of the IMF in Greece’s third international bailout, paving the way for debt talks. Government officials suggest that the IMF, which has yet to decide whether to join Greece’s third bailout, is to blame for the slow process of talks between Greece and its creditors. In a media briefing on Tuesday, government spokesman Dimitris Tzanakopoulos acknowledged that the differences between Greece and its creditors remain too great for an agreement on all prior actions to be reached by the December 5 Eurogroup meeting and said that Athens was aiming for a political agreement by that time.

There is enough time until December 5 for agreements to be reached in talks on labor laws, fiscal issues and the overhaul of the Greek energy sector, Tzanakopoulos said, noting that the government has shown the political will necessary to achieve a breakthrough by the deadline. However, he said, this political will does not include “a willingness for new austerity measures and concessions on matters of principle such as labor rights.” Elaborating, government sources said authorities will not retract their demands for the restoration of collective labor contracts. If all differences have not been bridged by December 5, Greece’s creditors should issue a political decision and make good on their pledge to launch talks on debt relief, Tzanakopoulos said.

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Denouncing the CON21 accord is not the worst of things. Because it doesn’t achieve a thing.

Trump: ‘Open Mind’ On Quitting Climate Accords (AFP)

US President-elect Donald Trump said Tuesday he has an open mind about pulling out of world climate accords and admitted global warming may be in some way linked to human activity. “I think there is some connectivity. Some, something. It depends on how much,” he told a panel of New York Times journalists. Asked whether he would make good on his threat to pull the United States out of UN climate accords, he said: “I’m looking at it very closely. I have an open mind to it.” But he said he was also wanted to see how much the Paris climate accord “will cost our companies” and its impact on US competitiveness.

The Republican billionaire businessman has called climate change a “hoax” perpetrated by China and threatened to pull out of the agreement on limiting greenhouse gas emissions. The accord was reached in Paris in December 2015 after negotiations involving 195 countries. The worldwide pact to battle global warming took effect on November 4. The agreement sets a goal of limiting the rise in global temperatures to two degrees Celsius (3.6 degrees Fahrenheit) over pre-industrial revolution levels. The United States, the second biggest emitter of greenhouse gases after China, ratified the accord in early September, with strong backing from President Barack Obama.

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What are you going to do about it?

Sea Ice Reaches A New Low (Economist)

Measuring sea ice is difficult. Not only does it only appear in the most remote, inhospitable parts of the world, it is constantly either melting or forming. Since 1979, satellites have made the job easier, but they can give a misleading picture. Using satellite images to tot up the total area of sea ice risks mistaking surface melt for open water during the summer melting season. Scientists at the National Snow and Ice Data Center (NSIDC) in Colorado instead measure sea-ice extent by dividing the images into grids and counting any squares with more than 15% ice concentration as “ice covered”. Sea-ice extent is always larger than sea-ice area, but this method eliminates melt-season inaccuracies.

Scientists are interested in sea ice as a marker -and amplifier- of climate change. Its bright surface reflects 80% of the sunlight that hits it back into space. When it melts, the uncovered dark ocean surface absorbs 90% of the sunlight, which heats it up, causing more ice to melt. In recent years, the melting season in the Arctic has been ending later in the year, leading to less time for new ice to form. As a consequence, the total sea-ice extent in September 2016 was over 3m km2. smaller than in September 1980, although not as small as in September 2012, the worst year on record.

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Sep 202016
 
 September 20, 2016  Posted by at 9:13 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 20 2016


DPC Main Street, Buffalo, NY 1900

The Bank of Japan May Overshadow the Fed on Super Wednesday (CNBC)
Italy PM Renzi Tells Bundesbank To Solve German Banks’ Derivatives Problem (R.)
Housing Crisis Is Driving A “Geographic Wedge” Between Generations (Ind.)
Global Regulators See Risks in European Banks (WSJ)
Shore Up The Euro Before It’s Too Late (R.)
Theresa May Outs Herself as Wall Street’s Poodle in Brexit Talks (NC)
China Creates Global Steel Champion As Doubts Deepen On Output Cuts (AEP)
China’s Property Bubble Keeps Getting Bigger (WSJ)
Chinese Say Home Prices ‘High and Hard to Accept’ but Buying Frenzy Surges (WS)
Yuan Funding Crunch Shows Risks in Reserve Currency Ranking (BBG)
New Zealand’s Sizzling Economy Sees Goldman Go Out On a Limb Over Rates (BBG)
Alabama Selling Bonds Backed by Deepwater Horizon Settlement (BBG)
Slowly, Then All at Once (Jim Kunstler)
Italy ‘Ready To Go It Alone On Migrants’ (ANSA)
Thousands Flee As Blaze Sweeps Through Moria Refugee Camp In Lesbos (G.)

 

 

Stupid circus.

The Bank of Japan May Overshadow the Fed on Super Wednesday (CNBC)

In Super Wednesday’s central bank double-header, the Federal Reserve’s show may be an afterthought to the Bank of Japan’s performance. In a case of unusual timing, both the BOJ and the Fed will announce the outcomes of their monetary policy meetings on Wednesday. [..] Analyst predictions for the BOJ’s next move varied widely, from expectations that the central bank would cut interest rates deeper into negative territory, to changing the size or make up of its quantitative easing asset purchases, to trying to steepen the yield curve or to doing nothing at all. “The BOJ has a propensity to surprise, although most of the time, the surprises are negative,” Lam said. The market certainly took a negative view of the BOJ’s late January surprise move to introduce a negative interest rate policy, when the central bank cut the rate it pays on certain deposits to negative 0.1%.

That counterintuitively sent the yen sharply higher, frustrating policymakers who had hoped a weaker currency would help the BOJ reach its long-delayed 2% inflation target by increasing the cost of imports and spurring more consumption. Indeed, the yen may become the bellwether of how the markets view the twin central bank meetings. “Dollar-yen has fallen pretty much every time we’ve had an FOMC and BOJ meeting week this year,” David Forrester at Credit Agricole told CNBC’s “Street Signs” on Monday. He expected that the BOJ would aim to steepen Japan’s bond yield curve and if that move “impressed” the Nikkei stock index, then the yen might weaken. Forrester also noted that if the Fed sounded more hawkish in its statement, that would push up the dollar, and by extension, weaken the yen.

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At least $42 trillion worth.

Italy PM Renzi Tells Bundesbank To Solve German Banks’ Derivatives Problem (R.)

Italian Prime Minister Matteo Renzi said on Monday that Germany’s central bank chief Jens Weidmann should concentrate on fixing the problems of his own country’s banks, after Weidmann had urged Italy to cut its huge public debt. Renzi told reporters in New York that Weidmann needed to solve the problem of German banks which had “hundreds and hundreds and hundreds of billions of euros of derivatives” on their books. Renzi, who has staked his career on a referendum on constitutional reform this autumn, has repeatedly criticized other European leaders in the last few days over what he sees as an inadequate European Union response to the problems of the economy and immigration. In an interview with daily La Stampa published on Monday, Weidmann said Italy needed to consolidate its budget to avoid doubts emerging about the sustainability of its public debt.

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How to kill a city, Chapter 26.

Housing Crisis Is Driving A “Geographic Wedge” Between Generations (Ind.)

The housing crisis is driving a “geographic wedge” between the generations, weakening the bond between different age groups, according to new research. The study found that the rise in “age segregation”, caused by the lack of affordable housing for younger people, is damaging our society. Across England and Wales, the number of neighbourhoods in which half the population is aged over 50 has risen rapidly since 1991, the research from the Intergenerational Foundation (IF) found. In 1991 there were just 65 such neighbourhoods. This had risen to 485 by 2014, 60% of which were rural. But within urban areas, older people, children and young adults are also living increasingly separately.

“The housing crisis is driving a geographic wedge between the generations,” the research said. “It means that older and younger generations are increasingly living apart.” Since 1991, the median average age of neighbourhoods near the centre of cities has generally fallen by between five and 10 years, the report said. The report identified Cardiff, with its large student population, as “the most age segregated city in England and Wales”. Brighton, Leeds, Nottingham, Sheffield and Southampton were also identified by the report as age segregation “hotspots”. In Cardiff and Brighton, nearly a quarter of the population would need to move home in order to eliminate age segregation.

Surging house prices and a lack of choice for buyers have meant many people in the younger generation have had to move to find affordable housing close to employment. Younger generations are more likely rent than own, but older generations also face a “last-time buying crisis” due to a general lack of supply and a lack of affordable suitable accommodation to downsize into, the report said. Living apart in this way is making it harder for younger and older generations to look after each other, putting a bigger strain on the NHS. Age segregation also reduces people’s opportunities to find work and makes it harder for people to see different generations’ perspectives, it said.

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It is really simple: “..every euro of loans or securities they own is worth less than 30 cents in risk-weighted assets..”

Global Regulators See Risks in European Banks (WSJ)

Global rule makers think some banks are too clever by half. They want to limit the capital benefits those banks get from sophisticated risk models because they worry that these create a level of accuracy and detail as seductive as it is fallible. The Basel Committee, which sets global banking rules, wants to rein in the outliers: Those banks whose models produce the lowest-risk weightings and create most benefits in reducing their capital requirements. This will disproportionately affect European banks versus U.S. peers because Europeans have long designed their businesses around a risk-based approach to capital, while U.S. banks historically were governed by simpler leverage ratios that use plain asset measures.

It is quite easy to see which banks in Europe face the biggest potential impact from the changes currently being designed and debated by the rule makers who should complete them by the year’s end. Deutsche Bank, Société Générale, Barclays and BNP Paribas all have a relatively low-risk density, which is a measure of how little risk a bank assigns to the assets on its books. Each has a risk density of less than 30%, which means that every euro of loans or securities they own is worth less than 30 cents in risk-weighted assets. And it is risk-weighted assets that determines a bank’s capital requirement. For comparison, J.P. Morgan has a risk density of 61%.

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The answer to all problems with the euro(-zone): more euro.

Shore Up The Euro Before It’s Too Late (R.)

Will the euro survive the next big crisis? A new report inspired by Jacques Delors, one of the architects of the single currency, says it probably won’t and urges policymakers to pursue immediate changes to Europe’s troubled monetary union to ward off the inevitable collapse. The report, entitled “Repair and Prepare – Growth and the Euro after Brexit”, comes at a time when even the most ardent defenders of the euro are cautioning against closer integration in the aftermath of Britain’s vote to leave the European Union. Pressing ahead, they worry, would deepen public resentment towards Europe after years of economic crisis that has pushed up unemployment and sent populist, eurosceptic parties surging in opinion polls.

The authors, a group of academics, think tankers and former policymakers from across Europe, acknowledge the obstacles but argue that politicians cannot afford to wait. They have put together a three-pronged plan for shoring up the euro that they believe is politically feasible despite the troubling backdrop. “Reforming the euro might not be popular. But it is essential and urgent: at some point in the future, Europe will be hit by a new economic crisis,” the report says. “We do not know whether this will be in six weeks, six months or six years. But in its current set-up the euro is unlikely to survive that coming crisis.”

[..] In a first stage to shore up the single currency, they recommend “quick fixes” that include a reinforcement of the euro zone’s rescue mechanism, the ESM, a strengthening of banking union and improved economic policy coordination that does not require changes to the EU treaty. This would be followed by a north-south quid pro quo on structural reforms and investments. In a third stage, the euro zone would move to a more federal structure, with risk and sovereignty sharing. This final stage, the most controversial, could take a decade or more to realize and is described as important but optional.

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So there!

Theresa May Outs Herself as Wall Street’s Poodle in Brexit Talks (NC)

The only elements that differentiate Theresa May’s latest move from a Monty Python skit is her lack of a pith helmet and safari jacket. The British Prime Minister, per the Financial Times, plans to visit with top executives of major Wall Street firms to “canvass” them on “how Britain should structure its departure from the EU to reassure them that Brexit will not damage their UK business.” Mind you, she is not making this kiss-the-ring trip to New York to “reassure” the financial behemoths. That would mean the UK has a plan and is making the rounds to sell it and perhaps make cosmetic changes around the margins to make them feel important. Nor is it “consult,” which is diplo-speak for, “We’ll listen to your concerns but are making no commitment as to how much if any well take under advisement.”

No, “canvass” means they are a valued constituency she intends to win over and is seeking their input for real. This “canvass” is yet more proof of how out of its depth the UK government is in handling the supposedly still on Brexit. There’s a decent likelihood that May is running to the US because her team is short on staff and ideas and those clever conniving Americans might have some useful ideas up their sleeves. After all, they don’t want to go through the bother of getting more licenses and moving some staff to the Continent or Dublin. It’s much simpler to keep everything in London, particularly since top New York execs might face a tour of duty there, and the housing, shopping and schools are much more to their liking. Mind you, most financial services would remain in London with a Brexit, but Euroclearing will require a restructuring (that will have to be done out of an EU entity).

The embarrassing part is that May is apparently having to solicit input, when the big issue is obvious and binary: will the UK keep passporting rights for banking? This is binary and not hard to understand. If not, UK and US banks will need to obtain EU licenses to do certain types of business and some customer-facing personnel will need to be domiciled in the EU, not the UK. Numerous estimates have been bandied about, and they vary widely. Note that many important operations, like foreign exchange trading, were centered in the UK long before it entered the EU, are not regulated, and are conducted by phone and electronically, so there’s no reason to think they will need to migrate.

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China wa never going to restructure steel. It’s a strategic industry.

China Creates Global Steel Champion As Doubts Deepen On Output Cuts (AEP)

China has backed the creation of a giant national steel champion with continental reach, calling into question the country’s pledge at the G20 summit to slash over-production.Caixin Magazine said regulators have approved the merger of Baosteel and the loss-making group Wuhan Iron and Steel, calling it the birth of a strategic “behemoth” with a capacity of over 60 million tonnes a year. The move is touted as part of a restructuring plan to slash 100-150 million tonnes of excess capacity in China by 2020, with the loss of 180,000 steel jobs. But the evidence so far shows that output is still rising. An internal document from the German steel federation Stahl alleges that China has added 9m tonnes of extra capacity so far this year and there is no chance whatsoever that the country will meet its commitment to eliminate 45m tonnes of plant in 2016.

Stahl said China’s capacity has been increasing every year for the last four years, reaching 1,105m tonnes at a time when internal demand in China has slumped to 686m tonnes. Over-capacity has in effect doubled to 419m tonnes since 2012, more than twice the entire steel output of the EU. The Baosteel takeover of Wuhan is not necessarily a threat. Mergers can be part of the slow process of consolidation, and in this case the two state-owned companies have vowed to cut capacity by 13.4m tonnes between them. The nagging doubt is that steel is deemed a “strategic” industry by Beijing, a term with specific meaning in Communist Party ideology. The normal reflex of the authorities – especially regional party bosses – is to keep ailing steel mills alive by rolling over bad debts or forcing debt-equity swaps.

[..] For now the global steel crisis is in remission. The glut has been masked by China’s own policies over recent months, chiefly a fresh blast of infrastructure spending and a 20pc surge in new construction driven by easier credit. This looks like a cyclical bounce, now a routine feature of China’s stop-go economic management. The latest property boom is highly unstable. House prices rose 9.2pc in August from a year earlier, reaching 40pc in Hefei, 37pc in Shenzhen, 37pc in Nanjing, and 31pc in Shanghai. Once the new bubble deflates, a slowdown in building is likely to expose the immense scale of the steel glut once again.

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See my article yesterday.

China’s Property Bubble Keeps Getting Bigger (WSJ)

China’s attempts to contain property prices have been halfhearted. If anything, they may have made the bubble grow even bigger. Average new-home prices in August were up 1.3% from July, the government reported, the 17th straight increase and the biggest since at least January 2011. Prices declined in only four of the 70 cities surveyed. The latest leg of China’s property boom, which began last year in the biggest cities—such as Shenzhen and Shanghai—has recently spread to smaller cities, driving local governments to roll out tightening measures. Some specifically aim at capping land prices, which in some places exceed the price per square meter of already-built housing nearby. Shanghai has suspended land auctions while other cities, including Nanjing and Guangzhou, have capped land prices.

These measures, however, may have backfired by reducing supply, driving developers to acquire land in other ways. Sunac China, for example, said Sunday it would buy 42 property projects from Legend Holdings, the biggest shareholder of computer maker Lenovo, for 13.8 billion yuan ($2.1 billion). More important, tightening measures haven’t tackled the key factor of rising home prices—easy credit. As a%age of total loans, outstanding mortgage loans are at their highest since at least 2008. For developers, cheaper money available in the onshore bond market fuels aggressiveness. Sunac, for example, a company whose dollar-denominated bonds were yielding 10% just 17 months ago, raised 4 billion yuan last month with coupons of 3.44% to 4%—despite a doubling of its net debt in just the past year. With so many parties including banks and local governments all depending on real estate, it may not make sense for them to pop the bubble.

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Until another stock bubble is blown. Beijing had better understand that game is largely up after it’s in the IMF basket. Then stability becomes much more important.

Chinese Say Home Prices ‘High and Hard to Accept’ but Buying Frenzy Surges (WS)

Home prices in China are “high and hard to accept,” said 53.7% of the respondents in a survey by the People’s Bank of China, published today in the People’s Daily, the official paper of the Communist Party. Only 42.9% found them “acceptable.” And only 23.1% predicted that they would rise next quarter, while 11.9% expected them to fall. But that isn’t stopping people from wanting to participate in this frenzy: “Nevertheless, the ratio of residents who were prepared to buy a house within the next three months increased 1.3% from the third quarter to reach 16.3%.” That’s a lot of people “prepared to buy a house,” even with prices “high and hard to accept.”

There are several remarkable things in this survey: the worried tone in terms of the soaring prices, the increased desire to buy because, or despite, of the soaring prices, and the fact that this survey came via the official party organ from the PBOC which has been publicly fretting about the housing bubble, the debt bubble that comes along with it, and what it might do when it deflates. And what a bubble it is! The average new home price in 70 Chinese cities soared 9.2% in August year-over-year, after having jumped 7.9% in July, the eleventh month in a row of year-over-year gains, according to the China Housing Index, reported by the National Bureau of Statistics. In Tier 1 cities, prices skyrocketed: in Beijing, by 23.5% and in Shanghai by 31.2%!

Prices increased in 64 of the 70 cities, up from 51 in July. They fell in only four cities and remained flat in two. This chart by tradingeconomics.com shows the year-over-year percentage change in new home prices, the boom and bust cycles, and the stage of the boom where prices are at the moment:

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Beijing will have to give up a substantial part of the control it’s used to having over the yuan. That will not be a smooth process.

Yuan Funding Crunch Shows Risks in Reserve Currency Ranking (BBG)

China’s desire to stabilize the yuan risks undermining its future as a global reserve currency. For the second time this year, the overnight cost to borrow the offshore currency in Hong Kong surged above 20% amid speculation the People’s Bank of China is mopping up liquidity to boost the exchange rate. The volatility comes less than two weeks before the yuan’s inclusion in the IMF’s Special Drawing Rights – an event seen as a validation of President Xi Jinping’s efforts to promote its standing on the world stage. “This is not the sort of behavior you would expect from an SDR currency,” said Sue Trinh at Royal Bank of Canada in Hong Kong. “You can’t have funding for a reserve currency blowing up or moving in such a volatile fashion; it would be a nightmare for short-term portfolio management.”

Any use of borrowing rates to shake down bears risks eroding authorities’ pledges to give markets more sway in the world’s second-largest economy and undercutting Hong Kong’s position as the biggest offshore yuan trading center. The yuan’s funding costs at home and abroad have been more volatile than the four existing currencies in the IMF’s reserve basket over the past three years, data compiled by Bloomberg show. The offshore yuan funding cost, known as Hibor, jumped 15.7 percentage points to 23.7% on Monday, the second-largest increase on record, before falling to 12.4% on Tuesday. The rate previously surged to a high of 66.8% in January as China’s policy makers battled to restore control over the currency after a series of weaker fixings.

Traders are growing used to China’s policy makers intervening before key events, said Hao Hong at Bocom International in Hong Kong. “The central bank has done this before.” Still, the move is underscoring the greater volatility in China’s money markets compared with other reserve currencies. While the overnight Shanghai Interbank Offered Rate surged to 13% during a credit crunch in 2013, similar funding costs for the dollar, yen, euro and pound all traded within a 100 basis-point range in the past three years, according to data compiled by Bloomberg.

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Those Auckland homes are turning into ATMs.

New Zealand’s Sizzling Economy Sees Goldman Go Out On a Limb Over Rates (BBG)

New Zealand’s sizzling economy has prompted Goldman Sachs to go out on a limb and call an end to the country’s easing cycle. Data last week showed GDP expanded 3.6% in the year through June, putting New Zealand among the fastest-growing economies in the developed world and suggesting inflation should finally start to gather pace. The Kiwi economy is “too strong to justify further rate cuts,” Tim Toohey, chief economist at Goldman Sachs Australia, wrote in a note to clients. He cancelled the two rate reductions he’d been forecasting and said the Reserve Bank of New Zealand will now hold its official cash rate at 2% through 2017. That’s a bold call after RBNZ Governor Graeme Wheeler all but committed himself to at least one more cut as he struggles to return inflation to target.

While 16 other economists surveyed by Bloomberg expect Wheeler to keep borrowing costs on hold at Thursday’s policy decision, they all predict he’ll lower them in November and some forecast another cut early next year. New Zealand’s strong dollar is damping the price of imports, meaning Wheeler has to crank up domestic price pressures to get inflation back into his 1-3% target band. He’s worried the longer the gauge stays low – it’s currently at 0.4% and forecast to slow further – the greater the risk inflation expectations will drop and create a deflationary spiral. Goldman may be on to something though. The GDP data showed a surge in household spending growth to a four-year high, suggesting inflation may be just around the corner. Spending was led by categories such as furniture, carpets and audio equipment.

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Craziness. Not a crisis goes to waste.

Alabama Selling Bonds Backed by Deepwater Horizon Settlement (BBG)

The 2010 Deepwater Horizon oil-rig disaster, featured in a major-motion picture opening next week, may soon help Alabama rebuild its reserves, pay Medicaid expenses and fund road projects. Alabama plans to use annual payments from a $1 billion settlement with U.K. oil producer BP to back bonds issued within the next two months, said Bill Newton, the state’s acting director of finance, who also sits on the Alabama Economic Settlement Authority, which was created to handle the debt issue. The state will receive the payments under the settlement for 18 years.

State lawmakers earlier this month approved the bond sale and authorized creation of the six-member authority, which had its first meeting Monday. Under the legislation about $400 million of the bond proceeds will go to repay money the state loaned itself from reserve funds in prior years to balance budgets, with the rest going to fund Medicaid expenses and road work in the southern part of the state. The amount issued will depend on interest rates when the debt is sold. “We started the process to issue the bonds within the next two months,” said Newton. “We’ll see what the market brings.”

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Wise words: “They can organize ten-acre farms instead of cell phone game app companies. They can do physical labor instead of watching television. They can build compact walkable towns instead of suburban wastelands….”

Slowly, Then All at Once (Jim Kunstler)

As is usually the case with troubled, over-ripe societies, these elites have begun to resort to magic to prop up failing living arrangements. This is why the Federal Reserve, once an obscure institution deep in the background of normal life, has come downstage front and center, holding the rest of us literally spellbound with its incantations against the intractable ravages of debt deflation. One way out of this quandary would be to substitute the word “activity” for “growth.” A society of human beings can choose different activities that would produce different effects than the techno-industrial model of behavior.

They can organize ten-acre farms instead of cell phone game app companies. They can do physical labor instead of watching television. They can build compact walkable towns instead of suburban wastelands (probably even out of the salvaged detritus of those wastelands). They can put on plays, concerts, sing-alongs, and puppet shows instead of Super Bowl halftime shows and Internet porn videos. They can make things of quality by hand instead of stamping out a million things guaranteed to fall apart next week. None of these alt-activities would be classifiable as “growth” in the current mode. In fact, they are consistent with the reality of contraction. And they could produce a workable and satisfying living arrangement.

The rackets and swindles unleashed in our futile quest to keep up appearances have disabled the financial operating system that the regime depends on. It’s all an illusion sustained by accounting fraud to conceal promises that won’t be kept. All the mighty efforts of central bank authorities to borrow “wealth” from the future in the form of “money” – to “paper over” the absence of growth – will not conceal the impossibility of paying that borrowed money back. The future’s revenge for these empty promises will be the disclosure that the supposed wealth is not really there – especially as represented in currencies, stock shares, bonds, and other ephemeral “instruments” designed to be storage vehicles for wealth. The stocks are not worth what they pretend. The bonds will never be paid off. The currencies will not store value. How did this happen? Slowly, then all at once.

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Renzi has everyhting to lose with his referendum coming before the new year.

Italy ‘Ready To Go It Alone On Migrants’ (ANSA)

Italian Premier Matteo Renzi on Monday reiterated his disappointment at Friday’s EU summit in Bratislava, which concluded with him openly coming out against Germany’s and France’s stance on migrants and economic growth for the bloc’s post-Brexit future. “If Europe continues like this, we’ll have to get organised and act autonomously on immigration,” Renzi said. “This is the only new development to come from Bratislava, where there were so many words, but we weren’t capable to saying anything clear about the issue of Africa. “That’s why, to use a euphemism, we didn’t take it well. ” Juncker says lots of wonderful things, but we don’t see actions. “This is one of Europe’s problems. Italy will go it alone. “It is capable of doing it, but this is a problem for the EU”

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The camp is basically gone. The poor just got a whole lot more desperate. Why the EU should no longer exist.

Thousands Flee As Blaze Sweeps Through Moria Refugee Camp In Lesbos (G.)

Thousands of refugees detained at one of Greece’s biggest camps, on the island of Lesbos, have fled the facility amid scenes of mayhem after some reportedly set fire to it, local police have said. Up to 4,000 panic-stricken men, women and children rushed out of the barbed-wire-fenced installation following rumours of mass deportations to Turkey. “Between 3,000 and 4000 migrants have fled the camp of Moria,” a police source said, attributing the exodus to fires that rapidly swept through the facility because of high winds. Approximately 150 unaccompanied children, controversially housed at the camp, had been evacuated to a childrens’ village, the police source added. No one was reported to have been injured in the blaze.

But damage was widespread and with tents and prefabricated housing units going up in flames, the Greek channel Skai TV, described the site as “a war zone”. The disturbances, it reported, had been fuelled by frustration over the notoriously slow pace with which asylum requests were being processed. A rumour, earlier in the day, that Greek authorities were preparing to send possibly hundreds back to Turkey – in a bid to placate mounting frustration in Germany over the long delays – was enough to spark the protests. [..] The increase in arrivals in recent months from Turkey – the launching pad for more than a million Europe-bound refugees last year – has added to the pressure on Greek authorities.

On Monday, the government announced that 60,352 refugees and migrants were registered in the country, essentially ensnared by the closure of borders along the Balkan corridor into Europe. Some 13,536 were detained on Aegean islands, including Lesbos which has borne the brunt of the influx. The detention centre at Moria has a capacity to house no more than 3,000 but is now said to be holding almost twice that number ..

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Sep 182016
 
 September 18, 2016  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 18 2016


John Collier FSA housing project for Martin aircraft workers, Middle River, MD 1943

Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)
How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)
China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)
Italian Banking Crisis Turns into Mission Impossible (DQ)
Most Likely Scenario For Hanjin Is Liquidation (WSJ)
US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)
Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)
Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)
Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)
France Bans All Plastic Cups, Plates And Cutlery (Ind.)

 

 

“..the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage.”

Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)

Ken Rogoff is by all accounts a brilliant man. The Harvard professor and former IMF chief economist is a chess grandmaster. His thesis committee included current Fed vice-chair Stanley Fischer. But like many survivors of Ivy League hoop jumping, the poor fellow appears to have emerged punch drunk. That’s the only conclusion to be drawn from Rogoff’s new book, The Curse of Cash , which, in effect, proposes a ban on paper currency. It’s terrifying piece of work, for several reasons. [..]

Rogoff’s “cashless society” is an elegant solution to a key problem bedeviling the Federal Reserve: with interest rates at the zero bound, the US central bank has no ammunition left to fight the next recession – because if cuts rates below zero, savers will withdraw their cash and put it under their mattresses. “In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy,” Rogoff writes. “Unfortunately, the existence of cash gums up the works.” That argument is spurious at best. By now, it is fairly clear from experiences in Japan and the US since 2008 that below neutral level interest rates provide little or no net new economic stimulus. At best, easy monetary policy brings forward spending and investment from the future into the present.

However, the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage. Rogoff, one of the country’s top economists, knows this; which is an important clue that there is much more to his proposals than meet the eye. It seems clear that Rogoff’s negative interest rate/cashless society proposal is structured to engineer a back-door US government debt default. Over the long term, by forcing savers, businesses, and banks to give the US government their money, and allowing Washington to repay less of that money each year, the US can legally default – on all that it owes. More worrying for investors: the fact that Rogoff, Ben Bernanke and others are proposing negative rates despite the considerable evidence that they will do no economic good suggests that they believe that the US government cannot pay back its debts – that it is already insolvent.

[..] maybe Rogoff is just as good a player on the public policy front as he is on the chess board. There is a possibility that he wrote The Curse of Cash as a quasi-job application for a higher government post, possibly as Treasury Secretary in a Clinton Administration. “If you give me the job, I’ll help make sure that government can borrow all it wants and it won’t have to pay any of it back,” may be the sub-text to Rogoff’s book. There is a precedent for this. Ben Bernanke’s 2002 “helicopter money” speech is widely credited with having set the ground for his appointment as Fed Chairman several years later. Brilliant? Cynical? Delusional? Or maybe all three? Take your pick. Either way, you haven’t heard the last of Ken Rogoff.

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“Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve. ..”

How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)

News reports paint a picture of a Bank of Japan board that remains solidly in favor of maintaining an ultra-easy monetary policy, but is sharply divided over the best way to proceed as the country’s banking sector feels the pinch of low rates and a flat yield curve. Ideas the Bank of Japan could ultimately move to adjust its program in a way designed to further steepen the yield curve are behind recent market moves, analysts said, and could pave the way for further steepening of yield curves around the world, including U.S. Treasurys. Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve.

That would be a mirror image of a Federal Reserve maneuver dubbed “Operation Twist” that the central bank used in 1961 and 2011 to flatten the yield curve by buying long-term debt and selling short term debt. Bond yields move inversely to prices. There are other measures the Bank of Japan could take to try to steepen the yield curve, including simply changing the mix of maturities it buys or setting a yield target. Christoph Rieger at Commerzbank urged against undertaking an inverse twist, noting that Kuroda has expressed concerns that a “bear steepening” of the yield curve—a phenomenon in which long-term rates rise faster than short term rates—tends to tighten monetary conditions. Obviously, that would blunt the impact of the BOJ’s easing efforts and prove unwelcome in an economy that’s contracting.

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“The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.”

China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)

Housing in major cities in China has seen price hikes over the last year that resemble the famous Dutch “Tulip Fever” bubble of 1637, according to new research by economic consultancy firm Longview Economics. “I think what’s going on in China is troubling … some of the valuations there are really quite extraordinary,” Chris Watling, the CEO of Longview Economics, told CNBC Thursday. “We’ve double checked these numbers about seven times, because I found them quite hard to believe.” The firm’s research found that only San Jose in the Silicon Valley is more expensive than Shenzhen. The Chinese city has seen prices rise 76% since the start of 2015, with the acceleration beginning in April 2015 as the country’s stock market was nearing its peak.

The situation in Beijing and Shanghai is similar, albeit less extreme, the company states. “Housing in some of the tier 1 cities is more expensive than it is in London, which I think itself is on a bubble, Watling added. “The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.” The analysis suggests that the typical home in Shenzhen costs approximately $800,000. Watling said that the house-income ratio in Shenzhen is now running at 70 times, compared to around 16 times in somewhere like London.

China, the biggest economic story of the last 30 years, has soured in the eyes of many analysts. A stock market crash that began in the country last summer has highlighted the vast difficulties Chinese lawmakers are now facing. Watling said Chinese housing was a story built on credit, lots of liquidity and lots of debt. He added that all bubbles, though, once established, will eventually burst and deflate. “It’s simply a question of when,” Watling said in a research note earlier this week, adding that the removal of cheap money would be the likely scenario that would lead to the beginning of the tightening and subsequent prices falls.

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“.. the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.”

Italian Banking Crisis Turns into Mission Impossible (DQ)

[..] for Monte dei Paschi’s latest rescue plan to have any chance of working, both parts of the plan — Part A and Part B — must succeed. Part A consists of a €28 billion bad-loan sale for which JP Morgan Chase, Citi and Italian investment bank Mediobanca are already assembling a bridge loan, in return for very handsome fees. Atlante, Italy’s deeply opaque, Luxembourg-based bank rescue fund, has reportedly agreed to buy the so-called mezzanine tranche in Monte dei Paschi’s bad loan securitization. Apparently demand for heavily discounted, slowly-decomposing bank debt in Italy is high, which is great news considering Italy is purportedly home to roughly a third of all of the bad debt at EU banks.

In a perfect sign of our yield-starved times, last week saw around 250 global investors converge on Venice to attend Banca Ifi s SpA’s “Non-performing Loan” conference. That’s twice as many as last year, reports Bloomberg. In other words, Part A of the rescue plan seems to be coming along nicely — as long as no one asks who will make up the difference between the book value of the bank’s toxic assets and the discount value at which they’re now being sold. As for Part B of the Plan — MPS’ €5 billion cash call scheduled for the end of this year — it’s going nowhere fast. Twice-bitten, thrice-shy investors are no longer buying the hype. Gennaro Pucci at London-based PVE Capital said that even if a significant proportion of MPS’ bad loans were “spun off into a special vehicle,” he would not buy more MPS shares out of fear that the bank could suffer further losses from the remaining soured debt.

This is a serious problem in today’s Italy: as long as the economy continues to stagnate, much of the supposedly good debt currently on the banks’ books will also, sooner or later, end up putrefying. It’s already happened to Banca Popolare di Vicenza, a regional lender that was rescued from bankruptcy late last year by the Atlante fund, but which is already in need of fresh funds. So, too, is Italy’s biggest and only global systemically important financial institution, Unicredit, which has a staggering €80 billion in bad debt on its balance sheets — more than any other European bank. While the downfall of MPS would be enough to cause serious damage to Italy’s already fragile financial system, the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.

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But first a fire sale.

Most Likely Scenario For Hanjin Is Liquidation (WSJ)

Debt-ridden Hanjin Shipping is working on a restructuring plan that calls for the drastic reduction of its owned fleet and returning the vast majority of the ships it charters to their owners, according to people with direct knowledge of the matter. Despite the efforts, these people say the most likely scenario is still that the Korean operator— the world’s seventh-biggest in terms of capacity—will be liquidated, marking one of the shipping industry’s biggest failures. Hanjin filed for bankruptcy protection last month. The South Korean government has strongly indicated it has no plans to bail out the company. A Korean court will decide in December whether to accept the plan or let the company go under, according to court officials in Seoul.

One person with knowledge of Hanjin’s efforts to restructure said the operator is considering a number of scenarios but focusing on one that involves Hanjin keeping up to 15 of its 37 ships, and returning to owners almost all of the 61 chartered vessels. Under that scenario, which is subject to approval by the bankruptcy court, “Hanjin will emerge as a small regional operator in Asia that will move a small part of Korea’s exports,” the person said. [..] Hanjin’s main charterers, including Danaos, Navios and Seaspan, with a combined exposure of more than $1 billion to Hanjin, were hoping for a last-minute intervention by the Korean government that would allow Hanjin to honor its vessel-leasing commitments. That looks less and less likely.

“Hanjin now has two alternatives: either to drastically downsize or to liquidate,” said Iraklis Prokopakis, Danaos’s COO. “We have eight ships chartered to Hanjin and five will be returned. The other three still have cargo on them so I don’t know what will happen.” Danaos has a $560 million exposure to Hanjin. Mr. Prokopakis said the key issue at the December court hearing will be whether Hanjin has enough cash to continue operating, even at a much smaller scale.

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“Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria.”

US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)

The US military has bombed Syrian government positions in the eastern province of Deir el-Zour today, where the Syrian military had been battling ISIS. According to the report, the US attack on Syrian troops “enabled an [ISIS] advance on the hill overlooking the air base.” This is the second time US forces have directly targeted Syrian government troops inside Syria. It would be the first time such an attack produced a battlefield advantage to ISIS. The US attack has killed at least 62 and perhaps as many as 100 Syrian government troops. Earlier today it was reported that the Syrian government had sent some 1,000 members of the elite Republican Guard into the Deir el-Zour province, as battles with ISIS in the area increase.

This US attack has wiped out perhaps 10% of this force and has obliterated Syrian army weapons and other materiel. The US government has admitted to the attack, but claims it was all a mistake. As some observers have pointed out, however, ISIS does not behave as traditional military units. They do not generally gather in large numbers like this or establish “bases.” The US Central Command released a statement earlier today claiming that the US coordinated the strike with the Russians, but Moscow has vehemently denied the claim. In fact, spokesman for the Russian Foreign Ministry Maria Zakharova was quoted by the state news agency Tass as saying that “after today’s attack on the Syrian army, we come to the terrible conclusion that the White House is defending the Islamic State.”

This dramatic development comes as the latest ceasefire begins to crumble. Russia has condemned Washington’s refusal to implement a key component of the agreement, to press US-backed rebels to cease fighting alongside al-Qaeda; and the main US-backed “moderate” Islamist group, Ahrar al-Sham, has refused to take part in the ceasefire at all. Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria. Is today’s attack a turning point in the war, where the US will begin to strike Syrian government forces more frequently? If so, how will Russia and Iran react to this overt shift in US strategy? Is this the flashpoint?

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But that’s all he’s going to get.

Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)

Italian Prime Minister Matteo Renzi blasted the latest European Union summit in Bratislava on Saturday, effectively labeling Friday’s high-level meeting a waste of time. “I don’t think it would be right for Italy to pretend not to notice when things are not getting any better,” Renzi said at a conference in Florence. Hours earlier, he criticized the summit in an interview with TV broadcaster RTV38. “As Italy, we strongly believe that the EU has a future, but we need to be doing things for real, because we have no use for staged events,” he said. Renzi also said he did not partake in the closing press conference with Angela Merkel and Francois Hollande because he was unhappy with the decisions reached concerning economic and migrant policy.

Renzi said Italy would not “serve as a fig leaf” for the likes of France or Germany. In what was the first European summit without the United Kingdom in over four decades, European leaders sought to show unity in the wake of this summer’s Brexit vote. This, Renzi said, “signals a small step forward, but it is still a rather long way away from the idea of Europe that we have in mind.” Renzi castigated the summit for not raising the African migrant issue. The documents “didn’t even mention Africa,” he said. As the first European destination for migrants arriving from Africa, Italy has been left to cope with the influx of refugees largely on its own while politicians debate how to address refugees in Turkey and along the so-called Balkan Route though Greece, eastern and central Europe.

Italy has long pushed for an international agreement with African states that would close migrant routes to Europe in exchange for increased investment. Renzi repeated his critiques of the EU’s austerity policy. While the country is respecting the EU’s strict budget disciplinary rules, he said Italy retains the right to stress that the rules are not working and it is not prepared “to pretend not to notice.”

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Insult to injury. It never stops. Electricity prices were raised 4-5% in Greece. Who can afford that?

Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)

Public properties, including real estate assets, are very often sold for extremely low prices, as the political risk factor supersedes even the crucial financial risk that comes with investing in Greece. The Hellenic Federation of Enterprises (SEV) this week commented on the issue, saying that this institutional shortfall of the Greek state and the lack of trust this generates in the three pillars of power (legislative, executive, judiciary) have turned the optimum utilization of state property into “a political point-scoring battle among parties.” As SEV pointed out, “in many instances we see the state’s assets devalued, owing to the delays that political tensions bring about in privatizations, so that they are sold off at particularly low prices. In other instances the prevailing criterion becomes the price of the privatization, without taking into consideration any distortions created in the market from incomplete planning.”

For the industrialists’ association there is no doubt that “the correct utilization of public property along clear and stable rules and terms of economic efficiency, both for state revenues and for the operation of markets, can become a key growth factor for the economy.” All this becomes clearer when one considers the tenders that the state privatization fund (TAIPED) has been conducting for the concession of real estate assets. As property market professionals observe, in most cases the prices investors offer – particularly in instances of plot development – are just a fraction of each asset’s actual value. The reason for that is not to be found in the financial crisis and the drop in market prices, but in investors’ need to factor the political risk into their calculations regarding the sustainability of their chosen investment, in order to secure the desired returns.

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CNBC tries an odd twist by claiming it’s not really a TTiP protest, but a form of general ‘easy anti-Americanism’. The same tactics as used in Brexit and the US elections. Curious to see when these people will realize these are losing tactics.

Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)

Hundreds of thousands of Germans took to the streets Saturday, in protest of pending trade deals with the United States and Canada. The deals in question are the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union and the Comprehensive Economic and Trade Agreement (CETA) for the Canadian-EU relationship. Neither free trade agreement has been ratified yet, but popular outcry has been growing for the last few years. The demonstrations took place in seven cities throughout Germany: Berlin, Frankfurt, Hamburg, Cologne, Leipzig, Munich and Stuttgart. Organizers told CNBC that the official estimate is 320,000 demonstrators across Germany.

In Berlin, where discussions of trade policy are frequently overheard in cafes and most available surfaces are plastered in posters and stickers against the deals, the largest demonstration of the day took place with about 70,000 attendees, according to the organizers. Earlier, local reports had indicated there could be as many as 80,000 in the German capital, but a heavy downpour close to the start time may have depressed turnout. A broad coalition of organizations helped plan the event, but the stated rationale for opposing the agreements centers on the belief that such deals “primarily serve the interests of powerful economic interest groups, and thus only cement the imbalance between the common good and economic interests,” according to one organization.

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Under TTiP, this would have been impossible.

France Bans All Plastic Cups, Plates And Cutlery (Ind.)

France has passed a new law to ensure all plastic cups, cutlery and plates can be composted and are made of biologically-sourced materials. The law, which comes into effect in 2020, is part of the Energy Transition for Green Growth – an ambitious plan that aims to allow France to make a more effective contribution to tackling climate change. Although some ecologists’ organisations are in favour of the ban, others argue that it has violated European Union rules on free movement of goods. Pack2Go Europe, a Brussels-based organization representing European packaging manufacturers, says it will keep fighting the new law and hopes it doesn’t spread to the rest of the continent. “We are urging the European Commission to do the right thing and to take legal action against France for infringing European law,” Pack2Go Europe secretary general Eamonn Bates told AP. “If they don’t, we will.”

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