Feb 012022
 


Pablo Picasso Woman in an armchair (Olga) 1922

 

The Revolt Begins (Jim Kunstler)
Now Is the Time for Mass Resignations From Within the Ruling Class (Tucker)
Mandatory Covid Rules Morph Into Global Power-grab (Mitch Feierstein)
We Are All Canadian Truckers Now! (Ron Paul)
Trudeau Reappears To Denounce ‘Freedom Convoy’ Truckers (RT)
No 10 Set For U-turn Over Mandatory Covid Jabs For NHS Staff In England (G.)
Why Joe Rogan Remains The World’s Most Popular Podcaster (Cheong)
The Left Tries to Deplatform . . . Critics of Big Pharma? (Geraghty)
Since We’re Taking Shots…. (Denninger)
COVID-19-Infected HIV Patient Developed 21 Mutations (ET)
Documents via FOI from Pfizer (Delaney)
Newly Released State Memos Undercut Democrats’ Ukraine Impeachment Story (JTN)
JFK Revisited: Through the Looking Glass by Oliver Stone (Curtin)
Checkmate in Ukraine (Ritter)
Trudeau Tests Positive For Fascism (BBee)

 

 

 

 

The needle and the damage done…
https://twitter.com/i/status/1486436415390904321

 

 

(“Let’s Go, Brandon!”) And Let’s go, Canadian truckers!

The Revolt Begins (Jim Kunstler)

For now, the truckers seem determined to stick around and disrupt the Canadian capital. Their estimated 50,000 rigs could surround the city and create siege conditions, where food supplies and other goods won’t get in, starving the government into surrendering on its mandates and restrictions. So far, the local Ottawa police have stood by with a very light hand, and there are rumors that they are on the same page as the truckers against federal overreach. Will Mr. Trudeau resort to using the military to break up the revolt? Good luck with that. Like virtually every other “advanced” nation, Canada depends on trucks and truckers to move everything needed for everyday life. The truckers can just say no… we don’t feel like working this month. No poutine or Cornish pasties for you, Ottawa! Then what? Throw them all in jail? How will that help move stuff from Point A to Point B?

It kind of looks like they have Mr. T over a Molson barrel. For now, it’s a stand-off, but it looks to me like the Prime Minister must resign and whoever takes charge next will have to rapidly rethink the country’s entire Covid-19 policy in a not-insane direction. The Canadian revolt appears to be inspiring similar operations in the US, where a movement has started for a massive trucker convoy from California to Washington, DC — the swampy pivot-point of Covid tyranny under the phantasm known as “Joe Biden” — as a very general way of saying we’ve had enough of being pushed around by political grifters and their bureaucratic subalterns.The Covid-19 saga gets darker every day, while the official alibis, cover-stories, and disinfo ops bend ever deeper toward an arc of criminality. The US government has lied about every plot-line in the two-year horror show. In fact, a conscientious observer would have to conclude the following:

That the government’s highest-paid employee, Dr. Anthony Fauci, led surreptitiously in the creation and release of a bioweapon; that he and his cohorts, along with the pharma companies, and other interested parties such as the Bill and Melinda Gates Foundation and the World Health Organization, enabled the release of so-called “vaccines” (genetic treatments) that were at least as deadly as the disease itself; that as a result of the shots many people of all ages will die before their natural time; that the process is already underway as documented in the all-causes death data tallied by insurance companies; that the same government officials maliciously suppressed viable, inexpensive, FDA-approved treatments for Covid-19 in order to herd the populace into receiving dangerous “vaccines”; that said officials have worked strenuously to muddle and fake the statistics that would show who is actually dying of what; and that the entire fiasco appears to have been ginned up in order to systematically control the population in ways contrary to our natural rights while killing off a substantial number of us.

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Wishful thinking?

Now Is the Time for Mass Resignations From Within the Ruling Class (Tucker)

We’ve been assured by David Hume (1711–1776) and Etienne de la Boétie (1530–1563) that government rule is untenable when it loses the consent of the governed. “Resolve to serve no more,” wrote Boétie, “and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall off his own weight and break into pieces.” That’s inspiring but what does it mean in practice? What precisely is the mechanism by which the overlords in our time are effectively overthrown? We’ve seen this in totalitarian states, in states with one-man rule, in states with unelected monarchies.

But unless I’m missing something, we’ve not seen this in a developed democracy with an administrative state that holds the real power. We have scheduled elections but those are unhelpful when 1) elected leaders are not the real source of power, and 2) when the elections are too far in the distant future to deal with a present emergency. One very easy and obvious path away from the current crisis is for the ruling class to admit error, repeal the mandates, and simply allow for common freedoms and rights for everyone. As easy as that sounds, this solution hits a hard wall when faced with ruling-class arrogance, trepidation, and the unwillingness to admit past errors for fear of what that will mean for their political legacies. For this reason, absolutely no one expects the likes of Trudeau, Ardern, or Biden to humbly apologize, admit that they were wrong, and beg the people’s forgiveness. On the contrary, everyone expects them to continue the game of pretend so long as they can get away with it.

The people on the streets today, and those willing to tell pollsters that they are fed up, are saying: no more. What does it mean for the ruling class not to get away with this nonsense anymore? Presuming that they do not resign, they do not call off the dogs of mandates and lockdowns, what is the next step? My instincts tell me that we are about to discover the answer. Electoral realignment seems inevitable but what happens before then? The obvious answer to the current instability is mass resignations within the administrative state, among the class of politicians that gives it cover, as well as heads of media organs that have propagandized for them. In the name of peace, human rights, and the renewal of prosperity and trust, this needs to happen today. Bury the pride and do what’s right. Do it now while there is still time for the revolution to be velvet.

Justin French

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“It almost feels like China has taken over the world..”

Mandatory Covid Rules Morph Into Global Power-grab (Mitch Feierstein)

Enter 2020 and the China virus aka COVID-19. Why was no one allowed to focus or ask about treatment protocols? Instead, a financially conflicted, unelected, 80-year-old bureaucrat named Anthony Fauci dictated tyrannical policies with narratives that had more holes in them than a 100 Kilo block Swiss cheese. Lord Fauci ratcheted the level of public fear up to 11 out of ten and issued the first lie, “two weeks to stop the spread”. Next, he bristled, “masks don’t work”, later demanding “mandatory masks”. Fauci’s dictates became more dictatorial and changeable than a kindergartener’s game of “Simon says”. These mandatory Covid rules morphed into several years of the most unprecedented global and tyrannical power-grab ever made by governments.

Let’s be clear; this authoritarian creep is the greatest existential threat to our western system of freedom—free speech, democracy, and liberty—in history. It almost feels like China has taken over the world. The mantra: It is mandatory you take four doses of an experimental biological agent with questionable efficacy, or we will destroy you, for which the side effects seem underreported, and the effectiveness appears overstated. The dishonest media unleashed an army of apparatchik Karen’s anyone daring non-compliance. If this pandemic was so terrible as to allow government tyranny, destruction of SMEs, and the middle class, why have we not seen a massive increase in total year-on-year global morbidity rates? Now, after using coercion: the fear of death and or the denial to earn a living to force unwilling members of society to participate in mass medical experiments, we have unprecedented numbers of deaths of working-age people ages 18-64 occurring.

A massive number of unexplained deaths have been reported by all insurance companies in Q3 and Q4 of 2021 [..] Regarding these deaths, OneAmerica’s CEO stated, “It may not have said COVID on the death certificates, but deaths in this age group are up massively”. Actuarial data is generally the most accurate data available. We know mass participation in the Pfizer, Moderna, and Astra Zeneca medical experiments with unknown long-term consequences; could these deaths be related? Why is the media not all over his story?

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“..now that the Berlin Wall of the tyrants has been breached, it’s just a matter of time before the shockwaves are felt far and wide.”

We Are All Canadian Truckers Now! (Ron Paul)

We all remember where we were when the Berlin Wall came down. While it may have seemed that communist rule would go on forever, when the people decided that they had enough suddenly the wall fell. Just like that. Thus it is after two years of Covid authoritarianism that in Canada the largest truck convoy in history has smashed through the Berlin Wall of tyranny. I have watched as the Canada I once respected as a haven for antiwar Americans in the 1960s turned into one of the most repressive countries on earth. I wondered how a freedom-loving people could allow themselves to be abused by these mini-Stalins without a peep. But then Canada stood up and showed the rest of the world that freedom can triumph over tyranny if the people demand it. As I say, no army can stop an idea whose time has come.

Canadian prime minister Justin Trudeau had been basking in his ability to terrorize the population in the name of fighting a virus. He was so confident in his seemingly unlimited power that he felt he could ridicule any Canadian with different views. The prime minister said in a recent interview that unvaccinated Canadians were “extremists,” “misogynists,” and “racists.” When the Canadian truckers stood up to his tyranny and began their historic convoy to Ottawa, he thought he could continue ridiculing people. The truckers and their supporters were just a “small fringe minority” who hold “unacceptable views,” he confidently claimed. For Trudeau, love of liberty is just an “unacceptable view.”

Less than a week later, as tens of thousands of trucks began entering the capital with millions of supporters behind them, the “brave” Canadian prime minister had fled the city and shuffled off to an undisclosed location. As Elon Musk Tweeted, “It would appear that the so-called ‘fringe minority’ is actually the government.” The Canadian mainstream media is obviously just as obedient to the regime as ours. They ignored the Freedom Convoy for as long as possible. There was almost no reporting. Then, when it became impossible to ignore, they began to attack and ridicule instead of trying to report it accurately. It was disgusting and almost comical to see a “reporter” from the Canadian Broadcasting Corporation suggest that the Canadian Freedom Convoy was cooked up by Putin and the Russians!

Thousands of trucks have arrived in Ottawa. They demand an end to covid tyranny. They are backed by millions of citizens, who braved the Canadian winter at night to cheer the truckers on. This protest is so important because it’s not limited to Canada. The truckers are being supported worldwide, and a similar convoy is being planned from California to Washington, DC. In a US where grocery store shelves are increasingly bare, the truckers have more leverage than the powers-that-be would like to admit. If I were prime minister of totalitarian Australia or New Zealand – or most anywhere in Europe – I would be getting pretty nervous right now. Just as the Covid tyranny descended across the globe in a seemingly coordinated fashion, now that the Berlin Wall of the tyrants has been breached, it’s just a matter of time before the shockwaves are felt far and wide.

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“Nazi symbolism, racist imagery and desecration of war memorials”

Trudeau Reappears To Denounce ‘Freedom Convoy’ Truckers (RT)

Canadian Prime Minister Justin Trudeau reappeared in public after several days, criticizing the “Freedom Convoy” of truckers protesting his vaccine mandates in Ottawa as tainted by racist, Nazi extremists desecrating war memorials. After reports that he had been moved to an “undisclosed location” over the weekend due to security concerns, Trudeau emerged from hiding on Monday to announce that he tested positive for Covid-19 – despite having had it before, and being triple-vaccinated. He then held a virtual press conference to denounce the protest. “Canadians were shocked, and frankly disgusted by the behavior of some people protesting in our nation’s capital,” he said. “We are not intimidated by those who hurl insults and abuse at small business workers and steal food from the homeless.”


He also referenced reports in the Canadian media that at least three protesters climbed onto the National War Memorial and danced on the Tomb of the Unknown Soldier, and that a Nazi flag and a Confederate flag were spotted at the protest. “Nazi symbolism, racist imagery and desecration of war memorials” are not acceptable free speech but “an insult to memory and truth,” Trudeau said. “We won’t give in to those who fly racist flags, we won’t cave to those who engage in vandalism or dishonor the memory of our veterans.” Trudeau also appealed to the “nearly 90% of truckers who’ve gotten vaccinated” who he said were doing the right thing by continuing to work, saying that “the behavior on display this weekend does not represent you.” “You can rely on us to continue to stand with you and allow you to do your jobs safely,” the PM added.

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80,000 is a big number…

No 10 Set For U-turn Over Mandatory Covid Jabs For NHS Staff In England (G.)

Downing Street appears likely to drop its policy of dismissing frontline NHS and care staff in England who refuse Covid vaccinations, a minister has strongly indicated, after nursing and care organisations called for this to happen. A decision would be made “in the course of the next few days”, according to Simon Clarke, the chief secretary to the Treasury. He said the lower severity of the Omicron variant of Covid did “open a space” for the policy to be reversed. The apparent imminent U-turn came as the Royal College of Nursing argued that both the change in severity from Omicron and the number of NHS vacancies meant the mandatory vaccination policy should be dropped.

The National Care Association said it would also welcome a change of policy, while warning that many unvaccinated care staff had already lost their jobs in the run-up to the 1 April deadline. Speaking in a TV clip on a visit to Essex, Boris Johnson also indicated a likely change, saying Sajid Javid, the health secretary, “is saying a bit more later on about how you might deal with different variants of coronavirus because they have different implications when it comes to transmission”. The Guardian reported this month that an internal document drawn up by the Department of Health and Social Care said the growing evidence on the Omicron variant cast doubts over the new law’s “rationality” and “proportionality”.

Asked about reports of a change to the policy, Clarke told Sky News that ministers had hoped to find “the right balance between having the maximum impact for measures that support public safety in the face of the virus, but also have the minimum impact in terms of our wider freedoms as a society”. He added: “And it’s in that context that a decision was made last autumn to make sure we went ahead with the mandatory vaccination policy, and that was because, obviously, we had the Delta variant, which was extremely dangerous, and was taking a huge toll on our society, and we had to make sure that people going into hospital, very vulnerable people, whether they had Covid or another condition which required treatment, weren’t going to be faced with an increased risk of infection on the wards.

“We continue to monitor that situation very, very closely. What we know about Omicron is that it is much, much more transmissible but less severe – any decision that is taken this week will reflect that reality.

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“..the signatories of the open letter to Spotify declared the episode a “mass-misinformation event” and used it as an example to bill Rogan as a menace to public health.”

Why Joe Rogan Remains The World’s Most Popular Podcaster (Cheong)

While ‘The Joe Rogan Experience’ has enough content to drive itself, much of the public curiosity about the show has been fanned by the hatred the corporate media has for its host. Described by CNN in 2020 as “libertarian-leaning,” Rogan has voted for a wide variety of political candidates, including Libertarian Party nominees Ron Paul and Gary Johnson in 2012 and 2016, and even endorsed left-winger Bernie Sanders in the 2020 Democratic primaries. His politics are fairly middle of the road in terms of American politics. He’s fiscally conservative, but somewhat socially progressive, drawing the line when it comes to open borders, transgenderism in children, the participation of biologically male athletes in women’s sports, and high taxes. He’s also a strong supporter of free speech and the right to bear arms, which places him at odds with the majority of Democrats.

His remarks about transgenderism in sport became a bone of contention for Sanders’ progressive supporters, who described his views as “transphobic.” The subsequent outrage in gay, trans, and other communities over the senator’s embrace of Rogan’s endorsement was one of the more intricate and multifaceted political controversies of the election. In 2021, Rogan kicked the hornet’s nest when he was infected with coronavirus. Having been unvaccinated, he opted to use the antiparasitic drug ivermectin, monoclonal antibody therapy, and a host of other controversial treatments to aid his recovery. CNN claimed he had consumed “horse dewormer” – a point he took up with CNN fixture Dr. Sanjay Gupta when the neurosurgeon was a guest on his podcast. While ivermectin is used in veterinary medicine, it’s also approved for humans, and Rogan said it had been prescribed to him by a doctor – although the US Food and Drug Administration has never approved it as a treatment for Covid-19.

Rogan’s refusal to be vaccinated, his opposition to vaccine mandates, and his willingness to give airtime to guests who have been accused of “spreading medical misinformation” have resulted in numerous calls to get him deplatformed. More recently, he became the target of 270 “experts” – not all of whom, it should be noted, are medical professionals – who objected to the podcast having featured Dr. Robert Malone, one of the co-creators of the mRNA vaccine, because of the views he had expressed in it about the pandemic. Dr. Malone has been banned from Twitter for violating the platform’s Covid-19 misinformation policies, and the signatories of the open letter to Spotify declared the episode a “mass-misinformation event” and used it as an example to bill Rogan as a menace to public health.

‘Godfather of Grunge’ Neil Young then issued the platform with an ultimatum: that he would remove his music unless it removed Rogan, and then following through with his warning. Several other musicians, including Joni Mitchell, then followed suit. In an apparent concession, Spotify’s CEO announced new policies on “combating misinformation” about Covid-19, albeit without referencing Rogan by name. The streaming service will now make sure its creators “understand accountability” for posting “dangerous” content that dismisses Covid-19 as “a hoax” and “promotes or suggests” that coronavirus vaccines “are designed to cause death,” and listeners will be directed to “trusted sources” on these issues.

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“Voices on the left are now up in arms because Rogan is showcasing the arguments of critics of Big Pharma.”

The Left Tries to Deplatform . . . Critics of Big Pharma? (Geraghty)

You may love Joe Rogan, you may hate him, or you may not have strong feelings about him. I suspect that many of people who profess to hate Joe Rogan have either never listened to him or have listened to little more than a snippet. Zaid Jilani observed, “It’s interesting seeing so many conservatives rally around Joe Rogan when he’s probably more liberal than 90 percent of Americans. Agnostic dude who loves drug legalization, Bernie Sanders, thinks the CIA is awful, etc.” He later made the accurate point that the “average episode of Rogan is about [mixed-martial arts] or drugs and these folks think it’s like a Satanic cult ritual.”


Perhaps conservatives are rallying around Joe Rogan because they don’t need a figure to agree with 100 percent of their worldview in order to conclude that he is worth defending from an angry mob that desires censorship of differing views. It’s very clear that the people who are the most determined to “deplatform” Rogan — to force Spotify to cancel his show, and likely with that, get his videos off of YouTube as well — are battling a cartoon-like caricature that they’ve drawn in their heads. If you listen to Rogan defend his choices in a recently taped video, you’ll see that he’s not a lunkhead, and seems the opposite of a wide-eyed extremist ideologue, hungry to hammer a twisted narrative into brainwashed followers:

“There’s a lot of people who have a distorted perception of what I do — maybe based on soundbites or based on headlines of articles that are disparaging. The podcast has been accused of spreading dangerous misinformation. Specifically, about two episodes — a little about some other ones, but specifically about two. One with Dr. Peter McCullough and one with Dr. Robert Malone. Dr. Peter McCullough is a cardiologist, and he is the most published physician in his field in history. Dr. Robert Malone owns nine patents on the creation of MRNA-vaccine technology and is at least partially responsible for the creation of the technology that led to MRNA vaccines. Both these people are very highly credentialed, very intelligent, very accomplished people and they have an opinion that is different from the mainstream narrative. I wanted to hear what their opinion is. I had them on, and because of that, those episodes in particular, were labeled as being dangerous, had dangerous misinformation in them.

The problem I have with the term disinformation, especially today, is that many of the things we thought of as misinformation a short while ago are now accepted as fact. For instance, eight months ago, if you said, “If you get vaccinated, you can still catch Covid, and you can still spread Covid” — you would be removed from social media. They would ban you from certain platforms. Now, that’s accepted as fact. If you said, “I don’t think cloth masks work,” you would be banned from social media. Now, that’s openly and repeatedly stated on CNN. If you said I think it’s possible that Covid-19 came from a lab, you would be banned from many social-media platforms. Now that’s on the cover of Newsweek.* All of those theories, that at one point in time were banned, were openly discussed by those two men that I had on my podcast, that have been accused of “dangerous misinformation.” I do not know if they’re right. I don’t know, because I’m not a doctor, I’m not a scientist. I’m just a person who sits down, and talks to people, and has conversations with them. Do I get things wrong? Absolutely. I get things wrong. But I try to correct them. Whenever I get things wrong, I try to correct them. Because I’m interested in telling the truth.”

For a guy who’s supposed to be a dangerous megalomaniac who’s indoctrinating people into a hardline, deceitful ideology, Rogan seems awfully humble about what he knows and doesn’t know. De-platform Joe Rogan? We should give him a medal and hold him up as a role model for conducting probing, open-minded, respectful interviews. Want to know something spectacularly ironic? Drs. McCullough and Malone are opponents of Covid-19 vaccines in large part because of their skepticism and suspicion of the profit motive of big pharmaceutical companies. Voices on the left are now up in arms because Rogan is showcasing the arguments of critics of Big Pharma.

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“..an impossibility unless the vaccine was interfering with building that titer or destroyed existing antibody titers if jabbed after being infected and recovered.”

Since We’re Taking Shots…. (Denninger)

It is impossible to inject something without some of it ending up in the circulation — that is, in and around the endothelium. That begs the obvious question as to which is more-dangerous: A definite exposure of your endothelium to the spike from an injection or a possible one from infection if, and only if, you get severely hammered? Nobody knows and nobody has done the work to find out. Despite the signal in December of 2020 we went ahead anyway without first disproving that the balance of harms went the wrong way especially in healthy, low-risk individuals.

On top of this we knew very early on that there was no reduction in transmission from the jabs; a person who had a “breakthrough” was just as infectious (per Fauci and the CDC itself) and thus might be more-dangerous because by hiding symptoms you make the problem worse. If I do not know I’m sick I will not self-isolate in my home since I have no reason to suspect I’m infected. An inoculation that does not prevent infection, replication or transmission but prevents symptom expression is thus not only bad from a public health perspective its disastrous. Indeed one can reasonably make the argument that intentional blinding of symptoms is involuntary manslaughter. We have historical precedent for this, incidentally, in the fiasco surrounding the DTP vaccine in the 1970s and the twenty-fold higher case rate for pertussis today after the formula for that jab was changed to DTaP, a non-sterilizing inoculation that prevents neither infection or transmission. Do you think I can’t read history and the CDC’s own data on pertussis cases?

What’s worse is that we now know the jabs don’t work with any degree or durability at all. How do we know this? Because the CDC has proved it with their own contemporary data, that’s how. The >65 cohort is the most vaccinated in the United States. Indeed, the CDC says that 88.3% of those >65 have been fully vaccinated, and 64.3% have received boosters, that is, the third shot.

The proof they don’t work is that the CDC also reports that hospitalization among those >65 for Covid is roughly as high or higher this winter as it was last winter when there were no shots. With nearly 90% of that age cohort fully vaccinated across the entire United States if the jabs worked to prevent severe disease we would see a ratable decrease in hospitalization among that cohort. Indeed, since we know natural immunity is protective against severe disease for much longer than the jabs, at least one year, again by the CDC’s own data, if the jabs did nothing we’d expect to see a lower rate among that segment of the population simply because many of them already had the virus and survived. There are simply not enough unvaccinated and uninfected seniors remaining if the jabs work and yet there is in fact no decrease at all compared with last winter’s surge among the most-vaccinated population subgroup.

This strongly implies that what the jabs are doing is producing VEI (vaccine-enhanced infection); that is, causing actual harm and either wildly potentiating first infections or, far worse, destroying immunity from infection whether prior to or subsequent to vaccination such that people are getting the virus a second or subsequent time and not mildly either; they’re getting hammered since this is not relying on “infections”, it’s hospitalizations. We knew the latter was likely this summer, incidentally, because “N” protein seroprevalence in Britain flatlined during Delta — an impossibility unless the vaccine was interfering with building that titer or destroyed existing antibody titers if jabbed after being infected and recovered.

Never mind that there’s evidence these jabs may be back-boosting other common coronaviruses. That was known to be a risk in May of 2021. We see that in the data too; people showing up in the ER and Urgent Care with “covid-like illness” but they don’t have Covid, and a huge percentage of them are vaccinated. Are these jabs turning the common OC43 and HKU1 coronaviruses, that usually produce mild colds, into severe disease events? Maybe — and we knew they might in May of last year but didn’t bother to follow up on that either. Since OC43 is believed to have been the cause of a Covid-like pandemic in the 1890s if this proves up we will have screwed millions of Americans — or even perhaps tens of millions — instead of helping them.

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“Once again our experience reinforces previous reports that effective [anti-retroviral drugs are] the key to controlling such events.”

COVID-19-Infected HIV Patient Developed 21 Mutations (ET)

A South African woman suffering from “poorly controlled” HIV who also had COVID-19 for nine months saw the CCP virus develop at least 21 mutations while in her body, a recent preprint study found. The woman, 22, was able to overcome the CCP (Chinese Communist Party) virus which causes COVID-19, within six to nine weeks after she started taking anti-retroviral medication that is used to treat HIV, according to researchers at Stellenbosch and the University of KwaZulu-Natal. They concluded that “increased vigilance is warranted” among HIV patients who contract COVID-19 to “prevent the emergence” of COVID-19 variants. Notably, the Omicron variant was first discovered in South Africa in November 2021, and U.S. health officials say it’s now the dominant strain across the United States.

“This case, like others before, describes a potential pathway for the emergence of novel variants,” the scientists said in the pre-print study, adding that it is still a hypothesis and much more data is needed. “Our experience reinforces previous reports that effective anti-retroviral treatment is the key to controlling such events.” South Africa has the world’s largest HIV epidemic. About 8.2 million of out its 60 million population is infected with the virus. According to the researchers, the patient observed in the study had developed around 10 mutations on the CCP virus spike protein, which allows it to bind to cells, along with 11 other mutations. Some of the mutations were similar to those seen in the Omicron and Lambda variants, whereas others were consistent with mutations that allow the virus to bypass antibodies.

“Once again our experience reinforces previous reports that effective [anti-retroviral drugs are] the key to controlling such events. Once HIV replication is brought under control and immune reconstitution commences, rapid clearance of [the CCP virus] is achieved, probably even before full immune reconstitution occurs,” they said. “This underscores the broader point that gaps in the HIV care cascade need to be closed which will benefit other conditions and public health problems, too, including COVID-19.”

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Twitter thread with 11 clips. I lifted out nrs 7 and 8, where Dr. Nagase describes the process that -potentially- allows mRNA to enter and transform your DNA.

Documents via FOI from Pfizer (Delaney)

Documents via FOI from Pfizer… from over 40000 test subjects 31% suffered death & life long complications. Information was SENT to government health authorities in APRIL 2021

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I can’t read the name Nuland without getting shivers.

Newly Released State Memos Undercut Democrats’ Ukraine Impeachment Story (JTN)

Just months before Joe Biden forced his firing, Ukraine’s chief prosecutor was told by U.S. State Department officials that they were “impressed” with his anti-corruption plan and fully supportive of his work, according to newly released memos that cast doubt on a key Democrat impeachment narrative. During former President Donald Trump’s first impeachment trial two years ago, House Democrats alleged that Ukrainian Prosecutor General Viktor Shokin was fired in March 2016 because State officials were widely displeased with his anti-corruption efforts and not because Shokin’s office was investigating the Ukrainian gas firm that had given then-Vice President Biden’s son Hunter a lucrative job.

But the memos obtained by Just the News and the Southeastern Legal Foundation under a Freedom of Information Act request show senior State Department officials — including then-Secretary of State John Kerry — were sending the opposite message to Shokin the summer before his firing. “We have been impressed with the ambitious reform and anti-corruption agenda of your government,” then-Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland personally wrote Shokin in an official letter dated June 9, 2015 that was delivered to the prosecutor two days later by then-U.S. Ambassador Geoffrey Pyatt.

Nuland, now President Biden’s undersecretary of state, wrote that “Secretary Kerry asked me to reply on his behalf” to let Shokin know he enjoyed the full support of the United States as he set out to fight endemic corruption in the former Soviet republic. “The ongoing reform of your office, law enforcement, and the judiciary will enable you to investigate and prosecute corruption and other crimes in an effective, fair, and transparent manner,” Nuland added. “The United States fully supports your government’s efforts to fight corruption and other crimes in an effective, fair and transparent manner.”

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“..this Nation, for all its hopes and all its boasts, will not be fully free until all its citizens are free.”

JFK Revisited: Through the Looking Glass by Oliver Stone (Curtin)

Two of the greatest speeches ever delivered by an American president bookend this extraordinary documentary film. It opens with President John F. Kennedy giving the commencement speech at American University on June 10, 1963 and it closes with his civil rights speech to the American people the following day. It is a deft artistic touch that suggests the brevity of JFK’s heroic efforts for world peace and domestic racial equality and justice before he was assassinated in a public execution in Dallas, Texas on November 22, 1963. In the former anti-war speech, he called for the end to the Cold War with the Soviet Union, the halt to the arms race, and the abolishment of war and its weapons, especially nuclear. He said:

“What kind of peace do I mean? What kind of peace do we seek? Not a Pax Americana enforced on the world by American weapons of war. Not the peace of the grave or the security of the slave. I am talking about genuine peace, the kind of peace that makes life on earth worth living, the kind that enables men and nations to grow and to hope and to build a better life for their children – not merely peace for Americans but peace for all men and women – not merely peace in our time but peace for all time.” In the latter address to the American people, having just sent National Guard troops to the University of Alabama to make sure two black students were admitted despite the racist objections of Governor George Wallace, his words transcended the immediate issue at the university and called for the end to the immoral and illegal discrimination against African Americans in every area of the nation’s life. He said:

“One hundred years of delay have passed since President Lincoln freed the slaves, yet their heirs, their grandsons, are not fully free. They are not yet freed from the bonds of injustice. They are not yet freed from social and economic oppression. And this Nation, for all its hopes and all its boasts, will not be fully free until all its citizens are free.” Having framed the documentary thus, Oliver Stone and the screenwriter James DiEugenio do a masterful job of explaining what really happened in the years of Kennedy’s short presidency, why he was such a great threat to the CIA and the military-industrial complex, what really happened when they killed him, and how the Warren Commission, the CIA, and the corporate media have worked hand-in-hand to this day to cover up the truth.

The current two-hour version of JFK Revisited: Through the Looking Glass will be followed in a month or so by a more detailed four-hour version. The importance of this film is twofold: It establishes an updated historical record since the Assassination Records Review Board (AARB) was established as a result of Stone’s 1991 breakthrough film, JFK, which forced the release of previously hidden documents, and, more importantly, it emphatically shows why JFK’s assassination is crucial for understanding the United States today. For without a clear and unambiguous accounting of why he was killed and by whom (I do not mean the actual shooters), and who in the government and media has covered it up, we are doomed to repeat the past as this country has been doing ever since.

Read more …

“Russia has already declared that banning it from the Swift system for international monetary transactions will result in the immediate halt of Russian energy supplies to Europe.”

Checkmate in Ukraine (Ritter)

Despite the repeated Western warnings, Russia is highly unlikely to invade Ukraine — at least not yet. Instead, Russia appears to be entering a new phase of crisis management that seeks to exploit the weaknesses in the U.S./NATO alliance highlighted by their written responses to its demands. First, Russia will keep the diplomatic option open, but on its terms. Moscow has already engaged in so-called Normandy Format talks involving Russia, France, Germany and Ukraine over the ongoing crisis in Donbas. In the initial meeting, all parties agreed to respect the cease-fire in effect and to meet again in 10 days — the exact opposite of any imminent invasion by Russia. Note the absence of the U.S. and NATO from these talks.

Next, Russia will turn the threat of sanctions against the U.S. and Europe. Russia has already declared that banning it from the Swift system for international monetary transactions will result in the immediate halt of Russian energy supplies to Europe. Russia is expected to sign major economic agreements with China soon that will further insulate it from economic sanctions. China has made it clear it supports Russia in the current crisis, recognizing that if the West prevails against Russia, it will soon face a similar attack. Finally, Russia will exploit U.S. hypocrisy on spheres of influence and military alliances by entering military relationships with Cuba, Venezuela and Nicaragua and deploying a naval squadron to the Caribbean, with the potential for additional force deployments in the future.

With these three measures, Russia seeks to further isolate the U.S. from NATO and Europe. In the end, the U.S. will be confronted with one of two options, either agree to trade NATO’s open-door policy for Russian agreement not to deploy into the Western Hemisphere, or force a confrontation that will result in a Russian invasion of Ukraine that is seen by Europe as being the fault of the U.S.. The chess pieces are already being moved. While the U.S. may not see it, a Russian checkmate can be predicted sooner, rather than later.

Read more …

“..his replacement glue-on vanity eyebrows are still stuck on a delivery truck somewhere..”

Trudeau Tests Positive For Fascism (BBee)

From an undisclosed hiding place outside Canada’s capital city, Prime Minister Justin Trudeau confirmed for the world that he has tragically tested positive for fascism. “I took the fascism test this morning,” said Trudeau, beginning to sob. “And the test came back positive. I understand this may come as devastating news to freedom-loving Canadians, and I am here to assure you that everything will be ok… after I crush you underneath the jackboot of government tyranny until you learn to start obeying me.” “Together, we will achieve strength through unity, and unity through faith. In SCIENCE.”

According to sources, Trudeau will remain in his hiding place under quarantine until all the scary protesting truckers go away, after which he will emerge to grind his people into the very dust until they accept his vision for a glorious fascist future for Canada. Fortunately, his plans have been delayed as his replacement glue-on vanity eyebrows are still stuck on a delivery truck somewhere, and the fascist dictator refuses to be seen without them.

Read more …

 

 

 

 

 

• Merck’s COVID-19 pill encourages sexually actively men “to use a reliable method of contraception correctly and consistently during treatment and for at least 3 months after the last dose of molnupiravir. The risk beyond 3 months after the last dose of molnupiravir is unknown..“

• Paxlovid interacts with 32 classes of drugs. Not 32 drugs….32 classes.

• Both are apparently less toxic than ivermectin per the FDA.

 

 

 

 

 

 

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May 202018
 
 May 20, 2018  Posted by at 2:20 pm Finance Tagged with: , , , , , , , , , ,  4 Responses »


Vittorio Matteo Corcos Conversation in the Jardin du Luxembourg 1892

 

Obviously, there are tensions between Europe and the US. Just as obviously, these tensions are blamed on, who else, Donald Trump. European Council President Donald Tusk recently said: “With friends like Trump, who needs enemies?” EU Commission chair Jean-Claude Juncker even proclaimed that “Europe must take America’s place as global leader”.

These European ‘leaders’ love the big words. They think they make them look good, strong. In reality, they are merely messenger boys for Berlin and Paris. Who have infinitely more say than Brussels. Problem is, Berlin and Paris are not united at all. Macron wants more Europe, especially in finance, but Merkel knows she can’t sell that at home.

So what are those big words worth when the whip comes down? It’s amusing to see how different people reach wholly different conclusions about that. Instructive and entertaining. First, Alex Gorka at The Strategic Culture Foundation, who likes the big words too: “..a landmark event that will go down in history as the day Europe united to openly defy the US.” and “May 17 is the day the revolt started and there is no going back. Europe has said goodbye to trans-Atlantic unity. It looks like it has had enough.

 

Brussels Rises In Revolt Against Washington: A Turning Point In US-European Relations

The May 16-17 EU-Western Balkans summit did address the problems of integration, but it was eclipsed by another issue. The meeting turned out to be a landmark event that will go down in history as the day Europe united to openly defy the US. The EU will neither review the Iran nuclear deal (JPCOA) nor join the sanctions against Tehran that have been reintroduced and even intensified by America.

Washington’s unilateral withdrawal from the JPCOA was the last straw, forcing the collapse of Western unity. The Europeans found themselves up against a wall. There is no point in discussing further integration or any other matter if the EU cannot protect its own members. But now it can.

[..] As European Council President Donald Tusk put it, “With friends like Trump, who needs enemies?” According to him, the US president has “rid Europe of all illusions.” Mr. Tusk wants Europe to “stick to our guns” against new US policies. Jean-Claude Juncker, the head of the EU Commission, believes that “Europe must take America’s place as global leader” because Washington has turned its back on its allies.

Washington “no longer wants to cooperate.” It is turning away from friendly relations “with ferocity.” Mr. Juncker thinks the time is ripe for Europe “to replace the United States, which as an international actor has lost vigor.” It would have been unthinkable not long ago for a top EU official to say such things and challenge the US global leadership. Now the unthinkable has become reality.

[..] Sandra Oudkirk, US Deputy Assistant Secretary of State for Energy, has just threatened to sanction the Europeans if they continue with the Nord Stream 2 pipeline project to bring gas in from Russia across the Baltic Sea.

[..] President Donald Trump has just instructed Secretary of State Mike Pompeo to prepare a list of new sanctions against the Russian Federation for its alleged violations of the 1987 Intermediate-Range Nuclear Forces (INF) Treaty. [..] But nobody in Europe has announced that they want US nuclear-tipped intermediate- range weapons on their territory that will be a target for a potential retaliatory strike by Russia.

[..] The time is ripe for Brussels to stop this sanctions-counter-sanctions mayhem and stake out its own independent policies on Russia, Iran, defense, and other issues, that will protect European, not US, national interests. May 17 is the day the revolt started and there is no going back. Europe has said goodbye to trans-Atlantic unity. It looks like it has had enough.

As for placing new nukes in Europe, that will be a hard sell. But the US will probably find countries that say yes, provided they are compensated well. Just don’t try it in Holland, Germany or France. But also don’t forget the amount of nukes already on the continent: just call it an upgrade.

Nord Stream 2 is tricky, but mostly an economic issue: Trump wants to sell American gas to Europe, and uses the bad bad Putin narrative to make that happen. Still, the pipeline has been in the pipeline for a long time, and a lot of time and money has been spent on it. It’ll be hard for the US to cut it off at this late stage.

When it comes to claiming the EU will not review the Iran nuclear deal, isn’t that exactly what they are indeed doing? Reuters:

 

Europe, China, Russia Discussing New Deal For Iran

Under the 2015 deal, Iran agreed to curb its nuclear program in return for the lifting of most Western sanctions. One of the main complaints of the Trump administration was that the accord did not cover Iran’s missile program or its support for armed groups in the Middle East which the West considers terrorists.

Concluding a new agreement that would maintain the nuclear provisions and curb ballistic missile development efforts and Tehran’s activities in the region could help convince Trump to lift sanctions against Iran, the paper said. “We have to get away from the name ‘Vienna nuclear agreement’ and add in a few additional elements. Only that will convince President Trump to agree and lift sanctions again,” the paper quoted a senior EU diplomat as saying.

All in all, Mr. Gorka doesn’t convince me. Europe doesn’t speak with one voice, and we wouldn’t even know which voice speaks for it. Just that it isn’t Juncker or Tusk, they’re handpuppets. Moreover, Europe has so many internal issues to deal with that it has a hard time speaking at all. A landmark event in US-EU relations may happen one day, but May 17 wasn’t it.

What I find more interesting is the account of academic John Laughland, ‘a historian and specialist in international affairs’, at RT:

 

With Iran Sanctions Trump Made Europeans Look Like The Fools They Are

Donald Tusk may say “Europe must be united economically, politically and also militarily like never before … either we are together or we are not at all” but Europe is indeed not “together” at all. The Brussels commission is hounding Poland and Hungary on what are clearly internal political matters beyond the Commission’s remit; the EU is about to lose one of its most important member states; and a new government is going to take power in Rome whose economic policies (a flat tax at 15%) will blow the eurozone’s borrowing rules out of the water and perhaps cause Italy to leave the euro.

The Italian 5-Star/League government also wants an end to the EU sanctions against Russia; these are voted by a unanimity which, although fragile, has held until now but which, if the new power in Rome keeps its word, will shortly collapse. In other words, what Trump has done is to make the Europeans look like the fools they are. In circumstances in which the EU has placed all its eggs in one basket, a basket which Trump has now overturned, it will be impossible for it to come together. On the contrary, it is falling apart.

[..] the EU draws its entire legitimacy from the belief that by pooling sovereignty and by merging its states into one entity, it has advanced beyond the age when international relations were decided by force. It believes that it embodies instead a new international system based on rules and agreements, and that any other system leads to war. It is impossible to exaggerate the importance of this belief for European leaders; yet Donald Trump has just driven a coach and horses through it.

The angry statements by European leaders might lead one to think that we are on the cusp of a major reappraisal of trans-Atlantic relations. However, the reality is that the EU and its leaders have painted themselves into a corner from which it will be very difficult, perhaps impossible, to extricate themselves.

Like I said, completely different conclusions based on the exact same events. The EU risks what might turn into an existential crisis with Beppe Grillo effectively holding the reins of power in Rome. The new government may have dropped the demand for a €260 billion debt relief, but the basic income plan is still there, and so is dropping Russian sanctions.

The new guys can’t divert from their election promises much further, they need to maintain their credibility. But for a lot of their promises it is not at all clear how they could possible fit into the present EU structure. Try their demand for a mechanism to leave the EU.

Italy is so large that Brussels cannot be too aggressive against it. The ECB cannot stop buying Italian bonds, as it did with Greek ones. And at some point the debt relief demand will return too.

But Laughland has a lot more cold water to pour on the alleged but toothless European revolt. In the shape of NATO. This is scary for every European:

 

[..] the links between the EU and the US are not only very long-standing, they are also set in stone. NATO and the EU are in reality Siamese twins, two bodies born at the same time which are joined at the hip. The first European community was created with overt and covert US support in 1950 in order to militarize Western Europe and to prepare it to fight a land war against the Soviet Union; NATO acquired its integrated command structure a few months later and its Supreme Commander is always an American.

Today the two organizations are legally inseparable because the consolidated Treaty on European Union, in the form adopted at Lisbon in 2009, states that EU foreign policy “shall respect” the obligations of NATO member states and that it shall “be compatible” with NATO policy. In other words, the constitutional charter of the EU subordinates it to NATO, which the USA dominates legally and structurally. In such circumstances, European states can only liberate themselves from US hegemony, as Donald Tusk said they should, by leaving the EU. It is obvious that they are not prepared to do that.

Anything else about those dreams of standing up to Trump? Have the past and present leaders in Brussels, and in Berlin and Paris and Rome, betrayed their own citizens? Sold them out? How far removed is this from treason? And does this perhaps indicate that it’s high time for a complete and utter overhaul of the European Union?

It sure sounds a lot more realistic than Europe replacing America as the global leader.

Who needs enemies? NATO does.

 

 

May 012017
 
 May 1, 2017  Posted by at 9:29 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


Walker Evans Air 1930s

 

40% of Americans Spend Up To Half Of Their Income Servicing Debt (MW)
Are American Debt Slaves Getting in Trouble Again? (WS)
Congress Agrees $1 Trillion Budget Deal – But No Money For Border Wall (G.)
Trump Tax Plan ‘Dead On Arrival’, Wall Street ‘Delusional’ – Stockman (CNBC)
Economics Is A Form Of Brain Damage (RWE)
Why The Reflation Trade Is About To Fizzle (ZH)
If Rates Ever Rise Above 3.5% “It Would Spark Massive Defaults” (ZH)
Toronto Is The King Of Risky Mortgage Debt (BD)
Canada’s Home Capital Distress and the Contagion Odds (BBG)
A Perspective on Electric Vehicles (Science Errors)
For A Treaty Democratizing Euro Area Governance (SE)
Macron Says EU Must Reform Or Face ‘Frexit’ (BBC)
Europe’s Youth Don’t Care To Vote—But They’re Ready To Join A Mass Revolt (Qz)
Schaeuble Says Greece Has Made Good Reform Progress (R.)

 

 

“..many consumers in the survey also said they’re spending up to 40% of their income on discretionary purchases such as entertainment, leisure, hobbies and travel. And a quarter said they are prone to “excessive” and “frivolous” spending.”

40% of Americans Spend Up To Half Of Their Income Servicing Debt (MW)

Americans are struggling to get out of the red. Some 40% of Americans with debt are spending up to half of their monthly income paying it back. And that may not even be enough to cover how much they owe. That’s according to a study on debt Thursday released by Northwestern Mutual, a life insurance and financial services company. The polling company Harris Poll surveyed more than 2,000 U.S. adults in February 2017 on behalf of Northwestern Mutual. The survey found that nearly half of Americans are carrying at least $25,000 in debt, with an average debt of $37,000, excluding mortgage payments. About one in 10 surveyed said their debt was more than $100,000. “It becomes an ongoing cycle and really hard to get out of, given that people are not prioritizing debt and saving for their future as the first part of their budget,” Rebekah Barsch at Northwestern Mutual said.

Debts that are investments in the future, including mortgages and student loans, can be beneficial in consumers’ long-term financial plans, Barsch added. But many consumers in the survey also said they’re spending up to 40% of their income on discretionary purchases such as entertainment, leisure, hobbies and travel. And a quarter said they are prone to “excessive” and “frivolous” spending. Previous studies have shown similar results. The Federal Reserve announced in early April that collective American credit-card debt had hit $1 trillion. And total household debt, including mortgages, auto loans, credit card debt and student loans, had hit nearly $12.6 trillion. Housing-related debt is down nearly $1 trillion since its 2008 peak, but auto loan balances are $367 billion higher since then and student loans are $671 billion higher, the Fed found.

Mortgages made up 67% of the debt total in 2016. As a result, about 21% of Americans aren’t saving any of their income, according to an April survey from personal finance site Bankrate.com. When asked why they aren’t saving more, 38% of people said they had too many expenses, about 16% said they simply “hadn’t gotten around to” saving, 16% said they didn’t have a good enough job and 13% said they were struggling with debt. The amount each individual or family should put toward their debt is different, Barsch said. She recommended automatically allocating the largest percentage of one’s paycheck possible to high-interest debt and putting discretionary spending at the bottom of the priority list.

Read more …

Same study, slightly different angle.

Are American Debt Slaves Getting in Trouble Again? (WS)

American consumers are holding $1 trillion in revolving credit, mostly in credit card debt. So how well is this segment of consumer debt holding up? Synchrony Financial – GE’s spin-off that issues credit cards for Walmart and Amazon – disclosed on Friday that, despite assurances to the contrary just three months ago, net charge-off would rise to at least 5% this year. Its shares plunged 16% and are down 27% year-to-date. Credit-card specialist Capital One disclosed in its Q1 earnings report last week that provisions for credit losses rose to $2 billion, with net charge-offs jumping 28% year-over-year to $1.5 billion.

Synchrony, Capital One, and Discover – a gauge of how well over-indebted consumers are managing to hang on – have together increased their Q1 provisions for bad loans by 36% year-over-year. So this is happening. Other worries about consumer debt in the US are piling up. The $1.4 trillion in student loans are already in crisis, though the government backs them, and they cannot be charged off in bankruptcy. Mortgage debt is still hanging in there, given the surge in home prices that make defaults unlikely. But of the $1.1 trillion in auto loans, subprime loans packaged into asset backed securities are getting crushed by net charge-off rates that are worse than during the Financial Crisis.

The US economy is fueled by credit. Americans turning themselves into debt slaves makes it tick. Take it away, and what little growth there is – nearly zero in the first quarter – will dissipate into ambient air altogether. So it’s time to take the pulse of our American debt slaves In a new study, life insurer and financial services provider Northwestern Mutual found that 45% of Americans that have debt spend “up to half of their monthly income on debt repayment.” Those are the true debt slaves. Excluding mortgage debt, American carry an average debt of $37,000. Of them, 47% carry $25,000 or more, and more than 10% carry $100,000 or more in debt, excluding mortgage debt. Most of them expect to get out of debt before they die, but 14% expect to be in debt “for the rest of their lives.”

This debt adds stress. About 40% said that debt has a “substantial” or “moderate” impact on their financial security; and about as many consider debt a “high” or “moderate” source of anxiety. Given the rising defaults, this is likely to get worse. And what changes would most positively affect their financial situations? The top two: earning more money (29%) and getting rid of debt (26%). Alas, those two, for many people, are precisely the most elusive factors in the current economy. But there is a lot of irony in how Americans look at debt. The study asked them what they would do with a $2,000 windfall: 40% said they’d pay down debt. And this is the irony: they’d pay down their maxed out credit cards, but a few months later, their credit cards would be maxed out again, and thus that $2,000 would be consumed. Because the money always has to get spent.

Read more …

Just in time for recess?!

Congress Agrees $1 Trillion Budget Deal – But No Money For Border Wall (G.)

Negotiators have reached a bipartisan agreement on a spending package to keep the US federal government funded until the end of September, according to congressional aides. The House of Representatives and Senate must approve the deal before the end of Friday and send it to the president, Donald Trump, for his signature to avoid the first government shutdown since 2013. Congress is expected to vote early this week on the agreement that is likely to include increases for defense spending and border security. No money will be allocated for Trump’s pet project of a border wall with Mexico after he bowed to Democratic resistance to the plan. However, the deal will allocate an additional $1.5bn for border security, which one congressional aide described as “the most robust border security increase in roughly a decade”, and there was no language in the bill preventing Mexico from paying for the wall if it so desired.

A senior congressional aide told the Guardian that the deal increased defense spending by $12.5bn, with the possibility of $2.5bn more contingent on the White House presenting an anti-Isis plan to Congress. Trump had requested $30bn in increased defense spending. Democrats were pushing to protect funding for women’s healthcare provider Planned Parenthood and sought additional Medicaid money to help the poor in Puerto Rico get healthcare. Both of those goals were achieved. According to a senior congressional aide, the deal also protects other important Democratic priorities. The EPA’s budget is at 99% of current levels and includes increased infrastructure spending as well.

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Stockman won’t let go.

Trump Tax Plan ‘Dead On Arrival’, Wall Street ‘Delusional’ – Stockman (CNBC)

David Stockman has a stern message for investors: They’re living in a fantasy land about Trump. In a recent interview on CNBC’s “Futures Now,” the former director of the Office of Management and Budget under President Reagan said that “Wall Street is totally misreading Washington,” and President Trump’s promises of tax reform will be “dead before arrival.” The president is “essentially a 70-year old kid in a candy store who wants one of everything: More for defense, veterans, border walls, law enforcement, infrastructure and ‘phenomenal’ tax cuts, too—without the inconvenience of paying for any of it,” said Stockman. Of the proposed tax bill announced this week, he said, “It’s a wonderful fantasy…but there’s no way to pay for the $7.5 trillion cost of the main features.”

The White House announced a one-page tax reform plan on Wednesday, and some of the points Stockman highlighted include: Three tax brackets, double standard deduction and the reduction of corporate and non-corporate business taxes down to 15%. In a research note this week, Goldman Sachs pegged the cost of the tax plan to just under $5 trillion, when factoring in key changes such as repealing of the state and local tax, and a 35% top marginal rate instead of 33%. Goldman analysts expect the tax bill is “fairly likely” to become law, but warned progress could be slow. “I like [the tax plan] but you have to pay for it either with a new tax like the border adjustment tax, which is dead, or spending cuts which Trump has ruled off the table,” Stockman explained.

“What you have down there is a total fiscal calamity that is going to basically dominate Washington.” Stockman expects a “constant fiscal crisis and stalemate” in D.C., which will ultimately delay the “good stuff,” like a tax cut, from ever happening. Of Trump’s first 100 days in office, Stockman again referred to the White House as a “pop up store giving out candy before the 100th day to say they’ve accomplished something.” Adding, “this isn’t a serious plan, it can’t be done. And I think it’s only indicative of the huge trouble that’s brewing down there in the beltway.” [..] “I don’t know what the stock market is thinking but if they have faith in a giant fiscal stimulus and tax cut then it’s a delusional faith that’s going to be badly disappointed and I think fairly soon,” he added.”

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Suzuki -he’s 80 already?!- always got this.

Economics Is A Form Of Brain Damage (RWE)

Environmentalist David Suzuki hits the nail on the head. The number of ways that economic theory systematically blinds you to the realities of the world we live in is almost uncountable. When Henry George’s land tax became widely popular, economists “disappeared” land as a factor of production from economic theories, merging it illegitimately with capital. Money is made to “disappear” by using the quantity theory of money to claim that money is veil. This makes it impossible to understand how the mechanisms of creation of money ensure that the wealthy can get rich at the expense of the rest of us.

The parasitical nature of the finance industry has been covered up by the idea of “wealth creation” — when wild speculation doubles the price of stocks, financiers have created wealth, which is a socially valuable activity, instead of a fraud and deception. The ideas of cut-throat competition, survival of fittest, and social darwinism have been used to justify a large number of free market activities which harm the masses to make profits for the wealthy. There is no doubt that believing all of the textbook economic theories leads to serious brain damage, as I myself have experienced — the process of unlearning has been slow and painful. Here is the 2 minute video by David Suzuki:

Read more …

If you can’t properly define inflation, how could you possibly get this right? Inflation is a meaningless concept if you don’t take into account money velocity. And with falling money velocity because of maxed-out consumers, you will never get reflation.

Why The Reflation Trade Is About To Fizzle (ZH)

As SocGen writes in previewing tomorrow’s Headline and Core PCE deflators numbers, after spending nearly five years missing to the downside on the inflation target, the Fed finally achieved its goal as the yoy headline PCE deflator hit 2.1% in February. Unfortunately, Fed officials cannot take a victory lap, because they will be right back to missing the target again when the March figures are released. The data in hand from the PPI and CPI suggest that the headline PCE deflator likely fell by 0.164% in March, which would result in the yoy rate falling from 2.1% to 1.9% (1.885% un-rounded).

Energy prices – now virtually unchanged from a year ago – in the CPI fell by 3.2% last month, and these likely flowed through into the PCE as well. However, given the smaller weight of energy in the PCE gauge, the drop in energy prices will result in a smaller drag on the headline PCE index (almost a tenth less than in the CPI). Meanwhile, the CPI’s food index increased by 0.34% in March (that being said, the PCE food index is broader, and the food indexes in the PCE not present in the CPI have been a bit volatile of late). So aside from anniversarying the unchanged Y/Y base effect, here is what else SocGen expects from tomorrow’s anti-reflationary PCE prints: the core PCE deflator looks to have declined by 0.1% in March (-0.072% un-rounded). A reading in line with our forecast would lead the yoy core rate to fall from 1.8% in February to 1.6% in March, which would be the weakest print in nine months.

It’s not just energy however: recall that one of the biggest drivers behind the CPI miss earlier this month was the sharp drop in wireless telecom services in the CPI, which will now flow into the PCE and subtract around 0.075 percentage points (pp) from the monthly change in the core PCE (which is less than the 0.15 pp drag in the core CPI given the lower weight of this index in the core PCE). In other words, the core PCE would have been flat if not for the wireless telecom services index. Offsetting some of this drag will be a positive contribution from health care. Data from the PPI suggests that the health care index may have advanced by around 0.2% last month, marking its biggest rise in five months. Data within the Q1 GDP report suggests that the gain may be closer to 0.3% in March. In any case, core services prices in March look to have been essentially unchanged, while core goods prices may have fallen by 0.3%.

Read more …

The central banks have trapped themselves and will seek to make you pay for it. Expect a lot of “economic growth will fix it all” comments. But it won’t, we spend $10 to get $1 of growth already.

If Rates Ever Rise Above 3.5% “It Would Spark Massive Defaults” (ZH)

Earlier today in his weekly note, One River CIO Eric Peters explained that in their attempt to overturn the natural order of the global economic “ecosystem”, what central banks have done is “stunning, unprecedented… and arrogant”, and as a result it is only a matter of time before another “peak instability” moment emerges as “it stands to reason that our volatility-selling machine will break one day. We saw a glimpse of this in 2008-09. And yet, as Peters concedes in a follow up note, those same central bankers don’t have any other option but to kick the can because as the CIO notes, any attempt to break the current ultra-low rate regime would “spark massive defaults.”

Incidentally, those are the same defaults that should have happened during the “near systemic reset” of 2008/2009 but the Fed, in all its wisdom, decided to kick the can at the cost of trillions in global excess liquidity, and while it bought itself some time – in the process unleashing a global deflation wave thanks to zombie companies that should not exist yet do, and every day try to undercut each other on pricing – nearly ten years later it has discovered that it has no way out, for one simple reason: there is now too much accumulated debt. Here is Peters “modelling” out why the Fed is stuck with no way out:

“When debt expands constantly relative to GDP, there’s a limit to how high interest rates can rise without causing massive defaults,” said the Model. “There’s nothing inherently wrong with defaults, they can cleanse a system, but a rise in US defaults from today’s 2.5% to 6.0% would boost unemployment by 3%.” America’s economy is leveraged to the financial system, which includes non-capitalized liabilities; entitlements, pensions, healthcare. “US total debt/GDP is 300%, but if you include these non-capitalized liabilities, it’s more like 800%.” “These non-capitalized liabilities rise as both interest rates and economic growth decline,” continued the same Model. “Low growth produces less income, and low rates supply less investment returns on pensions. Which means companies need to set aside more money to pay the liabilities.” It’s a slow-moving economic death spiral.

“The Neo-Fisher Model posits that we can escape this trap by increasing interest rates. Which will raise investment returns, while simultaneously lifting growth. Fisher’s Model may be right, but it will never be tested in reality.” “In reality the world operates on monthly payments,” explained the same Model. “So if we tested the Fisher Model by raising interest rates meaningfully, we’d spark massive defaults.” Unemployment would jump dramatically. “Our central banking and political reaction function ensures that each rise in unemployment is followed by monetary stimulus.” In the 30yrs since Greenspan became Fed Chairman, borrowers have learned this lesson and responded by leveraging up. “And that’s why US interest rates will never rise sustainably above 3.5%.”

Read more …

Think Justin still sleeps at night? If so, he needs some wake-up lessons.

Toronto Is The King Of Risky Mortgage Debt (BD)

Canadian real estate values continue to soar, and a record number of buyers are piling into risky loans. According to the Bank of Canada (BoC), and the Ministry of Finance (MoF), high ratio mortgage borrowers are extending themselves to the limit. While we covered how concerning this trend has become in Toronto, it’s not just isolated to that city. It’s a trend that’s growing across all Canadian urban centers. People taking out high-ratio mortgages combined with incomes too low for the property value, is spreading across Canada. A high-ratio mortgage is defined as a mortgage where the buyer leaves less than a 20% downpayment. The BoC and MoF have both expressed concern when high-ratio mortgages are paired with high income-to-loan ratios. The amount of high risk buyers is increasing as markets reach dizzying heights, especially in urban areas.

Vulnerability isn’t just the buyer’s ability to keep devoting a high percentage of their income to carrying payments. Since the number of these buyers are accelerating as prices get higher, they’re at a greater risk during a correction (not even a crash). Something as small as a 5% drop in value and many of these mortgages would be underwater. If this happens it would mean already broke homeowners would have to pay to get rid of their home. Combine that with a higher interest rate at renewal, and you can imagine the mayhem that can unfold. High-ratio mortgages with low income levels is a growing trend in Canada, but Toronto and Vancouver take it to the next level. Across Canada, 18% of high risk mortgages have extremely low incomes for the homes they’re in, an increase of 38% over two years.

Despite Vancouver’s insanely high prices, Toronto still tops the risky business of subprime borrowers. Toronto takes the top spot with a 53% increase during the same period, bringing their total to 49%. Coming in second is Vancouver which had a 25% increase over the past two years, bringing their total to 39%. These two cities are moving much faster than the average for the country, and they’re getting to dangerously high levels. Although Toronto and Vancouver take the cake, this trend is also growing across Canada, albeit with a lower impact. Over the past 2 years, Calgary saw a 23% increase of high ratio mortgages with at risk-income ratios, totalling 32%. Montreal saw a 30% increase over the past two years, bringing their total to 13%. Ottawa-Gatineau saw a massive 62.5% increase, bringing their total to 13%.

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Complete delusion. Everywhere: “Canada’s financial system, deemed the world’s soundest by the World Economic Forum for eight straight years until 2016..” Over many of those years, this was already obviously happening.

Canada’s Home Capital Distress and the Contagion Odds (BBG)

The escalation of Home Capital’s distress last week has led one of its largest former investors to rethink – if only slightly – the prospects of troubles spreading through the rest of Canada. After the alternative-mortgage lender set up a C$2 billion ($1.5 billion) credit line to offset a run on deposits, Mawer Investment Management’s Jim Hall is recalculating the odds of a contagion widening across one of the world’s strongest financial systems. “The probability has gone from infinitesimal to possible — unlikely, but possible,” said Hall, CIOmoney manager, in an interview Saturday. “If depositors or bondholders start to lose faith in their banks, well then that becomes systemic.”

Mawer, which oversees more than C$40 billion in assets, sold about 2.8 million shares, or a 4.3% stake, in Home Capital in the past week, joining another money manager, QV Investors, in exiting its investment amid the imbroglio consuming the Toronto-based lender. Home Capital has been struggling since April 19, when Ontario’s securities regulator accused management of misleading investors over how the firm handled a review of mortgage brokers who falsified documents about borrowers’ income. Home Capital shares plunged 65% the following day, and the lender has since disclosed an accelerating pace of declines of its high-interest savings balances – deposits used to help fund its mortgage business.

For its part, Home Capital secured a loan to compensate for a drop in deposits and said it’s weighing a sale, hiring RBC Capital Markets and BMO Capital Markets to advise on financing and “strategic options.” Even if withdrawals continue, as expected, the new funding should mitigate it, the company said April 26. Canada’s banking regulator says it’s closely monitoring the situation and surveying other financial firms to assess their condition. “The assets look, at this point, still reasonably good,” Hall said, adding that Home Capital’s problem is a matter of confidence. “Confidence was lost in this company and the business model breaks apart. That’s the problem with banks.”

Canada’s financial system has lots of fire breaks, as Hall describes it, to prevent problems from spreading. “Even if a bank gets itself into a confidence issue, it can be effectively bailed out by another bank or by another financial institution or by ultimately the regulator,” Hall said. Bank failures in Canada’s financial system, deemed the world’s soundest by the World Economic Forum for eight straight years until 2016, are rare. Canadian banks sidestepped the worst of the 2008 financial crisis, having only a fraction of the $1.95 trillion of writedowns and losses suffered by financial firms worldwide.

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Posted by Tyler. No time stamp that I could see, but this is an eternal truth anyway.

A Perspective on Electric Vehicles (Science Errors)

An electric auto will convert 5-10% of the energy in natural gas into motion. A normal vehicle will convert 20-30% of the energy in gasoline into motion. That’s 3 or 4 times more energy recovered with an internal combustion vehicle than an electric vehicle. Electricity is a specialty product. It’s not appropriate for transportation. It looks cheap at this time, but that’s because it was designed for toasters, not transportation. Increase the amount of wiring and infrastructure by a factor of a thousand, and it’s not cheap. Electricity does not scale up properly to the transportation level due to its miniscule nature. Sure, a whole lot can be used for something, but at extraordinary expense and materials. Using electricity as an energy source requires two energy transformation steps, while using petroleum requires only one.

With electricity, the original energy, usually chemical energy, must be transformed into electrical energy; and then the electrical energy is transformed into the kinetic energy of motion. With an internal combustion engine, the only transformation step is the conversion of chemical energy to kinetic energy in the combustion chamber. The difference matters, because there is a lot of energy lost every time it is transformed or used. Electrical energy is harder to handle and loses more in handling. The use of electrical energy requires it to move into and out of the space medium (aether) through induction. Induction through the aether medium should be referred to as another form of energy, but physicists sandwich it into the category of electrical energy. Going into and out of the aether through induction loses a lot of energy.

Another problem with electricity is that it loses energy to heat production due to resistance in the wires. A short transmission line will have 20% loss built in, and a long line will have 50% loss built in. These losses are designed in, because reducing the loss by half would require twice as much metal in the wires. Wires have to be optimized for diameter and strength, which means doubling the metal would be doubling the number of transmission lines. High voltage transformers can get 90% efficiency with expensive designs, but household level voltages get 50% efficiency. Electric motors can get up to 60% efficiency, but only at optimum rpms and load. For autos, they average 25% efficiency. Gasoline engines get 25% efficiency with old-style carburetors and 30% with fuel injection, though additional loses can occur.

Applying this brilliant engineering to the problem yields this result: A natural gas electric generating turbine gets 40% efficiency. A high voltage transformer gets 90% efficiency. A household level transformer gets 50% efficiency. A short transmission line gets 20% loss, which is 80% efficiency. The total is 40% x 90% x 50% x 80% = 14.4% of the electrical energy recovered (85.6% lost) before getting to the vehicle and doing something similar to the gasoline engine in the vehicle.

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By Stéphanie Hennette, Thomas Piketty, Guillaume Sacriste and Antoine Vauchez. As I’ve said, I don’t believe the EU can be reformed, because no-one has the power to do it.

For A Treaty Democratizing Euro Area Governance (SE)

Over the last ten years of economic and financial crisis, a new centre of European power has taken shape: the ‘government’ of the Euro Area. The expression may seem badly chosen as it remains hard to identify the democratically accountable ‘institution’ which today implements European economic policies. We are indeed aiming at a moving and blurred target. Characterized by its informality and opacity, the central institution of that government, the Eurogroup of Finance Ministers of the Euro Area, operates outside the framework of the European treaties and is in no way accountable to the European Parliament, nor to national parliaments. Worse, the institutions that form the backbone of that government – from the ECB and the Commission to the Eurogroup and the European Council – operate following combinations that constantly vary from one policy to the other (Troika Memoranda, European Semester ‘budgetary recommendations’ and bank ‘evaluations’ under the Banking Union).

However scattered they may be, these different policies are truly ‘governed’, as a hard core emerged from the ever closer union of national and European economic and financial bureaucracies – French and German national treasuries, ECB executive board, senior economic officials from the European Commission. As matters stand, this is where the Euro Area is supposedly governed and where the proper political tasks of coordination, mediation and balancing among the current economic and social interests are carried out. In 2012, as he gave up reforming the Treaty on Stability, Coordination and Governance, a cornerstone of this Euro Area governance, François Hollande contributed to consolidating this new power structure. From then onwards, this European executive pole has only seen its competences expand.

Over a decade, its scope for intervention has become significant, ranging from ‘budgetary consolidation’ (austerity) policies to far-reaching coordination of national economic policies (Six Pack and Two Pack), the set-up of rescue plans for member states facing financial distress (Memorandum and Troika), the supervision of all private banks. Both mighty and elusive, the government of the Euro Area evolved in a blind spot of political controls, in some sort of democratic black hole. Who indeed controls the drafting process of Memoranda of Understanding, which impose significant structural reforms in return for the financial assistance of the European Stability Mechanism? Who scrutinizes the executive operations of the institutions making up the Troika?

Who monitors the decisions taken within the European Council of the Heads of State or Government of the Euro Area? Who knows exactly what is negotiated within the two core committees of the Eurogroup, i.e. the Economic Policy Committee and the Economic and Financial Committee? Neither national parliaments, which at best simply control their own executive, nor the European Parliament, which has carefully been sidelined from Euro Area governance. In view of its opacity and isolation, the many criticisms voiced against that Euro Area government seem well deserved, starting with Jürgen Habermas’ denunciation of a “post-democratic autocracy”.

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Pre-empting Le Pen.

Macron Says EU Must Reform Or Face ‘Frexit’ (BBC)

The front-runner in the French presidential election has told the BBC that the EU must reform or face the prospect of “Frexit”. Pro-EU centrist Emmanuel Macron made the comments as he and his far-right rival Marine Le Pen entered the last week of campaigning. French voters go to the polls on Sunday to decide between the pair. Ms Le Pen has capitalised on anti-EU feeling, and has promised a referendum on France’s membership. She won support in rural and former industrial areas by promising to retake control of France’s borders from the EU and slash immigration. “I’m a pro-European, I defended constantly during this election the European idea and European policies because I believe it’s extremely important for French people and for the place of our country in globalisation,” Mr Macron, leader of the recently created En Marche! movement, told the BBC.

“But at the same time we have to face the situation, to listen to our people, and to listen to the fact that they are extremely angry today, impatient and the dysfunction of the EU is no more sustainable. “So I do consider that my mandate, the day after, will be at the same time to reform in depth the European Union and our European project.” Mr Macron added that if he were to allow the EU to continue to function as it was would be a “betrayal”. “And I don’t want to do so,” he said. “Because the day after, we will have a Frexit or we will have [Ms Le Pen’s] National Front (FN) again.”

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What I would expect.

Europe’s Youth Don’t Care To Vote—But They’re Ready To Join A Mass Revolt (Qz)

Young Europeans are sick of the status quo in Europe. And they’re ready to take to the streets to bring about change, according to a recent survey. Around 580,000 respondents in 35 countries were asked the question: Would you actively participate in large-scale uprising against the generation in power if it happened in the next days or months? More than half of 18- to 34-year-olds said yes. The question was part of a European Union-sponsored survey, titled “Generation What?” The report went on to focus on respondents from 13 countries to better understand what young people are optimistic and frustrated about in Europe. Among these spotlighted countries, young people in Greece were particularly interested in joining a large-scale uprising against their government, with 67% answering yes to the question. Respondents in Greece were also more likely to believe politicians were corrupt and to have negative perceptions of the country’s financial sector.

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His ‘solution’ is self-defeating. More pension cuts and more taxes will cut more money velocity, hence more GDP. Which means Greece is less able to pay back anything at all.

Schaeuble Says Greece Has Made Good Reform Progress (R.)

German Finance Minister Wolfgang Schaeuble was quoted in a newspaper interview on Sunday saying that Greece has made strong progress towards introducing reforms that could lead to the imminent release of further financial support. “If the Greek government upholds all the agreements, European finance ministers could complete the review on May 22 and then soon after that release the next tranche,” Schaeuble told the Funke media group newspapers. Greece and its international creditors reached a preliminary agreement at a meeting of eurozone finance ministers in April to set up the next transfer of some €7 billion in aid. But the finance ministers will not release the tranche until the audit is completed.

“The longer it takes, the more uncertainty will be in the financial markets and economy,” Schaeuble added. He said the Greek government had promised to make further adjustments in pensions as well as improve tax collection. Asked why he was optimistic the aid could soon be released, Schaeuble said, “Because we negotiated in a very determined fashion and the Greek government said it would adjust the pensions more strongly to the economic situation. “That’s not easy – I know that. And it wants to improve the tax collection system so that tax revenues will rise again from 2020.”

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Mar 112016
 
 March 11, 2016  Posted by at 7:27 am Finance Tagged with: , , , , , ,  2 Responses »


Arthur Rackham “Why, Mary Ann, what are you doing out here?”1907

I’ll try and keep this gracefully short: Mario Draghi ‘unleashed’ a bazooka full of desperate tools on the financial markets yesterday and they blew up in his face faster than you could say blowback or backdraft (and that’s just the start of the alphabet). This must and will mean that Draghi’s stint as ECB head is for all intents and purposes done. But…

But there are two questions: 1) who has the power to fire him (not an easy one), and 2) who can replace him. Difficult issues because the only candidates that would even be considered for the job by the same people who hired -no, not elected- Mario -and who will still be in power after he’s gone-, under present conditions, are carbon copies of Draghi. They all went to the same schools, worked for the same banks etc.

So maybe they’ll let him sit a bit longer. Then again, the damage has been done, and Mario has done a lot of destruction, is what the markets said yesterday. But to replace him with someone who’s also already lost all credibility, because they supported Mario every step of the way, carries a very evident risk: that nobody will believe in the entire ECB itself anymore. If you ask me, it’s crazy that anyone still would, but that’s another chapter altogether.

Not that Janet Yellen and Japan’s Kuroda and China’s Zhou Xiaochuan should not also be put out by the curb. While they may -seem to- vary in approaches today, they all started from the same untested, purely theoretical and entirely clueless origins. Just saying. None of them have any idea what negative rates etc will lead to. They’re all in the same rabbit hole. And that’s not a joke, it’s deeply sad.

Ultra-low interest -even negative- rates and bond purchases to the tune of $1 trillion a year, Mario’s schtick, exist all across the formerly rich world. And they all do for the same purpose: to make the people think that they, and their economies, are still rich. Just so bankers can take from them whatever it is they still do have. Think pension funds, investment funds.

Why did this pandemonium of ZIPR and QE ever get started? Because central banks, and the economists that work within them, edged along by bankers who risked behemoth losses, said the most important thing to do was to ‘save’ the banking system, and they can always find some theory to confirm that preference.

But the banking system is where the losses are, and it’s where the risks are. Which are then both transferred to Joe and Jane Blow, who subsequently have less to spend, which defeats the alleged central bank purpose of ‘stimulating’ the economy.

Draghi’s argument for the new (water-)bazooka measures is that without them, Europe would face ‘awful’ deflation. But it’s his very measures that create and encourage deflation. So who still knows how to count beyond 101? Good question.

But anyway, I just wanted to say that Draghi’s gone in all but physical presence. And if they keep him on for a while longer, that means that what happened today will happen again, just faster. Big risk.

No Super Mario no more.

What happened with Draghi yesterday is eerily reminiscent of the ‘glorious’ Bernanke days, when ‘poor’ Ben would make one of his weighty announcements and the effects he was looking for would fizzle out within hours. In full accordance with the law of diminishing returns, Draghi’s new and far more desperate measures lost their very meaning even within the space of barely more than half an hour. This EURUSD graph says it all:

That is ugly. That has meaning. Much more than Mario -the former Goldman Sachs executive- himself and his paymasters will be willing to acknowledge. It means the financial world is now ready to bet against Draghi. Like they bet against China.

Europe’s best hope, somewhat ironically, is German resistance against Draghi, which yesterday reached a point of no return. Ambrose Evans-Pritchard gave a perfect example overnight of why that is:

Professor Richard Werner from Southampton University, the man who invented the term QE, said the ECB’s policies are likely to destroy half of Germany’s 1,500 savings and cooperative banks over the next five years. They cannot pass on the negative rates to savers so their own margins are suffering. “They are under enormous pressure from regulatory burdens already, and now they are reaching a tipping point,” he said.

These banks make up 70pc of German deposits and provide 90pc of loans to small and medium firms, the Mittelstand companies that form the backbone of German industry. Prof Werner said these lenders are being punished in favour of banks that make their money from asset bubbles and speculation.

“We have learned nothing from the financial crisis. The sooner there is a revolt in Germany, the better,” he said.

Draghi’s done. This hole is too deep for him to climb out of.

Aug 152015
 
 August 15, 2015  Posted by at 11:02 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle August 15 2015


Lewis Wickes Hine 12-year-old newsie, Hyman Alpert, been selling 3 years, New Haven CT 1909

A. Gary Shilling: “Oil Is Headed For $10 To $20 A Barrel” (Bloomberg)
US Credit Traders Send Warning Signal to Rest of World Markets (Bloomberg)
The Great China Ponzi – An Economic And Financial Trainwreck (David Stockman)
China Says Plunge Protection Team Will Prop Up Stocks “For Years To Come” (ZH)
Hundreds Of Chinese Cities In Precarious Financial State (NY Times)
Euro Ministers Give Blessing To Greek Bailout, Wooing IMF On Debt (Reuters)
EU Aims To Lure Greek Deposits Back To Banks With Bail-In Shield (Bloomberg)
Greek PM Alexis Tsipras Faces Biggest Party Revolt Yet (Reuters)
Germany’s Hypocrisy Over Greece Water Privatisation (Guardian)
Germany Proves Russia’s Most Loyal Gas Customer as Price Plunges (Bloomberg)
Eurozone Economy Sputters As China Risks Loom (Reuters)
How the IMF Failed Greece (Subramanian)
Market Liquidity Is Not “Invariably Beneficial” (Perry Mehrling)
Misery On The Farm: Milk Price Slump Raises Spectre Of Ruin (NZ Herald)
Economics Jargon Promotes A Deficit In Understanding (James Gingell)
European Entrepreneurs Launch StartupBoat To Address Refugee Crisis (TC)

“The oil market is still clearly oversupplied and “it will get more so as refiners go into maintenance..”

A. Gary Shilling: “Oil Is Headed For $10 To $20 A Barrel” (Bloomberg)

If crude’s slump back to a six-year low looks bad, it’s even worse when you reflect that summer is supposed to be peak season for oil. U.S. crude futures have lost 30% since the start of June, set for the biggest drop since the West Texas Intermediate crude contract started trading in 1983. That beats the summer plunges during the global financial crisis of 2008, the Asian economic slump in 1998 and the global supply glut of 1986. It even surpasses the decline of 2011, when prices fell as much as 21% over the summer as the U.S. and other large oil-importing nations released 60 million barrels of oil from emergency stockpiles to make up for the disruption of Libyan exports during the uprising against Muammar Qaddafi.

WTI, the U.S. benchmark, fell to a six-year low of $41.35 a barrel Friday. It may slide further, according to Citigroup Inc. “Summer is when refineries are all running hard, so actual demand for crude is as good as it gets,” Seth Kleinman at Citigroup said. OPEC’s biggest members are pumping near record levels to defend their market share and U.S. production is withstanding the collapse in prices and drilling. The oil market is still clearly oversupplied and “it will get more so as refiners go into maintenance,” Kleinman said. Oil demand usually climbs in the summer as U.S. vacation driving boosts purchases of gasoline and Middle Eastern nations turn up air-conditioning.

Crude has sunk this year even U.S. gasoline demand expanded, stimulated by a growing economy and low prices. Total gasoline supplied to the U.S. market rose to an eight-year high of 9.7 million barrels a day last month, according to U.S. Department of Energy data. Crude could fall to $10 a barrel as OPEC engages in a “price war” with rival producers, testing who will cut output first, Gary Shilling, president of A. Gary Shilling Co., said in an interview on Bloomberg Television on Friday. “OPEC is basically saying we’re not going to cut production, we’re going to see who can stand lower prices longest,” Shilling said. “Oil is headed for $10 to $20 a barrel.”

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“..conditions in the high grade credit market are currently very unusual.”

US Credit Traders Send Warning Signal to Rest of World Markets (Bloomberg)

Credit traders have an uncanny knack for sounding alarm bells well before stocks realize there’s a problem. This time may be no different. Investors yanked $1.1 billion from U.S. investment-grade bond funds last week, the biggest withdrawal since 2013, according to data compiled by Wells Fargo. Dollar-denominated company bonds of all ratings have lost 2.3% since the end of January, even as the Standard & Poor’s 500 index gained 5.7%. “Credit is the warning signal that everyone’s been looking for,” said Jim Bianco. “That is something that’s been a very good leading indicator for the past 15 years.”

Bond buyers are less interested in piling into notes that yield a historically low 3.4% at a time when companies are increasingly using the proceeds for acquisitions, share buybacks and dividend payments. Also, the Federal Reserve is moving to raise interest rates for the first time since 2006, possibly as soon as next month, ending an era of unprecedented easy-money policies that have suppressed borrowing costs. All of this has corporate-bond investors concerned enough that they’re demanding 1.64 percentage points above benchmark government rates to own investment-grade notes, the highest since July 2013, Bank of America Merrill Lynch index data show.

That’s also the biggest premium relative to a measure of equity volatility since March 6, 2008, 10 days before Bear Stearns was forced to sell itself to JPMorgan, according to Bank of America analysts in an Aug. 13 report. “Unlike the credit market, the equity market well into 2008 was very complacent about the subprime crisis that led to a full blown financial crisis,” the analysts wrote. “While we are not predicting another financial crisis, we believe it is important to keep highlighting to investors across asset classes that conditions in the high grade credit market are currently very unusual.” So if you’re very excited about buying stocks right now, just beware of the credit traders out there who are sending some pretty big warning signs.

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Great take down by Stockman.

The Great China Ponzi – An Economic And Financial Trainwreck (David Stockman)

There is an economic and financial trainwreck rumbling through the world economy. Namely, the Great China Ponzi. In all of economic history there has never been anything like it. It is only a matter of time before it ends in a spectacular collapse, leaving the global financial bubble of the last two decades in shambles. But here’s the Wall Street meme that is stupendously wrong and that engenders blind complacency with respect to the impending upheaval. To wit, the same folks who brought you the myth of the BRICs miracle would now have you believe that China is undergoing a difficult but doable transition – from an economy driven by booming exports and monumental fixed asset investment to one based on steady as she goes US-style consumption and services.

There may well be some bumps and grinds along the way, we are cautioned, such as the recent stock market and currency turmoil. But do not be troubled – the great locomotive of the world economy will come out the other side better and stronger. That’s because the wise, pragmatic and powerful leaders and economic managers who deftly guide China’s version of capitalism have the capacity to make it all happen. No they don’t! China is not a clone-in-the-making of America’s $18 trillion consume till you drop economy – even if that model were stable and sustainable, which it is not. China is actually sui generis – a historical freak accident that has no destination other than a crash landing. It’s leaders are neither wise nor deft economic managers.

In fact, they are a bunch of communist party political hacks who have an iron grip on state power because China is a crude dictatorship. But their grasp of the fundamentals of economic law and sound finance can not even be described as negligible; it’s non-existent. Indeed, their reputation for savvy and successful economic management is an unadulterated Wall Street myth. The truth is, the 25 year growth boom in China is just a giant, credit-driven Ponzi. Any fool can run a central bank printing press until it glows white hot. At the end of the day, that’s all the Beijing suzerains of red capitalism have actually done. They have not created any of the rudiments of viable capitalism. There are no honest financial markets, no genuinely solvent banks, no market driven allocation of capital and no financial discipline which comes from the right to fail as well as succeed.

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“..China acted as is if forced lending to a state-run stock buying entity represented real, organic growth in demand for credit.”

China Says Plunge Protection Team Will Prop Up Stocks “For Years To Come” (ZH)

Perhaps it’s a case of something getting lost in translation (so to speak), but Chinese authorities have a remarkable propensity for saying absurd things in a very straightforward way as though there were nothing at all odd or amusing about them. For example, here’s what the CSRC said on Friday about the future for China Securities Finance (aka the plunge protection team): “For a number of years to come, the China Securities Finance Corp. will not exit (the market).” For anyone who hasn’t followed the story, Beijing transformed CSF into a trillion-yuan state-controlled margin lender after a harrowing unwind in the half dozen or so backdoor leverage channels that helped inflate Chinese equities earlier this year caused stocks to plunge 30% in the space of just three weeks.

CSF has since become something of an international joke, as the vehicle, along with an absurd effort to halt trading in nearly three quarters of the country’s stocks, came to symbolize the epitome of market manipulation – and that’s saying something in a world where everyone is used to rigged markets. And because Beijing wanted to get the most manipulative bang for their plunge protection buck (err… yuan) the PBoC went on to count loans made to CSF by banks towards total loan growth in July. In other words, China acted as is if forced lending to a state-run stock buying entity represented real, organic growth in demand for credit. Now, apparently, the practice of using CSF to “stabilize” stocks and artificially prop up loan “demand” will become standard procedure. Here’s more from AFP:

China’s market regulator on Friday vowed to stabilise the volatile stock market for a “number of years”, saying a state-backed company tasked with buying shares will have an enduring role. “For a number of years to come, the China Securities Finance Corp. will not exit (the market). Its function to stabilise the market will not change,” the China Securities Regulatory Commission (CSRC) said in a statement on its official microblog. The China Securities Finance Corp. (CSF) has played a crucial role in Beijing’s stock market rescue, which was launched after Shanghai’s benchmark crashed 30% in three weeks from mid-June.

The regulator’s comments were the first time it has given any indication of how long it would intervene to support equities. Authorities gave the CSF huge funding to buy shares and subsequent speculation the government was preparing to withdraw from the stock market has spooked investors. The statement added the CSF will only enter the market during times of volatility. “When the market drastically fluctuates and may trigger systemic risk, it will continue to play a role to stabilise the market in many ways,” said the statement, which quoted CSRC spokesman Deng Ge.

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From last weekend, but an important additional headache for Beijing. How are they going to control hundreds of cities heavily indebted to shadow banks?

Hundreds Of Chinese Cities In Precarious Financial State (NY Times)

Although the country escaped the worst of the global financial crisis six years ago, it did so on the back of a borrowing binge by local governments, which spent heavily on new but often unprofitable infrastructure projects. Now, many local governments are mired in debt. In Weifang, a city known for seafood processing and an annual kite-flying festival, rapid urbanization over the last decade has saddled the local government with debts totaling 88.4 billion renminbi, or $14.2 billion, as of June 2013, the most recent data available. Since 2007, China’s overall local government debt has risen at an annual rate of 27%. It now totals almost $3 trillion, according to estimates from the consulting firm McKinsey & Company.

Companies, too, have gorged on cheap credit in recent years. Altogether, China’s total debt stands at 282% of its gross domestic product — a high level that raises the risk of a financial crisis should borrowers prove unable to repay and a wave of defaults ensue. It has created a conundrum for the country. China’s leaders want to wean the country from this debt-fueled growth model. But they also need to continue stimulating the economy, particularly at a time when growth is slowing. Part of Beijing’s solution has been to help local governments lower their borrowing costs through refinancing. Local government-controlled companies that are struggling to pay bonds are being encouraged to exchange them for new loans at lower interest rates from state-run banks.

China’s Ministry of Finance recently expanded this local government debt refinancing program to 3 trillion renminbi, or nearly $500 billion, up from 1 trillion renminbi just a few months ago. China has also begun a national campaign to encourage private investment in local infrastructure projects. In May, the nation’s top economic planning agency released a list of more than 1,000 projects worth 2 trillion renminbi that local governments across the country are seeking to finance with outside investment. Analysts estimate that is on top of roughly 1,500 other projects worth 3 trillion renminbi that had been previously announced by the local authorities.

A decade ago, the MTR Corporation, the Hong Kong subway operator, was an investor in Beijing’s fourth metro line. Beijing had won the right to host the 2008 Summer Olympics and was expanding its transport network at a blinding pace. By the time it opened in 2009, passenger flows on the new line were much higher and revenue much lower than either party had forecast. This prompted huge subsidy payments from the Beijing government to the MTR, which did not sit well with local officials. So city officials simply rewrote the contract. The new terms reduced subsidy payments to the MTR, and were on balance more favorable to the city government. MTR, as the minority shareholder, had little room to object.

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Still far from over.

Euro Ministers Give Blessing To Greek Bailout, Wooing IMF On Debt (Reuters)

Finance ministers from the eurozone gave their final blessing to lending Greece up to €86 billion after the parliament in Athens agreed to stiff conditions overnight. After six hours of talks in Brussels, ministers said in a statement: “The Eurogroup considers that the necessary elements are now in place to launch the relevant national procedures required for the approval of the ESM financial assistance.” Assuming final approval next week by the German and some other national parliaments, an initial tranche of €26 billion would be approved by the European Stability Mechanism next Wednesday. Of that, €10 billion would be reserved to recapitalise Greek banks ravaged by economic turmoil and the imposition of capital controls in June, and €13 billion would be in Athens on Thursday to meet pressing debt payment obligations.

Some issues still need to be ironed out following a deal struck with Greece on Tuesday by the EC, ECB and IMF. They include keeping the IMF involved in overseeing the new eurozone programme while delaying satisfying the Fund’s calls for debt relief for Greece until a review in October. IMF Managing Director Christine Lagarde, who took part in the meeting by telephone, said in a statement that the Fund believed Europe would need to provide “significant” debt relief as a complement to reforms Athens is taking to put Greece’s finances on a sustainable path. “I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own,” she said.

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There’s no way back now for Brussels. They can’t un-promise to leave depositors’ money alone. Big move for Greek banks.

EU Aims To Lure Greek Deposits Back To Banks With Bail-In Shield (Bloomberg)

Euro-area finance ministers shielded Greek bank depositors from any losses resulting from the restructuring of the nation’s financial system, as part of Friday’s deal on an€ 86 billion bailout. Senior bank bondholders will be in the crosshairs if Greek lenders tap into any of the financial stability funds set aside in the new bailout. Euro-area finance ministers agreed to a deal that would next week place €10 billion in Greece’s bank recapitalization fund, with another €15 billion available if needed. “Bail-in of depositors will be explicitly excluded” from EU rules to make private investors share the cost of fixing troubled banks, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem told reporters after the six-hour meeting in Brussels.

By shielding all depositors, the euro area will protect small and medium-sized enterprises who have more than 100,000 euros in their accounts and aren’t covered by government deposit insurance, Dijsselbloem said. This prevents “a blow to the Greek economy” that ministers wanted to avoid, he said. Instead, the focus will turn to bond investors. “When so much money must be invested in banks, in the first place, banks must take part of the risks,” Dijsselbloem said. Alpha Bank AE’s €400 million of 3.375 percent notes due 2017 traded at 70.5 cents on the euro Friday to yield 25.4 percent. Those securities are up from a low this year of 27.5 cents in July.

At the start of the new aid program, the bank funds will be placed in a designated account at the European Stability Mechanism, the currency bloc’s firewall fund. Bank supervisors can tap the money as required once Greece’s banks have gone through stress tests and an asset-quality review. After Greece’s lenders are recapitalized, the subsequent bank holdings will be transferred to the nation’s planned privatization fund, which will then be able to sell off the stakes and use the proceeds to pay back bailout funds. By shielding deposits, account holders won’t have “anything to worry about,” Greek Finance Minister Euclid Tsakalotos told reporters. “The process of reversing the negative effects of capital controls will start very quickly and will speedily return the banks to where they were before and hopefully on a far firmer footing.”

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I still think he knows he needs this.

Greek PM Alexis Tsipras Faces Biggest Party Revolt Yet (Reuters)

Greek Prime Minister Alexis Tsipras faced the widest rebellion yet from his leftist lawmakers as parliament approved a new bailout programme on Friday, forcing him to consider a confidence vote that could pave the way for early elections. After lawmakers bickered for much of the night on procedural matters, Tsipras comfortably won the vote on the country’s third financial rescue by foreign creditors in five years thanks to support from pro-euro opposition parties. That cleared the way for euro zone finance ministers to approve the deal. This they did on Friday evening, albeit with stringent conditions. The vote laid bare the anger within Tsipras’s leftist Syriza party at the austerity measures and reforms which he accepted in exchange for the bailout loans.

Altogether 43 lawmakers – or nearly a third of Syriza deputies – voted against or abstained. The unexpectedly large contingent of dissenters, including former finance minister Yanis Varoufakis, heaped pressure on Tsipras to clear the rebels swiftly from his party and call early elections in the hope of locking in popular support. Tsipras remains hugely popular in Greece for trying to stand up to Germany’s insistence on austerity before relenting under the threat of a euro zone exit. He would be expected to win again if snap polls were held now, given an opposition that is in disarray. “I do not regret my decision to compromise,” Tsipras said in parliament as he defended the bailout from euro zone and IMF creditors. “We undertook the responsibility to stay alive over choosing suicide.”

But the vote left the government with support from within its own coalition below the threshold of 120 votes in the 300-seat chamber, the minimum needed to command a majority and survive a confidence vote if others abstain. In response, government officials said Tsipras was expected to call a confidence vote in parliament after Greece makes a debt payment to the ECB on Aug. 20 – a move that could trigger the government’s collapse and snap elections. Still, some of those who rebelled on Friday could still opt to support the government in a confidence vote, as could other pro-European parties such as the centrist Potami and the centre-left PASOK, leaving the final outcome unclear.

Friday’s vote was only the latest in a series of events highlighting the rift within Syriza, which stormed to power this year on a pledge to end austerity once and for all, before Tsipras accepted the new bailout to avoid a banking collapse. The leader of Syriza’s far-left rebel faction, former energy minister Panagiotis Lafazanis, took a step toward breaking away from the party by calling for a new anti-bailout movement. “Syriza accepted a new, third bailout – austerity that goes against its programme and pledges,” Lafazanis told Efimerida Ton Syntakton newspaper, adding that this “will open the way for a mutation of Syriza with an uncertain ending”. Syriza would be weakened by the departure of the faction led by Lafazanis.

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“It’s clear that the model of privatisation of water has failed all around the world..”

Germany’s Hypocrisy Over Greece Water Privatisation (Guardian)

Greek activists are warning that the privatisation of state water companies would be a backward step for the country. Under the terms of the bailout agreement approved by the Greek parliament today, Greece has pledged to support an existing programme of privatisation, which includes large chunks of the water utilities of Greece’s two largest cities – Athens and Thessaloniki. There is an ongoing debate about water privatisation and the role of business. Across Europe a wave of austerity-driven privatisation proposals have led to protests in Ireland, Italy, Greece and Spain. At the same time, some of northern Europe’s largest cities, including Paris and Berlin, are buying back utilities they sold just last decade.

President of the Thessaloniki water company trade union George Argovtopoulos said a move to a for-profit model would raise prices for consumers and degrade services. “It’s not any more a democracy or equality in the European Union. It’s a kind of business,” he said, adding that austerity measures that require water privatisation smacked of a “do as I say, but not as I do” approach from Germany. “We know that in Berlin, just two years ago they remunicipalised the water there, although they paid just under €600m to Veolia [to buy back its stake]. It’s clear that the model of privatisation of water has failed all around the world,” he said.

Deputy finance minister Jens Spahn told German breakfast television on Tuesday that sell offs of the electricity and rail sectors had benefited Germans. “Privatisation isn’t just about raising money, it’s about changing parts of the economy,” he said. The new bailout requires Greece to sell off €50bn worth of public assets. Manuel Schiffler, a former project manager for the World Bank and author of the book Water, Politics and Money, said privatisation only made sense where there was a need to improve efficiency. In the case of Thessaloniki in particular, he said, the water system was already quite well run. “I think it’s a privatisation for the wrong reasons. It’s only for fiscal reasons and not in order to improve the services provided by the utility,” he said.

Maude Barlow, the chair of Food & Water Watch said that years of experimentation with privatisation in developing countries had shown: “The best answer to bad government is good government. Don’t hold out for privatisation. It’s not a perfect system and I know Greece has it’s problems, but privatising their water systems is not a good answer to the crisis there.”

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“Germany was the only nation among Gazprom’s key clients that increased Russian gas purchases in the first half.”

Germany Proves Russia’s Most Loyal Gas Customer as Price Plunges (Bloomberg)

Russia boosted natural gas supplies to Germany by almost 50% in the second quarter as prices plunged, while the world’s largest natural gas exporter struggled with weaker demand from its former Soviet allies. Gazprom’s deliveries to Germany jumped to 11.7 billion cubic meters compared with 7.8 billion a year earlier, the highest quarterly level since at least 2010, according to data on the Moscow-based exporter’s website. Gazprom’s average gas price at the German border fell 36% this year as crude plunged. The European Union, which gets about 30% of its gas from Russia, may be Gazprom’s only growing market this year, the government in Moscow said last month. Gazprom has boosted fuel sales to the 28-nation bloc since the end of May as Brent crude slumped 21%.

Most of the company’s gas contracts are linked to the price of oil. “Germany has been a loyal customer for Russia for years,” said Alexander Kornilov, an oil and gas analyst at Alfa Bank in Moscow. “Such relationships stay in place, though volumes depend on a price – business is business.” Gazprom’s price to Germany fell to $6.68 per million British thermal units in July, the lowest level since December 2009, according to the IMF. Germany is importing almost all of its gas from Russia now, energy broker Marex Spectron said in a July 29 note. Germany was the only nation among Gazprom’s key clients that increased Russian gas purchases in the first half.

The company’s total shipments of the fuel fell 10% to 222.8 billion cubic meters through June, mainly because of lower sales in Italy, Turkey, Central Europe, Ukraine and Russia, Gazprom said in its earnings report under Russian accounting standards on Friday. Gazprom cut its 2015 output forecast for at least the third time this year, reducing its outlook to 444.6 billion cubic meters, according to the report. That’s only 0.1% higher than last year’s record-low output. Russia’s Economy Ministry predicted last month the gas company would cut output to 414 billion cubic meters for 2015.

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Beware France.

Eurozone Economy Sputters As China Risks Loom (Reuters)

Germany enjoyed robust if unspectacular growth in the second quarter while the French economy stagnated, leaving policymakers looking at a fragile euro zone recovery and risks from volatile Chinese markets. The German economy, Europe’s largest, grew by 0.4% on the quarter – a slight acceleration from 0.3% in the first three months of the year but below expectations for a 0.5% expansion as weak investment acted as a drag. In France, a jump in exports was not strong enough to offset the impact of weak consumer spending and changes in inventories and growth came to a standstill after a strong first quarter.

The readouts from the euro zone’s two largest economies came a day after the minutes of the ECB’s last meeting showed it was concerned that volatility in Chinese markets may have more impact than expected on the euro zone. China has seen a run of weak economic data. The ECB described the recovery in the 19-country euro zone as moderate and gradual, a trend it called “disappointing”, and said an increase in U.S. interest rates might slow the upturn. Private sector economists are also concerned that Germany, Europe’s powerhouse economy, is not growing faster despite favorable conditions.

“The fact that record low interest rates, low energy prices and the weak euro have not led to a stronger expansion in our view shows that the German economy has simply reached the end of its long positive virtuous circle of structural reforms and growth,” said Carsten Brzeski at ING. “Normally, such a cocktail of strong external steroids should have given wings to the economy. This is not the case.” Germany’s Federal Statistics Office said weakness in investment and a marked drop in inventories weighed on growth in the second quarter, while the weaker euro helped support exports.

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“.. the emergence of a new institution: a truly International Monetary Fund, in place of today’s Euro-Atlantic Monetary Fund.”

How the IMF Failed Greece (Subramanian)

The reason why an assisted Grexit was never offered seems clear: Greece’s European creditors were vehemently opposed to the idea. But it is not clear that the IMF should have placed great weight on these concerns. Back in 2010, creditor countries were concerned about contagion to the rest of the eurozone. If Grexit had succeeded, the entire monetary union would have come under threat, because investors would have wondered whether some of the eurozone’s other highly indebted countries would have followed Greece’s lead. But this risk is actually another argument in favor of providing Greece with the option of leaving. There is something deeply unappealing about yoking countries together when being unyoked is more advantageous.

More recently, creditor countries have been concerned about the financial costs to member governments that have lent to Greece. But Latin America in the 1980s showed that creditor countries stand a better chance of being repaid (in expected-value terms) when the debtor countries are actually able to grow. In short, the IMF should not have made Europe’s concerns, about contagion or debt repayment, decisive in its decision-making. Instead, it should have publicly pushed for the third option, which would have been a watershed, for it would have signaled that the IMF will not be driven by its powerful members to acquiesce in bad policies. Indeed, it would have afforded the Fund an opportunity to atone for its complicity in the creditor-driven, austerity-addled misery to which Greeks have been subject for the last five years.

Above all, it would have enabled the IMF to move beyond being the instrument of status quo powers – the United States and Europe. From an Asian perspective, by defying its European shareholders, the IMF would have gone a long way toward heralding the emergence of a new institution: a truly International Monetary Fund, in place of today’s Euro-Atlantic Monetary Fund. All is not lost. If the current strategy fails, the third option – assisted Grexit – remains available. The IMF should plan for it. The Greek people deserve some real choices in the near future.

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“..economics quite regularly adopts the simplifying assumption that all markets are fully liquid, so that supply always exactly equals demand and markets always clear.”

Market Liquidity Is Not “Invariably Beneficial” (Perry Mehrling)

The recently released PwC “Global Financial Markets Liquidity Study”, sounds a warning. Financial regulation, while perhaps well-intentioned, has gone too far. Banks may be safer but markets are more fragile. At the moment, this fragility is masked by the massive liquidity operations of world central banks. But it will soon be revealed as, led by the Fed, central banks attempt to exit. Now, before it is too late, additional regulatory measures under consideration should be halted (Ch. 5). And existing regulations should be urgently revisited with an eye to achieving better balance between two social goods, financial stability and market liquidity, rather than the current focus on stability at the expense of liquidity (Ch. 3).

The bulk of the report consists of market-by-market empirical documentation of the reduction in market liquidity in past years (Ch. 4). Pretty much all markets have been affected, even sovereign bond markets, but especially markets that were already not so liquid. “There is clear evidence of a reduction in financial markets liquidity, particularly for less liquid areas of the financial markets, such as small and high-yield bond issues, longer-term FX forwards and interest rate derivatives. However, even relatively more liquid markets are experiencing declining depth, for example US and European sovereign and corporate bonds” (p. 104) “Bifurcation”, meaning widening difference between vanilla markets now supported by central clearing and everything else, is a repeated watchword, as well as “liquidity fragmentation” across different jurisdictions.

Both are taken to be obvious bads. But are they? The central analytical frame of the report is that market liquidity is always and everywhere a good thing, and that more of it is always and everywhere better than less. “We consider market liquidity to be invariably beneficial” (p. 8, 17). “We consider market liquidity to be beneficial in both normal times and times of stress. For this study we therefore work on the premise that market liquidity is invariably beneficial” (p. 23). Accept this premise, and everything else follows. But why accept the premise? To be sure, economics quite regularly adopts the simplifying assumption that all markets are fully liquid, so that supply always exactly equals demand and markets always clear. (On page 17, the report cites the venerable Varian microeconomics text as authority.)

It’s a good assumption if you are concerned about something other than market liquidity. It is a terrible assumption, and a terrible premise, if you are concerned exactly about market liquidity. In fact, the idealization of full liquidity in every market is logically impossible in a world where market liquidity is provided by profit-seeking market makers. In such an ideal world, market-making profit would be zero, so no market-maker would be willing to participate! The idealization thus makes most sense as a world where liquidity is provided for free by government. It is thus quite inappropriate as a measure of how far current reality falls short of optimum.

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The stop to Europe’s milk quota reverbs around the world. New Zealand is THE obvious victim.

Misery On The Farm: Milk Price Slump Raises Spectre Of Ruin (NZ Herald)

“There’s nothing more depressing than knowing when those big tankers come on to your farm you are paying Fonterra to take your milk away.” Depression is not a word New Zealanders associate with dairy farming, but Farmers of NZ operations director Bill Guest is stating the obvious. Fonterra’s price signal for the coming year of $3.85 per kg of milksolids is nearly $2/kg short of what the average dairy farmer needs to cover costs. On an average-size farm with annual costs of around $900,000, that’s an operating deficit of $260,000, Dairy NZ estimates. For most, that spells increased borrowing but that option won’t be there for the heavily indebted. “I would say people with $1 million of debt are not going to survive,” Guest says.

There will scarcely be a profitable dairy farm in New Zealand this year in cashflow terms and the effects of farmer belt-tightening will ripple through service industries and provincial towns and on to the Government’s coffers. The Government may play down the effects – Finance Minister Bill English says the dairy sector accounts for only 20% of exports; Dairy NZ says it’s 29% – but some analysts predict a $1.5 billion fall in GDP. That’s similar to the effect of the one-in-50-year drought that hit rural New Zealand in 2013. Right now, though, all the weight is being borne by dairy farmers as banks ponder the balance sheet implications of another year of low incomes and associated declines in stock and land values.

It’s the lowest farmgate price since 2002, and some analysts say Fonterra will struggle to make the $3.85 forecast. Dairy NZ is estimating $3.65. Last year’s payments were well below recent norms, although the blow was cushioned by deferred payments from the record 2013/14 price. But in July, for the first time, farmers received no retrospective payments – meaning no income until milking gears up. While only a few dairy farms are now on the block, many more farmers are expected to attempt an “orderly exit” from the industry in the coming months – before they are forced out.

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“If you can’t explain something simply, you don’t understand it well enough.”

Economics Jargon Promotes A Deficit In Understanding (James Gingell)

Whether it’s discussion of debt, or the argument for austerity, it’s hard to find good economics communication, where the language is rinsed free of jargon. Take this as an example, from an excited Telegraph journalist describing the Greek financial crisis: “Late on Wednesday night, the governing council of the ECB decided that it would no longer accept Greek sovereign debt as collateral for its loans. Greece’s junk-rated bonds had been the subject of a “waiver”, where the central bank accepted sovereign and bank debt as security in return for cheap ECB funding.” I’m a fairly intelligent man. I am deeply interested in foreign affairs. Yet I have only the vaguest sense of what the above means.

Does “sovereign debt” or “junk-rated bonds” or, in this context, “collateral” mean much to the average person? Have any of these phrases truly entered the public consciousness? I would argue not. A recent survey of 1,500 University of Manchester students would agree with me. Only 40% of them could even properly define GDP. Politicians aren’t much better. Here’s George Osborne presenting his latest budget: “While we move from deficit to surplus, this [new fiscal] charter commits us to keeping debt falling as a share of GDP each and every year – and to achieving that budget surplus by 2019-20 … Only when the OBR judge that we have real GDP growth of less than 1% a year, as measured on a rolling four-quarter basis, will that surplus no longer be required.” Eh?

You could argue that because the Telegraph example featured in its finance pages, some of its technical language could be forgiven on the basis of audience suitability. But Osborne’s budget announcement was to the country. The whole country. The whole country whose lives his decisions profoundly influence. Yet he makes no attempt whatsoever to remove the jargon in order to effectively relay what is essentially a generation-defining message. It’s simply not good enough. So why does he, and many of his establishment peers, do this? Some of the answer can be found in the old Einsteinian cliche: “If you can’t explain something simply, you don’t understand it well enough.”

Economics is clearly very difficult and solving its problems is an extremely demanding task, particularly for someone with no formal training like our dear chancellor. In Osborne’s defence, it seems to me that if the answers were obvious, then more people would agree on them. But because he – like many of his colleagues in Westminster – doesn’t really understand what he is talking about, he simply can’t describe his economic policies in simple enough terms. And into this vacuum of insight George pumps his jargon, which gives him an air of understanding that is just about convincing enough to maintain power. The other part of the explanation is that politicians deliberately use jargon to diffuse our ire and frustrations.

They pitch their speeches and briefings at a level most of us will never understand in order to limit public scrutiny. Their reasoning is thus: if we can’t understand what they’re talking about then how can we possibly begin to question them? Advertisers do the same thing when they use pseudoscience to market their products. They say things like “the pentapeptides in our anti-ageing cream are the active ingredient” or “our makeup remover contains micellar water to give you a fresher look”. Although this is complete drivel, the advertisers know that many of us are happy to accept the claims as fact because we don’t have the capacity to challenge them.

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Again: what the EU should be doing. It’s about morals, because it’s about human lives.

European Entrepreneurs Launch StartupBoat To Address Refugee Crisis (TC)

While many in Europe are sunning themselves on beaches, a group of young tech entrepreneurs and investors have grouped together to address the crisis of refugees, many from Syria, which have come to European shores in wave after wave this Summer. The initiative was started by Paula Schwarz, an entrepreneur based in Berlin, who’s family owns a house on the the Greek island of Samos where thousands of refugees have landed in the last few weeks. Up to 800 people land in Samos every day, according to the island’s mayor Michaelis Angelopoulos. Schwarz brought together people from startups from Germany, Greece and South Africa to tackle the refugee crisis with a typical startup approach, forming a group called Startupboat, to come up with new ideas.

The idea was to conduct research on the status quo of political refugees on Samos Island and “develop tools to improve the status quo of irregular migrants on Greek islands” Web site, Twitter, Facebook). She put out the call to her network and was joined by 20 others, including venture capitalist David Rosskamp, formerly with Earlybird Capital in Berlin and Franziska Petersen, the German client manager for Facebook’s European headquarters in Dublin, Ireland. Rosskamp told me: “People were from Facebook, Saving Global (and formerly Index Ventures), Wings University, other VC funds, Academia, the Lufthansa Innovation Hub, McKinsey and Entrepreneurs from Greece, Berlin and South Africa. We wanted to understand the situation and human tragedy, show civil engagement and think about local help.

On top of this, we feel that the European public is clearly missing a transparent discussion of the issue. Most refugees here are from Syria, they are well educated and could actually be ‘us’.” “We are on Samos as the island is seeing close to 800 refugees per day. They arrive through Turkey and are taken out of the water by the Coast Guards or strand on remote rocks somewhere on the island. From here, their journey through Europe begins. We have followed their odyssey over the island and have organized ad hoc support, including the involvement of local authorities and press to raise awareness and dialogue. We have also set up information websites for both migrants and the Samos public. He says the StartupBoat group is a private initiative. “We saw what was happening on the European borders and got together a set of people equally concerned.”

But the ideas morphed into action as the people — normally used to chatting about business models and innovation — toured the refugee camps and realized they had to do something practical as well. They’ve now launched a website called First-contact. This explains to refugees arriving on Samos what do to do when they arrive, as many of the refugees have cell phones and can go online, according to Schwarz. They’ve ben supplying them with food, speaking to officials and organizing an “awareness walk” through the capital (led by the mayor of the island). [..] Christian Umbach, one of Startupboat’s members who works for Lufthansa Innovation Hub in Berlin, believes the EU should address the issue head on, and also lobby to stop the war in Syria. Quoted in an article in Handelsblatt, Umbach said: “After meeting these people, you start to understand that they don’t come here because they want to benefit economically from us,” he said. “They come here because they are under fire and bomb attacks at home.”

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Oct 162014
 
 October 16, 2014  Posted by at 11:14 am Finance Tagged with: , , , , , , , , , , ,  6 Responses »


Arthur Rothstein First settler on Douglas County farmsteads, Nebraska May 1936

World Economy So Damaged It May Need Permanent QE (AEP)
Liquidity Nightmare Blamed For Crazy Market Moves (CNBC)
This Is Just The Beginning Of The Bear Market: Gartman (CNBC)
World Economy Gives Investors Growth Scare as They Look to US (Bloomberg)
Tumbling Oil Prices: Recession In Russia, Revolt In Venezuela? (Guardian)
Citigroup Sees $1.1 Trillion Stimulus From Oil Plunge (Bloomberg)
Oil Drop Makes US Drillers Own Worst Enemy (Bloomberg)
Yellen Voices Confidence in U.S. Economic Expansion (Bloomberg)
U.S. Stocks Drop as Weakening Economic Data Fuel Selloff (Bloomberg)
Draghi Letdown Sends European Equities Down 11% (Bloomberg)
ECB Stress Test Dead On Arrival As Deflation Hits (Telegraph)
German States Join Ranks Pressing Merkel to Spur Spending (Bloomberg)
Why Putin and Merkel Don’t Put Growth First (Bloomberg)
Biggest Pain Trade Gives 37% Loss to Bond Bears Getting It Wrong (Bloomberg)
Hedge Funds Face Their Worst Year Since 2011 (FT)
US Warns Europe On Deflation, ECB Policies (Reuters)
U.S. Says China Shows Some ‘Willingness’ to Let Yuan Rise (Bloomberg)
How Both Dating And Finance Have Been Screwed By The Internet (Slate)
US Health Official Allowed New Ebola Patient On Plane With Fever (Reuters)

But we can’t have permnent QE. Ambrose claims China and the Fed will yet see the light and start pumping again, but what have they left?

World Economy So Damaged It May Need Permanent QE (AEP)

Combined tightening by the United States and China has done its worst. Global liquidity is evaporating. What looked liked a gentle tap on the brakes by the two monetary superpowers has proved too much for a fragile world economy, still locked in “secular stagnation”. The latest investor survey by Bank of America shows that fund managers no longer believe the European Central Bank will step into the breach with quantitative easing of its own, at least on a worthwhile scale. Markets are suddenly prey to the disturbing thought that the five-and-a-half year expansion since the Lehman crisis may already be over, before Europe has regained its prior level of output. That is the chief reason why the price of Brent crude has crashed by 25pc since June. It is why yields on 10-year US Treasuries have fallen to 1.96pc, and why German Bunds are pricing in perma-slump at historic lows of 0.81pc this week. We will find out soon whether or not this a replay of 1937 when the authorities drained stimulus too early, and set off the second leg of the Great Depression.

If this growth scare presages the end of the cycle, the consequences will be hideous for France, Italy, Spain, Holland, Portugal, Greece, Bulgaria, and others already in deflation, or close to it. The higher their debt ratios, the worse the damage. Forward-looking credit swaps already suggest that the US Federal Reserve will not be able to raise interest rates next year, or the year after, or ever, one might say. It is starting to look as if the withdrawal of $85bn of bond purchases each month is already tantamount to a normal cycle of rate rises, enough in itself to trigger a downturn. Put another way, it is possible that the world economy is so damaged that it needs permanent QE just to keep the show on the road. Traders are taking bets on capitulation by the Fed as it tries to find new excuses to delay rate rises, this time by talking down the dollar. “Talk of ‘QE4’ and renewed bond buying is doing the rounds,” said Kit Juckes from Societe Generale.

Gentle declines in the price of oil are typically benign, a shot in the arm for companies and consumers alike. The rule of thumb is that each $10 drop in the price adds 0.3pc to GDP growth over the next year. Crashes are another story. They signal global stress, doubly dangerous today because the whole industrial world is one shock away from a deflation trap, a psychological threshold where we batten down the hatches and wait for cheaper prices. That is the Ninth Circle of Hell in economics. Lasciate ogni speranza. The world is also more stretched. Morgan Stanley calculates that gross global leverage has risen from $105 trillion to $150 trillion since 2007. Debt has risen to 275pc of GDP in the rich world, and to 175pc in emerging markets. Both are up 20 percentage points since 2007, and both are historic records.

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Without excess stimulus, nothing moves anymore.

Liquidity Nightmare Blamed For Crazy Market Moves (CNBC)

Investors are blaming an unprecedented lack of liquidity for Wednesday’s gut-wrenching stock market open, which saw the S&P 500 fall as much as 2.2% from Tuesday’s close, sent the VIX screaming to 28 and led to outsized moves in major stocks like Disney. According to Eric Hunsader of Nanex, there were 179 “mini flash crashes” during the first 15 minutes of trading, which is the most since the Knight Capital Group fiasco in August 2012. Additionally, Hunsader reports that there were 68 trades in the S&P e-mini that moved that key futures contract 3 or more ticks. And Treasury futures, too, moved sharply as a result of low liquidity. The definition that Nanex uses for a mini flash crash is that a stock sees 10 or more down ticks, for a price change exceeding 0.8%, within 1.5 seconds. “There was no liquidity at all, so it doesn’t take a whole lot of size to really move the price,” Hunsader told CNBC. But “some people come in, and they’re used to buying or selling X-amount, and they’re not paying attention. And X-amount now causes significant movements in price.”

When this lack of liquidity collided with a great number of traders willing to get out at any price, markets got ugly. “This was a pukage. People were putting in market order to sell on the open—’Just get me out’—without thinking,” said Brian Stutland of Equity Armor Investments. The issue, Hunsader said, is that high-frequency trading creates the appearance of liquidity. He gives the example of a trader who wants to buy 10,000 shares of a stock. That order might get routed to two exchanges, but instead of the order getting completed with 5,000 shares traded on each exchange, the first trade of 5,000 shares will cause the other 5,000 share offered on the other exchange to dry up. When these are market-order trades to buy or sell at the available price, the effect of this is a ricochet effect that leads to an outsized move. This explains why not all of Wednesday morning’s moves were to the downside.

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Heed Dennis.

This Is Just The Beginning Of The Bear Market: Gartman (CNBC)

The selloff in global markets is set to continue as a bear market takes hold “for a long period of time,” according to widely followed investor Dennis Gartman, who warned investors not to go long on stocks. “This is the start of a bear market,” Gartman, the founder of the closely watched Gartman Letter, told CNBC Europe’s “Squawk Box” on Thursday. “You stay in cash and you stay in short term bonds and you don’t move out, this is a very difficult period of time and I’m afraid – and I don’t like to think about it – but this might be the very beginnings of a bear market that could last some period of time,” he warned. Gartman’s comments come amid global market turmoil, particularly in the U.S. this week on the back of weaker economic data and fears of an economic slowdown in previous growth engines China, the U.S. and Germany. [..]

Gartman warned that there was going to be “more than a mere 7% to 10% correction” in markets which had enjoyed a bull run since the U.S. Federal Reserve announced an unprecedented bond-buying program designed to stimulate growth in the world’s largest economy. “I don’t like to be that way- you have to remember that in the business of trading…in the business of trading bears don’t eat. Only bulls in the market enjoy the upside, only bulls actually get paid over time. I don’t like to be bearish but this is a time to be at least neutral and perhaps at worst bearish.” Earlier this week, Gartman told CNBC he has “north of 80% in cash and short-term bond funds.” He said Wednesday’s flight to Treasurys was “real panic buying in the bond market probably by those that have been short, because so many people have been bearish of the bond market.”

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The US will sink right along with the rest.

World Economy Gives Investors Growth Scare as They Look to US (Bloomberg)

The global economy faces its biggest test of confidence since the European sovereign debt crisis as investors fear it’s running out of engines. Japan and the euro area are throwing up fresh signs of weakness by the day and emerging markets such as China are dragging instead of driving growth. The sense of tumult is being exacerbated by war in the Middle East, the standoff in Ukraine, street protests in Hong Kong and the spread of Ebola to Dallas. The worry is that five years since the world limped out of recession, central banks have virtually exhausted their stimulus arsenals if activity keeps fading. That leaves the hopes of financial markets riding on the U.S. to resume its historical role as a locomotive robust enough to pull up demand elsewhere. “The global economy and the markets have a history of traumatic economic events,” said Paul Mortimer-Lee, chief economist for North America at BNP Paribas SA in New York.

“Psychologically and physically they have not recovered fully and are anxious about a relapse.” The doubts were evident across financial markets yesterday as a bear market in oil deepened, the Standard & Poor’s 500 Index came close to surrendering its gains for the year and bonds from Germany to the U.S. rallied. The Chicago Board Options Exchange Volatility Index (VIX), a measure of investor nerves known as the VIX, is at its highest since June 2012. U.S. stocks pared losses after Bloomberg News reported that Fed Chair Janet Yellen voiced confidence in the durability of the American expansion at a closed-door meeting in Washington last weekend. The S&P 500 closed 0.8% lower after dropping as much as 3%.

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If it’s up to the Saudi-US combo, bring it on!

Tumbling Oil Prices: Recession In Russia, Revolt In Venezuela? (Guardian)

The sudden slump in oil prices, which have fallen 15% in the past three months, has sent tremors through the capitals of the world’s great oil powers, many of whom could face testing budget crunches if the tendency persists. Higher output coupled with weaker demand from China and Europe has driven the price of crude down to $85 – its lowest for four years. The US also now produces 65% more oil than it did five years ago following the boom in shale production. The rise has contributed to the global glut of crude and allowed the US to import 3.1 million fewer barrels of oil a day compared with its peak in 2005. Prices are now well below the level on which many oil exporters have based their budgets.

If prices remain weak – and many forecasters suggest they will – then from Moscow to Caracas and from Lagos to Tehran governments will start to feel the impact on macroeconomic policy. Brent has averaged $103 since 2010 – trading mostly between $100 and $120 – so a continued period of $80 oil, or less, would have an impact across the world, and from multiple angles. The lower price isn’t bad news for everyone. For example, India would not suffer much – commodities account for 52% of India’s imports but only 9% of its exports (paywall), and unlike Brazil, Russia or South Africa, India would reap immediate advantages from a fall in commodity prices.

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Sure. Things do look spectacularly different when you live in just one dimension.

Citigroup Sees $1.1 Trillion Stimulus From Oil Plunge (Bloomberg)

The lowest oil price in four years will provide stimulus of as much as $1.1 trillion to global economies by lowering the cost of fuels and other commodities, according to Citigroup Inc. Brent, the world’s most active crude contract, closed at $83.78 a barrel in London yesterday. That’s more than 20% below its average for the past three years, amounting to savings of about $1.8 billion a day based on current output, Citigroup estimates. Savings will climb to $1.1 trillion annually as the slide cuts costs of other commodities, leaving consumers and companies with extra cash to spend and bolstering growth, according to Ed Morse, the bank’s head of global commodities research in New York.

Crude prices are plunging amid signs that OPEC, supplier of 40% of the world’s oil, won’t act to eliminate a surplus as global growth slows. Combined supplies from the U.S. and Canada rose last year to the highest since at least 1965 as producers tapped stores locked in shale-rock formations and oil sands. The global economy will rebound next year, with growth quickening to 2.98%, the fastest since 2010, according to analyst forecasts compiled by Bloomberg. “A reduction in oil prices also results in a reduction in prices across commodities, starting with natural gas, but also including copper, steel, and agriculture,” Morse said yesterday in an e-mailed response to questions. “All commodities are energy intensive to one degree or another.”

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Let’s have the margin calls come in, see what’s left behind.

Oil Drop Makes US Drillers Own Worst Enemy (Bloomberg)

U.S. oil producers that saw profits soar on the North American shale boom are feeling the downside of success: falling prices and shrinking cash are threatening to slow development. At the same time, as crude prices approach four-year lows, natural gas companies are experiencing a reversal of fortune after having been shunned by many investors when a supply glut drove the fuel to a decade-low. Gas producers are now viewed as a safer haven than oil companies. Whiting Petroleum hit an all-time high in August after striking a deal to become the biggest oil producer in North Dakota, the state with the second-largest output. It has since lost more than $4 billion in value as its shares plunged 38%. Meanwhile, Southwestern Energy, an independent producer whose output is 99% gas, has fallen just 13%. “Natural gas is becalmed through this,” Donald Coxe, who manages about $200 million at Coxe Advisorsin Chicago, said in an interview. “It is Walden Pond compared to a hurricane in Florida.”

Whiting is one of 26 companies on the S&P Oil & Gas Exploration and Production Select Industry Index that have declined more than 30% in the past month. Shale producers had shifted their focus to more profitable oil as gas prices fell. Now a growing glut of crude has deflated the price of the U.S. benchmark by 18% in the past three months, as gas futures dropped 7.2%. “We’re running into a wall,” said Scott Hanold, an Austin, Texas-based analyst for RBC Capital Markets. “We’re producing more light, sweet crude than we need.” West Texas Intermediate touched $80.01 a barrel, the lowest since June 2012, on the New York Mercantile Exchange today. Brent prices, an international benchmark, fell to the lowest price since November 2010. Exploration and production companies “just drill and produce and all at once say, ‘My God, we’ve oversupplied the market,’” T. Boone Pickens said in an Oct. 9 interview. If crude prices stay below $80 a barrel for three months, they “are going to sober up.”

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Well, well. Talking her book.

Yellen Voices Confidence in U.S. Economic Expansion (Bloomberg)

Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth and turbulent financial markets at a closed-door meeting in Washington last weekend, according to two people familiar with her comments. The people, who asked not to be named because the meeting was private, said Yellen told the Group of 30 that the economy looked to be on track to achieve growth of around 3%. She also saw inflation eventually rising back to the Fed’s 2% target as unemployment falls further, according to the people. The G-30 describes itself as a “nonprofit, international body composed of very senior representatives of the private and public sectors and academia.” Former European Central Bank President Jean-Claude Trichet is chairman, and former Fed Chairman Paul Volcker is chairman emeritus. G-30 Executive Director Stuart Mackintosh was unavailable for immediate comment.

Stocks pared losses after Yellen’s comments were reported, and Treasury yields rose. The S&P 500 was down 0.8% to 1,862.49 at the 4 p.m. close of trading in New York after falling as much as 3%. The yield on the two-year Treasury note was down 5 basis points, or 0.05 %age point, to 0.32% after dropping as much as 13 basis points. “She expressed some confidence” in the outlook, said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. Yellen’s reported remarks were roughly in line with the forecasts presented by Fed policy makers at their last meeting in September. They saw the economy growing by 2.6 to 3% next year and inflation rising to 1.7 to 2% in 2016, according to their central tendency forecasts, which excludes the three highest and three lowest projections.

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” … a cathartic, cataclysmic crescendo of capitulation”.

U.S. Stocks Drop as Weakening Economic Data Fuel Selloff (Bloomberg)

An afternoon rebound helped the Standard & Poor’s 500 Index pare its biggest intraday plunge since 2011 amid speculation the selloff was overdone. The S&P 500 lost 0.8% to 1,862.49 at 4 p.m. in New York, trimming an earlier plunge of as much as 3%. The index pared its gain for the year to less than 0.8% and has tumbled 7.4% since a record on Sept. 18. The Dow Jones Industrial Average fell 173.45 points, or 1.1%, to 16,141.74 after dropping as much as 460 points. The Russell 2000 Index of smaller companies jumped 1%. “Investor sentiment has clearly been pummeled of late as some signs of surrender are forming,” Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist in New York, wrote in a note today. “While no one ever rings a bell at the bottom and there is not generally a cathartic, cataclysmic crescendo of capitulation, fear is emerging which intimates that a floor may be within reach.”

The Chicago Board Options Exchange Volatility Index, the benchmark gauge of options prices known as the VIX, jumped 15% to 26.25, the highest level since 2012, amid demand for protection against losses in equities. Almost 12 billion shares changed hands in the U.S., the most since October 2011. Stocks pared losses after the S&P 500 fell to its low of the day of 1,820.66 shortly before 1:30 p.m. in New York. About an hour later, Bloomberg News reported that Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth and turbulent financial markets at a closed-door meeting in Washington last weekend. Retail sales in the U.S. dropped more than forecast in September, decreasing 0.3% after a 0.6% gain in August that was the biggest in four months, Commerce Department figures showed. Another report today showed manufacturing in the Federal Reserve Bank of New York’s region slowed more than projected in October. The bank’s so-called Empire State index dropped to 6.2 this month from an almost five-year high of 27.5 in September. Readings greater than zero signal growth.

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It’s the bubble as much as it is Draghi. All he could do would be temporary and grossly expensive.

Draghi Letdown Sends European Equities Down 11% (Bloomberg)

Just last month, Europe’s stocks were trading near their highest levels in six years, with optimism spreading that central-bank stimulus would ignite the economy. Much has changed. The Stoxx Europe 600 Index plunged the most in almost three years yesterday, closing down 11% from its June high to meet the definition of a correction. At one point, Greece’s ASE Index was down 10% from the previous day’s close, finishing with a loss of 6.3%. Italy’s FTSE MIB Index fell 4.4% and Portugal’s PSI 20 Index hit a two-year low. Europe is leading a rout that has wiped almost $5 trillion from the value of equities worldwide. While data on everything from industrial production in Germany to manufacturing in the U.K. has contributed to the gloom, sentiment began souring on Oct. 2, when European Central Bank President Mario Draghi stopped short of spelling out how many assets the ECB might buy to head off deflation.

“The shock to markets has been so big in the past days, I have doubt that equities will recover from this very quickly,” Francois Savary, chief investment officer of management firm Reyl & Cie., said in a phone interview from Geneva. “Draghi’s latest communication to the market was a nightmare.” Equities in the Stoxx 600 have lost more than 6% since Draghi spoke this month as investors came to grips with prospects that policy makers might lack tools to keep Europe out of its second recession in a year. It was Draghi’s promise to leave no option off the table in saving the euro that ended the region’s last crisis. “It’s the realization that there’s a real limit to his ‘whatever it takes’ promise,” said Savary. “Any signs that U.S. growth won’t do as well as expected throws markets into a panic because it’s still carrying the global economic recovery on its shoulders.”

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It’s all just politics.

ECB Stress Test Dead On Arrival As Deflation Hits (Telegraph)

It’s the banking fix which is meant to set Europe on the path to economic recovery. Regrettably, it’s all too likely to be just another damp squib. Too little, too late, and too backward looking, it may already have become largely irrelevant for a continent that seems fast to be slipping into deflation. For much of the past year, the European Union’s 130 largest banks, together accounting for 85pc of European banking assets, have been conducting an exhaustive process of “stress testing” their balance sheets against a series of supposedly worst-case economic calamities. One bank, I’m told, has devoted 20pc of its staff to the tests, leaving everything else to go to hell in a handcart. The purpose of the exercise is to identify which banks do not have sufficient capital to meet the imagined shocks, and then require them to recapitalise accordingly, thus restoring confidence in a banking system that nobody trusts as things stands.

The results are due to be published on 26 October, triggering further capital raising which according to some City estimates could amount to €50bn or more. This is in addition to the €70bn already raised so far this year in anticipation. Once complete, then credit growth can begin anew, and economic recovery will follow seamlessly in its wake. That at least is the hope; as ever with Europe, it seems to be built largely on sand. There have been two previous attempts to stress test Europe’s banks. The first was so deficient that it famously found the Irish banking system to be perfectly solvent. Since then, a sum roughly equivalent to half a year’s national GDP has been spent on Irish bailouts. The second one wasn’t much better, so there is a lot riding on the third attempt, particularly as it marks the ECB’s official appointment as overarching supervisor for the eurozone banking system.

The birth of a “single supervisory mechanism” for Europe is, by the way, in itself proving a mind numbingly complicated process, involving multiple layers of duplication, instruction and general regulatory grief. If there is still a banking sector left at all by the time the bureaucrats have had their fill, it will be a minor miracle. There will be 69 individual “supervisors” looking after Deutsche Bank alone, with the lead regulator a French national to avoid any suspicion of national favouritism. Likewise, the lead supervisor for BNP Paribas will be Spanish. It would be amusing to think the Greek banking system will be assigned a German, but that might be thought an insensitivity too far.

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At least they still have the cash.

German States Join Ranks Pressing Merkel to Spur Spending (Bloomberg)

Germany’s state governments stepped up calls for infrastructure spending, adding another source of pressure on Chancellor Angela Merkel to boost investment as economic growth falters. Much like Merkel’s national government, the states are caught between a deteriorating growth outlook and the balanced-budget drive that Germany started in response to the euro area’s debt crisis. It’s making the 16 regions set aside political differences to challenge the status quo, from rich Bavaria to rural Mecklenburg-Western Pomerania in the east, home to Merkel’s electoral district. A day after the German government lowered its growth outlook, proposals to spend more on projects such as highways in Europe’s biggest economy are on the table at a retreat of state premiers starting today that Merkel plans to attend.

“To unleash growth impulses, additional investment is needed in infrastructure and other future-oriented sectors,” according to a summary of the states’ negotiating position in fiscal talks with the federal government that was prepared for the meeting in Potsdam. The states want a “lasting” funding boost, saying a lack of spending is holding back economic development nationwide. The struggle in Germany parallels the international conflict pitting Merkel and Finance Minister Wolfgang Schaeuble against the International Monetary Fund and countries such as France and Italy that advocate spending to stimulate growth. Germany cut its forecast as investor confidence fell to the lowest level in two years, the latest in a series of data fueling speculation the country may be facing recession.

Merkel didn’t flinch, telling lawmakers yesterday that Germany won’t raise public spending and reaffirming her goal of balancing the budget next year, according to a party official who asked not to be named because the session was private. While Merkel said last week her government is looking at measures that don’t threaten her budget goal, such as spurring investment in digital technology and renewable energy, she and Schaeuble say fiscal leeway is tight. “We are agreed in the German federal government that we must stay the course even in difficult times,” Schaeuble said after a meeting of European Union finance ministers yesterday.

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Bloomberg uber-douche Bernidsky gets something halfway right.

Why Putin and Merkel Don’t Put Growth First (Bloomberg)

The notion requires something of an-apples-and-oranges leap, but President Vladimir Putin of Russia and Chancellor Angela Merkel of Germany may have more in common than their experience in the former East Germany and the ability to speak each other’s language. Both defy their critics by continuing to pursue policies that are bad for economic growth. From their perspective, however, it may make sense to resist placing growth above other considerations. Conventional wisdom holds that if gross domestic product is growing, a government must be doing something right, or at least nothing too wrong. If GDP drops 0.2%, as it did in Germany in the second quarter of this year, and especially if it goes down for two consecutive quarters – the formal definition of a recession – the government is supposed to do something about it.

Merkel is under pressure to borrow and spend more to address the slowdown. For Putin, who is faced with a potential recession, the course would be comply with Western demands on Ukraine and earn the lifting of economic sanctions. The GDP, however, is a deeply flawed reflection of a nation’s welfare. Simon Kuznets, who laid the groundwork for the modern methods of GDP calculation, asked in a report to the U.S. Congress in 1934, “If the GDP is up, why is America down?” He continued: “Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.” Both Merkel and Putin are trying to mind those distinctions.

In Germany, the low growth and threat of recession don’t necessarily mean living standards will deteriorate. Economics Minister Sigmar Gabriel forecast that the number of working Germans would increase by 325,000 this year, and by half as many more in 2015. At the same time, he said, the number of unemployed would stay at 2.9 million, or about 4.9%. Net wages per employee will increase by 2.6% this year and by 2.7% next year. With such numbers in hand, German officials must be asking themselves what would be achieved if they gave in to the growing demands from both home and abroad to resort to deficit spending.

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Panic is as panic does.

Biggest Pain Trade Gives 37% Loss to Bond Bears Getting It Wrong (Bloomberg)

What a dismal time for bond traders who were optimistic about growth. Investors who poured more than $1 billion this year into a $3.8 billion leveraged exchange-traded fund that bets against long-dated U.S. Treasuries are suffering a 10.7% loss this month alone, Bloomberg data show. The fund is down 36.5% this year, a small window into the magnitude of pain in a market where many traders have been wagering debt prices would fall. Treasuries have defied predictions across Wall Street for higher yields all year, and yesterday’s move is sending bond bears into a tailspin. Yields on 10-year Treasuries fell the most since March 2009, trading below 2% for the first time since June 2013 as a decline in retail sales prompted traders to reduce wagers the Federal Reserve will start raising interest rates next year. The move is in part driven by traders covering their short bets, according to Jack Flaherty, an investment manager at GAM USA in New York. “There’s been weakness, weakness, weakness and today it’s just ‘Get me out’,” Flaherty said yesterday.

Primary dealers had the biggest short position on benchmark government notes at the beginning of the month since June 2013. They had a net $20.7 billion wager against notes maturing in the seven-to-eleven year range in the week ended Oct. 1, Fed data show. It seems, though, that almost everything in the world is going against these bears right now. The global economy is slowing down, the Ebola epidemic in Western Africa is spreading, and conflicts in Iraq and Syria are escalating. All of that is translating into a surge in demand for the safety of Treasuries. “We keep thinking we’re getting capitulation trades, but clearly there’s a lot more skeletons in the closet than we thought,” Ira Jersey, an interest-rate strategist at Credit Suisse in New York, wrote in an e-mail. “We’re also seeing more flight to quality buyers out of global asset classes that are considered ‘riskier.’” Adding to the bout of general anxiety overwhelming the market was the data yesterday showing that U.S. retail sales dropped more than forecast in September on a broad pullback in spending.

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Not a lot of money there lately. They should all disband and find something useful to do with their lives. These are not stupid people, but they do make stupid choices like chasing money 24/7. Go be useful to society, I’d say.

Hedge Funds Face Their Worst Year Since 2011 (FT)

Hedge funds are on course for their worst year since 2011, as several of their biggest and most popular trades turned sour and some managers were forced to cut their losses. Wednesday’s new and sudden fall in US Treasury yields wrongfooted numerous funds that had positioned themselves for rising interest rates and an improving macroeconomy. Hedge fund bets on tax-driven mergers and on US housing finance giants Fannie Mae and Freddie Mac have also unraveled this month. October is shaping up to be a worse month for some hedge funds even than September, when the industry lost 0.75%. Big name managers including so-called “Tiger cubs” Rob Citrone, Philippe Laffont and Chase Coleman, who used to work under veteran hedge fund manager Julian Robertson at Tiger Management, have all fallen into the red as technology stocks have been hard hit.

Claren Road, the hedge fund controlled by Carlyle Group, has suffered an 11% fall in its credit opportunities fund since the start of October. Some funds have pulled back their positions as financial market volatility has jumped in recent weeks, and more appeared to capitulate on Wednesday amid a flash crash in US Treasury yields. The unexpected drop in the price of oil has created cascading losses through popular hedge fund trades, said Mino Capossela, head of liquid alternative investments for Credit Suisse Asset Management. The price of Brent crude has fallen by almost a quarter since mid-June. As well as using oil as a bet on improving economic growth, funds have also bought energy stocks and bonds. Oil companies have been among the biggest recent issuers of high-yield bonds, meaning that credit funds have also been affected.

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And I warn the US.

US Warns Europe On Deflation, ECB Policies (Reuters)

The United States on Wednesday renewed a warning that Europe risks falling into a downward spiral of falling wages and prices, saying recent actions by the European Central Bank may not be enough to ward off deflation. In a semiannual report to Congress, the U.S. Treasury Department said Berlin could do more to help Europe, namely by boosting the German economy. “Europe faces the risk of a prolonged period of substantially below-target inflation or outright deflation,” the Treasury said.

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Moot.

U.S. Says China Shows Some ‘Willingness’ to Let Yuan Rise (Bloomberg)

The U.S. said China has shown “some renewed willingness” to let the yuan strengthen while reiterating the currency “remains significantly undervalued.” In a twice-yearly report to Congress on foreign exchange, the Treasury Department said changes to China’s currency policy remain incomplete and the world’s second-largest economy should allow the market to play a greater role in setting the yuan’s value. The report covering the first half of this year concluded that no country was designated a currency manipulator. The Treasury reiterated its call for more balanced global growth as the U.S. economy gathers strength, the euro area and Japan struggle, and emerging markets such as China face slowdowns. Countries including Germany, where domestic demand has been “persistently weak,” need to do more to support domestic growth and help the world economy, the report said.

“The report tries to strike a fine balance between encouraging economies that have weak growth and current-account surpluses to boost domestic demand, but to do so using fiscal policy and other responses,” said Eswar Prasad, a professor of trade policy at Cornell University in Ithaca, New York, and a senior fellow at the Washington-based Brookings Institution. China should build on “the apparent recent reduction in foreign-exchange intervention and durably curb its activities in the foreign-exchange market,” the department said in yesterday’s report. The Treasury also pushed for changes in South Korea, saying the won “should be allowed to appreciate further.” Treasury Secretary Jacob J. Lew, in a meeting with South Korea’s finance minister last month, emphasized the importance of avoiding currency intervention.

The Treasury said Japanese authorities need to “carefully calibrate the pace of overall fiscal consolidation” to help escape deflation, according to the report. “Monetary policy cannot offset excessive fiscal consolidation nor can it substitute for necessary structural reforms that raise trend growth and domestic demand.” To boost growth, Japan could raise household income through greater labor-force participation and higher earnings to “durably increase” consumers’ buying appetite, the Treasury said. The yen has depreciated 23% from October 2012 to August 2014 on a real trade-weighted basis, according to the report.

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Nice approach.

How Both Dating And Finance Have Been Screwed By The Internet (Slate)

Your parents dated the way Warren Buffett picks a stock: a close review of the prospectus over dinner, careful analysis of long-term growth potential, detailed real asset evaluation. Sure, the old economy dating market in which they participated had the occasional speculative frenzy: Woodstock, V-E day, whatever went on at Studio 54. My parents met during spring break. In Florida. But love and its compounding interests were usually pursued with appropriate due diligence. Then came the Internet. The “innovation” that has driven the financial industry over the last two decades has also transformed the dating market, with similar effects on romance as on the economy. The traditional focus on long-term security—marriage and retirement—has been replaced by a relentless pursuit of instant gratification and immediate returns. These days, the Wolf is as much on Tinder as on Wall Street.

Just look at what online dating has done to the meet market. The speed and frequency of transactions has gone up. Volatility has spiked as relationship investment strategy has changed from building long-term value to quarterly—or nightly—profits. New investors have entered the market with greater ease, although all too often only to be taken advantage of by more sophisticated players. New avenues for fraud have opened up: Manti Te’o meet Bernie Madoff on Ashley Madison. Even inequality has risen. Some investors are rolling in it; others have just lost their shirts. How did the bedroom end up looking so much like the boardroom? In successive waves, innovation pioneered in the financial markets has been adopted to dating. Online dating’s initial trading platforms—Match created in 1995, JDate in 1997, etc.—were the relationship equivalent to the online trading sites that first allowed investors to directly manage their own portfolios. Think “Talk to Chuck,” except if he can message you first (hopefully not about the size of his portfolio).

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Unbelievable. What else is there to say? She cared for a patient who died, and who already infected one other nurse. She should have been in isolation.

US Health Official Allowed New Ebola Patient On Plane With Fever (Reuters)

A second Texas nurse who has contracted Ebola told a U.S. health official she had a slight fever and was allowed to board a plane from Ohio to Texas, a federal source said on Wednesday, intensifying concerns about the U.S. response to the deadly virus. The nurse, Amber Vinson, 29, flew from Cleveland to Dallas on Monday, the day before she was diagnosed with Ebola, the U.S. Centers for Disease Control and Prevention (CDC) said. Vinson told the CDC her temperature was 99.5 Fahrenheit (37.5 Celsius). Since that was below the CDC’s temperature threshold of 100.4F (38C) “she was not told not to fly,” the source said. The news was first reported by CNN.

Chances that other passengers were infected were very low because Vinson did not vomit on the flight and was not bleeding, but she should not have been aboard, CDC Director Dr. Thomas Frieden told reporters. Congress will hold a hearing on Thursday on the U.S. response to Ebola, with Frieden and other officials scheduled to testify. Vinson was isolated immediately after reporting a fever on Tuesday, Texas Department of State Health Services officials said. She had treated Liberian patient Thomas Eric Duncan, who died of Ebola on Oct. 8 and was the first patient diagnosed with the virus in the United States. Vinson was transferred to Emory University Hospital in Atlanta by air ambulance and will be treated in a special isolation unit. Three other people have been treated there and two have been discharged, the hospital said in a statement.

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