Jan 092018
 
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Thomas Abercrombie Beirut 1957

 

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)
US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)
Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)
The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)
Retail Investors Are Finally True Believers with Record Exposure (WS)
iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)
‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)
The Decline of Anti-Trumpism (David Brooks)
Cryptocurrencies Are Selling Off (BBG)
Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)
US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)
Fairy Tale (Jim Kunstler)
Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)
Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

 

 

A nation of expendables. To think how hard earlier generations fought for health care.

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)

As tax season approaches, some consumers are waiting for their refund checks to spend on a long-delayed purchase – a visit to the doctor or dentist. U.S. consumers boosted their out-of-pocket health spending by 60% in the week after they got a tax refund, according to new research from JPMorgan Chase, based on data from Chase customer accounts. Spending stayed high for about 2 1/2 months, with about two-thirds of the extra spending money going to in-person payments to doctors and dentists. Much of the rest was used to pay down past bills. Health insurers and employers have raised copays and deductibles for consumers, making them bear a larger portion of the cost of care when they go see a health-care provider.

As a result, patients sometimes lack the cash to get the care they may need, according to the report. “Cash-flow dynamics are a significant driver of out-of-pocket spending for health care,” the study found. “Even when consumers knew with near-certainty the size and source of a major cash infusion, they still waited until the infusion arrived before spending.” The researchers found that availability of cash had far less of an impact on health-spending decisions among those with credit cards, or who had higher bank-account balances.

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Until about 1970, the US had the lowest child mortality rates. Then something happened.

US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)

The United States has the worst child mortality rate among a group of 20 wealthy democracies, an analysis released Monday found. And despite overall improvement in the child mortality rate in the U.S. and those 19 other countries, the U.S. has persistently outpaced those nations in that grim metric for decades, the Health Affairs report said. “From 2001 to 2010, the risk of death in the US was 76% greater for infants and 57% greater for children age 1-19,” the report said. And during the same decade, children between the ages of 15 and 19 were 82 times more likely to die from gun-related homicide in the U.S. than in the comparison countries.

The authors of the Health Affairs report said that in the full 50-year period their study looked at, the U.S. had more than “600,000 excess deaths” among kids because of the country’s lagging performance in curbing child mortality. Those excess deaths have occurred even as the U.S. spends more money on health care for kids than the other countries. Among the countries looked at, “there has never been a better time to be born in any of these 20 countries,” the Health Affairs report said. “Despite this generalized trend, children are less likely to survive and transition into adulthood in the US than in other [countries examined],” the report said. “Persistently high poverty rates, poor educational outcomes, and a relatively weak social safety net have made the US the most dangerous of wealthy nations for a child to be born into.”

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Due to the tax law.

Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)

New Chapter 11 bankruptcies in the US more than doubled in December 2017 from a year ago to 699 filings. That jump of 362 filings from December 2016 was the largest year-over-year jump since the Financial Crisis. This chart shows Chapter 11 filings back to 2011, based on data from the American Bankruptcy Institute. I marked the prior five Decembers with red dots. Note how they’re near the low point of the seasonal swings. That makes the spike in December 2017 even more spectacular. A spike like this in Chapter 11 filings in a month of December is unheard of in normal times. Normally, bankruptcies jump during tax season, the first four or five months of the year, but not at the end of the year. But these are not normal times.

In December, Chapter 11 filings soared 61% from November. This is also highly unusual, as over the prior five years, presumably the “normal times,” the number of filings from November to December has fallen by an average 8.7%. The chart below shows the year-over-year change in Chapter 11 filings. I marked the prior Decembers in yellow. I circled the oil bust and the brick-and-mortar meltdown. But December 2017 was special.

I think companies and their owners and creditors know one thing: They can write off losses in 2017 under the old corporate tax rates, at 35%, thus getting the government to pick up 35% of the tab of their losses via lower taxes. In 2018, the new tax law applies and all kinds of uncertainties have yet to be ironed out, and these companies – the owners and creditors – are thinking (I assume) that it’s better to try to recognize the loss in 2017, support it with a Chapter 11 filing, and pull the write-off into 2017 against a tax rate of 35%, rather than 21% in 2018. A tax-law change of this drastic nature motivates people jump through all kinds of hoops to save some money – including waiting in line for hours to pay property taxes early, a hitherto unthinkable strategy. And I think this is the likely suspect for the spike.

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Wonderful history lesson about the robber barons. Go read.

The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)

The U.S. is now living through a second Gilded Age. Where once the robber barons were millionaires, today they’ve added a few zeros to their wealth and became billionaires. However, they act with no-less impunity, but a greater sense of entitlement. The Trump administration, together with the Republican-controlled Congress, are functional shills for the current generation of robber barons. As evident from the recently-passed tax bill, legislators jump when their big-money donors order them to deliver the goods — and they did. The U.S. economy has rebounded from the 2007-2009 “great recession,” with the stock market hitting new highs, unemployment the lowest in a generation and home prices recovering. But Americans still haven’t regained the wealth they lost, with incomes remaining stagnant and, on the whole, working Americans worse off than since the late-1990s.

The Federal Reserve’s most recent Survey of Consumer Finances finds that median net worth for all families (measured in 2016 dollars) dropped 8% since 1998. Most sobering, the poorer you are, the worst your fate – and this is compounded by race, education level, gender and age factors. America’s poorest, the bottom fifth, saw their net worth fall 22%; the broad working class, the second-lowest income tier, were the hardest hit with their net worth shrinking by more than a third (34%); and those dubbed “middle class,” with incomes from $43,501 to $69,500, were barely treading water, with their worth gaining a whopping 3.5%. Since 1998, the top 10% saw their worth rise 146%. The share of the nation’s wealth held by the top 1% rose to 38.6% while that portion controlled by the bottom 90% fell 22.8% (from 33.2% in ’89).

Looking at the nation’s income for the period of 2013 to 2016, the same phenomenon is evident: income going to the top 1% climbed to 23.8% (from 20.3%) while the share going to the bottom 90% slipped to about 50% (from 54%). And then there is debt, the lubricant of the U.S. post-WW-II “consumer revolution.” During the 2013 to 2016 period, those with the lowest income (below $25,300), saw their debt rise by 57%; for the lower-middle class (incomes between $25,301 and $43,500), debt increased 58%; and for the middle class (incomes from $43,501 to $69,500), debt rose by a modest 12.5%.

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What beaking points are made of.

Retail Investors Are Finally True Believers with Record Exposure (WS)

As far as the stock market is concerned, it took a while – in fact, it took eight years, but retail investors are finally all in, bristling with enthusiasm. TD Ameritrade’s Investor Movement Index rose to 8.59 in December, a new record. TDA’s clients were net buyers for the 11th month in a row, one of the longest buying streaks and ended up with more exposure to the stock market than ever before in the history of the index. This came after a blistering November, when the index had jumped 15%, “its largest single-month increase ever,” as TDA reported at the time, to 8.53, also a record:

Note how retail investors had been to varying degrees among the naysayers from the end of the Financial Crisis till the end of 2016, before they suddenly became true believers in February 2017. “I don’t think the investors who are engaging regularly are doing so in a dangerous fashion,” said TDA Chief Market Strategist JJ Kinahan in an interview. But he added, clients at the beginning of 2017 were “up to their knees in it and then up to their thighs, and now up to their chests.” The implication is that they could get in a little deeper before they’d drown. “As the year went on, people got more confident,” he said. And despite major geopolitical issues, “the market was never tested at all” last year. There was this “buy-the-dip mentality” every time the market dipped 1% or 2%.

But one of his “bigger fears” this year is this very buy-the-dip mentality, he said. People buy when the market goes down 1% or 2%, and “it goes down 5%, then it goes down 8% — and they turn into sellers, and then they get an exponential move to the downside.” In addition to some of the big names in the US – Amazon, Microsoft, Bank of America, etc. – TDA’s clients were “believers” in Chinese online retail and were big buyers of Alibaba and Tencent. But they were sellers of dividend stocks AT&T and Verizon as the yield of two-year Treasuries rose to nearly 2%, and offered a risk-free alternative at comparable yields. And he added, with an eye out for this year: “It’s hard to believe that the market can go up unchallenged.” This enthusiasm by retail investors confirms the surge in margin debt – a measure of stock market leverage and risk – which has been jumping from record to record, and hit a new high of $581 billion, up 16% from a year earlier.

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Duh!

iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)

Apple investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits. Hedge fund JANA Partners and the California State Teachers’ Retirement System (CalSTRS) pension fund said on Saturday that iPhone overuse could be hurting children’s developing brains, an issue that may harm the company’s long-term market value. But some investors said the habit-forming nature of gadgets and social media are one reason why companies like Apple, Google parent Alphabet Inc and Facebook Inc added $630 billion to their market value in 2017. “We invest in things that are addictive,” said Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management.

He also owns stock in coffee retailer Starbucks Corp, casino operator MGM Resorts International and alcohol maker Constellation Brands Inc. “Addictive things are very profitable,” Gerber said. Still, the investment community is increasingly holding companies to higher social standards, and there is some concern that market-leading tech companies could draw attention from regulators much like alcohol, tobacco and gambling companies have in the past. Alphabet and Facebook could not immediately be reached for comment on Monday. Facebook has said social media can be beneficial if used appropriately. In a statement to Reuters, Apple said it has offered a range of controls on iPhones since 2008 that allow parents to restrict content, including apps, movies, websites, songs and books, as well as cellular data, password settings and other features.

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This leaves many questions about what the industry knew and what they did not. Hard to believe they were all entirely ignorant for 20 years.

‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)

It was late November and former Intel Corp. engineer Thomas Prescher was enjoying beers and burgers with friends in Dresden, Germany, when the conversation turned, ominously, to semiconductors. Months earlier, cybersecurity researcher Anders Fogh had posted a blog suggesting a possible way to hack into chips powering most of the world’s computers, and the friends spent part of the evening trying to make sense of it. The idea nagged at Prescher, so when he got home he fired up his desktop computer and set about putting the theory into practice. At 2 a.m., a breakthrough: he’d strung together code that reinforced Fogh’s idea and suggested there was something seriously wrong. “My immediate reaction was, ‘It can’t be true, it can’t be true,’” Prescher said.

Last week, his worst fears were proved right when Intel, one of the world’s largest chipmakers, said all modern processors can be attacked by techniques dubbed Meltdown and Spectre, exposing crucial data, such as passwords and encryption keys. The biggest technology companies, including Microsoft, Apple, Google and Amazon.com are rushing out fixes for PCs, smartphones and the servers that power the internet, and some have warned that their solutions may dent performance in some cases. Prescher was one of at least 10 researchers and engineers working around the globe – sometimes independently, sometimes together – who uncovered Meltdown and Spectre. Interviews with several of these experts reveal a chip industry that, while talking up efforts to secure computers, failed to spot that a common feature of their products had made machines so vulnerable.

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David Brooks exposes everything his paper -NYT- has done for well over a year: make it all up. A mea culpa between the lines.

The Decline of Anti-Trumpism (David Brooks)

Let me start with three inconvenient observations, based on dozens of conversations around Washington over the past year: First, people who go into the White House to have a meeting with President Trump usually leave pleasantly surprised. They find that Trump is not the raving madman they expected from his tweetstorms or the media coverage. They generally say that he is affable, if repetitive. He runs a normal, good meeting and seems well-informed enough to get by. Second, people who work in the Trump administration have wildly divergent views about their boss. Some think he is a deranged child, as Michael Wolff reported. But some think he is merely a distraction they can work around. Some think he is strange, but not impossible. Some genuinely admire Trump. Many filter out his crazy stuff and pretend it doesn’t exist.

My impression is that the Trump administration is an unhappy place to work, because there is a lot of infighting and often no direction from the top. But this is not an administration full of people itching to invoke the 25th Amendment. Third, the White House is getting more professional. Imagine if Trump didn’t tweet. The craziness of the past weeks would be out of the way, and we’d see a White House that is briskly pursuing its goals: the shift in our Pakistan policy, the shift in our offshore drilling policy, the fruition of our ISIS policy, the nomination for judgeships and the formation of policies on infrastructure, DACA, North Korea and trade. It’s almost as if there are two White Houses. There’s the Potemkin White House, which we tend to focus on: Trump berserk in front of the TV, the lawyers working the Russian investigation and the press operation.

Then there is the Invisible White House that you never hear about, which is getting more effective at managing around the distracted boss. I sometimes wonder if the Invisible White House has learned to use the Potemkin White House to deke us while it changes the country. I mention these inconvenient observations because the anti-Trump movement, of which I’m a proud member, seems to be getting dumber. It seems to be settling into a smug, fairy tale version of reality that filters out discordant information. More anti-Trumpers seem to be telling themselves a “Madness of King George” narrative: Trump is a semiliterate madman surrounded by sycophants who are morally, intellectually and psychologically inferior to people like us. I’d like to think it’s possible to be fervently anti-Trump while also not reducing everything to a fairy tale.

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Still up and down, but that will be a big problem at some point, not some quaint feature..

Cryptocurrencies Are Selling Off (BBG)

Bitcoin slumped, dragging down smaller rivals such as ether and litecoin, as concerns that regulators will tighten their grip on the market weigh on the the world’s largest cryptocurrency. Regulators in China and South Korea are increasing oversight on cryptocurrency trading and mining, while the U.S. Securities and Exchange Commission late last year started cracking down on some digital token sales, known as ICOs. Coinmarketcap.com’s decision to exclude Korean pricing data for coins helped create the appearance of a large drop in prices, which some traders attributed as playing a part in the selloff. “News on the regulatory front is dragging down cryptos,” said Gabor Gurbacs at VanEck Associates.

“South Korea and China tightening is weighing on bitcoin and in the ICO market, things started slowing down, with the SEC cracking down on illegal offerings.” Bitcoin slumped as much as 17% to $14,820, the most in more than two weeks. The rout in bitcoin is part of a broader selloff in the cryptocurrency realm, with all of the top 10 by market cap falling, and most tumbling by at least 10%, according to Coinmarketcap.com. Cardano fell 16%, while litecoin slumped as much as 16% to as low as $230. Bitcoin is little changed this year after surging about 1,400% in 2017.

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Liquidity concerns.

Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)

Two U.S. companies shelved proposals to launch bitcoin exchange-traded funds, citing ongoing concerns by the Securities and Exchange Commission (SEC), filings showed on Monday. Staff at the regulatory agency “expressed concerns regarding the liquidity and valuation” of futures contracts based on the digital asset, according to one of the filings. The move adds a new hurdle to the bid by Wall Street firms to capitalize on investor interest in cryptocurrencies, and it opens a rare public divergence between two financial regulatory agencies over how to regulate them. Trusts controlled by Rafferty Asset Management and Exchange Traded Concepts each canceled plans to launch three bitcoin funds that could be traded by retail investors as easily as stocks. Neither firm could be reached for comment.

Fund managers thought the proposals had a chance at winning approval given the launch last month of futures contracts based on bitcoin on both the CME and the CBOE exchanges. Regulators have been scrambling to figure out how to deal with this relatively new asset, and no single one has control. The SEC has dominion over funds, while the Commodity Futures Trading Commission (CFTC) governs futures contracts. The CFTC has been under pressure to address concerns it did not fully assess the potential risks that bitcoin poses to the financial system. [..] The SEC’s decisions also face close scrutiny given its power to clear the way for products that could be among the more volatile traded in U.S. equity markets.

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It was always nonsense, and they know it.

US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)

The US energy watchdog terminated Monday a key proposal by President Donald Trump’s administration to subsidize coal and nuclear plants, finding it neither justified nor reasonable. The decision by the Federal Energy Regulatory Commission (FERC) was handed down in a unanimous verdict by its five members, a majority of whom belong to the president’s Republican Party. Energy Secretary Rick Perry had in September proposed providing federal aid to nuclear and coal power plants with at least 90 days’ worth of production capacity, arguing the move was necessary to make the national grid more resilient in case of extreme events.

Both sectors have seen their share of the energy market diminish in recent years, losing out to oil, natural gas and renewables – which had all opposed Perry’s plan. There are currently only two nuclear reactors under construction in the US, in addition to the 99 in service. Coal is also facing a crisis, and Trump made reversing its decline a major campaign pledge. In announcing its decision, FERC cited an existing department study’s findings that “changes in the generation mix, including the retirement of coal and nuclear generators, have not diminished the grid’s reliability or otherwise posed a significant and immediate threat to the resilience of the electric grid.”

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Of the Oprah kind.

Fairy Tale (Jim Kunstler)

Oprah might be the Democratic Party’s last best hope before it collapses into the mausoleum of US political history, where the Whigs, Free Soilers, and Anti-Federalists lie a’moldering. Politics in this land has failed in its effort to become show business, while show business is succeeding wildly in its attempt to replace politics. All Washington can produce these days is a succession of tedious irresolvable soap operas. Hollywood is enacting a grand moral drama of clear-cut heroines and villains, victims and oppressors, sticking to archetypal story-line of our lifetime: the campaign for freedom, equality, and decency. Show business loves the desert sunshine; politics is mired in the Potomac swamp. Oprah even has better hair than the current occupant of 1600 Pennsylvania Avenue.

Oprah herself is an object lesson in the social and political themes that America dares not talk about: a person of humble origins who succeeded wildly in American life by signing onto a once-sturdy and now-fading common culture. In fact, Oprah probably embodies all that remains of American common culture, and the multitudes adore her for it. They are reassured to know that the binding verities still exist. She moves in a realm where blackness and whiteness are emphatically irrelevant — which is surely a relief to people of good will who are sick of race-hustling from all quarters. Though she has credibly acted plenty of sharecropper roles in the movies, Oprah speaks English beautifully and doesn’t apologize for moving up from the ghetto patois of her rough childhood. She may not write all her own material — such as Sunday’s Golden Globes speech that may live on like MLK’s I Have a Dream oration — but she delivers her message with conviction.

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Stumbling from failure to failure.

Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)

U.K. Prime Minister Theresa May’s attempt to give her government a 2018 reboot was marred by a chaotic cabinet reshuffle as senior ministers refused to follow her orders. It’s a development that bodes ill for her ability to successfully navigate the next, even trickier stage of Brexit talks. May’s office flagged Monday’s events as “a refresh” of her top team. But instead of the usual parade of lawmakers arriving at her office in quick succession to accept their new roles, things went off script. First Health Secretary Jeremy Hunt, then Education Secretary Justine Greening were locked in discussions with her after rejecting proposed moves. Hunt eventually won his argument to stay on, but Greening, who spent more than two hours in 10 Downing Street, quit rather than accept another job.

May was said to be “disappointed” at losing Greening, who opposed Brexit, and could now vote with pro-European Union rebels in the House of Commons. It was not the restart she wanted. There were echoes of her botched decision to call an election in her announcement of a reshuffle she didn’t have to carry out. In both instances May seemed to dissipate any political goodwill she recouped. She had begun the new year in a position of relative strength, having concluded a problematic first phase of talks over Brexit – still the issue that will define her political legacy and will only get more complicated this year. “She can’t have the government she would choose and has to select from a small group of people,” said Matt Beech, director of the Centre for British Politics at the University of Hull. “Even with a majority she’d be facing tough decisions because her party’s completely divided on Brexit.”

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Want to know when you’re being had? Look no further. The reasoning here is that the German economy is doing so well that climate targets can’t be met. But that’s an impossible contradiction. Because it tries to make you believe that the investments needed to meet the targets will be made when the economy is not doing so well. But they won’t, because by then the story will be that the money is needed to support the economy.

Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

Germany’s would-be coalition partners have agreed to drop plans to lower carbon dioxide emissions by 40% from 1990 levels by 2020, sources familiar with negotiations said on Monday – a potential embarrassment for Chancellor Angela Merkel. Due to strong economic growth and higher-than-expected immigration, Germany is likely to miss its national emissions target for 2020 without any additional measures. Negotiators for Merkel’s conservative bloc and the centre-left Social Democrats (SPD) told Reuters the parties had agreed in exploratory talks on forming a government that the targeted cut in emissions could no longer be achieved by 2020. Instead, they would aim to hit the 40% target in the early 2020s, the sources said, adding that both parties are still sticking to their goal of achieving a 55% cut in emissions by 2030.

The deal would represent something of a U-turn for Merkel, who has long presented herself as an advocate of climate protection policies on the international stage. Sources said both parties had also agreed that the share of renewable energy in Germany’s electricity consumption should rise to 65% by 2030 from roughly a third last year. Currently, the government plans to raise the renewable energy quota to between 45 and 55% by 2025. Negotiators also agreed to cut the tax on electricity in order to reduce energy costs, according to a document seen by Reuters. They also plan to tender an extra 4 gigawatts of solar energy as well as onshore and offshore wind-generating capacity.

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Nov 082016
 
 November 8, 2016  Posted by at 10:32 am Finance Tagged with: , , , , , , , , ,  1 Response »
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DPC Engineer at his post, Michigan Central RR 1904

US Stocks Have Best Day Since March On Clinton Relief Rally (MW)
Investors Aren’t Ready to Dump Their Trump-Upset Hedges (BBG)
Options Price In One of Biggest Stock Moves on Record for US Election (BBG)
Vote As If Your Life Depended On It… Because It Does (Zuesse)
What’s Driving The Recent Slump In US Imports? (WS)
Portrait of the American Debt Slave, as of Q3 (WS)
China’s Exports -7.3%, Imports -1.4%, on ‘Tepid Global Demand’ (BBG)
China’s Investors Get Creative About Capital Controls (BBG)
Yuan Heads Toward Six-Year Low as Capital Outflows Fuel Weakness (BBG)
Cash Is Still King in Japan, and That is a Problem for the BOJ
In “Seismic Shift”, Saudis Halt Egypt Oil Supplies As Cairo Turns To Iran (ZH)
Tesco Bank Freezes Transactions After Cash Stolen From 20,000 Accounts (G.)
Australia Returns To The Gilded Age Of Rent-Seekers And Robber Barons (RR.)
Winter is Coming for Refugees in Greece (HRW)

 

 

T’was the day before Brexit…

US Stocks Have Best Day Since March On Clinton Relief Rally (MW)

U.S. stocks on Monday had their best day since March on a%age basis after the Federal Bureau of Investigation said its review of a new batch of Democratic presidential nominee Hillary Clinton’s emails won’t lead to charges. Gains were broad, with the Dow Jones Industrial Average reclaiming the key 18,000 level and the S&P 500 snapping its nine-day losing streak, the longest since 1980. The slide had been attributed partly to polls showing a closer contest between Clinton and Republican rival Donald Trump. The Dow Jones Industrial Average soared 371.32 points, or 2.1%, to close at 18,259.60. The Dow’s rally marks its best session before a presidential election since Nov. 7, 1932, when the blue chip index rose 3.5%, according to Dow Jones data.

The S&P 500 index rose 46.34 points, or 2.2%, to finish at 2,131.52. The Nasdaq Composite climbed 119.80 points, or 2.4%, to end at 5,166.17. FBI Director James Comey informed lawmakers on Sunday that there were no new findings in the additional emails discovered on the computer of former Rep. Anthony Weiner, whose estranged wife is Clinton aide Huma Abedin. News that the FBI had discovered the new batch of emails just over a week ago jolted the presidential election race, taking a toll on Clinton’s lead in polls. “The rally is all about Clinton having a better chance of winning, though I don’t think the market is celebrating her policies so much as reflecting how markets, like many Americans, are fearful of the unknown that comes with Trump,” said James Meyer, CIO at Tower Bridge Advisors.

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As Reuters/IPSOS reports a 90% chance of a Hillary victory.

Investors Aren’t Ready to Dump Their Trump-Upset Hedges (BBG)

Some of the biggest investors are holding tight to their hedges against market swings should Donald Trump be elected U.S. president, even after the FBI absolved Hillary Clinton a second time of committing a crime. Millennium Global Investments is sticking to its view that the Republican candidate still has a 35% chance of winning the vote Tuesday. Old Mutual Global Investors says it’s keeping its protection as prospects of a surprise victory by the political novice can’t be ruled out. Janus Capital International echoes that view. Together they manage more than $500 billion. Polls still show a tight race hours after the FBI said it adhered to an earlier finding that absolved Clinton of crime in handling e-mails as secretary of state.

While that signaled a boost for her to become the first female president, investors continue to hark to the scenario of the U.K. Brexit referendum in June, saying they’re focused on not getting burned by underestimating a resurgent underdog vote. “I’m not sure if this is a game changer,” said Richard Benson, a London-based money manager at Millennium Global. “I haven’t changed my positions because of this new development. It may halt the Trump momentum that had seen a sharp narrowing of the polls. The issue now is how many quiet Trump supporters are out there.” Benson declined to reveal details of his stakes, saying he has “a number of good/risk reward positions with limited downside established,” to hedge the election outcome.

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But today everyone seems to think they already know?!

Options Price In One of Biggest Stock Moves on Record for US Election (BBG)

Get ready for some volatility. With polls opening nationwide in less than 24 hours, Wall Street is trying to grapple with what different election outcomes would mean for markets across the globe. If options markets are correct, the S&P 500 could move 3.7%, or roughly 80 points, the day after the election. “Implied volatilities surged across asset classes last week as investors grappled with the increasing probability of a Trump presidency,” Mandy Xu of Credit Suisse wrote in a note the day before the election. “S&P 500 Nov 7th vs. 9th options are implying a 3.7% one-day move for the election, which if realized, would be the 3rd-largest move on record in the past 70 years.”

A range of different assets have betrayed sensitivity to the odds of a Republican victory. The Mexican peso, for instance, surged on the recent news that the FBI is sticking to its prior conclusion that Hillary Clinton’s handling of her e-mails as Secretary of State did not involve any criminal action. Other areas to watch are U.S. Treasuries, the U.S. dollar, and emerging-market stocks. Of course, there is reason to believe that these reactions will be short-lived. While the S&P 500 typically swings 1.5% the day after the vote, gains or losses over the first 24 hours predict the market’s direction 12 months later less than half the time, according to Bloomberg data.

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“The CIA has been trying ever since 1949 to overthrow Syria’s Ba’athist government – the only remaining non-sectarian government in the Middle East other than the current Egyptian government.”

Vote As If Your Life Depended On It… Because It Does (Zuesse)

Hillary has repeatedly said: “We should also work with the coalition and the neighbors to impose no-fly zones that will stop Assad from slaughtering civilians and the opposition from the air. Opposition forces on the ground, with material support from the coalition, could then help create safe areas where Syrians could remain in the country, rather than fleeing toward Europe.” This would mean that U.S. fighter-jets and missiles would be shooting down the fighter-jets and missiles of the Syrian government over Syria, and would also be shooting down those of Russia. The Syrian government invited Russia in, as its protector; the U.S. is no protector but an invader against Syria’s legitimate government, the Ba’athist government, led by Bashar al-Assad.

The CIA has been trying ever since 1949 to overthrow Syria’s Ba’athist government – the only remaining non-sectarian government in the Middle East other than the current Egyptian government. The U.S. supports Jihadists who demand Sharia law, and they are trying to overthrow and replace Syria’s institutionally secular government. For the U.S. to impose a no-fly zone anywhere in Syria would mean that the U.S. would be at war against Russia over Syria’s skies. Whichever side loses that conventional air-war would then have to choose whether to surrender, or instead to use nuclear weapons against the other side’s homeland, in order for it to avoid surrendering. That’s nuclear war between Russia and the United States. Would Putin surrender? Would Hillary? Would neither? If neither does, then nuclear war will be the result.

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Let me think. Putin?

What’s Driving The Recent Slump In US Imports? (WS)

The dollar has strengthened against other currencies since mid-2014 as the Fed was tapering QE Infinity out of existence, and as it began flip-flopping about rate increases. Dollar strength should have done two things in terms of international trade: 1) Weaken exports as US goods would become less competitive for buyers using other currencies; 2) Strengthen imports as imported goods would be cheaper compared to US-made goods. The first has happened. But the second has not happened: Imports have been in a down-trend since mid-2015. This is something that should not happen when the dollar is strong, and it has flummoxed the folks at the New York Fed’s Liberty Street Economics: “The growth in US imports of goods has been stubbornly low since the second quarter of 2015, with an average annual growth rate of 0.7%. Growth has been even weaker for non-oil imports, which have increased at an average annual rate of only 0.1%.”

So oil imports cannot be blamed. This is in sharp contrast to the pattern in the five quarters preceding the second quarter of 2015, when real [inflation adjusted] non-oil imports were growing at an annualized rate of 8% per quarter. The timing of the weakness in import growth is particularly puzzling in light of the strong US dollar, which appreciated 12% in 2015, lowering the price of imported goods relative to domestically produced goods. The “recent slump” in imports of non-oil goods becomes clear in this chart that shows imports as a ratio of GDP, adjusted for inflation. The ratio of non-oil imports = red line; the ratio of total goods imports (including oil) = blue line:

[..] Imports of capital goods are “very highly correlated” with investment by businesses in equipment. Alas: “Equipment investment has been unusually weak, with its four-quarter%age change falling into negative territory, which is unusual outside a recession period. These data suggest that the slowdown in import growth likely stems from whatever is behind the weakness in equipment, rather than from trade-specific factors such as trade policies or higher trade costs.” This chart shows the deterioration of imports of capital goods and equipment, adjusted for inflation. Note how the declines in the prior two cycles were followed by recessions:

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The poisoned chalice inherited by the new president.

Portrait of the American Debt Slave, as of Q3 (WS)

Consumer debt rose by $19.3 billion in September to $3.71 trillion, another record in a five-year series of records, the Federal Reserve’s Board of Governors reported on Monday. Consumer debt is up 6% from a year ago, at a time when wages are barely creeping up and when consumer spending rose only 2.4% over the same period. This follows the elegant principle of borrowing ever more to produce smaller and smaller gains in spending and economic growth. Which is a highly sustainable economic model with enormous future potential, according to the Fed. Consumer debt – the Fed uses “consumer credit,” which is the same thing but sounds a lot less onerous – includes student loans, auto loans, and revolving credit, such as credit cards and lines of credit. But it does not include mortgages. And that borrowing binge looks like this:

Diving into the components, so to speak: outstanding balances of new and used vehicle loans and leases jumped by $22.6 billion from Q2 to $1.098 trillion, another record in an uninterrupted four-year series of records. They’ve soared 38% from Q3 2012, the time when auto loans regained the glory levels from before the Financial Crisis:

Then to the next-generation debt slaves, many of whom might not even know yet what that term means since they haven’t started to make payments on it. Total student loans, owned by the US government and by private-sector lenders, were $1.396 trillion at the end of September. The portion owned by private-sector lenders fell during the third quarter by $4.8 billion to $357.6 billion, as they’re pulling back from this business. But student loans owned by the government jumped by $14.2 billion in September alone, and by $37.5 billion in Q3, to a new record of $1.039 trillion. So here’s what’s coming at these hapless debtors:

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All you need to know about world trade.

China’s Exports -7.3%, Imports -1.4%, on ‘Tepid Global Demand’ (BBG)

China’s exports fell for a seventh month, leaving policy makers reliant on domestic growth engines to hit their economic expansion goals. Overseas shipments dropped 7.3% from a year earlier in October in dollar terms. Imports slipped 1.4%. Trade surplus widened to $49.1 billion. A depreciation of about 9% in the yuan since August 2015 has cushioned the blow from tepid global demand, but failed to give shipments a sustained boost. Rising input costs and surging wages have flattened exporter profit margins to the point where many can no longer discount and may raise prices, according to interviews at the Canton Fair last month. With global demand tepid, policy makers are relying on infrastructure investment and a property led pick up in local demand to reach their expansion goal of at least 6.5% this year.

“External demand remains sluggish across the board,” said Julia Wang, an economist at HSBC in Hong Kong. “On the import side, commodities demand is still holding up well, suggesting that domestic infrastructure investment likely remains strong.” “Trade’s contribution to China’s economy is now diminishing as the economy increasingly depends on domestic demand,” said Zhu Qibing, chief macro economy analyst at BOCI International (China) in Beijing. “With both global and domestic growth unlikely to accelerate much further, the medium-term outlook for Chinese trade remains challenging,” said Julian Evans-Pritchard, an economist at Capital Economics in Singapore. “The ongoing cyclical rebound in China’s economy should support imports for another quarter or two but is unlikely to last.” Exports to U.S. slipped 5.6% in October and fell 8.7% to EU. Imports from U.S. fell 6.9%.

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Is Beijing just going through the motions of stopping this?

China’s Investors Get Creative About Capital Controls (BBG)

China’s policy makers are playing catch-up as investors get more creative in evading capital controls. The authorities are taking a series of steps to plug loopholes, such as a potential plan to curb transactions that use the bitcoin digital currency to take funds out of the country, as well as a statement from UnionPay Co. limiting mainlanders from using its cards to buy insurance in Hong Kong. These add to more traditional measures, including an order seen as asking mainland banks to reduce foreign-exchange sales. These measures, all reported in the past two weeks, follow a period during which Chinese officials and state media stepped up efforts to talk up the yuan even as the currency fell to six-year lows at home and overseas.

While the exchange rate received some relief last week as the dollar dropped on concern over the U.S. presidential election, the onshore yuan is still down about 4.2% for the year in Asia’s worst performance. The nation’s foreign-exchange reserves plunged $45.7 billion in October, the most since January, according to data released Monday. “The People’s Bank of China is doing this now because data show capital outflow pressures remain significant and there are no signs of a reversal,” said Ken Cheung, a currency strategist at Mizuho Bank Ltd. in Hong Kong. “It looks like the government will block outflow channels as and when they find them. This will slow the yuan’s internationalization and discourage foreign investment due to concern money will get locked up once invested.”

The yuan’s accelerated declines – it fell 1.53% last month in the biggest drop since a surprise devaluation in August last year – have worsened outflow pressures. This has prompted investors to find innovative ways to move their wealth overseas by bypassing a range of curbs set in place after the devaluation. A record $44.7 billion left the nation in September in yuan payments rather than in foreign exchange, official data show. Also, regulators have recently noticed that some investors bought bitcoins on local exchanges and sold them offshore, evading rules on foreign exchange and cross-border fund flows, according to people familiar with the matter.

Mainland investors have flocked to Hong Kong to buy insurance policies, which offer a way to skirt money controls. A Bloomberg News report in March this year cited an example from Hong Kong insurance agent Raymond Ng, who said he swiped the credit cards of a mainland Chinese client 800 times for the purchase of HK$28 million ($3.6 million) of insurance policies. Chinese firms have also accelerated overseas acquisitions, with spending on international acquisitions and investments reaching $222.8 billion so far this year, more than double last year’s amount.

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The fall gets dramatic. And still exports fall.

Yuan Heads Toward Six-Year Low as Capital Outflows Fuel Weakness (BBG)

The yuan weakened toward its lowest level in six years as the greenback strengthened and the government struggled to plug loopholes in capital controls. The exchange rate fell 0.03% to 6.7788 per dollar at 12:04 p.m. local time, extending a 0.3% slump on Monday that was the biggest in a month. The latest data show China’s foreign-exchange reserves dropped last month by the most since January while exports plunged 7.3%, adding pressure for further currency weakness. The yuan slid for a sixth day against a basket of peers. Officials have stepped up measures to curb outflows as investors seek to hedge against a weakening currency and traders ascribed a higher likelihood that Hillary Clinton will become the next U.S. president, boosting the dollar.

In recent weeks China limited the use of UnionPay’s cards to buy insurance products in Hong Kong, while Bloomberg News reported authorities are planning to curb transactions that use bitcoins to shift funds out of the country. “The larger-than-expected drop in reserves underscores capital outflows in October, and as we know central banks also intervene in the forward markets, the reserves data are hardly likely to give a full picture of fund exits,” said Fiona Lim, a senior currency strategist at Malayan Banking in Singapore. “And there is wide expectation for the yuan to weaken against the dollar beyond the U.S. presidential election result. So all in all, risks to the yuan really are to the downside.”

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“More than 101 trillion yen ($966 billion) of cash was circulating at the end of October. It was used for more than 80% of transactions by value in 2014.”

Cash Is Still King in Japan, and That is a Problem for the BOJ (BBG)

As anyone who has visited Japan knows, cash is still king. Even though many places now take credit cards, Apple Pay and other forms of cashless technology, the actual amount of notes and coins circulating in the country has doubled in 20 years. And that’s while the economy and population has shrunk. More than 101 trillion yen ($966 billion) of cash was circulating at the end of October. It was used for more than 80% of transactions by value in 2014. One problem with this preference for notes and coins is that it limits the central bank’s policy options. The tendency of Japanese to prefer cash means that any attempt to further lower negative interest rates or to impose them on private bank accounts might push people to take their money from the banking system and add it to their stash under the mattress.

The decision in Europe to stop printing the €500 note prompted concerns that governments were trying to make it harder to hold cash, and thus make it easier to impose deeper negative interest rates. In Sweden, where the vast majority of payments don’t use cash and many bank branches won’t even accept cash deposits and withdrawals, the central bank argued last year that negative rates function better in a cashless society. Rates are minus 0.5% in Sweden, but that isn’t an option in Japan, which “is a cash-based economy,” according to former BOJ board member Sayuri Shirai. The BOJ could maybe cut the negative interest rate to minus 0.2% or minus 0.3% at most, she said earlier this month. It’s currently minus 0.1%.

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Keep your eye on this going forward.

In “Seismic Shift”, Saudis Halt Egypt Oil Supplies As Cairo Turns To Iran (ZH)

While the proxy war in the middle-east rages, a curious, and largely under the radar pivot has been taking place in one of the countries directly impacted by Hillary Clinton’s foreign policy: Egypt. In mid-October, we reported that, for the first time ever, Russia and Egypt would conduct joint military drills. This followed news that Russia will sell attack helicopters to the North African nation and invest billions in Egyptian infrastructure. These items, along with the fact that Egypt is eager to be re-granted Russian tourism rights for its citizens after recent bad blood between the countries, lead one to the logical conclusion that Egypt has every incentive to cooperate with Russia going forward.

This means when the Russian fleet reaches the Mediterranean – whether the intent is to park in those waters and bombard Aleppo, as some believe, or merely to project Russian might to the world, as others suggest – it will be flanked by friendlies on three sides. Turkey to the north, Syria to the east, and Egypt to the south. It appears, however, that the quiet Egyptian pivot has not gone unnoticed by the US and its mid-east allies, and on Monday, Saudi Arabia informed Egypt that critical shipments of oil products expected under a $23 billion aid deal have been halted indefinitely, which according to Reuters suggests a deepening rift between the Arab world’s richest country and its most populous.

The official narrative is that while Saudi Arabia has been a major donor to Egypt since President Abdel Fattah al-Sisi seized power in a violent countercoup in mid-2013, Riyadh has become frustrated with Sisi’s lack of economic reforms and his reluctance to be drawn into the conflict in Yemen. During a visit by Saudi King Salman in April, Saudi Arabia agreed to provide Egypt with 700,000 tonnes of refined oil products per month for five years but the cargoes stopped arriving in early October as festering political tensions burst into the open. What is curious is that the deal fell apart just weeks after Cairo suddenly became friendly with Moscow.

While Egyptian officials said since that the contract with Saudi Arabia’s state oil firm Aramco remains valid and had appeared to expect that oil would start flowing again soon, on Monday, however, Egyptian Oil Minister Tarek El Molla confirmed it had stopped shipments indefinitely. Aramco has not commented on the halt and did not respond to calls on Monday. “They did not give us a reason,” an oil ministry official told Reuters. “They only informed the authority about halting shipments of petroleum products until further notice.”

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Today 20,000 accounts are plundered. What is tomorrow it’s ten times as many, or 100 times? Who’s going to pay you back? How safe is your money in banks?

Tesco Bank Freezes Transactions After Cash Stolen From 20,000 Accounts (G.)

Tesco Bank was scrambling to restore services for customers on Monday after it admitted 40,000 customers had been affected by an online heist over the weekend when money was stolen from half the number of accounts targeted. Tesco immediately froze online transactions and pledged to refund the 20,000 customers whose current accounts had been plundered in one of the largest cyber-thefts ever to hit a UK bank. Benny Higgins, chief executive of the supermarket chain’s banking arm, said the decision to suspend some banking activities was an attempt to protect customers from “online criminal activity”. The National Crime Agency (NCA) is one of a number of organisations scrutinising what has taken place at a bank with more than 7 million customers.

“We apologise for the worry and inconvenience that this has caused for customers, and can only stress that we are taking every step to protect our customers’ accounts,” said Higgins. Refunds to customers – some of whom claimed they had lost thousands of pounds – were under way on Monday but Higgins was facing demands from MPs for an explanation of what had gone wrong in the face of repeated warnings about cybersecurity from regulators in recent years. It is thought to be the first time such a large group of UK bank customers have lost money as a result of a single cyber-crime incident and could prove costly for its parent supermarket group in reputational as well as financial terms.

There were also concerns of collateral brand damage for other digital and online banks attempting to compete with established high street players, as Tesco raced to keep pace with the deluge of complaints on social media about difficulty reaching its call centres in Glasgow and Newcastle. Higgins provided little explanation for what had gone wrong over the weekend, when the bank started to text customers to warn them it had detected suspicious activity. However, he told the BBC it was “a systematic, sophisticated attack”.

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Inevitable for a society built on bubbles.

Australia Returns To The Gilded Age Of Rent-Seekers And Robber Barons (RR.)

With the world currently in the process of tearing itself apart piece by piece as the failed Western neoliberal project succumbs to the internal contradictions and terminal imbalances of unfettered globalisation, finance capitalism, and residual and covert imperialism, you’d be forgiven for missing the devastating and cynical betrayal of young Australians that recently happened right under our noses. It escaped the attention of our myopic and clueless presstitute media for nearly four months. But before I discuss that betrayal, which at first glance seems to be just garden variety political neglect and bastardry, let’s first remind ourselves of the report released earlier this year by the University of Melbourne into the state of income and wealth equality, retirement outcomes and home ownership in Australia.

The HILDA (Household, Income and Labour Dynamics in Australia Survey) report, which rightly garnered a huge amount of attention in the media and commentariat, laid bare exactly how far down the path of class warfare that Australia has travelled. Almost by stealth over several decades, short-sighted, self-interested and often corrupt decisions have been made in all offices of power in this nation to restructure our entire economy and society toward the extreme and nearly exclusive benefit of landowners, rentiers, and those that seek to extract unearned windfall gains from the fruits of our considerable prosperity. We have created a system wherein the tax burden for land speculators is less than that for workers, innovators and savers. Far less. Indeed, the tax burden on land is often negative.

We actually reward landowners and speculators while punishing workers, innovators and savers. This is a balance that has striking similarities with the Gilded Age of the late 19th century, wherein landowners, monopolists and creditors (the modern equivalent of the medieval ‘Robber Barons’) bled economies dry to such an extreme extent, that capitalism itself was reinvented, giving birth to the Progressive Era, which attempted to save the world from the grip of rentiers. Few today would recall that the origin of the term Progressive, as used in political context, was this tumultuous moment in the history of industrialisation. The leftwing or so-called progressive parties in today’s world have all but abandoned any pretence to protecting society and the economy from contemporary Robber Barons and rent-seekers.

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Blame countries, blame the EU, for sure. But with €370 million having gone to (i)NGO’s, you MUST wonder what they have been doing with all that cash. Which is why the Automatic Earth supports O Allos Anthropos, which while it has no access to these funds, is far more effective. Give us just a fraction of that and we’ll be able to solve many of the issues that are still not being tackled.

I’m working on a Christmas fund raiser for Athens, but of course you can donate today as well. Any amount donated via our Paypal widget (top left corner) that end in $0.99 or $0.37 will as always go to Athens’ poor and homeless and refugees.

Winter is Coming for Refugees in Greece (HRW)

“Winter is coming” has become an anxious refrain among asylum seekers living in tented refugee camps across Greece, that offer no shelter from damp and cold. Ali, a 25-year-old father of three very young children from Afghanistan, including a 6-year-old who has a disability, was living with his family in a tent pinned to the ground of Elliniko camp in Athens, when I met him in late October. “Now that winter is coming, the conditions are not good… When it rains water gets inside our tent. And every morning, the inside of our tent is wet because of the damp,” he explained. We heard similar testimonies across Greece. Ali’s predicament reflects Europe’s utter failure to respond collectively and compassionately to people seeking protection.

More than 60,000 women, men, and children are stranded in Greece as a result of Western Balkan border closures and a poorly executed EU relocation plan. Thousands are restricted to abysmal and volatile conditions on the islands, while tens of thousands face deplorable conditions without access to services in the camps on the mainland. As part of a winterization plan, the UN refugee agency (UNHCR) and Greek authorities are replacing tents with prefabricated housing units in some of the over 40 camps across Greece. At other sites, winter items are being distributed and in fifteen of them infrastructure improvements are planned, such as installing heating. However, many of the largest and worst camps where thousands of people live, will essentially remain unsuited for winter.

The government says it plans to close most of these facilities by January, but if the asylum seekers are not relocated to other appropriate sites, they will soon find themselves exposed to worsening weather conditions without proper shelter. On the islands, efforts are underway to transfer a small number of people, who are presently living in severely overcrowded and filthy conditions, to the mainland. But Greece is under pressure from the European Commission to contain most asylum seekers on the islands to prevent onward movement to other EU countries.

With winter approaching, there is an urgent need to transfer people to hardier facilities and in the short-term, fully adapt remaining camps for falling temperatures. In the long-term, the Greek authorities should end encampment. With almost €128 million provided by the European Commission to the Greek government and €370 million given to humanitarian aid agencies and international organizations, including the UNHCR, there’s no excuse for the failure to provide humane and dignified reception conditions to asylum seekers.

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