Jul 172016
 
 July 17, 2016  Posted by at 4:08 pm Finance Tagged with: , , , , , , , , , ,  7 Responses »


Ben Shahn Daughter of Virgil Thaxton, farmer, near Mechanicsburg, Ohio 1938

Recently, I posted a two-tear old article on facebook.com/TheAutomaticEarth that was shared so many times it seems to make sense to use it for an Automatic Earth article as well. The article asks how toxic the wheat we eat is – or Americans, more specifically-, and why that is.

But first I would like to touch on a closely connected issue, which is Nassim Nicholas Taleb’s ‘war’ on GMOs. Taleb, of Black Swans fame, has been at it for a while, but he’s stepped up his efforts off late.

In 2014, with co-authors Rupert Read, Raphael Douady, Joseph Norman and Yaneer Bar-Yam, he published The Precautionary Principle (with Application to the Genetic Modification of Organisms), an attempt to look at GMOs through a ‘solidly scientific’ prism of probability and complex systems. From the abstract:

The precautionary principle (PP) states that if an action or policy has a suspected risk of causing severe harm to the public domain (affecting general health or the environment globally), the action should not be taken in the absence of scientific near-certainty about its safety. Under these conditions, the burden of proof about absence of harm falls on those proposing an action, not those opposing it. PP is intended to deal with uncertainty and risk in cases where the absence of evidence and the incompleteness of scientific knowledge carries profound implications and in the presence of risks of “black swans”, unforeseen and unforeseable events of extreme consequence.

[..] We believe that the PP should be evoked only in extreme situations: when the potential harm is systemic (rather than localized) and the consequences can involve total irreversible ruin, such as the extinction of human beings or all life on the planet. The aim of this paper is to place the concept of precaution within a formal statistical and risk-analysis structure, grounding it in probability theory and the properties of complex systems. Our aim is to allow decision makers to discern which circumstances require the use of the PP and in which cases evoking the PP is inappropriate.

This puts into perspective the claims made by Monsanto et al that since no harm has ever been proven to arise from the use of GMOs, they should therefore be considered safe. Which is the approach largely taken over by American politics, and increasingly also in Europe and other parts of the world. In their paper, Taleb et al say the approach does not meet proper scientific standards.

This is very close to my personal opinion, expressed in many articles in the past, that GMOs pose such risks on such a wide scale to the food supply of every human being on earth -as well as a much wider selection of organisms- that they should not be legalized before perhaps 100 years of tests have been done by large and independent teams of specialists.

Note that if you, as an individual farmer, as a community or even as a nation, want to ban GMOs but your neighbors do not, you will in the case of many crops not stand a chance of keeping your plants GMO free. For which you can subsequently be sued by the ‘owner’ of the genetically altered plants and seeds.

Also, I think it is irresponsibly dangerous to give a handful of companies (Monsanto, Bayer, DuPont, Syngenta), who all happen to be chemical giants dating back to the 20th century interbellum, and all with questionable pasts, a quasi-monopoly over the -future of- world’s food. Because that is where things will go unless proper principles are applied, both scientific and legal.

One of the main arguments proponents of GMOs use is that through thousand of years mankind has altered crops through selection ‘anyway’, so talking about anything ‘pure’ or ‘natural’ in this regard is not relevant. Taleb put the difference between altering a staple through this ‘generational’ selection on the one hand and the modifying of genes in a lab into a sketch:

The sketch was later annotated by Rahul Goswami, approved and shared by Taleb:

I think it is obvious that ‘generational’ selection through breeding is localized, can be rejected by nature. Genetic modification is something completely different, it takes a much bigger step (a giant leap) and forces itself -as a more or less alien body- onto a much larger eco-system.

It’s not about trying to figure out what works, but about forcing itself upon the world and its inhabitants regardless of the consequences. The precautionary principle is missing where it is most needed.

A few examples of Taleb’s tweets on the topic in the past few days make his stance abundantly clear.

“GMO issue is ignorance of the properties of complex systems/fattails (Monsanto’s 107 Nobels, 80 y.o. are 50 y behind)”

“Anyone pro-GMOs on “scientific” grounds is 50 years behind, ignorant of complexity, or just stupid”

“Monsanto pulled no stop trying to discredit me: 1000 mails to Univ (!),>1000 shill posts. Nada. F***you money works.”

Then, on to the article I started talking about above. As I said, it was written some two years ago by Sarah at the Healthy Home Economist. From the reactions to my posting it on Facebook -a huge number of shares- I surmise that many people A) had no idea that what Sarah describes is common practice, and B) have a profound interest in the topic.

Note: while a fair number of people said they had never heard of this, and/or doubted it was true at all, quite a few confirmed it as common where they live, and not just stateside, but in Scotland, Argentina etc.

Let’s see how we get through this. I don’t want to just post the whole thing, but I’ll need large portions of it.

The Real Reason Wheat is Toxic

The stories became far too frequent to ignore. Emails from folks with allergic or digestive issues to wheat in the United States experienced no symptoms whatsoever when they tried eating pasta on vacation in Italy. Confused parents wondering why wheat consumption sometimes triggered autoimmune reactions in their children but not at other times.

In my own home, I’ve long pondered why my husband can eat the wheat I prepare at home, but he experiences negative digestive effects eating even a single roll in a restaurant. There is clearly something going on with wheat that is not well known by the general public. It goes far and beyond organic versus nonorganic, gluten or hybridization because even conventional wheat triggers no symptoms for some who eat wheat in other parts of the world.

What indeed is going on with wheat? For quite some time, I secretly harbored the notion that wheat in the United States must, in fact, be genetically modified. GMO wheat secretly invading the North American food supply seemed the only thing that made sense and could account for the varied experiences I was hearing about. I reasoned that it couldn’t be the gluten or wheat hybridization. Gluten and wheat hybrids have been consumed for thousands of years.

It just didn’t make sense that this could be the reason for so many people suddenly having problems with wheat and gluten in general in the past 5-10 years.

Finally, the answer came over dinner a couple of months ago with a friend who was well versed in the wheat production process. I started researching the issue for myself, and was, quite frankly, horrified at what I discovered. The good news is that the reason wheat has become so toxic in the United States is not because it is secretly GMO as I had feared (thank goodness!).

The bad news is that the problem lies with the manner in which wheat is grown and harvested by conventional wheat farmers. You’re going to want to sit down for this one. I’ve had some folks burst into tears in horror when I passed along this information before.

Common wheat harvest protocol in the United States is to drench the wheat fields with Roundup several days before the combine harvesters work through the fields as the practice allows for an earlier, easier and bigger harvest

Pre-harvest application of the herbicide Roundup or other herbicides containing the deadly active ingredient glyphosate to wheat and barley as a desiccant was suggested as early as 1980. It has since become routine over the past 15 years and is used as a drying agent 7-10 days before harvest within the conventional farming community.USDA pesticides applied to wheat.

According to Dr. Stephanie Seneff of MIT who has studied the issue in depth and who I recently saw present on the subject at a nutritional Conference in Indianapolis, desiccating non-organic wheat crops with glyphosate just before harvest came into vogue late in the 1990’s with the result that most of the non-organic wheat in the United States is now contaminated with it.

Seneff explains that when you expose wheat to a toxic chemical like glyphosate, it actually releases more seeds resulting in a slightly greater yield: “It ‘goes to seed’ as it dies. At its last gasp, it releases the seed” says Dr. Seneff. According to the US Department of Agriculture, as of 2012, 99% of durum wheat, 97% of spring wheat, and 61% of winter wheat has been treated with herbicides. This is an increase from 88% for durum wheat, 91% for spring wheat and 47% for winter wheat since 1998.

Wheat farmer Keith Lewis: “I have been a wheat farmer for 50 yrs and one wheat production practice that is very common is applying the herbicide Roundup (glyphosate) just prior to harvest. Roundup is licensed for preharvest weed control. Monsanto, the manufacturer of Roundup claims that application to plants at over 30% kernel moisture result in roundup uptake by the plant into the kernels. Farmers like this practice because Roundup kills the wheat plant allowing an earlier harvest.

A wheat field often ripens unevenly, thus applying Roundup preharvest evens up the greener parts of the field with the more mature. The result is on the less mature areas Roundup is translocated into the kernels and eventually harvested as such. This practice is not licensed. Farmers mistakenly call it “dessication.”

Consumers eating products made from wheat flour are undoubtedly consuming minute amounts of Roundup. An interesting aside, malt barley which is made into beer is not acceptable in the marketplace if it has been sprayed with preharvest Roundup. Lentils and peas are not accepted in the market place if it was sprayed with preharvest roundup….. but wheat is ok.. This farming practice greatly concerns me and it should further concern consumers of wheat products.”

This practice is not just widespread in the United States either. The Food Standards Agency in the United Kingdom reports that use of Roundup as a wheat desiccant results in glyphosate residues regularly showing up in bread samples. Other European countries are waking up to to the danger, however. In the Netherlands, use of Roundup is completely banned with France likely soon to follow.

Using Roundup on wheat crops throughout the entire growing season and even as a desiccant just prior to harvest may save the farmer money and increase profits, but it is devastating to the health of the consumer who ultimately consumes the glyphosate residue laden wheat kernels.

The chart below of skyrocketing applications of glyphosate to US wheat crops since 1990 and the incidence of celiac disease is from a December 2013 study published in the Journal Interdisciplinary Toxicology examining glyphosate pathways to autoimmune disease. Remember that wheat is not currently GMO or “Roundup Ready” meaning it is not resistant to its withering effects like GMO corn or GMO soy, so application of glyphosate to wheat would actually kill it.

While the herbicide industry maintains that glyphosate is minimally toxic to humans, research published in the Journal Entropy strongly argues otherwise by shedding light on exactly how glyphosate disrupts mammalian physiology. Authored by Anthony Samsel and Stephanie Seneff of MIT, the paper investigates glyphosate’s inhibition of cytochrome P450 (CYP) enzymes, an overlooked component of lethal toxicity to mammals.

The currently accepted view is that glyphosate is not harmful to humans or any mammals. This flawed view is so pervasive in the conventional farming community that Roundup salesmen have been known to foolishly drink it during presentations! However, just because Roundup doesn’t kill you immediately doesn’t make it nontoxic. In fact, the active ingredient in Roundup lethally disrupts the all important shikimate pathway found in beneficial gut microbes which is responsible for synthesis of critical amino acids.

Friendly gut bacteria, also called probiotics, play a critical role in human health. Gut bacteria aid digestion, prevent permeability of the gastrointestinal tract (which discourages the development of autoimmune disease), synthesize vitamins and provide the foundation for robust immunity. In essence:

Roundup significantly disrupts the functioning of beneficial bacteria in the gut and contributes to permeability of the intestinal wall and consequent expression of autoimmune disease symptoms

In synergy with disruption of the biosynthesis of important amino acids via the shikimate pathway, glyphosate inhibits the cytochrome P450 (CYP) enzymes produced by the gut microbiome. CYP enzymes are critical to human biology because they detoxify the multitude of foreign chemical compounds, xenobiotics, that we are exposed to in our modern environment today.

As a result, humans exposed to glyphosate through use of Roundup in their community or through ingestion of its residues on industrialized food products become even more vulnerable to the damaging effects of other chemicals and environmental toxins they encounter! What’s worse is that the negative impact of glyphosate exposure is slow and insidious over months and years as inflammation gradually gains a foothold in the cellular systems of the body.

The consequences of this systemic inflammation are most of the diseases and conditions associated with the Western lifestyle: Gastrointestinal disorders, Obesity ,Diabetes, Heart Disease, Depression, Autism, Infertility, Cancer, Multiple Sclerosis, Alzheimer’s, etc.

In a nutshell, Dr. Seneff’s study of Roundup’s ghastly glyphosate which the wheat crop in the United States is doused with uncovers the manner in which this lethal toxin harms the human body by decimating beneficial gut microbes with the tragic end result of disease, degeneration, and widespread suffering

[..] The bottom line is that avoidance of conventional wheat in the United States is absolutely imperative even if you don’t currently have a gluten allergy or wheat sensitivity. The increase in the amount of glyphosate applied to wheat closely correlates with the rise of celiac disease and gluten intolerance.

Dr. Seneff points out that the increases in these diseases are not just genetic in nature, but also have an environmental cause as not all patient symptoms are alleviated by eliminating gluten from the diet. The effects of deadly glyphosate on your biology are so insidious that lack of symptoms today means literally nothing. If you don’t have problems with wheat now, you will in the future if you keep eating conventionally produced, toxic wheat!

I guess we can leave it at that for now. Do go to the original article for more. Whether you look at it from a scientific viewpoint, as Taleb et al do, or from a common sense one, as Sarah does, the common thread seems obvious: Monsanto and other rich chemical giants seek to be the sole providers -even owners- of the world’s food, handed to us for free by nature and generations of our ancestors.

And to achieve that magnitude of power -and riches- they are more than willing to literally drive over sick and dead bodies. Once again, Taleb:

The precautionary principle (PP) states that if an action or policy has a suspected risk of causing severe harm to the public domain (affecting general health or the environment globally), the action should not be taken in the absence of scientific near-certainty about its safety. Under these conditions, the burden of proof about absence of harm falls on those proposing an action, not those opposing it.

That is not what’s happening, and there’s not much time left to start applying it before it’s too late. Because GMOs, once they’ve been introduced in a large enough environment, are near impossible to get rid of.

To end on a somewhat happier note, Taleb thinks that Monsanto is doing quite poorly these days, financially. Then again, that’s why Bayer wants to buy them, and that would only mean a continuation or even increase of the present practices.

What we need is decision makers who understand the science of complex systems, probability and the precautionary principle. And I don’t know about you, but when I look at who’s vying to be the leaders of the US, UK and many other nations, I think we’re a long way away from that.

Only Putin seems to get it. His stated goal is to make Russia the largest producer of organic food in the world. So maybe there is still hope.

Mar 042016
 
 March 4, 2016  Posted by at 9:16 am Finance Tagged with: , , , , , , , , ,  1 Response »


Edward Meyer School victory garden on First Avenue New York 1944

China’s Coming Mass Layoffs: Past as Prologue? (Diplomat)
Red Ink Rising (Economist)
China Begins to Tackle Its ‘Zombie’ Factory Problem (WSJ)
PBOC Pulls $129 Billion in Biggest Weekly Withdrawal Since 2013 (BBG)
China To Increase Defence Spending By ‘7-8%’ In 2016 (AFP)
“I See Bubbles Bursting Everywhere” (CNBC)
UBS: “The Move In Oil Is TOTALLY Short Squeeze Led” (ZH)
EU Superstate Would Have No Democratic Legitimacy (Tel.)
Brazil’s Economy Slumps To 25-Year Low as GDP Falls 3.8% (Guardian)
Only The IMF Can Now Save Brazil (AEP)
Era Of Zero, Negative Interest Rates Could Last For Years: Barclays (Reuters)
Osborne’s Desire To Further Cut Spending Makes Little Sense (Wolf)
The Economy Simply Explained (AA)
Monsanto’s RoundUp Found in 14 Popular German Beers (NS)
Ballooning Bad Loans in Turkey Worsen as Tourists Flee (BBG)
The Syrian War Will Define The Decade (Reuters)
EU Fate At Stake On Muddy Greek Border (Reuters)
Pensioners Share Their Bread With Refugees At Greek Border (Reuters)
EU Mulls ‘Large-Scale’ Migrant Deportation Scheme (AP)

1990s: “Overnight, tens of millions of workers lost their “iron rice bowls.”

China’s Coming Mass Layoffs: Past as Prologue? (Diplomat)

China’s minister for human resources and social security has said that China will lay off 1.8 million workers in the coal and steel sectors, part of an overall plan to reduce overcapacity and streamline state-owned enterprises. Reuters, citing anonymous sources close to China’s leadership, puts the figure much higher, at 5 to 6 million in layoffs over the next two years. Beijing is aware of the risks such massive layoffs pose for social stability, and it’s already moving to control to damage. A Chinese official recently announced that the national government will set aside 100 billion renminbi ($15.3 billion) to help find new employment for those who lose their jobs to the restructuring.

On Wednesday, a spokesperson for the National Committee of the Chinese People’s Political Consultative Conference, which begins its annual session on Friday, assured journalists that the job losses would be “temporary.” At least publicly, Chinese officials are confident that growth in service sector jobs can absorb most of the layoffs from heavy industry. That may seem unlikely, given the sheer number of the coming layoffs, but remember that China has been through this before – and on an even grander scale. In the late 1990s, China drastically restructured its state-owned enterprises, privatizing some and shutting down others. The result: from 1995 to 2002, over 40 million jobs in the state sector were cut, along with nearly 30 million jobs lost in the manufacturing, mining, and utilities sectors.

Although many of these workers were able to pick up jobs in the newly-growing private sector, the societal and cultural shift entailed in the restricting should not be underestimated. Prior to that wave of reforms, state sector employees (the vast majority of China’s workforce) enjoyed the benefits of an “iron rice bowl,” absolute job security along with social benefits (such as healthcare and pensions) provided by the state. Yet as China transitioned to a capitalistic economy – as “socialism with Chinese characteristics” turned out to be – the state sector and its “iron rice bowl” were proving a financial disaster, particularly in the wake of the Asian Financial Crisis in the late 1990s.

Chinese blogger Yang Hengjun explained the resulting transition as follows: “The reforms of the 1990s resulted in massive lay-offs. Overnight, tens of millions of workers lost their “iron rice bowls.” There were people who didn’t want to accept it, even those who actively resisted, but the government ruled with an iron fist and eventually the reforms went through. Even today, some of these people have grown old on the edge of poverty. On a certain level, we sacrificed them in exchange for huge reforms to the economic system.”

This is the same situation China faces today: the need for economic restructuring that will inevitably cause economic turmoil for millions of Chinese. China’s reforms in the 1990s had obvious benefits for the Chinese economy; the painful transition toward capitalism help usher in the boom-time of double-digit economic growth during the 2000s. There were consequences as well, particularly noticeable in a wealth gap that has grown at the same breakneck pace as China’s economy. Yet, with all the benefits of hindsight, you’d be hard pressed to find a Chinese official who would argue against the state sector restructuring of the late 1990s.

Read more …

Ehh..: “..with the right policies, China could survive a deleveraging without too much pain.” That’s true only as long as you don’t understand why deleveraging takes place. You can’t escape it through more debt.

Red Ink Rising (Economist)

How worrying are China’s debts? They are certainly enormous. At the end of 2015 the country’s total debt reached about 240% of GDP. Private debt, at 200% of GDP, is only slightly lower than it was in Japan at the onset of its lost decades, in 1991, and well above the level in America on the eve of the financial crisis of 2007-08. Sooner or later China will have to reduce this pile of debt. History suggests that the process of deleveraging will be painful, and not just for the Chinese. Explosive growth in Chinese debt is a relatively recent phenomenon. Most of it has accumulated since 2008, when the government began pumping credit through the economy to keep it growing as the rest of the world slumped. Chinese companies are responsible for most of the borrowing. The biggest debtors are large state-owned enterprises (SOEs), which responded eagerly to the government’s nudge to spend.

The borrowing binge is still in full swing. In January banks extended $385 billion (3.5% of GDP) in new loans. On February 29th the People’s Bank of China spurred them on, reducing the amount of cash banks must keep in reserve and so freeing another $100 billion for new lending. Signs of stress are multiplying. The value of non-performing loans in China rose from 1.2% of GDP in December 2014 to 1.9% a year later. Many SOEs do not seem to be earning enough to service their debts; instead, they are making up the difference by borrowing yet more. At some point they will have to tighten their belts and start paying down their debts, or banks will have to write them off at a loss—with grim consequences for growth in either case. An IMF working paper published last year identified credit growth as “the single best predictor of financial instability”.

Yet China is not obviously vulnerable to the two most common types of financial crisis. The first is the external sort, like Asia’s in 1997-98. In such cases, foreign lending sparks a boom that eventually fizzles, prompting loans to dry up. Firms, unable to roll over their debts, must cut spending to save money. As consumption and investment slump, net exports rise, helping bring in the money needed to repay foreign creditors. China does not fit this mould, however. More than 95% of its debt is domestic. Capital controls, huge foreign-exchange reserves and a current-account surplus help defend it from capital flight. The other common form of crisis is a domestic balance-sheet recession, like the ones that battered Japan in the early 1990s and America in 2008. In both cases, dud loans swamped the banking system. Central banks then struggled to keep demand growing while firms and households paid down their debts.

China’s banks are certainly at risk from a rash of defaults. Markets now price the big lenders at a discount of about 30% on their book value. Yet whereas America’s Congress agreed to recapitalise banks only in the face of imminent collapse, the Chinese authorities will surely be more generous. The central government’s relatively low level of debt, at just over 40% of GDP, means it has plenty of room to help the banks. Indeed, with the right policies, China could survive a deleveraging without too much pain.

Read more …

Begins is the key word.

China Begins to Tackle Its ‘Zombie’ Factory Problem (WSJ)

China’s leaders two decades ago decided that a combination of restructuring, privatization and massive job cuts was needed to revitalize the economy and shake up state industries weighed down by debt, overcapacity and declining profits. An estimated 20 to 35 million people lost jobs in the late 1990s. The same ills are now back, and reform of the country’s swollen industries is expected to feature prominently in China’s next five-year plan as the National People’s Congress, China’s annual legislative session, starts Saturday in Beijing. But this time around, the government is taking a more modest approach to cutting off its “zombie” factories as it confronts slowing economic growth that has unnerved Chinese leaders and global markets and raised fears of social unrest.

Beijing has outlined plans to cut 1.8 million steel and coal workers over the next five years. To ease social pain, it will put 100 billion yuan ($15.3 billion) into a restructuring fund for severance, retraining and relocation. Economists query whether the initiatives are enough. Beijing aims to cut up to 150 million tons of capacity in its steel industry by 2020, for example, but the annual surplus is currently around 400 million tons, according to the China Iron and Steel Association. The outline of China’s restructuring vision can be seen in its traumatized northeastern rust belt. In Jixi, a coal-dust-covered town of boarded-up buildings and sagging chimneys, provincial money is helping the Heilongjiang LongMay Mining trim its bloated payroll.

Between November and January, some 20,000 LongMay workers were transferred to jobs in farming, forestry and sanitation, among others, said Guo Shenming, a security inspector at the company’s Dongshan mine in Jixi. Workers receive 1,800 yuan ($275) a month for three years from the province, after which the new employer picks up the tab, he said. “Coal is a twilight industry,” he said, “so it’s a good chance for workers to get out.” But the coal-industry retrenchment and the 2014 closure of a steel mill has hit Jixi hard, said Mr. Guo, whose family runs a restaurant. “Families used to buy 10 or more pig’s feet for the Lunar New Year holiday, but this year they only got three or four,” he said. LongMay, which had over 250,000 workers in its heyday, now has well below 200,000. But it still lost 2.23 billion yuan in the first half of 2015, according to China Bond Rating, which is affiliated with the central bank. In November, the provincial government stepped in with a 3.8 billion yuan bailout to help the company with its debts.

Read more …

Guess this is where you say: Make up your minds already! You can’t micro-manage this.

PBOC Pulls $129 Billion in Biggest Weekly Withdrawal Since 2013 (BBG)

China’s central bank drained the most funds from the financial system in three years, mopping up excess cash after a reserve-requirement ratio cut earlier this week boosted liquidity. The People’s Bank of China pulled a net 840 billion yuan ($129 billion) in the five days through Friday, data compiled by Bloomberg show. While that was the biggest weekly withdrawal since February 2013, money-market rates barely reacted with the RRR reduction releasing an estimated 685 billion yuan into the banking system. The PBOC kept its open-market seven-day interest rate unchanged at 2.25% on Friday. The seven-day repurchase rate, a benchmark gauge of interbank funding availability, fell one basis point Friday and five basis points for the week, according to a weighted average from the National Interbank Funding Center.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was little changed at 2.3%. “The PBOC didn’t seem to plan to add excessive liquidity,” said Qu Qing at Huachuang Securities. “Keeping the interest rate of the operations unchanged also indicated its intention to maintain prudent monetary policy. The RRR cut is only replacing the huge amount of reverse repos due this week.” The central bank auctioned 50 billion yuan of seven-day reverse repos on Friday, bringing this week’s total sales to 320 billion yuan. That’s less than a record 1.16 trillion yuan of contracts maturing this week that will drain funds from the financial system. The PBOC injected an unprecedented 1.7 trillion yuan via such operations in the five weeks running up to the Lunar New Year holidays.

Read more …

Where the newly unemployed can go.

China To Increase Defence Spending By ‘7-8%’ In 2016 (AFP)

China will raise its defence spending by between 7-8% this year, a senior official has said, a smaller increase than the double-digit rises of the past as Beijing seeks a more efficient military. China’s budget will rise to around around 980bn yuan ($150bn) as the Beijing regime increases its military heft and asserts its territorial claims in the South China Sea, raising tensions with its neighbours and with Washington. Defence spending last year was budgeted to rise 10.1% to 886.9bn yuan ($135.39bn), which still only represents about one-quarter that of the United States. The US defence budget for 2016 is $573bn. “China’s military budget will continue to grow this year but the margin will be lower than last year and the previous years,” said Fu Ying, spokeswoman for the national people’s congress (NPC), the Communist-controlled parliament.

“It will be between 7-8%.” The exact increase will be announced on Saturday at the opening of the NPC, Fu told reporters. The slowdown in spending comes as president Xi Jinping seeks to craft a more efficient and effective People’s Liberation Army (PLA), the world’s largest standing military. At a giant military parade in Beijing last year to commemorate the 70th anniversary of Japan’s World War II defeat, Xi announced the PLA would be reduced by 300,000 personnel. But the event also saw more than a dozen “carrier-killer” anti-ship ballistic missiles rolling through the streets of the capital, with state television calling them a “trump card” in potential conflicts and “one of China’s key weapons in asymmetric warfare”.

Read more …

As we’ve been saying for a very long time. The inevitability far trumps the timing.

“I See Bubbles Bursting Everywhere” (CNBC)

Deflationary tides are lapping the shores of countries across the world and financial bubbles are set to burst everywhere, Vikram Mansharamani, a lecturer at Yale University, told CNBC on Thursday. “I think it all started with the China investment bubble that has burst and that brought with it commodities and that pushed deflation around the world and those ripples are landing on the shore of countries literally everywhere,” the high-profile author and academic said at the Global Financial Markets Forum in Abu Dhabi. Price levels are already falling in parts of Europe. Inflation declined by an annualized 0.2% in the euro zone in February, according to an estimate from the European Union’s statistical body. Annualized inflation was flat in Japan in January (the latest month for which there is official data), but rose by a narrow 0.3% in the U.K.

On Thusday, Mansharamani said that financial bubbles had been fueled by “cheap money” created by highly accommodative monetary policy across developed economies. “I mean, we’ve got a bubble bursting, I would argue, in Australian housing markets — that is beginning to crack; South Africa – the whole economy; Canada – housing and the economy; Brazil. We can keep going on and on,” the academic told CNBC. Financial markets have suffered a rocky ride this year, with significant variation across the world. The U.S. benchmark S&P 500 equity index is down 2.8% since the start of 2016, while China’s Shanghai Composite index has tumbled more than 19%. On Thursday, though, markets were in “risk-on” mode. The CBOE’s VIX — a widely used indicator of risk aversion – dipped to its lowest level in 2016 and “safe-haven” U.S. Treasury notes traded at three-week lows.

Read more …

Banks drive up price of oil so borrowers, before going bankrupt, can pay back loans to … banks.

UBS: “The Move In Oil Is TOTALLY Short Squeeze Led” (ZH)

Today, one Wall Street firm confirms that indeed the recent move in oil has nothing to do with fundamentals, and everything to do with positioning, and as UBS explains, “the performance is TOTALLY short-squeeze led.” Here’s why:

RECENT ACTION/ SENTIMENT : Yesterday oil ended in the green despite a very large reported crude inventory build, a reflection of how biased to the downside sentiment and positioning already is. Today, crude started in the read and has been mixed from there but moving higher. And both days, the stocks have lead with energy the best performing subsector in the S&P. Now, there is no doubt that the performance today is TOTALLY short-squeeze led. Though it also shows how negative sentiment and positioning is. Interestingly, with energy outperforming the market the last few days for the first time in a very long while, I actually got a few long only generalist type calls yesterday. Nothing concrete but generalists who are underweight the space trying to figure out if this is a turning point…

WHAT HAS HELPED FUEL THIS SHORT SQUEEZE?
• Positioning and sentiment very biased to the short side/ underweight. And as we move up, the move is also exxacerbated by short gamma positions that have to cover at higher levels.
• Despite high oil inventories (and still building), most upstream producers (from Exxon on down) have guided to lower than expected production as a result of lower capex.
• Ongoing hopes of a potential agreement between OPEC and non-OPEC members (seems umlikely but now a meeting set for March 20th is reviving some market hopes).
• A couple of supply issues like Kirkuk/Ceyhan pipeline damage taking longer to repair than expected and Farcados force majeure in Nigeria still on going issue.
• Credit players covering equity shorts — evident today that “good credit names” are underperforming and “bad credit names” outperforming.
• We took a day break from equity issuances in the space ystd and this morning… despite energy’s strong performance. Though rest assured we haven’t seen the end of issuances yet (RRC WLL, RSPP, MUR, CRZO GPORare all top of mind)… by the same token all this energy issuances are helping the credit side of things which has also been the culprit of the issue.

One may wonder if the squeeze is forced, or simply momentum driven, although we would like to quickly point us that most of the recent equity offerings by O & G companies who have benefited from the rally have noted in the “use of proceeds” that the raised capital would be used to pay down secured debt, i.e., take out the banks. In other words, it is as if the banks are orchestrating a squeeze to allow the shale companies to raise capital which will then allow them to repay their secured debt to the banks, secured debt whose recoveries as we have recently shown are practically non-existent in bankruptcy.

Read more …

“As it stands, the people of the nations of monetary union are farther away from the idea of political union than at any time in the past.”

EU Superstate Would Have No Democratic Legitimacy (Tel.)

The eurozone’s fledgling attempts to create a full-blown fiscal union has no democratic legitimacy, one of the single currency’s founding fathers has warned. Professor Otmar Issing – a former chief economist at the ECB and architect of the euro – said EU policymakers would not dare put their plans to transfer budgetary sovereignty to Brussels before electorates as they would fail at the first hurdle. Speaking of the European Commission’s Five Presidents Report – which lays out plans to shore up the foundations of the euro – Mr Issing said it was a step towards creating a fiscal union “without democratic legitimacy”. “Those who have read [the Five Presidents] report know that. Without political union all transfers will lack democratic legitimacy.

And nobody can be as stupid as to think political union is around the corner,” he told a parliamentary committee at the House of Lords. Prof Issing – who has been a fierce critic of attempts to pool budgetary powers in the euro – said EU elites were afraid to “confront” voters, delaying their plans for integration until after 2017, the year France and Germany hold national elections. “The thrust of all these ideas is going through a back door towards fiscal union,” he said. “Voters in the end will understand what is going on. They will know they are being exploited.” His comments come after prominent voices such as former Bank of England governor Lord King predicted the euro would collapse under the weight of popular disillusion in its weakest economies. But Prof Issing said there was too much “political investment” in the project to allow the euro to collapse.

“It will stay – I am sure about that,” he said. Instead of calling for a giant leap in integration, which would create a euro “superstate” with an EMU parliament and treasury, the German central banker urged policymakers to “stabilise” the current system and return to the original principles of monetary union, which forbids transfers from stronger to weak nations. “In the end, governments are responsible for their own actions,” said Professor Issing. “As it stands, the people of the nations of monetary union are farther away from the idea of political union than at any time in the past.” He also criticised EU plans to set up a banking union that guarantees the deposits of citizens across the 19-country bloc, describing it as an “expropriation of taxpayer money in some countries”.

“The idea of a common deposit insurance is fine, but before you start, you have to clarify bank balance sheets and have a new start. But this is also tricky and complex – there is no simple way out.” Highlighting the democratic constraints the euro has faced since the financial crisis, Professor Issing said he was concerned by developments in Spain and Portugal – where two incumbent bail-out governments have failed to be re-elected after imposing punishing austerity measures. “People have decided for a policy that is different to what is needed for monetary union. This strikes at the core of democracy.”

Read more …

Going more wrong by the day.

Brazil’s Economy Slumps To 25-Year Low as GDP Falls 3.8% (Guardian)

Brazil’s economy suffered its worst slump for quarter of a century last year as a global commodity rout, a domestic political crisis and rising inflation forced businesses to slash spending and jobs. Economists warned that the country’s recession had further to run and could deepen amid fresh signs that a drop in demand has continued into 2016. Official figures showed Brazil’s GDP fell 3.8% in 2015, the steepest decline since 1990, when the country was battling hyperinflation. Last year finished on a gloomy note with fourth quarter GDP down 1.4% on the previous quarter against the backdrop of a deepening political corruption scandal. The Brazilian economy is expected to shrink again by more than 3.0% this year, the worst consecutive annual plunges since records began in 1901. Four years ago, the economy was growing by more than 4.0% a year.

The gloomy news will raise pressure on President Dilma Rousseff, who is fighting efforts to impeach her over charges that she used money from state-run banks to plug holes in the budget. More timely figures showed the private sector contracted at a record pace last month. The Brazil composite output index, published by data company Markit, dropped to its lowest since the survey began in 2007. The index, which tracks companies across the economy, dropped to 39 in February, marking the 12th month running below the 50-point mark that separates expansion from contraction. Brazil’s economy had been hit hard by a collapse in commodity and oil prices in the past two years, said Mihir Kapadia at Sun Global Investments. “The situation has been made worse by the high debt levels, especially in foreign currency – essentially in US dollars. Problems of governance, corruption and political issues have created a perfect storm for continued political instability,” Kapadia added.

Read more …

No, not even the IMF can.

Only The IMF Can Now Save Brazil (AEP)

Brazil is heading straight into the arms of the IMF. The sooner this grim reality is recognized by the country’s leaders, the safer it will be for the world. The interwoven political and economic crisis has gone beyond the point of no return. The government is frozen. The finance ministry has lost the trust of Brazilian investors and global markets in equal measure. Almost nothing credible is being done to stop the debt trajectory spinning into orbit. Few believe that the ruling Workers Party is either capable or willing to take the drastic austerity measures needed to break out of the policy trap, or that it would suffice at this late stage even if they tried. “There is an enormous fiscal crisis and we’re flirting with a return to hyperinflation. All the debt variables are going in the wrong direction,” said Raul Velloso, the former state secretary of planning.

“There is a loss of confidence in the ability of the government to manage its debts. We face the risk of default,” he said. Three quarters of the budget is effectively untouchable, locked in by a web of welfare payments and regional transfers. President Dilma Rousseff is battling impeachment. Whether she wins or loses over coming months, the congress is too fractured and enflamed to do much about a budget deficit running at over 10pc of GDP. “I have the feeling that nobody wants to take any bold steps, or make any sacrifices,” said Arminio Fraga, the former central bank governor. “Brazil ended up in this situation by doubling down on credit and fiscal expansion. It woke up with the nightmare of a paralyzed country and a ruined model that is not being corrected. It is an economic tragedy,” he told O Estado de Sao Paulo.

Mr Fraga said the collapse is desperately sad because Brazil seemed to be on the right path under president Luis Inacio da Silva, or Lula as everybody knows him. “There was a feeling that the country was getting ahead, and then it vanished. The country suddenly lost itself completely,” he said. It emerged this week that even Lula is under criminal investigation, the latest casualty of the Lava Jato (carwash) scandal. This began as a probe into the abuse of inflated contracts from the state oil giant Petrobras to fund the Workers Party, but is fast engulfing the country’s political elites in a broader purge – akin to Italy’s “mani pulite” scandals in the 1990s. In a sense it is an impressive show of judicial independence. But nobody knows how this will end, and the mood is turning tetchy.

The justice minister resigned this week, angry over pressure from his own Workers Party to rein in the probe. Rui Falcão, the party chief, retorted that basic rights are now being violated by prosecutors acting beyond the rule of law. “We’re seeing the abolition of habeas corpus. It is the democracy of the country that is at stake,” he said. Dilma lost her last chance to win back market trust when her Chicago-trained trouble-shooter, Joaquim Levy, threw in the towel after a year as finance minister, defeated by foot-dragging in the cabinet. Disbelief is by now so pervasive that her government would struggle to restore confidence even if it grasped the nettle. The IMF is the only way out of the impasse.

Read more …

Only as long as investors can profit, and banks. Not endless.

Era Of Zero, Negative Interest Rates Could Last For Years: Barclays (Reuters)

The era of zero or negative interest rates, notably in Japan and the euro zone, could extend for several more years as central banks battle persistently low growth and inflation, strategists at Barclays said on Thursday. The downward pressure on interest rates will be strongest in Japan and the euro zone, while the greater flexibility and resilience of the U.S. and UK economies should allow interest rates there to rise quicker, albeit extremely gradually. “Negative nominal interest rates are more than just a passing monetary fad,” Barclays said in its 61st annual Equity Gilt Study. Barclays said the natural rate of interest across the developed world, where borrowing costs are neither stimulative nor restrictive given an economy’s potential growth and inflation rates, is lower than where nominal rates currently stand.

The study finds that real equilibrium policy rates are near-zero across the developed world and may need to fall further below zero in the euro zone and Japan for interest rate policy there to become “sufficiently accommodative”. Michael Gapen, the bank’s chief U.S. economist and co-author of the report, said the way to avoid a repeat of Japan’s experience over the last two decades is to restructure “zombie” banks and firms so that the broader private sector can clean itself up and get itself in shape to start growing again. This could be most difficult in the euro zone, where the mix of slow growth, low inflation and a fractured banking system blighted by bad loans will make it difficult for the ECB to escape low or negative rates.

“The era of low or even negative interest rates across the developed world, particularly in Japan and the euro zone, could last for several years to come,” Gapen said. In 1995 the Bank of Japan lowered its main interest rate to 0.5% to try and reflate the flagging economy. Rates have never been higher since and the BOJ has also injected trillions of yen worth of stimulus via quantitative easing bond purchases. The BOJ is still fighting that battle against low growth and deflation. Earlier this year it adopted negative interest rates on certain bank deposits and became the first G7 rich country to have yields on its benchmark 10-year bonds fall below zero. “We don’t see a ‘Japanification’ of the world. But accommodative policy is here to stay,” said Christian Keller, head of economics research at Barclays and also a co-author of the study. “Before we get to the limits (of these policies), central banks will persist with zero and negative rates,” he said.

Read more …

“This is bad history and worse economics.”

Osborne’s Desire To Further Cut Spending Makes Little Sense (Wolf)

George Osborne wants to burnish his image as an iron chancellor of the exchequer. He has already committed to achieving a fiscal surplus by 2019-20. He now suggests that further tightening of fiscal policy may be needed in response to the “storm clouds” he identified when in Shanghai last week. Mr Osborne may be preparing for bad news in his Budget on March 16. The question is whether his plan makes sense. The answer is no. The fiscal objective is itself questionable. The aim is to achieve an overall surplus, unless growth drops below 1%. This is to offer respite in the event of a recession. Just compare what the government would do if a deficit opened up while the economy grew 1.1% for three years (namely, tighten policy), with what it would do if it grew 3%, 0.9% and then 2% (not tighten at all in the second year).

Why should an overall fiscal surplus be important, anyway? The answer is that it is a quicker way to lower the ratio of debt to GDP. But that would only be true if achieving the surplus did not itself slow the growth of GDP. As the Institute for Fiscal Studies notes in its Green Budget, “running a surplus is not necessary to bring debt down as a share of national income”. Moreover, if the government is in a position to invest by borrowing at low real interest rates, as now, it makes sense to do so. The government must worry about its balance sheet, not just its debt. Yet the absurdity of the target is brought out better still by the comments Mr Osborne made last week. He said, first, “this country can only afford what it can afford”; second, “the economy is smaller than we thought”; third, the UK must tighten further, to ensure “economic security”; and, finally, “the last time we didn’t [live within our means] we were right in the front rank of nations facing economic crisis”.

This is bad history and worse economics. It is a myth that the UK’s crisis was due to a failure of the government to live within its means. The truth is the opposite. The government did not have a fiscal crisis. The country had a financial crisis whose economic results were cushioned by the government’s deficits. Again, it is not true that running a fiscal surplus year after year is either necessary or sufficient to achieve “economic security”. It is more important to create a robust financial sector. Yet pressure from the Treasury today seems to be to relax constraints. That may well be far riskier for the UK economy in the long run than modest fiscal deficits.

Read more …

Ari Andicropoulos.

The Economy Simply Explained (AA)

Sometimes my friends tell me that they try to read them, but my posts are too complicated. I am using jargon that they don’t understand and probably they are too long and confusingly written. To remedy this, I have decided to try to write a simplified version of this piece I wrote about how the economy works.

How can one picture the economy? The economy should be viewed as a flow of money. This may seem straightforward, but mainstream economic models do not include money at all. And yet, a lot of the workings of the economy can be understood by looking at who receives money and how much of it they spend.

 If everyone is working and producing goods and services, then people need to buy these goods and services. In order for people to buy these products they need to have enough money.

Money received by people for producing things is then spent by these people on more things. This cycle repeats itself and makes the economy run.

What if people don’t have enough money? They can’t buy the goods and services. In a perfect world, the price of everything would go down so that all of what is produced can be bought. Unfortunately, in reality this is not the case.

Why can’t prices go down very easily? The reason that prices can’t adjust very easily to not enough money is that people’s wages tend not to go down. This is called ‘stickiness of wages’. Because people generally don’t like having pay cuts, producers can’t reduce prices or they will be making goods at a loss.

If they can’t reduce prices, what do they do? Instead they cut production and make people unemployed. This then, in turn, reduces the amount of money that people have to buy things. Leading to further job losses.

Eventually what would happen? Without any government intervention, in the end prices and wages would fall enough so that everyone could have a job again. But it is a long and painful process. It is much better to ensure that the correct amount of money is running therough the system.

How much money is the correct amount? A generally accepted nominal GDP growth target is 5% per year. This means that in total 5% more value in goods and services are produced each year. Some of this increase is due to inflation – one pays more for the same number of goods. And some of this is growth – more goods are produced.

But if 5% more £ worth of goods and services are produced, doesn’t that mean that people need to spend 5% more money each year than the year before? Exactly. Every year, for the economy to be healthy, 5% more money needs to be spent than the year before.

Where does this extra money come from? This is a very good question. And it is one that seems to be ignored by most economists.

The problem we have with the economy today is that actually it is being drained of money. If £1m of goods are produced and sold, then in the next year only approximately £970,000 will be spent. People are saving the other £30,000.

To be more exact, the gap between the amount people are saving and the amount of people’s savings from previous years that they are spending comes to 3%, maybe even 4%, of GDP.

Why is this gap so large? There are a number of reasons but it mainly has to do with the difference in spending of the people who receive the money. Working people on low and medium incomes tend to spend most of the money they receive. But savers receiving interest and dividends spend less of it in the economy.

Read more …

You expected something else? That German beer purity law (Reinheitsgebot) is 500 years old.

Monsanto’s RoundUp Found in 14 Popular German Beers (NS)

Want a round of Round Up with your beer? The German beer industry is in shock after finding that 14 different popular beer brands have traces of the ‘probably’ carcinogenic herbicide, glyphosate – an ingredient found in Monsanto’s best-selling weed killer, Round Up. Germany’s Agricultural minster is playing down the risks in order to save one of the countries’ best-selling exports. Glyphosate levels were as high as 30 micrograms per liter, even in beer that is supposed to be brewed from only water, malt, and hops. This finding by the Munich Environmental Institute calls into question the rampant spraying of Round Up on both GMO and non-GMO crops around the world, and casts doubt upon Germany’s 500-year-old beer purity law.

The EU Commission was looking to extend approval for the use of glyphosate in Germany, and other EU countries in April for another 15 years. The current license runs out this summer. Following the findings by France, that glyphosate is likely a human carcinogen, as well as the World Health Organization’s cancer research arm, the IARC, finding that glyphosate is a probable carcinogen, glyphosate in Germany’s coveted beer is not a positive discovery for the makers of this herbicide, which include companies like Monsanto. Germany’s farm federation has denied responsibility, saying that malt derived from glyphosate-sprayed barley has been banned. The group admits, though, that glyphosate could have been used on farms prior to the ban, meaning barley could still be grown in glyphosate-drenched soil.

The Bremen office of the brewery giant Anheuser-Busch described the institute’s findings as “not plausible,” citing a bill of health issued by Germany’s Federal Institute for Risk Assessment (BfR) that the amounts of glyphosate found in beer did not pose a threat to consumers. In a statement, the Institute said: “An adult would have to drink around 1,000 liters (264 US gallons) of beer a day to ingest enough quantities to be harmful to health.” As with other Big Ag deniers, they seem to forget that glyphosate exposure comes from multiple sources, aside from just contaminated beer.

Read more …

This will make Erdogan all the more dangerous.

Ballooning Bad Loans in Turkey Worsen as Tourists Flee (BBG)

The ailments afflicting Turkey’s economy that have triggered a surge in bad loans look poised to get worse before they get better. Non-performing loans at the nation’s lenders climbed to 3.18 percent of total credit in January, the sixth straight monthly increase and the highest proportion in almost five years, according to data this week from the Ankara-based Banking Regulation and Supervision Agency. BofA Merrill Lynch and Commerzbank said in Februrary corporate distress is deepening in Turkey, making it harder for companies to pay down debts. The rise in bad loans is compounding the challenges for Turkey’s $814 billion banking industry as a combination of currency depreciation, Russian sanctions and waning tourist visits amid a spate of terrorist attacks weigh on the economy.

As the central bank limits funding to tame inflation, the highest borrowing costs in four years and a slow down in loan growth are piling pressure on indebted businesses. “The trend is likely to increase and intensify,” said Apostolos Bantis, a Commerzbank credit analyst in Dubai, who said loans and lira-denominated bonds would be exposed. “While I don’t see the situation running out of control, the impact of Russian sanctions, the blow to the tourism industry, higher funding costs and the weaker currency will all take a toll on the corporate sector,” he said before the data.

Read more …

Would tend to agree. But don’t underestimate the coming financial crash.

The Syrian War Will Define The Decade (Reuters)

Many decades have a war that defines them, a conflict that points to much broader truths about the era — and perhaps presages larger things to come. For the 1930s, the Spanish Civil War, the three-year fight between Fascists (helped by Nazi German) and Republicans (armed by the Soviet Union) pointed to the far larger global disaster to come. For the 1980s, the Soviet battle to control Afghanistan, a bloody mess of occupation and insurgency, helped bring forward the collapse of the Soviet Union and set the stage for 9/11 and modern Islamist militancy. For the 1990s, you can take your pick of the Balkans, Somalia, Rwanda or Democratic Republic of Congo. For the 2000s, it was Iraq — the ultimate demonstration of the “unipolar moment” and the limits, dangers and sheer short-livedness of America’s status as unchallenged global superpower.

We are, of course, little more than half way through the current decade. Already, however, it looks as though it has to be Syria’s civil war. In pure human terms, the war dwarfs any other recent conflict. Estimates of the number of Syrian dead range from 270,000 to 470,000 people. The UN estimates up to 7.6 million Syrians are displaced within their own country, with up to 4 million fleeing their homeland. From its relatively small beginnings as a largely unarmed revolt, the Syrian conflict has now dragged in more than a half-dozen countries. Its broader implications continue to grow by the month. While not the sole cause of Europe’s migrant crisis, Syrians make up a significant proportion — perhaps even the majority — of new arrivals on the continent. The sheer numbers are producing political strains that have already torn up the ideal of a “borderless” Europe and may yet wreck the entire EU project.

Syria has exemplified what Financial Times columnist Gideon Rachmann calls a “zero-sum world.” From the beginning, rival regional powers — particularly Shi’ite Iran and Sunni states led by Saudi Arabia — approached the conflict with the assumption that neither side could afford to back down or compromise without letting the other win. From that perspective, Syria is part of a larger regional confrontation that encompasses the war in Yemen, the long-term sectarian battle for control of Iraq and, of course, attempts to rein in Iran, in general, and its nuclear program, in particular. Increasingly, though, the war in Syria has become part of the wider, potentially more dangerous confrontation between Western powers and Russia. That confrontation also goes back years — through Kosovo and the Balkans to the Cold War.

Read more …

It’s already lost.

EU Fate At Stake On Muddy Greek Border (Reuters)

In muddy fields straddling the border with Macedonia, a transit camp hosting up to 12,000 homeless migrants in filthy conditions is the most dramatic sign of a new crisis tearing at Greece’s frayed ties with Europe and threatening its stability. For the last year, Greece has largely waved through nearly a million migrants who crossed the Aegean Sea from Turkey on their way to wealthier northern Europe. Now, on top of a searing economic crisis that took it close to ejection from the euro zone a year ago, the European Union’s most enfeebled state is suddenly being turned into what Prime Minister Alexis Tsipras calls a “warehouse of souls”. At least 30,000 people fleeing conflict or poverty in the Middle East and beyond are bottled up in Greece after Western Balkan states effectively closed their borders.

Up to 3,000 more are crossing the Aegean every day despite rough winter seas. “This is an explosive mix which could blow up at any time. You cannot, however, know when,” said Costas Panagopoulos, head of ALCO opinion pollsters. Men, women and children from Afghanistan, Syria and Iraq are packed like sardines in a disused former airport terminal in Athens, crammed into an indoor stadium or sleeping rough in a central square, where two tried to hang themselves last week. The influx is severely straining the resources of a country barely able to look after its own people after a six-year recession – the worst since World War Two – that has shrunk the economy by a quarter and driven unemployment above 25%.

After years of austerity imposed by international lenders, who are now demanding deeper cuts in old-age pensions, ordinary Greeks say they feel abandoned by the European Union. A staggering 92% of respondents in a Public Issue poll published by To Vima newspaper last Sunday said they felt the EU had left Greece to fend for itself. The poll was taken before the European Commission announced €300 million in emergency aid this year to support relief organizations providing food, shelter and care for the migrants. But such promises do little to soften public anger. “I want to spit at them,” said 40-year-old Maria Constantinidou, who is unemployed. “Those European leaders .. should each take 10 migrants home, feed them, look after them and then see how difficult things are.”

Read more …

Greeks are Menschen.

Pensioners Share Their Bread With Refugees At Greek Border (Reuters)

Each day, Demetrios Zois buys two loaves of bread. One is for his family, and one for whoever comes knocking on his door. In the past year, there have been plenty of unexpected visitors. He is among 100 mainly elderly people living in Greece’s border community of Idomeni, which has become the focal point of a growing migrant crisis that is proving too big for the country to handle. Around 30,000 migrants and refugees were stranded in Greece on Thursday, with just over a third of them at Idomeni, waiting for the border with Former Yugoslav Republic of Macedonia (FYROM) to open. “We feel very bad for them. We understand they are hungry, but they are 10,000 and we are 100. If more come what will happen?” Zois, an 82-year-old pensioner, told Reuters.

He and his friend Theodoros Moutaftsis watch with growing concern as a tent city in the meadows outside their homes get bigger by the day. “It’s the first thing we check when we wake up in the morning, whether they have gotten closer to the village,” said Moutaftsis, 79. “That and if anything is missing,” he adds. Ten hens disappeared from his garden last month, and he thinks it was people from the camp. “These poor people are hungry. The state isn’t here to help them. It’s totally absent,” he said. There were anything between 11,000 and 12,000 people at the transit camp on Thursday, waiting for the border gate to open to continue their trek further in to Europe.

Read more …

This is flat-out illegal. In general, push back is not permitted. International law says that at the very minimum they would have to weigh every single case on an individual basis.

EU Mulls ‘Large-Scale’ Migrant Deportation Scheme (AP)

Turkey is under growing pressure to consider a major escalation in migrant deportations from Greece, a top EU official said Thursday, amid preparations for a highly anticipated summit of EU and Turkish leaders next week. European Council President Donald Tusk ended a six-nation tour of migration crisis countries in Turkey, where 850,000 migrants and refugees left last year for Greek islands. “We agree that the refugee flows still remain far too high,” Tusk said after meeting Turkish Prime Minister Ahmet Davutoglu. “To many in Europe, the most promising method seems to be a fast and large-scale mechanism to ship back irregular migrants arriving in Greece. It would effectively break the business model of the smugglers.”

Tusk was careful to single out illegal economic migrants for possible deportation, not asylum-seekers. And he wasn’t clear who would actually carry out the expulsions: Greece itself, EU border agency Frontex or even other organizations like NATO. Greek officials said Thursday that nearly 32,000 migrants were stranded in the country following a decision by Austria and four ex-Yugolsav countries to drastically reduce the number of transiting migrants. “We consider the (FYROM) border to be closed … Letting 80 through a day is not significant,” Migration Minister Ioannis Mouzals said. He said the army had built 10,000 additional places at temporary shelters since the border closures, with work underway on a further 15,000. But a top U.N. official on migration warned that number of people stranded in Greece could quickly double.

Read more …

Mar 212015
 
 March 21, 2015  Posted by at 6:53 am Finance Tagged with: , , , , , , , , ,  3 Responses »


Jack Delano Freight operations on the Indiana Harbor Belt railroad 1943

Wages Haven’t Been This Crucial to US Economy in 50 Years (Bloomberg)
American Underwater Homeowners “Here To Stay” Zillow Says (Zero Hedge)
Here’s the Next Biggest Threat to Global Crude Oil Prices (Bloomberg)
Global Oil Glut Set To Grow As China Slows Crude Imports (Reuters)
Debt Is Oil Patch’s Four-Letter Word (Bloomberg)
Shocking Austerity: Greece’s Poor Lost 86% Of Income, Rich Only 17-20% (KTG)
Of Greeks and Germans: Re-Imagining Our Shared Future (Yanis Varoufakis)
Legal Experts: Greece Has Grounds for WWII Reparations (Greek Reporter)
It Really Looks Like Greeks Are Hiding Cash Under the Mattress (Bloomberg)
EU Offers Funds In Return For Urgent Greek Reforms (Guardian)
EC Head Juncker Offers $2 Billion In Unused Funds To Greece (RT)
EU Bank’s Lack Of Transparency ‘Like A John Le Carré Novel’ (Guardian)
Japan Pensions Sell Record $46 Billion Bonds to Buy Stocks (Bloomberg)
The Central Banks Will Not Be Able to Control the Dollar Carry Trade (Phoenix)
US Sets First Fracking Standards in More Than 30 Years (Bloomberg)
Ukraine Sends Request For Proposals For US Taxpayer-Guaranteed Bond (Reuters)
US ‘Aggressively’ Threatened Germany Over Snowden Aylum (Glenn Greenwald)
Inhofe’s Snowball Fight With NASA, US Navy, CEOs And The Pope (Paul B. Farrell)
Monsanto Weedkiller Roundup Is Probably Carcinogenic, WHO Says (Bloomberg)
The Lion Hugger (BBC)

Why? Because people refuse to go deeper into debt: “In an environment where credit is not being used in a material way, the fate of wages matters..” But that still sounds far too much like it’s a voluntary thing. It’s not.

Wages Haven’t Been This Crucial to US Economy in 50 Years (Bloomberg)

When it comes to U.S. economic growth, wages may never have been this important. The link between earnings and consumer spending has been tighter in this expansion than in any other since records began in the 1960s, according to calculations by Tom Porcelli at RBC Capital Markets. Wages have become even more critical as households, still shaken after being caught with too much debt when the recession hit, remain unwilling or unable to tap home equity or let credit-card balances balloon to buy that new television or dishwasher. By not overextending themselves again, Americans are only spending as much as their incomes will allow, meaning that 70% of the economy is riding on how fast pay rises.

“In an environment where credit is not being used in a material way, the fate of wages matters,” Porcelli said. “They’re doing all of the driving from a consumption perspective.” The correlation between growth in wages and consumer spending adjusted for inflation stands at 0.93 since June 2009, when the recovery began, according to Porcelli. A reading of 1 means they move in the same direction all the time, zero means there is little relationship and minus 1 means they continually diverge. Porcelli tracked wages through the index of aggregate weekly payrolls for private production workers, which takes into account hourly earnings, the length of the workweek and changes in employment for about 80% of the labor force. Records go back to 1964, longer than the measure for all employees that includes supervisors, which dates back only to 2006.

Read more …

“The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us..”

American Underwater Homeowners “Here To Stay” Zillow Says (Zero Hedge)

A few weeks back we commented on the rather disturbing news that repeat foreclosures jumped in January: “According to Black Knight Financial, both new and repeat foreclosures hit a 12-month high during the first month of the year with repeats (i.e. the borrower was rescued but has since entered the foreclosure process again) jumping 11% M/M. More troubling is the trend in repeat foreclosures which accounted for only 15% of total foreclosures during the crisis but now make up a startling 51%.” Here’s what the trend looks like:

Now, a new report from Zillow seems to offer further evidence that the US housing market may not be the picture of health after all (as if we needed more proof after housing starts cratered 17% in February). The%age of homeowners underwater in the US was flat from Q3 to Q4 which doesn’t sound all that terrible until you consider that this figure had fallen for 10 consecutive quarters. Things look particularly bad in Florida and the midwest where Zillow notes more than 25% of borrowers are sitting in a negative equity position. Here’s more:

In the fourth quarter of 2014, the U.S. negative equity rate – the%age of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9%, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year… More than a quarter of mortgaged homes are underwater in some markets in Florida and the Midwest…

Zillow goes on to note that we have entered a new era in the US housing market: the era of the underwater homeowner. Even better, the report goes on to note that in a number of cases, borrowers will likely be “in negative equity forever”:

…this represents a major turning point in the housing market. The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived. Negative equity, while it may still fall in fits and spurts, is decidedly here to stay, and will impact the market for years to come.

In fact, some homeowners trapped very deeply underwater may essentially be in negative equity forever. And those homeowners are much more likely to own America’s least expensive homes. Making matters worse, many homeowners in the bottom home value tiers are not only underwater, but very far underwater. Consider, for example, homeowners of the least expensive homes in the Detroit metro area. These homeowners are 29 times more likely to owe twice as much than their house is worth compared to a homeowner at the high end of the market.

Read more …

Darn! Trumped by teapots again!

Here’s the Next Biggest Threat to Global Crude Oil Prices (Bloomberg)

The next big threat to oil prices isn’t from OPEC or Bakken shale. It’s Russian samovars, or teapots. Simple refineries that process crude into fuel oil are scaling back, because when oil prices slump, the government reduces the discount that these refiners – known as teapots to those in the industry – get for exporting fuel. They use less crude, freeing it up for sale abroad, which in turn adds to the global glut. Russia may increase oil exports by as much as 250,000 barrels a day this year, according to James Henderson, a senior research fellow at the Oxford Institute for Energy Studies who’s followed the country’s energy industry for more than 20 years. That would equate to 5% growth in shipments, the most in at least a decade.

“The pain Russia is feeling from low oil prices has made more crude available for export,” Henderson said by phone March 18. “Quite a few of Russia’s simple refineries could reduce their runs.” Rising shipments from Russia, which ranks with Saudi Arabia and the U.S. as the world’s biggest oil producers, would put more pressure on crude, already down more than 50% from last year. Falling energy prices and U.S. and European Union sanctions imposed last year in response to the Ukraine crisis have pushed Russia to the brink of recession, damping demand for refined fuel products in the country. Crude loadings from Russian ports are 9.5% higher in the first quarter year over year, according to shipment schedules obtained by Bloomberg.

Teapot refineries processed as much as 800,000 barrels of crude a day last year, Igor Dyomin, a spokesman for Russia’s state-run pipeline operator, Transneft, said by phone March 19. A teapot refinery is one that produces mostly fuel oil rather than more premium fuels, according to Dyomin. Seven simple plants with a combined capacity of 1.2 million barrels a day are most at risk in the current price environment, according to Henderson.

Read more …

As seen from a mile away.

Global Oil Glut Set To Grow As China Slows Crude Imports (Reuters)

A global oversupply of oil is set to rise as China pauses in the build-up of its strategic reserves and Asian refineries slow crude imports ahead of the spring maintenance season, putting more downward pressure on prices. China’s purchases to fill its strategic petroleum reserves (SPR) had been one of the main drivers of Asian demand since August of last year, with the No.2 oil consumer taking up cheap crude to fill its tanks despite slowing economic growth. Yet China could pause its reserve purchases soon as tank sites reach their limits and new space only becomes available later this year. Little is known about China’s SPR levels.

The government seldom issues data, but its plan is to reach around 600 million barrels, about 90 days’ worth of imports. Most estimates put the SPR stocks currently to be 30-40 days’ worth. “I don’t think there is much (SPR) space left to fill,” a Chinese storage executive said under the condition of anonymity. In the Zhoushan area of Zhejiang province – site of two SPR bases and major commercial storage facilities – tanks are brimming, the executive said. “They are so full that one VLCC tanker owned by a state refiner has had to wait for almost 15 days to discharge,” he said. Adding to downward pressure is the expectation that Chinese refiners could process less crude oil in the second quarter as demand is dented by tax hikes and an economy growing at its slowest in 25 years.

Thomson Reuters data also shows that Asian imports overall have fallen 5% since peaking in December, when China’s purchases hit an all-time high at 7.2 million barrels per day. In India and Japan, crude imports for the most recent month are down 20% and 11% from a year ago, respectively, mainly due to the approach of the spring refinery maintenance season.

Read more …

“Just as fracking helped production soar in America’s oil fields, the debt boom is now magnifying the slump in prices..”

Debt Is Oil Patch’s Four-Letter Word (Bloomberg)

The 60 percent plunge in crude oil prices since mid-2014 isn’t just about increased production and slower global growth. Debt may be the four-letter word when it comes to explaining the extent of the energy sector’s collapse, a paper in the Bank for International Settlement’s Quarterly Review shows. While production has certainly increased and consumption cooled, current estimates of both are little changed from previous forecasts. This stands in contrast to the last two periods of similar oil-price declines in 1996 and 2008, which were attributed to big reductions in demand and/or a surge in production, according to the paper.nThis time, low borrowing costs, a product of easy Federal Reserve monetary policy, are a new wrinkle.

Cheap financing has made it easier for exploration and production (E&P) companies to finance operations and expand rapidly as the era of hydraulic fracturing kicked into high gear. Debt in the global oil and gas industry reached $2.5 trillion in 2014, 2 1/2 times what it was eight years earlier, according to the BIS paper. Just as fracking helped production soar in America’s oil fields, the debt boom is now magnifying the slump in prices as E&Ps boost current and future sales of crude to make sure they can fulfill their debt obligations. The direct effect on the economy is a sharp cutback in capital spending plans, already evidenced by plummeting rig counts.

At the same time, production continues to march higher. Deteriorating balance sheets encourage companies to keep pumping from existing wells even as the value of the assets (the oil) backing those securities declines. That explains the blowout in spreads between high-yield energy bonds and risk-free counterparts. “A sell-off of oil company debt could spill over to corporate bond markets more broadly if investors try to reduce the riskiness of their portfolios,” the BIS authors write. “The fact that debt of oil and gas firms represents a substantial portion of future redemptions underlines the potential system-wide relevance of developments in the sector.”

Read more …

Just to show you what Samaras and the Troika did to the country. And what the EU etc. want to continue doing.

Shocking Austerity: Greece’s Poor Lost 86% Of Income, Rich Only 17-20% (KTG)

Greece’s unbalanced austerity and drastic increase of poverty. The poorest households in the debt-ridden country lost nearly 86% of their income, while the richest lost only 17-20%. The tax burden on the poor increased by 337% while the burden on upper-income classes increased by only 9% !!! This is the result of a study that has analyzed 260.000 tax and income data from the years 2008 – 2012.

According to the study commissioned by the German Institute for Macroeconomic Research (IMK) affiliated with the Hans Böckler Foundation:
– The nominal gross income of Greek households decreased by almost a quarter in only four years.
– The wages cuts caused nearly half of the decline.
– The net income fell further by almost 9%, because the tax burden was significantly increased
– While all social classes suffered income losses due to cuts, tax increases and the economic crisis, particularly strongly affected were households of low- and middle-income. This was due to sharp increase in unemployment and tax increases, that were partially regressive.
– The total number of employees in the private sector suffered significantly greater loss of income, and they were more likely to be unemployed than those employed in the public sector.
-From 2009 to 2013 wages and salaries in the private sector declined in several stages at around 19%. Among other things, because the minimum wage was lowered and collective bargaining structures were weakened. Employees in the public sector lost around a quarter of their income.

Read more …

“In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors.”

Of Greeks and Germans: Re-Imagining Our Shared Future (Yanis Varoufakis)

Any sensible person can see how a certain video[1] has become part of something beyond a gesture. It has sparked off a kerfuffle reflecting the manner in which the 2008 banking crisis began to undermine Europe’s badly designed monetary union, turning proud nations against each other. When, in early 2010, the Greek state lost its capacity to service its debts to French, German and Greek banks, I campaigned against the Greek government’s quest for an enormous new loan from Europe’s taxpayers. Why?

I opposed the 2010 and 2012 ‘bailout’ loans from German and other European taxpayers because:
• the new loans represented not a bailout for Greece but a cynical transfer of losses from the books of the private banks to the weak shoulders of the weakest of Greek citizens. (How many of Europe’s taxpayers, who footed these loans, know that more than 90% of the €240 billion borrowed by Greece went to financial institutions, not to the Greek state or its citizens?)
• it was obvious that, at a time Greece could not repay its existing loans, the austerity conditions for giving Greece the new loans would crush Greek nominal incomes, making our debt even less sustainable
• the ‘bailout’ burden would, sooner or later, weigh down German and other European taxpayers once the weaker Greeks buckled under their mountainous debts (as moneyed Greeks had already shifted their deposits to Frankfurt, London etc.)
• misleading peoples and Parliaments by presenting a bank bailout as an act of ‘solidarity to Greece’ would turn Germans against Greeks, Greeks against Germans and, eventually, Europe against itself.
In 2010 Greece owed not one euro to German taxpayers. We had no right to borrow from them, or from other European taxpayers, while our public debt was unsustainable. Period!

That was my ‘controversial’ point in 2010: In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors. Well before the May 2010 ‘bailout’, I urged European citizens to tell their governments not to even think of transferring private losses to them. To no avail, of course. That transfer was effected soon after[2] with the largest taxpayer-backed loan in economic history given to the Greek state on austerity conditions that have caused Greeks to lose a quarter of their income, making it impossible to repay private and public debts, and causing a hideous humanitarian crisis. That was then, in 2010. What should we do now, in 2015, that Greece remains in crisis and our people, the Greeks and the Germans, have, regrettably but also predictably, descended into a mutual ‘blame game’?

First, we should work towards ending the toxic ‘blame game’ and the moralising finger-pointing which benefit only the enemies of Europe. Secondly, we need to focus on our joint interest: On how to grow and to reform Greece rapidly, so that the Greek state can best repay debts it should never have taken on while looking after its citizens as a modern European state ought to do. In practical terms, the 20th February Eurogroup agreement offers an excellent opportunity to move forward. Let us implement it immediately, as our leaders have urged in yesterday’s informal Brussels meeting. Looking ahead, and beyond current tensions, our joint task is to re-design Europe so that Germans and Greeks, along with all Europeans, can re-imagine our monetary union as a realm of shared prosperity.

Read more …

“Greece was not asked, so the claims have not gone away.” “The German government’s argument is thin and contestable. It is not permissible to agree to a treaty at the expense of a third party, in this case Greece..”

Legal Experts: Greece Has Grounds for WWII Reparations (Greek Reporter)

A growing number of legal experts are supporting Greece’s demands over the German war reparations from the country’s brutal Nazi occupation during World War II. Despite the official German refusal to address the issue, legal experts say now Athens has ground for the case. The hot issue is expected to be brought up by Greece’s newly elected Prime Minister Alexis Tsipras during his official visit to Berlin on Monday, where he is scheduled to hold a meeting with the German Chancellor Angela Merkel. The tension between the two countries have recently rose to unexpected levels and a series of events with the Finance Ministers of Greece and Germany, Yanis Varoufakis and Wolfgang Schaeuble respectively, and the war reparations issue — mainly by the Greek side — has significantly affected the already negative climate.

The Greek leftist-led coalition government has repeatedly raised the issue causing Germany’s firm reaction as expressed by German Finance Minister Wolfgang Schaeuble, who recently warned Athens to forget the war reparations, underlining that the issue has been settled decades ago. Central to Germany’s argument is that 115 million deutschemarks have been paid to Greece in the 1960s, while similar deals were made with other European countries that suffered a Nazi occupation. At the same time, though, lawyers from Germany and other countries have said the issue is not wrapped up, as Germany never agreed a universal deal to clear up reparations after its unconditional surrender.

The German answer on that is that in 1990, before its reunification, the “Two plus Four Treaty” agreement was signed with the United Kingdom, the United States, the former Soviet Union and France, which renounced all future claims. According to Berlin, this agreement settles the issue for other states too. “The German government’s argument is thin and contestable. It is not permissible to agree to a treaty at the expense of a third party, in this case Greece,” international law specialist Andreas Fischer-Lescano said, as cited by the Reuters. Mr. Lescano’s opinion finds several other experts in agreement. One of them, the Greek lawyer Anestis Nessou, who works in Germany highlighted that “there is a lot of room for interpretation. Greece was not asked, so the claims have not gone away.”

Read more …

Obviously. But still, that money did not leave the country.

It Really Looks Like Greeks Are Hiding Cash Under the Mattress (Bloomberg)

It is no secret that banks in Greece have been losing deposits in recent months. The question that is somewhat open, though, is where Greeks have been moving their deposits to. Have they been transferring the cash to other banks, or have they been squirreling it away under the mattress—and under bathroom tiles? At first glance, data from the Bank of Greece seem to point to the deposit transfer option rather than the cash-under-mattress option as the “banknotes in circulation” line item on its balance sheet hasn’t shown any big spike in recent months. This, however, does not tell the full story. The banknotes in circulation item on the Bank of Greece balance sheet only shows the amount of cash Greece has been allocated under its share of overall euro-area banknote circulation.

Any extra cash needs of the Greek economy are accounted for elsewhere on the Bank of Greece balance sheet under the rather drab headline of “net liabilities related to the allocation of euro banknotes within the Eurosystem.” This extra cash was zero before the start of the Greek crisis in 2009, climbed above €22 billion in the months leading to the 2012 Greek political crisis, and had been falling steadily since. Until December of last year, that is, when the Greek political crisis reemerged following the collapse of the Samaras administration. We can now clearly see there has been a €10 billion increase in cash in Greece in the three months to the end of February 2015. That is a lot of mattresses.

Read more …

Impossible conditions: “only on condition that Tsipras’s left-wing government had persuasively shown it was committed to enforcing austerity..” That directly contradicts its mandate.

EU Offers Funds In Return For Urgent Greek Reforms (Guardian)

Greece’s eurozone creditors are considering bringing forward a financial lifeline for Athens by a few weeks after Alexis Tsipras, the Greek prime minister, told EU leaders the country would be insolvent by the end of April without assistance. In a key three-hour meeting in Brussels that ended in the early hours of Friday, Tsipras informed his creditors if they wait until the end of April before releasing funds, it will be too late for Greece. According to an account of that meeting policymakers are now discussing whether they can supply emergency funding earlier than previously agreed. Tsipras was also advised to treat the Eurocrats working in Athens with more respect and ensure their safety. Under the terms of an agreement on Greece’s bailout last month, some €7.2bn in rescue funds were not to be disbursed until the end of April and only on condition that Tsipras’s left-wing government had persuasively shown it was committed to enforcing austerity in the country.

Chancellor Angela Merkel of Germany concluded a two-day EU summit in Brussels on Friday by stressing Tsipras had to present a “comprehensive” reform package urgently and this would need to be endorsed by the Eurogroup of finance ministers before Greece could access any of the funds. Merkel’s remarks came after the crucial meeting, that ran until 2am on Friday, when Tsipras came face-to-face for the first time with the leaders of his key creditors – Merkel and Mario Draghi, the president of the European Central Bank. The other five present at the crisis talks were the French president, François Hollande; the presidents of the European Commission and Council, Jean-Claude Juncker and Donald Tusk; Jeroen Dijsselbloem, head of the committee of eurozone finance ministers; and Uwe Corsepius, a senior eurocrat who has just been appointed Merkel’s EU adviser.

Tsipras had requested the meeting and had been confrontational in the days preceding it. According to an authoritative account of what took place, he started the negotiations by making it clear he expected urgently needed bailout funds released without giving very much in return. According to the account, he was disabused of that notion within 10 minutes and the meeting then ran smoothly, except for an episode where the new Greek leader was upbraided by Draghi, who is furious at the way senior EU officials monitoring the terms of the Greek bailout are being treated in Athens. According to senior officials in Brussels, the Tsipras government has been orchestrating a campaign of intimidation against the eurocrats in Athens, frustrating their work and refusing all access.

Visiting Athens this week, they were confined to a luxury hotel and denied access to government ministries. Their whereabouts were leaked to the media and “aggressive” demonstrations were staged outside the hotel. One of the top officials needed two bodyguards. Draghi was said to have read Tsipras the riot act, while the others demanded cooperation with the creditors. Merkel was said to have soothed things by telling Tsipras that, when International Monetary Fund officials go to Berlin, they are granted access to everything they need, even when it is a little humiliating.

Read more …

Narrative: it’s for the poor.

EC Head Juncker Offers $2 Billion In Unused Funds To Greece (RT)

The European Commission has made $2 billion of unused funds available to Greece to help the country avert a cash crunch, EC head Jean-Claude Juncker says. The offer was made a day after crisis talks between Greece’s new Prime Minister Alexis Tsipras and European leaders on Greece’s EU-IMF bailout. Greek authorities said on Friday they were gradually moving towards meeting the requirements of international creditors on a more detailed reform plan, after Prime Minister Tsipras said his coalition would intensify work to avert the country’s bankruptcy. Austerity policies have been the focus of a standoff between Greece and its troika of creditors.

Promises to end the era of drastic cuts helped Tsipras win power two months ago, but since then his stance has weakened. Greece’s western creditors have been insisting the country needs to reform its economy and start cutting its own expenses, if it wants to get new money for its ailing economy. Austerity policies have been the focus of a standoff between Greece and its Troika of creditors. Promises to end the era of drastic cuts helped Tsipras win power two months ago, but since then his stance has weakened. Greece’s western creditors have been insisting the country needs to reform its economy and start cutting its own expenses, if it wants to get new money for its ailing economy.

The Troika of creditors said in February they were ready to extend the current bailout program until June 2015, but a general agreement hasn’t been reached yet. Tsipras has sharply criticized the Troika methods calling them arm-twisting. He blames them for his country’s unprecedented recession. Greece received two bailouts from the EU in 2010 and 2014 totaling €240 billion. Having taken on austerity measures, Greece saw its economy losing a quarter of its value, with a third of Greeks living below the poverty line and unemployment exceeding 30%. Experts say the money Greece has now will only last till the end of March.

Read more …

Bizarre story.

EU Bank’s Lack Of Transparency ‘Like A John Le Carré Novel’ (Guardian)

The EU watchdog has accused the union’s bank of flouting its own transparency rules and hiding what it knows about allegations of tax avoidance by a Zambian mining firm largely owned by the Swiss commodity trader Glencore. On Tuesday, Emily O’Reilly, the European ombudsman, said she was not satisfied with the European Investment Bank’s claims that, despite an internal investigation, it had been unable to establish whether Mopani Copper Mines had avoided paying local tax running into tens of millions. Ten years ago, the EIB – which is owned by EU member states – loaned Mopani $50m (£30m) for the renovation of a smelter to reduce sulphur dioxide emissions.

Six years later, after a leaked audit report suggested that Mopani had avoided paying tens of millions of dollars in local tax, the bank announced an investigation into the company. It also halted loans to Glencore because of “serious concerns” about its corporate governance. Glencore has always denied the allegations, which it maintains are based on “fundamental factual errors”. Mopani repaid the EIB loan in full in 2012.

After the EIB refused to release the findings of its investigation, the charity Christian Aid referred the bank to the European ombudsman, who was granted access to the internal report. In her ruling, O’Reilly disputed the bank’s assertion that “it was not possible to comprehensively prove or disprove the allegations” made in the leaked audit report. She said: “The ombudsman considers that this statement does not adequately reflect the information contained in the [EIB] investigation report on this issue.”

Read more …

Someone should stop Abe and Kuroda. This will be a huge disaster.

Japan Pensions Sell Record $46 Billion Bonds to Buy Stocks (Bloomberg)

Japan’s public pension funds, which include the world’s biggest, accelerated their push to dump local bonds and invest the money abroad to a record pace. The $1.1 trillion Government Pension Investment Fund and its smaller peers almost doubled net sales of Japanese government bonds to 5.56 trillion yen ($46 billion) in the fourth quarter, the most in Bank of Japan figures dating back to 1998. They bought an unprecedented 2.39 trillion yen of foreign stocks and bonds. Selling of JGBs and buying of overseas securities has continued for six straight quarters.

GPIF posted its largest investment gain in almost two years last quarter after shifting more money into stocks from Japanese bonds, as it came under government pressure to boost returns to cover payouts for the world’s fastest-aging population. The Federation of National Public Service Personnel Mutual Aid Associations, last month said it will boost its investments in foreign stocks and bonds and cut exposure to domestic debt, matching the plan by GPIF. “It seems like three other civil service funds have yet to move,” Takafumi Yamawaki, the chief rates strategist in Tokyo at JPMorgan, said referring to data from the BOJ and and GPIF. “That means there is still some room left for the shift to take place.”

Japan’s public pension funds raised domestic stock holdings for a fifth quarter, adding a net 1.73 trillion yen, the most since 2009. They held 5.6% of a record 1.023 quadrillion yen of outstanding JGBs at the end of December. The biggest holder, the BOJ, owned 25% of the total as of then, it said Wednesday in Tokyo. GPIF hired four external managers of domestic and overseas stocks as it moves to boost equities to half its assets. It made a 5.2% return in the fourth quarter, the most since the period ended March 2013, according to a statement last month. Domestic shares returned 6.2% in the quarter, while local debt returned 1.9%. Foreign bonds returned 9.4%, and overseas stocks gained 10%.

Read more …

” The US Dollar carry trade is north of $9 trillion… literally bigger than the economies of Germany and Japan COMBINED..”

The Central Banks Will Not Be Able to Control the Dollar Carry Trade (Phoenix)

The biggest issue facing the finacial system today is the US Dollar rally. The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013. And it’s imploding as we write this. Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally bigger than the economies of Germany and Japan COMBINED. When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.

And the US Dollar has been rallying… HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown. Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up. You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed’s FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up. Rate hikes, QE, all of this stuff is minor in comparison to the carnage the US Dollar is having on the financial system. Take a look at the impact it’s having on emerging market currencies.

Read more …

It’s all about timing.

US Sets First Fracking Standards in More Than 30 Years (Bloomberg)

The Obama administration issued the first federal regulations for fracking since the drilling technique fueled a domestic energy boom, requiring extensive disclosures of the chemicals used on public land. After years of debate and delay, the Bureau of Land Management on Friday said drillers on federal lands must reveal the chemicals they use, meet well construction standards and safely dispose of contaminated water used in fracking. The rule had been highly anticipated by drillers, who oppose added regulation, and by environmentalists who have raised alarms about water contamination. Both sides had complaints with the outcome: groups representing the oil and gas industry sued to block its implementation and an environmental group said the regulation favored industry over public health.

“This rule will move our nation forward as we ensure responsible development while protecting public land resources,” Interior Secretary Sally Jewell said on a call with reporters. “As we continue to offer millions of acres of America’s public lands – your lands – for oil and gas development, it is critical that the public has confidence that robust safety and environmental protections are in place.” Domestic production from more than 100,000 wells on public lands accounts for about 11% of U.S. natural-gas production and 5% of oil production. Fracking, or hydraulic fracturing, is a technique in which water, chemicals and sand are shot underground to free oil or gas from rock. It is used for about 90% of the wells on federal lands.

The rule, which is set to take effect in three months, triggered criticism from environmental groups, which said the regulations put industry interests ahead of public health, and from congressional Republicans the oil and gas industry. The Independent Petroleum Association of America and the Western Energy Alliance filed a lawsuit against the Interior Department, saying the regulations are the product of “unsubstantiated concerns,” and lack evidence necessary to sustain them. The group asked in a lawsuit filed Friday in a U.S. court in Wyoming to have the new rules declared invalid.

Read more …

Can it get any crazier?

Ukraine Sends Request For Proposals For US Taxpayer-Guaranteed Bond (Reuters)

The Republic of Ukraine has sent out a request for proposals (RFP) to banks for a new US government-guaranteed bond, according to three sources. This is the second time the US government has thrown its financial backing behind a Ukrainian international bond issue. In May 2014, the US guaranteed a US$1bn Ukrainian bond maturing in 2019 through the US Agency for International Development. That bond was given a credit rating in line with the US sovereign at Aaa by Moody’s, AA+ by Standard & Poor’s and AAA by Fitch. This is a far cry from Ukraine’s credit rating, which stands at Caa3, CCC and CC with the same three agencies.

The RFP comes just over a week after Ukraine agreed a new four-year US$17.5bn bailout facility with the IMF. As part of the IMF agreement several institutions – including the EU, World Bank and US – have agreed to provide around US$7.5bn between them, according to analyst estimates, to the war torn country. It is not clear whether the US-backed bond forms part of the US contribution. Meanwhile, Ukraine is obligated under the IMF agreement to restructure at least US$15.3bn of outstanding debt. Ukraine’s finance minister Natalia Yaresko confirmed during an investor call last week that bondholders will see haircuts to principal, as well as maturity extensions and changes to interest payment.

Russia, which holds US$3bn of Ukrainian debt that comes due in December this year, will not be exempt from the cuts, Yaresko said. A clause in the debt owed to Russia allows it to accelerate bond payments if Ukraine’s debt-to-GDP ratio breaches 60% – a number that has been passed largely because Ukraine’s industrial power centre Donbass has ground to a halt under sustained conflict. Russia has repeatedly said that it would not accelerate the debt.

Read more …

Not surprised.

US ‘Aggressively’ Threatened Germany Over Snowden Aylum (Glenn Greenwald)

German Vice Chancellor Sigmar Gabriel (above) said this week in Homburg that the U.S. government threatened to cease sharing intelligence with Germany if Berlin offered asylum to NSA whistleblower Edward Snowden or otherwise arranged for him to travel to that country. “They told us they would stop notifying us of plots and other intelligence matters,” Gabriel said. The vice chancellor delivered a speech in which he praised the journalists who worked on the Snowden archive, and then lamented the fact that Snowden was forced to seek refuge in “Vladimir Putin’s autocratic Russia” because no other nation was willing and able to protect him from threats of imprisonment by the U.S. government (I was present at the event to receive an award).

That prompted an audience member to interrupt his speech and yell out: “Why don’t you bring him to Germany, then?” There has been a sustained debate in Germany over whether to grant asylum to Snowden, and a major controversy arose last year when a Parliamentary Committee investigating NSA spying divided as to whether to bring Snowden to testify in person, and then narrowly refused at the behest of the Merkel government. In response to the audience interruption, Gabriel claimed that Germany would be legally obligated to extradite Snowden to the U.S. if he were on German soil.

Afterward, however, when I pressed the vice chancellor (who is also head of the Social Democratic Party, as well as the country’s economy and energy minister) as to why the German government could not and would not offer Snowden asylum — which, under international law, negates the asylee’s status as a fugitive — he told me that the U.S. government had aggressively threatened the Germans that if they did so, they would be “cut off” from all intelligence sharing. That would mean, if the threat were carried out, that the Americans would literally allow the German population to remain vulnerable to a brewing attack discovered by the Americans by withholding that information from their government.

Read more …

“..if it’s really God’s plan, does He also pay the bill?”

Inhofe’s Snowball Fight With NASA, US Navy, CEOs And The Pope (Paul B. Farrell)

The Tulsa World newspaper recently reran a heated Washington Post editorial headlined: “Sen. Jim Inhofe embarrasses GOP and U.S.” The Senate’s top climate-science denier’s snowball throwing stunt in the Senate chambers was more offensive to his Senate colleagues and the liberal media than his official denier’s bible he wrote calling it “The Greatest Hoax: How the Global Warming Conspiracy Threatens Your Future.” But what if Oklahoma Sen. Inhofe is right? What if “God really is in charge” of the global warming mess? And what if “humans cannot change climate,” as he warns America? Get it? Humans cannot reverse the climate damage. The biggest “hoax is that there are some people who are so arrogant to think that they are so powerful.”

But humans can’t change climate. Humans are powerless to change it, not RiskyBusiness.org nor 350.org, not Big Oil nor the GOP. And if God is in solely responsible, humans are just bit players in a grand drama, but can’t affect the outcome one way or another, either accelerating it or halting it. And no matter what capitalists or environmentalists do, or plan, or legislate, or oppose, or spend, God’s plan is “The Plan,” and we may just make matters worse, and waste a lot of money … $60 trillion. Economic shocker. A ScientificAmerican team did a research study on the cost of fixing the global warming and climate-change problem. Bottom line: $60 trillion. That’s one helluva price tag. A whopping $60 trillion on our planet – where the total global GDP is only $75 trillion.

And if it’s really God’s plan, does He also pay the bill? Now add this to the economic equation: Is Inhofe speaking for God? He’s hardly neutral, a huge chunk of Oklahoma’s state revenue is generated by Big Oil. And he’s received well over a million bucks in campaign donations from fossil-fuel interests. Worse, no states, nations nor businesses, nobody has a master plan for dealing with climate change … yes, lots of conflicting, piecemeal technologies … but no tested, reliable grand solution … no guarantees anything will work.

Read more …

Monsanto has more clout than the WHO.

Monsanto Weedkiller Roundup Is Probably Carcinogenic, WHO Says (Bloomberg)

Monsanto’s best-selling weedkiller Roundup probably causes cancer, the World Health Organization said in a report that’s at odds with prior findings. Roundup is the market name for the chemical glyphosate. A report published by the WHO in the journal Lancet Oncology said Friday there is limited evidence that the weedkiller can cause non-Hodgkin’s lymphoma and lung cancer and convincing evidence it can cause cancer in lab animals. The report was posted on the website of the International Agency for Research on Cancer, or IARC, the Lyon, France-based arm of the WHO. Monsanto, which invented glyphosate in 1974, made its herbicide the world s most popular with the mid-1990s introduction of crops such as corn and soybeans that are genetically engineered to survive it.

The WHO didn t examine any new data and its findings are inconsistent with assessments from the U.S., EU and elsewhere, Monsanto said. We don t know how IARC could reach a conclusion that is such a dramatic departure from the conclusion reached by all regulatory agencies around the globe, Philip Miller, Monsanto vice president for global regulatory affairs, said in a statement. The evidence in humans is from studies of exposures, mostly agricultural, in the USA, Canada, and Sweden published since 2001, the WHO said in the report. In addition, there is convincing evidence that glyphosate also can cause cancer in laboratory animals. The WHO said exposure by the general population is generally low.

Read more …

Feel good story.

The Lion Hugger (BBC)

In 2012 Valentin Gruener rescued a young lion cub and raised it himself at a wildlife park in Botswana. It was the start of an extraordinary relationship. Now an astonishing scene is repeated each time they meet – the young lion leaps on Gruener and holds him in an affectionate embrace. “Since the lion arrived, which is three years now, I haven’t really left the camp,” says Gruener. “Sometimes for one night I go into the town here to organise something for the business, but other than that I’ve been here with the lion.” The lion he has devoted himself to is Sirga – a female cub he rescued from a holding pen established by a farmer who was fed up of shooting animals that preyed on his cattle. “The lions had killed the other two or three cubs inside the cage, and the mother abandoned the remaining cub. She was very tiny, maybe 10 days old,” Gruener says.

The farmer, Willy de Graaf, asked Gruener to try to save her and so he took her to a wildlife park financed by de Graaf and became her adoptive mother, “feeding her and taking care of her”. “You have this tiny cute animal sitting there and it’s already quite feisty,” he says. “It will become about 10 times that size and you will have to deal with it.” She’s much bigger now, but when Gruener opens her cage she still rushes to greet him – ecstatically throwing her paws around his neck. “That happens every time I open the door. It is an amazing thing every time it happens, and it’s such a passionate thing to do for this animal to jump and give me a hug,” says Gruener. “But I guess it makes sense. At the moment she has no other lions with her in the cage and I guess for her I’m like her species. So I’m the only friend she’s got. Lions are social cats so she’s always happy to see me.”

Read more …