America 2.0

Apr 072018
 
 April 7, 2018  Posted by at 12:32 pm Finance Tagged with: , , , , , , , , , , , ,  


Dorothea Lange Farmers’ supply co-op. Nyssa, Malheur County, Oregon 1939

 

 

It’s Dr. D again. Told you he’s on a roll. He remains convinced America can re-invent itself. If only because it must.

 

 

Dr. D: Herbert Stein’s Law states “What Can’t Go On Forever, Doesn’t.” This is a neat summary of the present trade and currency imbalance. China makes real goods and the U.S. consumes them by typing digits on a keyboard. This is the very definition of what cannot go on forever.

 

• How long do you expect a nation can make nothing and consume everything?

• How long do you expect a nation without manufacturing, without a workforce, and now without a viable military to remain pre-eminent?

• How long does wealth and influence remain in a nation that makes nothing, does nothing, and knows nothing?

 

Reminds me of that other Law: “A fool and his money should be parted as soon as possible”, for to be wealthy, and helpless, and dumb, is not a combination that lasts for very long.

Since China cannot send the U.S. free goods forever, ergo, they won’t. That means slowly or quickly, now or later, they will cut us off. Right now it appears that can never happen, but I assure you it will very soon. And what will the U.S. do then? Actually, that’s very simple: the U.S. will have to close a $600B trade deficit instantly. Roughly, that means the U.S. will no longer import $600B worth of goods and be $600B/year poorer, or $2,000/year per person. Nor is this unusual. History is rife with examples of nations that once were prosperous and were suddenly cut off: Spain and Greece come immediately to mind. So how does this happen?

The Core nation, the trading hub has failed dozens of times in history, from Venice to Holland, Spain to England, and although most of history was on a gold standard, nevertheless the same thing happened: repudiation and devaluation of the currency. That’s why a U.K. Pound is no longer a troy pound of pure silver ($192) and why the U.S. Dollar is no longer 1/20th ounce of gold ($267). So let’s run down how this might unfold.

Like other empires, the U.S. rose to prominence with hard work and industry. Like other empires, this personal and physical industry was the foundation of an effective military. This military eventually stood alone, leaving the U.S. to set the rules of trade, the rules of diplomacy, and the rules of conduct. Like other nations, the U.S. bent those rules in its own favor, both early and late. Like other nations, the natural way to take advantage was to run an overvalued currency, which draws in capital from all trading partners worldwide, creating a 100-year spiral of wealth and influence that seems truly endless.

However math, the cruelest of Mother Nature’s laws, is not fooled. If you bend the rules to create market distortions, those distortions are indeed created. If there were fair trade, a gold standard, a nation that increases their wealth would find its currency rise. A rising currency would dampen manufacturing and efficiency, the gold would flow back out, and the unfair advantage would be corrected. But only in a free market. Any market on Earth has an Army, and that Army’s job day and night is to make sure that unfair advantage does NOT end. Ask Smedley Butler.

 

Mother Nature is never deterred. However long it takes, she waits. Lacking fair trade, an abnormally strong currency does the only other thing it can: destroy the Core nation’s industry, totally and completely. More certain than a nuclear explosion, economics will not miss a single spot until the wrong is righted and the truth is out. At first the low-gain commodity industries go: mining, shipping, smelting; then their sooty kinsmen: heavy rail, ships, ports, transportation.

After that go the lighter industries: manufacturing, stamping, autos, and so on up to mainframes, silicon chips and phones, and with them, their children, manufacturing processes and R&D. However, as London and NY showed, you can forestall currency correction even now by moving market distortions into services and financial engineering. At this point, however, the Core nation has nothing left but Banks, Universities, and the Government/Military, and no underlying economy to support them.

However, what Charles Hugh Smith calls the fiefdoms of monopoly cartels and apparatchiks of the 1% now lead an empty parade, horse-whipping the uncompliant 99% into supporting an economy that exists only in their minds. And then “What can’t go on, doesn’t.” The empire collapses from within, to the total surprise of historians of the 1%, and the total lack of interest of the 99%, for whom it had already collapsed decades before.

And of the other side? Thanks to the overly-high currency of the Core nation, the perimeter nation has an artificially LOW currency. They didn’t do that, because they are by definition small and weak and aren’t using an army to set the rules. The artificially low currency leads to low costs, low labor, high enterprise, and in the mirror image of the Core nation, the constant INCREASE in manufacturing. The increase in wealth, and the addition of commodity goods, then heavy industry, then manufacturing, then R&D. Whose fault is that? Who used a worldwide army to enforce the very rules that gutted their homeland? Not the Vandals; not China. It was Rome; it was D.C.

What is this whole imbalance based on? In our case, the artificially strong dollar, backed by a worldwide U.S. military. So how must it end? With a weak dollar, falling real markets, and a U.S. military returning home.

You say this can’t happen? Yet it must happen. To say otherwise means China will give us free goods for 10,000 years, and the U.S. will get always weaker that whole time. So how does the transition go?

The U.S. financial bulwark cracks, being highest and most based on psychology, not reality, very likely in conjunction to a military failure or withdrawal, as in empire finance, the military and currency are equivalent. Slowly, then rapidly, the tide flows out, the U.S. dollar gets weaker, the Chinese Yuan gets stronger, and the whole process reversed as it should have done years ago.

 


(mind the log scale)

 

Mother Nature isn’t fooled, and those 70 years of repression and manipulation are made up in a few years.

Down on the ground, what happens is not that China shuts off free imports to the U.S. directly, with a political embargo, what happens is the U.S. is seen as a has-been and the U.S. dollar falls in purchasing power on the world market, raising the price of foreign goods in a “free” and “open” marketplace. Lacking manufacturing and the military power to stop it, the U.S. can’t hold off Mother Nature and the laws of physics any more.

Knowing this to be inevitable, how would a nation prepare? For one thing, you would need to kick-start your industry, post-haste. Anything that can be made internally will find its prices stabilize and not rise. Yet before the currency rates are corrected this face overwhelming headwinds. Second, as income will be lost and the borders will be shut off, you need to switch the focus of taxation from income to tariffs, from finance to real goods.

Third, you need to open your pipelines, ports, and infrastructure, and expand the required steel, oil by any means necessary, even armed standoffs. Fourth, you’ll need to shove the culture away from government support and subsidies that will soon disappear, and into self-reliance and productivity. Firth, you’ll need to downsize the government and especially the military, which will and must return home. Any of those platforms sound familiar?

 

Despite what you read, it’s not all bad. Just as “The arrogant people will be brought down, and high and mighty people will be humbled”, “Every valley shall be raised up, and every mountain and hill shall be made low; and the crooked shall be made straight, and the rough places smooth.”

 

This is a master reversal of all manipulations, of all imbalances that have reached extremes. As the U.S. – China trade deficit must balance, we know that Chinese goods must rise. But that also means the cost of production for U.S. goods must fall. This cost-advantage puts Americans back to work just as it did the Chinese, while the rise of the Yuan will make China rich, but less productive.

What’s more, as matters reverse, the U.S. will raise prices on their exports: food and oil, two things China must have and cannot get elsewhere. Agriculture is at an all-time, 1,000 year low and must rise. Stocks and housing are at an all-time high and must fall. In a reversal, the high prices fall, the low prices rise, that’s obvious. That’s what “reversal” means, that’s what “extreme” means.

As for manufacturing, the world is changing fast. Even China is opening “dark” factories that employ no people, only robots. That will be true here as well, which undercuts any labor savings they once had. There’s a few problems, however: robotic mega-factories only work with very large scale of identical goods that can source reliable, high-quality inputs. If oil is too high, and/or shipping or marketing fractures, those factories scale down, retool more, and therefore require more people than presently.

How is China going to have huge robotic mega-factories if half their export market can no longer afford them? If the U.S. and China split the market, aren’t all those factories half the size of present? Since the U.S. will now have low-cost people and raw materials, what advantage does China bring to offset shipping and tariffs? The “market” isn’t uniform. There was worldwide mass-integration of manufacturing between India and England and the world in 1910 too, yet it’s didn’t persist; it changed.

 

One way it can change is to leapfrog China. We hear about how the U.S. is a has-been as we are supporting legacy copper telephones while the 3rd world goes directly to fiber and cell, and this is true. However, China has mainlined on low-price, low-profit, mass-manufacturing. Why would anyone compete with them there? It’s irrational. Build a baseline and let them have all the low-profit, environment-destroying work they want, the U.S. can’t and won’t beat them there.

We can beat them by leapfrogging into technology that’s out there, but no one is revealing yet, things they haven’t done, but Americans are good at doing: innovating, high-tech, medical. Much as I hate high-tech and its panacea as an answer, yet I believe there are goods, ideas out there that can transform the way things work.

Look at the rapid development and uptake of LEDs for example. The patent office is filled with them, and an outsized number are American. We have superconducting maglev, field physics, material science of no-weight foam, color-shifting paint, hyperconducting graphite, and transparent concrete to name a few. All there, all unused. Let’s make an example case in a very large, very quiet investment.

Medical and Biotech are to some extent used up, with overpriced, mass-market pharmaceuticals being rejected by price and form even by the wider population. But that’s so last-century. The new biotech is going to take a blood or DNA sample and synthesize a drug specifically for your blood and DNA. They are going to create another organ, a blood transfusion no one but you can use.

In one way, this may be more expensive, and that’s good for profits, but in another way, they will work for you, much better and guaranteed, and therefore fix your health faster, spare you useless drugs, bad side effects, and actually work, and therefore be cheaper. What does it take to make them? A complete revolution in drug manufacturing. Multi-billion dollars’ worth of equipment, extremely unique development and patents, a 20 year head start.

 

Could you sell such a thing to the Chinese? You bet. Could they get off retail manufacturing and scoop us on it? Not a chance. So you see how such a thing could happen, even with a U.S. dollar falling and a hard readjustment ahead. And that’s just one.

If boutique and robotic goods are the new industries, what do we do with 200 million unemployed? We won’t have 200 million. That’s a consequence of the distorted extreme of our finance, our centralization, our currency. For one thing, we have only 100 million now and a lower dollar will definitely restore the competitive advantage of highly-productive U.S. workers. At the same time, if work requires fewer workers, we will find a solution. Why?

Because you can’t have 200 million unemployed. Not even 100 million. The resulting inequity and income disparity can and has caused a revolution. Faced with that, any nation will adjust because they must or perish. As difficult as Americans can be, they are a practical people above all. This has happened to dozens of nations in the past: Spain, France, Germany, England, China, Japan, and they all still exist. Things rotated out in the big wheel of time. New things were made and the old ones faded away, and we will too.

We’re going back to being just one of many nations, and a fair and productive one too. There are ways and we will find them. How can I be so sure? Because “What Can’t Go On Forever, Doesn’t,” and it won’t this time either.

 

 

Globalization is Poverty

Oct 162017
 
 October 16, 2017  Posted by at 2:00 pm Finance Tagged with: , , , , , , , , ,  


Marc Riboud Zazou, painter of the EIffel Tower 1953

 

Central bankers have never done more damage to the world economy than in the past 10 years. One may argue this is because they never had the power to do that. If their predecessors had had that power, who knows? Still, the global economy has never been more interconnected than it is today, due mostly to the advance of globalism, neoliberalism and perhaps even more, technology.

Ironically, all three of these factors are unremittingly praised as forces for good. But living standards for many millions of people in the west have come down and/or are laden with uncertainty, while millions of Chinese now have higher living standards. People in the west have been told to see this as a positive development; after all, it allows them to buy products cheaper than if they had been made in domestic industries.

But along with their manufacturing jobs, their entire way of life has mostly disappeared as well. Or, rather, it is being hidden behind a veil of debt. Still, we can no longer credibly deny that some three-quarters of Americans have a hard time paying their bills, and that is very different from the 1950s and 60s. In western Europe, this is somewhat less pronounced, or perhaps it’s just lagging, but with globalism and neoliberalism still the ruling economic religions, there’s no going back.

What happened? Well, we don’t make stuff anymore. That’s what. We have to buy our stuff from others. Increasingly, we lack the skills to make stuff too. We have become dependent on nations half a planet away just to survive. Nations that are only interested in selling their stuff to us if we can pay for it. And who see their domestic wage demands go up, and will -have to- charge ever higher prices for their products.

And we have no choice but to pay. But we can only pay with what we can borrow. As nations, as companies, and as individuals. We need to borrow because as nations, as companies, and as individuals we don’t make stuff anymore. It’s a vicious circle that globalization has blessed us with. And from which, we are told, we can escape only if we achieve growth. Which we can’t, because we don’t make anything.

 

So we rely on central bankers to manage the crisis. Because we’re told they know how to manage it. They don’t. But they do pretend to know. Still, if you read between the lines, they do admit to their ignorance. Janet Yellen a few weeks ago fessed up to the fact that she has no idea why inflation is weak. Mario Draghi has said more or less the same. Why don’t they know? Because the models don’t fit. And the models are all they have.

Economic models are more important in central banking than common sense. The Fed has some 1000 PhDs under contract. But Yellen, their boss, still claims that ‘perhaps’ the models are wrong, with it comes to inflation, and to wage growth. They have no idea why wages don’t grow. Because the models say they should. Because everybody has a job. 1000 very well paid PhDs. And that’s all they have. They say the lack of wage growth is a mystery.

I say that those for whom this is a mystery are not fit for their jobs. If you export millions of jobs to Asia, take workers’ negotiating powers away and push them into crappy jobs with no benefits, only one outcome is possible. And that doesn’t include inflation or wage growth. Instead, the only possible outcome is continuing erosion of economies.

The globalist mantra says we will fill up the lost space in our economies with ‘better’ jobs, service sector, knowledge sector. But reality does not follow the mantra. Most new jobs are definitely not ‘better’. And as we wait tables or greet customers at Wal-Mart, we see robots take over what production capacity is left, and delivery services erase what’s left of our brick and mortar stores. Yes, that means even less ‘quality’ jobs.

 

Meanwhile, the Chinese who now have taken over our jobs, have only been able to do that amidst insane amounts of pollution. And as if that’s not bad enough, they have recently, just to keep their magical new production paradise running, been forced to borrow as much as we have been -and are-, at state level, at local government level, and now as individuals as well.

In China, credit functions like opioids do in America. Millions of people who had never been in touch with the stuff would have been fine if they never had, but now they are hooked. The local governments were already, which has created a shadow banking system that will threaten Beijing soon, but for the citizens it’s a relatively new phenomenon.

And if you see them saying things like: “if you don’t buy a flat today, you will never be able to afford it” and “..a person without a flat has no future in Shenzhen.”, you know they have it bad. These are people who’ve only ever seen property prices go up, and who’ve never thought of any place as a ghost city, and who have few other ways to park what money they make working the jobs imported from the US and Europe.

They undoubtedly think their wages will keep growing too, just like the ‘value’ of their flats. They’ve never seen either go down. But if we need to borrow in order to afford the products they make in order to pay off what they borrowed in order to buy their flats, everyone’s in trouble.

 

And then globalization itself is in trouble. The very beneficiaries, the owners of globalization will be. Though not before they have taken away most of the fruits of our labor. What are you going to do with your billions when the societies you knew when you grew up are eradicated by the very process that allowed you to make those billions? It stops somewhere. If those 1000 PhDs want to study a model, they should try that one.

 

Globalization causes many problems. Jobs disappearing from societies just so their citizens can buy the same products a few pennies cheaper when they come from China is a big one. But the main problem with globalization is financial: money continually vanishes from societies, who have to get ever deeper in debt just to stand still. Globalization, like any type of centralization, does that: it takes money away from the ‘periphery’.

The Wal-Mart, McDonald’s, Starbucks model has already taken away untold jobs, stores and money from our societies, but we ain’t seen nothing yet. The advent of the internet will put that model on steroids. But why would you let a bunch of Silicon Valley venture capitalists run things like Uber or Airbnb in your location, when you can do it yourself just as well, and use the profits to enhance your community instead of letting them make you poorer?

I see UK’s Jeremy Corbyn had that same thought, and good on him. Britain may become the first major victim of the dark side of centralization, by leaving the organization that enables it -the EU-, and Corbyn’s idea of a local cooperative to replace Uber is the kind of thinking it will need. Because how can you make up for all that money, and all that production capacity, leaving where you live? You can’t run fast enough, and you don’t have to.

This is the Roman Empire’s centralization conundrum all over. Though the Romans never pushed their peripheries to stop producing essentials; they instead demanded a share of them. Their problem was, towards the end of the empire, the share they demanded -forcefully- became ever larger. Until the periphery turned on them -also forcefully-.

 

The world’s central bankers’ club is set to get new leadership soon. Yellen may well be gone, so will Japan’s Kuroda and China’s Zhou; the ECB’s -and Goldman’s- Mario Draghi will go a bit later. But there is no sign that the economic religions they adhere to will be replaced, it’ll be centralization all the way, and if that fails, more centralization.

The endgame of that process is painfully obvious way in advance. Centralization feeds central forces, be they governmental, military or commercial, with the fruits of labor of local populations. That is a process that will always, inevitably, run into a wall, because too much of those fruits are taken out. Too much of it will flow to the center, be it Silicon Valley or Wall Street or Rome. Same difference.

There are things that you can safely centralize (peace negotiations), but they don’t include essentials like food, housing, transport, water, clothing. They are too costly at the local level to allow them to be centralized. Or everybody everywhere will end up paying through the nose just to survive.

It’s very easy. Maybe that’s why nobody notices.

 

 

Coming Apart: The Imperial City At The Brink

Jun 182017
 
 June 18, 2017  Posted by at 1:00 pm Finance Tagged with: , , , , , , , , ,  


Thomas Cole Destruction of Empire 1836

 

The Conflicts Forum, directed by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, sent me another unpublished article by Alastair and asked if the Automatic Earth would publish it. But of course. Previous articles by Alastair published here are: ‘End of Growth’ Sparks Wide Discontent in October 2016, Obstacles to Trump’s ‘Growth’ Plans in November 2016 and What is this ‘Crisis’ of Modernity? in January 2017.

Here’s Alastair again:

 

 

Alastair Crooke: David Stockman routinely refers to President Trump as the ‘Great Disrupter’. But this is not a bad quality, he insists. Rather, it is a necessary one: Stockman argues (my paraphrasing) that Trump represents the outside force, the externality, that tips a ‘world system’ over the brink: It has to tip over the brink, because systems become too ossified, too far out on their ‘branch’ to be able to reform themselves. It does not really matter so much, whether the agency of this tipping process (President Trump in this instance), fully comprehends his pivotal role, or plays it out in an intelligent and subtle way, or in a heavy-handed, and unsubtle manner. Either serve the purpose. And that purpose is to disrupt.

Why should disruption be somehow a ‘quality’? It is because, during a period when ‘a system’ is coming apart, (history tells us), one can reach a point at which there is no possibility of revival within the old, but still prevailing, system. An externality of some sort – maybe war, or some other calamity or a Trump – is necessary to tip the congealed system ‘over’: thus, the external intrusion can be the catalyst for (often traumatic) transformational change.

Stockman puts it starkly: “the single most important thing to know about the present risk environment [he is pointing here to both the political risk as well as financial risk environment], is that it is extreme, and unprecedented. In essence, the ruling elites and their mainstream media megaphones have arrogantly decided that the 2016 [US Presidential] election was a correctible error”.

But complacency simply is endemic: “The utter fragility of the latest and greatest Fed bubble could not be better proxied than in this astounding fact. To wit, during the last 5,000 trading days (20 years), the VIX (a measure of market volatility) has closed below 10 on just 11 occasions. And 7 of those have been during the last month! … That’s complacency begging to be monkey-hammered”, Stockman says.

Former Presidential candidate, Pat Buchanan concurs: “President Trump may be chief of state, head of government and commander in chief, but his administration is shot through with disloyalists plotting to bring him down.

We are approaching something of a civil war where the capital city seeks the overthrow of the sovereign, and [to achieve] its own restoration. Thus far, it is a nonviolent struggle, though street clashes between pro- and anti-Trump forces are increasingly marked by fistfights and brawls. Police are having difficulty keeping people apart. A few have been arrested carrying concealed weapons.

That the objective of this city is to bring Trump down, via a deep state-media coup, is no secret. Few deny it.”

The extraordinary successful ‘manufacture’ and ‘parachuting-in’ of Macron into the French Presidential election by the French élite, precisely has given to the globalised Deep State (including their US counterparts), renewed confidence that Europe and America’s slide towards ‘populism’, is indeed a ‘correctable error’. European élites now can barely contain their revived schadenfreude at the Brexiters’ and at the Populists’ presumed discomfort (see here).

 


Thomas Cole Consummation of Empire 1836

 

But despite the palpable danger to the integrity of the political system itself, Stockman notes, “it is no inconsiderable understatement to suggest that the S&P 500 at 2440 is about as fragile as the ‘market’ has ever been.

Any untoward pinprick could send it into a tailspin … Doug Kass said it best in his recent commentary: “Over history, as we have learned, a Minksy Moment develops when investor sentiment becomes complacent after long periods of prosperity and the data is ignored, and doesn’t seem to matter anymore, as I wrote in “It’s a ‘Bohemian Rhapsody’ Market: Nothing Really Matters … to investors.” In short, the market has become ‘zombie’ (in the sense of residing within a psychological defence mechanism – as, when to contemplate the alternative – simply is too threatening to the psyche) [emphasis added].

Daniel Henninger, in a Wall Street Journal op-ed, writes: “Donald Trump’s election has caused psychological unhingement in much of the population. But the Trump phenomenon only accelerated forces that were plummeting in this direction before the 2016 election…

“Impossible to miss, though, is how jacked up emotional intensity has become in American politics. The campaign rallies of both Mr. Trump and Bernie Sanders often sat on the edge of violence. Reporters describe political town hall meetings as full of “angry” voters. Shouting down the opposition in these forums or on campus has been virtually internalized as standard behavior. Refusal to reason is the new normal. And then, the unreason is euphemized as free speech.

Explaining away these impulses as a routine turn of the populist political cycle is insufficient. Something more permanent is happening.”

It is not, of course just the markets which are threatened by unperceived risk. Trump shall not be forgiven for challenging the sacrosant meme of a world divided between (good) ‘liberal’ democracies (led by the US and its European allies) and (bad) illiberal autocracies (led today, by President Putin’s Russia): by snubbing Nato and withdrawing from the Paris climate agreement, Professor Michael Klare writes, “we’ve been told, President Trump is dismantling the liberal world order created by Franklin D Roosevelt at the end of World War II”.

 


Thomas Cole Destruction of Empire 1836
 

An offence, it seems, against something somehow sacral: recently, US comedienne Kathy Griffin posted a video of herself holding the bloody, severed head of Donald Trump. “But that wasn’t the end of it” Henninger notes. “We may assume that as Ms. Griffin was creating her video, the artists at New York’s Public Theatre, were rehearsing their production of Julius Caesar, the one in which Central Park audiences watch ‘Caesar’ as a blond-haired Donald Trump, who is pulled down from a podium by men in suits, and assassinated with plunging knives … Whatever once fastened the doors of people’s minds to something secure and stable has become unhinged.”

Mike Vlahos (Professor at the US Naval War college and John Hopkins) tells us that, as a military historian and global strategist, he became curious to know just why it is that ‘world systems’ do ‘come apart’. His first, intuitive sense was that their collapse generally was brought about by some massive external force such as war, pestilence or famine, and by the concomitant mass migrations of peoples.

But when he and his students completed their research, he concluded that though these factors had often played an important part, they were not the prime cause of the system coming apart. Rather, he identified a number of key triggers:

· The élites became stratified, and politics frozen
· The peoples’ allegiance became taken for granted, at the same time that the élites chose to ignore threats to the peoples’ way of life
· Social mobility declined, and change is fiercely resisted
· Rather, élites work to maximize their wealth and status.
· Elite authority becomes excessively militarized – and justified as ‘saving civilization’.

He concludes from this study, “the situation that we inhabit today […] here in the imperial city in Washington DC, is that it is absolutely hollowed out … it is incapable of offering anything to its own people, the American people … I think we have reached a point where there is no possibility of revival within the current system that exists. The current system is set upon … is determined to eat itself out in a kind of civil war that is coming, and at the end of that, it will be done, will be finished”.

“The Methoni, one of the great nations of the late Bronze Age, had this same problem with the élites and the 1% that we have today, and they were overthrown. That’s 3300 years ago, and it keeps happening again and again. And the very structure of the decadent relationships in late periods where élites refuse to accommodate, refuse to adapt, refuse to be sensitive to needs of the larger whole of society, means this has to happen. There has to be an overthrow … for things eventually to get better, to be renewed. In other words, you can’t renew from within”.

Is this the situation today? The pre-conditions that Professor Vlahos relates, in terms of élite hubris, self-regard, and disdain for the real concerns of people are there (the polarization of US society at the US election provides the empirical evidence for this). And Stockman, in calling Trump the ‘Great Disrupter’ plainly implies that he might be precisely the ‘externality’ (coming from outside the élite) – that might tip things ‘over’. This surely is what Stockman means when he warns about ‘the present risk environment’ being extreme.

Of course, the usual retort is that Trump offers no coherent alternative conceptual vision for the future, but only seized successfully upon a number of key insights: the power of cultural nationalism, the pain felt by the casualties of globalism, the impact of a hollowed-out US economy, and the need to put America first. This is true. These insights do not constitute a vision for the future, but why should one expect that, from the ‘Disrupter’? His ‘agency’ is that of catalyst, not that of final ‘constructor’. That comes later.

 


Thomas Cole Desolation of Empire 1836

 

So, from whence does ultimate societal renewal come? The classic answer is that after ‘disruption’ nothing much is left standing amidst the (metaphoric) ruins of whatever stood as the reigning ‘modernity’. Historically, renewal was effected through a communal ‘reaching back’- beyond the roots of whatever represented the contemporary crisis – to delve back, deep into the archetypal cultural history of a people. The rummaging in collective memory, allows a narrative to shape, about why the present ‘hurt’ befell its people, and to bring forward, transformed into contemporary meaning, some ‘solution’: a new meta-historical understanding.

Plainly, this (a type of spiritual renewal) is not President Trump’s ‘bag’. (Steve Bannon’s the more so, perhaps?)

What does all this mean in practical terms? First, it suggests that most of us still prefer not to address the stark reality that “the objective of this city (DC), is to bring Trump down, via a deep state-media coup” and the bitter political trench warfare, which this portends. We prefer to rest in complacency, (as zombies for now), until a crisis squarely hits us – in a personal way.

Secondly, thoughts of an easy return to the status quo ante (such as via Vice-President Pence standing-in), is problematic (Macron’s election in France notwithstanding). Since the élites (all of them), have, in their ‘war’ against ‘populists’ and deplorables, totally lost legitimacy and authority for a substantive part of their populations. And they will not – cannot – adapt. For, that is their nature. This is the moment, Professor Vlahos notes, when a system – i.e. US operational governance – begins to ‘come apart’. Individuals, cabals within government, whole departments of state, look to their own self-awarded ‘authority’, rather than to that of the government as mandated by the electorate.

Thus we have this past week, the Senate voting 97-2 to impose further sanctions on Russia. Another wrench jammed into Trump’s foreign policy wheels – and explicitly conceived to paralyse and impede the President.

Thirdly, the intent is – like some Amazonian reptile venom – to ‘bite’ him with so much innuendo and assorted investigations and further allegations, that Trump, like the reptile’s victim, remains awake – but incapable of moving a muscle: A true zombie, in fact, as the reptile feeds on its living corpse.

Fourth, this zombified US President, will shortly face the requirement to negotiate with Congress an exit from a bubbling financial sphere soaring upwards, whilst a moribund real economy trails downwards – under pressure from the fast-approaching debt-ceiling deadline. The Senate’s slap at the President’s face with the Russia sanctions vote suggests it is more likely that he will be tossed another spanner: this time aimed at the wheels of the ‘Trump reflation’ programme.

What other insights might history offer? Two, perhaps: Professor Vlahos, during his discussion with John Batchelor, the latter points out that, even at the very moment that the hub of the Roman Empire already had fallen apart, the collapsing Empire was celebrated the most, when it was imitated at the furthest edges of Empire: by the peoples of Gaul and Germany, for example. Are we not seeing the same today, in Europe, as Merkel and Macron vow to keep the liberal, globalist values of the American Empire alive — at the edges of the American Empire — in Europe?

And lastly, the constituency that historically led renewal? Professor Vlahos: “The Roman legions, the Czarist armies, the German Imperial armies and the Ottoman armies”.

The Pentagon élites should note well.

 

 

Debt Rattle June 14 2017

Jun 142017
 
 June 14, 2017  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  


Fred Lyon San Francisco cable car turnaround 1946

 

• A Record 60% Of Americans Disapprove Of President Trump (ZH)
• Age Is The New Dividing Line In British Politics (YouGov)
• UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)
• Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)
• Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)
• Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)
• Are Public Pensions A Thing Of The Past? (CNN)
• Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)
• OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)
• China Defaults Feared as Firms Confront Short Debt Addiction (BBG)
• Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)
• Schaeuble Promises Greece Deal With Lenders On Thursday (R.)
• Foreign Buyers Snap Up Greek Property (K.)
• State Of Emergency Declared On Lesvos As 800 Left Homeless (AP)
• ‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

 

 

A nation divided.

• A Record 60% Of Americans Disapprove Of President Trump (ZH)

Despite record high stock prices, 43-year lows in jobless claims, and near record-high optimism among small business owners, Gallup reports the percentage of Americans who disapprove of the job President Trump has risen to a record 60% this week. As Gallup details, despite the president’s claim on Monday at a Cabinet meeting that “Never has there been a president, with few exceptions – in the case of F.D.R. he had a major Depression to handle – who’s passed more legislation, who’s done more things than what we’ve done,” his administration has been roiled by controversies. Most recently, Trump ran into a buzz saw of criticism with his decision, announced June 1, to withdraw the U.S. from participation in the Paris climate accord.

He has also been under significant political scrutiny over the June 8 testimony of former FBI Director James Comey before the Senate Intelligence Committee. Those events coincided with the lower averages seen in the past two weeks. But, given that his averages were almost as low in the weeks leading up to them, it is difficult to establish direct causality between specific events and the president’s ratings.

The highly polarized nature of Americans’ views of Trump (and Obama before him) have been well-documented, and that pattern continues: Trump’s 8% average approval rating among Democrats last week is right at his 9% average to date; His 83% approval among Republicans is three points lower than his average among that group; Among independents, his approval is 31%, five points lower than his average among that group; Notably the spread between Republican ‘confidence’ and Democrat ‘confidence’ (via Bloomberg) has not been this wide since before Barack Obama was elected…

Trump’s job approval ratings are the worst of his administration so far, and Trump continues to have the lowest ratings for a newly elected president in Gallup’s history of approval ratings. The previous low first-year approval rating in June for an elected president was Bill Clinton, with a 37% approval June 5-6, 1993. The approval ratings of all other presidents since 1953 in June (May in the case of Eisenhower) of their first year after being elected were above 50%.

Read more …

Another nation divided, but not along the same lines. Older people, especially pensioners, vote Conservative, and a much higher percentage of them actually vote.

• Age Is The New Dividing Line In British Politics (YouGov)

Since last week’s election result YouGov has interview over 50,000 British adults to gather more information on how Britain voted. This is part of one of the biggest surveys ever undertaken into British voting behaviour, and is the largest yet that asks people how they actually cast their ballots in the 2017 election. The bigger sample size allows us to break the results down to a much more granular level and see how different groups and demographics voted on Thursday. In electoral terms, age seems to be the new dividing line in British politics. The starkest way to show this is to note that, amongst first time voters (those aged 18 and 19), Labour was forty seven percentage points ahead. Amongst those aged over 70, the Conservatives had a lead of fifty percentage points.

In fact, for every 10 years older a voter is, their chance of voting Tory increases by around nine points and the chance of them voting Labour decreases by nine points. The tipping point, that is the age at which a voter is more likely to have voted Conservative than Labour, is now 47 – up from 34 at the start of the campaign.

Despite an increase in in youth turnout, young people are still noticeably less likely to vote than older people. While 57% of 18 and 19 year-olds voted last week, for those aged 70+ the figure was 84%.

Read more …

Corbyn growth territory.

• UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)

Low-income families are going without beds, cookers, meals, new clothes and other essential items as they struggle to cope with huge debts run up to pay domestic bills, according to a survey highlighting the cost-of-living crisis experienced by the UK’s poorest households. Clients of the debt charity Christians Against Poverty (CAP) had run up an average of £4,500 in debts on rent or utility bills, forcing them on to what the charity described as a “relentless financial tightrope” juggling repayments and basic living costs, leaving many acutely stressed and in deteriorating health. The pressure of coping with low income and debt frequently triggered mental illness or exacerbated existing conditions, with more than a third of clients reporting that they had considered suicide and three-quarters visiting a GP for debt-related problems.

More than half were subsequently prescribed medication or therapy. “The crippling reality of living in poverty and debt is still unashamedly evident in every home we visit, and year on year we see financial difficulty taking a tighter grip,” said Matt Barlow, the UK chief executive of CAP. Experts said the survey highlighted the extreme hardship faced by the “new destitute” – people on low incomes who might in the past have been able to rely on a welfare safety net to help them through financial shocks but who now were forced to go into debt to survive, leaving them struggling to afford even the basics. Debt had a crushing effect on living standards, the CAP survey found, with one in 10 clients unable to afford to buy or repair a bed, washing machine, TV, sofa or fridge. Roughly the same proportion could afford to acquire furniture only on punitive rent-to-buy terms, for example paying £6 a week to acquire a bed and mattress over a set three-year period.

The impact on family life was severe, with a quarter of clients saying debt caused relationship breakdowns, and more than two-thirds saying they felt unable to cater for their children’s needs. A sixth said they could not afford to feed their children three meals a day. A third feared eviction. A tiny handful of clients – predominantly single mothers – reported that they had turned to prostitution to make ends meet. Prof Suzanne Fitzpatrick, of Heriot Watt University, the co-author of groundbreaking research into destitution, told the Guardian: “The new destitute are citizens who would previously have managed to avoid absolute destitution with the help of the welfare safety net. But the level of working age benefits is now so low that people barely managing to get by can easily find themselves in a position where they can’t afford even the basic essentials to eat, stay warm and dry, and keep clean.”

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“If you’re a trader or a speculator, I think you should be raising cash today, literally today..”

• Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)

DoubleLine Capital’s Jeffrey Gundlach said the establishment in Washington is trying to undermine President Donald Trump by running out the clock on his administration. “They’re really just trying to wait Trump out, trying to obstruct his agenda as much as possible,” Gundlach, one of the few money managers to predict Trump’s election, said during a webcast Tuesday. “Small change is what they’re looking for.” Gundlach, manager of the $53.9 billion DoubleLine Total Return Bond Fund, spoke during televised Senate testimony by Attorney General Jeff Sessions, which the money manager called “a sideshow or entertainment.” He called the U.S. political conflict “rope-a-dope,” a strategy used by boxer Muhammad Ali to wear out opponents.

Among Gundlach’s other observations:
• There’s a low probability of a recession.
• The days of low volatility markets are probably numbered.
• Expect higher bond yields and lower stock prices this summer.
• Yields on 10-year Treasuries are likely to end 2017 roughly in the 2.7% to 2.8% range, from about 2.2% currently.

The Dow Jones Industrial Average and the S&P 500 Index closed at record highs Tuesday prior to Gundlach’s talk. Futures trading implies a 98% probability the Federal Reserve will raise interest rates by 0.25% when it meets Wednesday. “If you’re a trader or a speculator, I think you should be raising cash today, literally today,” Gundlach said. “If you’re an investor, I think you can sit through a seasonally weak period.” The Total Return fund was up 2.7% this year through June 12, beating 84% of its peers, according to data compiled by Bloomberg.

Read more …

Yves Smith’s piece is too long and comprehensive to do justice here. Click the link.

• Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)

After having promised banks to get rid of Dodd Frank, which was never a strong enough bill to have a significant impact on profits or industry structure, Trump didn’t even back the House version of the bill to crimp Dodd Frank. But you’d never know that from the cheerleading from bank lobbyists upon the release of a 147 page document by the Treasury yesterday, the first of a series describing the gimmies that the Administration seeks to lavish on banks. As we’ll touch on below, the document repeatedly asserts that limited bank lending post crisis to noble causes like small businesses was due to oppressive regulations. We wrote extensively at the time that small business surveys showed that small businesses then overwhelmingly weren’t interested in borrowing and hiring. Businessmen don’t expand operations because money is cheap, they expand because they see a commercial opportunity.

But the even bigger lie at the heart of this effort is the idea that the US will benefit from giving more breaks to its financial sector. As we’ve written, over the last few years, more and more economists have engaged in studies with different methodologies that come to the same conclusion: an oversized financial sector is bad for growth, and pretty much all advanced economies suffer from this condition. The IMF found that the optimal level of financial development was roughly that of Poland. The IMF said countries might get away with having a bigger banking sector and pay no growth cost if it was regulated well. Needless to say, with the banking sector already so heavily subsidized that it cannot properly be considered to be a private business, deregulating with an eye to increasing its profits is driving hard in the wrong direction.

[..] So if it wasn’t Dodd Frank, what was led the banks to focus so much on high FICO score borrowers? It was mortgage servicing reforms, which made it hard to foreclose due to stopping abuses, like dual tracking (continuing to foreclose even when supposedly considering a mortgage modification). To look at the bigger picture, it’s hard to take bank complaints about oppressive regulation seriously in light of this:

Read more …

But the domestic echo chamber makes that hard to do.

• Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)

All of America’s allies and partners have been calling on Washington to improve its relations with Russia, Secretary of State Rex Tillerson acknowledged after the US Senate reached a bipartisan deal to boost sanctions against Moscow. “I have yet to have a bilateral, one-on-one, a poolside conversation with a single counterpart in any country: in Europe, Middle East, even South-East Asia, that has not said to me: please, address your relationship with Russia, it has to be improved,” Tillerson said on Tuesday during testimony before the Senate Appropriations Committee on Foreign Operations. Tillerson added that the countries urging the US to review its Russian policy “believe worsening this relationship will ultimately worsen theirsituation.” He added: “People have been imploring me to engage and try to improve the situation, so, that was our approach anyway.”

Earlier, Tillerson warned that the US Senate’s bipartisan deal on new set of restrictive measures against Moscow might further worsen relations with Russia and hinder existing efforts on joint US-Russia progress to fight terrorism in Syria. “There are efforts under way in Syria specifically, those are, I would say, progressing in a positive way,” America’s top diplomat said on Tuesday during testimony to the Senate Foreign Relations Committee. Despite the relationship between US and Russia being “at an all-time low,” according to Tillerson, the “objective is to stabilize that” rather than deteriorate it further. Washington is “engaged” and working with Moscow “in a couple of areas,” including on such issues of international importance as the Ukrainian and Syrian crises. “We have some channels that are open, where we are starting to talk, and I think what I wouldn’t want to do is close the channels off,” Tillerson told the Senate committee, warning that to establish “something new… will take time.”

Read more …

Yes, they are.

• Are Public Pensions A Thing Of The Past? (CNN)

New teachers and state workers will no longer get a traditional pension in Pennsylvania. Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019. The new plan combines elements of a traditional pension and a 401(k)-style account. Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office. But Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support. “It’s a win for Pennsylvania taxpayers and fair to Pennsylvania’s workforce,” Wolf said at a press conference Monday.

The reform will build upon previous legislation to help fully fund the pension system and preserve a path to retirement for public workers, said Greg Mennis, a director at Pew Charitable Trusts. “Our research indicates that this would be one of the most – if not the most – comprehensive and impactful reforms any state has implemented,” he wrote in a letter urging state lawmakers to pass the bill. Over the past 10 years, Rhode Island, Virginia, Tennessee and Georgia have created plans similar to Pennsylvania’s. They require workers to contribute some of their salary to a pension-like plan that guarantees a certain payout based on their salary. Workers also contribute to a 401(k)-style plan that they can take with them if they leave public service. The state will make contributions to both plans on their behalf.

In Pennsylvania, workers will be defaulted into a hybrid plan, but there will be two other versions they could opt into. Under the default, workers will have to contribute a total of 8.25% of their salary. (Teachers currently contribute 7.5% and other public workers pay 6.25%.) Most will have to work until 67, instead of 65, in order to get their full payout in retirement. A state employee who works for 35 years and earns a final salary of $60,000, currently receives an estimated $40,000 a year in retirement. Under the reformed system, that same worker would receive $34,1048, according to the Independent Fiscal Office report. [..] Like pension plans in other states, Pennsylvania’s was badly hurt by the Great Recession. It also took a hit because of retroactive benefit increases made before the market took a dive. The pension fund went from a nearly $20 billion surplus in 2000 to a $70 billion deficit in 2015.

Read more …

ZIRP machines have taken over.

• Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)

Quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets, according to a new report from JPMorgan. “While fundamental narratives explaining the price action abound, the majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” Marko Kolanovic, global head of quantitative and derivatives research at JPMorgan, said in a Tuesday note to clients. Kolanovic estimates “fundamental discretionary traders” account for only about 10% of trading volume in stocks. Passive and quantitative investing accounts for about 60%, more than double the share a decade ago, he said.

In fact, Kolanovic’s analysis attributes the sudden drop in big technology stocks between Friday and Monday to changing strategies by the quants, or the traders using computer algorithms. In the weeks heading into May 17, Kolanovic said funds bought bonds and bond proxies, sending low volatility stocks and large growth stocks higher. Value, high beta and smaller stocks began falling in a rotation labeled “an unwind of the ‘Trump reflation’ trade,” Kolanovic said. “Upward pressure on Low Vol and Growth, and downward pressure on Value and High Vol peaked in the first days of June (monthly rebalances), and then quickly snapped back, pulling down FANG stocks” — Facebook, Amazon.com, Netflix and Google parent Alphabet, the report said.

Read more …

Told you those output cuts wouldn’t go anywhere.

• OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)

OPEC’s oil production jumped in May, despite the exporter group agreeing last month to extend its six-month deal to cap output into 2018. Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq. Output from Libya surged by more than 178,000 bpd to 730,000 bpd as the country’s rival factions moved toward reconciliation, and supplies disrupted throughout years of conflict remained on line. In Nigeria, production was up more than 174,000 bpd to 1.68 million bpd as supplies sidelined by militant attacks on energy infrastructure last year came back into operation. With the gain, Nigeria reclaimed the title of largest African producer in OPEC from Angola, where output fell by 54,000 bpd, the biggest drop among the 13 members in May.

Iraq, OPEC’s second-largest producer, contributed the third-biggest increase with a more than 44,000 bpd jump. Baghdad has yet to cut deeply enough to hit its quota of 4.35 million bpd under the output cut deal. In May, it produced 4.42 million bpd. Only four countries were producing at or below the levels they agreed to in November: Saudi Arabia, Angola, Kuwait, and Qatar. Last month, OPEC and other exporters extended an agreement to remove 1.8 million barrels a day from the market in order to shrink brimming global stockpiles of crude oil. In May, inventories in the OECD, a group of mostly wealthy countries, remained 251 million barrels above the five-year average.

Read more …

More ground for shadow banks to take over.

• China Defaults Feared as Firms Confront Short Debt Addiction (BBG)

China’s leverage crackdown is forcing local companies to confront their addiction to short-term bond sales that they use to roll over debt. The shock therapy is worsening the outlook for corporate defaults in the second half of this year after borrowing costs jumped to a two-year high. With yields surging, Chinese non-banking firms sold 131 billion yuan ($19.3 billion) of bonds with a maturity of one year or less in May, the least since January 2014 and less than half of the same month last year, according to data compiled by Bloomberg. About 87% of the short note sales last month will be used for refinancing, according to Bloomberg data.

The habit of relying on borrowing short-term money to repay maturing debt has pushed up such liabilities to a total of 5.2 trillion yuan on China’s listed non-financial companies’ balance sheets as of March 31, the highest on record, according to data compiled by Bloomberg. With no sign of an end to the government’s campaign against leverage, the average coupon rate for bonds maturing in one year or less rose to 5.5% in June, deterring issuers from raising money to roll over debt. “Small issuance of short-term bonds will be a normal phenomenon in the coming six months because cash supply will probably remain tight,” said Ma Quansheng at Fullgoal Fund Management. “Both default risks and the number of corporate bond defaults may increase.”

The loose funding environment last year helped Chinese companies raise enough money to withstand repayment pressure so far in 2017. There have been 13 onshore defaults in the public bond market in 2017, compared with 16 in the same period of 2016. The yield on one-year AAA rated company bonds averaged 4.19% this year, up from 2.97% in 2016. HFT Investment Management said more note defaults may come as the economy doesn’t look good. In the second half of this year, Chinese non-banking firms must repay 2.36 trillion yuan of bonds. “The current rising borrowing costs may have a big impact on companies’ operations and finance,” said Lu Congfan at HFT Investment Management. “What can you do when you must refinance to repay maturing debt while facing such high borrowing costs? That would be a question challenging many local companies in the second half or next year.”

Read more …

Well, well… Let’s see it.

• Schaeuble Promises Greece Deal With Lenders On Thursday (R.)

German Finance Minister Wolfgang Schaeuble said on Tuesday he was confident that Greece and its international lenders will reach a compromise deal this week, a step that would unleash more loans for Athens. “We’ll manage it on Thursday. You’ll see,” Schaeuble said during a panel discussion in Berlin. Officials have said eurozone finance ministers and the IMF are likely to strike a compromise on Greece on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later. IMF head Christine Lagarde suggested a plan last week under which the Fund would join the Greek bailout now, because Athens is delivering on agreed reforms, but would not disburse any IMF money until the euro zone clarifies what debt relief it can offer Greece.

Read more …

Greeks don’t believe you, Wolfie…

• Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)

Alexis Tsipras has spent nearly two years telling Greeks that a debt deal and inclusion in the ECB’s quantitative-easing program will unleash an investment boom that salves the pain of austerity. The prime minister’s message hasn’t convinced Panagiotis Kouinis, a 60-year-old civil engineer in Corinth who says business has steadily dwindled through all of Greece’s eight-year crisis and has now ground almost to a halt. “What I know is they tell you pensions will be cut another 20%, wages down, and what is quantitative easing?” Kouinis said in an interview in his office near the city center. “Do we have to be economists so we can understand what they’re saying?” Across the country in places like Corinth, an industrial hub 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future.

In the meantime, as the ECB’s stimulus measures – including its asset-purchase program – buoy the rest of the euro-area economy, Greece’s output has been stagnant, leaving its people the most pessimistic in the region. Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That’s because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and IMF. That would leave Tsipras high and dry.

[..] Despite some signs of an improvement in industrial output, Greece has been heavily reliant on consumers and a booming tourist sector to keep GDP – which shrank by a quarter in the early years of the crisis – from continuing its slide. While the economy hasn’t been in a recession since 2015, and grew 0.4% at the start of the year, it hasn’t strung together more than two quarters of consecutive expansion in more than a decade. Accountancy firm PWC said in March that infrastructure investment plunged during the crisis, leaving a backlog of planned and in-progress projects amounting to more than 21 billion euros. Near Corinth, that includes rail, waste management, road and marina developments. “With taxation what it is, not only will no-one come to invest here, but they’d need to be mad to,” said Kouinis, the civil engineer. “Growth needs to start from public works, because the private sector has been killed.”

Read more …

Foreigners buy apartments in Athens to rent out to other foreigners on Airbnb. So wrong in so many ways.

• Foreign Buyers Snap Up Greek Property (K.)

Property buyers from abroad are this year growing at the fastest pace in a decade, as booming Greek tourism has had a positive impact on the property market too. According to the latest data from the Bank of Greece, in the first quarter of the year the inflow of capital from abroad for real estate acquisitions increased by 61.7% on an annual basis. The March figures have signaled a further improvement, since in the first couple of months the yearly rise had come to 56.7%. If the existing growth rate is sustained throughout 2017, it is likely that by the end of the year more than 430 million euros will have been invested the Greek property market from other countries. The equivalent figure for the whole of 2016 had amounted to 270 million euros, up 45.3% on the 2015 inflow of 186 million euros.

The only time a similar growth rate had been recorded before was in the first quarter of 2007, when foreign investors spent 66.5% more money on property acquisitions than a year earlier. Real estate professionals say this uptick in foreign funds entering the local property market is particularly positive because it came during a period when transactions are usually sparse: Expressions of buying interest this year started in the winter months, not in the summer when demand typically peaks. This has bolstered optimism about an even better summer in terms of transactions, which may reach their high for the entire period since the outbreak of the financial crisis.

The major rise in inflows this year is due to the increase in demand for apartments in Athens, primarily in the city center and the southern suburbs. This mainly concerns flats eligible for short-term leasing through Internet platforms such as HomeAway, Airbnb and FlipKey. It also concerns luxury mansions that would fit the bill for the same type of online platforms as well as for the purpose of getting a Golden Visas (for buys of properties worth 250,000 euros or more by investors from outside the European Union). Besides those buyers aiming for the five-year residence permits, considerable buying interest is also coming from Italy, France, Switzerland, Germany and the Scandinavian countries.

Read more …

It’s a miracle there are not many more victims.

• State Of Emergency Declared On Lesbos As 800 Left Homeless (AP)

Authorities in Greece have declared a state of emergency on the island of Lesvos after an earthquake left one woman dead and more than 800 people displaced. The 6.1 magnitude undersea quake on Monday occurred south of Lesvos but was felt as far as Istanbul, Turkey. Officials from the island’s regional government on Tuesday said homes in 12 villages in southern Lesvos had been seriously damaged or destroyed. The mostly elderly residents affected were being housed with relatives, in hotels or at an army-run shelter. The earthquake marked the second crisis to hit the island in the last two years, after hundreds of thousands of migrants and refugees, including many fleeing war in Syria and Iraq, crossed to Lesvos on boats from Turkey as they headed to Europe.

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Brussels should be forced to take in 100,000. In their new swanky buildings.

• ‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

Rome Mayor Virginia Raggi has asked the Italian Interior Ministry for stricter measures to be taken toward the influx of foreigners into the capital. A letter outlining the need for a “moratorium” on “the continued influx of foreign citizens” was sent by Raggi to Roman prefect Paola Basilone. “I find it impossible, as well as risky, to think up further accommodation structures,” she wrote in the letter, as quoted by La Repubblica on Tuesday. “This administration, given the high flows of unregistered migrants, hopes the assessments of new facilities take into account the evident migrant pressure on Roma Capitale [the City of Rome] and the possible devastating consequences in terms of social costs as well as for the protection of the beneficiaries themselves.”

In May, Raggi told RT that she was working to help accommodate refugees and asylum seekers in Rome, but also that she also has a responsibility to her constituents and other countries in the EU must do their part. “Let’s put it this way – Rome would be better off if European states didn’t build walls along their borders, but rather followed through on their obligations and respected the migrant quotas agreed upon by the EU,” she told RT’s Sophie Shevardnadze. “According to the law, the city of Rome must accept migrants, as Mayor – I have to follow the law and do everything in my power to make sure that people are granted a safe place to stay here. But if other European countries decide to finally follow through on their obligations, we will welcome that decision.” “As mayor of Rome, I have to accommodate migrants, but I am also responsible for the security of my city and its residents. We cannot ignore either issue.”

Read more …

Why There is Trump

Sep 262016
 
 September 26, 2016  Posted by at 9:33 pm Finance Tagged with: , , , , , , , ,  


Dorothea Lange Family of rural rehabilitation client, Tulare County, CA 1938

 

It’s over! The entire model our societies have been based on for at least as long as we ourselves have lived, is over! That’s why there’s Trump.

There is no growth. There hasn’t been any real growth for years. All there is left are empty hollow sunshiny S&P stock market numbers propped up with ultra cheap debt and buybacks, and employment figures that hide untold millions hiding from the labor force. And most of all there’s debt, public as well as private, that has served to keep an illusion of growth alive and now increasingly no longer can.

These false growth numbers have one purpose only: for the public to keep the incumbent powers that be in their plush seats. But they could always ever only pull the curtain of Oz over people’s eyes for so long, and it’s no longer so long.

That’s what the ascent of Trump means, and Brexit, Le Pen, and all the others. It’s over. What has driven us for all our lives has lost both its direction and its energy.

We are smack in the middle of the most important global development in decades, in some respects arguably even in centuries, a veritable revolution, which will continue to be the most important factor to shape the world for years to come, and I don’t see anybody talking about it. That has me puzzled.

The development in question is the end of global economic growth, which will lead inexorably to the end of centralization (including globalization). It will also mean the end of the existence of most, and especially the most powerful, international institutions.

In the same way it will be the end of -almost- all traditional political parties, which have ruled their countries for decades and are already today at or near record low support levels (if you’re not clear on what’s going on, look there, look at Europe!)

This is not a matter of what anyone, or any group of people, might want or prefer, it’s a matter of ‘forces’ that are beyond our control, that are bigger and more far-reaching than our mere opinions, even though they may be man-made.

Tons of smart and less smart folks are breaking their heads over where Trump and Brexit and Le Pen and all these ‘new’ and scary things and people and parties originate, and they come up with little but shaky theories about how it’s all about older people, and poorer and racist and bigoted people, stupid people, people who never voted, you name it.

But nobody seems to really know or understand. Which is odd, because it’s not that hard. That is, this all happens because growth is over. And if growth is over, so are expansion and centralization in all the myriad of shapes and forms they come in.

Global is gone as a main driving force, pan-European is gone, and whether the United States will stay united is far from a done deal. We are moving towards a mass movement of dozens of separate countries and states and societies looking inward. All of which are in some form of -impending- trouble or another.

What makes the entire situation so hard to grasp for everyone is that nobody wants to acknowledge any of this. Even though tales of often bitter poverty emanate from all the exact same places that Trump and Brexit and Le Pen come from too.

That the politico-econo-media machine churns out positive growth messages 24/7 goes some way towards explaining the lack of acknowledgement and self-reflection, but only some way. The rest is due to who we ourselves are. We think we deserve eternal growth.

And of course it’s confusing that the protests against the ‘old regimes’ and the growth and centralization -first- manifest in the rise of faces and voices who do not reject all of the above offhand. That is to say, the likes of Marine Le Pen, Donald Trump and Nigel Farage may be against more centralization, but none of them has a clue about growth being over. They don’t get that part anymore than Hillary or Hollande or Merkel do.

So why these people? Look closer and you see that in the US, UK and France, there is nobody left who used to speak for the ‘poor and poorer’. While at the same time, the numbers of poor and poorer increase at a rapid clip. They just have nowhere left to turn to. There is literally no left left.

Dems in the US, Labour in the UK, and Hollande’s ‘Socialists’ in France have all become part of the two-headed monster that is the political center, and that is (held) responsible for the deterioration in people’s lives. Moreover, at least for now, the actual left wing may try to stand up in the form of Jeremy Corbyn or Bernie Sanders, but they are both being stangled by the two-headed monster’s fake left in their countries and their own parties.

Donald Trump, and I say this mere hours before the first debate, may still lose the election, but it doesn’t truly matter. He’s just the figure head -dare we say bobble head?- for a development, even a revolution, that he doesn’t control any more than you and I do. He’s got a role to play but he didn’t write it.

If he wins, his program too, like all the others, will be targeted towards more growth, and there’s no such thing available. And while in a no-growth scenario it’ll be a good thing for America to bring jobs back home, as is trump’s message, they won’t spell anything that even comes close to growth.

‘Leaders’ such as Trump and Le Pen can only be seen as intermediate figures necessary for nations, and indeed the world, to adapt to an entirely different paradigm. One that is at best based on consolidation, on trying not to lose too much, instead of trying to conquer the world.

But also one that is likely to lead to warfare and mayhem, because nobody’s been willing to address even the possibility of no more growth, and therefore everyone will be looking to squeeze growth out of any available place, starting with their neighbors, and the globe’s weakest. It’s the Roman empire all over again, where the core strangled the periphery ever harder until the Barbarians and the Visigoths decided it was enough and then some.

That is the meaning of Donald Trump, and of Brexit. You’re not going to understand these things without taking a few steps back, and without looking at history, and especially without acknowledging the possibility that, in economics, perpetual growth may indeed be what physics has always said it was: an impossible pipedream.

Trump has a role to play in this whether he wins the election or not. He’s the big red flashing American warning sign that the increase in poverty that has so far been felt only among those who it has hit, will shake the familiar political landscape on its foundations, and that this landscape will never return.

Look at European political parties established for decades and you see the exact same thing. Only there you often have other ‘escape valves’, because new parties are easier to form and get onto national forums. But it’s still the same thing.

Centralization, globalization, UN, NATO, IMF, all these ‘principles’ and organizations will see their influence and support dwindle, and rapidly. It’s really over. Debt did it. Or rather, our doomed mission to hide our downfall behind a veil of ever more debt did.

And Donald Trump has a role to play in that. If Hillary wins, it’ll only be more, and ever more, and spastically more, attempts to convince everyone that more globalization is the way to go, and that going to war with Putin and sending young Americans into battle in fields lost before they enter is the way of the future.

Both will be failures. All we really get to do is try to decide who may be the lesser failure.

But anyway, that’s where Trump comes from, and he doesn’t understand the half of it. Trump is there because everything else failed. And he will fail too, win or lose.

 

 

Debt Rattle June 20 2016

Jun 202016
 
 June 20, 2016  Posted by at 9:02 am Finance Tagged with: , , , , , , ,  


Harris&Ewing Car exterior. Washington & Old Dominion R.R. 1930

• IMF Calls For Overhaul Of Abenomics (R.)
• The Economy Is Not What It Seems (Roberts)
• Asking Prices For Homes In England And Wales Rise To Record High (G.)
• City of London Fears Brexit Will End Golden Age (BBG)
• Brexit Is The Best Outcome (Gambles)
• Brexit – The End of the Universe (Rose)
• The Progressive Argument For Leaving The EU Is Not Being Heard (G.)
• Economic Gauges Raise Specter of Recession (WSJ)
• Italy PM Renzi Suffers Setback As 5-Star Makes Breakthrough (R.)
• China’s Housing Market in Flux as Price Recovery Tapering Off (BBG)
• Chinese Bare All for Credit (BBG)
• World Refugee Day: 65.3 Million People Displaced (R.)
• Turkish Border Guards Shoot and Kill 8 Syrian Refugees, 3 Children (G.)

The amount of nonsense that can be held in just a few words is breathtaking. Nobody knows what deflation is. The IMF and Shinzo Abe: the deaf and the blind.

• IMF Calls For Overhaul Of Abenomics (R.)

The IMF on Monday urged Japan’s government to overhaul its stimulus policies by moving income policies and labor market reform to the forefront, supported by more monetary and fiscal stimulus. “Under current policies, the high nominal growth goal, the inflation target, and the primary budget surplus objective all remain out of reach within the timeframe set by the authorities,” the IMF said in a statement after “Article 4” annual consultations on economic policy with Japan.

The global lender called for a more flexible monetary policy framework with the Bank of Japan abandoning a specific calendar date for achieving its 2% inflation target. It added that Japan would need to raise the sales tax to at least 15% to strike the right balance between growth and fiscal sustainability. “Without bolder structural reforms and credible fiscal consolidation, domestic demand could remain sluggish, and any further monetary easing could lead to overreliance on depreciation of the yen,” the IMF said.

Read more …

Strong graphs.

• The Economy Is Not What It Seems (Roberts)

Economic cycles are only sustainable for as long as excesses are being built. The natural law of reversions, while they can be suspended by artificial interventions, can not be repealed. More importantly, while there is currently “no sign of recession,” what is going on with the main driver of economic growth – the consumer? The chart below shows the real problem. Since the financial crisis, the average American has not seen much of a recovery. Wages have remained stagnant, real employment has been subdued and the actual cost of living (when accounting for insurance, college, and taxes) has risen rather sharply. The net effect has been a struggle to maintain the current standard of living which can be seen by the surge in credit as a percentage of the economy.

To put this into perspective, we can look back throughout history and see that substantial increases in consumer debt to GDP have occurred coincident with recessionary drags in the economy.

Read more …

A nation built on debt.

• Asking Prices For Homes In England And Wales Rise To Record High (G.)

Asking prices for homes in England and Wales have risen to a new record high, and sales are being agreed quicker than at any point since 2010, according to latest figures from the property website Rightmove. The site, which measured asking prices for just under 150,000 properties listed over the past month, said they had risen by 0.8% in June, to an average of £310,471 – 5.5% higher than in June 2015. Asking prices have risen every month so far in 2016, and Rightmove said the rush for properties ahead of April’s stamp duty increase for second homes and the availability of cheap mortgages had supported the market. As a result of increased buyer demand, the average time taken to sell a property dropped to 57 days, compared with 60 in May and 65 in June 2015.

The headline figures do not suggest that the looming EU referendum is having an impact on buyers’ decisions, but Rightmove said there were signs that sellers were sitting tight until the outcome is known. “Fewer new sellers are coming to market, with this month’s numbers being 5.3% below the monthly average for this time of year since 2010,” the monthly report said. “The most reluctant are owners of larger homes, those with four or more bedrooms, with 6.6% fewer sellers over the same time period. Given the well-documented structural shortages of housing supply any longer-term reluctance of owners to come to market would be a worrying trend.”

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Far too big.

• City of London Fears Brexit Will End Golden Age (BBG)

Gooses don’t come much more golden than the City of London. The narrow lanes of the Square Mile, lined with handsome neoclassical stone and gleaming modern glass, are at the heart of a British financial sector that paid 66 billion pounds ($94 billion) in tax last year and employs more than 2 million people nationwide. It is oft-resented, has helped push the capital’s house prices out of reach for many, and required a bailout of more than 100 billion pounds from taxpayers less than a decade ago. It is also without a doubt the country’s most lucrative industry. Yet ahead of a June 23 referendum on European Union membership, many of the City’s leading lights are deeply worried about its future.

Since almost exactly 30 years ago, when Conservative Prime Minister Margaret Thatcher liberalized finance through a package of reforms so dramatic they were dubbed the “Big Bang,” London has become the undisputed financial capital of a united Europe – a status that now hangs in the balance. “Just because the City is strong at the moment doesn’t mean that it has a perpetual right to remain so,” said Marcus Agius, 69, the chairman of Barclays during the 2008 global financial crisis. “Brexit would be an act of supreme folly. In the future we would look back and wonder: ‘Why the hell did we do that? What were we thinking?’”

Read more …

“..remaining in a collapsing tower of bad debt will guarantee a far worse economic outcome and catastrophic confrontations between Europe’s ever narrowing core and ever widening periphery..”

• Brexit Is The Best Outcome (Gambles)

Imagine this week that the exit vote prevails, the U.K. government stands down and in a ripple effect not seen in Europe since the fall of the Berlin Wall, the immediate dissolution of the EU is announced and there is a return to national currencies. Equities would plunge and trading in the euro currency would be suspended. European bourses would go into free-fall, continuing even after the U.K., the U.S. and others initially appear to stabilize. Each country’s no longer fungible euro would be converted into national currencies and chaos would reign until many EU national governments bail out banks. The uncertainty caused would puncture China’s debt bubble, hitting emerging and developed markets.

After a few years of global pain, by 2018 to 2020 peripheral Europe, the U.K., the U.S. and ‘healthier” emerging economies might begin to recover. Recovery in Germany and China, however, may take far longer. Until now Germany has successfully re-imposed the costs of the reckless euro borrowing spree on debtor banks, individuals, corporations and even governments. A break-up of either the euro or the EU would expose German banks’ vulnerable underbellies, having effectively underwritten the euro project in exchange for German control over sovereign budgets. Sounds scary? In my view, this would be the best long term outcome.

However, it’s extremely unlikely to happen. Either U.K. voters will decide to remain or, if the leave campaign wins, the U.K. government and Eurocrats will desperately cling on to power. This may delay the collapse but would leave a far more painful journey with a much more severe conclusion ahead. [..] The EU has already facilitated the destruction of private and sovereign balance sheets with reckless levels of record debt that can never be repaid. This is why leaving now will precipitate a global economic drama. It’s also why remaining in a collapsing tower of bad debt will guarantee a far worse economic outcome and catastrophic confrontations between Europe’s ever narrowing core and ever widening periphery.

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“The EU elite feel too secure and have too much to lose.”

• Brexit – The End of the Universe (Rose)

[..] The EU spends millions every year maintaining the illusion that it is one of the great European achievements. The problem is that it has not been the case for a long time. It has become the enforcer of a now-liberal agenda, converting the particular interests of big business into European law. So we have an anti-democratic EU under German hegemony furthering the interests of large corporations – I doubt this is what the people of Europe want or deserve. The words of the British playwright Dennis Potter apply to the current situation in the EU: “They are not interested in our development or emancipation. That is the quality of an occupying force.” This is a conclusion the Greeks reached years ago.

It has been interesting to follow the stages of the Brexit campaign. Initially it seemed to be a referendum concerning David Cameron’s government. Then the role of immigration took centre stage. Now the question of national sovereignty and the lack of democracy in the EU has become an important debating point. There is even a nascent debate among the British left if the EU can be re-democratised, which is rather odd, seeing that it never was a democratic organisation. There seems to be little hope of the EU being reformed. The EU elite feel too secure and have too much to lose. A democratic EU is completely useless for them, especially for the Germans.

Schäuble has recently joined those calling for a stop to further EU integration. Germany no longer needs integration, which implies compromise, when it is already calling the shots. As I was recently in Brussels a member of an NGO explained that Germany is very content with the current EU situation. They dictate policy. There may be resistance here and there, but these cases are never existential for Germany and its clients. Brexit however offers Britain a unique opportunity. Once out of the EU, who are the Tories going to blame when it becomes clear that it is mainly they who are ruining Britain, not the EU or the immigrants?

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The closer they try to make the union, the more violent the reactions will be.

• The Progressive Argument For Leaving The EU Is Not Being Heard (G.)

The British economy has become increasingly dominated by the fortunes of the financial sector, with the bankers responsible for the worst slump since the 1930s escaping pretty much scot free. London and the rest of the UK have become two countries, which explains why hostility to the EU increases with distance from the capital. Nor is this phenomenon confined to the UK. It has become commonplace to bracket growing support for leave in poorer parts of Britain with Donald Trump’s emergence as the Republican candidate in this year’s US presidential election, but populist and anti EU sentiment is on the rise across Europe.

The US research company Pew conducted a survey earlier this year to test sentiment towards the EU. In Britain, 48% said they had an unfavourable view of the EU and 44% said they had a favourable view. In France, the anti-EU sentiment was much more pronounced at 61% and 38% in favour, while in Germany there had been an eight-point drop in support for the EU in the past year, leaving those in favour only narrowly ahead at 50% against 48% . The impact of the great recession in Europe has been exacerbated by monetary union, a policy blunder of catastrophic proportions. The euro has been responsible for the slow growth and high unemployment that has angered the French, and the high debts and that have alarmed the Germans.

Stir in the unexpectedly large flows of refugees from the Middle East and North Africa, and you have a toxic mix. Last summer, when the Greek debt crisis was at its most intense, Europe’s leaders came up with a plan. The “five presidents’ report” laid down a step-by-step approach to a United States of Europe, with banking union followed by a common budget and finally political union. Getting even the least controversial part of this agenda – banking union – past sceptical European electorates has proved impossible. Yet the alternative approach, breaking up the euro and giving countries more control over their own economic destiny, is seen as not just potentially dangerous but also a betrayal of the idea of ever-closer union.

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Useless talk about how hard forecasting is.

• Economic Gauges Raise Specter of Recession (WSJ)

Gut-wrenching gyrations in financial markets early in the year helped summon the specter of a new recession. Now, warning signs are coming mostly from the U.S. economy itself. Hiring is slowing, auto sales are slipping and business investment is dropping. America’s factories remain weak and corporate profits are under pressure. All are classic signs of an economic downturn, and forecasters have certainly noticed. In a Wall Street Journal survey this month, economists pegged the probability of a recession starting within the next year at 21%, up from just 10% a year earlier. Some economists think the risk is even higher. Whether this proves to be the precursor to a recession or yet another false alarm could take years to sort out.

Uneven economic growth throughout the seven-year expansion has delivered several such scares that passed. But plenty of gauges are pointing to a decent chance of a recession starting within the next 18 months. “Like everybody, I can see clouds on the horizon,” said Stanford University economist Robert Hall, chairman of the National Bureau of Economic Research committee that will—eventually—identify the start date of the next recession. But, he said, “Nobody’s very good at predicting. I don’t even try.” Financial-market convulsions at the start of the year stoked worries about a possible recession. But continued strength in the labor market reassured most economists about the resilience of the expansion, and markets largely calmed.

While the economy is still adding jobs, the recent hiring slowdown has spooked some forecasters. May’s growth in payrolls—just 38,000 jobs—was the weakest month of hiring since U.S. employers stopped shedding jobs in 2010. Barclays economist Michael Gapen noted that since 1960, persistently slower hiring compared with the recovery average, as seen in recent months, “more often than not” was followed by a recession in the next nine to 18 months.

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M5S won’t be happy about not getting Milan.

• Italy PM Renzi Suffers Setback As 5-Star Makes Breakthrough (R.)

Italian Prime Minister Matteo Renzi was trounced by the anti-establishment 5-Star Movement in local elections in Rome and Turin on Sunday, clouding his chances of winning a do-or-die referendum in October. The result represented a major breakthrough for 5-Star, which feeds off popular anger over widespread corruption, with the party’s Virginia Raggi, a 37-year-old lawyer, making history by becoming the first woman mayor in the Italian capital. “A new era is beginning with us,” said Raggi, who won 67% of the vote in the run-off ballot. “We’ll work to bring back legality and transparency to the city’s institutions.”

As a consolation for Renzi, his center-left Democratic Party (PD) held on to power in Italy’s financial capital Milan and in the northern city of Bologna, beating more traditional, center-right candidates in both places. Renzi has said he would not step down whatever the results on Sunday. Instead, he has pinned his future on the referendum on his constitutional reform that, he says, will bring stability to Italy and end its tradition of revolving-door governments. But the losses in Rome and Turin suggest he might struggle to rally the nation behind him, with opposition parties lined up to reject his reform and even his own PD divided over the issue.

[..] The PD’s defeat in Rome had been expected after widespread criticism of its management of the city over the past three years, with its mayor forced to resign in 2015 in a scandal over his expenses. But the loss in Turin, a center-left stronghold and home of carmaker Fiat, was a major shock. The incumbent, Piero Fassino, a veteran party heavyweight, was swept aside by 5-Star candidate Chiara Appendino, 31, who overturned an 11-point gap after the first round to win 55% of the vote. “It will be difficult (for the PD) to downplay what happened,” wrote Massimo Franco, leading political commentator for the Corriere della Sera newspaper.

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How to make even Bizarro jealous: ..the recovery is almost hitting the ceiling.. That mortgages graph is frightening by the way.

• China’s Housing Market in Flux as Price Recovery Tapering Off (BBG)

The recovery in China’s housing market that helped underpin the economy in the first half is showing signs of tapering off. New-home prices excluding government-subsidized housing climbed in 60 cities in May, down from 65 in April, among the 70 tracked, the National Bureau of Statistics said Saturday. With less of a boost from a recovering property market likely in the second half, the government will need to find other drivers such as infrastructure investment to meet its growth goal of at least 6.5% this year, according to Shen Jianguang at Mizuho. “The housing market is in flux,” Shen said. “The government is likely to step up policies to encourage home-buying in places where demand is weak and inventories of unsold housing are still high as the destocking policy didn’t yield the expected results.

” Faced with a massive pile of unsold homes in smaller cities, the government and central bank since late 2014 had unleashed a range of measures aimed at improving demand for homes to clear the overhang. While inventory levels may not have budged much, mortgage demand has, rising to a record last month, according to the latest data from the central bank. Still, the recovery in home prices last month abated as local governments put curbs in top economic centers like Shanghai and Shenzhen where prices have been surging, while they deployed home-buying stimulus in smaller cities to clear the glut of unsold residences. “This market rebound since last May has been fueled by credit and easing measures, making it unsustainable in some regions,” said Xia Dan at Bank of Communications. “Now the recovery is almost hitting the ceiling.”

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Some send nude selfies to get a better loan.

• Chinese Bare All for Credit (BBG)

Talkative people pay back loans. The very talkative default. Too taciturn is no good either. Also, don’t take out a loan at 4 a.m. Those are lessons from online lenders in China that are tracking people’s behavior – via apps on their mobile phones – and taking it into account when deciding what their credit ratings should be. Chinese consumers don’t mind handing over personal details that would spark outrage in the West, in exchange for lower interest rates. The Chinese willingness to share is key to China’s plan to create the largest repository of online data on its citizens and their habits in the world. More than 80% of what’s collected is in the hands of the government, which will make it largely available for private sector use, Chinese Premier Li Keqiang recently told an audience in China that included Dell CEO Michael Dell.

WeLab Ltd., a Hong Kong-based online lender that makes loans in China, looks at what apps people have downloaded, where they go using the phone’s GPS tracker, their social networks and their school records. It offers discounted interest rates for each extra piece of personal information that helps profile customers for credit ratings. In Hong Kong, for example, giving WeLab access to a Facebook account gets a 5% discount on the cost of a loan, and access to LinkedIn gets you 10% off, on loans with interest rates that otherwise reach as high as 20%. “Chinese people have no issue handing over their personal data, giving you their credit card number, giving you their bank account,” said GGV Capital’s Jenny Lee, whose firm has invested in data-hungry tech giants such as Alibaba. “Look at the whole internet finance sector, people are giving you their bank statement so you can do profiling.”

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Another record. We’re number 1!

• World Refugee Day: 65.3 Million People Displaced (R.)

A record 65.3 million people were uprooted worldwide last year, many of them fleeing wars only to face walls, tougher laws and xenophobia as they reach borders, the United Nations refugee agency said on Monday. The figure, which jumped from 59.5 million in 2014 and by 50% in five years, means that 1 in every 113 people on the planet is now a refugee, asylum-seeker or internally displaced in a home country. Fighting in Syria, Afghanistan, Burundi and South Sudan has driven the latest exodus, bringing the total number of refugees to 21.3 million, half of them children, the UNHCR said in its “Global Trends” report marking World Refugee Day.

“The refugees and migrants crossing the Mediterranean and arriving on the shores of Europe, the message that they have carried is that if you don’t solve problems, problems will come to you,” U.N. High Commissioner for Refugees Filippo Grandi told a news briefing. “It’s painful that it has taken so long for people in the rich countries to understand that,” he said. “We need action, political action to stop conflicts, that would be the most important prevention of refugee flows.” A record 2 million new asylum claims were lodged in industrialized countries in 2015, the report said. Nearly 100,000 were children unaccompanied or separated from their families, a three-fold rise on 2014 and a historic high.

Germany, where one in three applicants was Syrian, led with 441,900 claims, followed by the United States with 172,700, many of them fleeing gang and drug-related violence in Mexico and Central America. Developing regions still host 86% of the world’s refugees, led by Turkey with 2.5 million Syrians, followed by Pakistan and Lebanon, the report said.

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Our friend Erdogan.

• Turkish Border Guards Shoot and Kill 8 Syrian Refugees, 3 Children (G.)

Eight Syrian refugees have been shot dead by Turkish border guards as they tried to escape war-torn northern Syria, a human rights watchdog has claimed. Three children, four women and one man were killed on Saturday night, according to the Syrian Observatory for Human Rights. It said a total of 60 Syrian refugees had been shot at the border since the start of the year. Six of this weekend’s casualties were from the same family, said the observatory’s founder, Rami Abdelrahman. “I sent our activists to hospital there, we have video [of the corpses], but we haven’t published it because there are children [involved],” he said.

The Local Coordination Committees, a network of activists inside Syria, supported the claim, reporting that one of the children was as young as six. Syrian refugees have been making illegal crossings of the Turkish border as Jordan, Turkey and Lebanon have made it virtually impossible for them to leave Syria legally. There have been reports of shootings on the border since at least 2013, and rights groups fear that the number of incidents has increased since European countries, including Britain, began pressing Turkey to curb migration flows towards Europe late last year.

Read more …

Debt Rattle May 8 2016

May 082016
 
 May 8, 2016  Posted by at 9:31 am Finance Tagged with: , , , , , , , ,  Comments Off on Debt Rattle May 8 2016


DPC Peanut stand, New York 1900

• Saudi Arabia’s Oil ‘Maestro’ Exits As Young Prince Flexes Muscles
• Saudi Shake-Up Rolls On With Big Reshuffle Of Economic Posts (R.)
• Canada Fire ‘Out Of Control,’ Doubles In Size (AFP)
• 70,000 Fort McMurray Foreign Workers May Have To Leave Canada (AFP)
• China April Exports, Imports Decline More Than Expected (R.)
• Britain Braced For A Ban On Second Homes (DM)
• The TTIPing Point: German Protests Threaten Trade Deal (Spiegel)
• Is For-Profit Care For The Elderly The Answer? (Economist)
• On The Frontline Of Africa’s Wildlife Wars (G.)
• German Vice Chancellor Urges Debt Relief For Greece (R.)
• Greece Has ‘Basically Achieved’ Reform Goals, Says Juncker (AFP)
• 1,700 Years Ago, Mismanagement Of A Migrant Crisis Cost Rome Its Empire (Q.)

Panic in Riyadh.

• Saudi Arabia’s Oil ‘Maestro’ Exits As Young Prince Flexes Muscles

The end of Ali al-Naimi’s more than two-decade tenure as Saudi Arabia’s oil minister signals a new era for crude markets, analysts said on Saturday, and appeared to be a reaffirmation of Saudi policy to let oil set its own pricing. On Saturday, Saudi Arabia issued a royal decree that replaced al-Naimi with Khalid al-Falih, chairman of Saudi Aramco, as part of a broad reshuffling of the cabinet. The move came as the world’s largest oil producer continues to grapple with the fallout from the global bear market in crude oil. Al Naimi was the most watched figure in the oil world, and was often described as a “maestro” of the market. His utterances on production levels could swing prices and drive the direction of oil for months. Last month, a high-stakes summit in Doha between OPEC and non-OPEC producers failed to produce an agreement to freeze output, in what was seen as the product of tensions between Saudi Arabia and Iran.

The failure of Doha reinforced what many analysts have said for months: That the oil cartel was quickly losing its ability to set the agenda of world oil markets, and influence prices. Al-Naimi battled to manage the price of oil throughout his time as minister. In his absence, the Saudis may allow market forces to play a greater role in setting the cost of crude, according to observers. “What that means is you’ll have much more market volatility. You’ll have higher highs and lower lows if you don’t manage” crude prices, Pira Energy Group founder and executive chairman Gary Ross told CNBC on Saturday. Al-Naimi was a “stabilizing force,” and markets could react negatively to his absence, said Ross, who has known al-Naimi for more than 20 years. Although savvy observers say the aging al-Naimi was ready to vacate his post, the implications of the shake up are still far reaching. “The Saudi put is gone,” Ross added.

Read more …

Say what? “..encouraging Saudis to spend money at home by creating more entertainment opportunities.”

• Saudi Shake-Up Rolls On With Big Reshuffle Of Economic Posts (R.)

Saudi Arabia’s King Salman on Saturday replaced his veteran oil minister and restructured some big ministries in a major reshuffle apparently intended to support a wide-ranging economic reform programme unveiled last week. The most eye-catching move was the creation of a new Energy, Industry and Natural Resources Ministry under Khaled al-Falih, chairman of the state oil company Aramco. He replaces the 80-year-old oil minister Ali al-Naimi, in charge of energy policy at the world’s biggest oil exporter since 1995. But major changes were also made to the economic leadership, with Majed al-Qusaibi named head of the new Commerce and Investment Ministry, and Ahmed al-Kholifey made governor of the Saudi Arabian Monetary Agency (SAMA), the central bank.

The changes, announced in a series of royal decrees, go far beyond Salman’s previous reshuffles since he became king in January last year, and also put the stamp of his son, Deputy Crown Prince Mohammed bin Salman, author of the Vision 2030 reform programme, on the government. Prince Mohammed’s programme has been presented as a sweeping rethink of the entire way that Saudi Arabia’s government and economy will function to prepare for a future that is less dependent on oil income. Some of the most important elements of the plan, which will be fleshed out in coming weeks, involve creating a massive sovereign wealth fund, privatizing Aramco, cutting energy subsidies, expanding investment and streamlining government. The plan also seeks to boost revenues by increasing the number of foreign pilgrims outside the main annual Haj, and encouraging Saudis to spend money at home by creating more entertainment opportunities.

Read more …

The Alberta blaze is so big smoke from the fire is being detected in Florida.. It’s now threatening to cross the border into both Sasketchewan and the Northwest Territories too. It’ll take months to get it under control.

• Canada Fire ‘Out Of Control,’ Doubles In Size (AFP)

A ferocious wildfire wreaking havoc in Canada doubled in size and officials warned that the situation in the parched Alberta oil sands region was “unpredictable and dangerous.” “This remains a big, out of control, dangerous fire,” Public Safety Minister Ralph Goodale said of the raging inferno bigger than London that forced the evacuation of the city of Fort McMurray. Winds were pushing the flames east of the epicenter around the oil city late Saturday, as nearly all 25,000 people who were still trapped to the north finally left town, either via airlift or convoys on the roads. The wildfire had doubled in size in one day, covering more than 200,000 hectares (494,000 acres) by midnight and continuing to grow, the Alberta Emergency Management Agency said in an update late Saturday. “Fire conditions remain extreme,” it said.

Low humidity, high temperatures nearing 30 degrees Celsius (86 Fahrenheit) and gusty winds of 40 kilometers (25 miles) in forests and brush dried out from two months of drought are helping fan the flames. Still, in a glimmer of positive news, the authorities have recorded no fatalities directly linked to the blaze that began almost a week ago. Cooler, moist air with some chance of rainfall could help slow the fires in the coming days, Alberta Fire Service director Chad Morrison said. However, “we need heavy rain,” he cautioned. “Showers are not enough.” The only “good news,” he said, was that the wind was pushing the fires away from Fort McMurray and oil production sites to the northeast, presenting less threat to people although causing serious damage to the environment.

The government has declared a state of emergency in Alberta, a province the size of France that is home to one of the world’s most prodigious oil industries. In the latest harrowing chapter, police convoys shuttling cars south to safety through Fort McMurray resumed at dawn. Making their way through thick, black smoke, the cars were filled with people trapped to the north of the city, having sought refuge there earlier in the week. Police wearing face masks formed convoys of 25 cars, with kilometers (miles) of vehicles, smoke swirling around them, patiently awaiting their turn. Separate convoys of trucks carried essential equipment to support “critical industrial services,” according to the Alberta government. With elevated risk that something could go wrong, the convoys along Highway 63 were reduced in size compared to the previous day.

Those being evacuated – for a second time, after first abandoning their homes – had fled to an area north of the city where oil companies have lodging camps for workers. But officials concluded they were no longer safe there because of shifting winds that raised the risk of them becoming trapped, and needed to move south to other evacuee staging grounds and eventually to Edmonton, 400 kilometers away. Some 2,400 vehicles made it to safety on Friday. But concerns are growing about the effect on the oil industry, the region’s economic mainstay, as the fires come dangerously close to extraction sites. Syncrude, one of several oil companies in the region, announced that it had shut down its facility 50 kilometers (31 miles) north of Fort McMurray due to smoke, followed by Suncor, after the local authorities ordered them to evacuate personnel. The military dispatched C130 aircraft to help evacuate 4,800 Syncrude employees.

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Hard to see how the tar sands industry could ever be rebuilt.

• 70,000 Fort McMurray Foreign Workers May Have To Leave Canada (AFP)

Jonathan Infante fled for his life from wildfires ravaging Canada’s remote Athabasca oil-producing region, and now he and other migrant workers face the grim prospect of having to altogether leave Canada. Their residency here is tied to their employment and if that is now gone – literally up in smoke – they could be forced to leave this country. The wildfires in northern Alberta have forced the evacuation of 100,000 people. Among the evacuees were almost two dozen distraught migrant workers who arrived late Friday at a government shelter in Edmonton, Alberta’s capital. Marco Luciano of the migrant advocacy group Coalition for Migrant Worker Rights in Canada, who was on hand to greet them, said many showed up in their work uniforms.

“They had been evacuated from work and did not have time to stop at home to pick up any of their clothes or belongings,” Luciano told AFP. “They’re not sure what’s coming… Because they no longer have work, their (residency) status has become precarious.” “Many are bracing for the worst,” he said. Infante’s wages support a wife and two children back in the Philippines. The Wendy’s fast food restaurant in Fort McMurray where he worked is believed to have survived the wildfires, so far. “Our employer told us to wait and see,” Infante said outside an evacuation center in Lac La Biche, about 300 kilometers (185 miles) south of Fort McMurray. According to Luciano’s group, there are about 70,000 temporary foreign workers accredited in Alberta. There’s no breakdown available of how many were displaced by the fires.

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“April imports dropped 10.9% from a year earlier, falling for the 18th consecutive month. ”

• China April Exports, Imports Decline More Than Expected (R.)

China’s exports fell more than expected in April, reversing the previous month’s brief recovery, as weak global demand weighed on trade out of the world’s second-largest economy. Exports fell 1.8% from a year earlier, the General Administration of Customs said on Sunday, supporting the government’s concerns that the foreign trade environment will be challenging in 2016. April imports dropped 10.9% from a year earlier, falling for the 18th consecutive month. The continued decline in imports suggests domestic demand remains weak, despite a pickup in infrastructure spending and record credit growth in the first quarter. China had a trade surplus of $45.56 billion in April, versus forecasts of $40 billion. [..]

An official factory survey and Caixin’s private-sector gauge for April painted a mixed picture of the health of the manufacturing sector. The official purchasing managers’ index (PMI) showed factory activity expanded for the second month in a row in April but only marginally, while Caixin’s manufacturing PMI pointed to 14 straight months of sector contraction. Concerns of a hard-landing in China had eased after the strong March economic data, but analysts have warned that the rebound may be short-lived. Economists expect a slowdown in credit growth and industrial production in April although inflation could accelerate. Key economic data is expected over the next two weeks. [..] Amid shrinking global demand, China still managed to grow its share of world exports to 13.8% last year from 12.3% in 2014, indicating the country’s export sector remains competitive despite higher costs.

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“..I worry that it is discriminatory..” Well, what is more discriminatory? A person not being able to buy a second home, or a person not having access to any home?

• Britain Braced For A Ban On Second Homes (DM)

Councils across the UK are set to consider banning people who already own homes from buying holiday cottages after a historic vote yesterday. More than 80% of voters in St Ives, Cornwall, backed proposals that will mean new housing developments will only get planning permission if homes there are reserved for full-time residents. And now councils in the Lake District, Derbyshire Dales, north Devon and the Isle of Wight are all looking at schemes to prevent outsiders buying holiday homes. But ministers are poised to oppose the ban, saying it could be regarded as unfair and discriminatory. Tory MP Mark Garnier told The Times: ‘The only home I own is in St Ives but I live in rented properties elsewhere. Would it be considered as a second home? ‘I worry that it is discriminatory – that one person can buy a home but another can’t.’

The mayor of Aldeburgh on the Suffolk coast, Michael Kiff, admitted that he would be watching what happened in St Ives with interest, and Liberal Democrat MP Norman Lamb said that a vote to ban second homes would be ‘entirely justified’ in his North Norfolk constituency, which has a high percentage of holiday homes. The St Ives vote comes after figures revealed that 48% of homes in the town centre were second homes or holiday lets. Planning minister Brandon Lewis will meet the St Ives’ MP Derek Thomas on Monday to urgently discuss the ban – which is subject to a legal challenge by a firm of architects from Penzance. The town has been dubbed Kensington-on-Sea because of the number of rich holidaymakers who own houses there, and concerns were raised that local people in the town were struggling to stay in the area thanks to increasingly expensive house prices, and rents that spiral during the summer months.

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You’d almost hope they try to push it through regardless. Germany badly needs a wake-up call that is not right-wing and racist.

• The TTIPing Point: German Protests Threaten Trade Deal (Spiegel)

As the battle over TTIP was lost, Angela Merkel feigned resolution yet one more time. “We consider a swift conclusion to this ambitious deal to be very important,” her spokesperson said on her behalf on Monday. And this is the government’s unanimous opinion. But the German population has a very different one. More than two-thirds of Germans reject the planned trans-Atlantic free trade agreement. And even in circles within Merkel’s cabinet, the belief that TTIP will ever become a reality in its currently planned form is disappearing. That’s because on Monday morning, Greenpeace published classified documents from the closed-door negotiations. Even if the papers only convey the current state of negotiations and do not document the end results, they still confirm the worst suspicions of critics of TTIP.

The 248 pages show that bargaining is taking place behind the scenes, even in areas which the EU and the German government have constantly maintained were sacrosanct. These include standards on the environment and consumer protection; the precautionary principle, a stricter EU policy that sets high hurdles for potentially dangerous products; the legislative self-determination of the countries involved, etc. Even the pledge made on the European side that there would be no arbitration courts has turned out to be wishful thinking. So far, the Americans have insisted on the old style of arbitration court. The result is that Merkel’s grandly staged meeting with US President Barack Obama in Hanover eight days earlier had been nothing more than a show – one aimed at hiding the fact that the two sides are anything but united in their positions.

The leaks have resulted in a failed attempt to bypass 800 million European citizens as they negotiate the world’s largest bilateral free trade agreement. From the very beginning, the government underestimated the level of resistance these incursions on virtually all aspects of life would unleash among the people. What began as a diffuse discomfort over opaque backroom dealings grew into a true public initiative, especially in Germany. It was fueled by an international alliance of non-government organizations that has acted in a more professional and networked way than anything that has come before.

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We need discussions on this. Big ones. On pensions and on health care. But we’re not having them. Not everything can be optimized for profit. What happens when the profit is gone, what happens when the economy crashes? We’re going to dump our elderly?

• Is For-Profit Care For The Elderly The Answer? (Economist)

The forecasts are clear: by 2050 the number of people aged over 80 will have doubled in OECD countries, and their share of the population will rise from 3.9% to 9.1%. Around half will probably need help with daily tasks—particularly those with enduring chronic illnesses such as Alzheimer’s, heart disease and osteoporosis. Health systems designed only to offer hospital care for acute cases will struggle to provide such support. To maintain the well-being of wrinkly populations, hospital stays can be replaced by residencies in purpose-built facilities at less cost. A forthcoming report covering 20 countries from KPMG, a consultancy, suggests the number of care-home residents could grow by 68% over the next 15 years. How care is managed in any one country reflects a tussle between cultural attitudes, national budgets and gritty demographic realities.

The increasing availability of technology that would allow the elderly to stay in their homes for longer will also affect demand for such options. Residential care in America and Japan is flourishing. But in an era of tight public finances, some governments are trimming the payments they offer to cover, or subsidise, care-home places. Some operators now struggle to make money; in western Europe, for example, governments are encouraging the elderly to stay in their own houses for longer. This is why the length of stays in care homes has declined from an average of three to four years a decade ago to 12 to 18 months today, says Max Hotopf, the boss of Healthcare Business International, a publishing company. Thousands of residential beds in the Netherlands and Sweden have disappeared as a result. About 5,000 debt-laden British care homes—a quarter of the total—may close within three years.

This makes emerging markets a more attractive prospect, at least for European care firms. Senior Assist, a Belgian company which manages residential facilities and home help, is now expanding in Chile and Uruguay. But China is the big prize. The Chinese will rely heavily on residential care, thanks to the country’s one-child policy and increasing urbanisation: two parents and four grandparents often depend on one child far away. Families in other developing countries are more hesitant about handing Granny over to strangers, however. In Brazil, India and richer countries of the Middle East, such as Saudi Arabia, elderly care remains centred around hospitals. In Brazil taking the old from their neighbourhoods is frowned upon. In India and the Middle East, families are expected to look after their elderly when they are not in hospital.

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Let’s make our armies do something useful.

• On The Frontline Of Africa’s Wildlife Wars (G.)

Brigadier Venant Mumbere Muvesevese, a 35-year-old father of four, became the 150th ranger in the last 10 years to be killed protecting lowland gorillas, elephants and other wildlife in Virunga national park last month. He and his young Congolese colleague, Fidèle Mulonga Mulegalega, were surrounded by local militia, captured and then summarily executed. For Emmanuel de Mérode, the Belgian head of Virunga, himself shot and wounded by militia in 2014, the two killings in Africa’s oldest park, in the Democratic Republic of the Congo, were yet another atrocity in the brutal wildlife wars raging through southern Sudan, the Central African Republic, Congo and parts of Uganda, Chad and Tanzania. “These two rangers were killed in situations that may amount to war crimes in any other conflict,” he said. “We cannot sustain these kind of losses in what is still the most dangerous conservation job in the world.”

Virunga has lost five rangers so far this year. Speaking to the Observer from the park’s fortified HQ in Goma, De Mérode said security had got worse in recent months. “We lost people in January, too. We have a state of armed conflict, a low-intensity war being fought over the exploitation of natural resources in the park,” he said. “For the rangers it is not impossible to work, but it is now very dangerous. We are training 100 new rangers now and there will be 120 more next year. We are still very committed and optimistic.” The battle for central Africa’s wildlife has exploded as heavily armed militia target elephants and rhino and gun down anyone trying to protect them. Three rangers were killed and two wounded in a shootout in the vast Garamba national park in DRC last week; others were killed in Kahuzi-Biéga park near the city of Bukavu in March; in northern Tanzania, poachers killed British helicopter pilot Roger Gower in January.

The five rangers shot in Garamba were working for African Parks, a Johannesburg-based nonprofit conservation group that sends South African and other military officials to train rangers in the 10 wildlife parks it manages on behalf of governments. According to Peter Fearnhead, African Parks director, Garamba is now the heart of the illegal African wildlife trade. Its 300-odd armed guards combat helicopters and drones and find poachers from as far afield as the Central African Republic, Uganda, Sudan, Chad, Somalia, Kenya and Tanzania. “We have lost probably 30 people in Garamba alone in seven years. Hundreds of elephants are killed every year. This is the last stronghold of elephant and giraffe in Congo, but probably the toughest park in Africa. Every elephant poached can turn into a firefight,” said Fearnhead. “Life for a wildlife ranger is now very dangerous in some countries, probably more risky than being in a national army.”

[..] “Last week we buried three people but morale is as strong as ever. When [the rangers] were told that their colleagues had been shot, they all wanted to respond. The poachers use automatic weapons, even grenades. Being a ranger is not about chasing people through the bush and arresting them. It’s war. The rangers put their lives on the line every day, and are under real siege in Garamba. We are not militia but it requires a militaristic response to defend wildlife. [Groups of militia] are now bidding for contracts to get tons of ivory. It’s big business with groups of armed people crossing multiple borders. These people have phenomenal bush skills, with AK-47s. They shoot for the head. They are a total law unto themselves.”

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Stop talking and do it already.

• German Vice Chancellor Urges Debt Relief For Greece (R.)

German Vice Chancellor Sigmar Gabriel urged euro zone finance ministers to start talks on debt relief for Greece, saying it made no sense to crush the green shoots of economic recovery with further austerity measures. The finance ministers of the euro zone’s 19 countries are due to meet in Brussels on May 9 to discuss Greece’s debt and a new set of contingency measures that Athens should adopt to ensure it will achieve agreed fiscal targets in 2018. “The euro group meeting on Monday must find a way to break the vicious circle,” Gabriel, who is also Economy Minister, said in an emailed statement to Reuters on Saturday. “Everyone knows that this debt relief will have to come at some point. It makes no sense to shirk from that time and time again,” he added.

The IMF wants Greece’s European partners to grant Athens substantial relief on its debt, which it sees as vital for its long term sustainability. But Germany’s hardline Finance Minister Wolfgang Schaeuble opposes any debt relief, arguing it is not necessary. Thrice-bailed-out Greece needs to secure an overdue aid payment of €5 billion to repay IMF loans, bonds held by the ECB maturing in July, and growing state arrears. “It doesn’t help the people and the country to have to fight every 12 months to get new credit to pay off old loans,” Gabriel said. “Greece needs debt relief.” Gabriel spoke out against further austerity measures and said Athens had managed to achieve better economic growth than expected. “It makes no sense to destroy these tender shoots once again with new austerity measures,” he added.

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“Tsakalotos warned of the price of a “failed state” if the crucial talks on Monday run aground.”

• Greece Has ‘Basically Achieved’ Reform Goals, Says Juncker (AFP)

Greece has “basically achieved” the objectives of the reforms required by its creditors and its eurozone partners will begin discussing possible debt relief for the country, according to European Commission head Jean-Claude Juncker. “We are now at the time of the first review of the programme (to aid Greece) and the objectives have been basically achieved,” Juncker said in an interview to be published on Sunday in Funke Mediengruppe newspapers in Germany. Greece’s creditors carried out the review intended to evaluate progress on reforms by the Athens government as it hopes to unlock the next tranche of its €86bn bailout agreed in July. The Eurogroup, comprised of the 19 finance ministers of the euro area countries, is set to meet on Monday in Brussels and take up this review of Greek reforms.

They will also “start the first discussions about how to make Greece’s debt sustainable in the long term”, Juncker told the German papers. Approval of the reforms is needed before any consideration of Greek debt relief, but despite months of talks, Greece’s reforms have yet to win the backing of all its creditors largely due to differences between the EU and the IMF, which has demanded more reforms. Juncker’s comments come as Greek finance minister Euclid Tsakalotos Saturday called on his eurozone partners to back Greece’s reform package of cuts worth €5.4 billion, and to put aside the creditors’ call for €3.6 billion of additional measures. “Any package in excess of €5.4 billion is bound to be seen by both Greek citiziens and economic agents, within and beyond Greece, as socially and economically counter-productive,” he wrote in a letter to the Eurogroup. Tsakalotos warned of the price of a “failed state” if the crucial talks on Monday run aground.

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History rhymes.

• 1,700 Years Ago, Mismanagement Of A Migrant Crisis Cost Rome Its Empire (Q.)

On Aug. 3, 378, a battle was fought in Adrianople, in what was then Thrace and is now the province of Edirne, in Turkey. It was a battle that Saint Ambrose referred to as “the end of all humanity, the end of the world.” The Eastern Roman emperor Flavius Julius Valens Augustus—simply known as Valens, and nicknamed Ultimus Romanorum, (the last true Roman)—led his troops against the Goths, a Germanic people that Romans considered “barbarians,” commanded by Fritigern. Valens, who had not waited for the military help of his nephew, Western Roman emperor Gratian, got into the battle with 40,000 soldiers. Fritigern could count on 100,000. It was a massacre: 30,000 Roman soldiers died and the empire was defeated. It was the first of many to come, and it’s considered as the beginning of the end of the Western Roman Empire in 476.

At the time of the battle, Rome ruled a territory of nearly 600 million hectares, with a population of over 55 million. The defeat of Adrianople didn’t happen because of Valens’s stubborn thirst for power or because he grossly underestimated his adversary’s belligerence. What was arguably the most important defeat in the history of the Roman empire had roots in something else: a refugee crisis. Two years earlier the Goths descended toward Roman territory looking for shelter. The mismanagement of Goth refugees started a chain of events that led to the collapse of one of the biggest political and military powers humankind has ever known. It’s a story shockingly similar to what’s happening in Europe right now—and a it should serve as a cautionary tale.

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