Feb 192019
 


Alfred Eisenstaedt The kiss (V-J Day in Times Square) 1945

 

16 States Sue Over Trump’s National Emergency Declaration (NPR)
US Deputy Attorney General Rod Rosenstein To Leave Office Soon (AFP)
Scott Pelley Commits Career Suicide (Kunstler)
US Auto Industry Lines Up Against Possible Tariffs (R.)
China Car Sales Plunge Most In 7 Years (ZH)
Honda Confirms UK Swindon Plant Will Close In 2021 (G.)
Germany Tops Japan With World’s Largest Current Account Surplus In 2018 (R.)
Euroskeptic Parties Could Paralyze EU (K.)
More MPs Ready To Quit Labour, Corbyn Warned (Ind.)
The First Step For Labour’s Exiles: Bring 29 More With Them (G.)
Museums Grapple With Rise In Pleas For Return Of Foreign Treasures (G.)
Majority Of European Firms Have No CO2 Reduction Targets (G.)
How The World Got Hooked On Palm Oil (G.)

 

 

Way ahead of you: “We will possibly get a bad ruling, and then we’ll get another bad ruling, and then we’ll end up in the Supreme Court, and hopefully we’ll get a fair shake.”

16 States Sue Over Trump’s National Emergency Declaration (NPR)

A group of 16 states has filed a lawsuit in a Northern California federal court against President Trump’s declaration of a national emergency, calling the president’s decision to use executive power to fund a border wall unconstitutional. The complaint filed Monday in the U.S. District Court for the Northern District of California seeks to bar the administration from using emergency powers to divert money from other programs to a wall on the U.S.-Mexico border, marking the start of a legal battle anticipated by both the president and his opponents. “The President has used the pretext of a manufactured ‘crisis’ of unlawful immigration to declare a national emergency,” the plaintiffs wrote in California et al. v. Trump et al.

The lawsuit, spearheaded by California Attorney General Xavier Becerra, says that the Constitution gives Congress alone the power to control spending, not the president. Trump declared the emergency on Friday to free up billions of dollars for construction of a long-promised border wall, after Congress passed a spending bill that allocated just $1.375 billion for its construction. The president says he plans to allocate a total of $8 billion to the wall, including redirecting $3.6 billion in military construction funds and $2.5 billion from the Department of Defense’s counter-drug activities. Trump acknowledged the likelihood of legal challenges, saying on Friday, “We will possibly get a bad ruling, and then we’ll get another bad ruling, and then we’ll end up in the Supreme Court, and hopefully we’ll get a fair shake.”

The White House has argued that the move is routine. According to the Brennan Center for Justice, presidents have declared national emergencies 60 times, including Trump, since the power was codified in the National Emergencies Act of 1976. But Democratic critics, including House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, have advanced the same argument as the California-led lawsuit, claiming Trump’s declaration violates lawmakers’ power to set spending priorities. Experts seem to think the courts are likely to defer to the president on the question of whether there is an emergency, NPR’s Nina Totenberg has reported, and the legal fight is likely to boil down to whether the president has the right under existing law to “reprogram” money Congress has appropriated.

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I meant to do that.

US Deputy Attorney General Rod Rosenstein To Leave Office Soon (AFP)

The US Justice Department official who once oversaw the Russia probe, Rod Rosenstein, plans to resign in mid-March, US news outlets reported. Rosenstein’s departure from his post as deputy attorney general has been expected for some time. CNN late Monday quoted a department official as saying it has nothing to do with recent explosive claims by the former acting director of the FBI, Andrew McCabe. McCabe has said that Rosenstein raised the idea of wearing a wire to tape President Donald Trump and talked about removing him from office under the 25th Amendment after Trump fired FBI director James Comey in May 2017.

CNN said Rosenstein has widely been expected to leave his job after Bill Barr is confirmed to fill the vacant post of attorney general. The network said that a departure by Rosenstein next month could suggest the Russia probe being carried out by special counsel Robert Mueller is nearing completion. Trump abruptly fired Comey as pressure rose over the Russia investigation, setting off alarm bells in the FBI and Justice Department. According to McCabe, in a lengthy interview that aired Sunday on CBS’s “60 Minutes,” Rosenstein brought up the possibility of invoking the 25th Amendment of the US Constitution, which provides for the removal of a sitting president for incapacity.

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“..the attempt by CBS-News to sell “the sterling career” story of Andrew McCabe (as Mr. Pelley put it), is really just a way for the network to cover its own ass..”

Scott Pelley Commits Career Suicide (Kunstler)

Apparently, one of the main objectives in the 60-Minutes story was to paint Mr. McCabe as an heroic patriot defending America against the wicked, shape-shifting, all-powerful Russia, which had made Mr. Trump its captive. The 60-Minutes piece happens to coincide exactly with the release of Mr. McCabe’s ass-covering book: The Threat: How the FBI Protects America in the Age of Terror and Trump. (Real superheroes fight both.) It also sets up a nice contrapuntal battle between the enigmatic Rod Rosenstein and Mr. McCabe vis-à-vis the idea of “wearing a wire” to record the President en route to running him over with the 25th Amendment. According to Mr. McCabe, there was a lot of lively discussion around this plan.

Mr. Rosenstein has brushed it off as a gag. Mr. McCabe, apparently, thought it was dead serious. They never did get their stories straight. In the meantime, Mr. McCabe’s own colleagues in the FBI’s ethics office and its Inspector General charged him with lying repeatedly about his role in this matter. You had to wonder whether the attempt by CBS-News to sell “the sterling career” story of Andrew McCabe (as Mr. Pelley put it), is really just a way for the network to cover its own ass in acting as a propaganda patsy in the long-running RussiaGate affair. The 60-Minutes segment also coincided with William Barr’s confirmation last week by the senate as the Attorney General, as well as official reports issued by both house and senate committees stating that they found no evidence for the Trump/Russia collusion story.

The ground is shifting under all this seditious hugger-mugger. Whether you are a Trump cheerleader or not (I’m not), there is a reality-based chain of events behind the FBI’s actions from early 2016 on — and the actions of other official players in government — that can only be clarified now in the courts, and chances are pretty good that they will be. It concerns me because the specter of massive institutional failure in federal law enforcement and the news media bodes very darkly for this country’s future.

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Let’s start with no longer calling it a growth industry. And then execute a controlled demolition. There are enough cars already.

US Auto Industry Lines Up Against Possible Tariffs (R.)

The U.S. auto industry urged President Donald Trump’s administration on Monday not to saddle imported cars and auto parts with steep tariffs, after the U.S. Commerce Department sent a confidential report to the White House late on Sunday with its recommendations for how to proceed. Some trade organizations also blasted the Commerce Department for keeping the details of its “Section 232” national security report shrouded in secrecy, which will make it much harder for the industry to react during the next 90 days Trump will have to review it.

“Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs,” the Motor and Equipment Manufacturers Association said in a statement, adding that it was “alarmed and dismayed.” “It is critical that our industry have the opportunity to review the recommendations and advise the White House on how proposed tariffs, if they are recommended, will put jobs at risk, impact consumers, and trigger a reduction in U.S. investments that could set us back decades.” The industry has warned that possible tariffs of up to 25 percent on millions of imported cars and parts would add thousands of dollars to vehicle costs and potentially devastate the U.S economy by slashing jobs.

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Actually, “For 2018, the drop was 4.1%, marking the first decrease since the early 1990s.”

China Car Sales Plunge Most In 7 Years (ZH)

Car sales in China continued their relentless descent in January, falling 17.7%, as we recently expected would happen when discussing Europe’s tumbling January auto sales. This follows the country’s first full year slump (2018) in more than two decades and it puts further pressure on the state of the global automotive market. The drop marked the eighth monthly retail sales decline in a row and was the biggest one-month drop in seven years. Gu Yatao, a Beijing-based auto analyst with Roland Berger, confirmed to Bloomberg that the “downward pressure is still there. The government isn’t adopting stimulating policies to give the market a shot in the arm.”

The contraction in China comes at the same time that auto markets in Europe and North America continue to shrink as a result of car sharing services and slowing economies. As we have been reporting for months, the slowdown in China continues to be a result of the country’s slowing economy, coupled with the lagging trade war with the United States. Even discounts for the Chinese New Year, which traditionally can help spur sales, weren’t enough to keep consumers in showrooms early this year. It’s a “historic slump” for China: the wholesale decline in January, to 2.02 million units, accelerated from December’s 15.8% slump. For 2018, the drop was 4.1%, marking the first decrease since the early 1990s.

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Boohoohoo.

Honda Confirms UK Swindon Plant Will Close In 2021 (G.)

Honda has confirmed the closure of its Swindon factory with the loss of 3,500 jobs, dealing another huge blow to Britain’s car industry in the run-up to Brexit. The Japanese carmaker announced it would shut the factory, its only European production site, in 2021, when the current model’s production cycle ends. The Swindon factory produces 150,000 Honda Civics a year – most of them for export to the EU – amounting to about a tenth of total UK vehicle production. It employs 3,500 people but supports many more jobs in the supply chain. Greg Clark, the UK business secretary, said Honda’s plan was “a devastating decision” for Swindon and the UK. “This news is a particularly bitter blow to the thousands of skilled and dedicated staff who work at the factory, their families and all of those employed in the supply chain.”

He said Honda’s move was a “commercial decision based on unprecedented changes in the global market”. Katsushi Inoue, the chief officer for European regional operations and president of Honda Motor Europe, said: “In light of the unprecedented changes that are affecting our industry, it is vital that we accelerate our electrification strategy and restructure our global operations accordingly. “As a result, we have had to take this difficult decision to consult our workforce on how we might prepare our manufacturing network for the future. This has not been taken lightly and we deeply regret how unsettling today’s announcement will be for our people.”

 

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Talking about cars…

How Reuters can write this without indicating with whom Germany has its main surpluses is a valid question.

Germany Tops Japan With World’s Largest Current Account Surplus In 2018 (R.)

Germany’s current account surplus shrank but remained by far the world’s largest last year due to strong exports, according to data from the Ifo institute on Tuesday that is likely to renew criticism of Chancellor Angela Merkel’s fiscal policies. The IMF and the European Commission have urged Germany for years to do more to lift domestic demand as a way to boost imports, stimulate growth elsewhere and reduce global economic imbalances. Since he took office, U.S. President Donald Trump has also criticized Germany’s export strength.

Germany’s current account surplus, which measures the flow of goods, services and investments, was the world’s largest for the third year running in 2018 at $294 billion, followed by Japan with $173 billion, the Ifo figures showed. Russia came in third with a surplus of $116 billion. When measured in relation to economic output, Germany’s current account surplus shrank for the third year in a row, however, falling to 7.4 percent in 2018 from 7.9 percent the previous year, according to the Ifo figures. Since 2011, Germany’s current account balance has been consistently above the European Commission’s indicative threshold of 6 percent of GDP and the surplus reached a record high of 8.9 percent in 2015.

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And according to the report, that would be a bad thing.

Euroskeptic Parties Could Paralyze EU (K.)

A new survey by the European Council on Foreign Relations (ECFR) ahead of European Parliament elections in May has found that Euroskeptic parties are on course to win a third of the seats in the assembly, which could potentially undermine the European Union’s cohesion and security. “In the longer term, their ability to paralyze decision-making at the center of the EU would defuse pro-Europeans’ argument that the project is imperfect but capable of reform. At this point, the EU would be living on borrowed time,” said the report, “The 2019 European Elections: How anti-Europeans plan to wreck Europe and what can be done to stop it.” Mark Leonard, director of the London-based think-tank, said that the warning contained in the report, that anti-European parties are gaining strength and could paralyze the EU, should focus the minds of pro-Europeans.

“They must not become trapped into becoming defenders of the status quo in Europe or allowing the election to become a referendum on the issue of migration – which is exactly the battleground that the anti-Europeans want,” he said. “Instead, pro-Europeans need to unmute the silent majority by fighting different elections that Europe’s different publics will vote on – such as the climate change election, the ‘Facebook’ election for those concerned about their data and privacy, the election for those worried about Russian aggression, the prosperity election for those worried about stalled living standards, the rule of law election for those worried about democratic backsliding, and the ‘saving Europe’ election for the EU’s most ardent defenders.”

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Antisemitism sells as much as Trump does. People eat it up.

More MPs Ready To Quit Labour, Corbyn Warned (Ind.)

Jeremy Corbyn faces a historic Labour rupture after being warned that more MPs are ready to follow the seven who dramatically quit his party on Monday. The leader publicly appealed for unity while his supporters launched savage attacks on the MPs, branding them “cowards”, “traitors” and “splitters” and demanding they give up their seats. But as the crisis deepened, deputy leader Tom Watson said other MPs are also considering leaving Labour, a party he admitted he sometimes no longer recognises, amid visceral anger over antisemitism, Brexit and Mr Corbyn’s leadership. The breakaway MPs headed by prominent backbenchers Chuka Umunna and Luciana Berger said they would form a new “Independent Group” in the House of Commons and invited people from other parties to join.

There were some early signs on Monday evening that they might attract support from disenfranchised Conservatives to the new centre-ground anti-Brexit grouping in the chamber. The group who left Labour, in the first major split of a British political party since the SDP were formed in 1981, also included Angela Smith, Gavin Shuker, Mike Gapes, Chris Leslie and Ann Coffey. Shortly after the announcement, Mr Corbyn wrote to every party member expressing his disappointment that a “small group” had left and urged the party “must be united”. But in a longer filmed statement, Mr Watson lamented their departure and in particular the antisemtic abuse suffered by Ms Berger that had preceded her announcement.

He said: “Even a single incident of antisemitism in the Labour Party shames us. Now we have lost Luciana, one of our most dedicated and courageous MPs. “If someone like Luciana no longer believes there is a home for her in the Labour Party then many other colleagues will be asking themselves how they can stay. “That’s why time is short for us. To confront the scale of the problem and meet the consequences. To keep others from leaving.” [..] As she resigned, Ms Berger said Labour had become “institutionally antisemitic”, while Mr Gapes, a former chairman of the Commons Foreign Affairs Committee, told the press conference Labour is now a “racist, antisemitic party”. He added: “Jeremy Corbyn and those around him are on the wrong side on so many international issues – from Russia, to Syria, to Venezuela. A Corbyn Labour government would threaten our national security and international alliances.”

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Less than 40 days before Brexit. So what do you do? Of course.

The First Step For Labour’s Exiles: Bring 29 More With Them (G.)

It has no name, no logo, no staff and no money. Yet those who packed into the tiny room above Westminster Bridge as seven MPs announced they were quitting the Labour party were left in no doubt that this was the beginning of a new political party. “The crucial word is yet,” one of the MPs said afterwards. “We are not a new party – yet.” As of Monday, the group are independents with no special status in the House of Commons. They hope to be something much more concrete, depending on their success in persuading other MPs to join them. In the short term the group has one central task – to convince 29 more disgruntled MPs from any party colour to join their group.

That would give them official third party status – overtaking the SNP and access not just to more “Short money” but also a prized guaranteed slot for the group’s leader at every PMQs, replacing the SNP Westminster leader Ian Blackford. Those MPs involved in the new group’s organisation stress that they hope this week will be dominated by several news cycles’ worth of new developments, including an expectation of more defections. If they do not materialise, the group will find it hard to maintain momentum. Two names mentioned as the most likely Conservative targets are the Tory MPs Heidi Allen and Sarah Wollaston, both independent-minded and supporters of the People’s Vote campaign.

The most crucial name on the list of seven is Luciana Berger, the MP for Liverpool Wavertree who has faced a slew of antisemitic abuse including death threats that have seen more than one abuser put behind bars. Berger, who is nine months pregnant, had not often been talked about in the same breath as MPs like Chuka Umunna and Chris Leslie who have been on the brink of quitting for many months over the party’s Brexit policy. Yet it was she who strode into the room first and chaired the event, looking the most like the group’s leader.

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What more to say about this display of dumb f*ckery? The entire article doesn’t mention the Parthenon Marbles even once. But between the lines groups them together with a giant sloth. And some art historian says “[museums] are going to have to figure it out or someone is going to figure it out for them..” Nonsense. Just give it back. You stole it.

Museums Grapple With Rise In Pleas For Return Of Foreign Treasures (G.)

Neanderthal skulls and the remains of an extinct sloth named after Charles Darwin are among the items requested for repatriation from British institutions, as documents reveal museums are facing calls to return some of their most treasured items to their places of origin. The pressure on museums to grapple with the provenance of their collections has been revealed by freedom of information requests submitted by the Guardian. A series of high-profile restitution claims have been received by institutions including the British Museum and the Natural History Museum in recent months. They include a call from the government of Gibraltar for the return of Neanderthal remains, including the first adult skull to be discovered by scientists, and a request from Chile for the repatriation of the remains of a now extinct giant ground sloth.

The letters, almost all of which resulted in the requests being rejected, show that long-running restitution claims for high-profile exhibits such as the Parthenon marbles are the tip of the iceberg as debate rages over the right of museums to keep hold of contested collection items. Last month the Egyptian government called on the National Museum of Scotland to produce certification documents for its Egyptian antiquities after a row broke out over plans to display a casing stone from the Great Pyramid of Giza. In October last year, the British Museum faced calls to return Hoa Hakananai’a, a basalt statue taken from Easter Island in 1868 and given to the museum by Queen Victoria the following year. In April, the ministry of cultural heritage in Italy requested the return of a marble relief depicting the freedmen Publius Licinius Philonicus and Publius Licinius Demetrius.


The Hoa Hakananai’a statue from Easter Island is among the artefacts displayed in the British Museum asked to be returned. Photograph: Neil Hall/EPA

The art historian Alice Procter, whose Uncomfortable Art Tours seek to inform visitors about the colonial history of museums, said British institutions would increasingly be forced into “soul-searching” about the provenance of their items – and whether they should be returned. “This is a really critical time for museums to work out where they stand on these questions,” she said. “Stop hiding behind historical acts. They have little justification for continuing to cite something like the British Museum Act.” Procter referred to a recent report commissioned by the French president, Emmanuel Macron, which caused a stir in the museum world last November with a call for thousands of African artworks held by French museums to be returned to their countries of origin. “It’s one of those situations where [museums] are going to have to figure it out or someone is going to figure it out for them,” said Procter.

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But 47% already reward their CEOs for climate performance. Wonder what pot of money that comes out of.

Majority Of European Firms Have No CO2 Reduction Targets (G.)

Most European companies have no target for reducing their greenhouse gas emissions even though 80% see climate change as a business risk, a survey has found. Among those that have set climate goals, only one in three stretch beyond 2025, according to the annual Carbon Disclosure Project report. Instead, corporate action has focused in the boardroom, with 47% of firms rewarding their CEOs for climate performance, and a quarter tying incentives to environmental goals. European firms now make up half of the CDP’s environmental “A-list” and the managing director for Europe, Steven Tebbe, praised climate disclosure’s entry into the financial mainstream.

“The next decade is vital if our shift to a sustainable economy is to be successful, and companies lie at the heart of this transition,” he said. A-list companies on the Stoxx global climate change leaders index outperformed their peers by 5.5% per annum this decade, he noted. Although 53% of companies surveyed did not yet have climate goals, 58% reported carbon cuts in 2018, amounting to a total reduction of the equivalent of 85m tonnes of CO2 – as much as Austria’s annual emissions. One third of companies reported increased emissions. One A-listed property management firm, Landsec, has cut its greenhouse gases by 17% since 2014 – on the way to a planned 40% tail-off by 2030.

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There is essentially zero need for palm oil. But Europe throws it in its biofuels. And all of its food. Because Sumatran tigers, Sumatran rhinos and orangutans don’t protest.

Zombies ‘R’ Us. We kill anything for profit, including ourselves.

How The World Got Hooked On Palm Oil (G.)

Once upon a time in a land far, far away, there grew a magical fruit. This fruit could be squeezed to produce a very special kind of oil that made cookies more healthy, soap more bubbly and crisps more crispy. The oil could even make lipstick smoother and keep ice-cream from melting. Because of these wondrous qualities, people came from around the world to buy the fruit and its oil. In the places where the fruit came from, people burned down the forest so they could plant more trees that grew the fruit – making lots of nasty smoke and sending all of the creatures of the forest scurrying away. When the trees were burned, they emitted a gas that heated up the air. Then everybody was upset, because they loved the forest’s creatures and thought the temperature was warm enough already. A few people decided they shouldn’t use the oil any more, but mostly things went on as before, and the forest kept burning.

This is a true story. Except that it is not magic. The fruit of the oil palm tree (Elaeis guineensis), which grows in tropical climates, contains the world’s most versatile vegetable oil. It can handle frying without spoiling, and blends well with other oils. Its combination of different types of fats and its consistency after refining make it a popular ingredient in packaged baked goods. Its low production costs make it cheaper than frying oils such as cottonseed or sunflower. It provides the foaming agent in virtually every shampoo, liquid soap or detergent. Cosmetics manufacturers prefer it to animal tallow for its ease of application and low price. It is increasingly used as a cheap raw material for biofuels, especially in the European Union.


Orangutans rescued near a palm oil plantation in Kalimantan, Indonesia. Photograph: Vier Pfoten/Four Paws/Rex

It functions as a natural preservative in processed foods, and actually does raise the melting point of ice-cream. Palm oil can be used as an adhesive that binds together the particles in fibreboard. Oil palm trunks and fronds can be made into everything from plywood to the composite body of Malaysia’s national automobile. Worldwide production of palm oil has been climbing steadily for five decades. Between 1995 and 2015, annual production quadrupled, from 15.2m tonnes to 62.6m tonnes. By 2050, it is expected to quadruple again, reaching 240m tonnes. The footprint of palm oil production is astounding: plantations to produce it account for 10% of all global cropland. Today, 3 billion people in 150 countries use products containing palm oil. Globally, we each consume an average of 8kg of palm oil a year.

Of this, 85% comes from Malaysia and Indonesia, where worldwide demand for palm oil has lifted incomes, especially in rural areas – but at the cost of tremendous environmental devastation and often with attendant labour and human rights abuses. Fires set to clear forests and create land for more palm plantations are the top source of greenhouse gas emissions in Indonesia, a country of 261 million people. The financial incentive to produce more palm oil is helping to warm the planet, while destroying the only habitat of Sumatran tigers, Sumatran rhinos and orangutans – driving them towards extinction.

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Apr 072018
 
 April 7, 2018  Posted by at 10:24 am Finance Tagged with: , , , , , , , ,  2 Responses »


Arthur Rothstein Grain elevators, Great Falls, Montana 1939

 

US Jobs: One Big Miss (CNBC)
Everything Has Changed In Macroeconomics, But.. (Murphy)
Income From UK Savings Accounts Dropped 16% In A Year (Ind.)
Social Media Users Treated As ‘Experimental Rats’ – EU Watchdog (CNBC)
Facebook Users Have To Pay To Opt Out Of Their Data Being Used (CNBC)
AI: An ‘Immortal Dictator From Which We Can Never Escape’ (CNBC)
960,000 Households In Australia Will Face ‘Mortgage Stress’ (IBT)
Another Mighty Conundrum (Kunstler)
Provocations (Dmitry Orlov)
Shipping Is a Big Part of the Climate Problem (BBG)
Chinese Man Caught Smuggling Five Rhino Horns Is Jailed By Dutch Court (G.)

 

 

93 million not in the labor force.

US Jobs: One Big Miss (CNBC)

Nonfarm payrolls rose 103,000 in March while the unemployment rate was 4.1%, falling well short of Wall Street expectations during a month where weather caused havoc on the jobs market, according to a Bureau of Labor Statistics report Friday. Economists had been expecting a payrolls gain of 193,000 and the unemployment rate to decline one-tenth of a point to 4%. The monthly reading was a huge slip from the 326,000 reported in February. A broader measure of unemployment that includes discouraged workers and those holding part-time positions for economic reasons — the underemployed — fell two-tenths of a point to 8%, its lowest reading in 11 years.

“If one were to only focus on this single month, the March employment report is on the disappointing side,” said Mark Hamrick, senior economic analyst at Bankrate.com. “Broader context is appropriate, however. The job market is widely regarded to be close to full employment. So, hiring gains should be slowing at this point in the expansion.” In addition to the payrolls news, the closely watched average hourly earnings figure rose 0.3%, against estimates of 0.2%. The number equates to a healthy but not worrisome 2.7% rate on an annualized basis. The average work week was unchanged at 34.5 hours.

Stock market reaction to the report was muted, with major indexes lower largely on renewed worries over a U.S. trade war with China. “Wage growth continues to inch higher but not enough to worry markets at this point,” said Quincy Krosby, chief market strategist at Prudential Financial. “As we move closer and closer towards full employment expectations are that headline employment should slow. This number reflects a continued reversion to the mean.” Professional and business services led with 33,000 new jobs while manufacturing and health care added 22,000 new jobs apiece. Mining rose 9,000 while construction lost 15,000 positions and retail fell 4,000.

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Never again…

Everything Has Changed In Macroeconomics, But.. (Murphy)

I spend a lot of time writing about the Global Financial Crisis. Not much of it is published yet: academia is desperately slow. The crash of 2008 and its aftermath is, however, an ever-present reality both in my work life, and to be candid, the world beyond it. But I still do not think we appreciate how much everything has changed. A blog from John Lewis who works for the Bank of England gave some hint of the scale of this change this week. Lewis looked at real interest rates for three centuries i.e. those adjusted for inflation. When considering real bank rate, mortgage rates, and 10-year government bond yields over time this is what he found. As he notes: ‘the lines show the five-year moving averages of the ex-post real interest rate. The dots show the values over the years 2012 to 2016’:

As he notes: “The 5-year average of real bank rate rarely goes below zero – previous instances were mainly during the 1970s inflation and around world wars. The decline in real bond yields since the 1980s leaves them about 300bps below their all time average.” Now there may be good reason for that: broader markets, real reduced risk because of better information, and so on. The absence of world war helps too. But it also means that if we were to return to ‘normal’ or the mean then the change in rates would be massive:

The most useful contrast is with 1997 – 2007, of course. We’re talking adjustments of 4% or more. That is not going to happen. There are good reasons. Most mortgage holders would fail to make their payments. Most banks would then collapse. and government debt costs would increase and may politicians would panic at that whether appropriately or not. I will be blunt. Everything has changed. Those rates are history. This though has massive implications. If this is the case then monetary policy as a mechanism for controlling inflation and economic activity has died: rates that let it work cannot be recreated. And yet almost the whole of macroeconomic thinking is premised on its use, as is the role of central banks in our economies.

The reality is that everything has changed. And yet there is, so far, almost no reaction. Fiscal policy – spend and tax – is the only tool left to the government now and yet no one is saying so. No wonder I spend half my time wondering why we feel so out of control. We are.

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We’ll get you into the casino yet.

Income From UK Savings Accounts Dropped 16% In A Year (Ind.)

UK savers’ income from bank accounts fell 16 per cent in a year, according to new research, due to low interest rates from banks and building societies. According to easyMoney, the investment platform launched by easyJet founder Stelios Haji-Ioannou, the drop in savings income is worse in real terms due to rising inflation. The decline in income is based on numbers from the 2015/2016 financial year (the latest available data from HMRC) when savers made £5.7bn compared with £6.8bn in 2014/2015. At the end of the 2014/2015 fiscal year, inflation was -0.1 per cent; by January this year it had risen to 3 per cent.

With savers seeing less benefit from stashing their money in bank accounts and cash ISAs, easyMoney said, people are increasingly turning towards alternatives, with many inclined to “take on a sensible increase in risk”. Andrew de Candole, CEO of easyMoney, said: “Savers are increasingly fed up with seeing their money just sitting doing nothing in bank accounts. “It’s easy to see why: these figures show that savings accounts’ and cash ISAs’ performance has been getting worse. With inflation eating away at values, the reality is there’s very little incentive to save through these traditional routes. “For many people the time has come to take action. Investors need products that offer real returns, and many are prepared to accept a sensible, calculated increase in risk in order to achieve this.”

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So act.

Social Media Users Treated As ‘Experimental Rats’ – EU Watchdog (CNBC)

Facebook needs to make sure the new tools it has introduced to help safeguard user data in the wake of the Cambridge Analytica scandal is done in “practice and not only on paper,” the European Union’s top data watchdog told CNBC. The social network has unveiled a raft of new tools since news of the fiasco broke, with the aim of helping users understand and control how their data are used. Giovanni Buttarelli, the European Data Protection Supervisor (EDPS), said Facebook CEO Mark Zuckerberg needs to ensure these changes are done in practice. “I take note of what Zuckerberg has said recently, he said that he takes care of the privacy right. The question is they should do it in practice and not only on paper,” Buttarelli told CNBC in a phone interview on Thursday.

[..] Buttarelli criticized social media firms’ data collection practices. “There are days when you have the impression people are treated as battery animals or experimental rats. We are treated as a farm for data. We are in within a walled garden and every single action is monitored,” Buttarelli said. The EDPS is in charge of making sure that data are being handled correctly within EU institutions like the Commission. But it is also part of a working group made up of the data protection authorities from various member states.

[..] Buttarelli said there are likely to be far-reaching consequences which could include punishments for companies. “I’m expecting far-reaching consequences on the broader scale. There is a need of a change of culture,” he told CNBC. Last month, European Parliament President Antonio Tajani invited Zuckerberg to testify in front of lawmakers and give reassurances that EU citizens’ data were not used to “manipulate democracy.” Buttarelli said it would be “wise” for Zuckerberg to honor the invitation from Tajani.

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If you ask me, the highest tree ain’t high enough. But that’s just me. And it’s not those that do it, it’s those that let them.

Facebook Users Have To Pay To Opt Out Of Their Data Being Used (CNBC)

Facebook users could have to pay to completely opt out of their data being used to target them with advertising, the company’s Chief Operating Officer Sheryl Sandberg told NBC News on Thursday. NBC asked if Facebook could come up with a tool to let people have a button that allows them to restrict the social network from using their profile data to stop targeted ads. Sandberg said that the company has “different forms of opt out” but not one button for everything. “We don’t have an opt-out at the highest level. That would be a paid product,” Sandberg told NBC. The comments come in the wake of the scandal in which 87 million Facebook profiles were scraped with the data being sent to political consultancy Cambridge Analytica.

Facebook CEO Mark Zuckerberg has apologized for the company’s role in the data scandal and is now set to testify in front of Congress on April 11. Zuckerberg has also been summoned to appear in front of lawmakers in the U.K. and European Union. The data issue arose from a quiz app that collected data of Facebook users and their friends. This data was then passed on to Cambridge Analytica. Facebook banned the app in 2015, and said it got “assurances” from Cambridge Analytica and the app maker that the data was deleted. However, reports suggested this wasn’t the case. Facebook has been criticized for not checking the data had been erased, a mistake that Sandberg acknowledged.

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Even Musk makes sense once in a blue moon.

AI: An ‘Immortal Dictator From Which We Can Never Escape’ (CNBC)

Superintelligence — a form of artificial intelligence (AI) smarter than humans — could create an “immortal dictator,” billionaire entrepreneur Elon Musk warned. In a documentary by American filmmaker Chris Paine, Musk said that the development of superintelligence by a company or other organization of people could result in a form of AI that governs the world. “The least scary future I can think of is one where we have at least democratized AI because if one company or small group of people manages to develop godlike digital superintelligence, they could take over the world,” Musk said. “At least when there’s an evil dictator, that human is going to die. But for an AI, there would be no death. It would live forever. And then you’d have an immortal dictator from which we can never escape.”

The documentary by Paine examines a number of examples of AI, including autonomous weapons, Wall Street technology and algorithms driving fake news. It also draws from cultural examples of AI, such as the 1999 film “The Matrix” and 2016 film “Ex Machina.” [..] “If AI has a goal and humanity just happens to be in the way, it will destroy humanity as a matter of course without even thinking about it. No hard feelings,” Musk said. “It’s just like, if we’re building a road and an anthill just happens to be in the way, we don’t hate ants, we’re just building a road, and so, goodbye anthill.”

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Lowballing.

960,000 Households In Australia Will Face ‘Mortgage Stress’ (IBT)

The number of Australian households facing “mortgage stress” will likely reach 960,000, according to a new data. Slow wage growth is blamed for the trend as it does not keep up with the rising cost of living. Digital Finance Analytics (DFA) has recently released data which suggests that the number of households facing mortgage stress will likely reach about one million. Mortgage stress is a term used to refer to households spending 30% or above of its pre-tax income on home loan repayments. Households are defined as “stressed” when cash flow does not cover ongoing costs.

As for access to other available assets, that is something that they may or may not have. Some households have paid ahead, but those in mild stress have little leeway in their net income while those in severe stress could not meet repayments from current income. The new data also shows that the figure was a climb of 30,000 in the last month, encapsulating low and high-income-earning households, according to 9 News. For DFA spokesperson Martin North, it was an indication of how dire the country’s housing situation is getting.

“Things will get more severe, especially as household debt continues to climb to new record levels, mortgage lending is still growing at two to three times income,” Daily Mail Australia reported him as saying. North added that those numbers were not sustainable. It was estimated that over 55,000 households risk 30-day default in the next 12 months. Bank portfolio losses were expected to be about 2.8 basis points. Aside from flat wages growth and rising costs of living, higher real mortgage rates are perceived to be a burden. Mortgage lending continues to grow at two to three times income. The latest household debt to income ratio is currently at a record 188.6.

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Pot and sanctuary.

Another Mighty Conundrum (Kunstler)

The sanctuary city movement seems to me the most mendacious element of the story, a nakedly emotional appeal against the rule of law. The attorney general of California, Xavier Becerra, lately threatened to fine corporations there that share employee information with federal agents. There has not been such arrant flouting of federal law by state officials since Governor George Wallace stood in the doorway of the University of Alabama crying “segregation now, segregation tomorrow, segregation forever” in June, 1963 — and we all know how that ended. I’m among those who would like to see the immigration laws honestly enforced. In fact, I would also like to see the 1965 immigration law reformed to admit far fewer people from any land into this country. We have economic and cultural interests to protect, and they would seem to be self-evident.

So why has there been no move by the federal authorities to impose sovereign federal law over figures like Mr. Becerra, or Oakland Mayor Libby Schaaf, who went through the barrio there Paul Revere style warning that the ICE agents were coming? Well, one big reason is the marijuana situation. Nine states have legalized cannabis for recreational use (i.e. for getting high), and 29 have legalized it for medical purposes. This includes all of the states on the “Left Coast.” All of them are flouting federal law in doing that. But imagine the political uproar if the feds tried to step in at this point and quash the cannabis trade. In the early adapters, like Colorado, California, and Washington State, the trade has blossomed into multi-million dollar corporate enterprise, with significant tax revenue.

So, much as I object to the dishonest practices around immigration, I don’t see how the federal government can take principled action against them without first addressing its attitude to the marijuana situation. Of course, that could be easily disposed of by congress adopting a simple law to the effect that the cultivation and sale of cannabis shall be regulated by the states. The craven members of congress apparently don’t even dare to raise the issue of resolving this conundrum, and the thought may have never even entered the mighty golden brain-pan of our president — not to mention The New York Times, The Washington Post, CNN, Fox-News, or any of the other media organs of public debate. Well, maybe the time has come for that discussion.

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An absolutely fantastic story by Dmitry. Don’t miss this.

Provocations (Dmitry Orlov)

First, I will present just the facts. Next, I will indicate some huge, gaping holes in the plot which we must, perforce, fill using our imaginations (for lack of detailed factual information), but relying on real world knowledge as much as possible to build a plausible scenario (or two). In the end, the most plausible scenario wins. On February 22, 2018, the Argentine newspaper El Clarin has reported that a major shipment of drugs from Buenos Aires to Moscow—389 kg of pure cocaine, valued at over 60 million USD, and bearing the markings of the Sinaloa drug cartel of Northern Mexico—was prevented from taking place thanks to the efforts of Russia’s FSB and the Argentine authorities. Several people, including a member of the Argentine police and someone involved in charity work, have been detained.

Victor Coronelli, Russia’s ambassador to Argentina, related how all the way back in 2016 the embassy received information that possessions belonging to some third party had been found in a storage space at a children’s school operated by the embassy and located several blocks away from it. Suspicions arose and a thorough examination had uncovered 12 colorful suitcases filled with 389 “keys” (1-kilo blocks) of cocaine bearing the little star that is the symbol of the Sinaloa cartel of Northern Mexico. Shortly after the cocaine was discovered, Russia’s FSB, working together with the Argentine police, hatched an ingenious plan for a sting operation, to find out who is behind this shipment. To this end, they carefully replaced the cocaine with flour and placed the 12 colorful suitcases back in storage.

And there they sat for over a year. What has been done with the cocaine that was extracted isn’t known. Apparently, it took a great deal of effort to get anyone to take possession of these suitcases. Eventually, two people were found who agreed to take delivery of them in Moscow: Vladimir Kalmykov and Ishtimir Hudzhamov. They are currently in pretrial detention in Russia. A third suspect, Andrei Kovalchuk, is under arrest in Germany, awaiting extradition to Russia, but his extradition is conditional on whether the Russian side can offer evidence of his complicity or guilt in organizing the shipment.

Kovalchuk used to work for Russia’s Foreign Ministry, but most recently he has used his old ministerial connections to arrange for some small-scale contraband to be shipped to Russia via diplomatic mail: cigars, coffee, cognac, etc. Such trade had been common during the 1990s, when Russian diplomats had fallen on hard times and did whatever they could to make ends meet, but it has become unnecessary in recent years, now that they are very well provided for once again. Still, cigars, coffee and cognac is what Kovalchuk—an apparent throwback to this earlier, meager era—maintains was in the suitcases he had stashed at the school in Buenos Aires: he has kept all of the receipts. He plans to travel to Russia of his own free will once he has gathered all the evidence he needs to exonerate himself.

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Bloomberg editors are clueless, but the issue is real.

Shipping Is a Big Part of the Climate Problem (BBG)

When almost all the world’s governments agreed in Paris more than two years ago to address climate change, they sidestepped an important issue: carbon emissions from international shipping. Next week in London, they have a chance to put this right. Shipping is by far the most energy-efficient mode of transport, and it moves some 80% of world trade by volume. However, the fuel it uses is hard on the environment and human health — and ships last a long time, so deploying cleaner fleets takes time. Already, international shipping accounts for about as much carbon dioxide each year as Germany’s whole economy. On current trends, its share of the total will rise quickly. It could account for roughly 15% of the global carbon budget set by the Paris accord for 2050.

Next week, the International Maritime Organization is expected to announce a strategy for reducing these emissions. The plan is unlikely to be bold. Countries including Argentina, Brazil, India, Panama and Saudi Arabia are resisting carbon dioxide targets for shipping. Unsurprisingly, the industry itself is also opposed. Despite this resistance, the IMO needs to be ambitious. Ultimately, the most cost-effective approach would be to put a tax on carbon, and let that guide investment and innovation. But devising and implementing an international carbon-price system won’t be done overnight. In the short run, the IMO ought to propose a variety of useful course corrections.

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The problem in a nutshell: 1 year in jail (5 months with good conduct?!) for 5 rhinos. He’ll do it again as soon as he’s freed. $600,000. Another issue where the tallest tree isn’t high enough.

And we’re not even trying.

Chinese Man Caught Smuggling Five Rhino Horns Is Jailed By Dutch Court (G.)

A Dutch court has sentenced a Chinese man to a year in jail for smuggling five rhino horns and four other horn objects worth about €500,000 ($613,000) in his luggage. The man was caught by customs officials at Schiphol airport in December as he traveled through Amsterdam on his way from South Africa to the Chinese city of Shanghai. It recalled that trading in endangered species is banned under the CITES convention prohibiting sales of protected animals and plants. South Africa is battling a scourge of rhino poaching fuelled by insatiable demand for their horn in Asia.

The country’s ministry of environmental affairs said earlier this year that 1,028 rhinos were slaughtered in 2017. In the last eight years alone, roughly a quarter of the world population of rhinos has been killed in South Africa, home to 80% of the remaining animals. Most of the demand comes from China and Vietnam, where the horn is coveted as a traditional medicine, an aphrodisiac or as a status symbol.

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Apr 012018
 


Rembrandt van Rijn Christ and St Mary Magdalene at the Tomb 1638

 

US Homes Become ATMs Again (MW)
The Housing Crisis – There’s Nothing We Can Do… Or Is There? (Steve Keen)
Fear is Back (MW)
The S&P’s 200-DMA: Why It Ain’t No Maginot Line (Stockman)
Trump Renews Amazon Attack, Says ‘Post Office Scam’ Must Stop (BBG)
Senator Warren, In Beijing, Says US Is Waking Up To Chinese Abuses (R.)
Yanis Varoufakis: ‘Greece Is A Debtors’ Prison’ (G.)
Emmanuel Macron On France’s AI Strategy (Wired)
Conservationists Call For Urgent Action To Fix ‘America’s Wildlife Crisis’ (G.)
More Poachers Than Rhinos Killed In India Reserve (BBC)

 

 

There’s nonsense and then there’s nonsense. Staying in your home is now a “huge expansion of retirement options”: “We’ve seen a huge expansion of the types of retirement options people have. One is aging in place and retrofitting your house.”

US Homes Become ATMs Again (MW)

As interest rates rise, fewer households refinance their mortgages. And the refinances that do get done are often very different than those initiated during low-rate periods. “When rates are low, the primary goal of refinancing is to reduce the monthly payment,” wrote researchers for the Urban Institute in a recent report. “But when rates are high, borrowers have no incentive to refinance for rate reasons. Those who still refinance tend to be driven more by their desire to cash out.” “Cashing out” is shorthand for taking out a new mortgage that’s bigger than the remaining balance on the old one and using the money that makes up the difference for discretionary purchases.

As of the fourth quarter of last year, the share of all refinances that were cash-outs rose to the highest since 2008, according to Freddie Mac data. Rates have churned higher since the presidential election in late 2016, though they spent much of 2017 reversing the immediate post-election surge. It’s not clear whether the overall volume of cash-out refinances is rising. Right now they’re making up a bigger share of the pie because traditional lower-monthly-payment refis are plunging. Tapping into home equity is often a good way for owners to consolidate or manage other, more expensive, forms of debt like high-interest credit cards or bills for higher education.

“As people stay in their homes longer we see people reinvesting in their homes by using equity to update their homes and do repair work,” said Rick Sharga, executive vice president for Carrington Mortgage Holdings and an industry veteran. That’s especially true for older Americans, he added. “We’ve seen a huge expansion of the types of retirement options people have. One is aging in place and retrofitting your house.”

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Housing markets need ever more private debt. So then does the overall economy.

The Housing Crisis – There’s Nothing We Can Do… Or Is There? (Steve Keen)

The supply side of the housing market has two main two factors: the turnover of the existing stock of housing, and the net change in the number of houses (thanks to demolition of old properties and construction of new ones). The turnover of existing properties is far larger than the construction rate of new ones, and this alone makes housing different to your ordinary market. The demand side of the housing market has one main factor: new mortgages created by the banks. Monetary demand for housing is therefore predominantly mortgage credit: the annual increase in mortgage debt. This also makes housing very different to ordinary markets, where most demand comes from the turnover of existing money, rather than from newly created money.

We can convert the credit-financed monetary demand for housing into a physical demand for new houses per year by dividing by the price level. This gives us a relationship between the level of mortgage credit and the level of house prices. There is therefore a relationship between the change in mortgage credit and the change in house prices. This relationship is ignored in mainstream politics and mainstream economics. But it is the major determinant of house prices: house prices rise when mortgage credit rises, and they fall when mortgage credit falls. This relationship is obvious even for the UK, where mortgage debt data isn’t systematically collected, and I am therefore forced to use data on total household debt (including credit cards, car loans etc.).

Even then, the correlation is obvious (for the technically minded, the correlation coefficient is 0.6). The US does publish data on mortgage debt, and there the correlation is an even stronger 0.78—and standard econometric tests establish that the causal process runs from mortgage debt to house prices, and not vice versa (the downturn in house prices began earlier in the USA, and was an obvious pre-cursor to the crisis there).

None of this would have happened – at least not in the UK – had mortgage lending remained the province of money-circulating building societies, rather than letting money-creating banks into the market. It’s too late to unscramble that omelette, but there are still things that politicians could do make it less toxic for the public. The toxicity arises from the fact that the mortgage credit causes house prices to rise, leading to yet more credit being taken on until, as in 2008, the process breaks down. And it has to break down, because the only way to sustain it is for debt to continue rising faster than income. Once that stops happening, demand evaporates, house prices collapse, and they take the economy down with them. That is no way to run an economy.

Yet far from learning this lesson, politicians continue to allow lending practices that facilitate this toxic feedback between leverage and house prices. A decade after the UK (and the USA, and Spain, and Ireland) suffered property crashes – and economic crises because of them – it takes just a millisecond of Internet searching to find lenders who will provide 100% mortgage finance based on the price of the property. This should not be allowed. Instead, the maximum that lenders can provide should be limited to some multiple of a property’s actual or imputed rental income, so that the income-earning potential of a property is the basis of the lending allowed against it.

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Fear is needed.

Fear is Back (MW)

The Dow and the S&P 500 halted a record-setting streak of quarterly wins at nine, and the clearest reason why may be explained by the VIX index, widely known as Wall Street’s “fear gauge.” The Dow Jones Industrial Average posted a quarterly decline of more than 2.3%, snapping the longest streak of quarterly gains for the blue-chip average since an 11-quarter rally that ended in the third quarter of 1997. The S&P 500 index booked a 1.2% quarterly fall, ending its longest such stretch since the first quarter of 2015.

There are perhaps a host of reasons for the surcease of such a lengthy bullish run for the most prominent equity benchmarks: The Federal Reserve’s normalization of monetary policy, with the central bank lifting rates for the fifth time this month since December 2015; Intensifying uncertainty in the makeup and agenda of President Donald Trump’s administration, underscored by a number of high-profile departures; and the intensification of trade-war fears, after the president imposed duties on steel and aluminum imports and leveled more targeted tariffs at the world’s second-largest economy: China.

However, the surge in the Cboe Volatility Index VIX is perhaps the most correlated with the market’s downtrend. According to WSJ Market Data Group, the VIX posted its biggest quarterly rise, up 81% since it jumped in the third-quarter of 2011 following Standard & Poor’s historical downgrade of the U.S. credit rating and European debt-crisis jitters.

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Rhyme and repeat.

The S&P’s 200-DMA: Why It Ain’t No Maginot Line (Stockman)

For the last five years the S&P 500 has been dancing up its ascending 200-day moving average (200-DMA), bouncing higher repeatedly whenever the dip-buyers did their thing. Only twice did the index actually break below this seeming Maginot Line: In August 2015, after the China stock crash, and in February 2016, when the shale patch/energy sector hit the wall. As is evident below, since the frenzied peak of 2873 on January 26, the index has fallen hard twice—on February 8 (2581) and March 23 (2588). Self-evidently, both times the momo traders and robo-machines came roaring back with a stick-save which was smack upon the 200-DMA.

But here’s the thing. The blue line below ain’t no Maginot Line; it’s just the place where the Pavlovian dogs of Bubble Finance have “marked” the charts. And something is starting to smell. In fact, it’s starting to smell very much like an earlier go-round when Pavlov’s 200-DMA barkers had enjoyed a prolonged ascent – only to find an unexpected cliff-diving opportunity at the end. We refer to the nearly identical five year run-up to the March 2000 top at 1508 on the S&P 500. Back then, too, the 200-DMA looked invincible, and had only been penetrated by the August 1998 Russian bankruptcy and the Long Term Capital Management meltdown a month later.

Indeed, the bounce from the October 8, 1998 interim bottom of 960 was nearly parabolic, rising by 57% to the March 2000 top. That latter point might sound vaguely familiar. That’s because the rebound from the February 11, 2016 interim bottom (1829) to the January 26th top (2873) this year was, well, 57%!

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This is going to cost Amazon.

Trump Renews Amazon Attack, Says ‘Post Office Scam’ Must Stop (BBG)

President Donald Trump lit into Amazon.com Inc. for the second time in three days with a pair of Twitter messages that said the online retailer “must pay real costs (and taxes) now!” The president on Saturday claimed, citing reports he didn’t specify, that the U.S. Postal Service “will lose $1.50 on average for each package it delivers for Amazon” and added that the “Post Office scam must stop.” Amazon has said the postal service, which has financial problems stretching back for years, makes money on its deliveries. Amazon shed $53 billion in market value on Wednesday after Axios reported that the president is “obsessed” with regulating the e-commerce giant, whose founder and chief executive officer, Jeff Bezos, also owns the Washington Post newspaper.

Those losses were pared on Thursday, the final day of a shortened trading week, even as Trump tweeted that Amazon was using the postal service as its “Delivery Boy.” White House spokeswoman Lindsay Walters said on Thursday that while the president was displeased with the e-commerce giant, and particularly instances where third-party sellers on the site didn’t collect sales tax, there were no administrative actions planned against Amazon “at this time.” Still, Brad Parscale, who’s managing Trump’s 2020 presidential campaign, hinted in a tweet late Thursday that the administration may act to raise Amazon’s postal costs. “Once the market figures out that a single @usps rule change will crush @amazon’s bottom line we will see,” Parscale wrote.

Amazon.com and the Washington Post have been regular punching bags for Trump. In July, the president mused about whether the newspaper was “being used as a lobbyist weapon” to keep Congress from looking into Amazon’s business practices. He echoed that comment on Saturday, saying the Post “is used as a ‘lobbyist’ and should so REGISTER.” [..] While full details of the agreement between Amazon and the U.S. Postal Service are unknown – the mail carrier is independently operated, and strikes confidential deals with retailers – David Vernon, an analyst at Bernstein Research who tracks the shipping industry, estimated in 2015 that the USPS handled 40% of Amazon’s volume the previous year.

He estimated at the time that Amazon pays the postal service $2 per package, which is about half what it would pay UPS or FedEx. A sudden increase in postal rates would cost Amazon about $2.6 billion a year, according to a report by Citigroup from April 2017. That report predicted UPS and FedEx would also raise rates in response to a postal service hike. Citigroup also said that the “true” cost of shipping packages for the USPS is about 50% higher than its current rates, leading some editorial writers to conclude that Amazon was receiving the type of subsidy cited in Trump’s Thursday tweet.

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Wait, wasn’t she supposed to be the anti-Trump?

Senator Warren, In Beijing, Says US Is Waking Up To Chinese Abuses (R.)

U.S. policy toward China has been misdirected for decades and policymakers are now recalibrating ties, Senator Elizabeth Warren told reporters during a visit to Beijing amid heightened trade tensions between the world’s two largest economies. Warren’s visit comes as U.S. President Donald Trump prepares to implement more than $50 billion in tariffs on Chinese goods meant to punish China over U.S. allegations that Beijing systematically misappropriated American intellectual property. The Massachusetts Democrat and Trump foe, who has been touted as a potential 2020 presidential candidate despite rejecting such speculation, has said U.S. trade policy needs a rethink and that she is not afraid of tariffs.

After years of mistakenly assuming economic engagement would lead to a more open China, the U.S. government was waking up to Chinese demands for U.S. companies to give up their know-how in exchange for access to its market, Warren said. “The whole policy was misdirected. We told ourselves a happy-face story that never fit with the facts,” Warren told reporters on Saturday, during a three-day visit to China that began on Friday. “Now U.S. policymakers are starting to look more aggressively at pushing China to open up the markets without demanding a hostage price of access to U.S. technology,” she said.

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A poisonous political climate.

Yanis Varoufakis: ‘Greece Is A Debtors’ Prison’ (G.)

Yanis Varoufakis is back. He, of course, would say he never went away, but in Greece’s hurly-burly world of politics his is a name prone to triggering toxic reaction. Abroad, the shaven-headed economist is feted as the man who took on Europe’s establishment. At home, the former finance minister is seen, on both left and right, as a reckless incarnation of all that was wrong with Greece at the height of its struggle to remain in the eurozone. In Athens and Brussels, his confrontational style is still blamed for the price the debt-stricken country had to pay to be bailed out in the summer of 2015. Although his resignation now seems a long time ago, the sight of Varoufakis launching his own party in Greece has unleashed emotions that have run the gamut from enthusiasm to anger and disdain.

Media reaction has been cool; so, too, has that of politicians. None of which seems to bother him in the least. “Nobody believes the systemic media in Greece, and they’re all bankrupt,” he told the Observer with typical defiance, days after announcing his new venture in a packed Athens theatre. “To those who say I cost the country, and I’ve heard €30bn, €86bn, €100bn and even €200bn… I say I cost exactly zero. The troika [of creditors] cost Greece two generations and continue to impose cost.” At 57, in his leather bomber jacket and boots, Varoufakis clearly relishes his anti-establishment role and believes the birth of his European Realistic Disobedience Front, AKA MeRA25, is not a moment too late. Greece, almost nine years after the eurozone crisis erupted, is still condemned to being a debtors’ colony, he says.

[..] MeRA 25 has been working behind the scenes for a year now. Its plan is to contest the European elections in May 2019, although Varoufakis acknowledges Tsipras may elect to call a general election before that. After almost a decade under international surveillance, Athens will exit its third international rescue programme – the biggest sovereign bailout in global financial history – in August. With his popularity compromised under the weight of enforcing measures he once vehemently opposed, Tsipras may opt to capitalise on the success of finally exiting the programme and economic oversight. “We have travelled the whole country and held rallies in all major towns,” says Varoufakis, adding that politicians are already expressing interest in jumping ship.

Far from being saved, Varoufakis believes Greece’s future has been put on hold. If anything, he argues, it is in for an even tougher time because Europe has elected to tackle its debt problem by taking the “extend and pretend” approach of prolonging repayment timetables and condemning the country to decades of further austerity. More pension cuts and tax hikes loom, legislated by MPs at the behest of the EU and IMF. Short of measures to stop the rot, Varoufakis quips that he sees Greece becoming another Kosovo, “with beautiful beaches, only it’s a protectorate emptied of its young people. Every month 15-20,000 young Greeks leave. Everywhere I go, I meet them.”

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Macron knows what’s best for you. He’s your big brother.

Emmanuel Macron On France’s AI Strategy (Wired)

I want to create an advantage for my country in artificial intelligence, directly. And that’s why we have these announcements made by Facebook, Google, Samsung, IBM, DeepMind, Fujitsu who choose Paris to create AI labs and research centers: this is very important to me. Second, I want my country to be part of the revolution that AI will trigger in mobility, energy, defense, finance, healthcare and so on. Because it will create value as well. Third, I want AI to be totally federalized. Why? Because AI is about disruption and dealing with impacts of disruption. For instance, this kind of disruption can destroy a lot of jobs in some sectors and create a need to retrain people. But AI could also be one of the solutions to better train these people and help them to find new jobs, which is good for my country, and very important.

I want my country to be the place where this new perspective on AI is built, on the basis of interdisciplinarity: this means crossing maths, social sciences, technology, and philosophy. That’s absolutely critical. Because at one point in time, if you don’t frame these innovations from the start, a worst-case scenario will force you to deal with this debate down the line. I think privacy has been a hidden debate for a long time in the US. Now, it emerged because of the Facebook issue. Security was also a hidden debate of autonomous driving. Now, because we’ve had this issue with Uber, it rises to the surface. So if you don’t want to block innovation, it is better to frame it by design within ethical and philosophical boundaries. And I think we are very well equipped to do it, on top of developing the business in my country.

But I think as well that AI could totally jeopardize democracy. For instance, we are using artificial intelligence to organize the access to universities for our students That puts a lot of responsibility on an algorithm. A lot of people see it as a black box, they don’t understand how the student selection process happens. But the day they start to understand that this relies on an algorithm, this algorithm has a specific responsibility. If you want, precisely, to structure this debate, you have to create the conditions of fairness of the algorithm and of its full transparency. I have to be confident for my people that there is no bias, at least no unfair bias, in this algorithm.

I have to be able to tell French citizens, “OK, I encouraged this innovation because it will allow you to get access to new services, it will improve your lives—that’s a good innovation to you.” I have to guarantee there is no bias in terms of gender, age, or other individual characteristics, except if this is the one I decided on behalf of them or in front of them. This is a huge issue that needs to be addressed. If you don’t deal with it from the very beginning, if you don’t consider it is as important as developing innovation, you will miss something and at a point in time, it will block everything. Because people will eventually reject this innovation.

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“..more than 150 US species have already become extinct while a further 500 species have not been seen in recent decades..”

Conservationists Call For Urgent Action To Fix ‘America’s Wildlife Crisis’ (G.)

An extinction crisis is rippling though America’s wildlife, with scores of species at risk of being wiped out unless recovery plans start to receive sufficient funding, conservationists have warned. One-third of species in the US are vulnerable to extinction, a crisis that has ravaged swaths of creatures such as butterflies, amphibians, fish and bats, according to a report compiled by a coalition of conservation groups. A further one in five species face an even greater threat, with a severe risk of being eliminated amid a “serious decline” in US biodiversity, the report warns. “America’s wildlife are in crisis,” said Collin O’Mara, chief executive of the National Wildlife Federation. “Fish, birds, mammals, reptiles and invertebrates are all losing ground. We owe it to our children and grandchildren to prevent these species from vanishing from the earth.”

More than 1,270 species found in the US are listed as at risk under the federal Endangered Species Act, an imperiled menagerie that includes the grizzly bear, California condor, leatherback sea turtle and rusty patched bumble bee. However, the actual number of threatened species is “far higher than what is formally listed”, states the report by the National Wildlife Federation, American Fisheries Society and the Wildlife Society. Using data from NatureServe that assesses the health of entire groups of species on a sliding scale, rather than the case-by-case work done by the federal government, the analysis shows more than 150 US species have already become extinct while a further 500 species have not been seen in recent decades and have possibly also been snuffed out.

Whole classes of creatures have suffered precipitous drops, with 40% of freshwater fish species in the US now vulnerable or endangered, a third of bat species experiencing major declines in the past two decades and amphibians dwindling from their known ranges at a rate of about 4% a year. The true scale of the crisis is probably larger when species with sparse data, or those as yet unknown to science, are considered. “This loss of wildlife has been sneaking up on us but is now like a big tsunami that is going to hit us,” said Thomas Lovejoy, a biologist at George Mason University. Lovejoy was consulted on the study and said it “captures the overall degradation of American nature over recent decades, rather than little snapshots”.

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The future of wildlife conservation?! in 2015, park guards shot dead more people than poachers killed rhinos.

More Poachers Than Rhinos Killed In India Reserve (BBC)

A census in India’s Kaziranga National Park has counted 2,413 one-horned rhinos – up 12 from 2015. The Unesco World Heritage Site, in Assam state, is home to two-thirds of the world’s population of the species. The census is carried out every three years. It is an incredible conservation success story given the fact that there were only a few hundred rhinos in the 1970s, says the BBC’s South Asia editor Anbarasan Ethirajan. However, the conservation effort has not been without controversy. The government has in recent years given the park rangers extraordinary powers to protect the animals from harm – powers usually only given to soldiers intervening in civil unrest. About 150 rhinos have been killed for their horns since 2006, but in 2015, park guards shot dead more people than poachers killed rhinos.

[..] The census total given is an estimate, with authorities cautioning that the population could be bigger than that counted because some animals were concealed by tall grasses and reeds. This vegetation is usually burnt down to encourage its regeneration but this was hampered by unseasonal rains, said reports. It could mean the census is carried out again next year. Since its foundation in 1905, Kaziranga has had great success in conserving and boosting animal populations. As well as being a haven for one-horned rhinoceroses, the park was declared a tiger reserve by the Indian government, and is also home to elephants, wild water buffalo and numerous bird species. The endangered South Asian river dolphin also lives in the rivers that criss-cross the park.

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May 312017
 
 May 31, 2017  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Johannes Vermeer Woman in Blue Reading a Letter 1662-3

 

China Is The Greatest Financial Bubble in History (Rickards)
In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)
EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)
Sterling Dips After Poll Suggests Hung UK Parliament (BBC)
Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)
US Starts Shipping Weapons To Syrian Kurds (ZH)
The Plot To Overthrow Trump Is Very Real (Martin Armstrong)
‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)
Merkel Comes Out Swinging At Trump And Misses (Luongo)
After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)
Two-Thirds Of Greek Construction Jobs Have Vanished (K.)
Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)
US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

 

 

“The toxic combination of government debt, corporate debt, WMPs, and unrealistic growth expectations have set up China for the greatest market crash in history. But, not yet. As analysis will continue to prove, political forces will put off a day of reckoning until early 2018.”

China Is The Greatest Financial Bubble in History (Rickards)

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year. China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn. The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account. Paying off that debt requires growth, but the growth itself is fueled by more debt. China is now at the point where enormous new debt is required to achieve only modest new growth. This is clearly non-sustainable.

The next bubble is in investment instruments called Wealth Management Products, or WMPs. Picture this. You’re a middle-class Chinese saver and you walk into a bank. They offer you two investment options. The first is a bank deposit that pays about 2%. The other is a WMP that pays about 7%. Which do you choose? In the past ten years, bank customers have chosen almost $12 trillion of WMPs. That might be fine if WMPs were like high-quality corporate or municipal bonds. They’re not. They’re more like the biggest Ponzi scheme in history. Here’s how they work. Proceeds from sales of WMPs are loaned to speculative real estate developers and unprofitable state owned enterprises (SOEs) at attractive yields in the form of notes. So, WMPs resemble collateralized debt obligations, CDOs, the same product that sank Lehman Brothers in the panic of 2008.

The problem is that the borrowers behind the WMPs can’t pay their debts. They’re relying on further bubbles in real estate or easy credit from the government to meet their interest obligations. What happens when a WMP matures? Usually the bank customer is encouraged to rollover the investment into a new WMP. What happens if the customer wants her money back? The bank sells a new WMP to another customer, then uses those sales proceeds to redeem the first customer. The new customer now steps into the shoes of the first customer with the same pile of bad debt. That’s where the Ponzi dynamic comes in. Simply put, most of the debts backing up the WMPs cannot be repaid, which means it’s just a matter of time before the WMP market goes into a full meltdown and triggers a banking panic.

Finally, there is an infrastructure bubble. As explained in more detail below, China has kept its growth engine humming mostly with investment instead of aggregate demand from consumers. Investment is fine if it is directed at long-term growth projects that produce a positive expected return and help the broader economy grow as well. But, that’s not what China has done. About half of China’s investment in the past ten years has been wasted on “ghost cities,” white elephant transportation facilities, and prestige projects that look good superficially, but that don’t produce enough revenue or efficiencies to pay for themselves. Much of this investment was financed with debt. If the project itself is not revenue producing then the associated debt cannot be repaid, and will go into default.

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Watershed Ponzi.

In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)

Less than a decade after various complex, synthetic, squared, cubed and so on securitized debt structures nearly brought down the financial system, here come “Sovereign Bond-Backed Securities.” Moments ago, the FT reported that in a watershed event for the European – and global – bond markets, Brussels is pressing for sovereign debt from across the eurozone to be “bundled into a new financial instrument and sold to investors as part of a proposal to strengthen the single currency area.” Call it securitized sovereign debt. In the latest attempt by Europe to create a common bond market, a European Commission paper on the future of the euro seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.

The logic is simple: combine all the debt from strong and weak countries into one big pool, eliminating the outliers on both sides, then tranche it out, and sell it based on required yield returns. “Officials hope that the plans would boost demand for debt issued by governments with relatively weaker economies, and encourage banks to manage their risks better by diversifying their portfolios, while avoiding old political battles over whether the currency bloc should issue common bonds”. Why now? Because as has been Germany’s intention all along, Berlin has been hoping to create a fiscally intergrated Europe (with a shadow government in Berlin of course), call it a (quasi) “fiscal union”, and which is much more stable and resilient than the current iteration which is only as strong as its weakest link. Securitizing the sovereign debt resolves virtually all outstanding problems.

“The commission paper is the latest in a series of efforts to kick-start integration inside the eurozone. Such integration efforts have stalled since financial markets became convinced in 2013 that the European Central Bank would not allow the eurozone to break up. The last successful integration project was the creation of an EU banking union three years ago.” There is another reason why now: over the next year, the ECB’s QE, which has been instrumental to implement Draghi’s “Whatever it takes” bluff, will start hiking rates and eventually unwinding its balance sheet, the world’s biggest. That’s when the European bond market may have its next freak out moment. As a result, Brussels and Frankfurt are hoping to preempt this potential unwind by coming up with today’s “ingenious” solution.

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Brussels wants the opposite of what the people want.

EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)

The EU executive will suggest on Wednesday the euro zone might need to issue collective debt and run a joint budget, among proposals for bolstering the single currency that echo ideas from new French President Emmanuel Macron. People familiar with the European Commission reflection paper told Reuters the scenario of a finance minister managing common revenue, spending and borrowing had been worked on for many months in Brussels, but now appears a much more likely option since centrist former banker Macron won power on May 7. German conservatives dislike an idea they say means paying for poorer neighbors. But Chancellor Angela Merkel, seeking re-election in September, has welcomed Macron’s victory and EU officials said they hoped governments might start working on a plan to forge a more cohesive euro zone from next year.

The Commission paper examines possible reforms to the bloc after the 2010-2012 sovereign debt crisis that nearly destroyed it and which triggered a wave of quick fixes for its weak spots. While some problems have been addressed, there is a lot more EU governments need to do to have an optimally functioning Economic and Monetary Union (EMU), the Commission will say. The document, part of a wider series on the future of the EU, comes as the EU is to start talks with Britain on the terms of its withdrawal – a great setback to European integration but one that will see the euro zone make up nearly four-fifths of the EU’s economy, up from two thirds today. The Commission will avoid making any clear suggestions as to the evolution of the single currency area, leaving it up to EU governments to decide which of the ideas they like. But it does say that in the later stages of deepening euro zone integration, not least because it would require politically difficult and time-consuming changes to EU treaties, the bloc could establish a euro zone treasury.

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May’s fall is swift.

Sterling Dips After Poll Suggests Hung UK Parliament (BBC)

The value of the pound dropped after a projection suggested the Conservatives could fail to win an outright majority in the election on 8 June. Previous opinion polls suggested Prime Minister Theresa May’s party would increase its majority, which is currently 17 seats. But the projection, published in the Times and based on YouGov research, suggests a possible hung parliament. Sterling fell by more than half of one per cent, but recovered some losses. By early Wednesday morning, it was trading 0.44% lower against the dollar at $1.28020 and 0.29% lower against the euro at €1.146. The Times said the YouGov data suggested that the Tories could lose up to 20 of the 330 seats they held in the last parliament, with Labour gaining nearly 30 seats.

The Conservatives would still be the biggest party, but would not have an overall majority. The model is based on 50,000 interviews over a week, with voters from a panel brought together by YouGov. It uses a new “constituency-by-constituency” model for polling, which the paper says allows for big variations. According to the Times, “the estimates were met with scepticism by Tory and Labour figures.” YouGov’s chief executive, Stephan Shakespeare said the model had been tested during the EU referendum campaign, when it consistently put the winning Leave side ahead. But he added: “It would take only a slight fall in Labour’s share and a slight increase in the Conservatives’ to result in Mrs May returning to No 10 with a healthy majority.”

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Fear rules the waves. Telegraph headline today: “Tax on homes ‘to treble under Labour plans for Land Value Tax’ “

Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)

Flapping Theresa May fired off a volley of insults at Jeremy Corbyn today after Labour surged in general election polls. The desperate Prime Minister even conjured up an image of the Labour leader naked in Brussels as she urged voters to consider the impact of propelling Mr Corbyn to No 10. She used a Labour legend’s quote as she mocked Mr Corbyn over what she claimed would be his weakness in tough EU divorce talks. “With his position on Brexit , he will find himself alone and naked in the negotiating chamber,” she said. “I know that’s an image that doesn’t bear thinking about but actually this is very serious.” The barb was particularly wounding for Labour by borrowing the charge from one of the party’s heroes, NHS founder Aneurin Bevan.

Urging Labour conference delegates in October 1957 not to support unilateral nuclear disarmament, he warned: “You will send a British Foreign Secretary, whoever he may be, naked into the conference chamber.” Challenged by the Mirror, Mrs May denied demeaning the office of Prime Minister with her outspoken attacks. And she was later forced to deny they showed she was getting “desperate”, saying: “It represents the difference between myself, having prepared for the negotiations, having a clear plan for the negotiations, and Jeremy Corbyn and the Labour Party who have said they would tear up the plan we have produced.” Speaking at the former railway station in Wolverhampton, Mrs May claimed her rival’s performance in the Sky News/Channel 4 TV showdown proved he could not be PM. “Despite being a Member of Parliament for 34 years, despite being the leader of the Labour Party for the last two years, he’s simply not ready to govern, and not prepared to lead,” she said.

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Some are trying to turn this into a war with Iraq.

US Starts Shipping Weapons To Syrian Kurds (ZH)

Just three weeks after reports first emerged that the Trump administration was considering arming the Syrian Kurd militia caught in the crossfire between Turkish and Syrian army forces, NBC reported that the American military has started shipping weapons and equipment to the Kurdish fighters of the Syrian Democratic Forces, also known as YPG, a key US ally on the ground in Syria. Citing an unnamed official, NBC adds that the U.S. began providing the equipment in the last 24 hours. Details were scarce, with no specifics about what weapons and supplies the US is sending the Syrian Democratic Forces or how those items are being delivered however when the report first emerged, the U.S. military announced it would provide the YDF with ammunition, rifles, armor, radios, bulldozers, vehicles, and engineering equipment.

Pentagon spokesman Eric Pahon told RT taid that this move represents the “early steps to prepare for the eventual liberation of Raqqa,” which the Islamic State has declared the capital of its self-proclaimed caliphate. “Overall, the equipment the US-led coalition will provide to the SDF includes small arms, ammunition, heavy machine guns and weapons capable of defeating specific threats our partner forces are expected to encounter as they take the fight to a desperate enemy, such as heavily-armored vehicle-borne IEDs,” Pahon said. Earlier this month US officials said that Trump had signed off on a plan “to equip Kurdish elements of the Syrian Democratic Forces” in the fight to retake the Syrian city of Raqqa from ISIS. “The SDF, partnered with enabling support from U.S. and coalition forces, are the only force on the ground that can successfully seize Raqqa in the near future,” Pentagon spokeswoman Dana White said in a statement.

The announcement is guaranteed to send Turkey’s president Erdogan into another fit of rage. Earlier this month Erdogan condemned Trump’s decision to arm Syrian Kurds whom Turkey considers to be terrorists and an extension of outlawed Kurdish insurgents within its borders. Three weeks ago Erdogan said: “I hope very much that this mistake will be reversed immediately,” adding that “we want to believe that our allies would prefer [to] be side by side with ourselves rather than with the terror groups.” President Trump and Erdogan met earlier this month and discussed the administration’s plans to arm Kurdish militias in Syria. It was unclear what agreement the two leaders reached on this controverial move.

At the same time, Reuters reported that Syrian rebels say the United States and its allies “are sending them more arms to try to fend off a new push into the southeast by Iran-backed militias aiming to open an overland supply route between Iraq and Syria.” Rebels said military aid has been boosted through two separate channels: a program backed by the CIA, known as the MOC, and regional states including Jordan and Saudi Arabia, and one run by the Pentagon. “There has been an increase in the support,” said Tlass Salameh, head of the Jaish Usoud al-Sharqiya, one of the FSA groups backed via the CIA-backed program. “There’s no way we can let them open the Baghdad-Damascus highway,” he said.

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No doubt there.

The Plot To Overthrow Trump Is Very Real (Martin Armstrong)

There is a very REAL plot to overthrow Trump led by the political establishment and aided by the mainstream press.. This is not simply speculation – this is the real deal. Of course the Washington Post and New York Times are in full swing to get rid of Trump. No matter what it might be, the twist is always against Trump right down to the story how Sean Spicer wanted to see the Pope because he is a devote Catholic and was denied. CNN, of course, is also part of this conspiracy. You will NEVER find any positive article about Trump in mainstream media. Here is CNN and we can see that 50% of the top stories are always against Trump. We have Boehner coming out saying Trump is a disaster. This is the guy who threw people off committees if they did not vote for his agenda. The Kushner story is desperately trying to make something out of nothing.

Here we have after Flynn’s removal, Kushner suggesting setting up a direct channel for diplomatic purposes regarding Syria with the Russians. That is entirely within reason and has been done during confrontations in the past. This was only a suggestion. It was not done, yet the press twist this into somehow supporting Russia who single-handedly defeated Hillary and put Trump in office. They think if they can just keep selling that nonsense it will become a fact.. The press seems to want war with Russia and absolutely nothing else. No such link was established and the last thing you want to do is not talk to your adversary. So why is this a major story? Of yes. It’s again RUSSIA. The press created the Spanish American War. They supported the Vietnam War and kill more than 58,000 American boys, most of my high school friends died thanks to them.

Behind the Curtain, Republican Elites are conspiring to overthrow Trump (including Boehner) to protect the establishment. McCain and Graham are the worst of the lot in office. They obviously picked up the phone and called Boehner for help. The Republicans have lost it. They think this “populism” is over with Macron’s victory in France so it’s time to get rid of Trump and it will all be OK again. I have never seen such an all out effort on a massive coordinated effort to reject the people’s demand for reform. This is HIGHLY dangerous for we can very well move toward civil war. These people think getting rid of Trump and it will all be roses and raining money for them once again. They are DEAD wrong! Our model also warns that that United States can break up as a result of this by 2032-2040.

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No, Merkel has started her campaign.

‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)

Attending a campaign rally ahead of the country’s elections, Angela Merkel claimed that now was the time for Europe to pay more attention to its own interests, and “take our fate into our own hands”. In an uncharacteristically bold speech, she went so far as to suggest that even the US was no longer a reliable partner to the EU – a strong statement, according to officials, who were left stunned. The words appeared to herald a change in transatlantic relations – effectively saying with Donald Trump in charge, the US-European alliance would never be the same. Mrs Merkel’s out of character appearance also signalled a strong pro-European stance to voters in Germany, as well as the wider EU, that Berlin will be playing a more activist role in the bloc. Norbert Spinrath, Europe spokesman in the Bundestag for the Social Democrats, said: “[Mrs] Merkel seems to have finally understood that she really needs to get stuck in and solve Europe’s problems.

“She has to realise that Europe is more than just fiscal consolidation — we need closer integration, we need to strengthen the currency and fight social imbalances.” The speech comes just weeks after newly elected French president Emmanuel Macron announced his plans to spearhead reforms in the Eurozone. It would be a sharp departure from her previous role as the EU’s crisis manager, with Mr Macron’s election pushing the German leader to present a more promising vision of Europe’s future. According to Jan Techau, a foreign policy analyst at the American Academy in Berlin, the speech was more for domestic audiences than those abroad, with the country’s federal elections just four months away. He adds: “It shows she is finally moving into campaign mode. “She’s switched from the international Merkel to the domestic Merkel.”

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What is Trump going to do if Corbyn wins? Or Merkel?

Merkel Comes Out Swinging At Trump And Misses (Luongo)

German Chancellor Angela Merkel will preside over the end of the European Union. Her reaction to the G-7 meeting and U.S. President Donald Trump’s refusal to endorse the Paris Agreement on Climate Change will accelerate the market’s rejection of EU policy. I’ve been warning about this for months in my articles here on Seeking Alpha. Angela Merkel is caught between two stanch nationalists whom Germany depends on: Russian President Vladimir Putin to the east and U.S. President Donald Trump to the right. Last week, I told you that Trump would clash with Merkel over Brexit at the G-7 meeting. “But, the likelihood of that is remote. If anything, there are signs that Trump is getting control of the narrative and his presence at the G-7 meeting this weekend will put the EU, specifically German Chancellor Angela Merkel in her place with respect to Brexit by backing U.K. Prime Minister Theresa May.”

And by all accounts he did that and more, forcing the G-7 to issue a four-page forward statement that outlined the lack of consensus among the participants. This is unprecedented. Trump went overseas and stood athwart the financial and political order to fulfill campaign promises. Now, Angela Merkel is forced to make campaign promises of her own. And she’s not happy about it. Merkel gave a “watershed speech” during a Christian Democratic Union (CDU) rally in Munich. From an AFP report on the speech: “Europe “must take its fate into its own hands” faced with a western alliance divided by Brexit and Donald Trump’s presidency, German Chancellor Angela Merkel said Sunday. “The times in which we could completely depend on others are on the way out. I’ve experienced that in the last few days,” Merkel told a crowd at an election rally in Munich, southern Germany. “We Europeans truly have to take our fate into our own hands,” she added.

And while these are fighting words, they also ring hollow. Merkel is in no position to drive a hard bargain with either the U.S. or the U.K. over trade. Trump went to the G-7 to put the kibosh on the EU’s intransigence over Brexit. He succeeded. Trump is winning control of the political narrative at home. He’s up in the polls, he was deferential to Israel and even handed with the Arabs in Saudi Arabia. This trip and his standing up to G-7 technocrats on behalf of his voters give him the political capital to whip his Republican majority into line on spending, taxes and budgeting. The punditry is right. This is a watershed moment. But, it was not instigated by Merkel. It was instigated by Trump. And it will be the beginning of the next wave of capital flight out of the EU.

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So much for democracy in Holland. Make that Europe. Big mistake, guys.

After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)

The Dutch senate on Tuesday approved a European Union “association agreement” with Ukraine, a final hurdle to the treaty, which strengthens the former Soviet republic’s ties with Western Europe and moves it further from Moscow’s orbit. It did so following amendments made at the EU level to take into consideration the Dutch referendum vote last year against the agreement. “Today’s vote in the Dutch Senate sends an important signal from the Netherlands and the entire European Union to our Ukrainian friends: Ukraine’s place is in Europe. Ukraine’s future lies with Europe,” said EU Commission President Jean-Claude Juncker. The agreement, a treaty, had already been negotiated and approved by all EU governments and by Ukraine in 2014, and had even partially gone into effect pending ratification when it was abruptly rejected by Dutch voters in a snap referendum held in April 2016.

The Dutch vote was as much a rebuke to Prime Minister Mark Rutte and the European Union as a rejection of the treaty, which focuses mostly on trade ties. But Rutte and the European Union diplomats were forced to renegotiate parts of the treaty in order to render it palatable to Dutch parliament or risk seeing it derailed, since it cannot be ratified without support from all European Union legislatures. Ultimately the treaty was amended to underline it does not make Ukraine a candidate for EU membership, does not entitle Kiev to financial aid or military assistance from the bloc, and does not give Ukrainians the right to live and work in EU member states. The amended version passed Dutch parliament in March, and the Senate approved it Monday, both by comfortable margins.

Read more at

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Everything is left to fall apart. As billion-dollar buildings open in Brussels. Union.

Two-Thirds Of Greek Construction Jobs Have Vanished (K.)

The number of companies active in the construction sector has declined by 35.4% since 2004 as a result of the financial crisis and the considerable drop in investment in infrastructure. Worse, compared to the 401,000 employees in the sector during the third quarter of 2008 – just before the recession cycle started – construction employed just 141,800 workers at end-2016, which means that at least 64.6% of the construction workers eight-and-a-half years ago have now been forced out of the sector.

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Ironic quote of the year, from the oil industry: “There is life in deep-water yet..”

Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)

Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates. The tumbling costs present another challenge for OPEC which is currently curbing output to shrink a glut. In 2014, when the U.S. shale boom sparked oil’s crash from above $100 a barrel, the group embarked on a different strategy of pumping at will to defend market share and throttle high-cost projects.

Ali Al-Naimi, the former energy minister of OPEC member Saudi Arabia, said in February 2016 that such producers need to either “lower costs, borrow cash or liquidate.” “There is life in deep-water yet,” said Angus Rodger, director of upstream Asia-Pacific research at Wood Mackenzie in Singapore. “When oil prices fell, many projects were deferred, but the ones that were deferred first were deep-water because the overall break-evens were highest. Now in 2017, we’re seeing signs that the best ones are coming back.” The falling costs make it more likely that investors will approve pumping crude from such large deep-water projects, the process for which is more complex and risky than drilling traditional fields on land. That may compete with OPEC’s oil to meet future supply gaps that the group sees forming as demand increases and output from existing wells naturally declines.

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We should start training young people for this. Send them to Africa to live with the vets and observe. Best teachers ever.

US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

The sun has set over the scrubby savannah. The moon is full. It is time for Ryan Tate and his men to go to work. In camouflage fatigues, they check their weapons and head to the vehicles. Somewhere beyond the ring of light cast by the campfire, out in the vast dark expanse of thornbushes, baobab trees, rocks and grass, are the rhinos. Somewhere, too, may be the poachers who will kill them to get their precious horns. The job of Tate, a 32-year-old former US Marine, and the group of US military veterans he has assembled in a remote private reserve in the far north of South Africa is simple: keep the rhinos and the rest of the game in the bush around their remote base alive. The men are not mercenaries, or park rangers –they work for Tate’s Veterans Empowered To Protect African Wildlife (Vetpaw), a US-based nonprofit organisation funded by private donations.

All have seen combat, often with elite military units, in Iraq, Afghanistan and elsewhere. Though equipped with vehicles, trail bikes, assault rifles, sniper suits and radios, the most important weapons in the war against poaching, Tate believes, are the skills and experiences his team gained on successive deployments in conflict zones over the last decade and a half. “We are here for free. We are not going anywhere. Whether it is cold or hot, day or night … we want to work with anyone who needs help,” Tate says. The initiative is not without controversy. Some experts fear “green militarisation” and an arms race between poachers and gamekeepers. Others believe deploying American former soldiers to fight criminals in South Africa undermines the troubled country’s already fragile state. But the scale of the challenge of protecting South Africa’s rhinos is clear to everyone, with a rise in poaching in recent years threatening to reverse conservation gains made over decades.

[..] Tate founded Vetpaw after seeing a documentary about poaching and the deaths of park rangers in Africa. His team now work on a dozen private game reserves covering a total of around 200,000 hectares in Limpopo, the country’s northernmost province. One advantage for local landowners is the protection heavily armed combat veterans provide against the violent break-ins feared by so many South Africans, particularly on isolated rural farmsteads. The team has also run training courses for local guides and security staff. But if one aim of Vetpaw is to counter poaching, another is to help combat veterans in the US, where former servicemen suffer high levels of unemployment and mental illness. “Everyone gets PTSD when they come back from war … you are never going to get the brotherhood, the intensity again.. [There are] all these veterans with billions of dollars of training and the government doesn’t use them. I saw a need in two places and just put them together,” says Tate.

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Apr 302015
 


Unknown Medical supply boat Planter, General Hospital wharf on the Appomattox, City Point, VA 1865

Negative Interest Rates Set Up World For Biggest Mass Default Ever (Warner)
German Bunds Are Tanking After Big Investors Say to Get Out (Bloomberg)
The Real Financial Crisis That Is Looming: Consumer Spending (STA)
US Economy Grinds To A Halt In First Quarter 2015 (Bloomberg)
Fed Stays Vague on Rate-Hike Timing, but Sees Slower Growth as Blip (Hilsenrath)
Ignore The ‘Whiff Of Panic’ As US Economy Stalls (AEP)
Fed, White House Fail To Mention The D-Word (MarketWatch)
Firebrand Greek Minister Risks Fresh Schism With Europe (Telegraph)
Greece Close To Minimum Agreement Deal With Creditors: Deputy PM (Guardian)
Reinforced Greek Finance Team Heads To Brussels For Talks (Kathimerini)
Transactions Over €70 On Larger Greek Islands To Be Plastic Only (Kathimerini)
Majority of Financial Pros Now Say Greece Is Headed for Euro Exit (Bloomberg)
Bank Of Japan Keeps Policy Steady In 8-1 Vote (CNBC)
New Zealand Rockstar Economy All Smoke And Noise (NZ Herald)
It’s Now Impossible For Most Poor Australian Families To Find A Home (Guardian)
Who is to Blame for the Tragedy in Yemen? (Viktor Mikhin)
Going Rogue: 15 Ways to Detach From the System (Tess Pennington)
The Last 3 Bornean Rhinos Are in Race against Extinction (Scientific American)
Heaviest Element Yet Known To Science is Discovered: Governmentium (Not PC)

“Both Keynesian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess.”

Negative Interest Rates Set Up World For Biggest Mass Default Ever (Warner)

Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate. With the advent of ECB QE, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them. On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it’s 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it’s 17pc.

Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all. What makes today’s negative interest rate environment so worrying is this; to the extent that demand is growing at all in the world economy, it seems again to be almost entirely dependent on rising levels of debt.

[..] The flip side of the cheap money story is soaring asset prices. The bond market bubble is just the half of it; since most other assets are priced relative to bonds, just about everything else has been going up as well. Eventually, there will be a massive correction, in which creditors will suffer sickening losses. Nobody can tell you when that moment will arrive. We live in an “extend and pretend” world in which economies pathetically fight between themselves for any scraps of demand. One burst of money printing is met by another in an ultimately futile, zero-sum game of competitive currency devaluation.

As if on cue, along comes another soft patch in Britain’s economic recovery, with first-quarter growth quite a bit weaker than expected. Like a constantly receding horizon, the point at which UK interest rates begin to rise is pushed ever further into the future. It’s like waiting for Godot. When Bank Rate was first cut to 0.5pc in response to the financial crisis, markets expected rates to start rising again in a year. Six years later, Bank Rate is still at 0.5pc and markets still expect them to rise in a year. In Europe it’s not for four years. Both Keynesian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess.

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More negative interest ‘unintended crap’.

German Bunds Are Tanking After Big Investors Say to Get Out (Bloomberg)

Investors gave the clearest sign yet they’re losing patience with the record-low yields on euro-area government bonds in a selloff that spared no market. Yields on Germany’s bunds surged the most in two years as traders shunned an auction of the nation’s debt. Bond titan Jeffrey Gundlach of DoubleLine Capital egged on the declines, saying he’s considering making an amplified bet against the securities. His comments echoed Janus Capital’s Bill Gross, who once managed the world’s largest bond fund. He said bunds were the “short of a lifetime.”

The bond slump reflects growing angst among investors after the ECB’s €1.1 trillion quantitative-easing program sent yields to unprecedented lows from Germany to Spain. Emerging signs of inflation in the 19-nation economy are also hurting demand. “These are influential voices that offer a contrarian view when the German bond market appears to be at an extreme level, so there’s definitely going to be an impact on the market,” said Salman Ahmed, a global strategist at Lombard Odier Investments Managers in London.

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“The problem for the Federal Reserve is in an economy that is roughly 70% based on consumption, when the vast majority of American’s are living paycheck-to-paycheck…”

The Real Financial Crisis That Is Looming: Consumer Spending (STA)

It is important to remember that the total population in the US is currently around 320 million. In other words, more than 1:3 individuals in the United States is currently being supported by some form of government assistance. This is at a time when roughly 70 cents of every tax dollar is absorbed by government welfare programs and interest service on $18 Trillion in debt. Here is the problem with all of this. Despite Central Bank’s best efforts globally to stoke economic growth by pushing asset prices higher, the effect is nearly entirely mitigated when only a very small percentage of the population actually benefit from rising asset prices. The problem for the Federal Reserve is in an economy that is roughly 70% based on consumption, when the vast majority of American’s are living paycheck-to-paycheck, the aggregate end demand is not sufficient to push economic growth higher.

While monetary policies increased the wealth of those that already have wealth, the Fed has been misguided in believing that the “trickle down” effect would be enough to stimulate the entire economy. It hasn’t. The sad reality is that these policies have only acted as a transfer of wealth from the middle class to the wealthy and created one of the largest “wealth gaps” in human history. The real problem for the economy, wage growth and the future of the economy is clearly seen in the employment-to-population ratio of 16-54-year-olds. This is the group that SHOULD be working and saving for their retirement years. With 54% of this prime working age-group sitting outside of the labor force, it is not surprising that in a recent poll 78% of women in the U.S. want a “man with a J.O.B.”

The current economic expansion is already pushing one of the longest post-WWII expansions on record which has been supported by repeated artificial interventions rather than stable organic economic growth. While the financial markets have soared higher in recent years, it has bypassed a large portion of Americans NOT because they were afraid to invest, but because they have NO CAPITAL to invest with. The real crisis that is to come will be during the next economic recession. While the decline in asset prices, which are normally associated with recessions, will have the majority of its impact at the upper end of the income scale, it will be the job losses through the economy that will further damage and already ill-equipped population in their prime saving and retirement years.

With consumers again heavily leveraged with sub-prime auto loans, mortgages, and student debt, the reduction in employment will further damage what remains of personal savings and consumption ability. That downturn will increase the strain on an already burdened government welfare system as an insufficient number of individuals paying into the scheme is being absorbed by a swelling pool of aging baby-boomers.

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“Spending on nonresidential structures, including office buildings and factories, dropped 23.1%..”

US Economy Grinds To A Halt In First Quarter 2015 (Bloomberg)

The world’s largest economy sputtered to a near-halt in the first quarter, choked by a slump in U.S. business investment and exports that dimmed hopes for a meaningful short-term rebound. GDP rose at a 0.2% annualized rate after advancing 2.2% the prior quarter, Commerce Department data showed Wednesday in Washington. After their meeting, Federal Reserve policy makers said some of the headwinds holding back the U.S. will probably fade and give way to “moderate” growth. While the economy is likely to bounce back from the temporary restraints of harsh winter weather and delays at West Coast ports, the harm caused by the plunge in fuel prices and stronger dollar may be longer-lasting.

“There’s not a whole lot of momentum heading into the second quarter,” said Mike Feroli, chief U.S. economist at JPMorgan. “We expect the economy to be better, but some of the details in this report are cautionary.” Stocks fell as investors weighed the timing for a possible Fed rate increase. The Standard & Poor’s 500 Index declined 0.4% to 2,106.85 at the close in New York. The median forecast of 86 economists surveyed by Bloomberg projected GDP would rise 1%. Forecasts ranged from little change to a 1.5% gain. It was the weakest performance since the first three months of last year, when bad weather also damped growth.

Corporate fixed investment decreased at a 2.5% annualized pace in the first quarter, the biggest decline since the end of 2009. Spending on nonresidential structures, including office buildings and factories, dropped 23.1%, the most in four years. The decline reflected weakness in petroleum exploration as oil companies slashed budgets on the heels of plunging crude prices. Spending on wells and mines fell at a 48.7% annualized rate in the first three months of the year, the biggest drop since the second quarter of 2009, when the economy was still in the recession. Halliburton, the world’s second-biggest provider of oilfield services, has said it expects to reduce capital spending by 15% this year and accelerated the pace of job cuts ahead of its takeover of Baker Hughes.

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From the Fed bullhorn himself. It’s a matter of redefining terms. Apparently winter, though there is one every year, is now a ‘transitory factor’.

Fed Stays Vague on Rate-Hike Timing, but Sees Slower Growth as Blip (Hilsenrath)

Federal Reserve officials attributed the economy’s sharp first-quarter slowdown to transitory factors, in effect signaling an increase in short-term interest rates remains on the table for the months ahead although the timing has become more uncertain. The Fed now needs time to make sure its expectation of a rebound proves correct after a spate of soft economic data. That means the chances for a rate increase by midyear have diminished, a point underscored by the Fed’s statement released Wednesday after a two-day policy meeting. “Economic growth slowed during the winter months, in part reflecting transitory factors,” the Fed said.

The Fed also said that although growth and employment had slowed officials expected a return to a modest pace of growth and job market improvement, “with appropriate policy accommodation.” The gathering concluded a few hours after the Commerce Department reported the U.S. economy grew at a 0.2% annual rate in the first quarter. It was the worst performance in a year, pocked with evidence of a slowing trade sector and anemic business investment. The report also showed annual consumer price inflation slowed in the first quarter. For now, the Fed isn’t signaling any shift in its policy stance. It repeated it would keep its benchmark short-term interest rate, the federal funds rate, near zero, where it has been since December 2008.

Officials in March opened the door to rate increases later this year, by removing from the policy statement assurances rates would stay low. The statement said, as it did in March, that the Fed would raise rates when officials become reasonably confident that inflation is moving toward the Fed’s 2% objective and as long as the job market continues to improve. Officials sought to acknowledge the recent economic downshift in their policy statement, while keeping their options open. The pace of job gains moderated, the Fed statement said, and measures of labor-market slack were little changed. Business investment softened and exports declined.

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Ambrose and his opinionsm always fun. But do heed this: “Once you strip out a surge in inventories – often a pre-recession warning – the economy contracted sharply.”

Ignore The ‘Whiff Of Panic’ As US Economy Stalls (AEP)

The US economy has suddenly stalled. A blizzard of shockingly weak figures raise the awful possibility that America’s six-year growth cycle since the Great Recession has already rolled over, with unsettling implications for the world. Worse yet, this apparent exhaustion is taking hold even before the Federal Reserve has begun to raise interest rates or to drain any of its $3.7 trillion of quantitative easing and balance-sheet expansion. Former US Treasury Secretary Larry Summers warned in Davos earlier this year that the Fed typically needs to cut rates by three or four percentage points to combat each cyclical downturn. It is currently at zero. “Are we anywhere near the point when we have 3pc or 4pc running room to cut rates? This is why I am worried,” he said.

“Nobody over the last 50 years, not the IMF, not the US Treasury, has predicted any of the recessions a year in advance, never,” he said. We should not ignore his warnings lightly, yet for once I am an optimist, clinging to the belief that the US will recover from the strange “air pocket” of early 2015. A siege of snow and ice across the North East over the late winter – for the second year in a row, and some say evidence of a drastically slowing Gulf Stream – has obscured the picture. The first flash of data is often wrong, in any case. Yet the latest GDP figures are indisputably atrocious. “It is hard to put lipstick on that pig: This is unequivocally a very weak report,” said Harm Badholz from UniCredit. The slump in the annual growth rate to 0.2pc in the first quarter does not convey the full horror of it.

Once you strip out a surge in inventories – often a pre-recession warning – the economy contracted sharply. Investment in business buildings and factories fell 23pc. “A whiff of panic is in the air,” said the Economic Cycle Research Institute. The putatitve post-winter rebound keeps disappointing. Citigroup’s economic surprise index has tumbled to deeply negative levels. The Conference Board’s index of consumer confidence fell from 101.4 to 95.2 in April. The Fed has clearly been caught off-guard. Bill Dudley, the New York Fed chief, said as recently as last week that the growth rate had probably dipped to around 1.5pc in first quarter but would soon climb back to its two-year trend path of 2.7pc.

It is by now clear that the 15pc surge in the dollar’s trade-weighted index since June – one of the two most dramatic dollar spikes of the post-war era – has done more damage than expected. It has tightened monetary policy through the exchange rate before the Fed has even pulled the trigger. Exports fell 7.3pc in the first quarter, further evidence that the rotating devaluations carried out by one economic bloc after another are doing little more than stealing demand from others in a beggar-thy-neighbour world of quasi-depression.

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“..you won’t find any direct mentions of the strength of the greenback.”

Fed, White House Fail To Mention The D-Word (MarketWatch)

There’s a word that both the Federal Reserve and the White House didn’t mention Wednesday that has played havoc with the U.S. economy this year – the dollar. Search the text of the Federal Open Market Committee’s statement, or the statement put out by the White House after the disappointing first-quarter gross domestic product report, and you won’t find any direct mentions of the strength of the greenback. Part of that is down to politics and the mantra that only the Treasury speaks about the dollar. Because, without mentioning the dollar, the Fed pretty well describes what has happened.

“Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports,” the Fed said. That doesn’t sound like much, but look carefully at the back part of that sentence — the reference to “decreasing prices of non-energy imports.” That’s another way to say that consumers and businesses can buy more stuff and services from abroad for less. And, why is that? Because the dollar is up 26% against the euro over the last 52 weeks, and about 17% vs. a broader set of currencies as measured by the WSJ dollar index. The White House allusion to the dollar is even more subtle.

Written by Jason Furman, the chairman of the Council of Economic Advisers, the White House statement does note that volumes of U.S. exports are sensitive to foreign GDP growth. This weak growth has of course helped the dollar to rise. Furman has previously been on the record about the dollar being a headwind for U.S. growth. Whether the new tone is a result of pressure internally from colleagues at Treasury or more a political shift isn’t clear. Either way, both the Fed and the White House are finding it hard to ignore the biggest elephant in the room.

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They’re going to get homesick for Varoufakis soon.

Firebrand Greek Minister Risks Fresh Schism With Europe (Telegraph)

Hopes that a revamped Greek bail-out team would finally break a two-month deadlock with creditors took a fresh blow on Wednesday, as the Leftist government’s firebrand energy minister pledged “no surrender” to international lenders. Highlighting a deep schism within the ruling party over Greece’s future in the single currency, Panagiotis Lafazanis said there could be “no compromise” with creditor powers, who were seeking “subordination and surrender” from his government. “Our government will not bow down, neither will it surrender,” wrote Mr Lafazanis in a Greek newspaper. “Syriza will not accept an agreement that would be incompatible to its radical commitments.” A popular figurehead of the party’s radical Left Platform, Mr Lafazanis attacked the Troika for “water-boarding” the Greek economy, choking its people into submission.

“If our ‘partners’ and the IMF believe that they will blackmail us using the refusal of financing as a weapon, and that they will terrorise the Greek people forever using the ‘bogeyman’ of default and of a national currency, they are woefully deluded.” The energy minister, who has ties with Moscow, has been one of the fiercest critics of the Troika’s plans to undercut Athens’ promises to address Greece’s “humanitarian crisis” through raising wages and pensions for the poorest. He added the country could gradually get on its feet after a euro exit, but warned monetary union would be “subjected to a grave and mortal wound” should Greece be forced out.

The intervention comes amid hope that Athens was edging closer to agreeing the basis for its reforms-for-cash programme, after a two-month hiatus that has pushed the country towards insolvency. A newly established Greek bail-out team, headed by Oxford-educated minister Euclid Tsakalotos, was due to present a draft reform list to officials in Brussels on Wednesday. The appointment of the softly-spoken Marxist economist came after Brussels had grown increasingly exasperated by the stalling tactics of finance minister, Mr Varoufakis. But insisting he was still at the forefront of talks, the “rock-star” former academic said he remained “in charge of the negotiations with the eurogroup”.

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“[the new head of] the Greek negotiating team in the debt talks said Greece had to keep to its “red lines” on reforms and that any “areas of compromise” should be within the “political plan” of the radical government.”

Greece Close To Minimum Agreement Deal With Creditors: Deputy PM (Guardian)

Greece could seal a deal with its creditors in early May, its deputy prime minister said on Wednesday, as the country prepared a new list of reforms and the ECB provided more support to its beleaguered banks. But Yannis Dragasakis warned it was likely to be only a “minimum agreement” to unlock the delayed funds Greece needed to avoid default. He said: “Now we are going to a minimum agreement with actions that can be taken immediately. But [in the long-term] not just any solution will suffice. The solution has to be viable. After the interim agreement a long discussion about the debt, primary surpluses, investment and growth will follow.”

A eurozone official told Reuters time was running out to reach a deal about releasing the emergency funds, which amount to €7.2bn, since the country needed to begin negotiating a third bailout agreement before the current programme runs out at the end of June. Otherwise it faced the prospect of default or having to leave the eurozone. He said: “We are not talking about weeks any more, we are talking about days.” If the latest Greek proposals were approved, eurozone finance ministers could endorse the deal at their next meeting on 11 May. Greece’s creditors are demanding economic reforms in exchange for more bailout cash. But the impasse could still prove difficult to break, since the new reforms were not expected to offer any major new concessions even though previous plans had been rejected.

Due to be presented to the Greek parliament this week, they are said to include measures to clamp down on corruption and tax evasion, as well as tax and public administration reforms and a delay in plans to raise the minimum wage. But the Syriza-led government will continue resisting significant changes to pensions or reforms of the labour market. Euclid Tsakalotos, the Oxford-educated economics professor who now heads the Greek negotiating team in the debt talks, said Greece had to keep to its “red lines” on reforms and that any “areas of compromise” should be within the “political plan” of the radical government, which was elected on an anti-austerity ticket.

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“Energy Minister Panayiotis Lafazanis cast doubt on whether Greece and its lenders could reach an “honorable compromise.” Alternate Minister for Social Security Dimitris Stratoulis said there was no way the government would accept “painful compromises.”

Reinforced Greek Finance Team Heads To Brussels For Talks (Kathimerini)

A reinforced Greek team is to resume tough negotiations with representatives of the country’s international creditors in Brussels on Thursday, with some new proposals from the Greek side expected to be discussed, in a bid to make some progress toward a deal. According to a senior Finance Ministry official, the Greek delegation to Brussels involves 18 people, ranging from government negotiators to technocrats expected to provide eurozone officials with some of the accounting data they have struggled to obtain to date. The talks are expected to continue until Sunday as time is running short for Greece to conclude an agreement with its creditors before state cash reserves run out.

Meanwhile in Athens, the Cabinet is on Thursday set to discuss the proposed provisions of a multi-bill being drafted by a new “political negotiating team” and which is expected to recommend changes to Greece’s public sector and tax administration but not to tackle key areas of contention such as pensions and the labor market. A government official indicated that the government’s “red lines” would remain in place, noting however that the provisions have not been “written in stone.” The thorny issues of pension and labor sector reforms, along with privatizations and the size of this year’s primary surplus target, are expected to dominate talks in Brussels, however, as creditors are keen for progress in some of these areas. Greek officials are hoping that an extraordinary Eurogroup could be called before the one scheduled to take place on May 11.

A eurozone official told Kathimerini that an agreement at the May 11 meeting was unlikely while stressing that Greece has “days, not weeks” to conclude a pending review. A possible scenario, he said, is that eurozone officials could issue a positive statement. This might encourage the ECB to allow Greek banks to increase their exposure to T-bills. While Deputy Prime Minister Yiannis Dragasakis insisted that an agreement with lenders could be reached at the beginning of May, other SYRIZA ministers appeared more skeptical on Wednesday. In an op-ed published in Crash magazine, Energy Minister Panayiotis Lafazanis cast doubt on whether Greece and its lenders could reach an “honorable compromise.” Alternate Minister for Social Security Dimitris Stratoulis said there was no way the government would accept “painful compromises.”

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The tourist sector, especially on the islands, is one of the main tax evaders.

Transactions Over €70 On Larger Greek Islands To Be Plastic Only (Kathimerini)

A draft plan by the government to increase state revenues, which is to be submitted to the Brussels Group on Thursday, includes increasing the luxury tax by 30%, imposing an accommodation levy on hotels with three stars or more, and the obligatory use of credit or debit cards for transactions of €70 euros or more on islands that have more than 3,000 inhabitants. The latter measure will apply to the islands of Rhodes, Lesvos, Chios, Kos, Samos, Syros, Naxos, Santorini, Limnos, Kalymnos, Thasos, Myconos, Paros, Andros, Tinos, Icaria, Leros, Karpathos, Skiathos, Skopelos, Milos, Patmos and Symi.

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Given the track record of Bloomberg’s economists team, I guess this means there won’t be a Grexit.

Majority of Financial Pros Now Say Greece Is Headed for Euro Exit (Bloomberg)

Greece, mired in a protracted financial crisis and at loggerheads with its bailout stewards, will leave the euro, according to the majority of investors, analysts, and traders in a Bloomberg survey. 52 % of the respondents in the Bloomberg Markets Global Poll believe the cash-strapped country will leave the 19-nation bloc at some point, compared with 43% who see Greece remaining in the euro for the foreseeable future. In answer to the same question in mid-January, just 31% of poll respondents predicted a Greek exit and 61% had the country staying in. The downbeat assessment of Greece’s prospects, more than five years after the country’s first bailout, comes as the country stands on the edge of a financial abyss.

Prime Minister Alexis Tsipras has so far failed to squeeze a loan payment out of his country’s institutional creditors as he sticks to his pledge to dial back austerity, while the nation’s banks stay on ECB life support. “The banking sector is Greece’s Achilles heel, and if the ECB decides to stop funding, then the situation will be even more fragile than it is at the moment,” said Diego Iscaro, a senior economist at research company IHS Global Insight in London. “That could trigger an exit—eventually.” Having lost access to capital markets and being ineligible for the ECB’s regular financing operations, Greece’s banks are reliant on the ECB-approved Bank of Greece Emergency Liquidity Assistance.

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Out of options.

Bank Of Japan Keeps Policy Steady In 8-1 Vote (CNBC)

The Bank of Japan (BOJ) kept policy steady in an 8-1 vote Thursday, maintaining its massive easing program of purchasing 80 trillion yen ($670 billion) worth of assets annually. The BOJ is ignoring signs its efforts to boost inflation toward a 2% target are stalling, Marcel Thieliant, a Japan economist at Capital Economics, said in a note. He had forecast the central bank would step up easing at this meeting. “The bank obviously considers the slowdown in inflation since the autumn to be a temporary phenomenon, blaming it mostly on the plunge in energy prices. In our view, there is more to it than that,” he said.

“The economic recovery is stalling, wages are barely rising, and inflation excluding food and energy is near zero, too.” Analysts had broadly expected the BOJ would leave its easing program intact, but the Nikkei business daily had reported the central bank could lower its median inflation estimate for fiscal 2015 from the current 1% in its semiannual report. The new figure will likely fall somewhere between 0.5-1%, the report said.

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Not a country with an overly elevated general IQ. It fits right in with the rest of the ‘developed’ world.

New Zealand Rockstar Economy All Smoke And Noise (NZ Herald)

With our currency effectively at parity with the Australian dollar and house prices booming everything must be great in the “rockstar” New Zealand economy, right? I’m not so sure. Let’s look at the economic growth achieved in 2014. Headline real GDP growth was a very impressive 3.5%. However, population growth was 1.6% so per capita GDP growth was only about 1.8%. Commodity prices – in particular dairy – had a big run up in 2014 resulting in a positive impact of around $5 billion to nominal GDP. Working out the contribution to real GDP growth is difficult, but if we assume about half of this fed through directly into GDP, then that accounts for about 0.9% of growth. Likewise the Christchurch rebuild got into full swing and probably added a further 0.6%.

So real GDP growth per capita, excluding the one-off effects of surging commodity prices and the Christchurch rebuild, was about 0.3%. Not quite so flash. The big problem is that the quality of our GDP growth has been low. GDP growth per capita is a much better measure of increased prosperity than simple GDP growth because it adjusts for the growth in our population. New citizens place demands on our social and physical infrastructure and the costs of those demands need to be met from the overall economic pie. Given that the media and most economists tend to focus on overall GDP growth, it’s no wonder politicians are hooked on the drug that is immigration: it’s an easy way to boost perceived GDP growth, despite significant cost to our infrastructure.

Those costs tend to be hidden in the short term; pressure on housing, demand for social services and further congestion on motorway and transport systems already at breaking point. Given we are a small, open economy, we need to be smart about what we do. The world is finely balanced at the moment: global growth is tepid and China’s growth in particular is slowing rapidly which may cause serious problems. Government debt levels globally are at record highs, Europe is a mess and Australia is facing real economic challenges as unemployment threatens to rise to 7% by the year’s end. I sense that as a nation we lack a plan and there is a real absence of leadership at both a local and a national level. We need to ask: What sort of economy do we want and how do we achieve it?

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As the rising housing market allows for politicians to hide from sight their failures, the economy spins out of tilt.

It’s Now Impossible For Most Poor Australian Families To Find A Home (Guardian)

A review of housing rental affordability released on Thursday shows that for most people on low incomes, finding an affordable place to rent is impossible. Anglicare Australia’s annual snapshot of rental affordability shows that while there has been a slight increase in affordability for low income households, for the vast majority of those living on benefits – such as Newstart or on the minimum wage – the cost of renting causes significant financial hardship. When we talk about housing affordability the most common discussion is about the cost of buying a house. And yet for 30% of people, while buying a house may be an ambition, the more immediate housing affordability issue is affording to pay rent rather than the mortgage.

For the past five years Anglicare Australia has conducted a national survey of properties to provide a “snapshot of rental affordability”. Rather than survey households, the snapshot looks at the marketplace by examining the cost of renting properties nationwide. This year it involved a survey of some 65,614 properties. The report considers the affordability of these properties for households on different government benefits such as single people on Newstart, those on the single parenting payment, the disability support pension, as well as those on the minimum wage. It considers an affordable property one in which the rent takes up “less than 30% of the household’s income.” This accords with the general view of a household being in “housing stress” if “housing costs are greater than 30% of disposable income and that household’s income is in the bottom 40% of the income distribution.”

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How many guesses did you need?

Who is to Blame for the Tragedy in Yemen? (Viktor Mikhin)

Artificially created by the West and their minion – Saudi Arabia, the Yemen crisis is unfolding according to their pre-planned scenario. Instead of helping the fraternal Yemen in the peaceful settlement of internal disputes, Riyadh has followed the lead of the US and begun to use military means to establish its dictatorship. At first, as planned, the first phase of the plan was carried out, i.e. the bombing of peaceful cities, towns and villages from planes of the so-called Arab coalition, when pilots developed combat experience launching bomb strikes in the absence of any air defense. During this phase, the United States actively helped the Saudis with intelligence, logistics and organization of military air sorties.

But even in such circumstances, Saudi pilots did not particularly trouble themselves over launching attacks on actual militant targets of Houthis, but prefered to bomb major cities such as Sana’a, Aden and many others. “The air raids in which our valiant falcons participated along with our brothers from the countries of the coalition eliminated all threats to the security of the kingdom and neighboring countries by destroying heavy weapons and ballistic weapons, which Houthi groups and forces under the control of Ali Abdullah Saleh had taken over,” reads a statement quoted by state media in Saudi Arabia. However, the fact is that these bombings by “glorious falcons” harmed mostly civilians; women, the elderly and children. According to WHO, as a result of the armed conflict, 944 civilians had been killed and another 3,487 wounded in Yemen from March 19 to April 17, 2015.

Then, according to the plan developed by the Pentagon, Saudi troops began entering the Yemen territory. The coalition of Arab countries announced the launch on the night of April 21 to 22 of a new operation in Yemen called “Restoration of Hope”. According to Saudi media, the goal of the operation is to restore the political process and fight against terrorism, and combat Houthi military activity. The official representative of the coalition command, Brigadier General Ahmed Asiri, said that its forces will continue the naval blockade of Yemen in order to prevent the supply of arms to the rebels. “If necessary, we will again resort to force. Under the new operation, we will do everything to stop all maneuvers by the Houthis,” said Ahmed Asiri.

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“Developing personal dependence is no easy feat and requires resolute will power to continue on this long and rambling path.”

Going Rogue: 15 Ways to Detach From the System (Tess Pennington)

It is much too complicated to get into how the “system” was created. That said, the purpose is to enslave through debt and to create an interdependence that will force you and your family to never truly find the freedom you are seeking. It manipulates and convinces you to continue purchasing as a sort of status symbol to make you think you are living the good life; while all along, it has enslaved you further. Wonder why we have all of these holidays where you have to buy gifts? The system needs to be fed and forces you into further enslavement. If you don’t buy into this facilitated spending spree, you are socially shamed. Collectively speaking, the contribution from our easy lifestyle and comfort level has created rampant complacency and a population of dependent, self-entitled mediocres.

We no longer count on our sound judgement, capabilities and resources. The system keeps everything in working order so we don’t have to depend on ourselves, and furthermore, don’t want to. I realize that many of the readers here do not fall into this collectivism, as you see through the ideological facade and know that the system is fragile and can crumble. Breaking away from the system is the only way to avoid the destruction of when it comes crumbling down. When you don’t feed into the manipulation tactics of the system, or enslave yourself to debt, and possess the necessary skills to sustain yourself and your family when large-scale or personal emergencies arise, you will be far better off than those who were dependent on the system. Those who lived during the Great Depression grew up in a time when self-reliance was bred into them and were able to deal with the blow of an economic depression much easier. Which side of this would you want to be on?

Those who had the patience to learn the necessary skills, ended up surviving more favorably compared to others who went through the trying times of the Depression. Now is the time to get your hands dirty, to practice a new mindset, skills, make mistakes and keep learning. Developing personal dependence is no easy feat and requires resolute will power to continue on this long and rambling path. To achieve this you have to begin to break away from the confines of the system. You don’t have to run off to the woods to be the lone wolf. Simply by asking yourself, “Will your choices and the way you spend your time lead to more independence down the road, or will it lead to greater dependence?”, will help you gain a greater perspective into being self-reliant. As well, consider ignoring the convenient system altogether. This will help you to detach yourself from complacency and stretch your abilities and your mindset.

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Say hello and wave goodbye.

The Last 3 Bornean Rhinos Are in Race against Extinction (Scientific American)

s there any hope of saving the Bornean rhinoceros (Dicerorhinus sumatrensis harrissoni) from extinction? Sadly, the chances of that happening seem to grow slimmer and slimmer. Experts once estimated that the rapidly disappearing forests of Sabah, Malaysia, could have hidden up to 10 Bornean rhinos—a subspecies of the critically endangered Sumatran rhino, of which fewer than 100 remain scattered around Borneo, Sumatra and mainland Malaysia. But this month Sabah’s environmental minister reported some devastating news: It appears that there are no more wild rhinos in the state. There are, however, three Bornean rhinos in captivity in Sabah, all at the Borneo Rhino Sanctuary in Tabin Wildlife Reserve. One of them, a female named Iman, was captured from the wild a little over a year ago after she fell into a pit trap.

When she was rescued, Iman was proclaimed the species’s “newest hope for survival.” Sanctuary veterinarians even suspected she was pregnant at the time. That didn’t turn out to be true. Ultrasound tests conducted soon after Iman’s arrival at the sanctuary revealed that the mass in her uterus wasn’t a fetus. It was a vast collection of tumors that would make it impossible for her to ever get pregnant naturally. A male named Tam and another female, Puntung, also live at the sanctuary. According to WWF Malaysia, Puntung is also incapable of breeding because she has “severe reproductive tract pathology, possibly due to having gone unbred in the wild for a long time.”

So all hope is lost, right? Well, not so fast. Both Iman and Puntung are still producing immature eggs called oocytes. It might be possible to combine those oocytes with Tam’s sperm to produce embryos in the lab, which could then be implanted back into one of the two females or a rhino of another species. Late last month the Malaysian government pledged about $27,700 toward financing artificial insemination techniques for the task. That’s just a fraction of the money the Borneo Rhino Alliance says it needs for the task, but it’s a start.

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Not bad at all!

Heaviest Element Yet Known To Science is Discovered: Governmentium (Not PC)

News from the Scientific World: New Element Discovered 

Victoria University of Wellington researchers have discovered the heaviest element yet known to science. The new element, Governmentium (symbol=Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.  These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called pillocks. Since Governmentium has no electrons, it is inert. However, it can be detected, because it impedes every reaction with which it comes into contact. 

A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete. Governmentium has a normal half-life of 1 to 3 years (in NZ). It does not decay, but instead undergoes a re-organisation in which a portion of the assistant neutrons and deputy neutrons exchange places. In fact, Governmentium’s mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes. 

This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as a critical morass. When catalysed with money, Governmentium becomes Administratium (symbol=Ad), an element that radiates just as much energy as Governmentium, since it has half as many pillocks but twice as many morons.

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 January 23, 2015  Posted by at 11:45 am Finance Tagged with: , , , , , , , , ,  7 Responses »


Harris&Ewing Army Day Parade, Memories of the World War, Washington DC Apr 6 1939

Love In A Time Of Crisis In Greece (BBC)
Syriza To End Greece’s ‘Humiliation’ (BBC)
Saudi King’s Death Clouds Already Tense Relationship With US (WSJ)
Saudi Oil Policy ‘Just Took A Turn For The Worse’ (Kilduff)
This Currency War Cannot Go Well: Art Cashin (CNBC)
SocGen Explains Why The ECB’s QE Will Fail (Zero Hedge)
Mario Draghi: Charlatan Of The Apparatchiks (David Stockman)
Mario Draghi’s QE Blitz May Save Southern Europe At Risk Of Losing Germany (AEP)
ECB Bond Plan Won’t Fix Europe’s Economy (CNBC)
QE For The Eurozone Is A Huge Confidence Trick. It Should Fool No One (Guardian)
Eurozone Stimulus Will ‘Reinforce Inequality’, Warns Soros (BBC)
Why We Were Right On QE: ECB Board Member (CNBC)
Larry Summers Warns Of Epochal Deflationary Crisis If Fed Tightens Too Soon (AEP)
How We’re Preparing For $25 Oil: Lukoil CEO (CNBC)
If Oil Drops Below $30 A Barrel, Brace For A Global Recession (MarketWatch)
Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon (Bloomberg)
Asian Central Banks Under Pressure To Act (Reuters)
Is Bank Of Japan Governor Kuroda Losing Credibility? (CNBC)
Chinese Manufacturing Growth Stalls (BBC)
Denmark Ready to Dump Kroner on Market to Tame Hedge Funds (Bloomberg)
South Africa Rhino Poaching Record Set In 2014 (BBC)
Clock’s Ticking: Humanity ‘2 Minutes’ Closer To Its Doomsday (RT)

It’s downright criminal what the EU and ECB have accomplished: “Relationships are complicated these days,” says Katerina. “No-one is even thinking about getting married or having children.”

Love In A Time Of Crisis In Greece (BBC)

Amid its economic catastrophe, Athens is still a city of trendy cafes, cocktail bars and glamorous, air-kissing young people. As Greeks prepare to vote in Sunday’s general election, anti-austerity party Syriza is ahead in the polls and campaigning under the slogan, “Hope is on its way”. The average wage has fallen to €600 (£450: $690) a month; half of all young people are unemployed and the economy is barely emerging from six years of recession. But Greeks remain determined to maintain their hold on normality. “We don’t have much else,” they say, “we may as well enjoy our freddo cappuccinos.” But despite the drinking, flirting and dating, since the onset of financial disaster, a fundamental change has taken place in Greek society. Deejay Tommy, who works at the fashionable Opus bar in the south Athenian suburb of Glyfada, paints a sad picture of young Greeks waking up every day without a job.

“Things have lost a little bit of their romanticism,” he says. “The crisis has forced love to become a secondary priority. There are other things to worry about. I see many women looking for someone who will have money to take them out, who’ll take them on holidays. I see this quite a lot and it saddens me.” Down the road along the shoreline, the Bouzoukia clubs ring with live renditions of popular Greek love songs. Crowds sipping on vodka throw the singers red carnations and sing along to lyrics of heartbreak and pain. “We save up to come once every few months and we look forward to it,” says Katerina Fotopoulou, 30, at a table with her friends. “We don’t have the money to do much any more. We’re always talking about future plans, going on holiday, but no-one ever does anything.” Living at home, Katerina describes herself as an adult forced to live as a teenager, her life put on hold. Compared with other Europeans, Greeks are still fairly traditional.

For many young women, it is awkward bringing a boyfriend through the front door to meet the parents. And that poses a problem, considering the high numbers unable to afford a place of their own. “Relationships are complicated these days,” says Katerina. “No-one is even thinking about getting married or having children.” Indeed, Greece’s population is shrinking at an increasing pace according to data released by the Hellenic Statistical Authority (Elstat). Since Greece first signed its EU-IMF bailout agreement the number of births has declined rapidly. In 2010 there were 114,766 live births, and by 2013 that number had declined by almost 20,000 (94,134). Obstetrician Leonidas Papadopoulos says miscarriages at the Leto maternity hospital have doubled over the past year. “Maybe it’s down to stress,” he says. “There is no proof, but you can see it in the eyes of the people, there is stress and fear for the future.”

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“On Monday, national humiliation will be over. We will finish with orders from abroad..”

Syriza To End Greece’s ‘Humiliation’ (BBC)

The leader of Greek left-wing party Syriza says an end to “national humiliation” is near, as opinion polls put the party ahead three days before the general election. Alexis Tsipras asked supporters for a clear mandate to enable him to end the country’s austerity policies. He repeated his promise to have half of Greece’s international debt written off when the current bailout deal ends. Greece has endured deep budget cuts tied to the massive bailout. Sunday’s election is being closely watched by financial markets which fear that a Syriza victory could lead Greece to default on its debt and exit from the euro.

“On Monday, national humiliation will be over. We will finish with orders from abroad,” Mr Tsipras told thousands of cheering supporters at the party’s final election rally in Athens. “We are asking for a first chance for Syriza. It might be the last chance for Greece.” Greece has gone through a deep recession and still has a quarter of its workforce unemployed. However, there have been warnings that a Syriza victory could lead to a dangerous confrontation with other eurozone countries. Syriza is tipped to win but without an outright majority, and analysts say the party may struggle to find a coalition partner. Mr Tsipras has said he will not govern with those who support what he has called the policies of German Chancellor Angela Merkel.

Germany is seen in Greece as taking the hardest line on its debt. Earlier this month, a spokesman for Mrs Merkel said Germany expected Greece to uphold the terms of its international bailout agreement. Under those terms, the EU, International Monetary Fund and European Central Bank – the so-called troika – supported Greece with the promise of €240bn (£188bn) in return for budget cuts and economic reforms. Latest polls show Syriza widening its lead over Prime Minister Antonis Samaras’s centre-right New Democracy party. A poll to be published on Friday by Metron Analysis put Syriza’s lead over New Democracy up to 5.3% percentage points from 4.6 points. Another poll, by Rass, had Syriza 4.8 points in the lead.

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Things may not run as smoothly as many seem to think.

Saudi King’s Death Clouds Already Tense Relationship With US (WSJ)

U.S. officials worry that the death of Saudi King Abdullah ushers in a period of new uncertainty in a key relationship that already was tense. In the short term, the death of the king actually might ease strains in the relationship. The Saudi kingdom, as it enters a period of transition, may feel more vulnerable to external threats and eager to show the world that it still has the solid of backing of the U.S.—the country the kingdom always has seen as its ultimate protector. But in the longer term, the transition raises questions about how the new Saudi leadership will see its relations with the region and the wider world. Most likely, it will be a period of what longtime Middle East diplomat Dennis Ross calls “collective leadership.”

That in turn may reduce the Saudis’ ability to move decisively on the difficult and contentious issues—toward Iran, Iraq and the Islamic State uprising, as well as oil policy—that the U.S. and Saudi Arabia have been trying to address together. “I think you get more cautious decision-making,” said Mr. Ross. King Abdullah was seen as a reformer and relatively pro-American when he took office, though he became more repressive internally and less fond of the U.S. over time. The recent sentence of 1,000 lashes given to a writer convicted of insulting Islam sparked widespread condemnation in the West, including from the U.S. State Department. The late Saudi monarch was incensed by President Barack Obama ’s failure to follow through on his threats in 2013 to launch military strikes on the Syrian regime for its alleged use of chemical weapons.

And Riyadh didn’t believe the White House showed strong enough support for Mideast allies, particularly in Egypt, following the eruption of Arab Spring revolts in 2010. Secret talks between the U.S. and Iran—the country the Saudis most fear—over Tehran’s nuclear program also were viewed in Riyadh as a sign of a weakening American-Saudi alliance and proof that the White House was willing to work behind King Abdullah’s back, according to Saudi officials. The new king, the late ruler’s half-brother, Salman bin Abdul Aziz, is less well known and not considered a strong or healthy leader in his own right. That raises questions among U.S. officials about if or how quickly he will be able to consolidate power. As a result, American officials are likely to be guessing to some extent about who is in charge.

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“King Abdullah did push for modernization of Saudi society, allowing for more rights for women, but those efforts are now likely to be tabled.”

Saudi Oil Policy ‘Just Took A Turn For The Worse’ (Kilduff)

In earlier time, the death of Saudi Arabia’s King Abdullah bin Abdulaziz Al Saud would have rocked the oil market. The succession plan has always pointed in a direction away from U.S. interests and a turn toward an even harder line on Middle East issues. The antipathy toward Iran will be levered up, and the various Sunni-Shia battles will likely see greater escalation. Oil prices have quickly jumped $1.00 per barrel on the news in a knee-jerk reaction to the uncertainty. What is more likely is an even greater commitment to over supplying the market, in attempt to drive out higher cost producers and hurting Iran and Russia as an additional benefit. King Abdullah did push for modernization of Saudi society, allowing for more rights for women, but those efforts are now likely to be tabled.

There is a famous picture of King Abdullah walking and-in-hand with President George W. Bush through a patch of Blue Bonnets at W’s ranch in Crawford Texas, when oil prices were surging circa 2007. While the short-term plan is likely to attempt to hurt frackers, Iran and Russia via an over-supplied market, the longer-term implications are for oil supply policies that are more hostile toward western consumers. In addition, the appetite for bringing the proxy war to Iran and other Shiite factions in the region will rise, which result in a return of the geopolitical risk premium in the years ahead. U.S.-Saudi relations and longer-term Saudi oil production policy just took a turn for the worse with the death of King Abdullah.

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“This currency war cannot go well. They never have.”

This Currency War Cannot Go Well: Art Cashin (CNBC)

European Central Bank President Mario Draghi’s quantitative easing announcement Thursday may have been the latest salvo in a currency war, but veteran trader Art Cashin told CNBC that war is being played like a chess match. However, that will change at some point. “That laid-back cerebral attitude is going to disappear. At some point somebody is going to get their currency to a place where it’s going to cause enough pain to somebody else and then it’s going to turn into a real war,” Cashin, director of floor operations for UBS at the New York Stock Exchange, said in an interview with “Squawk on the Street.” On Thursday, the ECB announced an open-ended bond-buying program of 60 billion euros ($70 billion) a month in an effort to boost the region’s low inflation rate.

In fact, Cashin believes about the only thing the ECB achieved was a weaker euro and “not much else.” “The reliance on the LTROs [long-term refinancing operation] again is not going to increase bank lending in Europe as far as I can tell,” he noted. Cashin also expects the waves of deflation to get stronger as currencies fall. “These nations have been exporting deflation but it just hasn’t turned into a tsunami yet,” he said. “When it gets close to that then you’re going to see central banks around the world decide they better get a bit more cooperative.” “This currency war cannot go well. They never have.”

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“.. for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3 trillion, not a mere €1 trillion.”

SocGen Explains Why The ECB’s QE Will Fail: It’s Not Big Enough (Zero Hedge)

There are a bunch of things in the ECB post-mortem note just released by SocGen’s Michel Martinez, reproduced below, but here are the punchlines. First, on the impact of ECB QE on the economy: “we argue ECB QE could be five times less efficient than in the US. In December, press reports suggested that the ECB had run studies suggesting that a €1000bn QE programme would only boost price levels by 0.2-0.8% after two years, five to nine times less efficient than the studies for the US or the UK. The impact on GDP is not provided, but it would be reasonable to assume the same impact as on inflation on a cumulated basis.”

In other words, it will be an outright failure as it “tries” to boost inflation expectations and the European economy in its current format. That, as a reminder, is its stated purpose. So what does SocGen suggest? Simple: the same thing every Keynesian says when justifying why a piece of occult economic voodoo fails to work: it wasn’t big enough. To wit: “The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3 trillion, not a mere €1 trillion.”

And since there is nowhere near enough bond supply in Europe, the ECB will have to proceed with monetizing, drumroll, stocks. Should the ECB target such an expansion of its balance sheet, it would have to ease some conditions on its bond purchases (liquidity rule, quality…) or contemplate other asset classes- equity stocks, Real Estate Investment Trust-(REIT), Exchange-traded fund (ETF)…- as the BoJ, previously. Because what tens of millions of unemployed Europeans really need to help their lot in life, and to boost their confidence, is for the central bank to buy the stocks sold by the richest 0.001%.

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“The ECB has launched into a massive bond buying campaign for the sole purpose of redeeming Mario Draghi’s utterly foolish promise to make speculators stupendously rich..”

Mario Draghi: Charlatan Of The Apparatchiks (David Stockman)

Well, he finally launched “whatever it takes” and that marks an inflection point. Mario Draghi has just proved that the servile apparatchiks who run the world’s major central banks will stop at nothing to appease the truculent gamblers they have unleashed in the casino. And that means there will eventually be a monumental crash landing because the bubble beneficiaries are now commanding the bubble makers. There is not one rational reason why the ECB should be purchasing $1.24 trillion of existing sovereign bonds and other debt securities during the next 18 months. Forget all the ritual incantation emanating from the central bankers about fighting deflation and stimulating growth. The ECB has launched into a massive bond buying campaign for the sole purpose of redeeming Mario Draghi’s utterly foolish promise to make speculators stupendously rich by the simple act of buying now (and on huge repo leverage, too) what he guaranteed the ECB would be buying latter.

So today’s program amounts to a giant bailout in the form of a big fat central bank “bid” designed to prop up prices in the immense parking lot of French, Italian, Spanish, Portuguese etc. debt that has been accumulated by hedge funds, prop traders and other rank speculators since mid-2012. Never before have so few – perhaps several thousand banks and funds – been pleasured with so many hundreds of billions of ill-gotten gain. Robin Hood is spinning madly in his grave. The claim that euro zone economies are sputtering owing to “low-flation” is just plain ridiculous. For the first time in decades, consumers have been blessed with approximate price stability on a year/year basis, and this fortunate outbreak of honest money is mainly due to the global collapse of oil prices—not some insidious domestic disease called “deflation”. Besides, there is not an iota of proof that real production and wealth increases faster at a 2% CPI inflation rate compared to 1% or 0%.

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“Ultimately, €1.1 trillion over 18 months versus euro area GDP is roughly a third of what the BOE or Fed did under similar circumstances..”

Mario Draghi’s QE Blitz May Save Southern Europe At Risk Of Losing Germany (AEP)

Mario Draghi has achieved a spectacular triumph. His headline offering of €60bn a month in quantitative easing comes in the face of scorched-earth resistance from the German Bundesbank and the EMU creditor core. It is finally big enough to make an economic difference. Yet today’s shock-and-awe action by the ECB comes three years late, after the eurozone has already been allowed to drift into deflation, and very nearly into a triple-dip recession. The fact that the ECB is having to act on this scale a full six years into the world’s post-Lehman recovery is in itself an admission that policy has been horribly behind the curve. Mr Draghi told us year ago in Davos that warnings of deflation were jejune and that QE was out of the question. His hands were tied, of course, whatever he really thought at the time. He could not move too far beyond the ECB’s centre of gravity. He had to demonstrate that all else had failed, and all else did then fail.

It comes after six years of mass unemployment that has ravaged southern Europe, eroded the job skills of a rising generation, left hysteresis scars, and lowered the growth trajectory and productivity speed limit of these countries for a quarter century hence. It comes as the eurozone’s GDP is still languishing well below its pre-Lehman peak, with Italian industrial output down 24pc, back to levels first achieved in 1980. The bond purchases will not begin until March. They are cribbed about with conditions that may ultimately prove damaging and possibly fatal. Adam Posen, head of Washington’s Peterson Institute, said the QE blitz is large, but not as overwhelming as some think. “It will make some difference. It’s not going to be enough to fully offset deflationary forces, let alone restore growth, but to the degree that Draghi was able to make it sound open ended is a good thing,” he said.

“Ultimately, €1.1 trillion over 18 months versus euro area GDP is roughly a third of what the BOE or Fed did under similar circumstances, and it’s likely to take more money to get the same effect in Europe right now,” he said. The limits of delayed action are by now well known. Bond yields are already down to 14th Century lows. The ECB cannot force them much lower, though Mr Draghi did say cheerfully that it would buy debt with negative rates, prompting audible murmurs of alarm from German journalists. The decision amounts to an act of political defiance by a majority bloc in the Governing Council – unmistakably a debtors’ cartel of Latin states and like-minded states – and therefore opens an entirely new chapter of the EMU story. This Latin revolt is to violate the sacred contract of EMU: that Germany gave up the D-Mark and bequeathed the Bundesbank’s legacy to the ECB on the one condition that Germany would never be out-voted on monetary issues of critical importance.

Nor is the irritation confined to Germany. The Tweede Kamer of the Dutch parliament was up in arms today, the scene of fulminating protests from across the party spectrum. “Dutch taxpayers should not be made liable for the debts of the Italian state,” said the liberal VVD party. Mr Draghi said there was a “large majority on the need to trigger (QE) now, so large we didn’t need to vote”. That is an elegant way to describe a pitched battle. No doubt we will learn over coming days just how many hawks voiced their protest, and with what vehemence. He also said that the decision to pool 20pc of the risk through collective purchases was pushed through by “consensus”, the ECB’s euphemistic term for disagreement. This is an uncomfortable fudge.

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“Outside the U.S., the rest of the world’s economy is grappling with dropping prices and slower growth. While the recent crash in oil prices has accelerated the trend, prices of raw materials and natural resources have been falling since the Great Recession ended.”

ECB Bond Plan Won’t Fix Europe’s Economy (CNBC)

It’s a start, but it’s not a cure for Europe’s deepening economic stagnation. Borrowing from the playbook of their U.S. and Japanese counterparts, European central bankers Thursday embarked on a highly anticipated plan to buy hundreds of billions of dollars’ worth of government bonds to try to revive growth by pumping cash into the financial system. ECB President Mario Draghi announced an open-ended pledge to buy 60 billion euros ($70 billion) worth of private and public bonds every month in a program that could amount to as much as a trillion euros. The long-awaited—and, many say, long-overdue—program will start in March and last through September 2016, Draghi told reporters. The hope is that the bond-buying spree—known as quantitative easing—will help reverse a worrisome drop in prices that has recently spread throughout the euro zone.

First tried in Japan in the early 2000s, and then deployed in 2008 by the U.S. Federal Reserve, the goal of quantitative easing is to boost growth by lowering interest rates and making cash easier and cheaper to borrow, spurring lending and spending. In the U.S., Fed officials recently decided to end a third round of QE after sucking up more than $3 trillion in bonds. Though the Fed policy was not without critics, it is generally credited with helping to get the U.S. economy and banking system back on its feet after the worst financial crisis since the Great Depression. Europe is not alone in facing the perils of falling prices and economic slowdown. Outside the U.S., the rest of the world’s economy is grappling with dropping prices and slower growth. While the recent crash in oil prices has accelerated the trend, prices of raw materials and natural resources have been falling since the Great Recession ended.

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“It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not.”

QE For The Eurozone Is A Huge Confidence Trick. It Should Fool No One (Guardian)

At last the euro’s lords and masters have accepted that something must be done about their zone’s lamentable growth. They will unleash a massive bond-buying programme totalling a reported €1tn. The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the ECB has ridden to the rescue. No it has not. Europe’s great and good, partying on the slopes of Davos, are like courtiers at the Congress of Vienna. They are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since. There is absolutely no requirement on these banks to release this money into private or commercial bank accounts.

Given the fear of over-lending that regulators have struck into bank bosses since the collapse of Lehman Brothers, the money will simply build up reserves. That is exactly what has happened to quantitative easing in Britain since 2010: there has been no surge in bank lending, except into property investment. Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves. Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace.

If no one can afford to buy anything, no one will sell anything or invest money in making anything. The chronic imbalance between northern and southern states of the eurozone, previously ameliorated by selective devaluation, has bound poor and rich countries alike in a rictus of cash starvation. Collapsing demand drives down prices and profits; there is nothing for banks to invest in. The Chinese are laughing. Greece and some other Mediterranean economies are facing poverty not seen in half a century. A return to normal growth means they must declare themselves bankrupt, restructure past debts, leave the eurozone and devalue. Don’t bury money in their banks. Bury it in their wallet. The eurozone may still look great from the top of a Swiss mountain; it looks terrible from the foot of the Acropolis.

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“There is one large untapped source of triple-A credit, and that is the European Union itself – that has practically no debt, but it has taxing power..”

Eurozone Stimulus Will ‘Reinforce Inequality’, Warns Soros (BBC)

Billionaire investor George Soros has warned that the aggressive stimulus policy rolled-out by the ECB could “reinforce inequality” in the EU. The ECB committed to injecting at least €1.1 trillion into the ailing eurozone economy. Mr Soros added that the measures could have “serious political repercussions”. But he emphasised that he expected the ECB’s policy to drive economic growth in the European Union. Speaking at a dinner at the World Economic Forum in Davos, the 84-year-old, who was born in Hungary, voiced concerns that an “excessive reliance on monetary policy tends to enrich the owners of property and at the same time will not relieve the downward pressure on wages.” The ECB’s favoured method, known as quantitative easing, amounted to a “very powerful set of measures,” said the financier, and had “exceeded the very high expectations of the markets.”

However he twice cautioned that quantitative easing would “increase inequality between rich and poor, both in regards of the countries and people”. Asked if he worried that the newest round of quantitative easing, which essentially pumps more money into the eurozone, would lead some EU states to delay economic reforms, Mr Soros said that if there were growth, it would actually make it easier for countries like France to change their financial systems. He also said there was another powerful way of boosting the Eurozone economy. “There is one large untapped source of triple-A credit, and that is the European Union itself – that has practically no debt, but it has taxing power,” he said, urging the EU to spend more on financing infrastructure projects, such as energy pipelines, electricity networks and even roads.

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“It will work because it is big, because it’s strong, and because it’s open-ended.”

Why We Were Right On QE: ECB Board Member (CNBC)

Even before the ECB’s decision to launch a quantitative easing program was announced on Thursday, it was controversial. However, Benoit Coeuere, one of the bank’s key decision-makers, insisted to CNBC that the trillion-euro launch had been the right move. The slightly larger-than-expected program, which will see the ECB buy 60 billion euros ($69 billion) worth of corporate and government bonds a month for at least 18 months, was welcomed in global stock markets, with US and European equity markets rising after its announcement Thursday afternoon. “It shows that the program is credible for market participants,” Benoit Coeure, the French economist who has served as part of the ECB’s executive board since 2011, told CNBC at the World Economic Forum in Davos.

“It will work because it is big, because it’s strong, and because it’s open-ended.” Spooked by the specter of looming deflation and slowing economic growth, the ECB is now planning to provide a fillip to the euro zone’s economy by buying sovereign bonds from March until at least September 2016, or until inflation shows signs of picking up pace. “Lights were blinking red across our dashboard and we had to do something. The only question was what was the right instrument?” Coeure said Coeure admitted that there had been divisions on the board over the program in recent months, with some thinking it was too early and some too late. However, this month there was an “overwhelming majority” in favor of launching it, he added.

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Ray Dalio: “Back then we could lower interest rates. If we hadn’t done so, it would have been disastrous. We can’t lower interest rates now,”

Larry Summers Warns Of Epochal Deflationary Crisis If Fed Tightens Too Soon (AEP)

The United States risks a deflationary spiral and a depression-trap that would engulf the world if the Federal Reserve tightens monetary policy too soon, a top panel of experts has warned. “Deflation and secular stagnation are the threats of our time. The risks are enormously asymmetric,” said Larry Summers, the former US Treasury Secretary. “There is no confident basis for tightening. The Fed should not be fighting against inflation until it sees the whites of its eyes. That is a long way off,” he said, speaking at the World Economic Forum in Davos. Mr Summers said the world economy is entering treacherous waters as the US expansion enters its seventh year, reaching the typical life-expectancy of recoveries. “Nobody over the last fifty years, not the IMF, not the US Treasury, has predicted any of the recessions a year in advance, never.” When the recessions did strike, the US needed rate cuts of three or four percentage points on average to combat the downturn. This time the Fed has no such ammunition left.

“Are we anywhere near the point when we have 3pc or 4pc running room to cut rates? This is why I am worried,” he told a Bloomberg forum. Any error at this critical juncture could set off a “spiral to deflation” that would be extremely hard to reverse. The US still faces an intractable unemployment crisis after a full six years of zero rates and quantitative easing, with very high jobless rates even among males aged 25-54 – the cohort usually keenest to work – and despite America’s lean and efficient labour markets. Mr Summers warned that this may be a harbinger of deeper trouble as technological leaps leave more and more people shut out of the work-force, and should be a cautionary warning to those in Europe who imagine that structural reforms alone will solve their unemployment crisis. “If the US is in a bad place, we are short of any engine at the moment, so I hope you are wrong,” said Christine Lagarde, the head of the IMF.

Mrs Lagarde said the IMF expects the Fed to raise rates in the middle of the year, sooner than markets expect. “This is good news in and of itself, but the consequences are a different story: there will be spillovers. One thing for sure is that we are in uncharted territory,” she said. Worries about the underlying weakness of the US economy were echoed by Bridgewater’s Ray Dalio, who said the “central bank supercycle” of ever-lower interest rates and ever-more debt creation has reached its limits. Interest rate spreads are already so compressed that the transmission mechanism of monetary policy has broken down. “We are in a deflationary set of circumstances. This is going to call into question the value of holding money. People may start putting it in their mattress.”

Mr Dalio said the global economy is in a similar situation to the early Reagan-era from 1980-1985 when the dollar was surging, setting off a “short squeeze” for those lenders across the world who borrowed in dollars during the boom. There is one big difference today, and that is what makes it so ominous. “Back then we could lower interest rates. If we hadn’t done so, it would have been disastrous. We can’t lower interest rates now,” he said.

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“With oil companies staring down the barrel of low prices, they are realising that they have to prepare for ever more drastic scenarios.”

How We’re Preparing For $25 Oil: Lukoil CEO (CNBC)

With oil companies staring down the barrel of low prices, they are realising that they have to prepare for ever more drastic scenarios. Lukoil, the Russian oil company, has stress tested its business for the oil price falling to $25 a barrel, Vagit Alekperov, the company’s chief executive, told CNBC at the World Economic Forum in Davos. Brent crude was changing hands at close to $110 a barrel just a year ago, but has plummeted in recent months as the global economy performed worse than hoped, but supply continued at previous levels. On Friday, news that Saudi King Abdullah bin Abdulaziz Al Saud passed away sent oil prices sharply higher.

“We think that the current trends in the oil market and the global economy are only pushing the world oil to lower levels. We think the crisis is only at its earliest stages and the demand situation in world market is not really conducive to oil prices going up,” Alekperov warned. Lukoil, like other Russian businesses, has been affected by sanctions imposed by Western governments. A planned joint venture with French oil giant Total was scrapped in September. Lukoil, like other Russian companies, will also find it difficult to raise money internationally, or to repay international loans as the value of the rouble has tumbled. “The sanctions obviously limit our access to locality and financing. And over the past 25 years, we’ve been heavily integrated into the international community in terms of technology and financing,” Alekperov said. “These will have a telling impact on us.”

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“..a signal that worldwide demand is contracting so quickly that oil prices must quickly decline to reflect that fact.”

If Oil Drops Below $30 A Barrel, Brace For A Global Recession (MarketWatch)

The price of oil is about $17 a barrel away from signaling that a global recession is inevitable, according to a new survey of investment professionals. The survey from ConvergEx Group polled 306 investment professionals, asking, among other things, what oil price would show that a global recession was inevitable. “The idea behind this question was simple — at some point oil prices aren’t just a nice theoretical tailwind for global economies,” said Nicholas Colas, chief market strategist at ConvergEx, in a note. “Rather, they become a signal that worldwide demand is contracting so quickly that oil prices must quickly decline to reflect that fact.” The most common answer was $30 a barrel, from 26% of respondents, with $35 a barrel being the second most common answer (16% of respondents). All told, 62% of respondents said $30 or lower crude was a global recession’s canary in a coal mine.

More than half those surveyed represented buy-side firms such as asset managers and hedge funds, and about a quarter of them were from sell-side firms such as banks or broker dealers, according to ConvergEx. Crude oil for March delivery settled down $1.47, or 3.1%, at $46.31 a barrel on the New York Mercantile Exchange Thursday, as U.S. inventories for this time of year hit their highest level in eight decades. About 68% of the respondents said oil hasn’t reached a bottom yet, and only 20% think it already has. On Thursday, OPEC Secretary-General Abdalla el-Badri said he thinks oil prices will stay where they are now, setting up for an eventual rebound. Recently, Iran’s oil minister said his country’s oil industry is not threatened by $25 a barrel prices.

While a continued slide in oil prices may seem foreboding, not many of those surveyed think oil will actually drop to such low prices. Only 8% of those polled believe oil will end 2015 at below $40 a barrel, with the vast majority thinking it will settle above that: 43% estimated $40 to $60 a barrel, and 42% expect $60 to $80 a barrel. Those estimates, however, appear to be fluid. A ConvergEx survey conducted in December, when oil was at $63 a barrel, showed 89% of respondents forecasting an end-of-2015 price of more than $60, and 47% estimating oil at $80 a barrel or more. Most are looking for oil prices to rebound while acknowledging that current prices are benefiting the U.S. economy. About 66% said current prices are a positive to the U.S. economy, but if oil prices keep sliding from current levels, the U.S. labor market will take a hit, according to 55% of respondents. “The bottom line here is that investors say the drop in oil prices has been a net positive thus far, but their forecast is less sunny,” said Colas.

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“When I saw WTI hit $65, I thought we’re going to be really busy with restructurings,” Young said. “When it hit the $40s, I knew we were looking at outright liquidations.”

Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon (Bloomberg)

Oil drillers will begin collapsing under the weight of lower crude prices during the second quarter and energy explorers who employ them will shortly follow, according to Conway Mackenzie Inc., the largest U.S. restructuring firm. Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57% of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy. Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.

“The second quarter is going to be devastating for the service companies,” Young said in a telephone interview from Houston. “There are certainly companies that are going to die.” Oilfield-service providers are facing a “double-whammy,” he said. Even as oil companies are demanding 20% to 30% price reductions, they’re also extending wait times before paying their bills, enlarging cash-flow gaps for the drilling and equipment firms, he said. Young, who has restructured more than a dozen energy companies and advised Kirk Kerkorian’s Delta through its 2011 bankruptcy, is warning drillers to monitor whether the oil producers they work for have protected future cash flows with hedging instruments like swaps and collars.

The amount of projected 2015 oil and natural gas output a company has hedged is a strong indicator of whether they’ll be able to pay their bills, he said. Another important metric is how much is drawn on revolver loans, Young said. “I’m telling them they really have to keep an eye on this stuff and you’ve got to be the squeaky wheel,” he said. “You’ve got to start filing liens if you see a company starting to go down.” In the U.S., a lien is a legal claim against a debtor’s property to force payment of a delinquent bill. “When I saw WTI hit $65, I thought we’re going to be really busy with restructurings,” Young said. “When it hit the $40s, I knew we were looking at outright liquidations.”

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Asia has huge deflation risks.

Asian Central Banks Under Pressure To Act (Reuters)

Chinese factories were forced to cut prices for the sixth straight month in January to sell their products, while economic growth in South Korea slowed sharply, raising the prospect of more policy easing from major central banks in Asia. The weak manufacturing reading from China added to expectations that Beijing will have to announce fresh stimulus measures soon, and came a day after the European Central Bank took the ultimate leap and launched a huge bond-buying program as it tries to stave off deflation and kick-start growth. China’s manufacturing growth stalled for the second month in a row, the HSBC/Markit Flash Manufacturing Purchasing Managers’ Index (PMI) survey showed on Friday, while the sub-index for input prices fell to the lowest since the global financial crisis, reflecting a tumble in oil prices that is spreading disinflationary pressure throughout the globe.

Chinese companies again cut output prices, but more deeply than in December, eroding their profit margins and pointing to faltering demand. Analysts at Nomura saw more downside pressure on China’s producer prices, “enhancing our concerns over deflation”. “This looks like a trend and it will affect core inflation at some stage. So the PBOC will very likely react to such deflation concerns,” said Chang Chun Hua, an economist at Nomura, adding he expected the central bank to cut commercial banks’ reserve requirement ratio (RRR) in the first quarter to free up more money to lend. News out of South Korea made for uncomfortable reading as well. Asia’s fourth-largest economy grew a seasonally adjusted 0.4% in the October-December period on-quarter, less than half of the 0.9% gain in the third quarter. A senior statistics official from the central bank pointed to the uncertainty facing the trade-reliant economy, not least from the slowdown in China, South Korea’s biggest export market.

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What credibility?

Is Bank Of Japan Governor Kuroda Losing Credibility? (CNBC)

Bank of Japan (BOJ) Governor Haruhiko Kuroda has frustrated investors with his habit of surprising markets, and now the central bank’s latest inflation forecast has some questioning his credibility. “Now that the BOJ has admitted to failing to meet its target and put its credibility on the line, the risk is that another round of asset purchases could provoke a negative reaction,” said Hiroaki Hayashi, at Fukokushinrai Life Insurance director of investment management, who expects the BOJ to ease further in April. On Wednesday, the BOJ cut its inflation forecast for the fiscal year starting in April 2015 to 1.0%, half of the 2% target it set nearly two years ago. The central bank cited the around 50% decline in oil prices over the past six months for the updated forecast, which was lower than many analysts had expected.

Officially, the central bank expects to exceed its 2% forecast in fiscal 2016, raising its core inflation forecast to 2.2% from 2.1%. Apparently undeterred, Kuroda insisted the 2% target will be met, just a little later than expected. “Consumer inflation will slow for the time being due to oil price falls,” he said at the press conference following the BOJ’s two-day policy meeting. “On the assumption that oil prices will flatten out at current levels and rise moderately ahead… we expect consumer inflation to reach 2% in a period centered on fiscal 2015.” “Governor Kuroda is being his bullish self – he really does believe his forecasts can be achieved. The point is to raise expectations that inflation will rise,” explained Mizuho Securities market economist Kenta Ishizu. Although he conceded that “most people in the markets don’t think the 2% inflation is going to become a reality.”

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Without the government, there is no growth left: “More monetary and fiscal easing measures will be needed to support growth in the coming months.”

Chinese Manufacturing Growth Stalls (BBC)

Activity in China’s vast manufacturing sector contracted for the second consecutive month, according to a preliminary survey on Friday. The HSBC/Markit flash purchasing managers’ index (PMI) was at 49.8 in January, up from 49.6 in December. But the index was still below the 50-point level that separates growth from contraction in the sector. Firms cut prices for six months in a row to sell products, impacting profit margins, said the private survey. Economists had expected factory activity growth to continue to stall, with a Reuter’s poll forecasting a reading of 49.6. News of the contraction comes just days after Chinese authorities said growth in the world’s second largest economy had slowed to its weakest in 24 years. China’s economy expanded 7.4% in 2014 from a year ago, missing its official growth target of 7.5% for the first time in 15 years.

The recent data has stoked fears of deflation in China where producer prices have fallen for nearly three consecutive years. On the back of that, China’s annual consumer inflation hit a near five-year low of 1.5% in December. “Today’s data suggest that the manufacturing slowdown is still ongoing amidst weak domestic demand,” Qu Hongbin, a HSBC economist told Reuters. “More monetary and fiscal easing measures will be needed to support growth in the coming months.” Calls have been growing for more easing in China and the country’s central bank did surprise markets by unexpectedly cutting interest rates in November for the first time in over two years. Meanwhile, Asian markets ignored the weak data with both the Shanghai Composite and Hang Seng index up 1.8% and 1.3% respectively.

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The Danes would be better off with a dollar peg.

Denmark Ready to Dump Kroner on Market to Tame Hedge Funds (Bloomberg)

Denmark sent hedge funds and other speculators a clear message yesterday, daring them to test the full force of its monetary arsenal at their own peril. The central bank signaled it is ready to step up currency interventions and continue cutting rates to stamp out any lingering speculation it may be unable to defend its euro peg. “We have plenty of kroner,” Karsten Biltoft, head of communications at the central bank in Copenhagen, said in a phone interview. “We have the necessary tools in terms of interest-rate changes and interventions and we have a sufficient supply of Danish kroner.” The comments follow the central bank’s second rate cut in less than a week, with Governor Lars Rohde lowering the benchmark deposit rate to a record minus 0.35% yesterday.

That was more than expected by economists surveyed by Bloomberg and followed a 15 basis-point cut on Monday. The easing comes as the European Central Bank unveiled an historic bond-purchase program that drove the euro lower. Since Switzerland abandoned its euro peg on Jan. 15, the Danes have fought back conjecture they’ll be next after the krone rose to its strongest against the euro in 2 1/2 years. Denmark sold a record 50 billion kroner ($7.7 billion) from Jan. 15-20 to weaken the currency, Svenska Handelsbanken AB estimates. That’s equivalent to more than 10% of foreign reserves as of the end of December.

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Want your military to do something good?

South Africa Rhino Poaching Record Set In 2014 (BBC)

A record 1,215 rhinos were poached in South Africa in 2014, a 21% increase on the previous year, officials have said. More than two-thirds were killed in the famed Kruger National Park. The last few years have all seen new records set, with poaching fuelled by the belief in countries like China and Vietnam that horns have medicinal properties. The lucrative market has attracted criminal gangs who use sophisticated technology to kill their quarry. South Africa’s environment minister Edna Molewa said more than 100 rhinos had been moved to “more secure locations” – some of them in neighbouring countries – in a bid to protect the animals. “Through this method we aim to create rhino strongholds, areas where rhino can be cost-effectively produced,” she said. Despite successes through the re-location programme, Ms Molewa said the figures killed each year remained “worryingly high”.

“The organised transnational illicit trade in rhino horn undermines our efforts,” she explained. “We therefore have to ensure that we continue to work together in stepping up all the measures that we have adopted. The environment minister described poaching as part of an “multi-billion dollar worldwide illicit trade”. Conservationists say they are facing an ever greater challenge to protect animals against poachers who are equipped with sophisticated tools such as night-vision goggles and long-range rifles. “Killing on this scale shows how rhino poaching is being increasingly undertaken by organised criminal syndicates,” said Dr Carlos Drews, WWF’s director of global species programme. “The country’s brave rangers are doing all they can to protect the rhinos but only a concerted global effort can stop this illegal trade. This includes South Africa scaling up its efforts to stop the poaching and Viet Nam taking urgent measures to reduce consumer demand.”

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Tick tick.

Clock’s Ticking: Humanity ‘2 Minutes’ Closer To Its Doomsday (RT)

Three minutes to midnight – with midnight being the figurative end of humanity – are left before apocalypse descends upon the planet, scientists announced on Thursday, as the minute hand of the iconic ‘Doomsday Clock’ was adjusted two minutes forward. “World leaders have failed to act with the speed or on the scale required to protect citizens from potential catastrophe,” Kennette Benedict, the executive director of the Bulletin of Atomic Scientists, the organization behind the Doomsday Clock, announced on Thursday. Citing climate change and nuclear tensions, the latest decision to move the minute hand closer to midnight – thus pronouncing the world closer to its doom – was traditionally made by the Bulletin’s board of directors and the sponsors, including a number of Nobel laureates.

“Today, unchecked climate change and a nuclear arms race resulting from modernization of huge arsenals pose extraordinary and undeniable threats to the continued existence of humanity,” said Benedict, while breaking the news at an international conference in Washington. Founded in 1945 by University of Chicago scientists who had helped to develop the first atomic weapons, the Bulletin created the Clock two years later, making midnight and countdown to zero the imagery of apocalypse and nuclear explosion. It was then seven minutes to midnight. This time, the decision to push the Clock forwards was made with the reference to “accelerating climate change coupled with inadequate international action to greenhouse gas emission,” as well as nuclear programs in US, Russia and other countries, and “the stalled reduction of nuclear warheads in Russian and US arsenals.”

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Nov 272014
 
 November 27, 2014  Posted by at 12:02 pm Finance Tagged with: , , , , , , , ,  2 Responses »


DPC Wall Street and Trinity Church, New York 1903

Oil Price Fall Starts To Weigh On Banks (FT)
Oil Sinks Further As OPEC Meeting Begins (MarketWatch)
World On Brink Of Oil Price War As OPEC Set To Keep Pumping (Telegraph)
Oil Bust of 1986 Reminds US Drillers of Price War Risks (Bloomberg)
Drill On: U.S. Mantra as OPEC Power Wanes in the Face of Shale (Bloomberg)
Oil Slump Reverberates After Nigeria Currency Devaluation (Reuters)
Seadrill Plunges on Dividend Suspension as Oil Rig Market Sours (Bloomberg)
Tightening By Superpower Fed Trumps Mini-Stimulus In Europe And Asia (AEP)
China’s Industrial Profits Drop Most in Two Years Amid Slowdown (Bloomberg)
Spanish Consumer Prices Decline More Than Forecast (Bloomberg)
Juncker Investment Plan Questioned on Capital, Leverage (Bloomberg)
Greece Paralyzed By Major Strike, Flights Stopped (Reuters)
After Zero Rates, Sweden Ponders Next Steps To Avoid Deflation (Reuters)
Europe’s Economy Faces Three Major Risks: Draghi (CNBC)
Goldman Sachs, HSBC Sued By Jeweller For Fixing Platinum Prices (Independent)
Attack Dogs Deployed To Save South Africa’s Rhinos (Bloomberg)

A loss of $340 million on just one loan.

Oil Price Fall Starts To Weigh On Banks (FT)

Banks including Barclays and Wells Fargo are facing potentially heavy losses on an $850 million loan made to two oil and gas companies, in a sign of how the dramatic slide in the price of oil is beginning to reverberate through the wider economy. Details of the loan emerged as delegates of Opec, the oil producers’ cartel, gathered in Vienna to address the growing glut in the supply of oil. Several Opec members have been calling for a production cut to shore up prices, but Saudi Arabia, Opec’s leader and largest producer, signalled that it would not push for a big change in the group’s output targets. Repercussions from the decline in the price of crude, which has dropped 30% since June, are spreading beyond the energy sector, hitting currencies, national budgets and energy company shares.

The price slide is having a serious impact on oil producers that rely on revenues from crude exports to balance their budgets. The Russian rouble has lost 27% of its value since mid-June, when crude began to fall, while the Norwegian krone is down 12% and on Wednesday the Nigerian naira touched a record low. Companies are also being hit, with BP’s shares down 17% since mid-June and Chevron’s down 11%. Shares in SeaDrill, one of the world’s biggest drilling rig owners, fell as much as 18% on Wednesday as it suspended dividend payments. The company has suffered from an oversupply of rigs as the majors respond to crude’s slide by cancelling projects. Now banks are also being affected, with Barclays and Wells said to face potential losses on an energy-related loan.

Earlier this year, the two banks led an $850 million “bridge loan” to help fund the merger of Sabine Oil & Gas and Forest Oil, U.S.-based oil companies. Investors, however, balked at buying the loan when it was first offered in June and slumping oil prices combined with volatile credit markets in the months since have scuppered further attempts to sell, or syndicate, the loan, according to market participants. With underwriting banks unable to offload the loan to investors they are now facing losses on the deal as the value of the two oil companies’ debt erodes. Sabine’s bonds were trading above their face value at around $105.25 in June, but have since fallen to $94.25 – firmly in “distressed” territory. Their yield – which moves inversely to price – has jumped from around 7.05% to 13.4%. Rival bankers estimate that if Barclays and Wells attempted to syndicate the $850m loan now, it could go for as little as 60 cents on the dollar.

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Isn’t it fun?

Oil Sinks Further As OPEC Meeting Looms (MarketWatch)

Oil prices extended their losses and sunk to fresh four-year lows on Thursday as expectations of a cut in OPEC oil production faded following the Saudi Arabian oil minister’s comments Wednesday. On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $72.22 a barrel, down $1.47, or 2% in the Globex electronic session. January Brent crude on London’s ICE Futures exchange fell $1.92, or 2.5%, to $75.83 a barrel. The Organization of the Petroleum Exporting Countries meets in Vienna within a few hours to decide whether its members will cut production to remove some of the glut in supply in global markets and boost oil prices. The 12-member oil cartel typically steps in to adjust output when prices move sharply due to excess or insufficient supply. It currently has an oil production ceiling of 30 million barrels a day and has been producing in excess of this level in recent months.

Crude-oil prices have plummeted this year, losing almost 30% of their value since June, mainly due to rising U.S. oil production driven by the shale boom and slowing demand growth in Asia and Europe. Analysts say that OPEC will need to cut oil production much lower than its current ceiling for prices to make a significant recovery. Today’s OPEC meeting and any decision on production cuts is likely to set the tone for oil prices for the next few months and well into 2015. Forget about an OPEC cut: Three delegates told Reuters that OPEC was unlikely to take any action after Russia said it wouldn’t cut in tandem. On Wednesday, Saudi Oil Minister Ali al-Naimi said he expects the market “to stabilize itself eventually,” hinting he wouldn’t push for a cut in OPEC’s production targets. “This is a very clear indication that the Saudis and OPEC will do nothing at the meeting … It is not 100% rock solid or set in stone, but it is a very clear signal,” Michael Wittner, head of oil market research at Societe Generale said. His bearish price forecasts are for $70 Brent and $65 WTI for the next two years.

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“Saudi oil minister Ali Al-Naimi said: “The market will stabilise itself eventually”. Question is where and when.

World On Brink Of Oil Price War As OPEC Set To Keep Pumping (Telegraph)

Oil slumped on Wednesday as expectations that Opec will cut production faded following dovish remarks by cartel kingpin Saudi Arabia, which could signal the beginning of a price war. Speaking on the sidelines ahead of Thursday’s critical meeting of the Organisation of Petroleum Exporting Countries (Opec) in Vienna, Saudi oil minister Ali Al-Naimi said: “The market will stabilise itself eventually”. His remarks were interpreted by the market as a signal that the cartel would keep its production ceiling at 30m barrels per day (bpd), which sent the price of crude lower. Brent crude – a global benchmark comprised of a blend of high-quality oil from 15 North Sea fields – fell 1.3pc to $77.30 per barrel after Mr Naimi’s comments, before recovering to trade flat at $78.29 by late afternoon. Brent crude has fallen 30pc since June. Crude traded in the US fell to as low as $74 per barrel as traders bet that Opec will allow the price to fall further amid growing signs of a global price war amid producers.

“There remains little prospect of any production cut being agreed at [Thursday’s] Opec meeting,” said brokers at Commerzbank. “Opec will merely agree to comply better with the current production target of 30m bpd. Iranian officials, traditionally seen as hawks within the cartel of mainly Middle East producers, also appeared to soften their position following an afternoon of closed door meetings with counterparts from Saudi Arabia and Kuwait. Bijan Zanganeh, Iran’s oil minister, told reporters after leaving the talks that Iran was now “close” to the Saudi position, heading into Thursday’s final discussion at the Opec secretariat. Rafael Ramirez, Venezuela’s Opec representative, had tried to galvanise support for production cuts to restore oil prices to around $100 per barrel, after talks with senior Russian oil officials on Tuesday delivered no immediate sign of a consensus. Although Russia is not a member of Opec’s 12 nations, the country is a major oil producer and has expressed concerns over falling prices.

Major Opec nations, Russia and US shale oil drillers now appear on the brink of a price war as these three giant producing blocs fight for a greater share of global demand. Although Opec states enjoy the lowest average production costs – in some cases around $2 per barrel – they have increasingly lost ground in North America, which remains the world’s largest consumer of oil. Some Opec members now want producers outside the cartel, including Russia and the US, to shoulder some of the responsibility for balancing the market by essentially cutting their output. UAE energy minister Suhail Al-Mazrouei said on Wednesday that Opec alone was not responsible for the stability of the oil market. “This is not a crisis that requires us to panic,” he said.

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“In 1986, the Saudis opened the spigot and sparked a four-month, 67% plunge that left oil just above $10 a barrel.” This time around, the Saudis will achieve that by simply not closing the spigot.

Oil Bust of 1986 Reminds US Drillers of Price War Risks (Bloomberg)

The last time that U.S. oil drillers got caught up in a price war orchestrated by Saudi Arabia, it ended badly for the Americans. In 1986, the Saudis opened the spigot and sparked a four-month, 67% plunge that left oil just above $10 a barrel. The U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market. So while no one expects the Saudis to ramp up output now like they did then and U.S. shale oil companies are pledging to keep drilling regardless, the memory of that bust looms large for American industry executives on the eve of OPEC’s meeting tomorrow.

As the Saudis gather with officials from the 11 other OPEC nations in Vienna, analysts are split on whether the group will cut output to lift prices or leave production unchanged to fight for market share with shale drillers. “1986 was the big price collapse and the industry did not see it coming,” said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts, who has covered the oil sector for 37 years. “It put a lot of them out of business. You just don’t forget it. It’s part of the cultural memory.” The Organization of Petroleum Exporting Countries, responsible for about 40% of the world’s output, pumped 31 million barrels a day in October, exceeding its official target of 30 million. Oil has tumbled more than 30% from a 2014 peak in June.

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The more they drill, the lower prices will go. They’ll lose financing.

Drill On: U.S. Mantra as OPEC Power Wanes in the Face of Shale (Bloomberg)

No matter what OPEC countries decide tomorrow about cutting oil output, U.S. producers already know what they’re going to do: drill on. As Saudi Arabia and its 11 fellow members of the Organization of Petroleum Exporting Countries meet for what’s viewed as the cartel’s most important conclave since 2008’s worldwide financial crisis, the U.S. has the most to gain and the least to lose. For the oil industry, a significant production cut by OPEC would lift prices and profits across the board and help finance further U.S. energy innovation. And while a weaker response – or no move – would put more pressure on energy companies, the industry is increasingly insulated by burgeoning North American output. “The U.S. oil industry is going to continue on its growth track whether OPEC comes out with a cutback or not,” Daniel Yergin, vice chairman of consultant IHS. “As oil prices go down, the U.S. industry is going up the learning curve and is better capable of coping with lower prices than it would have been two or three years ago.”

The swagger of U.S. producers in the face of plunging oil prices shows the confidence they’ve gained from upending OPEC’s six decades of market dominance with technology that wrings oil from dense rock for prices as low as $40 a barrel. The shale boom has placed the U.S. oil industry in its strongest position since OPEC began flexing its pricing power in the early 1970s. Investors are taking note, pouring money back into shale producers in the past 10 days after shares fell an average 20% since July. Beyond the ability of producers to remain profitable at lower prices, the broader U.S. economy is even less susceptible to whatever course OPEC might take. A shift away from industries like steelmaking and into services such as health care has helped make the economy less reliant than ever on oil and natural gas, according to government data compiled since 1950.

Since the 1973 Arab oil embargo, the first major shock brought about by OPEC coordination, the amount of oil and gas consumed in the U.S. to generate $1 of gross domestic product has fallen 64%. The U.S. in August imported an average of about 4.8 million barrels a day of crude and petroleum products, a 24% decline from 1986, the year when Saudi Arabia’s market machinations sent prices below $10 a barrel in a crushing blow to U.S. producers. As the services economy has grown, oil demand has fallen, with the U.S. burning 13% less oil in 2013 than 2005. Improvements in fuel consumption mean cars and trucks can travel further on each gallon of gasoline. The nation is 26%age points more efficient in terms of the the energy required to generate economic growth than the global average, according to the U.S. Energy Information Administration.

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” IMF data shows Nigeria, Russia and Saudi Arabia all need prices above $90 to balance their budgets.”

Oil Slump Reverberates After Nigeria Currency Devaluation (Reuters)

The impact of sub-$80 oil prices rippled across energy-exporting emerging markets on Wednesday, with investors betting other countries will have to follow Nigeria in devaluing their currencies. Brent crude remained firmly below $80 per barrel and around a third lower from June levels after Saudi Arabia signaled it was unlikely to push for a major change in output when producers’ club OPEC meets on Thursday. Nigeria’s naira hit a record low near 178 per dollar – lower than its new target band of 160-176 per dollar – a day after the central bank devalued the currency by 8% and hiked rates by 100 basis points to conserve its reserves. Central bank governor Godwin Emefiele forecast a sustained drop in oil, saying the $73 per barrel assumed in Nigeria’s 2015 budget may be too optimistic.

“Oil remains on the back foot … it is a relevant dynamic for the rouble and for various parts of the Middle East and Africa,” said Manik Narain, emerging markets strategist at UBS in London. “We will see more pressure on local currencies there and Nigeria is an early example.” The risk that falling revenues will affect spending plans in oil-exporting countries, with unpredictable political and economic consequences, is a prime concern of investors. IMF data shows Nigeria, Russia and Saudi Arabia all need prices above $90 to balance their budgets. Sub-Saharan Africa’s other big oil producer, Angola, saw its kwanza currency trade near a record low hit on Tuesday.

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These guys are getting scared.

Seadrill Plunges on Dividend Suspension as Oil Rig Market Sours (Bloomberg)

Seadrill fell the most in six years after the offshore driller controlled by billionaire John Fredriksen suspended dividends as the slump in oil prices weakens demand for rigs. Seadrill, which hadn’t frozen or cut dividends in six years, dropped as much as 19% in Oslo trading, the most since November 2008. The stock was down 17% to 118.3 kroner at 3:58 p.m., the lowest since July 2010. “The decision to suspend the dividend has been a difficult decision for the board,” Fredriksen, chairman of Bermuda-based Seadrill, said in a statement. “However, taking into consideration the significant deterioration in the broader offshore drilling and financing markets over the past quarter, the board believes this is the right course of action.”

The plunge in crude prices since June is blowing through the oil-services industry as clients peg back spending on finding and developing fields. Transocean, one of Seadrill’s largest competitors, earlier this month wrote down the value of its fleet by $2.76 billion. Halliburton, the second-biggest oil-service company, is buying the third-largest, Baker Hughes. Seadrill, which paid owners $1 a share for the first two quarters this year, said in August that level was sustainable until at least the end of 2015. Today’s surprise decision will strengthen the company’s capital position by about $2 billion a year, the company said. “Suspending dividends entirely is the most reasonable thing to do, since the market is looking so bleak,” said Robert Andre Jensen from SpareBank 1 Markets AS. “Fredriksen’s companies are known for paying dividends, but you have to focus on your chances to survive the downturn.”

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“The liquidity cycle is inflecting downwards. The odds of turbulence are rising ..”

Tightening By Superpower Fed Trumps Mini-Stimulus In Europe And Asia (AEP)

The apparent tsunami of stimulus from central banks in Asia and Europe is a mirage. The world’s monetary authorities are on balance tightening. There may or may not be good reasons to buy equities at the current giddy heights, but reliance on the totemic powers and friendly intention of central banks should not be one of them. The US Federal Reserve matters most in a financial world that still moves to the rhythm of the 10-year US Treasury bond, and still runs on a de facto dollar standard. More than 40 currencies have dollar pegs or “dirty floats”, including China, joined to America’s hip whether they like it or not. Some $11 trillion of cross-border loans and bonds issued outside the US are denominated in dollars. The US capital markets are still a colossal $59 trillion, more than the total for Europe and Japan combined.

The Institute of International Finance says the impact of Fed action on capital flows to emerging markets is “twice as large” as moves by the European Central Bank. The Fed can hardly put off rate rises for much longer as the US economy grows at a 3.9pc clip and the jobless rate drops to a six-year low of 5.8pc. The “quit rate” tracked by labour economists as a barometer of the jobs market is suddenly surging, a clear sign that slack is vanishing and wage pressures will soon rise. The world is already turning on its axis even before the Fed pulls the trigger, as if the QE era were a memory. The dollar largesse that flooded the commodity nexus and drove the credit booms of Asia, Latin America and Africa is draining away. “The liquidity cycle is inflecting downwards. The odds of turbulence are rising,” said CrossBorder Capital, which monitors global flows.

Fresh money creation in Japan, China and the eurozone would not offset a liquidity squeeze by the Fed in a symmetric fashion even if it were happening, but it is not in fact happening on anything like an equivalent scale, and may not do so for a long time. The “happy handover” scenario is wishful thinking. China is tightening at a slower pace, but it is still tightening. The surprise rates cuts last week are less than meets the eye. The People’s Bank of China (PBOC) regulates the level of credit in the economy through curbs on quantity, not by adjusting the cost of credit. These controls are still in place. It is too early to conclude that President Xi Xinping has capitulated and ordered the PBOC to reflate, pushing the day of reckoning into the future once again. The balance of evidence is that Beijing is still attempting – with great difficulty – to deflate China’s $26 trillion credit boom before it turns into a national tragedy.

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” .. investment in fixed assets such as machinery expanded the least since 2001 ..”

China’s Industrial Profits Drop Most in Two Years Amid Slowdown (Bloomberg)

Industrial profits in China fell the most in two years, underscoring the need for looser monetary conditions as the world’s second-largest economy slows. Total profits of China’s industrial enterprises fell 2.1% from a year earlier in October, the National Bureau of Statistics said today in Beijing. That compares with September’s 0.4% increase and is the biggest drop since August 2012, based on previously reported data.

The People’s Bank of China, which last week cut benchmark interest rates, refrained from selling repurchase agreements in open-market operations today for the first time since July, loosening monetary policy further. Mired by a property slump, overcapacity and factory-gate deflation, China is headed for its slowest full-year economic expansion since 1990. Data released Nov. 13 showed the economy’s slowdown deepened in October. Factory production rose 7.7% from a year earlier, the second weakest pace since 2009, while investment in fixed assets such as machinery expanded the least since 2001 from January through October. Retail sales gains also missed economists’ forecasts last month.

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And it’s supposed to be doing so well?!

Spanish Consumer Prices Decline More Than Forecast (Bloomberg)

Spanish consumer prices fell more than economists forecast in November, which may raise concerns that deflation is taking hold in the euro region’s fourth-largest economy. Prices dropped 0.5% from a year earlier, the Madrid-based National Statistics Institute said today. The decline, based on a European Union measure, was bigger than the 0.3% forecast by economists in a Bloomberg News survey. Economic growth was unchanged at 0.5% in the third quarter, INE said in a separate release, confirming its Oct. 30 estimate. Euro-area data tomorrow is forecast to show inflation in the 18-nation currency region slowed to 0.3% in November to match the least since 2009.

European Central Bank policy makers are watching for signs that additional stimulus may be needed and have expert committees examining further measures to help boost near-stagnant growth to add to long-term loans and asset-purchase programs. “The data show risks of deflation remain high for some countries,” said Diego Trivino, chief economist at Intermoney Valores in Madrid. “Price drops in Spain are forced and structural as it’s the only way it can regain competitiveness in an environment of near-zero inflation in the euro region.” Spanish bond yields fell to a record low this week along with those of most members of the 18 nation euro region after ECB President Mario Draghi stoked speculation of a new stimulus program extending to sovereign bonds.

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Juncker is a windbag, and plans like this are what comes out of such bags.

Juncker Investment Plan Questioned on Capital, Leverage (Bloomberg)

German Chancellor Angela Merkel said she supports the European Commission’s 315 billion-euro ($394 billion) investment plan “in principle” as businesses around Europe sounded a note of caution. “We stress that investments are important, but that it has to be clear above all where the projects of the future lie,” Merkel, who announced Germany’s own 10 billion-euro investment program earlier this month, told the Bundestag in Berlin yesterday. The investment plan unveiled by commission President Jean-Claude Juncker will use 5 billion euros in cash from the European Investment Bank and 16 billion euros in European Union guarantees. The start-up money, projected to have an impact of 15 times its size, will serve as capital for a new EIB unit that can share risk with private investors.

The fund doesn’t have sufficient capital, Spanish Economy Minister Luis de Guindos said in Madrid yesterday. He described the commission’s leverage projection as “a bit high.” It’s right to focus on measures “to raise growth prospects across Europe and the emphasis on increasing private-sector investment,” British Chancellor of the Exchequer George Osborne said in a statement. The program, called the European Fund for Strategic Investments, is set to be operational by mid-2015. It doesn’t require EU member nations to commit any new money or alter existing budget agreements. The Brussels-based commission will dedicate 8 billion euros of existing funds to backstop its guarantee.

“Using a small amount of public funds to leverage private-sector provision can be a successful way to ensure that we choose projects that drive productivity and growth,” said Markus Beyrer, director general at BusinessEurope, a lobby representing employers from 35 nations. “We hope the leverage ratios set out in the investment plan can be achievable, but we must ensure that projects taken forward are genuinely ones that would not have taken place without the new fund.” By taking on some of the risk of new projects through a first-loss liability, the investment fund aims to attract cash-rich banks and companies to support investments in energy, broadband and transport infrastructure and back risk finance for small and medium-sized companies.

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Go. Leave.

Greece Paralyzed By Major Strike, Flights Stopped (Reuters)

Greek labour unions staged a 24-hour strike on Thursday that cancelled hundreds of flights, shut public offices and severely disrupted local transport, in the first major industrial action to cripple the austerity-weary country in months. Private sector union GSEE and its public sector counterpart ADEDY called the walkout to protest against planned layoffs and pension reform demanded by European Union and International Monetary Fund lenders who have bailed out Greece twice. All Greek domestic and international flights were cancelled after air traffic controllers joined the strike. Trains and ferries also halted services. Hospitals worked on emergency staff while tax and other local public offices remained shut. “GSEE is resisting the dogmatic obsession of the government and the troika with austerity policies and tax hikes,” the union said in a statement this week.

It accused the government of trying to take the labour market back to “medieval times” and of implementing policies that are causing a “humanitarian crisis”. Thousands of Greeks were preparing to march to parliament later on Thursday as part of rallies to mark the strike. The two unions last held a general strike in April. Major protests have declined sharply since then as frustration and anger give way to a mood of despondency and resignation over a jobless rate exceeding 25% and a sharp fall in incomes. Turnout at Thursday’s rallies could provide a key measure of the opposition facing Prime Minister Antonis Samaras’s conservative-led government, which is under pressure from EU/IMF lenders to impose more cutbacks to balance next year’s budget.

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Yep. Krugman was here.

After Zero Rates, Sweden Ponders Next Steps To Avoid Deflation (Reuters)

What should a central bank do next when it already has zero interest rates and arguably still faces the threat of Japanese-style deflation? If it’s the Swedish Riksbank, it should keep cutting, and do so soon, says Lars Svensson. Svensson no longer has a say; he quit as a deputy Riksbank governor last year after failing to persuade fellow board members to cut rates aggressively. Last month, they heeded his advice, lowering the repo rate to 0% and pushing back the official forecast for when the Riksbank will start tightening monetary policy again to mid-2016. After years of tense, polarized meetings that eventually led to Svensson’s resignation, a united Riksbank now sees zero rates as enough to push inflation up toward its 2% target. Svensson disagrees, saying Sweden should go into negative rates – effectively charging banks to deposit funds at the central bank – to avoid the deflation which has trapped Japan in low economic growth punctuated by periodic recessions for more than a decade.

“From this point it is unlikely that the current policy at zero is enough,” he told Reuters. “They should lower to -0.25 or even -0.50. The next meeting would be the natural time.” The Riksbank’s next policy meeting is on Dec. 15, with its decision announced the following morning. Rate-setters have not ruled out negative rates, but Riksbank Governor Stefan Ingves has rejected the comparison with Japan, pointing to expected Swedish growth this year of around 1.9%, with the economy moving up a gear again in 2015. Nevertheless, Swedish consumer prices have been flat or falling for most of the last two years on an annual basis. Underlying inflation, the Riksbank’s preferred measure which excludes interest rate effects, was 0.6% in October.

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Draghi himself is a big risk.

Europe’s Economy Faces Three Major Risks: Draghi (CNBC)

Europe’s recovery faces three risks – unemployment and a lack of productivity and structural reforms, according to the European Central Bank’s President, Mario Draghi. In a speech to be delivered to the Finnish Parliament later Thursday, Draghi concedes that the euro area economic outlook “is surrounded by a number of downside risks.” According to a transcript released ahead of the speech to Finnish lawmakers, Draghi will say that the euro zone’s “recovery will likely be dampened by high unemployment, sizeable unutilized capacity, and the necessary balance sheet adjustments….Inflation in the euro zone remains very low (and) meanwhile, we are facing continuously sluggish money and credit dynamics.”

“We have seen a weakening in the euro area’s growth momentum over the summer Also, most recent forecasts by private and public sector institutions have been revised downwards. Our expectation for a moderate recovery in the next years still remains in place, reflecting our monetary policy measures, the ongoing improvements in financial conditions, and the progress made vis-à-vis structural reforms and fiscal consolidation,” he said. His comments come amid speculation as to whether the ECB will implement a U.S.-style quantitative easing program to stimulate the euro zone economy in the face of slowing growth, disinflation and low consumer confidence – at a 9-month low in November.

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Why isn’t Washington suing them?

Goldman Sachs, HSBC Sued By Jeweller For Fixing Platinum Prices (Independent)

Goldman Sachs and HSBC are among a group of banks being sued in the US for allegedly fixing platinum and palladium prices. Modern Settings — a jeweller that buys precious metals and derivatives set on their prices — claims the banks “were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction” of prices. “This unlawful behaviour allowed defendants to reap substantial profits, while non-insiders, which include plaintiffs, were injured,” lawyers acting for the company added. Separately, HSBC is facing a probe into allegations that an employee leaked confidential client information to a major hedge fund, according to reports. The leak is alleged to have taken place in March 2010, when HSBC was advising Prudential on its failed bid for AIA. A senior HSBC trader is said to have alerted a trader at hedge fund Moore Capital Management about a transaction taking place.

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It’s going to take a lot more than dogs.

Attack Dogs Deployed To Save South Africa’s Rhinos (Bloomberg)

Strapped into a black nylon harness, Venom abseils from a helicopter 100 feet to a bush clearing below. The two-year-old Belgian Shepherd’s master Marius slides down in tandem and unclips his ward. Then the dog races across the grass and tears down a man wearing a felt-stuffed bite suit. Venom is part of an army of dogs being trained as South African defense company Paramount Group’s contribution to fighting the poachers in South Africa, home to most of the world’s rhinos. Prized for their horns, which are used in Asian traditional medicine, a record 1,020 rhinos have been slaughtered in the country this year, triple the number three years ago.

The Malinois, as the breed is also known, “can work in extreme conditions,” Henry Holsthyzen, who runs Paramount’s K9 Solutions dog academy, said at a presentation of the year-old school yesterday. “It’s been proven useful in Iraq and Afghanistan. It’s high energy, highly intelligent and very fast. It’s an awesome package.” Rhino horns are made of the same material as human hair or finger nails, yet is more valuable than gold by weight. Prices for a kilogram range from $65,000 to as much as $95,000 in China and Vietnam, where consumers buy them in a powdered form to ingest as a supposed cure for cancer and to try improve their libido. South Africa is trying a number of measures to end the poaching, including setting up a protection zone within the Israel-sized Kruger National Park, moving rhinos to private ranches and deploying soldiers to fight poachers.

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