Feb 142017
 
 February 14, 2017  Posted by at 10:09 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


David Myers Theatre on 9th Street. Washington, DC July 1939

 

Top Trump Aide Flynn Resigns Over Russia Contacts (AFP)
Judge Grants Injunction Against Trump Travel Ban In Virginia (AP)
Is Trump the New Boris Yeltsin? (Max Keiser)
Bond Traders Fear Yellen Is Planning A ‘St. Valentine’s Day Massacre’ (MW)
Yellen Outlook ‘Irrelevant’ Because Trump Will Reshape Fed (CNBC)
The Fed Is Bad For America – But Getting Rid Of It Isn’t The Answer (DDMB)
Made For Each Other (Jim Kunstler)
Democracies Must Reclaim Power Over The Production Of Money (Pettifor)
China Factory Prices Surge Most Since 2011, Boosting Reflation (BBG)
Putin’s Central Banker Is on a Tear (BBG)
The Euro May Already Be Lost (ETT)
Greece To Exceed Its Primary Surplus Target In 2018 (R.)
Greece Lines Up Rothschild For Debt Advisory Role As Bankruptcy Looms (IW)
To Those Who Kept Me Alive All These Years: Thank You (Chelsea Manning)
Lesbos Doctors Accuse NGOs Of Failing To Care For Refugees (K.)

 

 

I still don’t fully get it. Was Flynn set up? Hard to believe he didn’t know his calls would be recorded and transcribed. He ran US -military- intelligence for a number of years, for pete’s sake. How could he not have known?

Top Trump Aide Flynn Resigns Over Russia Contacts (AFP)

Donald Trump’s national security advisor Michael Flynn resigned amid controversy over his contacts with the Russian government, a stunning first departure from the new president’s inner circle less than a month after his inauguration. The White House said Trump had accepted Flynn’s resignation amid allegations the retired three star general discussed US sanctions strategy with Russia’s ambassador Sergey Kislyak before taking office. Flynn – who once headed US military intelligence – insisted he was honored to have served the American people in such a “distinguished” manner. But he admitted that he “inadvertently briefed” the now Vice President Mike Pence with “incomplete information” about his calls with Kislyak. Pence had publicly defended Flynn, saying he did not discuss sanctions, putting his own credibility into question.

“Regarding my phone calls with the Russian Ambassador. I have sincerely apologized to the President and the Vice President, and they have accepted my apology,” read Flynn’s letter, a copy of which was released by the White House. The White House said Trump has named retired lieutenant general Joseph Kellogg, who was serving as a director on the Joint Chiefs of Staff, to be interim national security advisor. Flynn’s resignation so early in an American administration is unprecedented, and comes after details of his calls with the Russian diplomat were made public – upping the pressure on Trump to take action. Several US media outlets in Monday reported that top Trump advisors were warned about Flynn’s contacts with the Russians early this year. Questions will now be raised about who knew about the calls and why Trump did not move earlier to replace Flynn.

Read more …

The ban is now all but dead. But they’ll throw out another one soon.

Judge Grants Injunction Against Trump Travel Ban In Virginia (AP)

A federal judge Monday granted a preliminary injunction barring the Trump administration from implementing its travel ban in Virginia, adding another judicial ruling to those already in place challenging the ban’s constitutionality. The ruling is significant from a legal standpoint because U.S. District Judge Leonie Brinkema found that an unconstitutional religious bias is at the heart of the travel ban, and therefore violates First Amendment prohibitions on favoring one religion over another. She said the evidence introduced so far indicates that Virginia’s challenge to the ban will succeed once it proceeds to trial. A federal appeals court in California has already upheld a national temporary restraining order stopping the government from implementing the ban, which is directed at seven Muslim-majority countries.

But the ruling by the 9th Circuit Court of Appeals was rooted more in due process grounds, said Virginia Attorney General Mark Herring, a Democrat who brought the lawsuit against Trump in Virginia. “Judge Brinkema’s ruling gets right to the heart of our First Amendment … claim,” Herring said in a conference call Monday night. In her 22-page ruling, Brinkema writes that Trump’s promises during the campaign to implement what came to be known as a “Muslim ban” provide evidence that the current executive order unconstitutionally targets Muslims. “The president himself acknowledged the conceptual link between a Muslim ban and the EO (executive order),” Brinkema wrote. She also cited news accounts that Trump adviser Rudy Giuliani said the executive order is an effort to find a legal way for Trump to be able to impose his Muslim ban. Herring said that “the overwhelming evidence shows that this ban was conceived in religious bigotry.”

Read more …

“The creeping tide of kleptocracy will be appeased at every juncture.”

Is Trump the New Boris Yeltsin? (Max Keiser)

The hope that Trump would take on Wall Street crooks is dead. It was a long shot to begin with but it’s now clear that his level of financial illiteracy and corruption, a hallmark of Obama’s Presidency, is on par, or perhaps even exceeds Obama’s. What we see shaping up in the first few weeks of Trump’s Presidency is his emergence as the new Boris Yeltsin, the puppet idiot installed by America’s neo-cons and Wall St. bankers after the Soviet Union collapsed to drown the country in debt and deceit. Yeltsin was a drunk clown who gave away the country to oligarchs, who turned the country into a kleptocracy – all happening under the laughing approval of President Bill Clinton. Today Trump fills the Yeltsin role in American politics. As Wall St. laughs, Trump begins the process of giving away (read: privatizing) America’s assets to be owned by our new ruling kleptocracy.

Inflation is coming…But not because wages go up, but because price gouging and monopoly pricing starts to dominate our everyday lives with no cheap substitutes coming from overseas due to an increasing global level of distrust and illiquidity among trading partners. Leveraged buyouts fueled by bailouts and free money from the central bankers will continue to kill competition in America. Media, energy, pharmaceutical, finance and agriculture will all be controlled by impregnable monopolies (and Warren Buffett). It’s a pitiful sham and a godawful shame – a situation where Trump’s supporters will, in the not too distant future, turn on him after they’ve had their illusions shattered – but will it be too late? The creeping tide of kleptocracy will be appeased at every juncture. The vanishing middle class will cling to their guns and bibles – hoping for a miracle. They simply will not be able to believe that they could have been so wrong. The triumph of the will.

Read more …

The always colorful language of Albert Edwards.

Bond Traders Fear Yellen Is Planning A ‘St. Valentine’s Day Massacre’ (MW)

Is Federal Reserve Chairwoman Janet Yellen capable of conducting a bond-market bloodbath? That’s what some on Wall Street are wondering. Albert Edwards, market strategist at Société Générale and noted permabear, expects Yellen, who is set to deliver semiannual testimony to the Senate Banking Committee on Tuesday, will trigger a steep bond selloff by talking up the possibility that the central bank will raise interest rates in March. In a note, he refers to the possibility as “The St. Valentine’s Day Massacre,” a homage to the 1929 gangland murder of seven men in a garage in the Lincoln Park neighborhood on Chicago’s North Side. The killings were allegedly planned by famed mobster Al Capone, who was trying to wrest power away from Chicago’s Irish gangsters.

Edwards isn’t the only one who expects Yellen to remind investors that the central bank could raise interest rates at its next meeting for what would be the third time in a decade. “The market is bracing for the possibility that Yellen will talk up the chances of a rate increase in March,” said Guy LeBas, chief fixed income strategist at Janney. Treasury yields, which move inversely to prices, are on track to rise for the third straight day, a selloff that has largely been driven by these concerns, LeBas said. The yield on the 10-year Treasury note rose 3.6 basis points to 2.447%. But a March hike is still viewed as far from likely. Although the central bank back projected back in December that it would raise interest rates three times in 2017, investors have remained skeptical—probably because they’ve been burned by the Fed before.

Read more …

If Brainard leaves too, that makes five seats to fill with Yellen gone early next year.

Yellen Outlook ‘Irrelevant’ Because Trump Will Reshape Fed (CNBC)

With at least three vacancies expected on the Federal Reserve’s Board of Governors this year, the central bank may not be exempt from a Trump-led shakeup, strategist Mark Grant told CNBC on Monday. “The Fed of today is not going to be the Fed of tomorrow,” the chief strategist at Hilltop Securities told “Squawk Box.” Grant, who accurately predicted the Brexit vote and Donald Trump’s victory, said the president and Treasury Secretary nominee Steven Mnuchin will take advantage of filling key vacancies on the Fed board to further their agenda. Grant spoke a day ahead of Fed Chair Janet’s Yellen’s semiannual monetary report to the Senate. The Fed has said it expect to raise interest rates three times this year.

“I think what the Fed says at this point is, for all practical purposes, irrelevant, because Mr. Trump is going to be able to appoint three members of the Fed,” Grant said. “I think they’re going to be business people and the days of an academic, economist Fed are going to be over.” Removing academics from the Fed’s board remains a point of contention, but Grant said the Trump administration is likely to do so with the economic landscape and policy goals in mind. “I also believe that Trump and company, as I call them, know as they put in the infrastructure or the military expansion that there’s going to be a balance to the balance sheet, and … that the new people on the Fed are going to keep interest rates low,” Grant said. “So all this talk of a three interest rate or four interest rate hike, in my opinion, is baloney.”

On Friday, Fed Governor Daniel Tarullo announced plans to leave the board in April, creating a third vacancy. Danielle DiMartino Booth, author of “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America,” said that there is a high probability that board member Lael Brainard will also leave, creating yet another vacancy. She said Trump’s bold spending plan may require low interest rates (and, in turn, a more dovish Fed), but she wondered about whom the president would appoint to the board. “It’s really going to come down to whether or not he’s got the gumption to totally change the complexion of the Federal Reserve board, or if he steps back and says, ‘You know what, I’ve got to finance all this stuff, so I’m going to put more doves in.’ These are hard decisions,” she said.

Read more …

Fed insider Danielle DiMartino Booth’s new book Fed Up is here.

The Fed Is Bad For America – But Getting Rid Of It Isn’t The Answer (DDMB)

On September 20, 2005, Mark Olson did something ordinary that’s since proved to be extraordinary. Never heard of him? You’re not alone. Nevertheless, the banking expert had the gumption to lob a dissenting vote in his capacity as a governor on the Federal Reserve Board. He joined the estimable company of Edward “Ned” Gramlich, a fellow governor who dissented at the September 2002 Federal Open Market Committee meeting. Gramlich is best known for sounding an early warning on the subprime crisis, and being resolutely dismissed by Alan Greenspan. The two gentlemen represent central banking’s answer to the “Last of the Mohicans,” the sole two dissents that have been recorded by governors since 1995. And that’s a problem. At last check, ‘No” was not a four-letter word.

It’s no longer a secret that an abundance of anger is churning among many working men and women who feel they’ve been excluded by the current economic recovery and the longest span of job creation in postwar history. The funny thing about a sense of abandonment is that more often than not, anger follows. What too few Americans appreciate is how directly the inability to say “no” at the Fed has determined their station in life. But that’s just the case. The Fed directly impacts a slew of the most important decisions we make — the values we instill in our children, the things we buy and how they are financed and how we best prepare for what follows after a lifetime of laboring in the trenches.

Stop and think for a moment about the first time you discovered the miracle of compounding interest, that first bank statement that proved savings does pay. Can your children experience that same sensation? What about the roof over your head and the car you drive? Can you afford the payments or did you stretch to buy more than you could afford, out of sheer necessity? What about your mom and dad’s retirements? Do they say their prayers that the stock market will hang in there and that the safety of their bond holdings will protect them if that’s not the case? All of these dysfunctional dynamics lay at the feet of an academic-led Fed being hellbent on launching unconventional monetary policy with the false prerequisite that interest rates had to be zero before quantitative easing (QE) could be deployed.

Read more …

“The Republican Party is Norma Desmond’s house in Sunset Boulevard, starring Donald Trump as Max the Butler, working extra-hard to keep the illusions of yesteryear going.”

Made For Each Other (Jim Kunstler)

Don’t be fooled by the idiotic exertions of the Red team and the Blue team. They’re just playing a game of “Capture the Flag” on the deck of the Titanic. The ship is the techno-industrial economy. It’s going down because it has taken on too much water (debt), and the bilge pump (the oil industry) is losing its mojo. Neither faction understands what is happening, though they each have an elaborate delusional narrative to spin in the absence of any credible plan for adapting the life of our nation to the precipitating realities. The Blues and Reds are mirrors of each other’s illusions, and rage follows when illusions die, so watch out. Both factions are ready to blow up the country before they come to terms with what is coming down.

What’s coming down is the fruit of the gross mismanagement of our society since it became clear in the 1970s that we couldn’t keep living the way we do indefinitely — that is, in a 24/7 blue-light-special demolition derby. It’s amazing what you can accomplish with accounting fraud, but in the end it is an affront to reality, and reality has a way of dealing with punks like us. Reality has a magic trick of its own: it can make the mirage of false prosperity evaporate. That’s exactly what’s going to happen and it will happen because finance is the least grounded, most abstract, of the many systems we depend on. It runs on the sheer faith that parties can trust each other to meet obligations. When that conceit crumbles, and banks can’t trust other banks, credit relations seize up, money vanishes, and stuff stops working.

You can’t get any cash out of the ATM. The trucker with a load of avocados won’t make delivery to the supermarket because he knows he won’t be paid. The avocado grower will have to watch the rest of his crop rot. The supermarket shelves empty out. And you won’t have any guacamole. There are too many fault lines in the mighty edifice of our accounting fraud for the global banking system to keep limping along, to keep pretending it can meet its obligations. These fault lines run through the bond markets, the stock markets, the banks themselves at all levels, the government offices that pretend to regulate spending, the offices that affect to report economic data, the offices that neglect to regulate criminal misconduct, the corporate boards and C-suites, the insurance companies, the pension funds, the guarantors of mortgages, car loans, and college loans, and the ratings agencies.

The pervasive accounting fraud bleeds a criminal ethic into formerly legitimate enterprises like medicine and higher education, which become mere rackets, extracting maximum profits while skimping on delivery of the goods. All this is going to overwhelm Trump soon, and he will flounder trying to deal with a gargantuan mess. It will surely derail his wish to make America great again — a la 1962, with factories humming, and highways yet to build, and adventures in outer space, and a comforting sense of superiority over all the sad old battered empires abroad. I maintain it could get so bad so fast that Trump will be removed by a cadre of generals and intelligence officers who can’t stand to watch someone acting like Captain Queeg in the pilot house.

Read more …

Ann Pettifor’s new book is out too.

Democracies Must Reclaim Power Over The Production Of Money (Pettifor)

Today, the international monetary system is run by the equivalent of Goethe’s Sorcerer’s Apprentice. In the absence of the equivalent of the Sorcerer – regulatory democracy – financial risk-takers and fraudsters have, since 1971, periodically crashed the global economy and trashed the lives of millions of people. And let’s be clear: there is no such thing as effective global regulation. Ask the Bitcoiners – that is why they operate in the ‘dark web’. The question is this: who should control our socially constructed, publicly-backed financial institutions and relationships? Private, unaccountable, rent-seeking authority? Or public, democratic, regulatory authority? Policy and regulation requires boundaries. Pensions policy, criminal justice policies, taxation policies, policies for the protection of intellectual property – all require boundaries.

Finance capital abhors boundaries. Like the Sorcerer’s Apprentice, global financiers want to be free to use the magic of money creation to flood the global economy with ‘easy’ (if dear) money, and just as frequently to starve economies of any affordable finance. And they want to have ‘the freedom’ to do that in the absence of the Sorcerer – regulatory democracy. If we want to strengthen democracy, then we must subordinate bankers to their role as servants of the economy. Capital control over both inflows and outflows, is, and will always be a vital tool for doing so. In other words, if we really want to ‘take back control’ we will have to bring offshore capital back onshore. That is the only way to restore order to the domestic economy, but also to the global economy.

Second, monetary relationships must be carefully managed – by public, not private authority. Loans must primarily be deployed for productive employment and income-generating activity. Speculation leads to capital gains that can rise exponentially. But speculation can also lead to catastrophic losses. Loans for rent-seeking and speculation, gambling or betting, must be made inadmissible. Third, money lent must not be burdened by high, unpayable real rates of interest. Rates of interest for loans across the spectrum of lending – short- and long-term, in real terms, safe and risky – must, again, be managed by public, not private authority if they are to be sustainable and repayable, and if debt is not going to lead to systemic failure. Keynes explained how that could be done with his Liquidity Preference Theory, still profoundly relevant for policy-makers, & largely ignored by the economics profession.

Read more …

Remember: there can be no inflation without consumer spending going up. Prices may rise for other reasons, but that’s not the same.

China Factory Prices Surge Most Since 2011, Boosting Reflation (BBG)

China’s producer prices increased the most since 2011, with the world’s biggest exporter further lifting the outlook for global inflation. Producer price index rose 6.9% in January from a year earlier, compared with a median estimate of 6.5% in a Bloomberg survey and a 5.5% December gain. Consumer-price index climbed 2.5%, boosted by the week-long Lunar New Year holiday beginning in January this year, versus a 2.4% rise forecast by analysts. Producer prices for mining products surged 31% year-on-year while those for raw materials climbed 12.9%, the National Bureau of Statistics said Tuesday. China is again exporting inflation as factories increase prices after emerging from years of deflation. That fresh strength may moderate in coming months as year-ago comparisons gradually rise and Donald Trump’s policies add uncertainties to the global demand outlook.

Continued pressure for raw materials is forcing companies to increase prices, according to Tao Dong at Credit Suisse in Hong Kong. “Without strong demand, producers have limited space for price hikes,” he said. “But I see a wide range of price increases because the cost push is so severe.” Both consumer and producer inflation will peak soon, Julian Evans-Pritchard, an economist at Capital Economics in Singapore, wrote in a report. “Tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium-term,” he said. “The latest inflation data add to the case for a continued moderate tightening in monetary policy,” Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, wrote in a report.

“The central bank is likely to continue on that path in the months ahead, as policy makers lean against excess leverage, yuan weakness and capital outflows, and nascent inflationary pressure.” “We haven’t seen significant pass-through effect from PPI to CPI inflation yet, suggesting that the strong rebound in PPI inflation is a reflection of proactive fiscal policies,” Zhou Hao, an economist at Commerzbank in Singapore, wrote in a report. With the Communist Party Congress later this year, “local governments are keen to deliver decent growth figures. Against this backdrop, the infrastructure investment pipeline will remain solid.”

Read more …

It’s almost 2 years ago that I wrote Russia’s Central Bank Governor Is Way Smarter Than Ours. This is a pretty crazy story. Russian banking appears to take place in some kind of black hole, complete with event horizons.

Putin’s Central Banker Is on a Tear (BBG)

In Russia, Peresvet Bank had an edge no other big private financial institution could match. Its largest shareholder was the powerful Russian Orthodox Church. In a 2015 pitch to investors, Peresvet said the backing of the church and the bank s other big owner, Russia’s Chamber of Commerce and Industry, gave it a quasi-sovereign status. For more than two decades, big state companies stashed their cash with the bank, whose ponderous full name Joint Stock Commercial Bank for Charity and Spiritual Development of Fatherland suggested its grand standing. Even so, it took less than a month last fall for the bank, one of Russia’s 50 largest, to come undone and be taken over by the central bank. Peresvet was just the latest casualty in a financial purge presided over by Central Bank chief Elvira Nabiullina, a bookish economist who’s a favorite of Vladimir Putin.

The regulator closed almost 100 banks in 2016, and in a cleanup with few precedents, Nabiullina has shut almost 300 over the past three years. This may be only the beginning. There are about 600 banks left across the world’s largest country, but Fitch Ratings analyst Alexander Danilov, adjusting for population, calculates that as an emerging market Russia would be fine with about 1 in 10 of those. A warning from Fitch signaled Peresvet’s fall: Almost a tenth of its loans were to companies seemingly without real businesses. Then Russian media reported that the chief executive officer, Alexander Shvets, had disappeared. The bank issued denials and publicized positive comments from other analysts. But within days, as depositors clamored for their cash, the bank said it was “temporarily” limiting withdrawals. The regulator took control of the lender four days later.

As of late January the central bank was still trying to determine the scale of Peresvet’s financial woes. Nabiullina, 53, has emerged as one of Putin’s most influential economic advisers following a low-key government career that began in the 1990s, before the Russian leader’s rise to power. Soft-spoken and unassuming, she runs what in Russia is called a “megaregulator.” When it comes to the economics behind Putin’s overarching goal of restoring Russia’s place in the world, there’s no one more influential. As central bank governor, she’s in charge of a banking system whose weak links are an economic burden, driving up the cost of financing so badly needed in the face of stagnant growth. She’s also the chief guardian of Russia’s foreign currency reserves. Those holdings are more than just a tool of monetary policy; according to several senior officials, Putin views them as a vital safeguard of the country’s sovereignty. [..]

Read more …

The eurozone’s core problem: as soon as harder economic times come, the poorer countries are hit hardest. Solution: a transfer union like the US. But that will never be accepted in the EU, because it means giving up more sovereignty.

From Finland’s EuroThinkTank, h/t Mish

The Euro May Already Be Lost (ETT)

The 1st of January 2017 marked the 18th anniversary of the European common currency, the euro. Despite its success from 1999 to 2007, after 2008 the euro has become a burden for many of its members. For example, living standards in Italy and Greece are below the levels when they joined the euro. Finland is the only Nordic country using the euro and it is also the only Nordic country which has not yet recovered from the financial crash of 2008. There have been many proposals on how to fix the euro and the EMU, but they are politically unpopular and unrealistic. In this blog-entry, we will argue that the euro will almost surely fail; we just do not know the exact timing of its demise. The problem of the euro can be visualized in the development of the GDP per capita.

Germany has been successful in the Eurozone, while Greece and Italy have not. France is not doing well either. The jury is still out for Finland. The different growth paths are a symptom of a general problem that has haunted currency unions for centuries. Competitiveness and productivity develop at a different pace in different countries. Over time, this leads to large competitiveness differences among the members of a currency union. These differences do not usually pose a problem during economic booms because strengthening aggregate demand supports ailing fields of production. However, when a currency union faces an economic downturn or a crisis, falling aggregate demand hits less competitive industries and countries hard and the financing costs of less competitive countries jump. This is an asymmetric shock.

The detrimental effects of asymmetric shocks can be mitigated by transferring funds from prosperous to declining member states. When the dollar union of the US threatened to fall apart during the Great Depression, the federal government enacted federal income transfers from prosperous states to aid ailing ones. The federal budget also increased rapidly and, in practice, income transfers became permanent. The no bailout policy of crisis-hit states had already been enacted earlier. According to the ECB, competitiveness of the German economy has improved by around 19.3%, Greece’s competitiveness has improved by around 6.5%, France’s around 3.9%, Finland’s around 1.7% and Italy’s around 0.9% since 1999. Thus, for survival in its present form and size, the Eurozone needs a similar income transfer system, that is, a full political union as in the US.

Read more …

Meaningless numbers.

Greece To Exceed Its Primary Surplus Target In 2018 (R.)

Greece will have a primary surplus in the budget of 3.7% of GDP next year, exceeding the target of 3.5% agreed with its euro zone creditors, the European Commission forecast on Monday. The size of next year’s Greek primary surplus, which is the budget balance before debt-servicing costs, is a bone of contention between euro zone governments and the IMF, which believes it will be only 1.5%. A further disagreement between the two lenders to Greece is what surplus Athens will be able to maintain in the years after 2018. The higher the surplus and the longer it is kept the less is the need for any further debt relief to Greece.

The IMF insists Greek debt, which the Commission forecast on Monday would fall to 177.2% of GDP this year from 179.7% in 2016 and then decline again to 170.6% in 2018, is unsustainably high and that Greece must get debt relief. Germany and several other euro zone countries say that, if Greece does all the agreed reforms, then debt relief will not be necessary. The Commission forecast that Greek investment would triple to 12% of GDP this year and rise further to 14.2% of GDP next year as the economy expands 2.7% in 2017 and 3.1% in 2018 after years of recession. It also forecast Greek unemployment would fall to 22% of the workforce this year from 23.4% last year and decline further to 20.3% in 2018.

Read more …

If all else fails, sell your soul.

Greece Lines Up Rothchild For Debt Advisory Role As Bankruptcy Looms (IW)

Greece is reportedly planning to hire Rothschild as its debt adviser, replacing current adviser Lazard in the role, as it attempts to end a long-running stand off with creditors. According to the Financial Times, government officials in Greece hope to finalise the appointment before a gathering of euro-area finance ministers on 20 February. Unless Greece receives fresh funds it will not be able to make €7bn of debt payments due this July, including €2.1bn to private sector creditors. In the role, Rothschild will reportedly advise the country on negotiations with creditors, potential inclusion in the European Central Bank’s bond-buying programme, and the sale of Greek government bonds.

The deal would replace the Greek government’s current deal with Lazard, which guided the country through its original bailout in 2012. According to the FT, out of Greece’s €323bn of outstanding government debt just €36bn is owned by private investors who hold Greek bonds, while the rest is owned by sector creditors. Last week, yields on two-year Greek bonds rose to their highest level since June last year after the IMF and the EU failed to reach an agreement on how to lend the €7bn required by the country to avoid bankruptcy. The IMF refused to sign up to the aid programme unless the EU grants further debt relief to Greece. However, the head of the eurozone’s €500bn rescue fund has rejected this demand.

Read more …

Power to you, Chelsea.

To Those Who Kept Me Alive All These Years: Thank You (Chelsea Manning)

To those who have kept me alive for the past 6 years: minutes after President Obama announced the commutation of my sentence, the prison quickly moved me out of general population and into the restrictive housing unit where I am now held. I know that we are now physically separated, but we will never be apart and we are not alone. Recently, one of you asked me “Will you remember me?” I will remember you. How could I possibly forget? You taught me lessons I would have never learned otherwise. When I was afraid, you taught me how to keep going. When I was lost, you showed me the way. When I was numb, you taught me how to feel. When I was angry, you taught me how to chill out. When I was hateful, you taught me how to be compassionate. When I was distant, you taught me how to be close. When I was selfish, you taught me how to share.

Sometimes, it took me a while to learn many things. Other times, I would forget, and you would remind me. We were friends in a way few will ever understand. There was no room to be superficial. Instead, we bared it all. We could hide from our families and from the world outside, but we could never hide from each other. We argued, we bickered and we fought with each other. Sometimes, over absolutely nothing. But, we were always a family. We were always united. When the prison tried to break one of us, we all stood up. We looked out for each other. When they tried to divide us, and systematically discriminated against us, we embraced our diversity and pushed back. But, I also learned from all of you when to pick my battles. I grew up and grew connected because of the community you provided.

Read more …

I’ll get back to this soon. It’s good to see others address this issue too.

Lesbos Doctors Accuse NGOs Of Failing To Care For Refugees (K.)

State hospital doctors on the eastern Aegean island of Lesvos, which has been hard particularly hit by the refugee crisis, have complained that nongovernmental organizations receiving European Union funding to help migrants are not doing enough, resulting in them being forced to bear an excessive burden. In a statement released on Monday, the island’s union of state hospital doctors said the two refugee camps at Moria and Kara Tepe do not have any pediatricians, meaning that all sick children from the camps must be treated at local hospitals, which are seriously understaffed. Noting that the NGOs “get paid handsomely” by the EU to help refugees, the union claimed they had “totally failed to provide humane conditions for the refugees.” Several human rights groups have complained about conditions at Greek refugee camps, particularly Moria and Elliniko, in southern Athens.

Read more …

Jun 212016
 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


NPC District National Bank, Dupont branch, Washington, DC 1924

The Big Guns Are Out: Soros, Rothschild Warn Of Brexit Doom (ZH)
When Brexit Has Come And Gone, The Real Problems Will Remain (ZH)
IMF Calls On Japan To ‘Reload’ Abenomics (Nikkei)
India’s Rockstar Central Banker Defeated As Modi Revolution Stalls (AEP)
Yellen Makes ‘Uncertainty’ New Mantra (R.)
“Whatever It Takes” Wasn’t Enough (Noland)
The World’s Newest “Reserve” Currency Is Anything But (Balding)
China’s Developers Can’t Stop Overpaying for Property (WSJ)
China’s ‘Land Kings’ Return as Housing Prices Rise (WSJ)
Energy-Related Loan Losses Rising (B.)
California Power Grid Prepares For Heatwave, Power Outages (R.)
Australia Whistleblower Loses Job After Speaking Out On Refugee Camps (G.)

Vested interests at stake.

The Big Guns Are Out: Soros, Rothschild Warn Of Brexit Doom (ZH)

Just yesterday, we recounted the story of “Black Wednesday” when on September 16, 1992, the UK was forced out of the EU’s exchange-rate mechanism, or ERM, when the BOE tapped out and allowed the British pound to float freely, leading to 15% losses in the sterling. As we noted, this was George Soros’ infamous trade which “broke the Bank of England” and made the Hungarian richer by over $1.5 bilion. 24 years later Soros is back, and this time he is warning against the kind of devaluation that made him a billionaire and which he believes will be unleashed by Brexit, when in a Guardian Op-Ed he wrote that U.K. voters are “grossly underestimating” the true costs of a vote to leave the EU, saying that there would be an “immediate and dramatic impact on financial markets, investment, prices and jobs.”

[..] It is notable that Soros’ warning comes just days after that of Jacob Rothschild himself who said in another Op-Ed, this time for The Times, that leaving the EU could lead to a “damaging and disorderly situation” in the UK as he urged Britons to vote ‘remain’. Just like Soros, Lord Rothschild, suddenly exhibiting a rare strain of humanitarian concern, said readers should not “risk the wellbeing of our country”and European countries are “better off together”. He said that “at present we enjoy being a permanent member of the UN security council and we are essential to the G8 and Commonwealth. But diplomacy, defence, the environment and our values of being a liberal democracy will all be at risk” adding that “I can see no good reason why we should accept our playing a diminished role on the world stage,” especially if his own personal fortune would be jeopardized.

Finally, completing the doom loop, was none other than Chancellor George Osborne who, according to the Telegraph, “refused to rule out suspending trading on the London stock market if Britons vote to leave the EU on Friday morning… The threat from the Chancellor, made in an LBC radio interview on Monday evening, after the market had closed could force shares down in London as early as Tuesday morning.”

Read more …

Everyone’s broke.

When Brexit Has Come And Gone, The Real Problems Will Remain (ZH)

In a few days, Brexit will come and go, and just a few days later it will be forgotten, as either outcome will be far less dramatic than has been widely predicted by the same fearmongering economist pundits who have been wrong about everything else for the past 8 years. Ironically, the better outcome for the market is precisely a Brexit as the panic selloff will prompt central banks around the globe to boost enough monetary stimulus to send risk assets to new all time highs. What will remain, however, are the real problems. Here is SocGen with a useful reminder of just what those are, and why the market may have already forgotten that just one week ago the Fed threw in the towel when addressing precisely these problems. From SocGen’s Andrew Lapthone:

“Global equity markets continued to struggle last week, with the MSCI World index off 1.8% pushing the index back into red for the year. Big losses were seen in Japan with the Topix 500 down 6% and the volatile Mothers index crashing 18.5% over the week as the yen continued to strengthen. According to the BOE measure, the trade-weighted yen is now up more than 20% over the past year and back to where it stood three years ago. In the battle for the weakest currency, Japan looks to have thrown in the towel.

Whatever the outcome of the Brexit vote this week investors will still be facing the prospect of negative rates and negative yields on a huge range of bonds, massive corporate leverage with worryingly rising delinquencies and of course expensive equity markets and falling profits. To that extent these political events are a distraction from the main event, weak global economic growth and perverse asset markets. So whilst the market preference for the status quo might be celebrated in the short-term, actually when the fog clears all of the problems will still be there.”

Read more …

Forcing companies to raise wages?!

IMF Calls On Japan To ‘Reload’ Abenomics (Nikkei)

Japan needs bolder income policies such as penalizing profitable companies that do not increase wages, the IMF said on Monday after concluding its annual economic assessment of the country. Despite initial success, progress under Abenomics, Prime Minister Shinzo Abe’s trademark economic policies, has stalled in recent months. The inflation rate has dropped to negative territory again, while economic growth has remained anemic.The IMF now expects Japan’s economy to grow by about 0.5% in 2016, before slowing to 0.3% in 2017, with potential growth sliding to close to zero by 2030, due to the declining demographic. “Abenomics needs to be reloaded,” the IMF said in its report and argued that income policies combined with labor market reforms should “move to the forefront” of the country’s fight against lagging growth.

“The government can introduce a ‘comply or explain’ mechanism for profitable companies to ensure that they raise base wages by at least 3% and back this up by stronger tax incentives or – as a last resort – penalties,” the IMF wrote. Promoting intermediate contracts that balance job security and wage increases will “reinforce income policies,” it added. “Our perception is that much of the stasis of inflation [in Japan] comes from the legacy, the history of having negative inflation,” said David Lipton, first deputy managing director at the IMF, in a press conference in Tokyo. “Certainly firms have at this point the cash flow and resource at hand to provide some wage increases. There are wage increases evident in a wide range of companies across this economy, so our thought is to suggest that this be a broader practice and that it be more uniform.”

Read more …

“..Mr Rajan has been an acerbic critic of zero rates and quantitative easing by the western central banks…”

India’s Rockstar Central Banker Defeated As Modi Revolution Stalls (AEP)

India’s bid to become the ‘economic super-tiger’ of Asia is in serious doubt after an assault on the independence of the central bank and failure to deliver on promised reforms. The country has been the darling of the emerging market universe since the Hindu nationalist Narendra Modi swept into power in May 2014 promising a blitz of Thatcherite reform and a bonfire of the diktats, but key changes have been blocked in the legislature. The government has turned increasingly populist. Matters have come to a head with the de facto ouster of Raghuram Rajan, the superstar governor of the Reserve Bank of India (RBI), rebuked for keeping monetary policy too tight. It is part of a pattern of attacks on central banks by politicians across the world, and the latest sign that the glory days of the monetary overlords are waning.

Mr Rajan has been battling criticism for months but threw in the towel over the weekend, sending tremors through the Indian financial markets and provoking a flurry of warnings from global investors. “He has decided not to wait until he is refused a second term,” said Lord Desai from the London School of Economics. “This is ‘Rexit’ – India’s equivalent of ‘Brexit. It looks very bad for India and will not go down well in financial markets. He was defeated by the crony capitalists up against him,” he said. The government has dampened the impact with by relaxing barriers to foreign investment in the country, but it may have underestimated the totemic status of Mr Rajan outside India. He is seen by funds as the guarantor of good practice and market integrity. Mr Rajan is a former chief economist for the IMF, famed for warning that the US subprime debt bubble was out of control long before the Lehman crisis blew up in 2008.

[..] Mr Rajan has been an acerbic critic of zero rates and quantitative easing by the western central banks. He blames them for flooding the international system with excess liquidity that emerging markets could not easily control. This fueled dangerous boom-bust asset cycles. While QE might have ‘worked’ for the US, UK, and Europe – the jury is out even for them – Mr Rajan argues that the policy is a “Pareto sub-optimal” for the world as a whole, and ultimately increases the danger of a deflation-trap in the future. The Fed and the leading central banks of the West have never really answered his critique.

Read more …

I was going to say the Empress has no clothes, but I don’t want that image lingering on my retina.

Yellen Makes ‘Uncertainty’ New Mantra (R.)

The U.S. Federal Reserve’s dwindling confidence in its own outlook and resulting confusion among investors are creating a policy problem that may require chief Janet Yellen to lay out her own views more forcefully. The Fed chair’s next communications test comes on Tuesday and Wednesday during her semi-annual testimony to U.S. lawmakers, less than a week after the central bank kept interest rates unchanged near record lows and lowered its projections for hikes in 2017 and 2018. A self-described consensus builder, Yellen sees her job as reflecting the whole committee’s views rather than setting an agenda for others to follow.

“I think that’s a very laudable intent, but sometimes that produces a lack of clarity,” said former Fed staffer and current partner at Cornerstone Macro LLC Roberto Perli. “Sometimes there is a consensus for one reason and then next time there is a consensus for a different reason so the story shifts and people get confused.” In fact, Fed policymakers’ deepening uncertainty about their own projections has resulted in the central bank sending mixed messages – repeatedly ratcheting up rate hike expectations only to tone them down later.

Read more …

Important point: “Whatever it takes” was orchestrated specifically to expel any market doubt with regard to the viability and sustainability of European monetary integration.

“Whatever It Takes” Wasn’t Enough (Noland)

Back in 2012, Mario Draghi recognized how even the notion that a country might exit the euro could unleash market dynamics that would rather quickly place Europe’s markets and banking system in peril. “Whatever it takes” was orchestrated specifically to expel any market doubt with regard to the viability and sustainability of European monetary integration. On the back of a wall of liquidity and inflating securities markets, Draghi’s gambit held things together for a few years. That said, the ECB bet the ranch – and was compelled to ante up in response to market instability early this year. The outcome of the game is very much in doubt. While Britain is not even a member of the euro, Brexit provides a test of ECB policymaking. Is Europe robust or fragile?

Has relative financial stability been nothing more than a brittle ECB-fabricated façade? Are the forces mounted against integration and cooperation too powerful to disregard? Is European integration – along with the euro currency – viable long-term? It’s an untimely test, with confidence in Europe’s banks already waning. It’s furthermore an untimely test because of faltering confidence in the ECB and contemporary global central banking more generally. Global market instability has again resurfaced and there will be no resolution next week. The FOMC has confounded Fed watchers with its abrupt pivot back to ultra-dovishness. There shouldn’t be much confusion. Global market fragility has reemerged, and the Fed’s rapid retreat has confirmed the seriousness of what’s unfolding.

Central banks have thrown everything at the problem, yet markets remain as vulnerable as ever. At least the world was not facing the downside of China’s historic Credit Bubble back in 2012. The Fed has never admitted that global concerns have been dictating U.S. monetary policy since 2012. It has now become clear, throwing the analysis of policymaking into disarray. The harsh reality is also increasingly apparent: global monetary management is dysfunctional and central bankers have become perplexed – without a backup plan. Such an uncertain backdrop is pro-currency market instability and pro-de-risking/deleveraging.

Read more …

Nobody has a reason to use the yuan.

The World’s Newest “Reserve” Currency Is Anything But (Balding)

Last week’s decision by MSCI not to include Chinese shares in its primary emerging-markets stock index has been viewed – widely and rightly – as a blow to China’s hopes of internationalizing its financial sector. There’s worse news, though: Even the progress China’s made thus far is in danger of going into reverse. MSCI’s choice is a sharp contrast to the one made by the IMF last December, when it promised to begin including the Chinese yuan in its basket of “special drawing rights.” The move essentially conferred global reserve status on the currency, despite the fact that China arguably didn’t meet the conditions for inclusion: It was debatable whether the yuan could be considered “freely usable,” and in any case, it was hardly used. At its peak in August 2015, the yuan accounted for 2.79% of global payments, compared to 44.8% for the U.S. dollar.

The idea was that compromising now would encourage leaders in China to fulfill their pledges to liberalize the yuan fully by 2020. In fact, since the IMF’s decision, the yuan has if anything grown less international, not more. Since March 2015, yuan deposits in the three largest offshore centers – Hong Kong, Taiwan and Singapore – have fallen 16%, to a total of 1.24 trillion yuan or about $188 billion. The currency is being used in even fewer international transactions than before: Its share of global payments stood at 1.82% in April 2016. The fact that only a quarter of those international payments included a partner other than China or Hong Kong means that only about 0.5% of all yuan transactions are truly international in scope. This places the currency somewhere between those of Scandinavian powerhouses Norway and Denmark.

Read more …

Absolutely completely madness. The casino keeps adding new slot machines and crap tables.

China’s Developers Can’t Stop Overpaying for Property (WSJ)

If the cost of flour is higher than the price of bread, what should a baker do? Chinese property developers are choosing to buy more flour. Prices for land, the main ingredient of the property world, have hit record highs in auctions this year in many Chinese cities. The average land price per square meter for the top 100 cities in the first five months of this year jumped nearly 50% from the same period last year, according to Wind Information. Some land prices are even higher than housing prices nearby.

State-owned developer Poly Real Estate, for instance, bought a piece of land in a Shanghai suburb for 5.5 billion yuan ($835.5 million) last month. This translates to roughly 44,000 yuan per square meter of buildable space. Houses in the region meanwhile go for around 40,000 yuan per square meter. After taking into account construction costs, taxes and other expenses, property prices would have to nearly double for the developer to make money. Prime land in the biggest cities always costs a lot, but increasingly the voracious buyers are showing up in less prime locations and smaller cities. In Suzhou, a city near Shanghai, with a population of 1.1 million, land sales in the first five months of this year have already exceeded the total of last year. And average prices have doubled.

Read more …

It’s the same they do with raw materials: “..After winning an auction, financial firms with access to cheap funding can apply for a loan with the land as collateral..”

China’s ‘Land Kings’ Return as Housing Prices Rise (WSJ)

The “land kings” are back. That had been a nickname for Chinese developers paying sky-high prices for land parcels during China’s property boom earlier this decade, which left so-called ghost cities of unsold housing across China. Now, with housing prices in China’s larger cities again rising rapidly, frothy bids for land parcels are back. On June 8, Logan Property Holdings agreed to pay 14.1 billion yuan ($2.14 billion) for a piece of land in Shenzhen’s Guangming district, the largest-ever price tag in the southern Chinese city. Logan says it didn’t overpay, calling the price “relatively favorable” in a hot market. Earlier in June, a joint venture between two firms, one of which is backed by state-owned Power Construction Corp. of China, outbid 17 rivals with an 8.3 billion yuan offer for a plot in Shenzhen’s Longhua district.

The soaring land prices show the challenges facing the government as it tries to prevent property bubbles. Moves to stimulate China’s slowing economy and to trim excess housing in smaller cities across the country—such as interest-rate cuts and eased mortgage rules—have fed into speculative demand for homes in top-tier cities that are now scrambling to cool prices. Average housing prices in 70 Chinese cities were about 5% higher in May than a year earlier, the fifth straight month of increases. In top-tier cities, prices were up 19% to 53%. But land prices are shooting up not just in Shenzhen, Shanghai and Beijing, but also in lower-profile cities such as Hangzhou, Hefei and Zhengzhou. Officials face a dilemma in trying to tame land prices: Land is commonly used as debt collateral; a sharp drop in valuation could trigger defaults and produce a wave of bad loans, hurting the economy. On the other hand, runaway land prices make it harder for ordinary Chinese to afford apartments.

[..] There is also concern that financial firms with little experience as builders are viewing land as an opportunity for arbitrage. After winning an auction, financial firms with access to cheap funding can apply for a loan with the land as collateral, and use that to extend a construction loan at a higher rate to a partner, which is typically a property developer.

Read more …

“Like an oil lease, you’re easily disposable..”

Energy-Related Loan Losses Rising (B.)

“Like an oil lease, you’re easily disposable,” the villainous J.R. Ewing quipped to his beauty queen wife in the 1970s television series Dallas. Readers of the latest edition of the Federal Reserve Bank of Dallas’s quarterly southwest economy publication might want to keep that quote in mind. News from the oil patch — the 11th Fed district that encompasses the shale heartland — is not encouraging, as it reveals a sharper rise in souring energy-related loans. “The persistence of relatively low oil prices has begun taking a toll on district bank customers,” the Dallas Fed said in its report.

“Oil-price hedges become less effective the longer prices stay low, and the cushion built by energy firms during the good times gets thinner. Cash flow becomes stretched and collateral loses its value, further pressuring borrowers.” That forces them closer to default unless banks are able to keep their lending spigots open. Many of these loans fall under the umbrella of commercial and industrial (C&I) lending — a category which has been surging in conjunction with commercial real estate (CRE) lending in recent years. While regulators have kept a somewhat lazy eye on rising CRE loans since even before the 2008 financial crisis (and certainly after it), the boom in C&I lending has been met with far less scrutiny — resulting in charts which look like this:

Read more …

“..millions of electric customers in Southern California were warned they could suffer power outages of up to 14 days this summer..”

California Power Grid Prepares For Heatwave, Power Outages (R.)

California will have its first test of plans to keep the lights on this summer following the shutdown of the key Aliso Canyon natural gas storage facility as temperatures in the Los Angeles area are forecast to hit triple digits this week. With record-setting heat and air conditioning demand expected in Southern California, the state’s power grid operator issued a so-called “flex alert,” urging consumers to conserve energy to help prevent rotating power outages – which could occur regardless. Electricity demand is expected to rise during the unseasonable heatwave on Monday and Tuesday, with forecast system-wide use expected to top 45,000 megawatts, said the California Independent System Operator (ISO), which manages electricity flow through the state.

That compares with a peak demand of 47,358 MW last year and the all-time high of 50,270 MW set in July 2006. That could put stress on the power grid, particularly with the shut-in of Aliso Canyon, following a massive leak at the underground storage facility in October. The facility, in the San Fernando Valley, is the second largest storage field in the western United States, according to federal data, and therefore crucial for power generation. All customers, including homes, hospitals, oil refineries and airports are at risk of losing power at some point this summer because a majority of electric generating stations in California use gas as their primary fuel. In April, millions of electric customers in Southern California were warned they could suffer power outages of up to 14 days this summer due to the closure.

Read more …

“The Border Force Act gives the Australian government the power to jail, for up to two years, anybody employed by the department..”

Australia Whistleblower Loses Job After Speaking Out On Refugee Camps (G.)

The trauma specialist who condemned the treatment of asylum seekers and refugees in Australia’s offshore detention regime as the worst “atrocity” he has seen has had his contract to work on Nauru terminated. Psychologist Paul Stevenson, whom the Australian government awarded an Order of Australia for his work counselling victims of the Bali bombings, had undertaken 14 deployments to Nauru and to Manus Island in Papua New Guinea. He was due to return to Nauru on Thursday. But after he spoke publicly to the Guardian about his experiences working within Australia’s offshore detention regime – describing conditions in the camps as “demoralising … and desperate” – he was told his contract had been summarily cancelled.

PsyCare, the company through which he was employed to provide counselling to guards working in offshore detention, informed him by email his employment had been terminated. Stevenson said the news was not unexpected. “But the public needs to hear about the consequences people face for speaking out, and to understand the level they go to in minimising access.” [..] The Border Force Act gives the Australian government the power to jail, for up to two years, anybody employed by the department or its contractors who speaks publicly about conditions inside the offshore detention regime, including doctors advocating for better healthcare, or other workers exposing sexual and physical abuse of detainees.

Read more …