Jul 292017
 
 July 29, 2017  Posted by at 9:09 am Finance Tagged with: , , , , , , , ,  2 Responses »
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Dorothea Lange Grocery store in Widtsoe, Utah 1936

 

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)
Congress Checkmates Trump (And The American People) (LR)
Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)
EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)
The Great Transatlantic Bond Divergence Unwind (WSJ)
Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)
Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)
Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)
What Explains amazon.com’s Share Price? (PCR)
Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)
Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

 

 

More incentives for the Fed to trigger a crisis.

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)

Let’s start at the beginning. Bubbles and Busts are both created by The Federal Reserve. Presidents are merely along for the ride. They like to credit themselves for the bubbles, and then look for scapegoats, usually the (non-existent) free market during the busts. But it is The Fed that creates them both. President Trump has made a big (yet understandable) mistake. He’s tried to portray himself as the cause of the current bubble in the stock market. He wants credit where credit is due. In this case, credit is not due. As we already mentioned, the Fed created the current bubble, and did so a long time ago. One look at a chart of the S&P 500 says it all:

Chances are, Trump realizes that most people won’t look at a chart of the stock market and he just wants some good PR. The president wants people to think that he is the reason for the stock market bubble. This is a big mistake. The Fed is the premier member of the so-called “Deep State”. In fact, without The Fed, there would hardly be a “Deep State” to speak of. The Fed sits at the top of the Deep State. They have the ultimate power (that no human beings should ever have) to create new money out-of-thin-air. In case Trump hasn’t figured it out yet, the Deep State does not like him. Should a major decline in the stock market occur during Trump’s Administration, guess who will take the blame? President Trump. After all, he took ownership of the bubble!

Should the market tumble, the mainstream media (that also despises Trump) will have plenty of his quotes, YouTubes, and Tweets to use against him. The economic woes will be pinned on Trump. Will Trump deserve the blame? No, but it’ll be too late. This is not to say that a major decline will occur during Trump’s tenure. Bubbles can take on a life of their own, and this one may last during Trump’s full term. But that’s a risky gamble to make. This bubble is going on almost 10 years now without a serious decline. Should we see a major selloff, Trump has very few friends in the major power centers that will come to his aid. As Peter Schiff points out in this fantastic clip below: The Fed now has their fall guy:

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A curious move. An ultimate power game.

Congress Checkmates Trump (And The American People) (LR)

Yesterday, the US Senate passed HR 3364, the Countering America’s Adversaries Through Sanctions Act by a massive 98 yeas to two nays. Opposing the bill were Sens. Bernie Sanders (I-VT) and Rand Paul (R-KY). The bill passed in the House by 419-3 on Tuesday, with Reps Massie (R-KY), Amash (R-MI), and Duncan (R-TN) opposing. The new sanctions bill ties President Trump’s hands on foreign policy, as he will be forced to ask Congress for permission to ease the measures. Speaking in favor of the legislation, Sen. Bob Menendez (R-NJ) cited the need to send Russia a message that it cannot meddle in US elections, that it cannot annex Crimea, that it cannot invade Ukraine, and that it cannot indiscriminately kill women and children in Syria.

Those of us living in the actual real world recognize that the first count remains unproven and the remaining counts are simply fatuous, fact-free bluster by Washington’s uninformed, group-thinking, foreign policy elites. Fueled by the millions coming in to the military-industrial complex. The House and Senate passed “Countering America’s Adversaries Through Sanctions Act” now goes to President Trump’s desk, where he faces a damned if he does and damned if he doesn’t scenario. A veto would certainly be over-ridden, handing the president a bitter bi-partisan blow that would likely end whatever aspirations he may retain to keep his campaign promises to get along better with Russia.

Similarly, signing the bill signs a death warrant for any foreign policy different than the one served up by the neocons for decades: create enemies; push war propaganda; collect massive checks from military industrial complex; demonize any American refusing to go along; repeat, adding bombs as necessary. Checkmate, President Trump.

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Over 600 would have to leave. Question: why does the US have over 6000 more staff in Russia than vice versa?

Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)

Russia told the United States on Friday that some of its diplomats had to leave the country in just over a month and said it was seizing some U.S. diplomatic property as retaliation for what it said were proposed illegal U.S. sanctions. Russia’s response, announced by the Foreign Ministry, came a day after the U.S. Senate voted to slap new sanctions on Russia, putting President Donald Trump in a tough position by forcing him to take a hard line on Moscow or veto the legislation and anger his own Republican Party. President Vladimir Putin had warned on Thursday that Russia had so far exercised restraint, but would have to retaliate against what he described as boorish and unreasonable U.S. behaviour. Relations between the two countries, already at a post-Cold War low, have deteriorated even further after U.S. intelligence agencies accused Russia of trying to meddle in last year’s U.S. presidential election, something Moscow flatly denies.

The Russian Foreign Ministry said on Friday that the United States had until Sept. 1 to reduce its diplomatic staff in Russia to 455 people, the same number of Russian diplomats it said were left in the United States after Washington expelled 35 Russians in December. It said in a statement that the decision by Congress to impose new sanctions confirmed “the extreme aggression of the United States in international affairs.” “Hiding behind its ‘exceptionalism’ the United States arrogantly ignores the positions and interests of other countries,” said the ministry. “Under the absolutely invented pretext of Russian interference in their “Under the absolutely invented pretext of Russian interference in their domestic affairs the United States is aggressively pushing forward, one after another, crude anti-Russian actions. This all runs counter to the principles of international law.”

[..] An official at the U.S. embassy in Moscow, who declined to be named because they were not allowed to speak to the media, said there were around 1,100 U.S. diplomatic staff in Russia. That included Russian citizens and U.S. citizens. Most staff, including around 300 U.S. citizens, work in the main embassy in Moscow with others based in outlying consulates. The Russian Foreign Ministry said it was also seizing a Moscow dacha compound used by U.S. diplomats to relax from Aug. 1 as well as a U.S. diplomatic warehouse in Moscow.

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Confidence spelled backwards. How to cause a bank run in 3 easy lessons.

EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)

European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed. The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble. The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender. It also come amid a bitter wrangle among European countries over how to deal with troubled banks, roughly a decade after a financial crash that required the ECB to print billions of euros to prevent a prolonged economic slump.

Giving supervisors the power to temporarily block bank accounts at ailing lenders is “a feasible option,” a paper prepared by the Estonian presidency of the EU said, acknowledging that member states were divided on the issue. EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said. “The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” a person familiar with German government’s thinking said. To cover for savers’ immediate financial needs, the Estonian paper, dated July 10, recommended the introduction of a mechanism that could allow depositors to withdraw “at least a limited amount of funds.”

Banks, though, say it would discourage saving. “We strongly believe that this would incentivize depositors to run from a bank at an early stage,” Charlie Bannister of the Association for Financial Markets in Europe (AFME), a banking lobby group, said. The Estonian proposal was discussed by EU envoys on July 13 but no decision was made, an EU official said. Discussions were due to continue in September. The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors’ powers to suspend withdrawals, but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000).

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Price discovery.

The Great Transatlantic Bond Divergence Unwind (WSJ)

Many of the trades embraced by markets after President Donald Trump’s election have been slowly unwinding in 2017. Here’s an important one that could have further to go: the gap between U.S. and German government bond yields. The spread between 10-year Treasurys and bunds ballooned after Mr. Trump’s November victory to a level not seen since before the fall of the Berlin Wall, around 2.3 percentage points by the end of 2016. U.S. yields rose sharply on the idea of reflation and stimulus, while Europe appeared stuck in a rut. At 1.75%age points, the gap is close to its pre-election level. But even that is unusual by historical standards. Between 1990 and 2014, the spread was only rarely wider than one percentage point, and over that period averaged just 0.2 point, according to data from FactSet.

Such a tight relationship between German and U.S. bonds reflected the long global bull market for bonds in the glory years of globalization. Relatively synchronized monetary policy meant yields fell on both sides of the Atlantic together. The Fed’s 2013 taper, followed by signals of coming European Central Bank bond buying helped set the bond markets apart. That both helped weaken the euro and encouraged a rush of bond issuance by U.S. companies in European markets as borrowing costs fell. Where policy goes now is key. Markets doubt how far the Fed might get with its tightening, and seem unflustered by the prospect of the central bank shrinking its balance sheet. Investors may be too relaxed, but in the absence of fiscal stimulus and inflation, much higher yields for Treasurys might be hard to achieve in the near term.

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But they rule Germany. So yeah, some fines etc., but the culture just goes on.

Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)

German’s major automakers were accused in a U.S. lawsuit of acting as a cartel, colluding for nearly two decades to limit the pace of technological advances in their vehicles and stifle competition – allegations that widen the scope of the latest scandal to hit the nation’s auto industry. BMW AG, Daimler AG, Volkswagen AG and its Audi and Porsche brands shared competitive information about vehicle technologies with one another from 1996 through at least 2015 in violation of antitrust laws, according to a complaint filed Friday in San Francisco federal court. “These coordinated actions enabled the manufacturer defendants — the self-named ‘Fünfer-Kreise,’ or Circle of Five — to impose a German automobile premium on consumers premised on superior German engineering, while secretly stunting incentives to innovate,” the suit alleges.

The suit, which seeks class-action status on behalf of U.S. drivers, says the companies agreed to limit the development of vehicle systems, including emissions control. The arrangement allegedly led to the development of so-called “defeat devices” used by Volkswagen to cheat on pollution tests. Plaintiffs claim the operation of convertible roofs, body design, brakes and electronic systems were also part of the “technological innovations inhibited” by the pacts. The supplier of VW’s cheat software, Robert Bosch Gmbh, was also named as a defendant in the lawsuit.

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“The added cost of insurance pushed 274,000 customers into delinquency..”

Elizabeth Warren has called on the Fed to remove Wells Fargo board members. I think if your legal system does not allow you to put these people behind bars, maybe you should look there first. Many of these people should be put before a judge and Wells Fargo should be forced to close. Institutions like that are diseases in a society.

Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)

New revelations that Wells Fargo spent years enrolling unknowing borrowers in costly auto insurance has put the bank under new pressure to answer for a months-long scandal over sales practices that have harmed millions of Americans. The latest news that 800,000 Wells Fargo auto borrowers were improperly charged for insurance rattled investors yet again, and sent its stock down 2.6% on Friday. Shareholders, analysts, lawmakers and consumer advocates demanded answers about how the situation manifested, and why Wells Fargo did not disclose the problems sooner, given existing turmoil over phony deposit and credit card accounts opened in customers’ names without their permission.

“This is a full-blown scandal — again,” said New York City Comptroller Scott Stringer, who oversees public pension funds that hold roughly 11.6 million Wells Fargo shares. “It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm.” Stringer called on the bank to install a new independent chair and “immediately” disclose more information. Wells Fargo first became aware of potential problems a year ago, when the auto lending business began receiving an unusually high number of complaints, Franklin Codel, head of consumer lending, said in an interview. The auto insurance program was quickly suspended, and the problem escalated to senior management, the board and regulators, he said.

Wells Fargo planned to delay public disclosure until it could notify affected customers and reimburse them. “The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they’re going to get their money,” he said. “It’s not a great customer experience to say, ‘Yeah, we’ll get back to you.'” [..] Wall Street analysts expect the financial damage to go beyond the $80 million in reimbursements. In a note on Friday, Piper Jaffray’s Kevin Barker predicted the true cost would be “multiples” of that figure, with lawsuits and further customer remediation. The added cost of insurance pushed 274,000 customers into delinquency, and led to at least 20,000 wrongful repossessions, according to the Times.

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“Community bank” and Wells Fargo in one sentence. Take out the ones that are most guilty and go on as you were.

Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)

Wells Fargo, the lender struggling to overcome a fake-accounts scandal in its community bank, said the division’s new leader is cutting about 70 senior executive jobs. The lender will reduce the number of regional and area presidents to 91, Mary Mack, head of the retail bank, said Friday in a memo to staff, a copy of which was obtained by Bloomberg. Bank spokeswoman Bridget Braxton confirmed the contents of the memo and said employees whose positions are eliminated will remain staff members for 60 days until further steps are decided. Most of the remaining managers will be re-titled as region bank presidents with direct responsibility for more employees than before, in a move aimed at reducing management levels across the branch network, Mack wrote.

Across its 10 geographical divisions, Wells Fargo previously employed 160 regional and area presidents. “Change is hard, yet change is necessary to make sure we are well positioned for the future,” Mack wrote. “In order to truly be better, we must put the right structure in place,” she added. The community-banking division, which houses the retail bank, has generated weaker profit since September when Wells Fargo was fined $185 million because employees had been opening accounts for more than a half decade without customers’ permission. This week, the firm’s consumer operations revealed another scandal, announcing that the bank had charged as many as 500,000 customers for auto insurance they didn’t need.

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“..Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.”

What Explains amazon.com’s Share Price? (PCR)

“Here are today’s top stories on Bloomberg” “Jeff Bezos briefly overtook Bill Gates as the world’s richest person. A surge in Amazon shares Thursday morning in advance of its earnings report gave Bezos a net worth of $92.3 billion, surpassing the Microsoft founder’s $90.8 billion fortune. In afternoon trading, Bezos remains ranked second on the Bloomberg Billionaires Index. Gates has held the top spot since May 2013.” Amazon’s stock closed yesterday at $1,046 per share. Amazon’s profits do not support this extraordinary price. Apple, a very profitable company, has a share price of $150.56, an overprice itself. What or who is making Bezos so rich from an online sales company? Note, amazon.com is just sales. It is not some new manufacturing technology that produces valuable output at low cost.

amazon.com is what Walmart, Sears, and Macy’s do, the difference being that amazon.com is online and Walmart, Sears, and Macy’s are in physical locations where real merchandise can be experienced hands on and tried on for fit. In other words, online purchases are convenient, but you don’t know what you are getting. Does it fit? What is the quality? And so forth. How many times do you send it back before you get what you want? There are two answers to the question about who is making Bezos rich. One is that Wall Street is betting that the collapse of US anti-trust law and regulatory authority—it is still on the books but not enforced, just look at the Big Banks—and the ability of Bezos to use his ownership of the Washington Post, the newspaper of the country’s capital, to support those who support him, ensure that amazon.com will be an online monopoly.

Once this is put in place, amazon’s prices and profits will rise, and the extraordinary amazon.com P/E ratio will come into line with reality. Another is that Bezos’ cooperation with Washington’s spy network over all Americans is paid for by the CIA’s many front companies driving up the price of amazon.com’s stock. As the price of amazon.com rises, so does Bezos’ wealth. I don’t know that either of these answers is correct. What I notice is that Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.

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Just in case you’re thinking things are a mess where you are. His brother is rumored to succeed him.

Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)

On July 28, 2017, the Supreme Court of Pakistan (SCP) rendered a unanimous verdict by a five-member bench that disqualified Prime Minister Nawaz Sharif from holding public office. This outcome was the result of the Panama Leaks, which revealed that the premier and his family owned assets disproportionate to their known sources of income. The opposition Pakistan Tehreek-i-Insaf (PTI), led by Imran Khan, seized on this issue and managed to compel Pakistan’s normally apathetic state institutions to take notice. For over a year, the premier and his family failed to explain how they acquired upscale properties in London. The ruling family dug themselves even deeper into the hole in their effort to establish some kind of cover for their acquisitions by being deliberately inaccurate before the SCP and even forging documents.

Surrounded by sycophants, the premier was evidently badly advised at each step and he and his family have paid a very high political price and could well face jail time. Pakistan has a long tradition of dragging its civilian chief executives over the coals. No prime minister has completed a regular term in office, their tenures cut short by assassination, civilian or military coups, judicial intervention, and intra-party machinations. Many premiers have been overthrown or dismissed for alleged abuse of power, mal-administration, and corruption. Nawaz Sharif and his family, in being unable to account for their wealth, and in their crude attempts at a cover up, have demonstrated that they are evidently crooks.

This said, the Pakistan Muslim League-Nawaz (PML-N) has done a better job of delivering on its campaign promises than any political party in Pakistan’s democratic experience. Pakistan’s energy crisis has eased, the economy is headed towards 6% annual growth, FDI is the highest in a decade, per capita income has risen perceptively, major cities have seen considerable investment in their infrastructure, and the gross level of terrorist violence has declined. Given that the ruling party won in 2013 with as many votes as the next two largest parties combined, its victory in 2018 seemed all but assured.

[..] Since 1947, Pakistan state elites have presided over a massive privatization of public wealth. Entitlements in the form of plots, perks, benefits, are part of an elaborate system of bureaucratically induced shortages that breed systemic corruption and undermines governance. Pakistani private and public sector corporations and entrepreneurs guzzle subsidies and thrive only in a cartelized environment. Any attempt by a government to rationalize the economy or improve productivity is met with howls of protest and demands for more subsidies. Pakistani professionals, be they lawyers, doctors, engineers, educators, behave like mafias, seeking to avoid ethical checks while relentlessly pursuing self-aggrandizement.

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We’ll eat our own crap yet. Garbage in, garbage out.

Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

Plastic microparticles are getting into the flesh of fish eaten by humans, according to a new study. A team of scientists from Malaysia and France discovered a total of 36 tiny pieces of plastic in the bodies of 120 mackerel, anchovies, mullets and croakers. They warned that as plastic attracts toxins in the environment, these poisons could be released into people’s bodies after they ate the fish. The plastics found included nylon, polystyrene and polyethylene. Writing in the journal Scientific Reports, the researchers said: “The widespread distribution of microplastics in aquatic bodies has subsequently contaminated a diverse range of aquatic biota, including those sold for human consumption such as shellfish and mussels.

“Therefore, seafood products could be a major route of human exposure to microplastics. “Microplastics were suggested to exert their harmful effects by providing a medium to facilitate the transport of other toxic compounds such as heavy metals and persistent organic pollutants to the body of organisms. Upon ingestion, these chemicals may be released and cause toxicity.” They suggested people eating the fish examined in this study, which are often dried and sold across Malaysia and neighbouring countries, could consume up to 246 pieces of microplastic a year. However, they added: “The majority of the tested fish in this study did not contain microplastics. Therefore, it is less likely that an individual would ingest the suggested maximum number of microplastics per annum.”

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Jun 272017
 
 June 27, 2017  Posted by at 10:00 am Finance Tagged with: , , , , , , , , ,  10 Responses »
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Egon Schiele Port of Trieste 1907

 

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)
Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)
US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)
Democrats Help Corporate Donors Block California Single-Payer (IBT)
Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)
Europe’s Inequality Highly Destabilizing – Draghi (R.)
Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)
ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)
Europe’s Gradualist Fallacy (Varoufakis)
Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda
Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)
Brazil Top Prosecutor Charges President With Bribery (AFP)
The Technicolor Swan (Jim Kunstler)
California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

 

 

What a great idea to try and prevent the US President from talking to other world leaders (i.e. doing his job).

Trump Eager For Big Meeting With Putin; Some Advisers Wary (AP)

President Donald Trump is eager to meet Russian President Vladimir Putin with full diplomatic bells and whistles when the two are in Germany for a multinational summit next month. But the idea is exposing deep divisions within the administration on the best way to approach Moscow in the midst of an ongoing investigation into Russian meddling in the U.S. elections. Many administration officials believe the U.S. needs to maintain its distance from Russia at such a sensitive time – and interact only with great caution. But Trump and some others within his administration have been pressing for a full bilateral meeting. He’s calling for media access and all the typical protocol associated with such sessions, even as officials within the State Department and National Security Council urge more restraint, according to a current and a former administration official.

Some advisers have recommended that the president instead do either a quick, informal “pull-aside” on the sidelines of the summit, or that the U.S. and Russian delegations hold “strategic stability talks,” which typically don’t involve the presidents. The officials spoke anonymously to discuss private policy discussions. The contrasting views underscore differing views within the administration on overall Russia policy, and Trump’s eagerness to develop a working relationship with Russia despite the ongoing investigations. Asked about the AP report that Trump is eager for a full bilateral meeting, Putin’s spokesman Dmitry Peskov told reporters in Moscow on Monday that “the protocol side of it is secondary.” The two leaders will be attending the same event in the same place at the same time, Peskov said, so “in any case there will be a chance to meet.”

Peskov added, however, that no progress in hammering out the details of the meeting has been made yet. There are potential benefits to a meeting with Putin. A face-to-face meeting can humanize the two sides and often removes some of the intrigue involved in impersonal, telephone communication. Trump — the ultimate dealmaker — has repeatedly suggested that he can replace the Obama-era damage in the U.S.-Russia relationship with a partnership, particularly on issues like the ongoing Syria conflict. There are big risks, though. Trump is known to veer off-script, creating the possibility for a high-stakes diplomatic blunder. In a brief Oval Office meeting with top Russian diplomats last month, Trump revealed highly classified information about an Islamic State group threat to airlines that was relayed to him by Israel, according to a senior administration official. The White House defended the disclosures as “wholly appropriate.”

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Here’s why people don’t want Trump to talk to Putin.

Three Journalists Quit CNN In Fallout From Retracted Russia Story (Fox)

Three CNN journalists who worked on a now-retracted story about Russia and a top Trump adviser are leaving the network. CNN is casting their departure as resignations in the wake of the fiasco, but the network has come under substantial criticism since apologizing for the story. The move would also help CNN’s legal position in case of a lawsuit. Anthony Scaramucci, the Trump adviser who is the target of the story, told me that he has no plans to sue. He said he has accepted CNN’s apology and wants to move on. But Scaramucci also told me in an earlier interview, “I was disappointed the story was published. It was a lie.” Lex Harris, executive editor of CNN’s investigative unit, was the highest-ranking official to resign. Thomas Frank, who wrote the story, and Eric Lichtblau, who edited it, also turned in their resignations.

Lichtblau is a highly regarded reporter who spent nearly a decade and a half at the New York Times. The story tried to draw a link between Scaramucci and the Russian Direct Investment Fund. Scaramucci was a Trump transition team member who has been nominated to an ambassadorial-level post based in Paris. The CNN.com article said that Scaramucci, back in January, held a secret meeting with an official from the Russian fund. According to an unnamed source, Scaramucci discussed the possibility of lifting U.S. sanctions at the meeting. But Scaramucci told me there was no secret meeting. He said he had given a speech on Trump’s behalf at Davos, and fund official Kirill Dmitriev approached him in a restaurant to say hello and they had a brief conversation, with no discussion of sanctions. In the retraction, the network said the story “did not meet CNN’s editorial standards.” The network is now requiring approval from two top editors before any Russia-related story can be published.

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Amazing how easy it can be. Now make it permanent.

US Congress To Stop Arms Sales To Gulf Until Qatar Crisis Is Solved (G.)

The Republican chairman of the Senate foreign relations committee has said the US Congress will hold up approval of arms sales to the Gulf as a result of the Saudi-led blockade of Qatar. Senator Bob Corker said the nations of Gulf Cooperation Council had failed to take advantage of a summit with President Trump in May to overcome their differences and had “instead chosen to devolve into conflict”. Corker continued: “For these reasons, before we provide any further clearances during the informal review period on sales of lethal military equipment to the GCC states, we need a better understanding of the path to resolve the current dispute and reunify the GCC.”

Earlier this month, the Senate narrowly fended off a bid to block a Trump administration plan to sell Saudi Arabia $500m in precision-guided munitions, part of a proposed $110bn arms sales package announced during the president’s visit to Riyadh last month. Congress has the power to block individual sales during a 30-day review period from when the state department gives notification of an impending sale. A Saudi-led coalition that includes Egypt, the United Arab Emirates and Bahrain cut ties with Qatar on 5 June, but only provided a justification 18 days later with the presentation of a list of 13 demands. They want Doha to close the al-Jazeera TV channel, restrict diplomatic ties with Iran, halt the construction of a Turkish military base in the country, and sever contacts with extremist organisations.

Qatar has been given 10 days to meet the demands, but the Saudi-led group has not said what action it would take if the deadline is not met. The US has sent mixed signals on the standoff. In the immediate aftermath of the embargo, Trump gave Riyadh and its allies fulsome support, echoing Saudi claims about Qatari funding for terrorism. However, Rex Tillerson, the secretary of state, last week called on the coalition present its complaints and negotiate a solution. Since the list of 13 demands was presented, Tillerson has been non-committal, observing that some of them would be “very difficult for Qatar to meet”, but arguing there were “significant areas which provide a basis for ongoing dialogue leading to resolution.”

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David Sirota: “Jerry Brown campaigned for president supporting single-payer, then he got big cash from insurers/drugmakers, now he refused to back the bill.”

Single payer is the only thing that can save US health care. But all sides are in debt to the very interests who will block it.

Democrats Help Corporate Donors Block California Single-Payer (IBT)

As Republican lawmakers grapple with their unpopular bill to repeal Obamacare, Democrats have tried to present a united front on health care. But for all their populist rhetoric against insurance and drug companies, Democratic powerbrokers and their allies remain deeply divided on the issue — to the point where a political civil war has spilled into the open in America’s largest state. In California last week, Democratic state Assembly Speaker Anthony Rendon helped his and his party’s corporate donors block a Democrat-sponsored bill to create a universal health care program in which the government would be the single payer. Rendon’s decision shows how progressives’ ideal of universal health care remains elusive — even in a liberal state where government already foots 70% of the total health care bill.

Until Rendon’s move, things seemed to be looking up for Democratic single-payer proponents in deep blue California, which has been hammered by insurance premium increases. There, the Democratic Party — which originally created Medicare — just added a legislative supermajority to a Democratic-controlled state government that oversees the world’s sixth largest economy. That 2016 election victory came as a poll showed nearly two-thirds of Californians support the creation of a taxpayer-funded universal health care system in a state whose population is roughly the size of Canada — which already has such a system. California’s highest-profile federal Democratic lawmaker recently endorsed state efforts to create single-payer systems, and 25 members of its congressional delegation had signed on to sponsor a federal single-payer bill.

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They missed everything so far, but now we need them.

Bernanke: Economists Missed Populism, Inequality, But Are Here To Help (CNBC)

Former chairman of the Federal Reserve Ben Bernanke said Monday that economists have a “responsibility” to help address populist frustrations. “The credibility of economists has been damaged by our insufficient attention, over the years, to the problems of economic adjustment and by our proclivity toward top-down, rather than bottom-up, policies,” Bernanke, now distinguished fellow in residence, Brookings Institution, said in prepared remarks for a dinner speech called “When growth is not enough.” “Nevertheless, as a profession we have expertise that can help make the policy response more effective, and I think we have a responsibility to contribute wherever we can,” the former Fed chair said.

In the last 18 months, growing populist sentiment contributed to the UK’s surprise vote to leave the European Union last June, and the election of U.S. President Donald Trump last November. Trump promised to bring jobs back from China and Mexico to the U.S., winning him support. The U.S. Census Bureau’s latest report on household income showed the Gini index of income inequality for the U.S. in 2015 of 0.482 was significantly higher than the prior year’s 0.480. “This increase suggests that income inequality increased across the country,” the report said. “Policymakers in recent decades have been slow to address or even to recognize those trends, an error of omission that has helped fuel the voters’ backlash,” Bernanke said. He was speaking at the European Central Bank’s Forum on Central Banking in Sintra, Portugal.

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Bernanke and Draghi greatly increased inequality with their ZIRP and NIRP policies. And today both all of a sudden come out as being worried about it?

Europe’s Inequality Highly Destabilizing – Draghi (R.)

Europe’s growing inequality is highly destabilizing and needs to be tackled with education, innovation and investment in human capital, particularly jobs for young people, ECB President Mario Draghi said on Monday. Income inequality has grown among euro zone countries since the global financial crisis and some measures also show divergence between the bloc’s richer and poorer members, a source of tension for the 19-member currency bloc. “Is this a seriously destabilizing factor that we should cope with?” Draghi said in a rare town-hall style meeting with university students in Lisbon. “Yes it is.” “We have to fight against inequality,” Draghi in response to a student question. Draghi, leading one of Europe’s most respected institutions, has for years called on governments to enact fundamental reforms, arguing that the ECB is able to prop up growth, but only temporarily, giving governments a window of opportunity.

Eurostat data has shown that only a handful of countries have managed to shrink income inequality since the crisis while it has grown sharply in places like France or Spain. Figures also show the highest level of income inequality in the bloc’s periphery, like Greece, Spain and Portugal, hit hardest by the crisis. Calling convergence among euro zone members “fundamental,” Draghi said the best way to fight inequality is by creating jobs, which comes from an increased investment in education, skills development and innovation. He also called on governments to consider better income and wealth redistribution policies. Defending the ECB’s ultra easy monetary policy, Draghi said that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality. He also rejected calls to exit super easy monetary policy quickly, arguing that premature tightening would lead to a fresh recession and more inequality.

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Here’s how ZIRP creates more inequality.

Change the Way Money Is Created, Or More Inequality, Disorder Inevitable (CHS)

Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit. Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest. There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes. The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.

This is the magic of fractional reserve lending. The bank is only required to hold a small%age of outstanding loans as reserves against losses. If the reserve requirement is 5%, the bank can issue $1,900,000 in new loans based on the $100,000 in cash: the bank holds assets of $2,000,000, of which 5% ($100,000) is held in cash reserves. This is a simplified version of how money is created and issued, but it helps us understand why centrally issued and distributed money concentrates wealth in the hands of those with access to the centrally issued credit and those who have the privilege of leveraging every $1 of cash into $19 newly created dollars that earn interest. Imagine if we each had a relatively modest $1 million line of credit at 0.25% interest from a central bank that we could use to issue loans of $19 million.

Let’s say we issued $19 million in home loans at an annual interest rate of 4%. The gross revenue (before expenses) of our leveraged $1 million would be $760,000 annually –let’s assume we net $600,000 per year after annual expenses of $160,000. (Recall that the interest due on the $1 million line of credit is a paltry $2,500 annually). Median income for workers in the U.S. is around $30,000 annually. Thus a modest $1 million line of credit at 0.25% interest from the central bank would enable us to net 20 years of a typical worker’s earnings every single year. This is just a modest example of pyramiding wealth.

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So Draghi whines about inequality and at the same time makes sure Greece gets hammered even more economically. Does his ass know where his mouth is located?

ECB Chief Draghi Rules Out Greece Joining QE Soon (K.)

The president of the European Central Bank, Mario Draghi, said on Monday that Greece will not join its quantitative easing program (QE) until international creditors specify what sort of debt relief measures the country can expect. “Until sufficient details are given on debt-related measures, serious concerns remain about the sustainability of Greek government debt,” he said in response to a question from Popular Unity (LAE) MEP Nikos Hountis over whether the ECB had completed its own debt sustainability analysis (DSA), and if it had come to any conclusions on the issue. Draghi said that ECB experts “are not currently in a position to complete a fully fledged DSA analysis of Greece’s public debt.” Up until very recently, Greece was banking on its inclusion in QE as a way to return to bond markets, which would put an end to its dependence on bailout programs.

If the ECB were to buy Greek debt it would boost the confidence of investors about the prospects of the Greek economy. But given Draghi’s comment on Monday and the failure of the government to secure more concrete language on debt relief at the Eurogroup on June 15, Athens now believes it can achieve the goal to enter bond markets without having to join QE. And it believes that it has three windows of opportunity to issue a bond in the period stretching from July until early next year. These three opportunities are, reportedly, in July, given the improved climate in international markets. The second chance will be at the end of September and beginning of October after German elections, while the third will be at the end of the year or early 2018, as predicted by the head of the European Stability Mechanism (ESM), Klaus Regling.

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Macron is Merkel’s messenger boy. France has nothing to say in the EU. That’s the essence of Europe’s problem.

Europe’s Gradualist Fallacy (Varoufakis)

Europe is at the mercy of a common currency that not only was unnecessary for European integration, but that is actually undermining the European Union itself. So what should be done about a currency without a state to back it – or about the 19 European states without a currency that they control? The logical answer is either to dismantle the euro or to provide it with the federal state it needs. The problem is that the first solution would be hugely costly, while the second is not feasible in a political climate favoring the re-nationalization of sovereignty. Those who agree that the cost of dismantling the euro is too high to contemplate are being forced into a species of wishful thinking that is now very much in vogue, especially after the election of Emmanuel Macron to the French presidency.

Their idea is that, somehow, by some unspecified means, Europe will find a way to move toward federation. “Just hang in there,” seems to be their motto. Macron’s idea is to move beyond idle optimism by gaining German consent to turn the eurozone into a state-like entity – a federation-lite. In exchange for making French labor markets more Germanic, as well as reining in France’s budget deficit, Germany is being asked to agree in principle to a common budget, a common finance ministry, and a eurozone parliament to provide democratic legitimacy. Macron knows that such a federation would be macroeconomically insignificant, given the depth of the debt, banking, investment, and poverty crisis unfolding across the eurozone. But, in the spirit of the EU’s traditional gradualism, he thinks that such a move would be politically momentous and a decisive step toward a meaningful federation.

“Once the Germans accept the principle, the economics will force them to accept the necessary magnitudes,” is how a French official put it to me recently. Such optimism may seem justified in light of proposals along those lines made in the past by none other than Wolfgang Schäuble, Germany’s finance minister. But there are two powerful reasons to be skeptical. First, Chancellor Angela Merkel and Schäuble were not born yesterday. If Macron’s people imagine a federation-lite as an entering wedge for full-blown political integration, so will Merkel, Schäuble, and the reinvigorated Free Democrats (who will most likely join a coalition government with Merkel’s Christian Democrats after the September federal election). And they will politely but firmly reject the French overtures.

Second, in the unlikely event that Germany gives federation-lite the go-ahead, any change to the functioning of the eurozone would, undoubtedly, devour large portions of the reformers’ political capital. If it does not produce economic and social results that improve, rather than annul, the chances of a proper federation, as I suspect it will not, a political backlash could ensue, ending any prospect of a more substantial federation in the future. In that case, the euro’s dismantling will become inevitable, will cost more, and will leave Europe in even greater shambles.

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Germany doesn’t care one bit about Macron’s agenda; they may pay lip service, but that’s it. In this particular case, do you think Germany wants an Italian bank collapse a few months before Merkel’s election?

Italy Bank Deal Makes Germans Wary of Macron’s Euro Agenda

Germany sounded the alarm over Italy’s latest bank bailout, saying the apparent bending of EU rules casts doubt on efforts to further integrate the euro zone. The government in Rome announced the country’s biggest bank rescue to date on Sunday evening as it committed as much as €17 billion ($19 billion) to clean up two failed banks. While the European Commission approved the plan, German officials pointed to the involvement of state aid to shield senior creditors from losses as working around EU law established to deal with bank failures. That exemption drew criticism from members of Chancellor Angela Merkel’s ruling coalition, who cited the need to uphold European law without setting unhealthy precedents.

“We’re in a phase where we are faced with the question of whether we can succeed at applying European law, irrespective of all the understandable domestic policy discussions,” Alexander Radwan, a lawmaker from Merkel’s CSU Bavarian sister party who sits on the Bundestag’s finance committee, said in an interview on Monday. “Cases like these make it more difficult to think about deepening the economic and monetary union.” The growing drumbeat for closer euro-area integration following Emmanuel Macron’s election in France is making some German lawmakers increasingly uneasy. Citing election results in France and the Netherlands this year that open “an opportunity for moving Europe forward,” Merkel has spoken of joint projects with France and left the door open to creating a euro-area budget and a joint finance minister.

“This decision discredits the further completion of the banking union and moves the common deposit-guarantee scheme into the distant future,” said Carsten Schneider, a deputy head of the Social Democrat caucus in Germany’s lower house. “It’s not acceptable that bank wind-downs under national rules offer better conditions for creditors than under the European regime.” Italy’s decision is “a grave mistake,” Schneider said in emailed comments to Bloomberg.

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Brussels hubris in its full splendor. (BRRD= Bank Recovery and Resolution Directive)

Italy’s Latest Bank Bailout Has Created A Two-Speed Eurozone (Coppola)

The bailout is dressed up as a rescue by a larger bank along the same lines as Santander’s recent acquisition for a nominal 1 euro of the insolvent Banco Popular. Like Santander, Intesa Sanpaolo, Italy’s second-biggest lender, will buy the two banks 1 euro. But there the similarity ends. Santander took on full responsibility for recapitalizing Banco Popular, for which it announced a 7bn euro rights issue. But Intesa isn’t taking financial responsibility for anything. The Italian government is paying Intesa about 5bn euros in cash to take over the two banks, and is additionally providing guarantees worth 12bn euros for the two banks’ bad assets. The total bailout amount is thus around 17bn euros, though according to the European Commission, the net cost will be much lower: Both guarantees and cash injections are backed up by the Italian State’s senior claims on the assets in the liquidation mass. Correspondingly, the net costs to the Italian State will be much lower than the nominal amounts of the measures provided.

The bailout imposes losses on the two banks’ shareholders and subordinated debtholders. But the all-important seniors have been spared, and small subordinated debtholders will be compensated by Intesa from the funds provided by the Italian government. The BRRD has effectively been sidestepped. Did the EU oppose this sleight of hand? Not a bit of it. In this statement, the European Commission approved the use of taxpayers’ funds to bail out these banks: “The Commission found these measures to be in line with EU State aid rules, in particular the 2013 Banking Communication. Existing shareholders and subordinated debt holders have fully contributed to the costs, reducing the cost of the intervention for the Italian State. Both aid recipients, BPVI and Banca Veneto, will be wound up in an orderly fashion and exit the market, while the transferred activities will be restructured and significantly downsized by Intesa, which in combination will limit distortions of competition arising from the aid.”

Remarkable. Winding up two banks in the Venetian area would cause massive economic disruption. So the solution is to create an effective banking monopoly in that area. And this doesn’t distort competition, apparently. I detect a distinct odor of Eurofudge. Italy’s decision, supported by the European Commission, tramples the BRRD to death. Senior creditors need never again fear losses due to a failing bank. If it is systemically important, it will be given a precautionary recapitalization at taxpayers’ expense. If it is not, an excuse will be found to bail it out at taxpayers’ expense. Either way, seniors and unsecured depositors are safe. That is, they are as safe as politicians want them to be. Italy is able to bail out these banks – and will no doubt in due course bail out others too – because it is a big country which can easily borrow the funds needed.

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“..”abundant” proof that the president received bribe money..”

Brazil Top Prosecutor Charges President With Bribery (AFP)

Brazil’s top prosecutor charged President Michel Temer with bribery on Monday, plunging Latin America’s biggest country into what could be prolonged new political turmoil. The bribery charge filed by Prosecutor General Rodrigo Janot swept Temer into the forefront of a giant graft scandal that has engulfed Latin America’s biggest country over the last three years. Although several past Brazilian presidents and scores of other politicians are currently being investigated for corruption in the “Car Wash” probe, Temer is the first leader in the country’s history to face criminal charges while still in office. Temer acted “in violation of his duties to the state and to society,” Janot wrote, citing “abundant” proof that the president received bribe money.

For Temer to go on trial, the lower house of Congress must first approve Janot’s charge by a two-thirds majority. Temer would then be suspended for six months for the trial. Janot is also probing Temer for alleged obstruction of justice and membership of a criminal group. He could file those charges at a later date, guaranteeing a sustained legal assault. However, Temer’s aides say they are confident he has sufficient support in Congress to get the charges thrown out. In his first comments since returning from a trip to Russia and Norway, the president was defiant. “There is no plan B,” he said at a ceremony to sign a new bill in the capital Brasilia. “Nothing will destroy us – not me and not our ministers.”

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Nothing black about it.

The Technicolor Swan (Jim Kunstler)

I registered as a Democrat in 1972 — largely because good ole Nixon was at the height of his power (just before his fall, of course), and because he was preceded as party leader by Barry Goldwater, who, at the time, was avatar for the John Birch Society and all its poisonous nonsense. The Democratic Party was still deeply imbued with the personality of Franklin Roosevelt, with a frosting of the recent memory of John F. Kennedy and his brother Bobby, tragic, heroic, and glamorous. I was old enough to remember the magic of JFK’s press conferences — a type of performance art that neither Bill Clinton or Barack Obama could match for wit and intelligence — and the charisma of authenticity that Bobby projected in the months before that little creep shot him in the kitchen of the Ambassador Hotel. Even the lugubrious Lyndon Johnson had the heroic quality of a Southerner stepping up to abolish the reign of Jim Crow.

Lately, people refer to this bygone era of the 1960s as “the American High” — and by that they are not talking about smoking dope (though it did go mainstream then), but rather the post World War Two economic high, when American business might truly ruled the planet. Perhaps the seeming strength of American political leaders back then was merely a reflection of the country’s economic power, which since has been squandered and purloined into a matrix of rackets loosely called financialization — a criminal magic act whereby wealth is generated without producing anything of value. Leaders in such a system are bound to be not just lesser men and women but something less than human. Hillary Clinton, for instance, lost the 2016 election because she came off as demonic, and I mean that pretty literally.

To many Americans, especially the ones swindled by the magic of financialization, she was the reincarnation of the little girl in The Exorcist. Donald Trump, unlikely as it seems — given his oafish and vulgar guise — was assigned the role of exorcist. Unlike poor father Merrin, he sort of succeeded, even to his very own astonishment. I say sort of succeeded because the Democratic Party is still there, infested with all its gibbering demons, but it has been reduced politically to impotence and appears likely to soon roll over and die. None of this is to say that the other party, the Republicans, have anything but the feeblest grip on credibility or even an assured continued existence. First of all there is Trump’s obvious plight as a rogue only nominally regarded as party leader (or even member).

Then there is the gathering fiasco of neither Trump nor his party being able to deliver remedies for any of the ills of our time that he was elected to fix. The reason for that is simple: the USA has entered Hell, or at least a condition that looks a lot like it. This is not just a matter of a few persons or a party being possessed by demons. We’ve entered a realm that is populated by nothing but demons — of our own design, by the way. Our politics have become so thoroughly demonic, that the sort of exorcism America needs now can only come from outside politics. It’s coming, too. It’s on its way. It will turn our economic situation upside down and inside out. It’s a Technicolor swan, and you can see it coming from a thousand miles out. Wait for it. Wait for it.

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It’s crazy that we’re still talking about this.

California To List Glyphosate As Cancer-Causing; Monsanto Vows Fight (R.)

Glyphosate, an herbicide and the active ingredient in Monsanto Co’s popular Roundup weed killer, will be added to California’s list of chemicals known to cause cancer effective July 7, the state’s Office of Environmental Health Hazard Assessment (OEHHA) said on Monday. Monsanto vowed to continue its legal fight against the designation, required under a state law known as Proposition 65, and called the decision “unwarranted on the basis of science and the law.” The listing is the latest legal setback for the seeds and chemicals company, which has faced increasing litigation over glyphosate since the World Health Organization’s International Agency for Research on Cancer said that it is “probably carcinogenic” in a controversial ruling in 2015.

Dicamba, a weed killer designed for use with Monsanto’s next generation of biotech crops, is under scrutiny in Arkansas after the state’s plant board voted last week to ban the chemical. OEHHA said the designation of glyphosate under Proposition 65 will proceed following an unsuccessful attempt by Monsanto to block the listing in trial court and after requests for stay were denied by a state appellate court and the California’s Supreme Court. Monsanto’s appeal of the trial court’s ruling is pending. “This is not the final step in the process, and it has no bearing on the merits of the case. We will continue to aggressively challenge this improper decision,” Scott Partridge, Monsanto’s vice president of global strategy, said.

Listing glyphosate as a known carcinogen under California’s Proposition 65 would require companies selling the chemical in the state to add warning labels to packaging. Warnings would also be required if glyphosate is being sprayed at levels deemed unsafe by regulators. Users of the chemical include landscapers, golf courses, orchards, vineyards and farms. Monsanto and other glyphosate producers would have roughly a year from the listing date to re-label products or remove them from store shelves if further legal challenges are lost.

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Jun 252017
 
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Marc Riboud Paris 1953

 

Dems Push Leaders To Talk Less About Russia (Hill)
UK Housing Crisis Threatens A Million Families With Eviction By 2020 (G.)
The Answer Is Wages, Not Capital (Angusto)
Not All Fossil Fuels Are Going Extinct (BBG)
Reclaiming Public Services (TNI)
Contagion from the 2 Friday-Night Bank Collapses in Italy? (DQ)
Health Spending In Greece Down 40% In 2009-2015 (Amna)
Moody’s Raises Greece’s Sovereign Bond Rating After Bailout (AFP)
Greece, A Guinea Pig For A Cashless And Controlled Society (MPN)
Monsanto And Bayer Are Maneuvering To Take Over The Cannabis Industry (WT)

 

 

Endlessly ironic that publications like the Hill write on this. They are more responsible for all the nonsense than any politicians are.

Dems Push Leaders To Talk Less About Russia (Hill)

Frustrated Democrats hoping to elevate their election fortunes have a resounding message for party leaders: Stop talking so much about Russia. Democratic leaders have been beating the drum this year over the ongoing probes into the Trump administration’s potential ties to Moscow, taking every opportunity to highlight the saga and forcing floor votes designed to uncover any business dealings the president might have with Russian figures. But rank-and-file Democrats say the Russia-Trump narrative is simply a non-issue with district voters, who are much more worried about bread-and-butter economic concerns like jobs, wages and the cost of education and healthcare.

In the wake of a string of special-election defeats, an increasing number of Democrats are calling for an adjustment in party messaging, one that swings the focus from Russia to the economy. The outcome of the 2018 elections, they say, hinges on how well the Democrats manage that shift. “We can’t just talk about Russia because people back in Ohio aren’t really talking that much about Russia, about Putin, about Michael Flynn,” Rep. Tim Ryan (D-Ohio) told MSNBC Thursday. “They’re trying to figure out how they’re going to make the mortgage payment, how they’re going to pay for their kids to go to college, what their energy bill looks like. “And if we don’t talk more about their interest than we do about how we’re so angry with Donald Trump and everything that’s going on,” he added, “then we’re never going to be able to win elections.”

Ryan is among the small group of Democrats who are sounding calls for a changing of the guard atop the party’s leadership hierarchy following Tuesday’s special election defeat in Georgia — the Democrats’ fourth loss since Trump took office. But Ryan is hardly alone in urging party leaders to hone their 2018 message. Rep. Tim Walz (D-Minn.) has been paying particularly close attention to voters’ concerns because he’s running for governor in 2018. The Russia-Trump investigation, he said, isn’t on their radar. “I did a 22-county tour. … Nobody’s focusing on that,” Walz said. “That’s not to say that they don’t think Russia and those things are important, [but] it’s certainly not top on their minds.”

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Elections it is then. A rudderless society.

UK Housing Crisis Threatens A Million Families With Eviction By 2020 (G.)

More than a million households living in private rented accommodation are at risk of becoming homeless by 2020 because of rising rents, benefit freezes and a lack of social housing, according to a devastating new report into the UK’s escalating housing crisis. The study by the homelessness charity Shelter shows that rising numbers of families on low incomes are not only unable to afford to buy their own home but are also struggling to pay even the lowest available rents in the private sector, leading to ever higher levels of eviction and homelessness. The findings will place greater pressure on the government over housing policy following the Grenfell Tower fire disaster in west London, which exposed the neglect and disregard for people living in council-owned properties in one of the wealthiest areas of the capital.

The Shelter report highlights how a crisis of affordability and provision is gripping millions with no option but to look for homes in the private rented sector due to a shortage of social housing. Shelter says that in 83% of areas of England, people in the private rented sector now face a substantial monthly shortfall between the housing benefit they receive and the cheapest rents, and that this will rise as austerity bites and the lack of properties tilts the balance more in favour of landlords. Across the UK the charity has calculated that, if the housing benefit freeze remains in place as planned until 2020, more than a million households, including 375,000 with at least one person in work, could be forced out of their homes. It estimates that 211,000 households in which no one works because of disability could be forced to go.

Graeme Brown, the interim chief executive at Shelter, said: “The current freeze on housing benefit is pushing hundreds of thousands of private renters dangerously close to breaking point at a time when homelessness is rising.” A total of 14,420 households were accepted by local authorities as homeless between October and December 2016, up by more than half since 2009 – with 78% of the increase since 2011 being the result of people losing their previous private tenancy. Local authorities are under a legal obligation to find emergency accommodation, such as in bed and breakfasts.

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A kernel of truth does not a good reasoning make.,

The Answer Is Wages, Not Capital (Angusto)

As in any other religion, faith lies behind capitalism. Faith that capital is a panacea always and in any situation: to push economic growth or to help less developed countries to catch up. Yet the fact is that the EU countries that were the main receivers of cohesion funds, before the extension to the East, later became rescued countries – and we have never before had as much capital on tap along with current low growth.

Both these facts should be enough to break the faith in capital or, at least, to recognise its limits. Let’s see those limits in the above-mentioned causes. The virtue of capital transfers to help low developed countries is based in old Marshall Plan history, which attributes the successful German recovery after WW2 to USA loans. Sure, those loans helped, but the necessary knowledge was already there and the capital transfers allowed the Germans to rebuild their supply capacity. Conversely, in the EU rescued countries, entering the EU came with a local supply capacity destruction, in Schumpeterian terms, for which cohesion funds were unable to compensate. As a result, their domestic demand outstripped internal supply and trade deficits became recurrent until the financial crash.

The key element was not capital but knowledge and its absence or availability in both situations; something very obvious but all too often forgotten. If capital has any virtue it comes from its origin: the capacity to produce output sufficient to recover the inputs used, to satisfy consumption needs and to save a part to be invested as new inputs for raising future output. It means that the virtue is not in the savings/capital itself but in the capacity to generate it. That’s why capital transfers that simply increased the receivers’ inputs provision, without increasing the output/input ratio –or system efficiency–, were in the end wasted money. To avoid this, it would have been necessary to increase the receivers’ efficiency, which is much more correlated with parameters like educational levels than with capitalization! Again, knowledge is the key question.

Furthermore, capital on its own is not only unable to help less developed countries catch up on their wealthier peers but it’s also unable to propel economic growth on its own, as we are now seeing. After years of letting profits grow at the cost of wages, hoping that greater capital would bring greater growth, now we hear companies claiming that they do not invest because they do not have sufficient demand to justify the investment. The clear solution would be to increase wages, but no single company will do it out of fear that the others won’t follow suit. In fact, what any company hopes is that the others increase wages and salaries but not itself. That’s why a global agent is needed: trade unions and the public administration! The latter to increase its spending to guarantee full employment and the former profiting from full employment to bargain higher salaries.

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Bloomberg’s valiant attempt to make you see it doesn’t understand energy. Well done!

Not All Fossil Fuels Are Going Extinct (BBG)

Bloomberg New Energy Finance’s latest New Energy Outlook points the way to a sunny, windy future for the global electric power industry. That doesn’t mean that fossil fuels (or nuclear power) will vanish. It also doesn’t mean that all fossil fuels are the same. The future of natural gas and coal is a tale of two resources — one a story of rising fortunes, the other of slow decline. The latest outlook on natural gas is brighter than ever: BNEF’s forecast for gas shows a higher estimate for consumption in 2040 than in previous years, with a short decline at the end of this decade.

Coal is a different matter. Coal demand is expected to peak late next decade, then decline almost every year to reach a low of 3.1 billion metric tons in 2040, about 25% lower than at its peak.

This long-term outlook is nuanced, as it should be. The aggregated demand for each fuel from 2020 to 2040 has not changed much in three successive New Energy Outlook reports. Total gas consumption has only increased 6% since the 2015 report, while coal consumption from 2020 to 2040 – despite the plunge that is now expected, as noted above – has only changed 3.5%, and was exactly the same in 2016. However, the shape of that coal curve is still important, even if the volume hasn’t changed much. A coal mine that opens today could have a 60-year life, but it is likely to be one fraught with oversupply and competition from other coal producers, as well as other technologies. So how does the 2017 New Energy Outlook for gas and coal compare to how major oil companies and the International Energy Agency see it? For gas, everyone agrees: Consumption grows. Shell expects gas consumption to more than double and, perhaps not surprisingly, Exxon Mobil and BP also expect consumption to increase at least 50%. BNEF’s expectations are a bit more muted.

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Looks a tad hippyish, but as I’ve said a million times, no society should ever sell its basics to anyone. It’s lethal.

Reclaiming Public Services (TNI)

Reclaiming Public Services is vital reading for anyone interested in the future of local, democratic services like energy, water and health care. This is an in-depth world tour of new initiatives in public ownership and the variety of approaches to deprivatisation. From New Delhi to Barcelona, from Argentina to Germany, thousands of politicians, public officials, workers, unions and social movements are reclaiming or creating public services to address people’s basic needs and respond to environmental challenges. They do this most often at the local level. Our research shows that there have been at least 835 examples of (re)municipalisation of public services worldwide since 2000, involving more than 1,600 municipalities in 45 countries.

Why are people around the world reclaiming essential services from private operators and bringing their delivery back into the public sphere? There are many motivations behind (re)municipalisation initiatives: a goal to end private sector abuse or labour violations; a desire to regain control over the local economy and resources; a wish to provide people with affordable services; or an intention to implement ambitious climate strategies. Remunicipalisation is taking place in small towns and in capital cities, following different models of public ownership and with various levels of involvement by citizens and workers. Out of this diversity a coherent picture is nevertheless emerging: it is possible to build efficient, democratic and affordable public services. Ever declining service quality and ever increasing prices are not inevitable. More and more people and cities are closing the chapter on privatisation, and putting essential services back into public hands.

Ulli Sima, Vienna City Councilor for the Environment and Wiener Stadtwerke: “As early as 2001, Vienna protected drinking water with a constitutional decision. Municipal services must remain public and should not be sacrificed to private profit. We want to ally with other cities for strong municipal servicest.” Eloi Badia, the Barcelona Councilor for presidency, water and energy: “It is important to demystify the process of privatisation that has been launched in recent years by several governments, because it’s a model that has not proved its efficiency, failing to offer a better service or a better price.”

Célia Blauel, President of Eau de Paris and Deputy Mayor of Paris in charge of the environment, sustainable development, water and the energy-climate plan: “Bringing local public services under public control is a major democratic issue, especially for such essential services as energy or water. It means greater transparency and better citizen supervision. In the context of climate change, it can contribute to leading our cities toward energy efficiency, the development of renewables, the conservation of our natural resources, and the right to water. ”

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Yesterday I wrote: “To paraphrase Juncker: “When things get serious in Europe, no rules or laws are immune to lies.”

Today, Don Quijones says: “..when things get serious in the EU, laws get bent.”

That ends to the Cyprus model before it was even truly inaugurated.

Contagion from the 2 Friday-Night Bank Collapses in Italy? (DQ)

When things get serious in the EU, laws get bent and loopholes get exploited. That is what is happening right now in Italy, where the banking crisis has reached tipping point. The ECB, together with the Italian government, have just this weekend to resolve Banca Popolare di Vicenza and Veneto Banca, two zombie banks that the ECB, on Friday night, ordered to be liquidated. Unlike Monte dei Pachi di Siena, they will not be bailed out primarily with public funds. Senior bondholders and depositors will be protected while shareholders and subordinate bondholders will lose their shirts. However, as the German daily Welt points out, subordinate bondholders at Monte dei Pachi di Siena had billions of euros at stake, much of it owned by its own retail customers who’d been sold these bonds instead of savings products such as CDs. So for political reasons, they were bailed out.

Junior bonds play a smaller role at the two Veneto-based banks. According to the Welt, the two banks combined have €1.33 billion (at face value) in junior bonds outstanding. They last traded between 1 cent and 3 cents on the euro. So worthless. Only about €100 million were sold to their own customers, not enough to cause a political ruckus in Italy. So they will be crushed. The good assets and the liabilities, such as the deposits, will be transferred to a competing bank. According to a rescue plan apparently drawn up by investment bank Rothschild that surfaced a few days ago, Intesa Sao Paolo, Italy’s second largest bank, would get these good assets and the deposits (liabilities), for the token sum of €1, while all the toxic assets (non-performing loans) would be shuffled off to a state-owned “bad bank” – and thus, the taxpayer.

According to the Italian daily Il Sole 24 Ore, the bad bank would be left holding over €20 billion of festering assets. “Intesa gets a free gift, the state takes on all the bad stuff and the taxpayer pays,” said at the time Renato Brunetta, parliamentary leader for former prime minister Silvio Berlusconi’s Forza Italia party. It is testament to just how desperate the situation has become in Italy’s banking crisis. The country’s largest lender, Unicredit, is in no position to help out: it had to raise €13 billion of new capital earlier this year just to keep itself afloat. Whether the deal with Intesa is still possible after the ECB’s decision to liquidate the banks, and what form this deal, if any, will take, and how much the taxpayer will have to fork over, and how to sugarcoat this in the most palatable terms is what the Italian government is currently trying to hammer out in its emergency meeting.

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How anyone can label this anything but ‘criminal’ is beyond me.

Health Spending In Greece Down 40% In 2009-2015 (Amna)

Health spending in Greece plunged 40% in the 2009-2015 period, Deloitte said in a survey released on Thursday. According to the survey, health spending fell to €14.1 billion in 2014, hit by a significant shrinking in medical/pharmaceutical coverage by the state and the social insurance system. It also stressed that this sharp decline mostly hit pharmacies and other professionals in the health sector and less the country’s hospitals. Hospital spending fell to €6.2 billion in 2015, from €9.0 billion in 2009, for an average annual decline of 6.0%, while average annual decline in the retail sector reached 7.0% and 9.0%, respectively. Deloitte said the state social insurance system covers 59.1% of total health spending in Greece, with patients covering 35.5% -a %age significantly higher compared with other European countries (UK 9.5%, France 6.7%, Italy 21.7%).

3.7% of total health spending is covered by private insurance contracts. Private hospitals were also hit during the 2009-2015 period, leading to more consolidation as the number of private hospitals fell by 6.0% and their size grew by around 1.0%. The total number of private and state hospitals in Greece was 283, mostly in Attica, offering 45,900 beds. The survey said that the number of beds surpassed demand by at least 18%. The survey noted that health spending recovered slightly to €14.7 billion in 2015 and stressed that international investors were showing strong interest for business deals in Greece.

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Want Moody’s to be nice to you? Slash your health system by 40%.

Moody’s Raises Greece’s Sovereign Bond Rating After Bailout (AFP)

Credit ratings agency Moody’s late Friday raised Greece’s long-term issuer rating to “Caa2” from “Caa3” after eurozone governments extended a credit lifeline to the country. Moody’s also changed its outlook to “positive”, up from “stable” previously, saying it saw signs that the heavily indebted country’s economy was stabilising. It pointed to a mid-June agreement reached by Greece’s creditors to relaunch an aid plan to the country, which had been blocked for months due to disagreements between eurozone countries – especially Germany – and the IMF. The move reduces the spectre of a short-term crisis, after eurozone governments agreed to give Greece a new credit lifeline of some €8.5 billion ($9.5 billion). Moody’s said it expected Greece’s debt ratio to stabilise this year at 179% of GDP, adding that growth should return to the economy this year and next.

Greece returned to growth in the first quarter of 2017, with a 0.4% increase in GDP, according to figures revised upwards in early June. “It is too early to conclude that economic growth will be durable,” Moody’s said. The IMF, which links financial aid to debt relief, has also signed an “agreement in principle” to allow immediate assistance that avoids a payment crisis in Athens this summer. It said Thursday that negotiations with creditors for debt reduction had “made progress”. “If we did not think there was a good chance of reaching a debt deal, we would not have chosen that route,” an IMF spokesman said. Moody’s also raised the long-term country ceilings for foreign-currency and local-currency bonds to B3 from Caa2.

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Another kernel of truth that proves writing articles is not that easy.

Greece, A Guinea Pig For A Cashless And Controlled Society (MPN)

The IMF, which day after day is busy “saving” economically suffering countries such as Greece, also happens to agree with this brave new worldview. In a working paper titled “The Macroeconomics of De-Cashing,” which the IMF claims does not necessarily represent its official views, the fund nevertheless provides a blueprint with which governments around the world could begin to phase out cash. This process would commence with “initial and largely uncontested steps” (such as the phasing out of large-denomination bills or the placement of upper limits on cash transactions). This process would then be furthered largely by the private sector, providing cashless payment options for people’s “convenience,” rather than risk popular objections to policy-led decashing.

The IMF, which certainly has a sterling track record of sticking up for the poor and vulnerable in society, comforts us by saying that these policies should be implemented in ways that would augment “economic and social benefits.” These suggestions, which of course the IMF does not necessarily officially agree with, have already begun to be implemented to a significant extent in the IMF debt colony known officially as Greece, where the IMF has been implementing “socially fair and just” austerity policies since 2010, which have resulted, during this period, in a GDP decline of over 25%, unemployment levels exceeding 28%, repeated cuts to what are now poverty-level salaries and pensions, and a “brain drain” of over 500,000 people—largely young and university-educated—migrating out of Greece.

Indeed, it could be said that Greece is being used as a guinea pig not just for a grand neoliberal experiment in both austerity, but de-cashing as well. The examples are many, and they have found fertile ground in a country whose populace remains shell-shocked by eight years of economic depression. A new law that came into effect on January 1 incentivizes going cashless by setting a minimum threshold of spending at least 10% of one’s income via credit, debit, or prepaid card in order to attain a somewhat higher tax-free threshold. Beginning July 27, dozens of categories of businesses in Greece will be required to install aptly-acronymized “POS” (point-of-sale) card readers and to accept payments by card.

usinesses are also required to post a notice, typically by the entrance or point of sale, stating whether card payments are accepted or not. Another new piece of legislation, in effect as of June 1, requires salaries to be paid via direct electronic transfers to bank accounts. Furthermore, cash transactions of over €500 have been outlawed. In Greece, where in the eyes of the state citizens are guilty even if proven innocent, capital controls have been implemented preventing ATM cash withdrawals of over €840 every two weeks. These capital controls, in varying forms, have been in place for two years with no end in sight, choking small businesses that are already suffering.

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Inevitable. Chemists go where they smell money.

Monsanto And Bayer Are Maneuvering To Take Over The Cannabis Industry (WT)

You may remember hearing back in September that Bayer, the largest pharmaceutical company in the world, made a deal to buy out Monsanto for $66 billion. Although Monsanto was voted the most evil company in the world in 2013 and its reputation has continued to fall since, Bayer still went ahead with the buyout. A merger between these two companies is unsurprising, as though they both have long histories of involvement with Nazism and chemical weapons like agent orange which have devastated Vietnam since the war. In fact, Bayer began as a break-off company of the infamous IG Farben, which produced the chemical weapons used on the Jews during the Nazi reign. After the war, Farben was forced to break up into several companies, including BASF, Hoeschst, and Bayer.

Soon after at the Nuremberg trials, 24 Farben executives were sent to prison for crimes against humanity. However, in a matter of just 7 years each of them was released and began filling high positions in each of the former Farben companies, and many of them began working for the Russian, British, and American governments through a joint intelligence venture called “Operation Paperclip”: (“IG (Interessengemeinschaft) stands for “Association of Common Interests”: The IG Farben cartel included BASF, Bayer, Hoechst, and other German chemical and pharmaceutical companies. As documents show, IG Farben was intimately involved with the human experimental atrocities committed by Mengele at Auschwitz. A German watchdog organization, the GBG Network, maintains copious documents and tracks Bayer Pharmaceutical activities.” – Alliance for Human Research Protection)

After all these years, Bayer is now richer and more powerful than their predecessor company I.G. Farben ever was. According to Big Buds Magazine, Monsanto and Scotts Miracle-Gro have a “deep business partnership” and plan on taking over the cannabis industry. Hawthorne, a front group for Scotts, has already purchased three of the major cannabis growing companies: General Hydroponics, Botanicare, and Gavita. Many other hydroponics companies have also reported attempted buyouts by Hawthorne. (“They want to bypass hydroponics retail stores…When we said we won’t get in bed with them they said, ‘Well, we could just buy your whole company like we did with Gavita and do whatever we want.’” – Hydroponics Lighting Representative) Jim Hagedorn, CEO of Scotts Miracle-Gro, has even said that he plans to “invest, like, half a billion in [taking over] the pot business… It is the biggest thing I’ve ever seen in lawn and garden.”

He has also invested in companies such as Leaf, which grows cannabis in an electronically regulated indoor terrarium accessible via smartphone. It is logical that Bayer, being the parent company, would work together with Monsanto in order to share secrets which would advance mutual business. Many people in the cannabis industry have been warning about this, including Michael Straumietis, founder and owner of Advanced Nutrients. (“Monsanto and Bayer share information about genetically modifying crops,” Straumietis notes. “Bayer partners with GW Pharmaceuticals, which grows its own proprietary marijuana genetics. It’s logical to conclude that Monsanto and Bayer want to create GMO marijuana.” – Michael Straumietis)

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Jun 212017
 
 June 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »
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Fred Lyon Post&Powell Union Square San Francisco 1947

 

100% Chance of Recession Within 7 Months? (DR)
The Secret Source of Eternal Australian Growth (Steve Keen)
We Need A Public Inquiry Into The Economics Profession (Pettifor)
Where Are The Empty Homes In Kensington? (Whoownsengland)
Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)
Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)
House Republicans Block Russia Sanctions Bill (ZH)
We Are Inches From A New World War (Medium)
Iran Slams Tillerson Call For Regime Change (RT)
The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)
EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)
Europe’s Unserious Plan for Greece (BBG)
Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)
At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

 

 

The numbers say it.

100% Chance of Recession Within 7 Months? (DR)

We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”

Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.

But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.

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Tons of graphs from Steve. I find his use of ‘debt and ‘credit’ as seemingly separate terms a bit confusing.

The Secret Source of Eternal Australian Growth (Steve Keen)

Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).

Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).

Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.

Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.

 

Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).

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A valiant effort, and economics should be redefined for sure, but Ann shirks far too close to assuming Brexit was about economics only and purely. Tempting when you’re an economist, but…

We Need A Public Inquiry Into The Economics Profession (Pettifor)

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.

The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

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If you allow for homes to be speculative ‘assets’, you will end up with homeless people.

Where Are The Empty Homes In Kensington? (Whoownsengland)

As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.

In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.

The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.

The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:

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Science and technology will not enforce human rights. Moral values will.

Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.

“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”

Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”

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Wherever you live in the world, if you think things are a mess where you are, spare a thought for Brazil.

Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.

If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.

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They’ll pass at some point.

House Republicans Block Russia Sanctions Bill (ZH)

After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.

“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.

“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”

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We’re still not clued in to how dangerous ‘our own’ are.

We Are Inches From A New World War (Medium)

This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.

This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.

“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.

We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen

It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.

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The opposite of what America needs.

Iran Slams Tillerson Call For Regime Change (RT)

Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.

Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.

[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.

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No surprise here.

The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.

In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.

So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.

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Complete nonsense: “..The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060

EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”

Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.

[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.

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Bloomberg, too, will first have to understand that Greece does not have €326 billion in debt, and why it is people state that regardless.

Europe’s Unserious Plan for Greece (BBG)

The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.

In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.

It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.

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While taxes have risen. An endless hole.

Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.

The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.

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So fitting. Though, World Refugee Day is the most cynical expression possible of the disaster we’ve created.

At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.

The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.

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Jun 202017
 
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Pablo Picasso Dans l’atelier 1954

 

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)
Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)
Absent Without Leave (Jim Kunstler)
Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)
Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)
Britiain’s Carmakers Face Brexit Cliff Edge (BBC)
UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)
UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)
China Cracks Down On Online Moneylenders Targeting Students (BBC)
China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)
Household Debt Sees Australian Banks Downgraded Again (ABCAu)
296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)
Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)
Could There Be A Bidding War For Whole Foods? (CNN)
Amazon Will Kill Your Local Grocer (BBG)

 

 

Funny how opinions of Russia revert to communism all the time.

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)

The neoconservative American Jan Wenner’s Rolling Stone magazine headlined on June 16th about these Showtime interviews, «10 Most WTF Things We Learned From Oliver Stone’s Putin Interviews», and sub-headlined: «From denying any involvement with U.S. election hacking to Putin’s love of Judo and Stalin, our takeaways from these truly baffling conversations».

Wenner’s reporter opened: “What’s the Russian equivalent of Kool-Aid? Whatever it is, it’s definitely red – and Oliver Stone has eagerly drunk it down. The trailers for The Putin Interviews, Showtime’s four-part series documenting conversations between Russian President Vladimir Putin and Stone, would have you believe that you’re going to hear some pretty hard-hitting stuff as the autocrat and the filmmaker face off, Frost-Nixon style. What we got instead was a series of softballs lobbed lovingly in the direction of one of the most powerful and dangerous men in the world. Except for a few moments, Stone seems serenely unconcerned with anything beyond flattering his subject – and engaging in some supremely one-sided exchanges about history and policy along the way.”

The term «red» in this context refers, of course, to communism, and alleges that Russia is still a communist country. To allow that type of smear to appear in any ‘news’ vehicle, is to expose itself as being actually a propaganda-vehicle, unless the allegation is backed up by solid documentation, which Wenner’s magazine didn’t do — Wenner’s magazine presented no documentation at all, for the inflammatory allegation. The magazine’s presumption was that their readers will simply believe what Wenner’s operation delivers, to be ipso-facto ‘true’.

But any such reader would be welcoming his own deception by Wenner’s propaganda-operation. Evidently, successful magazines can insult their own subscribers’ intelligence, so long as it’s done in ‘the right way’ — the subscribers won’t despise the publisher for trying to deceive them about such important matters as what countries to invade, or whether to invade, or why to invade. The U.S. military-industrial complex (MIC) can attract cannon-fodder for its operations, by means of such ‘news’ media to produce dupes for that MIC. During the 2016 U.S. Presidential campaign, Mr. Wenner’s propaganda-machine had ardently campaigned for the neoconservative Hillary Clinton against the moderately progressive Bernie Sanders in the U.S. Democratic Party primaries.

And, then, once she (and her friend Debbie Wasserman Schultz who ran the DNC) managed to steal the nomination from her opponent, Wenner’s operation campaigned for Ms. Clinton against her Republican opponent Trump, who claimed (falsely as it turns out, in lies exceeding Clinton’s own) to be opposed to neoconservatives (whom he has actually loaded into his Administration). Trump now relies upon neocons for his support, but perhaps Wenner and Robert Kagan and other neoconservatives won’t be satisfied until the U.S. government takes control over Russia — which cannot happen except upon all of our dead bodies (WW III) — which is precisely what Hillary Clinton was aiming for (and maybe Trump is, too). That’s how insane the U.S. aristocracy (and its PR organs such as Wenner’s) now is – they’re pushing the world toward nuclear Armageddon.

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There will come a point when Russia’s had enough. But they won’t shoot down US planes.

Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)

Russia says it will now consider US planes in Syria as “aerial targets” and cease communications via a military hotline in a rapid escalation of tensions between the two nations. The Russian defence ministry released a statement Monday afternoon, local time, condemning the US for shooting down a Syrian warplane that had dropped bombs near ground forces supported by the US. The ministry said it would now track all US-led coalition jets and drones found west of the Euphrates River in Syria and treat them as targets. This is a significant development because, while it is not uncommon for the two nations to criticise each other politically, Russia stays in contact with the US-led coalition via a military hotline to ensure there is no unintended military conflict between the two powers in the region.

The statement says that Russia will no longer use the communication channel, designed to avoid incidents in Syrian airspace. “The command of the coalition forces did not use the established communication channel for preventing incidents in Syrian airspace,” the defence ministry said in the statement. Russia said it would now “end co-operation with the American side”. “Any flying objects, including planes and drones of the international coalition, discovered west of the Euphrates River will be tracked as aerial targets by Russia’s air defences on and above ground,” it said. [..] The campaign has often put the US at odds with the regime of Syrian President Bashar al-Assad, which is leading its own attack against IS with air cover support from Russia. Syria is also in the grip of a civil war that has claimed more than 400,000 lives, according to the United Nations.

An American F/A-18 Super Hornet shot down a Syrian SU-22 about 7pm on Sunday. The coalition said the Syrian plane had dropped bombs near its allies, the Syrian Democratic Forces, which were fighting IS south of Tabqah. Russia said the shooting down of the plane was an act of aggression against Syria and called for a “careful investigation by the US command” into the incident. “Repeated military actions by US aircraft against the lawful armed forces of a United Nations member state, under the guise of a ‘fight against terrorism’, are a profound violation of international law and, in fact, military aggression against the Syrian Arab Republic,” the Russian Defence Ministry said. “As a result of the strike, the Syrian plane was destroyed. The Syrian pilot catapulted into an area controlled by Islamic State terrorists. His fate is unknown.”

The coalition said the Syrian warplane had been shot down “in accordance with rules of engagement and in collective self-defence of coalition partnered forces”. The deputy chairman of the Russian Senate’s defence committee, Frants Klintsevich, said there was “no defence” for the US shooting down the plane. “Blatant aggression and provocation. To provoke, above all, Russia. It seems that the US under Donald Trump is a source of a qualitatively new level of danger not only in the Middle East but also around the world,” he wrote on Facebook.

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“That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent.”

Absent Without Leave (Jim Kunstler)

After nearly a year of investigating, the FBI, the CIA, the NSA, the DIA, DHS, et. al. haven’t been able to leak any substantial fact about “Russian collusion” with the Trump election campaign — and, considering the torrent of leaks about all manner of other collateral matters during this same period, it seems impossible to conclude that there is anything actually there besides utterly manufactured hysteria. Now, one might imagine that this intelligence community could have manufactured some gift-wrapped facts rather than just waves of hysteria, but that’s where the incompetence and impotence comes in. They never came up with anything besides Flynn and Sessions having conversations with the Russian ambassador — as if the ambassadors are not here to have conversations with our government officials.

You’d think that with all the computer graphics available these days they could concoct a cineplex-quality feature film-length recording of Donald Trump making a “great deal” to swap Kansas for Lithuania, or Jared Kushner giving piggyback rides to Vladimir Putin in the Kremlin. But all we’ve really ever gotten was a packet of emails from the Democratic National Committee and John Podesta of the Clinton campaign gloating about how nicely they fucked over Bernie Sanders — and that doesn’t exactly reflect so well on what has evolved to be the so-called “Resistance.” The net effect of all this sound and fury is a government so paralyzed that it can’t even pass bad legislation or execute its existing (excessive) duties. That might theoretically be a good thing, except what we’re seeing are individual departments just veering off on their own, especially the military, which now operates without any civilian control.

Apparently General Mattis, the Secretary of Defense, pretty much decided on his own to dispatch another 8,000 US troops to Afghanistan to move things along there in the war’s 16th year. Or did he get President Trump to look up from his Twitter window for three seconds to explain the situation and get a nod of approval? Perhaps you also didn’t notice the news item over the weekend that a US-led fighter plane coalition shot down a Syrian air force plane in Syrian airspace. In an earlier era that could easily be construed as an act of war. Who gave the order for that, you have to wonder. And what will the consequences be? Reasonable people might also ask: haven’t we already made enough deadly mischief in that part of the world? With the US military gone rogue in foreign lands, and the intelligence community off-the-reservation at home, and the Trump White House all gummed up in the tarbaby of RussiaGate, and the House and Senate lost in the shuffle, you also have to wonder what anybody is going to do about the imminent technical bankruptcy of the USA as the Treasury Department spends down its dwindling fund of remaining cash money to pay ongoing expenses — everything from agriculture subsidies to Medicare.

That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent. I don’t see any indication that the House and Senate will be able to bluster their way through this. Instead, the situation will compel extraordinary new acts of financial fraud via the central banks and its cadre of Too-Big-To-Fail associates. In the event, the likely outcome will be a spectacular fall in the value of the US dollar, and perhaps consecutively, the collapse of the equity and real estate markets.

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Actual bankers charged? Or is this just more of the sudden anti-Qatar campaign?

Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)

Barclays and four former executives have been charged with conspiracy to commit fraud and the provision of unlawful financial assistance. The Serious Fraud Office charges come at the end of a five-year investigation and relate to the bank’s fundraising at the height of 2008’s financial crisis. Former chief executive John Varley is one of the four ex-staff who will face Westminster magistrates on 3 July. Barclays says it is considering its position and awaiting further details. Mr Varley, former senior investment banker Roger Jenkins, Thomas Kalaris, a former chief executive of Barclays’ wealth division, and Richard Boath, the ex-European head of financial institutions, have all been charged with conspiracy to commit fraud in the June 2008 capital raising. In addition, Mr Varley and Mr Jenkins have also been charged with the same offence in relation to the October 2008 capital raising and with providing unlawful financial assistance.

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The Greeks are the only ones who’ve seen the real face of the EU.

Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)

Two-thirds of Europeans believe the EU should take a hard line with the UK over Brexit, according to a survey. 65% of those questioned in Belgium, Germany, Greece, Spain, France, Italy Austria, Hungary and Poland said the EU, while trying to maintain a good relationship with Britain, should not compromise on its core principles. The Chatham House-Kantar survey showed just 18% of people in the nine countries – compared with 49% of people in Britain – believed the opposite; that the European commission should aim to keep the UK as close as possible, at the expense of its principles, during the talks, which began on Monday. f those surveyed across the nine continental countries, 57% said the EU had been weakened by Brexit, while 46% felt Britain’s departure would be bad for the bloc. By contrast, 70% of Britons felt the EU would suffer from the UK leaving.

The survey interviewed more than 1,000 people in each of the 10 countries including Britain earlier this year before elections in the Netherlands and France and an economic uptick that have significantly bolstered pro-European sentiment. The election of pro-European centrist Emmanuel Macron in France has in particular given the bloc a boost. The eurozone economy, too, is now growing faster than that of the UK or US. Britain’s confusion over what Brexit strategy to adopt have also helped swing EU opinion. A Pew survey last week found markedly higher approval for the EU since the Brexit vote: 63% of respondents in the 10 EU countries had favourable views about the bloc.

The figures mark a sharp increase from spring last year, with favourable opinions up 18 points in Germany and France, 15 in Spain, 13 in the Netherlands – and 10 in the UK. Only 18% of continental respondents wanted their country to leave the EU. Overall, the survey revealed that more than half (58%) of people in 10 countries believed another EU country might leave the bloc within the next decade. Four-fifths of Greeks, hardest hit by the 2008 financial crisis, backed this view, compared with less than half of Hungarians and Poles. Asked about what they considered the EU’s greatest achievements, the freedom to live and work across Europe and the creation of the border-free Schengen zone came top among continental respondents (both on 17%), followed by European peace and the euro (13%) and the single market (8%).

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“..almost a million people were employed across the wider automotive industry.”

Britiain’s Carmakers Face Brexit Cliff Edge (BBC)

The government must secure a transitional Brexit deal to protect the future of the UK car industry, a trade group has said. The Society of Motor Manufacturers and Traders (SMMT) said Britain was highly unlikely to reach a final agreement with the EU by the March 2019 deadline. That meant carmakers could face a “cliff edge”, whereby tariff-free trade was sharply pulled away. It warned the industry would suffer without a back-up plan in place. The EU is by far the UK’s biggest automotive export market, buying more than half of its finished vehicles – four times as many as the next biggest market. UK car plants also depend heavily on the free movement of components to and from the continent.

The SMMT said any new relationship with the EU would need to address tariff and non-tariff barriers, regulatory and labour issues, “all of which will take time to negotiate”. “We accept that we are leaving the European Union,” said chief executive Mike Hawes. “But our biggest fear is that, in two years’ time, we fall off a cliff edge – no deal, outside the single market and customs union and trading on inferior World Trade Organization terms. “This would undermine our competitiveness and our ability to attract the investment that is critical to future growth.” UK car manufacturing generated £77.5bn of turnover last year and accounted for 12% of all goods exports, according to the trade group. It added that almost a million people were employed across the wider automotive industry.

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At least divvy up the monopoly money with a little sense of justice, you’d say. The fall will be hard enough already.

UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)

A £2.3tn windfall for those lucky enough to own their own homes during the property boom of the 1990s and early 2000s has opened up a deep and widening inequality gap between the generations, a thinktank has warned. Rising house prices that have enriched older generations have priced the young out of home ownership, said the Resolution Foundation, adding that the pattern whereby each generation was wealthier than the previous one had broken down. In a new report, the thinktank noted that the baby boomers born in the 20 years after the second world war were the big beneficiaries of rapidly rising house prices, but had amassed most of the wealth through no skill of their own. Wealth disparities would have “worrying consequences” for the living standards of younger generations, it added.

Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Britain’s pre-crash property boom created a huge, unearned and largely tax-free £2.3tn housing wealth windfall for those old enough and lucky enough to be home owners at the time. But while the property bubble hugely benefited many of Britain’s baby boomers, it has also driven generational wealth progress into reverse by pricing younger people out of home ownership. “Property, pension and financial wealth can provide security and opportunities for families, as well as a decent income in retirement. The failure of younger generations to accumulate wealth in the way that earlier generations have been able to is therefore a huge living standards concern for us all.”

The report found that 82% of housing wealth increases between 1993 and 2012-14 were due to the property boom, which saw the average price of a residential property in the UK rise threefold, rather than through any active behaviour – such as buying, moving house or paying off mortgages. At the boom’s zenith in 2003, one in six of all working property-owning adults were earning more from the rising value of their homes than from their jobs.

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What a great idea! Take your money now?!

UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)

The Co-operative Group’s stake in the Co-op Bank could fall dramatically under a rescue plan being drawn up by hedge funds. The UK’s largest mutual, which owns supermarkets and funeral homes, has a 20% stake in the bank, which put itself up for sale in February in a search for £750m of extra funding. But under a proposal being discussed by the bank’s controlling hedge fund shareholders, this stake could drop towards zero unless the group decides to pump millions of pounds into the loss-making bank. In April, the group wrote down the value of its stake to zero, taking a further £140m hit on its shareholding that had stood at 100% before the problems at the banking arm were uncovered in 2013.

Four years ago, hedge funds which owned bonds issued by the Co-op bank helped contribute to its rescue and they are again regarded as the most likely source for the extra capital the bank needs to appease the Bank of England. In an update on the sales process on Monday, the Co-op bank, which has 4 million customers, said it was “in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise”. A liability management exercise would involve bondholders agreeing to convert debt into shares. In a previous update to the market, the bank had warned that it would need to undergo a liability management exercise regardless of whether it was sold, signalling that bondholders faced losses under all the options being considered. In the latest announcement, the Co-op Bank said it was still continuing with talks about a sale of the business.

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A few thoughts:

• A) China’s not all that different from the US, is it? Student debt is hot.

• B) This is largely shadow banking, and Beijing has very little grip on it

• C) Well, OK, haven’t heard this from the US yet: “.. borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral.”

China Cracks Down On Online Moneylenders Targeting Students (BBC)

China is cracking down on online moneylenders who target university students, following concerns about the largely unregulated industry. A recent government directive has ordered such lenders to suspend all activities wooing student borrowers. The move follows reports of exorbitant interest rates and unsavoury practices in the industry, including demanding “nude selfies” as collateral. Online peer-to-peer moneylending has grown popular in China in recent years. Known as “wang dai” in Chinese, it sees strangers providing small loans to others via websites and phone apps. The directive (in Chinese) was made by China’s banking, education and social security authorities, according to a copy released by the Jiangxi provincial government on its website on Friday.

It said the measures were needed to address moneylenders “making extortionate loans” and other behaviour that has “severely harmed the safety of university students”. The exact number of online moneylenders in China is not known, but one microfinancing portal called Wangdaizhijia lists at least 500 such platforms. In recent years some moneylenders and loan sharks have begun targeting university students in need of quick and easy credit, according to Chinese reports. Some students have since fallen prey to spiralling debt as a result of high interest rates. In some cases, borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral. They would threaten to release the pictures if the student defaulted on their debts. In December the naked pictures and contact details of more than 100 young female borrowers were leaked online, causing an outcry and shining a spotlight on the underground business.

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Silly to suggest this is some new development. China prints funny money, and blows bubbles with everywhere. Been going on for years.

China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)

Two weeks ago, a key China-linked concern that made headlines back in 2013 and 2014 reemerged after an extensive analysis by Reuters reporter Engen Tham found that China’s “ghost collateral” problem, or collateral that was either rehypothecated between two or more loans, or simply did not exist, had not only not gone away but was still as prevalent as ever if not worse. The report, a continuation of extensive reporting conducted on this site, said that 60% of all loans issued in China’s system are backed by property, and that China’s property values are “wildly misleading, which is part of the reason that China’s credit rating was recently downgraded.” Reuters reported that Chinese lenders are prone to fraud with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents.

Now, in a follow up by the Vancouver Sun’s Sam Cooper, the real estate reporter explains that China’s “ghost collateral” problem has jumped across the Pacific and is threatening the Canadian banking system. As Cooper notes, “as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral”, collateral that may not exist or is used continuously to secure loans for multiple borrowers.” And the stunner: “Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.” “OSFI does not dictate what type of collateral (federally regulated banks) can accept,” spokeswoman Annik Faucher said. “Whether the borrower is foreign or domestic, OSFI (allows) financial institutions to compete effectively and take reasonable risks.”

The underlying reason for Canada’s growing, if paradoxical, exposure to Chinese collateral is due to an explosion of Canada’s shadow banking system. An investigation by Cooper found “massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called “shadow banking.” This is similar, if smaller in scale, to the gargantuan $8.5 trillion shadow banking market in China, where “shadow” lenders and creditors bypass conventional banks to provide and obtain funding, often at far higher terms than prevailing rates, an increasingly dangerous proposition at a time when Chinese interest rates, especially on the short-end, are suddenly spiking. The Vancouver Sun adds that as a result of tighter federal lending rules, borrowers trying to buy million-dollar-plus properties in Vancouver’s market “are increasingly taking out dangerous loans from shadow bankers in a fast-growing and poorly regulated financial market.”

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First of many. Canada, Denmark, Netherlands et al, there’s a long list.

Household Debt Sees Australian Banks Downgraded Again (ABCAu)

Global ratings agency Moody’s has downgraded the big four banks and eight other institutions over fears about the housing market. Moody’s cut ANZ, CBA, NAB and Westpac by one notch from Aa3 to Aa2. Bendigo and Adelaide Bank and Newcastle Permanent Building Society went from A3 to A2 while Heritage Bank, Members Equity, QT Mutual, Teachers Mutual, Victoria Teachers Mutual and Credit Union went from A3 to Baa1. Moody’s action comes a month after rival agency S&P Global downgraded almost all Australian banks over fears of “a sharp correction in property prices”. Moody’s said while it did not expect a sharp downturn in housing as its key scenario, it could not ignore the risk that high levels of debt and the rapid credit expansion could pose down the track.

“Whilst mortgage affordability for most borrowers remains good at current interest rates, the reduction in the savings rate, the rise in household leverage and the rising prevalence of interest-only and investment loans are all indicators of rising risks,” the Moody’s statement said. The agency worries that while Australians have been taking on record amounts of debt, wages have not increased, while underemployment has. It also did not like “the rising prevalence of interest-only and investment loans” which it believed were indicators of rising risks. Banks are carrying an arsenal of cash, as required now by regulators, in preparedness for any downturn in the economy or problems in the housing market but Moody’s indicates it is not sure whether it will be enough. “The resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private-sector indebtedness,” it said.

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Yellowstone is a huge threat, but specifics must be viewed with extreme caution.

296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)

I spend a lot of time documenting how the crust of our planet is becoming increasingly unstable. Most of this shaking is taking place far away from the continental United States, and so most Americans are not too concerned about it. But we should be concerned about it, because a major seismic event could change all of our lives in a single instant. For instance, a full-blown eruption of the Yellowstone supervolcano would have the potential of being an E.L.E. (extinction level event). That is why it is so alarming that there have been 296 earthquakes in the vicinity of the Yellowstone supervolcano within the last 7 days. Scientists are trying to convince us that everything is going to be okay, but there are others that are not so sure.

The biggest earthquake in this swarm occurred last Thursday evening. It was initially measured to be a magnitude 4.5 earthquake, but it was later downgraded to a 4.4. It was the biggest quake in the region since a magnitude 4.8 earthquake struck close to Norris Geyser Basin in March 2014. This magnitude 4.4 earthquake was so powerful that people felt it as far away as Bozeman… “The main quake was centered about 5.8 miles underground. The quake and aftershocks occurred just over 8 miles northeast from West Yellowstone, according to the U.S. Geological Service. A witness reported that she felt the building she was in move. Dozens of people reported that they felt it in and around West Yellowstone, Gardiner, Ennis, and Bozeman”. But by itself that one quake would only be of minor concern. What is troubling many of the experts is that this earthquake has been accompanied by 295 smaller ones.

[..] I would like to try to describe for you what a full-blown eruption of the Yellowstone supervolcano would mean for this country. Hundreds of cubic miles of ash, rock and lava would be blasted into the atmosphere, and this would likely plunge much of the northern hemisphere into several days of complete darkness. Virtually everything within 100 miles of Yellowstone would be immediately killed, but a much more cruel fate would befall those that live in major cities outside of the immediate blast zone such as Salt Lake City and Denver. Hot volcanic ash, rock and dust would rain down on those cities literally for weeks. In the end, it would be extremely difficult for anyone living in those communities to survive.

In fact, it has been estimated that 90% of all people living within 600 miles of Yellowstone would be killed. Experts project that such an eruption would dump a layer of volcanic ash that is at least 10 feet deep up to 1,000 miles away, and approximately two-thirds of the United States would suddenly become uninhabitable. The volcanic ash would severely contaminate most of our water supplies, and growing food in the middle of the country would become next to impossible. In other words, it would be the end of our country as we know it today.

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Never privatize basic needs. Always a bad idea.

Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)

As the Senate has quietly been toying with the House’s proposed replacement for the Affordable Care Act, a new study, from researchers at Harvard Medical School and the University of British Columbia, found evidence that single-payer systems may lead to lower pharmaceutical prices. Could that data impact U.S. health care reform? U.S. drug prices are so high that the researchers didn’t even factor them into the study, focusing instead on other developed countries. It’s common knowledge that drug prices have been on the steady rise, increasing faster than average wages; at issue is how to push prices back down, or at least slow their escalation.

Examining the roots of high drug expenditures in 10 wealthy countries with universal health care, the study, published last week in the Canadian Medical Association Journal, discovered lower average drug prices in the nations with single-payer systems, which appeared to be better able to negotiate drug prices with pharmaceutical manufacturers. “There is some advantage to having a not-for-profit body, whether it’s a government body, a crown body… running a system without a profit motive,” said Steven Morgan, one of the authors and a professor of economics at University of British Columbia’s School of Population and Public Health. “The blunt instrument of government regulation will not in itself lower drug prices.”

Using drug price and expenditure data for 2015, the researchers established that the 10 countries with universal health care systems examined in the study — New Zealand, the United Kingdom, Canada, France, Germany, Switzerland, the Netherlands, Norway, Sweden and Australia — exhibited relatively little variation in volume of drug price purchases, with a difference as large as 41%. But the disparities in drug prices told a different story, with the two ends of the spectrum differing by 600%. For example, the average price of drug treatment per capita, per day, in New Zealand, which has a single-payer system, stood at just $23, or a third of those of the nine others. Norway, Australia, Sweden and the U.K., the other countries categorized in the study as single-payer, exhibited average daily per-capita drug expenditures of $59, $91, $56 and $81, respectively.

Switzerland, which has a multi-payer, social insurance-based system, had an average per-diem treatment cost of $171, twice as high as the other nine nations. Its fellow multi-payer countries examined in the study — France, Germany and the Netherlands — paid, per capita, on average, $106, $97 and $49, respectively, per day on drug treatments. Canadians, whose health care system the study described as “mixed,” purchased roughly the same volume of drugs as citizens of the other nine countries, but would’ve collectively saved $1.7 billion if their drug prices were comparable to those of the nine other countries, the study noted.

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As long as there’s plenty free money…

Could There Be A Bidding War For Whole Foods? (CNN)

Whole Foods will eventually be part of Amazon CEO Jeff Bezos’s empire. Or will it? Some Wall Street analysts are starting to wonder whether another retailer will come up with a higher offer and start a bidding war. Amazon announced on Friday that it was offering to pay $13.7 billion in cash for Whole Foods – a deal that values the chain of organic grocery stores at $42 a share. But Whole Foods stock closed above $42 on Friday, and it rose again Monday to top $43. That might not sound significant. But any price for Whole Foods stock that is higher than Amazon’s offer could be a sign that Wall Street thinks another company could swoop in with an even better deal. Barclays analyst Karen Short wrote in a report that she “would not be surprised” if other companies make offers for Whole Foods.

She raised her price target on the company to $48 – nearly 15% higher than Amazon’s bid. Short said in the report that “in theory, all retailers that sell food and compete with Amazon” could come up with their own offer for Whole Foods because they may “have too much to lose not to bid.” She said the likely bidders could include Walmart and Target, both of which have big grocery businesses, and the Kroger supermarket chain. She conceded it might be tough to outbid Amazon, but it could still be worth it to drive up the price and make Amazon pay more. Oppenheimer analyst Rupesh Parikh agreed. He raised his price target on Whole Foods to $45 after the Amazon deal was announced. He wrote in a report that “another bid cannot be ruled out” because other big retailers may want to do anything they can to prevent Amazon from getting even more powerful.

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The worst thing you can do is let your food supply be controllled from some point a thousand miles away. But then, Amazon has killed so much community already, and no-one sproke up. It’s labeled ‘progress’.

Amazon Will Kill Your Local Grocer (BBG)

Amazon’s done it to books. And electronics. And clothing. Now it wants to rule the grocery aisles. But Amazon still has a ways to go — the online retailing behemoth has taken a slow, yet calculated approach to attacking the grocery store. After years of testing the AmazonFresh program in its Seattle hometown, it began expanding the grocery delivery service to other cities in 2013. Today, it delivers fresh fruit and meat in parts of New York, New Jersey, Pennsylvania, Connecticut, California, Washington and Maryland. It also delivers food through its Amazon.com website and its Prime Now program. And even though research from Cowen & Co pegs Amazon’s market share of food and beverages sold online in 2015 at about 22 percent, that overall online grocery market in the U.S. is pretty small.

Out of the $795 billion Cowen expects Americans to spend on food and drinks this year, it estimates only about $33 billion of it will be spent online. That’s because it has taken shoppers a long time to grow comfortable with buying their apples, chicken breasts and granola online when they can stop by a physical store on the way home from work and actually touch and smell the food they’re buying. Companies struggle to profit from the very expensive business of picking, packing and transporting fresh food to their customers. It’s much easier to mail a video game or book, which doesn’t have to be kept cold or free of bruises. But for Amazon, the grocery business not only brings more sales, it could also make its business more profitable.

People tend to buy groceries weekly or daily, so getting them hooked on delivery justifies sending trucks out more frequently. Then any general merchandise, like a book or toy, that Amazon sells along with the food adds to profits. And since Amazon will need more trucks for grocery delivery, it could reduce its reliance on shipping companies, which have contributed to soaring costs. For now, Amazon is likely to take added grocery costs on the chin, in hopes it will pay off down the line. Growing its AmazonFresh and Prime Now offerings suggests Amazon is gearing up for the long haul in grocery. Though traditional grocers are not likely to see sales migrate to Amazon right away, that luxury won’t last. And just like bookstores, your local grocer could be toast.

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Jun 192017
 
 June 19, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Kandinsky Capricious Line 1924

 

Britain’s Brexit jam is Brussels’ Too (Pol.eu)
EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)
Pain Without Gain: The Truth About British Austerity (G.)
France Gives Macron Big Majority With Little Enthusiasm (EUO)
German Politicians Hammer the ECB, But Only to Get Votes (DQ)
Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)
Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)
Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)
Goodbye, Yellow Brick Road (Grant)
Australia Has The World’s Most Costly Energy Bills (MB)
Australia’s Haunted Housing Market (BW)
Greece Blocks EU Statement On China Human Rights At UN (R.)
Greece Cracks Down On Voucher Misuse By Employers (EurActiv)
Greek Summer Calm Before The Storm (K.)

 

 

The Brexit talks start today. They should not. Theresa May can start, but she won’t be there to finish them.

Britain’s Brexit jam is Brussels’ Too (Pol.eu)

As Brexit talks start Monday, Britain’s back is hard against a wall. And nobody, not even in Brussels, wanted it that way. Elections in the U.K. were supposed to give Prime Minister Theresa May a stronger hand against the EU and naysayers back home. Instead, her negotiating team will hobble into the talks with May in peril, still working to finalize a power-sharing agreement to allow her to form a minority government. The EU’s stance on major Brexit issues has been ironclad for months, backed by the 27 nations in a disciplined display of unity. Second-guessing about May’s approach has intensified since her election setback, so much so that there have been calls for the EU to avert potential disaster by laying out clear paths for the U.K.’s exit.

The view in Brussels, however, is there is no way to help May short of making clear that Britain is welcome to change its mind — a point reiterated by German Finance Minister Wolfgang Schäuble, French President Emmanuel Macron and European Commission First Vice-President Frans Timmermans, among others. While no one realistically expects such a total reversal, there is unease over the lack of clarity on the U.K.’s goals. “Clearly the Brits are not ready yet and it’s a pity,” a senior Commission official said. “Everybody has sympathy for [May] now because she put herself in an impossible situation,” the official said. “How we can help her? Where she is now, nobody can help her. What she said to the backbenchers, in a way made sense, ‘I put you in this mess. I will take you out of this mess.’ But who else can do anything for her? It’s just hell.”

“And all the questions,” the official added, “Withdrawal? No withdrawal? Now? Later? It’s for them to consider. What can Brussels say?” The EU has published and transmitted to the U.K. its position papers on the two issues Brussels insists take precedence: citizens’ rights and the financial settlement. May’s aides said she wanted to make a “big, generous” offer on citizens’ rights, but so far the U.K. has not published any similar documents laying out its positions.

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Brussels wants an orderly destruction of Britain, not a messy one.

EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)

European leaders fear that Theresa May’s government is too fragile to negotiate viable terms on which to leave the union, meaning the discussions that officially begin on Monday could end in a “brutal Brexit” – under which talks collapse without any deal. As officials began gathering in Brussels on Sunday night, the long-awaited start of negotiations was overshadowed by political chaos back in Westminster, where chancellor Philip Hammond warned that failing to strike a deal would be “a very, very bad outcome”. The EU side fears that, in reality, the British government will struggle to maintain any position without falling apart in the coming months, because, without support from the Democratic Unionist party, May’s negotiating hand is limited. There are also concerns that any DUP backing to give May a majority in the House of Commons would come with strings attached.

Hammond has been urged to publish the cost of any deals made with the DUP to prop up the government. Shadow chancellor John McDonnell has raised concerns over reports that the DUP wants to end airport tax on visitors to Northern Ireland, which generated about £90m in 2015/16, according to HMRC estimates. The abolition of air passenger duty is one of the DUP’s key demands, as it pits Northern Ireland unfavourably against the Republic of Ireland, where the duty has been abolished. As well as concern over any terms agreed with the DUP, May will have to assuage fears from Ireland’s new taoiseach, Leo Varadkar, when she meets him in Downing Street on Monday, that Brexit will not infringe on the rights of people in Ireland. The taoiseach will also raise the impact of any Tory-DUP deal on power-sharing in Northern Ireland.

The prime minister has said she is confident of getting the Queen’s speech through the Commons, regardless of whether a deal is reached with the DUP by the time of the state opening of parliament on Wednesday. British Brexit negotiators are hoping to shore up confidence in their hardline approach to the start of talks by making early progress on the vexed question of citizens’ rights. [..] Pierre Vimont, a veteran French diplomat, now at the Carnegie Europe thinktank, said lack of clarity did not matter for the opening, which was more about “a first glimpse into their overall attitude and position” and setting the tone. “It will be atmospherics and the way both sides show a genuine commitment to work ahead. I think that will be the most important. “But the British delegation will need to rather quickly put its house in order and to have a clear idea of where it wants to go.”

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We’ve seen that truth in Grenfell Tower.

Pain Without Gain: The Truth About British Austerity (G.)

There are few people in the developed world who still cling to the maxim that “home life ceases to be free and beautiful as soon as it is founded on borrowing and debt”. hese days we can’t afford to take the same view as Helmer, the husband in Ibsen’s A Doll’s House, one of literature’s most cautious budgeters. It’s a nice idea to be free of debt and just spend what you earn. But when a home costs many times the average annual income and life’s running costs often exceed the monthly income, borrowing is not something that can be avoided. The government knows this only too well. This week sees publication of the public borrowing total for May and it is not expected to make pleasant reading.

Together with April’s shocker, when government borrowing was higher than the same month last year, the first two months of this financial year are forecast to show the borrowing requirement for the year is on track to be higher, not lower than last year. When David Cameron and George Osborne were in Downing Street, bringing down the deficit was the main aim of domestic policy. Until just last year, the plan was to cut the deficit to zero by 2020 and start bringing down the debt-to-GDP ratio from this year. The EU referendum vote and Theresa May’s arrival at No 10 changed all that. Once she adopted a hard-Brexit stance, the economy began to turn. Her chancellor, Philip Hammond, was forced to loosen the purse strings. It meant that both of the main political parties went into the election with plans for the deficit to remain at about 2.5%.

Independent forecasts for GDP growth over the next five years are below this figure, meaning that far from cutting the overall debt-to-GDP ratio, both parties were content to push it towards 90% – higher than any government has experienced in 50 years. That’s why so many headlines after the election have declared austerity dead and why the deficit was the dog that didn’t bark when the electorate went to the polls. The pressure on the deficit has only worsened since then. It has become clear to many of May’s advisers and close colleagues that the Tory party might not survive a second election this year without stealing some of Labour’s clothes. There is the possibility she will sanction scrapping, or dramatically reducing tuition fees, to nullify one of Labour’s most popular pledges.

The health secretary, Jeremy Hunt, hinted that the cap on nurses’ pay might be relaxed, while local authority spending may need to increase after the Grenfell Tower fire. Meanwhile, household debts are on the increase. Credit card, car loan and student debt, and borrowing using that most pernicious of loans, the second mortgage, have all risen sharply in the last couple of years. Making matters worse, the proportion of savings in the economy is at rock-bottom levels. It all adds up to an economy running on empty, with everyone, including ministers, borrowing extra each year just to keep the wheels turning.

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Macron won, but his majority is nowhere near as big as predicted. He was expected to get well over 400 seats, and ended up with 308. See the graphs. Next, he’ll be up against the unions. He’s promised to fire 120,000 public workers. Good luck.

France Gives Macron Big Majority With Little Enthusiasm (EUO)

French president Emmanuel Macron won a three-fifth majority in the lower house in the second round of the legislative elections on Sunday (18 June), but less than half of voters cast a ballot. Macron’s political movement, La Republique en Marche (LRM, The Republic on the Move) won 308 seats in the National Assembly, out of 577, after obtaining 43.06% of the vote. Its centrist ally, the Modem party, got 40 seats (6%). While not as big as expected after the first round, LRM’s majority left other parties behind and completed Macron’s destruction of the old political landscape. The conservative Republicans party will be the main opposition faction, with 113 seats (22.2%), down from 192 in the outgoing assembly.

The party leader, Francois Baroin, said he was happy that the Republicans will be “big enough” to “make its differences with LRM heard”. The Socialist Party (PS), which had been the main party with 270 MPs, was left with 29 seats (5.68%). Several ministers who served under former socialist president Francois Hollande lost out to newcomers. The PS leader, Jean-Christophe Cambadelis, who was himself eliminated in the first round, resigned from his position. Some 431 new MPs will enter the assembly and a record 224 of the MPs will be women.

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The ECB has $4.73 trillion in assets. It buys anythng but Greece.

German Politicians Hammer the ECB, But Only to Get Votes (DQ)

These days it’s easy to tell when general elections are approaching in Germany: members of the ruling government begin bewailing, in perfect unison, the ECB’s ultra-loose monetary policy. Leading the charge this time was Finance Minister Wolfgang Schaeuble, who on Tuesday urged the ECB to change its policy “in a timely manner”, warning that very low interest rates had caused problems in “some parts of the world.” Werner Bahlsen, the head of the economic council of Merkel’s CDU conservatives, was next to take the baton. “The ongoing purchase of government bonds has already cost the European project a great deal of credibility and has damaged it,” he said. “The ECB can only regain trust with the return to a sound monetary policy.” As Schaeuble and Balhsen well know, that is not likely to occur any time soon.

Indeed, like all other Eurozone finance ministers, Schaeuble is benefiting handsomely from the record-low borrowing costs made possible by the ECB’s negative interest rate policy. But by attacking ECB policy he and his peers can make it seem that they take voters’ concerns about low interest rates seriously, while knowing perfectly well that the things they say have very little effect on what the ECB actually does. In short, they are telling their voters what they want to hear. A survey by the CDU’s economic council showed that less than a quarter of its roughly 12,000 members had confidence in the ECB’s current course. 76% said they backed Bundesbank head Jens Weidmann’s monetary policy stance. Herr Weidmann said on Thursday that the ECB is at risk of coming under political pressure because any hint of policy tightening could push yields higher and blow a hole in national budgets.

It’s a probably a bit late in proceedings for such worries, what with the ECB now boasting the largest balance sheet of any central bank on Planet Earth. At last count, it had €4.22 trillion ($4.73 trillion) in assets, which equates to 39% of Eurozone GDP. Many of those assets are sovereign bonds of Eurozone economies like Italy, Spain and Portugal. The ECB’s binge-buying of sovereign and corporate bonds has spawned a mass culture of financial dependence across Europe. In the case of Italy, the sheer scale of the government’s dependence on the ECB for cheap funding is staggering: since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019.

It’s not just governments that are dependent on the ECB’s largesse: so, too, are the banks. In total, European banks have approximately €760 billion of funding from long-term lending schemes, the bulk of which comes from the four rounds of the most recent program launched in March 2016. As of the end of April 2017, Italian banks were holding just over €250 billion of the total long-term loans — almost a third of the total. Spain had €173 billion, while French banks had €115 billion and German lenders €95 billion. As the FT reports, the funding appears to play much less of a role in stimulating economic activity through lending, and a much larger role in mitigating the pain that low interest rates — and poor asset quality — can inflict on banks.

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Propping up zombies.

Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)

If it weren’t for liquidity right now, the stock market rally could be ripping apart, according to BMO Private Bank’s chief investment officer. “Any sense that this IV drip of liquidity coming into the market is slowing down at all is going to cause some issues,” Jack Ablin said on CNBC’s “Futures Now.” He emphasized that investors have been encouraged to take on risk due to the trillions of dollars being pumped into the financial system by central banks. Ablin’s comments came a day after the Federal Reserve decided to lift short-term interest rate by a quarter%age point. Even though the rate hike was expected, Ablin admits there was some concern tied to the Fed’s statement.

The Fed put in some new wording, saying that it “expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.” That part left Ablin “a little bit taken aback with the timing,” he said. However, “I think the good news here is, ‘Look, this is a potentially contrived crisis.’ This could be the taper tantrum all over again where [The Fed says] ‘OK, look, we don’t want to cause major upset here. We will continue to pump if equity risk taking takes a hit.'” Ablin said he’s “somewhat optimistic” that the rally will continue. He prefers developed and emerging markets over U.S. stocks, arguing that places like Europe could see bigger gains than in the United States because the economy has been surprising experts to the upside.

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This story gets insaner by the day.

Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)

In the biggest political story of the past week, one which was timed to coincide with Donald Trump’s Birthday, the WaPo reported citing anonymous sources, that Special Counsel Robert Mueller was investigating President Trump for possible obstruction of justice. Just a few hours later on Thursday night, the DOJ’s Deputy Attorney General Rod Rosenstein, who is overseeing the Russia probe due to Jeff Sessions recusal, released a stunning announcement which urged Americans to be “skeptical about anonymous allegations” in the media, which many interpreted as being issued in response to the WaPo report. “Americans should exercise caution before accepting as true any stories attributed to anonymous ‘officials,’ particularly when they do not identify the country — let alone the branch or agency of government — with which the alleged sources supposedly are affiliated. Americans should be skeptical about anonymous allegations. The Department of Justice has a long-established policy to neither confirm nor deny such allegations.”

Then on Sunday, the plot thickened further when according to ABC, special counsel Robert Mueller has not yet decided whether to investigate President Trump as part of the Russia probe, suggesting the WaPo report that a probe had already started was inaccurate. “Now, my sources are telling me he’s begun some preliminary planning,” Pierre Thomas, the ABC News senior justice correspondent, said of Mueller on ABC’s “This Week” although he too, like the WaPo, was referring to anonymous sources, so who knows who is telling the truth. “Plans to talk to some people in the administration. But he’s not yet made that momentous decision to go for a full-scale investigation.”On Friday, Trump responded to the Washington Post story by tweeting: “I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director! Witch Hunt.” But also on Sunday Trump’s lawyer Jay Sekulow insisted the president was not literally confirming the investigation but was just referring to the story.

“Let me be clear: the president is not under investigation as James Comey stated in his testimony, that the president was not the target of investigation on three different occasions,” Sekulow said Sunday. “The president is not a subject or target of an investigation.” “Now Mueller faces a huge decision,” Thomas told “This Week” host Martha Raddatz. “Does he believe the president, who says there’s no wrongdoing here, or does he go after the president in the way James Comey wants him to do?” And so, yet another blockbuster media report has been cast into doubt as a result of more “he said, he said” innuendo, which will be resolved only if Mueller steps up and discloses on the record whether he is indeed investiating Trump for obstruction, or any other reason. That however is unlikely to happen, and so the daily ping-ponging media innuendos will continue indefinitely.

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“These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)

Russia on Sunday accused the U.S. of returning to “almost forgotten Cold War rhetoric,” after President Donald Trump’s decision to reinstate some sanctions on Cuba. It could have dropped “forgotten.” There’s been a lively debate among historians and diplomats for years over whether the souring of relations between the U.S. and Russia amounts to a new Cold War, and lately the case has been getting stronger by the day. Trump’s restoration on Friday of some of the Cold War restrictions on Cuba his predecessor, Barack Obama, eased just months ago was only one example. Earlier in the week, the U.S. Senate approved a bill to entrench and toughen sanctions on Russia that includes several vivid flashbacks to before the fall of the Berlin wall.

German Chancellor Angela Merkel added her voice on Friday to rising European condemnation of a proposal in the Senate draft that would penalize companies investing in new Russian energy pipelines. Nord Stream 2, a project to double the supply of Russian natural gas to Germany via the Baltic Sea, would be especially vulnerable. President Ronald Reagan used similar sanctions in an attempt to thwart the joint German-Soviet construction of a natural gas pipeline in the early 1980s, only to drop them amid intense opposition from Europe. Again, Germany led the pushback. The Senate bill would also codify a raft of existing sanctions against Russia, so that Trump would need Congressional approval to lift them. That happened in 1974, too, and the measures proved hard to kill.

The legislation wasn’t repealed until a decade after their target, the U.S.S.R., had ceased to exist. The sense of Cold-War deja vu has been building for some time, according to Robert Legvold, a professor at Columbia University and author of “Return of the Cold War.” There’s a renewed arms race, nuclear saber rattling, the buzzing of ships and planes, proxy wars and disputes over whether missile defense systems count as offense or defense. If the trend continues, said Legvold, it will prevent the strategic cooperation between the U.S. and Russia that’s needed to prevent approaching security challenges from spinning out of control: The rise of China, the race to exploit resources in the Arctic, international terrorism and, above all, a world with nine nuclear powers that’s more complex and unstable than in the 20th century. “These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

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It’s hard to agree on gold. Always has been.

Goodbye, Yellow Brick Road (Grant)

It’s no work at all to make modern money. Since the start of the 2008 financial crisis, the world’s central bankers have materialized the equivalent of $12.25 trillion. Just tap, tap, tap on a computer keypad. “One Nation Under Gold” is a brief against the kind of money you have to dig out of the ground. And you do have to dig. The value of all the gold that’s ever been mined (and which mostly still exists in the form of baubles, coins and ingots), according to the World Gold Council, is a mere $7.4 trillion. Gold anchored the various metallic monetary systems that existed from the 18th century to 1971. They were imperfect, all right, just as James Ledbetter bends over backward to demonstrate. The question is whether the gold standard was any more imperfect than the system in place today.

[..] As if to clinch the case against gold—and, necessarily, the case for the modern-day status quo—Mr. Ledbetter writes: “Of forty economists teaching at America’s most prestigious universities—including many who’ve advised or worked in Republican administrations—exactly zero responded favorably to a gold-standard question asked in 2012.” Perhaps so, but “zero” or thereabouts likewise describes the number of established economists who in 2005, ’06 and ’07 anticipated the coming of the biggest financial event of their professional lives. The economists mean no harm. But if, in unison, they arrive at the conclusion that tomorrow is Monday, a prudent person would check the calendar.

Mr. Ledbetter makes a great deal of today’s gold-standard advocates, more, I think, than those lonely idealists would claim for themselves (or ourselves, as I am one of them). The price of gold peaked as long ago as 2011 (at $1,900, versus $1,250 today), while so-called crypto-currencies like bitcoin have emerged as the favorite alternative to government-issued money. It’s not so obvious that, as Mr. Ledbetter puts it, “we cannot get enough of the metal.” On the contrary, to judge by ultra-low interest rates and sky-high stock prices, we cannot—for now—get enough of our celebrity central bankers.

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Pretty far out.

Australia Has The World’s Most Costly Energy Bills (MB)

In reality, there are three main components of household bills. Whether households actual ultimately pocket these savings will depend on what happens with all three. The first, is the wholesale cost. That’s the cost of actually generating the electricity, be it burning lumps of coal, a gas-fired electricity plant, solar panels, wind turbines or whatever clever ways we may come up with in the future to produce electricity. Today, 77 per cent of Australian electricity comes from mostly brown and black coal, 10 per cent from gas, and 13 per cent from renewable sources. For a long time, this part of the system, of producing the electricity and getting it into the grid, has been going pretty well. Australians have enjoyed a reliable and low-cost supply of wholesale energy.

Basically, we burned ship loads of cheap coal, and to hell with the environment. This is the part of the system that is now utterly falling apart and is in most need of repair – which we’ll get to. The second major component of household electricity bills is the cost of transmission and distribution. The costs involved in building poles and wires and actually getting electricity to your wall sockets makes up about 40 per cent of your total bill. This part of the electricity price equation has been broken for decades, and is the main reason power bills have nearly doubled over the last decade. Power lines are natural monopolies. Traditionally they were all government owned. Jeff Kennett privatised Victorian networks, but until very recently, distribution networks in other states, such as NSW and Queensland, have remained government owned, with regulated pricing.

And basically, they stuffed that up for consumers by deciding to let the networks earn a guaranteed rate of return, based on their costs. That is, the more they spent, the more they earned. …The third and final component of a household’s bill is the margin added by electricity retailers. In theory, anyone can set up a business retailing electricity and there are many suppliers. In reality, pricing structures are so complex consumers do not exercise their power to switch providers, and retail margins remain higher than otherwise.

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Moving towards a very deep black hole.

Australia’s Haunted Housing Market (BW)

Forget all the headlines about the undimmed pace of house price inflation – up 19% in Sydney during March, pushing the median house price in the city to A$1.15 million ($875,000) according to Domain, a property-listings website. House prices, after all, aren’t so much a guide to the state of the housing market as to the 1% or so of homes that bought or sold in a typical year. Even there, they’re less an indicator of supply and demand for housing than of how supply and demand for mortgage credit interact with real estate fundamentals. Splurge on mortgage credit, and even an overbuilt housing market can enjoy price appreciation; cut back on home loans, and the opposite may be the case. That’s why it’s worth looking at the state of rents. Right now, they’re growing at the slowest pace in more than two decades, according to calculations based on Australian Bureau of Statistics data.

This hasn’t completely escaped notice. Philip Lowe, who took over as Governor of the Reserve Bank of Australia in September, has included the same boilerplate reference (with minor cosmetic modifications) in each of the eight monetary policy decision statements he’s put out so far: In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. As Lowe indicates, the reason for the slowdown in rents isn’t hard to discern. For most of Australia’s recent history, building has struggled to keep pace with household formation. Supply of new homes has kept close to demand, and as a result rents have tended to grow more or less in line with incomes.

Compare the Housing Institute of Australia’s forecasts of housing starts and the Australian Bureau of Statistics’ forecasts of household formation, and the glut really comes into focus: The surplus of homes that Australian cities have built over the past five years, based on those numbers, is equivalent to a whole year’s worth of excess supply. That’s a worrying development for those hoping that Australia’s house price boom is sustainable, especially given the way that the country’s regulators look to be finally attempting to raise credit standards after years of laxity. Still, if Australia manages to deflate the housing bubble without seriously damaging its economy, the heroes and villains will be quite different from the popular perception. While governments and regulators spent years adding to the problem with tax breaks and hostility to macroprudential regulation, it may well be property investors and foreigners who helped ease the crisis.

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The EU should look at its own human rights record.

Greece Blocks EU Statement On China Human Rights At UN (R.)

Greece has blocked a EU statement at the UNs criticizing China’s human rights record, a decision EU diplomats said undermined efforts to confront Beijing’s crackdown on activists and dissidents. The EU, which seeks to promote free speech and end capital punishment around the world, was due to make its statement last week at the U.N. Human Rights Council in Geneva, but failed to win the necessary agreement from all 28 EU states. It marked the first time the EU had failed to make its statement at the U.N.’s top rights body, rights groups Amnesty International and Human Rights Watch said. A Greek foreign ministry official said Athens blocked the statement, calling it “unconstructive criticism of China” and said separate EU talks with China outside the U.N. were a better avenue for discussions. An EU official confirmed the statement had been blocked.

“Greece’s position is that unproductive and in many cases, selective criticism against specific countries does not facilitate the promotion of human rights in these states, nor the development of their relation with the EU,” a Greek foreign ministry spokesperson said on Sunday. Presented three times a year, the statement gives the EU a way to highlight abuses by states around the world on issues that other countries are unwilling to raise. The impasse is the latest blow to the EU’s credentials as a defender of human rights, three diplomats said, and raises questions about the economically powerful EU’s “soft power” that relies on inspiring countries to follow its example by outlawing the death penalty and upholding press freedoms. It also underscores the EU’s awkward ties with China, its second-largest trade partner, diplomats said.

[..] Hungary, another large recipient of Chinese investment, has repeatedly blocked EU statements criticizing China’s rights record under communist President Xi Jinping, diplomats said. One EU diplomat expressed frustration that Greece’s decision to block the statement came at the same time the IMF and EU governments agreed to release funds under Greece’s emergency financial bailout last week in Luxembourg. “It was dishonorable, to say the least,” the diplomat said. The Greek foreign ministry spokesperson said that “during the formulation of the common statement there were also other countries that expressed similar reservations” and that Greece participates on an equal footing in setting up the EU’s common foreign policy.

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Many will claim this is employers seeking illicit profits. But for many it’s the only way not to be forced to fire people, to keep them fed.

Greece Cracks Down On Voucher Misuse By Employers (EurActiv)

The growing trend of distributing vouchers to employees to avoid taxes has raised eyebrows in the Greek government, which has moved to crack down on unprecedented levels of tax evasion in the cash-strapped country. The government says vouchers are allowed only as an extra benefit and not as part of a taxable salary. But according to Greek media reports, more than 200,000 workers, mostly newcomers, receive up to 25% in their salary via vouchers, which they use in supermarkets to buy food. The total amount, according to the reports, reaches €300 million annually. Up to a specific amount, the vouchers are tax-free for businesses, which are also exempt from employer security contributions. A source at the Greek labour ministry told EURACTIV.com that replacing any part of the legal wage of employees with vouchers is illegal.

“Vouchers are only allowed as an extra benefit and in no case can they be a substitution for legally defined earnings,” the source noted, adding that all complaints filed with the Labour Inspectorate are being investigated. As of June, companies are required to pay salaries only to bank accounts in order to put a stop to the practice of avoiding paying salaries altogether or paying only a fragment. “The Labor Inspectorate (SEPE) is in constant collaboration with Greece’s Financial and Crime Unit (SDOE), the financial police and the Independent Public Revenue Authority to address all forms of labour market violations and the coordination of their audit work,” the source said. Vouchers are coupons companies distribute to their employees to improve work, health and safety by supporting proper nutrition.

The rationale behind vouchers is that they process will enhance satisfaction and boost productivity levels while improving the employee living standards. For the government, the proper use of vouchers should also result in more tax revenues. The labour market in Greece has been in turmoil after 7 years of austerity-driven bailout programmes. There are cases of employers who have taken advantage of the “flexible” labour relations to impose unusual working conditions. For many, the use of vouchers is seen as a means to improve the atmosphere at work. Sotiris Zarianopoulos, a non-attached MEP from the Greek Communist Party (KKE), has recently asked the European Commission about these practices. The Greek lawmaker noted that this is only a part of a “jungle labour market” created by EU policies and implemented by the leftist Syriza government.

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On the verge of heading back to Greece, I’m wary of what comes after the calm.

Greek Summer Calm Before The Storm (K.)

Even though Prime Minister Alexis Tsipras hailed last week’s Eurogroup deal as step in the right direction, Greece still has many rivers to cross as the agreement secured in Luxembourg fell far short of the goals set by the government. First and foremost, Tsipras will have to deal with dissent emanating from SYRIZA MPs that had agreed to vote through a batch of tough legislation last month with the understanding that, in exchange, Greece will be granted debt relief and access to the ECB’s quantitative easing program. However, contrary to the government’s aims at the Eurogroup, debt relief talks were deferred to 2018, while Greece’s inclusion in the QE seems highly unlikely before that.

Although analysts believe that dissenters may not raise the ante during the summer – due to the tourist season and relief provided by the release of a bailout tranche – the government is expected to come under new pressure in the fall when Tsipras drafts the 2018 budget, which must stipulate a primary surplus of 3.5%. Given the huge difficulties to achieve this target, Athens will find it hard to convince representatives of the country’s creditors that it will able to achieve this target without the need for yet more measures. The Greek PM will also struggle in the fall to clear the hurdles leading to the completion of the country’s third bailout review, which will also involve the IMF. The review’s focus will be on streamlining the Greek public sector, from which SYRIZA has drawn a large chunk of votes in the past and would not like to rock the boat.

Another sticking point could be Tsipras’s promise to bring back growth, when forecasts for 2017 see an anemic rate of 1.5 to 1.8%. According to reports, the left-led coalition is banking on elections taking place in June 2018 at the earliest so that it avoids having to implement pension cuts in 2019, as it had agreed with creditors and passed into law. On the other had, some reports suggest that Tsipras may seek to spring an election surprise this fall or by the end of the year. This, however, will hinge on whether Greece will be given specifics by creditors about what sort of debt relief it can expect after the German elections in September, and on the degree of difficulty it will have to draft the 2018 budget.

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Jun 162017
 
 June 16, 2017  Posted by at 10:02 am Finance Tagged with: , , , , , , , , , , ,  17 Responses »
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Pablo Picasso Dora Maar au chat 1941

 

‘It’s A ‘Scary’ Time With A Global Crisis On The Way’ (CNBC)
Angry Trump Decries Being Target Of Russia Probe (AFP)
Putin Comey Comment ‘Remark On Circus-like Russia Nonsense Gripping US’ (RT)
Theresa May Is Now Almost As Unpopular As Pre-Campaign Corbyn (YouGov)
UK Student Loan Debt Soars To More Than £100 Billion (G.)
UK Gov Still Hasn’t Submitted Brexit Papers For Talks Starting Monday (Ind.)
Germany, Austria Slam US Sanctions Against Russia (AP)
Debt Deal Gives Clarity To Markets – Greek FinMin Tsakalotos (AP)
Eurogroup Approves Greek Loans, Details Debt Relief, IMF To Join (K.)
IMF Won’t Fund Greek Bailout Until It Gets More Clarity On Debt Restructuring (CNBC)
Have The Greek Bailouts Worked? (BBC)
Greek Government Sabotages Its People With Water Privatization Scheme (Occupy)
Half of Athens’ Ambulances Are Out Of Action (AP)
Uptick In Migrant Arrivals Eyed With Concern By Greece’s Islanders (K.)

 

 

Louis Vuitton CEO knows it; where’s the rest?

‘It’s A ‘Scary’ Time With A Global Crisis On The Way’ (CNBC)

A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as “scary”. “For the economic climate, the present situation is…mid-term scary,” Bernard Arnault told CNBC Thursday. “I don’t think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode.”

Arnault, who is responsible for the world’s largest luxury goods company, couldn’t say whether the crash would be imminent or within the next few years, but he insisted that almost a decade on from the global financial crisis of 2008, one was due. “There has not been a big crisis for almost ten years now and since I’ve had a business I have seen crises more than every ten years, so be careful.” Longer term, however, Arnault said he was “optimistic”, pointing to advances in technology and innovation, which he said would stimulate the economy.

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The echo chamber expands.

Angry Trump Decries Being Target Of Russia Probe (AFP)

President Donald Trump responded angrily to reports he is under criminal investigation Thursday, deriding a “witch hunt” against him led by some “very bad” people. Trump responded to reports he is personally being investigated for obstruction of justice with a characteristic scorched earth defense: claiming mistreatment of historic proportions and calling into question the probity of his accusers. “You are witnessing the single greatest WITCH HUNT in American political history – led by some very bad and conflicted people!” Trump said in an early morning tweet. Trump did not directly address the allegations that he is being probed for possibly obstructing justice – a potentially impeachable offense. Nor did he deny he has entered the miniscule ranks of sitting presidents who have become the subject of a criminal investigation.

“They made up a phony collusion with the Russians story, found zero proof, so now they go for obstruction of justice on the phony story. Nice,” he wrote. Trump’s young presidency has been battered by allegations — under investigation both by Congress and the FBI — that Russia interfered to sway the 2016 election in his favor, in possible collusion with Trump’s campaign team. The FBI probe, now in the hands of special prosecutor Robert Mueller, shifted its focus to allegations of obstruction in the days after Trump fired the agency’s then director James Comey on May 9. The new allegations against Trump center on his own admission that he fired Comey because of the Russia investigation, and suggestions he asked several top intelligence officials for their help altering the direction of the inquiry.

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“..that sounds very strange when a special service chief records a conversation with the commander-in-chief and then gives it to the media via his friend.”

Putin Comey Comment ‘Remark On Circus-like Russia Nonsense Gripping US’ (RT)

Russia wants ties with the US improved, but the American domestic political situation is close to hopeless and while the Russian door is open, no one is going to lose their breath waiting to hold it open, political analyst Adam Garrie said, commenting on Putin’s statement. On Thursday, President Vladimir Putin held his annual live marathon Q&A session with the public, titled: “Direct Line with the president.” During the session, he said Russia was ready to grant former FBI director James Comey asylum. “[Comey] suddenly said that he had recorded a conversation with the president, and then gave the recording of this conversation to the media via his friend. Well, that sounds very strange when a special service chief records a conversation with the commander-in-chief and then gives it to the media via his friend. Then what’s the difference between the FBI director and Mr. [Edward] Snowden? Then he is not the head of the special services, but a human rights advocate who defends a certain position,” Putin said.

Political analyst Adam Garrie described the parallel between Comey and Snowden as “brilliant.” “It was a masterful moment for Vladimir Putin,” he told RT. “With all the lies and disinformation about the Russian president in Western mainstream media, people forget that, like most intelligent men, he’s got a wonderful sense of humor, he can be very cheeky, he can be sarcastic.” “Like Snowden, who thought he was doing a public good, Comey said that he thought he was doing the same. Should things get hairy for Comey, the doors to Russia are equally open to him.

I thought that was a very important remark by Putin on the whole sort of circus-like element of the whole Russia nonsense that’s gripping and probably will grip for some time the pundits in Washington. It just makes it clear that the entire tone of Putin’s statements about America is that we [Russia] want to get on with having good relations. It’s crucial not just bilaterally, but to the wider world, if the two of the three major superpowers do have improved relations, but that the situation domestically in America is close to hopeless – so that while the Russian door is open, no one in Russia is going to lose their breath or their cool waiting to hold it open,” Garrie said.

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She has no authority to negotiate anything anymore. That is a much bigger problem than people seem to think.

Theresa May Is Now Almost As Unpopular As Pre-Campaign Corbyn (YouGov)

New YouGov research highlights just how badly the election campaign and result damaged the public’s view of both the Prime Minister and the Conservative party and how much it boosted Labour and its leader. In April, Theresa May had a healthy net favourability rating of +10. At the end of May, following the campaign and negative reception of the Conservative manifesto, it fell to -5. Following the election result it has plummeted to -34. The Prime Minister is currently about as unpopular as Jeremy Corbyn was in November last year, when he scored -35. Meanwhile, the Labour leader has experienced a remarkable turnaround in public perception. Having experienced increasingly worse favourability ratings since Theresa May took office last summer, Jeremy Corbyn sank to a low of -42 in late April, just after the election was called.

However, the public’s view of the Labour leader improved markedly over the campaign, reaching -14 in the last YouGov favourability survey before election day. Now, following the result, his net favourability score is +0 – meaning that as many people now have a favourable view of him as have an unfavourable view. [..] It is remarkable that there has been such a sharp turnaround for the leaders of the two main political parties. When the election was called, Theresa May was secure in her position and many were speculating over the future of the Labour leader. Now, the roles are reversed, with Jeremy Corbyn having silenced his critics and won over large sections of the public while the Prime Minister faces criticism from across the board.

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Burden the young. An idea with future.

UK Student Loan Debt Soars To More Than £100 Billion (G.)

Student loan debt in the UK has risen to more than £100bn for the first time, underlining the rising costs young people face in order to get a university education. Outstanding debt on loans jumped by 16.6% to £100.5bn at the end of March, up from £86.2bn a year earlier, according to the Student Loans Company. England accounted for £89.3bn of the total. “Lots of prospective and current university students will see these figures and worry about being part of an increasing pool of graduate debt,” said Jake Butler of at money advice website Save the Student. “As fees increase this number will only go up, as more and more money is lent out each year. There is some cause for concern here, mainly for the government, as it is now widely accepted that the majority of graduates will never pay off their whole student loan debt before it is wiped off 30 years after their graduation.”

Sorana Vieru, the vice-president for higher education at the National Union of Students, said student debt had risen to “eye-watering levels”. The rise in student debt has been driven partly by rules introduced in 2012, allowing universities in England to charge up to £9,000 a year in tuition fees. In the year ending 31 March 2012, student debt was less than half the current level, at £45.9bn. Jeremy Corbyn made younger voters a key focus of Labour’s election campaign, promising to scrap tuition fees for new university students. A strong turnout among 18- to 24-year-olds at last week’s election helped the party to win 262 seats, an increase of 30. Sebastian Burnside, a senior economist at NatWest, said student debt was rising at a faster pace than any other form of debt, and eclipsed credit card debt of £68bn. “These latest figures show student debt is becoming of greater priority with every passing year. Student debt is the fastest growing type of borrowing and is rapidly becoming economically significant.”

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Maybe May intends to blame the EU and gather Brits together against them?

UK Gov Still Hasn’t Submitted Brexit Papers For Talks Starting Monday (Ind.)

The British Government has still not sent papers outlining its opening position for Brexit talks to the European Union, despite negotiations beginning on Monday. EU sources told The Independent Brussels had sent its “positioning papers” to London four days ago and while similar documents were expected in return, nothing has arrived as Theresa May’s administration struggles to get on its feet. Brexit Secretary David Davis confirmed on Thursday that talks to pull Britain out of the EU will begin on Monday regardless, despite cabinet splits over how to approach them and Ms May’s withdrawal plans not even being cemented in a Queen’s Speech.

Chancellor Philip Hammond cancelled a speaking event in which he was expected to signal new softer Brexit proposals focusing on jobs, amid fears it might spark an internal row with other Tories demanding Ms May stick to her immigration-centred approach. It came as the Prime Minister confirmed that a Queen’s Speech would go ahead, but only on 21 June – two days later than originally planned. It is still unclear if she has locked in the support of the Northern Irish DUP to prop her up in the House of Commons and give her the majority she needs to pass a vote approving the agenda set out in the Queen’s Speech. Conservatives signalled that talks with the unionists could even continue beyond the start of Brexit talks and the Queen’s Speech, as Sinn Fein’s Gerry Adams warned that any deal struck could breach the Good Friday Agreement that brought peace to Northern Ireland.

On Monday this week, the EU sent to London its positioning papers, officially outlining its negotiating stance ahead of talks, and had expected similar documents to come back in good time before discussions begin. But with the EU’s papers arriving as Ms May staved off a cabinet coup, convinced backbenchers to support her and held talks about realigning Brexit plans, nothing had been sent back to Brussels by Thursday night. One source across the Channel said it was “unbelievable” that the UK had still not sent the “basic” papers for the start of negotiations, with just over three days left before they begin. They added: “The talks are beginning on Monday. There are no positioning papers yet. It’s a basic thing that should happen beforehand. It doesn’t bode well.”

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Haha, Gazprom.

Germany, Austria Slam US Sanctions Against Russia (AP)

Germany and Austria voiced sharp criticism Thursday of the latest U.S. sanctions against Moscow, saying they could affect European businesses involved in piping in Russian natural gas. The United States Senate voted Wednesday to slap new sanctions on key sectors of Russia’s economy and individuals over its interference in the 2016 U.S. election campaign and its aggression in Syria and Ukraine. The measures were attached to a bill targeting Iran. In a joint statement, Austria’s Chancellor Christian Kern and Germany’s Foreign Minister Sigmar Gabriel said it was important for Europe and the United States to form a united front on the issue of Ukraine, where Russian-based separatists have been fighting government forces since 2014.

“However, we can’t accept the threat of illegal and extraterritorial sanctions against European companies,” the two officials said, citing a section of the bill that calls for the United States to continue to oppose the Nord Stream 2 pipeline that would pump Russian gas to Germany beneath the Baltic Sea. Half of the cost of the new pipeline is being paid for by Russian gas giant Gazprom, while the other half is being shouldered by a group including Anglo-Dutch group Royal Dutch Shell, French provider Engie, OMV of Austria and Germany’s Uniper and Wintershall. Some Eastern European countries, including Poland and Ukraine, fear the loss of transit revenue if Russian gas supplies don’t pass through their territory anymore once the new pipeline is built.

Gabriel and Kern accuse the U.S. of trying to help American natural gas suppliers at the expense of their Russian rivals. They said the possibility of fining European companies participating in the Nord Stream 2 project “introduces a completely new, very negative dimension into European-American relations,” they said. In their forceful appeal, the two officials urged the United States to back off from linking the situation in Ukraine to the question of who can sell gas to Europe. “Europe’s energy supply is a matter for Europe, and not for the United States of America,” Kern and Gabriel said.

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It’s getting close to outright lying.

Debt Deal Gives Clarity To Markets – Greek FinMin Tsakalotos (AP)

Greece’s finance minister says financial markets now have “much greater clarity” about the future of Greece’s debts, which will help the country regain market access when its current bailout program ends next year. Speaking after a meeting of the eurozone’s 19 finance ministers, Euclid Tsakalots said the country can “look forward with much greater confidence.” As well as securing €8.5 billion in bailout funds, which will help Greece meet a big summer repayment, Tsakalotos won a promise on future measures to ease the country’s debt burden and possible IMF financial involvement in the coming year. Greece has relied on bailout money for seven years and hopes that it will be able to stand on its own feet when the bailout ends. Tsakalotos said one big benefit from the deal Thursday was that future debt repayments could be linked to Greece’s growth. In essence, that could mean payments could be postponed in the event of an adverse shock.

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No , there are no details on debt relief, that’s the whole story.

Eurogroup Approves Greek Loans, Details Debt Relief, IMF To Join (K.)

Greece’s international creditors agreed on Thursday to approve the disbursement of €8.5 billion in bailout loans and to detail medium-term debt relief measures following talks in Luxembourg. Describing the agreement as “a major step forward,” Eurogroup President Jeroen Dijsselbloem said the deal aimed to get Greece standing “on its own feet again,” noting that debt relief would be linked to the country’s growth rates, in line with a proposal that had been promoted by French officials. The deal also outlined the participation of the IMF in Greece’s third bailout with the Fund’s chief Christine Lagarde saying she would formally recommend the IMF’s participation with $2 billion on a standby basis.

As regards the debt relief aspect of the agreement, Lagarde remarked that it was not the best solution for Greece as it was only an agreement in principle but the “second best” solution. European Commissioner for Economic and Monetary Affairs Pierre Moscovici sought to focus on the positive aspects of the deal. “Tonight, Greece can see the light at the end of its long tunnel of austerity,” he said. “From tonight, the watchwords are jobs, growth and investment.” His comments were echoed by Greek Finance Minister Euclid Tsakalotos who, in a separate press conference, said the deal provided greater clarity, for both citizens and investors, “more light at the end of the tunnel.” A spokesperson for the European Central Bank, whose bond buying program Greece wants to join, described the Eurogroup agreement as “a first step towards securing debt sustainability.”

However it remained unclear whether the deal was adequate to pave the way for the ECB to buy Greek bonds or not. The breakthrough last night came after Athens appeared to have shifted its stance slightly from earlier in the week when tensions between Greece and Germany had peaked and two top government ministers had said publicly that Athens mistrusts German Finance Minister Wolfgang Schaeuble. Speaking from Thessaloniki, where he met Israeli and Cypriot leaders for talks on energy cooperation, Prime Minister Alexis Tsipras remarked to reporters, “The good guys win in the end.” Greek officials have insisted over the past week that Greece has won the right to debt relief.

“Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief,” President Prokopis Pavlopoulos said in comments published in Germany’s Handelsblatt. He appealed to Schaeuble to abandon his persistent opposition to Greek debt relief. “Anything else would not be worthy of a great European politician,” he said. “It is important for us that our creditors secure the viability of the debt. Otherwise the ECB cannot buy Greek state bonds,” he said, referring to the European Central Bank.

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But the article above said “IMF to join”!

IMF Won’t Fund Greek Bailout Until It Gets More Clarity On Debt Restructuring (CNBC)

The IMF wants Greek debt to become more sustainable before it channels funds into the country’s bailout program, the organization’s managing director Christine Lagarde told CNBC. “For us to engage and for us to participate financially, more needs to be clarified, defined and approved in terms of restructuring,” she said late on Thursday. “What we believe will be needed is a deferral of interests, an extension of maturity, and a mechanism by which there is an adjustment based on growth … this is where further discussion and negotiation is needed.” Lagarde was speaking in Luxembourg after European finance ministers approved a €8.5 billion loan for Athens that will enable the cash-strapped nation to meet a major July repayment deadline.

European countries have been shouldering the burden of Greece’s current €86 billion rescue fund — its third bailout package since 2010. The IMF financially contributed to Athens’ previous bailouts but refused to join the current pact because it believes Greece needed debt relief — something that European creditors aren’t comfortable with. The organization’s absence has been a thorn in the sides of heavyweight European countries, particularly Germany, who view IMF participation as a key credibility factor. For Berlin to continue backing euro zone loans to Athens, Germany’s parliament is now insisting on IMF contribution. On Thursday, the IMF agreed to offer Athens a standby arrangement of less than $2 billion but won’t be disbursing any of the funds until euro zone countries offer more detail on potential debt relief measures in 2018.

“I’ve always said that the (bailout) program walks on two legs: the leg of policies and the leg of debt sustainability,” Lagarde told CNBC on Thursday. Athens has proved its commitment to key structural reforms, which cover pensions, tax, serial procedures, and labor markets, but the second leg of the bailout program — debt restructuring — needs to be further clarified, she continued. “Progress has been made today, no question about it but more is needed.” Lagarde praised Thursday’s loan agreement, stating that Athens would now be protected from future crisis moments because its financial needs in terms of debt service will be low.

“It (Athens) will actually produce a primary surplus and it should be, in terms of liquidity and stability, in a fairly solid situation to develop its economy to cultivate growth, generate investment , and proceed with the privatization that they have agreed to complete.” On the matter of Brexit negotiations, the IMF chief advised European and U.K. officials to adopt a risk-averse approach. “What is more predictable, more certain, can be calibrated, can be anticipated, can be transitioned into, is going to be more reliable and safer for the people and the economy.” Circumstances were still too premature for the IMF to forecast future economic developments, she added.

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They have for Germnay, yes.

Have The Greek Bailouts Worked? (BBC)

As eurozone finance ministers meet in Brussels for crucial talks on Greece, Reality Check looks at whether the bailouts the country has received have secured Greece’s economic survival or just created unsustainable debt. Neither Greece nor its creditors would say they are happy with how it has worked out. In 2010, when the Greek debt crisis started, Greece received €110bn in bailout money. And in 2012, the country received a second bailout of €130bn. These loans, from the eurozone and the International Monetary Fund (IMF), were deemed necessary to stop Greece going bankrupt. In exchange, Greece was required to make deep public spending cuts, raise taxes and introduce fundamental changes to the public sector and labour legislation. In August 2015, the eurozone countries agreed to give Greece a third bailout, of up to €86bn, on the condition of further changes.

The next tranche of that bailout, which Greece needs in order to honour repayments due in July, is being discussed at the eurozone finance ministers’ meeting on Thursday. In 2010, they managed to keep Greece in the euro and prevented the collapse of the common currency. So, from the perspective of the eurozone as a whole, a chaotic “Grexit” did not happen. But seven years on, and many more billions of euros later, was this price worth paying, both from the point of view of Greece’s creditors and of the Greek people? It is impossible to know what the situation would be like now had Greece not received the bailouts, but the consequences of receiving them have been painful. For the Greek people, the bailouts and the austerity measures implemented with them have come at a huge cost.

• Unemployment remains staggeringly high: 22.5% of Greeks were unemployed in March 2017. And almost half of people under the age of 25 were out of work
• Those who do work, earn less. The minimum monthly wage at the beginning of the crisis was €863. It has now fallen to €684
• Pensioners have been hit particularly hard. Pension changes since 2010 mean 43% of pensioners now live on less than €660 a month, according to the Greek government
• Government spending on health was almost halved between 2010 and 2015, while the education budget was cut by 20%

Greece’s creditors, strongly influenced by Germany, demanded that Greece start spending less than it earned. In 2016, for the first time, Greece achieved this. The surplus is small, at €1.3bn or 0.7% of GDP. But this can hardly be seen as a success – the economy has shrunk and the overall debt pile is still going up, not down.

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Tsipras is not going to grow a pair anymore. Rule 1 for every country and society should be: Never give up your water.

Greek Government Sabotages Its People With Water Privatization Scheme (Occupy)

The “fire sale” privatization of Greece started in 2015, following the infamous Syriza referendum in which more than three-fifths of the Greek people voted to reject Troika-imposed bailout conditions – and yet their government, led by Alexis Tsipras, chose to accept the deal anyway. The privatization process reached its peak the next year, when the Greek government sold the public transport giant TrainOSE to the Italian company Ferrovie dello Stato Italiane S.p.A for 45 million euros. This happened after a very brief bidding period and despite considerable employee pushback, including a 24-hour strike that paralyzed the country. Now, a second round of fire sales is taking place ahead of the upcoming third bailout negotiations for Greece, whose current bailout package will expire in August 2018.

Since last year, the sale of the country’s roads, rights to the use of its ports, and other public sector resources have only yielded around €4 billion – a far cry from the projected €50 billion that were promised when the privatization plan was put in motion. At best, it will result in a 6 billion euro profit, nowhere near enough to cover the ailing Greek economy’s massive overhead spending. In 2016, under the EYATH initiative (representing Thessaloniki’s public sector water workers) and activists, Save Greek Water was launched in an attempt to curb the Syriza administration’s efforts to privatize public water reserves. The initiative enjoyed enormous support from the public and media, and seemed to curbing further efforts to move the privatization talks forward. That was until last December, when an article published by Stavroula Symeonidou, president of the Workers Union of DEYA of Drama, revealed that Greece’s public water sector was being purposefully sabotaged by its own government.

“…DEYAs are not financially dependent on the State/Central Government, therefore they do not, in any way whatsoever, contribute to the public debt… however they are equally restricted in (actually barred from) recruiting any new personnel, which means that over time their already limited resources will reach zero,” Symeonidou wrote. The article also warned about the danger of further levies being imposed on Greek farmers using public water sources like ground- and rainwater wells. This dire prediction came to pass last month, when an “irregular water source charge” was imposed on the major rural regions of the country, directly targeting farmers and households in the affected areas. According to a statement released by the Syriza administration, 2.5% of the proceeds from this levy will be invested in the interest of supporting the Greek public sector – but not the DEYA initiative. This is being seen as an obvious attempt to further hobble any resistance to privatization.

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Let me guess, this is part of making the country competitive again? This is criminal.

Half of Athens’ Ambulances Are Out Of Action (AP)

Greece’s financial woes have clobbered spending on state-provided health services, even as demand has spiked because fewer Greeks can pay for private treatment. Some of Athens’ ambulances have up to 1 million kilometers (620,000 miles) — nearly three times the distance to the moon — on the clock, and about half are idle because of a lack of spare parts. At night, fewer than 40 vehicles cover a population of more than 4 million. Paramedic Dimitris Dimitriadis says the service is obliged to respond to every call it receives, even if the callers are just taking advantage of a rule that patients brought to hospitals by ambulance jump the line for treatment. “But then you also get elderly people who can’t afford a taxi fare to the hospital, so they call an ambulance,” he said, driving toward a reported suicide in central Athens. Upon arrival, the crew was told that the injured person had been taken to a hospital by relatives.

Unions say rescuers do their best against the odds, focusing on getting urgent cases to emergency treatment within minutes of receiving a call. But other patients, who may still require hospital treatment, can end up waiting well over an hour. Athens ambulance workers’ union leader Giorgos Mathiopoulos says about 70 of the capital’s 140 ambulances are out of action, and the fleet needs to be doubled in size. “Up to 30% of the immobilized ambulances can’t be repaired” and many are stripped for parts to keep others going, Mathiopoulos said. “When we’re trying to get to an incident as fast as possible … and the ambulance has that many kilometers on the clock, it’s a worry.”

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Something’s going to break.

Uptick In Migrant Arrivals Eyed With Concern By Greece’s Islanders (K.)

Official data on Thursday showed an uptick in refugee and migrant arrivals from Turkey to Greece’s shores, increasing concerns among residents on the Aegean islands that have borne the brunt of the refugee crisis. A total of 151 people were reported as entering Greece in 24 hours on Thursday, 74 of whom landed on Chios, 54 on Lesvos and 23 on other islands, slightly above the 146 arrivals in the previous 24-hour period. According to official figures, the number of migrants and refugees that reached Greece between June 8 and Thursday morning came to 538, a significant rise from May when daily arrivals were in the double digits.

The upsurge is stoking fears on islands such as Chios that are already struggling to cope with thousands of refugees and migrants stranded by slow processing and deportation procedures. Residents of Chios held a rally on Thursday night to protest plans for a pre-departure facility on the island, where authorities said they will temporarily detain dozens of migrants who are not eligible for asylum before they are deported. Protesters say that the official line in favor of the facility, pointing to a decrease in arrivals on Lesvos since a similar center was opened there, are disproved by the uptick observed in recent days. A similar rally was also held on the island of Samos on Thursday.

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Jun 152017
 
 June 15, 2017  Posted by at 9:59 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Francisco de Goya Saturn Devouring His Son 1819–1823

 

Fed Raises Rates, Unveils Balance Sheet Cuts In Sign Of Confidence (R.)
The Fed Is Flying Blind (BBG)
Peak Economic Delusion Signals Coming Crisis (Smith)
When the Fed Tightens, It Leads to Financial “Events (Phoenix)
Senate Overwhelmingly Approves New Sanctions To “Punish” Russia (ZH)
What If The Russia Russia Russia Story Was Nothing? (HotAir)
Pentagon Agrees To Sell $12 Billion In F-15s To Qatar (ZH)
The Old Are Eating the Young (Satyajit Das)
Greek Economy Minister Calls Wolfgang Schäuble ‘Dishonest’ (R.)
Greece Is Germany’s ‘De Facto Colony’ (Pol.)
EU Officials Warn Athens Not To Take Debt Issue To Leaders’ Summit (K.)

 

 

It’s getting increasingly frustrating to try and find objective views of anything to do with Trump or Putin. And I don’t want to live in an echo chamber. So I left out Mueller’s Trump investigation.

Yellen is stuck. Next.

Fed Raises Rates, Unveils Balance Sheet Cuts In Sign Of Confidence (R.)

The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and strengthening job market. In lifting its benchmark lending rate by a quarter%age point to a target range of 1.00% to 1.25% and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data. The U.S. central bank’s rate-setting committee said the economy had continued to strengthen, job gains remained solid and indicated it viewed a recent softness in inflation as largely transitory. The Fed also gave a first clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

It expects to begin the normalization of its balance sheet this year, gradually ramping up the pace. The plan, which would feature halting reinvestments of ever-larger amounts of maturing securities, did not specify the overall size of the reduction. “What I can tell you is that we anticipate reducing reserve balances and our overall balance sheet to levels appreciably below those seen in recent years but larger than before the financial crisis,” Fed Chair Janet Yellen said in a press conference following the release of the Fed’s policy statement. She added that the balance sheet normalization could be put into effect “relatively soon.” The initial cap for the reduction of the Fed’s Treasuries holdings would be set at $6 billion per month, increasing by $6 billion increments every three months over a 12-month period until it reached $30 billion per month.

For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, rising by $4 billion at quarterly intervals over a year until it reached $20 billion per month. [..] The Fed has now raised rates four times as part of a normalization of monetary policy that began in December 2015. The central bank had pushed rates to near zero in response to the financial crisis. Fed policymakers also released their latest set of quarterly economic forecasts, which showed only temporary concern about inflation and continued confidence about economic growth in the coming years. They forecast U.S. economic growth of 2.2% in 2017, an increase from the previous projection in March. Inflation was expected to be at 1.7% by the end of this year, down from the 1.9% previously forecast.

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The Fed’s been flying blind for well over 10 years.

The Fed Is Flying Blind (BBG)

The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation. Stock indexes are near record highs, and interest rates remain low. But those who set interest rates are in the awkward position of not understanding how things got so good—and are therefore confused about what to do next. “The Fed isn’t run by computers, it’s run by people,” says David Rosenberg, chief strategist at Gluskin Sheff. “Like all of us they have their flaws and their blind spots. On June 14, the Federal Open Market Committee voted as expected to raise the federal funds rate a quarter point, to a range of 1% to 1.25%. It said it expects inflation to rise to its 2% target “over the medium term.”

For Fed Chair Janet Yellen and company, the central mystery continues to be why inflation remains below 2% despite unemployment having dropped to just 4.3% in May. Even ex-convicts and high school dropouts are getting job offers one reason why many economists believe it’s inevitable that wages must rise. When you have a shortage of supply of something, its price will go up, says Gad Levanon, chief U.S. economist at the Conference Board, a business-supported research group. A tight job market, however, hasn’t translated into inflation. The Fed’s preferred measure of inflation, the personal consumption expenditures price index, rose just 1.7% in April from a year earlier. On June 14, as the Fed was meeting, the Bureau of Labor Statistics announced that the Consumer Price Index excluding food and energy rose just 0.1% in May, the third surprisingly low reading in three months.

Michael Feroli, chief U.S. economist at JPMorgan Chase., sympathizes with Yellen’s predicament. He said in an interview before the FOMC meeting that Yellen is relying out of necessity on the Phillips curve, which says that lower unemployment leads to higher inflation. “It’s kind of the best we’ve got” as a descriptor of the economy, he says. Still, Feroli couldn’t resist headlining his report on the puzzlingly low CPI number, “Captain Phillips goes overboard.” Some economists worry that the Fed rate increases will abruptly cool the economy by increasing the cost of borrowing via credit cards, auto loans, and student loans, as well as business loans. Rosenberg, who’s more bearish than most economists, points out that recessions occurred 10 of the last 13 times the Fed raised interest rates. He says the U.S. is due for a recession within the next 12 months.

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“The question is not “when” we will enter collapse; we are already in the midst of an economic collapse. ”

Peak Economic Delusion Signals Coming Crisis (Smith)

According to the Atlanta Fed, US GDP in the first quarter of 2017 has declined to 0.7% , going back to lows touched on in 2014 after the Fed reduced QE.

The US has lost 5 million manufacturing jobs since the year 2000, and this trend has accelerated in recent years. Manufacturing in the US only accounts for 8.48% of all jobs according to May statistics. 102 million working age Americans do not currently have a job. This includes the 95 million Americans not counted by the Bureau of Labor because they assume these people have been unemployed so long they “do not want to work”. Thousands of retail outlet stores, the primary engine of the American economy, are set to close in 2017. Sweeping bankruptcies and downsizing are ravaging the retail sector, and internet retailers are not taking up the slack despite highly publicized growth. In 2016, online retail sales only accounted for 8.1% of all retail sales.

Oil inventories continue to amass as US energy demand declines. Declining energy demand is a sure sign of overall economic decline. OPEC and other entities continue to argue that “too much supply” is the issue; an attempt to distract away from the reality of lower consumption and the falling wealth of consumers. Corporate earnings expectations continue their dismal path, suggesting that stock markets have been supported by central bank stimulus and blind investor faith in central bank intervention. The stimulus is now being cut off. How long before investor faith is finally lost?

It is unfortunate that so many people only track stocks when accounting for economic health. They have crippled themselves and their own observations, and actually condescend when confronted with counter-observations and data. They help globalists and international financiers by perpetuating false narratives; sometimes knowingly but often unconsciously. And, when the system does destabilize to the point that they actually realize it, they will blame all the wrong culprits for their pain and suffering. The question is not “when” we will enter collapse; we are already in the midst of an economic collapse. The real question is, when will the uneducated and the biased finally notice? I suspect the only thing that will shock them out of their stupor will be a swift stock market drop, since this is the only factor they seem to pay attention to. This will happen soon enough.

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That much is obvious.

When the Fed Tightens, It Leads to Financial “Events (Phoenix)

The Fed concludes its June meeting today. The Fed fund futures markets put the odds of the Fed hiking rates again at 99.6%. This would mark the third rate hike by the Fed during this cycle. Why would this matter? Because it indicates the Fed is embarked on a serious tightening cycle. One rate hike can be a fluke. Two rate hikes could even be just policy error. But three rate hikes means the Fed is determined.

As Bank of America noted in a recent research note, when the Fed becomes determined to tighten… it usually ends in an “event.” What would an “event” look like for today’s market? A Crash is coming…

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It’s a craze. It’s doing so much damage.

Senate Overwhelmingly Approves New Sanctions To “Punish” Russia (ZH)

The U.S. Senate on Wednesday approved new sanctions to punish Russia for “meddling” in the 2016 election. The bipartisan legislation, which passed with an overwhelming 97-2 vote, slaps new sanctions on Russia and restricts President Trump from easing them in the future without first receiving congressional approval. The only two senators to vote against the measure were Sens. Mike Lee (R-UT) and Rand Paul (R-KY), while Chris Van Hollen (D-Maryland) abstained. Known as the Crapo Amendment, after Mike Crapo (R-Idaho), chairman of the Senate Banking, Housing and Urban Affairs Committee, the measure was endorsed by Foreign Relations Committee Chairman Bob Corker (R-Tennessee) and ranking member Ben Cardin (D-Maryland). The deal was attached to an Iran sanctions bill that is expected to pass later this week.

While top Republican senators had initially wanted to give the White House space to try improving U.S.-Russia relations, but ultimately decided talks with Russia have been moving too slowly. The sanctions against Russia are “in response to the violation of the territorial integrity of the Ukraine and Crimea, its brazen cyber-attacks and interference in elections, and its continuing aggression in Syria,” according to the deal’s sponsors. The amendment also allows “broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways” and authorizes “robust assistance to strengthen democratic institutions and counter disinformation across Central and Eastern European countries that are vulnerable to Russian aggression and interference.”

New sanctions would be imposed on “corrupt Russian actors” and those “involved in serious human rights abuses,” anyone supplying weapons to the Syrian government or working with Russian defense industry or intelligence, as well as “those conducting malicious cyber activity on behalf of the Russian government” and “those involved in corrupt privatization of state-owned assets.” The biggest neocon in Congress, John McCain, was delighted with the outcome: “We must take our own side in this fight. Not as Republicans, not as Democrats, but as Americans,” said Sen. John McCain (R-AZ) before the vote. “It’s time to respond to Russia’s attack on American democracy with strength, with resolve, with common purpose, and with action.” As AP adds, lawmakers took action against Russia in the absence of a forceful response from President Donald Trump.

While the president has sought to improve relations with Moscow and rejected the implication that Russian hacking of Democratic emails tipped the election his way, non-stop “anonymous sources” have repeatedly leaked “news” to the NYT and WaPo, suggesting Trump colluded with Russia and/or was being probed by the FBI. Following Comey’s testimony, which confirmed there is no “there” there, the media attacks against Trump have shifted, and now accuse the president of obstruction of justice and interference with the FBI’s investigation into Mike Flynn. Speaking earlier on Wednesday, Vladimir Putin’s spokesman Dmitry Peskov said told reporters the Kremlin will hold out with its reaction until the U.S. decides on new sanctions against Russia. “We wouldn’t like to enter this sanctions spiral again. But that’s not our choice.” Indeed, and with the US having made Russia’s choice for them, we now look for Moscow’s response.

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They’ll just keep digging until they find something, and then blow that up way out of proportion.

What If The Russia Russia Russia Story Was Nothing? (HotAir)

Everyone has been busily trying to parse the Jeff Sessions testimony since the Attorney General took the stand but there doesn’t seem to be a lot to work with. Allahpundit talked about the number of times that Sessions declined to answer certain questions about private conversations he had with the president, but that’s some fairly thin gruel to build a presidency-ending scandal out of. But the one question which seems to still be off limits for most of the MSM is the really ugly one: what if this turns out to be a dry hole? Much of the speculation swirling around this entire saga has been based on anonymous sources supposedly spilling secrets about Oval Office conversations or supposed Russians hiding behind the potted plants. With all of that smoke, there certainly must be a fire, right? But that depends whether the smoke is coming from an actual blaze or some reporting blazing up some prime wacky tobacky.

Having hearings was supposed to clear up many of these questions. Take for example the widely reported and frequently repeated assertion that the Attorney General had a third, unreported meeting with the Russians at the Mayflower. That’s been stated so often that it’s basically become an article of faith on CNN and MSNBC. But yesterday Sessions was asked about it and he simply said… no. There was no third meeting. And? What happens now? Unless the New York Times can produce some video or at least a credible witness who saw Session sneaking off into the cloak room with the Russian ambassador or one of his henchmen that’s pretty much a dead end. And that’s falling into a pattern with so many other aspects of the entire tapestry of accusations against the Trump administration, a group of allegedly nefarious traitors who were colluding with the Russians to cripple the American elections.

David French at National Review tackles what may eventually become the biggest question of all. What if that never happened and it was all a fictional tale assembled by the media? “While we certainly aren’t privy to all the relevant information or all the relevant testimony, nothing that James Comey said last week or that Jeff Sessions said today (much less any of the questions directed his way) contained so much as a meaningful hint that the Committee was on the verge of uncovering the political scandal of the century. Rather, the focus keeps shifting to much narrower questions regarding Trump’s decision to fire James Comey — questions that are important but far less historically consequential than any claim that a president or his attorney general are traitors to their country…

Truth is truth, and it’s important for responsible people to not just understand and respond to actual evidence — no matter where it leads — but also acknowledge its absence. And so far the absence of evidence points to Trump’s innocence of some of the worst allegations ever leveled against an American president or his senior team.”

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Pentagon wouldn’t mind a little war.

Pentagon Agrees To Sell $12 Billion In F-15s To Qatar (ZH)

Remember when Trump called on Qatar to stop funding terrorism, claiming credit for and endorsing the decision of Gulf nations to isolate their small neighbor (where the most important US airbase in the middle east is located),even as US Cabinet officials said their blockade is hurting the campaign against ISIS. You should: it took place just 5 days ago. “We had a decision to make,” Trump said, describing conversations with Saudi Arabia and other Gulf countries. “Do we take the easy road or do we finally take a hard but necessary action? We have to stop the funding of terrorism.” Also last week, Trump triumphantly announced on twitter that “during my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!”

Well, Qatar funding terrorism apparently is not a problem when it comes to Qatar funding the US military industrial complex, because just two weeks after Trump signed a record, $110 billion weapons deal with Saudi Arabia, moments ago Bloomberg reported that Qatar will also buy up to 36 F-15 jets from the Pentagon for $12 billion …. even as a political crisis in the Gulf leaves the Middle East nation isolated by its neighbors and criticized by President Donald Trump for supporting terrorism, according to three people with knowledge of the accord. According to the Pentagon, the sale will give Qatar a “state of the art” capability, not to mention the illusion that it can defend itself in a war with Saudi Arabia. If nothing else, Uncle Sam sure is an equal-opportunity arms dealer, and best of all, with the new fighter planes,

Qatar will be able to at least put on a token fight when Saudi Arabia invades in hopes of sending the price of oil surging now that every other “strategy” has failed. To be sure, the sale comes at an opportune time: just days after Qatar put its military on the highest state of alert, and scrambled its tanks. All 16 of them. Maybe the world’s wealthiest nation realized it’s time beef up its defensive capabilities? Qatar’s defense minister will meet with Pentagon chief Jim Mattis on Wednesday to seal the agreement, Bloomberg reported citing people who spoke on condition of anonymity because the sale hasn’t been announced. Last year, congress approved the sale of up to 72 F-15s in an agreement valued at as much as $21 billion but that deal took place before the recent political crisis in the region.

It is unclear what the Saudi reaction will be to the news that Trump is arming its latest nemesis. If our thesis that Riyadh is hoping for Qatar to escalate the nest leg of the conflict is correct, then the Saudis should be delighted.

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“..society as a partnership between those who are living, those who are dead, and those who are yet to be born.”

The Old Are Eating the Young (Satyajit Das)

Edmund Burke saw society as a partnership between those who are living, those who are dead, and those who are yet to be born. A failure to understand this relationship underlies a disturbing global tendency in recent decades, in which the appropriation of future wealth and resources for current consumption is increasingly disadvantaging future generations. Without a commitment to addressing this inequity, social tensions in many societies will rise sharply. entral to the issue is that the rapid rise in living standards and prosperity of the past 50 years has been largely based on rising debt levels, ignoring the costs of environmental damage and misallocation of scarce resources. A significant proportion of recent economic growth has relied on borrowed money – today standing at a dizzying 325% of global GDP.

Debt allows society to accelerate consumption, as borrowings are used to purchase something today against the promise of future repayment. Unfunded entitlements to social services, health care and pensions increase those liabilities. The bill for these commitments will soon become unsustainable, as demographic changes make it more difficult to meet. Degradation of the environment results in future costs, too: either rehabilitation expenses or irreversible changes that affect living standards or quality of life. Profligate use of mispriced non-renewable natural resources denies these commodities to future generations or increases their cost. The prevailing approach to dealing with these problems exacerbates generational tensions. The central strategy is “kicking the can down the road” or “extend and pretend,” avoiding crucial decisions that would reduce current living standards, eschewing necessary sacrifices, and deferring problems with associated costs into the future.

Rather than reducing high borrowing levels, policy makers use financial engineering, such as quantitative easing and ultra-low or negative interest rates, to maintain them, hoping that a return to growth and just the right amount of inflation will lead to a recovery and allow the debt to be reduced. Rather than acknowledging that the planet simply can’t support more than 10 billion people all aspiring to American or European lifestyles, they have made only limited efforts to reduce resource intensity. Even modest attempts to deal with environmental damage are resisted, as evidenced by the recent fracas over the Paris climate agreement. Short-term gains are pursued at the expense of costs which aren’t evident immediately but will emerge later.

This growing burden on future generations can be measured. Rising dependency ratios – or the number of retirees per employed worker – provide one useful metric. In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050. In Germany, the number of workers per retiree will decrease to 1.6 in 2050, down from 4.1 in 1970. In Japan, the oldest society to have ever existed, the ratio will decrease to 1.2 in 2050, from 8.5 in 1970. Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

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Schäuble couldn’t care less.

Greek Economy Minister Calls Wolfgang Schäuble ‘Dishonest’ (R.)

Greek Economics Minister Dimitri Papadimitriou has accused German Finance Minister Wolfgang Schaeuble of being “dishonest” by blocking debt relief for Greece despite his acknowledgement that Athens has implemented significant reforms. Euro zone finance ministers and the IMF are expected to strike a compromise deal on Greece on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later. Papadimitriou told German newspaper Die Welt in an interview published on Thursday that Schaeuble first had acknowledged that Greece had met the requirements, but then changed his mind. “I haven’t met Schaeuble yet and I don’t want to be impolite, but his behavior seems dishonest to me,” he added.

Papadimitriou said German resistance to debt relief for Greece raised questions about the very idea and structure of the euro zone. The success of right-wing populists in Europe also showed dissatisfaction with such European structures, he said. “Greece is being made a sacrificial lamb,” he said. Papadimitriou also warned Schaeuble against making decisions based purely on domestic politics, noting that Germany had also received debt relief when it was rebuilding after World War Two. Debt relief is needed to help Greece expand its economy, he said, noting that Athens was not asking for a debt cut, but rather lower interest rates or longer repayment schedules. Greek President Prokopis Pavlopoulos also called on the euro zone finance ministers to spell out concrete measures to reduce the Greek debt burden.

“Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief,” Pavlopoulos said in an interview with German business daily Handelsblatt. German opposition politicians also criticized Schaeuble by honing in on the fact that the IMF is likely to participate in the third bailout, but will only disburse any loans when debt measures have been clearly outlined. Gerhard Schick from the Greens party accused Schaeuble of a “lousy trick” with the IMF participation. Thomas Oppermann, senior member of the co-governing Social Democrats (SPD), told Bild newspaper: “Schaeuble must put his cards on the table ahead of the election and say what German taxpayers will have to expect.”

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“Europe stopped listening to Greece a long time ago.”

Greece Is Germany’s ‘De Facto Colony’ (Pol.)

Poor Alexis Tsipras. For days, the Greek leader has been working the phones, trying to secure the best possible terms for his country as it enters the last mile of its seemingly endless cycle of bailouts. So far, his efforts have won him more mockery than respect — especially in Germany. “He keeps calling the whole time, and the chancellor says again and again, ‘Alexis, this issue is for the finance ministers,’” German Finance Minister Wolfgang Schäuble told an audience here on Tuesday, referring to the Greek prime minister’s attempts to win over Angela Merkel to his cause. Eurozone finance ministers are set to decide at a meeting in Luxembourg on Thursday whether to release a more than €7 billion tranche of aid to Greece. No one doubts Athens will get the money. Schäuble all but committed to it on Tuesday.

But Tsipras wants something even more precious: debt relief. No serious economist believes Greece will ever crawl out from under its more than €300 billion debt without significant forgiveness from its creditors. That means convincing Germany, the country to which Greece owes the most. For much of Greece’s nearly decade-long depression, the country was hostage to its domestic politics. Now, it’s hostage to Germany’s. Berlin, which has long opposed outright debt relief, refuses to budge. With a general election in Germany set for late September, Merkel and Schäuble are unlikely to soften their position anytime soon. The Greek bailouts remain politically toxic in Germany, and any agreement involving debt forgiveness would be seen domestically as an admission the rescue effort had failed — and at the German taxpayers’ expense.

Over the years, Germany has quietly accepted more subtle forms of forgiveness, like extending maturities on Greece’s loans and reducing the interest burden. But a straightforward cut, as demanded by the International Monetary Fund, remains out of the question. At least until after the election. Unfortunately for Tsipras, he has very little say in the matter. One big reason he wants debt relief now is that it would allow the European Central Bank to include Greece in its bond-buying program, known as quantitative easing. That would go a long way toward boosting investor confidence in Greece’s stability. But Greece won’t be eligible for the program as long as its debt burden isn’t deemed sustainable. And with the ECB’s program set to be wound down soon, Greece may never benefit. Tsipras may yet try to resist a deal this week and take the matter to next week’s summit of European leaders in Brussels. That’s unlikely to make much difference. Truth is, Europe stopped listening to Greece a long time ago.

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More blackmail.

EU Officials Warn Athens Not To Take Debt Issue To Leaders’ Summit (K.)

As Finance Minister Euclid Tsakalotos braces for a Eurogroup meeting in Luxembourg on Thursday which all evidence suggests will not yield a satisfactory debt solution for Greece, European officials on Wednesday warned Athens against trying to broach the issue at an EU leaders’ summit next week. “If the matter is not resolved today, then it will be discussed at the next Eurogroup, where the agreement won’t be any better,” one source in Brussels told Kathimerini. Sources in Berlin, which has taken a hard line in the face of calls by the IMF for Greek debt relief, struck a similar tone, with one official noting that the matter falls squarely within the remit of the Eurogroup, “a message that has been made absolutely clear.”

“I don’t remember any Greek problem being solved at the EU leaders’ summit level,” another source representing Greece’s international creditors told Kathimerini, referring to previous efforts by Prime Minister Alexis Tsipras to broach issues relating to the country’s international bailouts with Angela Merkel and other EU leaders. A spokesman for Germany’s Finance Ministry, however, struck a positive tone, saying he was looking forward to agreeing on a “viable comprehensive package.” A proposal by French officials, that a solution to Greek debt relief be linked to the country’s growth rate, is expected to be discussed in Luxembourg on Thursday, though it is unlikely to be embraced in its entirety.

Meanwhile, Athens sounded a defiant note on Wednesday, with a high-ranking government official warning that if German Finance Minister Wolfgang Schaeuble does not budge from his positions to make way for a final agreement, then “there are others in higher positions than him that can give a solution.” “If there is no positive move, in the next few days or during the Eurogroup, from the German minister, then it looks like Angela Merkel will be forced to hold the hot potato,” a government official told the Athens News Agency on Wednesday.

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Jun 142017
 
 June 14, 2017  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  17 Responses »
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Fred Lyon San Francisco cable car turnaround 1946

 

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

 

 

A nation divided.

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

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

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

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

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

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

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

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

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

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

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Corbyn growth territory.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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But the domestic echo chamber makes that hard to do.

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

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

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

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Yes, they are.

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

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

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

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

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ZIRP machines have taken over.

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

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

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

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Told you those output cuts wouldn’t go anywhere.

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

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

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

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More ground for shadow banks to take over.

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

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

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

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

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Well, well… Let’s see it.

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

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

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Greeks don’t believe you, Wolfie…

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

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

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

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

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

Foreign Buyers Snap Up Greek Property (K.)

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

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

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

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

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

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

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

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

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

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

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Jun 062017
 
 June 6, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , ,  1 Response »
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Pablo Picasso Les femmes d’Alger 1955

 

Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)
Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)
Contractor Charged With Leaking Document About US Election Hacking (R.)
How The Intercept Outed Reality Winner (ErrataS)
China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)
One Belt, One Road, and One Debt Hangover (Rickards)
Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)
Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)
Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)
Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)
Earnings vs. Profits & The Bull Market (Roberts)
US M&A: One Of The Scariest Charts To Look At – Citi (BI)
IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)
The Euro’s Future Demands Trust (K.)
An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

 

 

Well, it’ll be different alright. Given the Fed’s actions over the past decade, it can hardly get wrose.

Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)

President Donald Trump appears ready to remake the Federal Reserve in an image that will be considerably different than what investors have known for many years. The president is prepared to nominate Randal Quarles and Marvin Goodfriend to two of three vacancies at the central bank, according to multiple press accounts that have not been disputed by the administration. Quarles likely would assume the role vacated by Daniel Tarullo to oversee the nation’s banking system. White House officials did not respond to a CNBC request for comment. Should Trump nominate the two men and they receive confirmation, it will represent the first steps in a possible substantial remaking of a Fed that has practiced ultra-loose monetary policy for the past decade but has been tight on banking regulations.

Trump will have the opportunity to name one more person now, then can fill two even more critical vacancies in 2018 — that of Chair Janet Yellen and Vice Chair Stanley Fischer. If the Quarles and Goodfriend moves are indicators of what’s to come, things could start getting less comfortable for Yellen. Both are considered solidly conservative, in line with the Republican president and Congress but perhaps not with Yellen. “Clearly, these appointees are a significant departure from the crowd that we’ve had on the board,” said Christopher Whalen, head of Whalen Global Advisors and a former investment banker and long-time financial analyst. “Yellen is probably the most left-wing Fed chair we’ve ever had. I also think both Quarles and Goodfriend have much better grounding in the financial markets. That would be refreshing.”

Yellen, however, may not think so, particularly if the coalition she has carefully crafted since taking the chair’s seat in 2014 starts to unravel. “I welcome these additions,” Whalen said. “Hopefully they put a banker in the third slot. Then eventually Yellen’s going to leave because she’s going to start losing votes.”

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Kiwis flipping birds.

Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)

U.S. President Donald Trump told his top diplomat that the dispute over probes into links between his inner circle and Russia should not undermine U.S. efforts to rebuild relations with Moscow, Secretary of State Rex Tillerson said on Tuesday. Speaking in New Zealand after a trip to Australia, Tillerson reiterated the U.S. commitment to the Asia-Pacific region as global leaders have expressed growing mistrust over the Trump administration, which has withdrawn from key international agreements since taking office. At home, Trump’s administration has been plagued by questions over links to the Russian government. Tillerson said Trump told him to try to improve ties with Russia regardless of the U.S. political backdrop.

“I can’t really comment on any of that because I don’t have any direct knowledge,” Tillerson told a news conference in Wellington, when asked how worried he was that the U.S. political crisis could take down the Trump administration. “The president’s been clear to me: do not let what’s happened over here in the political realm prevent you from the work that you need to do on this relationship and he’s been quite clear with me… that we might make progress. I’m really not involved in any of these other issues,” he said after a meeting with New Zealand Prime Minister Bill English.

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This is another very curious story, and it’s not just the girl’s name, Reality Leigh Winner. Still, even The Intercept jumps to conclusions:

“Russian military intelligence executed a cyberattack on at least one U.S. voting software supplier and sent spear-phishing emails to more than 100 local election officials just days before last November’s presidential election, according to a highly classified intelligence report obtained by The Intercept.”

Even though they know that when signs point to Russia, it’s probably not Russial, the caveat only come later:

“While the document provides a rare window into the NSA’s understanding of the mechanics of Russian hacking, it does not show the underlying “raw” intelligence on which the analysis is based. A U.S. intelligence officer who declined to be identified cautioned against drawing too big a conclusion from the document because a single analysis is not necessarily definitive.”

If the raw intelligence is not available, how can one draw the Russia conclusions? The Intercept now blindly trusts US intelligence agents? And that’s not all, see next article…

Contractor Charged With Leaking Document About US Election Hacking (R.)

The U.S. Department of Justice on Monday charged a federal contractor with sending classified material to a news organization that sources identified to Reuters as The Intercept, marking one of the first concrete efforts by the Trump administration to crack down on leaks to the media. Reality Leigh Winner, 25, was charged with removing classified material from a government facility located in Georgia. She was arrested on June 3, the Justice Department said. The charges were announced less than an hour after The Intercept published a top-secret document from the U.S. National Security Agency that described Russian efforts to launch cyber attacks on at least one U.S. voting software supplier and send “spear-phishing” emails, or targeted emails that try to trick a recipient into clicking on a malicious link to steal data, to more than 100 local election officials days before the presidential election last November.

While the charges do not name the publication, a U.S. official with knowledge of the case said Winner was charged with leaking the NSA report to The Intercept. A second official confirmed The Intercept document was authentic and did not dispute that the charges against Winner were directly tied to it. The Intercept’s reporting reveals new details behind the conclusion of U.S. intelligence agencies that Russian intelligence services were seeking to infiltrate state voter registration systems as part of a broader effort to interfere in the election, discredit Democratic presidential candidate Hillary Clinton and help then Republican candidate Donald Trump win the election. The new material does not, however, suggest that actual votes were manipulated.

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… but it gets weirder. Soon after the Intercept published the story and docs, the leaker was arrested. How? She could easily be traced back to these docs. Was the Intercept not aware of this? That’s hard to believe, leaked documents is what they do. Was someone careless? We haven’t seen any excuses made. Did they knowingly give her up? Is this then the end of the Intercept?

How The Intercept Outed Reality Winner (ErrataS)

Today, The Intercept released documents on election tampering from an NSA leaker. Later, the arrest warrant request for an NSA contractor named “Reality Winner” was published, showing how they tracked her down because she had printed out the documents and sent them to The Intercept. The document posted by the Intercept isn’t the original PDF file, but a PDF containing the pictures of the printed version that was then later scanned in. The problem is that most new printers print nearly invisibly yellow dots that track down exactly when and where documents, any document, is printed. Because the NSA logs all printing jobs on its printers, it can use this to match up precisely who printed the document. In this post, I show how.

You can download the document from the original article here. You can then open it in a PDF viewer, such as the normal “Preview” app on macOS. Zoom into some whitespace on the document, and take a screenshot of this. On macOS, hit [Command-Shift-3] to take a screenshot of a window. There are yellow dots in this image, but you can barely see them, especially if your screen is dirty.

We need to highlight the yellow dots. Open the screenshot in an image editor, such as the “Paintbrush” program built into macOS. Now use the option to “Invert Colors” in the image, to get something like this. You should see a roughly rectangular pattern checkerboard in the whitespace.

It’s upside down, so we need to rotate it 180 degrees, or flip-horizontal and flip-vertical:

Now we go to the EFF page and manually click on the pattern so that their tool can decode the meaning:

This produces the following result:

The document leaked by the Intercept was from a printer with model number 54, serial number 29535218. The document was printed on May 9, 2017 at 6:20. The NSA almost certainly has a record of who used the printer at that time.

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“With 260-to-1 Leverage A Chinese Giant Takes On Goldman In US Repo”

China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)

High up in a New York City skyscraper, China’s biggest bank is playing in the shadows of American finance. The prize for Industrial & Commercial Bank of China isn’t stocks, bonds or currencies. It’s the grease in the wheels of all those markets: repurchase agreements. By exploiting a loophole in rules intended to keep U.S. banks from getting “too big to fail,” the state-owned ICBC has become a go-to dealer in repos in just a few short years, alongside longtime powerhouses like Goldman Sachs Group Inc. The short-term loans allow investors to borrow money by lending securities, serving a vital role in day-to-day trading on Wall Street. ICBC’s rise reflects not only China’s global ambitions in high finance, but also how post-crisis rules have let a whole host of new players profit from the murky world of shadow banking, largely beyond the reach of bank regulators.

As big banks face tougher standards, they’re being replaced by brokers, asset managers and foreign firms like ICBC, which can use more leverage and take greater risks. That has some regulators worried non-bank lenders are once again emerging as a threat to financial stability, less than a decade after panic in the repo market wiped out Lehman Brothers. “The concern is that non-bank dealers are becoming a larger part of the repo market,” said Benjamin Munyan, who specializes in shadow banking and regulation at Vanderbilt University’s Owen Graduate School of Management. “These intermediaries are outside the scope of our traditional Federal Reserve safety net.” In some ways, the development is emblematic of how steps taken to stamp out financial risk-taking in one area have created unforeseen risks in another. But it also highlights the willingness and ability of firms to jump through whatever holes regulators leave or create.

In a repo, firms borrow money by putting up securities like Treasuries as collateral. The cash can then be used to buy higher-yielding assets, something hedge funds often do. When the agreement expires, the borrower “repurchases” the collateral, paying interest to the lender. The process can be repeated over and over, boosting a firm’s leverage, as long as the assets backing the repo maintain their value. During the credit crisis, reliance on such short-term funding helped bankrupt Lehman and imperiled the financial system. Bailouts put the biggest securities firms under Fed supervision as banks, and Dodd-Frank regulations forced them to shrink their assets. A key provision has been the enhanced capital requirements, which made it prohibitively expensive for large U.S. banks to warehouse low-yielding Treasuries and finance repos.

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China runs out of collateral.

One Belt, One Road, and One Debt Hangover (Rickards)

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors. China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run. Just as Chinese state owned enterprises (SOEs) can’t repay debts to Chinese banks, China’s foreign partners will not be able to repay debts to China itself. These twin disasters-in-the-making may converge in such a way that China’s assets disappear or become illiquid at exactly the time they are most needed to bail-out its own banking system.

China has launched four major overseas investment initiatives in the past ten years. The oldest is their sovereign wealth fund, China Investment Corporation, or CIC, established in 2007. Sovereign wealth funds are a way for countries to invest their reserves in securities other than safe instruments such as U.S. Treasury notes. CIC today has assets of over $800 billion, spread among stocks, corporate bonds, hedge funds, private equity, commodities, and commercial real estate. Some of CIC’s investments are directly-owned enterprises, including gold mines in Zimbabwe. While these assets may outperform Treasury notes over time, they are also illiquid, and would tend to decline in value during a financial panic. This means that about 20%, of China’s reserves are unavailable for critical tasks such as bailing out the banking system or defending the currency.

[..] The problem with One Belt, One Road is that many of the potential recipients of development loans are not highly creditworthy or have a track record of defaulting on debts or requiring substantial debt restructuring in order to stay current. As with Chinese bank loans to SOEs, the NDB, AIIB, and One Belt, One Road efforts are not primarily economic but political. China is seeking to use its economic clout to create jobs and control critical infrastructure. [..] As with its other policies, China will turn liquid assets into illiquid assets in order to pursue its ambitions. This could make sense if nothing goes wrong. But, things will go wrong. China will face a monumental liquidity crisis sooner than later and find that its liquid assets have been turned into bridges to nowhere.

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This thing has been developing over decades.

Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)

Qatar’s stock market tumbled more than 7% on Monday as six of the Middle Eastern country’s neighbors reportedly severed diplomatic relations with Doha for allegedly supporting terrorism. The key stock index in Doha slipped shortly after Monday’s open – the benchmark’s sharpest fall in more than seven years – before paring some its losses to trade down 7.2% at around 3:00 p.m. local time. Six countries, including Saudi Arabia and Egypt, had all coordinated on Monday to accuse the wealthy Gulf state of supporting terrorism, which Qatar has denied. Investors viewed the diplomatic withdrawal as a major breakdown between powerful Gulf nations, who are also close U.S. allies. While Saudi Arabia – the world’s leading crude oil exporter – said Qatar had supported “Iranian-backed terrorist groups,” Qatar described the joint decision as having “no basis in fact” and was therefore “unjustified”.

Political tensions in the region had been building in recent weeks as Egypt, Saudi Arabia, Bahrain and the United Arab Emirates – all countries to have cut relations with Doha on Monday – had blocked Qatari-based news sites in May. However, Monday’s decision was reported to be based on Qatar’s alleged role in supporting Islamist groups and its stance concerning Iran – a regional rival to Saudi Arabia. Qatar, a member of the U.S. coalition against the so-called Islamic State, has frequently and consistently rejected accusations from Iraq’s Shia leaders that it has provided financial backing to ISIS. “Whilst Qatar is the member of the U.S. coalition against IS, wealthy individuals have reportedly made donations to extremist groups and the government is also accused of supporting extremists – allegations that Qatar vehemently deny,” Tamas Varga, oil associates analyst at PVM, said in an email on Monday.

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If I remember, the UK gets 90% of its LNG from Qatar.

Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)

Oil markets seem impervious to geopolitical risk. As four Arab neighbors imposed an unprecedented embargo on Qatar on Monday, oil prices briefly jumped 1.6 percent before falling back. The fuel to watch, though, is not oil, but gas. If this dispute is not resolved quickly, it may mean a hot summer in the Gulf. The problem has been simmering for a long time, with three of Qatar’s Gulf Cooperation Council colleagues blaming it for backing Islamist groups including the Muslim Brotherhood, and being too friendly with Iran. But in a dramatic escalation shortly after U.S. President Donald Trump’s visit to Saudi Arabia, the United Arab Emirates and Bahrain, along with Egypt, the shaky official government of Yemen and Libya’s contested eastern government broke relations with Doha and imposed a ban on air, land and sea travel.

Much of Qatar’s food and key equipment comes by land from Saudi Arabia, or reshipments through Dubai’s Jebel Ali port. Qatar is one of the smallest oil producers in OPEC, at 618,000 barrels per day, but condensate (light oil) and natural gas liquids – byproducts of its giant North Field – add about another 1.3 million barrels per day. It will stay in the OPEC production cuts deal, and even if it does not, its contribution is small. Its real power comes from being the world’s largest liquefied natural gas exporter. Qatar’s liquefied natural gas and oil exports should not be affected, even if Saudi and Emirati waters are barred to its ships. They can sail via Iranian waters and then pass the Strait of Hormuz via the usual shipping lane in Omani territory, or stay in the Iranian sector if Oman joins its GCC colleagues in the blockade. Any attempt to stop Qatari exports would be a major crisis, and would invite a serious response from major LNG customers Japan, South Korea, China and India.

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So is Britain’s political model.

Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)

Mayism could mean Brexit Britain renaming itself Poundland – cheap goods and cheap workers – or it might mean a reversion to some kind of one-nation Toryism. Her party just doesn’t know. Were it not for the Tories’ slim majority, their crisis would be far more exposed. The sofa class don’t do political economy, more’s the pity, but if they did they’d see the contradictions of Conservatism in 2017. The party of capital is now pursuing a policy – hard Brexit – hated by capital. The political arm of the City is about to rip a hole through the City. All these paradoxes are given almost physical representation on our tellies every night by May herself – a populist who doesn’t actually like people.

As a non-believer in New Labour, Corbyn has no such ideological awkwardness, while John McDonnell is one of the few people in the Labour party who didn’t subcontract out their economic thinking to Brown and Ed Balls. But still, their team admit they have a way to go in rethinking Britain’s economy – and they are having to do so against a famously hostile parliamentary party. The result is Corbyn’s manifesto, which is chiefly remarkable for its unabashed defence of basic social democratic values. It’s the programme you imagine Brown would like to have delivered – if only he hadn’t been so busy triangulating.

But behind the scenes, the party is doing much deeper thinking. I have seen an internal Labour report commissioned by McDonnell. It forms one part of what could be a far more radical programme after Thursday night. Some of the lines in it will give the Daily Mail stories for days – such as calling for a overhaul of the BBC trust (which is “dominated by appointees from the corporate and financial sectors”) and hundreds of millions in public money to be spent on establishing workers co-ops. For the sympathetic reader, however, it contains some of the most imaginative thinking around economic democracy to come out of the party in decades (not saying much, sadly). In that, it sits alongside the speeches made by Corbyn’s team last week about the need for “industrial patriotism”, and to give public backing to new sectors.

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More cuts are being prepared.

Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)

Police numbers, including the number of armed police officers, have fallen sharply under Theresa May’s watch first as home secretary between 2010 and 2016 and then as prime minister. The simple numbers tell the story. In 2010 May as home secretary made the mistake that Margaret Thatcher never made in the 1980s and agreed to a Treasury demand to cut police budgets by 18%. Over the next five years the number of police officers in England and Wales fell from a peak of 144,353 in 2009 to 122,859 in 2016. At the same time the number of specialist armed police officers has fallen from a peak of 6,796 in 2010 to 5,639 in 2016. As the graph shows it would appear to be an open and shut case that cuts in police officer numbers have had an impact on the capacity of the police to respond.

May was told in 2010 that in cutting police funding she was making a mistake that Thatcher never made when she instinctively realised that there would come a crucial moment when the country, and her premiership, would depend entirely on the resilience of the thin blue line. May took a different approach as home secretary that was not without foundation. She argued that with the big continuing falls in crime that had been seen since the mid-1990s it was not necessary to maintain such a large police force. Anyway, it was argued, there was no direct link between the number of officers and the level of crime.

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What you get after years of having zero price discovery. It gets worse as we go along.

Earnings vs. Profits & The Bull Market (Roberts)

As I have discussed previously, the operating and reported earnings per share are heavily manipulated by accounting gimmicks, share buybacks, and cost suppression. To wit: “The tricks are well-known: A difficult quarter can be made easier by releasing reserves set aside for a rainy day or recognizing revenues before sales are made, while a good quarter is often the time to hide a big ‘restructuring charge’ that would otherwise stand out like a sore thumb. What is more surprising though is CFOs’ belief that these practices leave a significant mark on companies’ reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study’s respondents said it was around 10% of earnings per share.“ However, if we analyze corporate profits (adjusted for taxes and inventory valuations) we find a very different story. Since the lows following the financial crisis, the S&P 500 has grown by 266% versus corporate profit growth of just 98%.

Important Note: The profits generated by the Federal Reserve’s balance sheet are included in the corporate profits discussed here. As shown below, actual corporate profitability is weaker if you extract the Fed’s profits from the analysis. As a comparison, in the first quarter of 2017, Apple reported a net income of just over $17 billion for the quarter. The Fed reported a $109 billion profit.

With corporate profits still at the same level as they were in 2011, there is little argument the market has gotten a bit ahead of itself. Sure, this time could be different, but it usually isn’t. The detachment of the stock market from underlying profitability suggests the reward for investors is grossly outweighed by the risk. But, as has always been the case, the markets can certainly seem to “remain irrational longer than logic would predict.” This was something Jeremy Grantham once noted: “Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.” Grantham is correct. As shown, when we look at inflation-adjusted profit margins as a percentage of inflation-adjusted GDP we see a clear process of mean reverting activity over time. Of course, those mean reverting events are always coupled with a recession, crisis, or stock market crash.

More importantly, corporate profit margins have physical constraints. Out of each dollar of revenue created there are costs such as infrastructure, R&D, wages, etc. Currently, one of the biggest beneficiaries to expanding profit margins has been the suppression of employment, wage growth, and artificially suppressed interest rates which have significantly lowered borrowing costs. Should either of the issues change in the future, the impact to profit margins will likely be significant. The chart below shows the ratio overlaid against the S&P 500 index.

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Well, if you don’t know what something’s worth, how are you going to justify purchasing it? At some point that stops.

US M&A: One Of The Scariest Charts To Look At – Citi (BI)

The slowdown in US dealmaking since 2015 is cause for concern, Citi’s equity strategists say. “In some respects, one of the scariest charts to look at currently is the number of announced mergers & acquisition deals over the past year or two,” Tobias Levkovich, the chief US equity strategist at Citi, said in a note on Friday. “M&A lawyers argue the ‘uncertainty’ factor, which has come about recently, given some unpredictable aspects of the new Trump administration, has been the issue. It only may explain the last six months, but the trend has been poor for about two years or more. In the past, there has been some correlation with the S&P 500 and thus it could generate more legitimate fears than some of the other excuses that are put forth for not wanting to buy American equities.”

This year through June 5, 7,561 deals were announced, the lowest count since 2013, according to S&P Global Market Intelligence. M&A volume reached a record $2.055 trillion that year, the firm’s data show, slipping in 2016 to $1.7 trillion. More dealmaking signals, in part, that companies are placing big bets on the long-term growth of certain pockets of the market. Levkovich said tough antitrust measures from European authorities and the Department of Justice antitrust division may be slowing dealmaking.

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Please let it stop.

IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)

IMF Managing Director Christine Lagarde has offered Greece’s European creditors a way out of their impasse over Athens’s debts that would allow the eurozone to release a tranche of aid later this month. The IMF believes Greece needs a debt haircut, which Germany rejects. Lagarde suggested agreeing a deal whereby the IMF would stay on board in the bailout, as Berlin wants, but not pay out further aid until debt relief measures are clarified. “There can therefore be a program in which the disbursement only takes place when the debt measures have been clearly outlined by the creditors,” she told Handelsblatt in pre-released comments to run in its Tuesday edition. The compromise could allow eurozone finance ministers to give the go-ahead for their next payment of their tranche of aid at their meeting on June 15, Handelsblatt said.

“It is a possibility for an agreement,” Lagarde said. Greece has about €7 billion of debt maturing in July, a sum it will not be able to repay unless it gets new loans out of its current bailout worth up to 86 billion euros, the third aid program since its debt crisis began. Eurozone finance ministers failed to agree with the IMF last month on debt relief terms for Greece. They did not release new loans to Athens but recognized it had made significant progress with reforms. Greece hopes that eurozone finance ministers will offer enough clarity in June on debt relief measures that could be carried out after its bailout ends in 2018, to show investors that its debt – now at 197% of GDP – will be sustainable and help it return to bond markets as early as this summer.

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Trust in the Troika has proven to be a very expensive mistake.

The Euro’s Future Demands Trust (K.)

The European Commission presented its proposal for possible ways to deepen Europe’s Economic and Monetary Union a few days ago, as part of the public debate on the EU’s future. It went unnoticed in Greece, which is a pity, because if all that is proposed is adopted, the Greek problem will be overcome; also, if the mechanisms and procedures now in place had existed from the start, our country would not have hit a dead end. The question now is how Greece will be part of a system that was established because of the Greek crisis but from which our country is still excluded.

For the Greeks – sinking in recession, insecurity and isolation – the ironies are many. Presenting the proposals in Brussels on Wednesday, Commission Vice President Valdis Dombrovskis said: “The euro is one of Europe’s most significant achievements. It is much more than just a currency. It was conceived as a promise of prosperity. To keep that promise for future generations, we need the political courage to work on strengthening and completing Europe’s Economic and Monetary Union now.” Pierre Moscovici, commissioner for economic and financial affairs, added: “The euro is already a symbol of unity and a guarantee of stability for Europeans. We now need to make it a vehicle for shared prosperity. Only by reversing economic and social divergence in the euro area will we be able to defeat the dangerous populism that this fuels.”

The indirect references to Greece are clear. This is where the euro’s weaknesses first appeared, this is where the political center was torn apart and fringe groups gained power, this is where confidence in the common currency and in solidarity is being tested. The Commission’s proposals focus on completing a genuine financial union, achieving a more integrated economic and fiscal union, on greater democratic accountability and strengthening euro-area institutions (including a full-time Eurogroup chair and a European Monetary Fund). The Commission noted the euro’s successes, adding, “And yet it is only 25 years since the Treaty of Maastricht paved the way for the single currency and only 15 years since the first coin was used.” So we ask: As the currency is so new, and as the necessary mechanisms and procedures are only now being instituted, why is Greece continually an outcast? How can we pretend all is well with the euro? .

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Nice thing is the City Plaza is not really occupied, nor a squat. The former employees own everyhting inside the building.

An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

It is almost summer in Europe. Temperatures are rising, and many are preparing for vacations somewhere in the Mediterranean, which means searching for accommodation online. “No pool, no minibar, no room service, and nonetheless: the best hotel in Europe” reads the City Plaza Hotel’s homepage. A joke? Yes. A lie? Not at all. While this hotel in Athens, Greece might not offer those conventional services, it provides something far better: Free housing, medical care and meals for hundreds of people who have had to flee their countries. [..] Over the course of the year, the hotel has provided decent housing for over 1,500 refugees — 400 at any one time — in times of undignified detention camps. It is a model of self-organization and solidarity with refugees — who share living quarters with locals — in times of rising racism and nationalism.

[..] Thousands of homeless refugees are living in the streets of Athens, including families with small children. In response to this crisis, the Greek state set up more than 49 detention centers and camps. Activists and refugees had another idea of how to respond. On April 22, 2016 they took over the City Plaza — which, like many businesses since the economic collapse, had been abandoned for six years. Along with eight other self-organized shelters occupied by refugees and activists around the city, the hotel offers displaced people a safe and dignified alternative to the miserable, unhygienic and cruel conditions of the detention facilities. When the City Plaza went bankrupt in 2010, the management failed to pay the employees their final salaries. According to a court ruling, since they were unable to pay the workers monetarily, everything that is inside the building belongs to the workers.

However, the owner prevented auctioning the hotel for years. When the seven-story building was finally occupied last year, the former hotel employees declared that they were happy to offer and share everything. And the activists running City Plaza now support the workers and are planning common efforts to meet the demands of both the former workers and the refugees. The refugees’ demands include access to housing, education and employment. By providing everything that is needed themselves, the project proves that decent living conditions for everyone is possible, even in a country as burdened by crisis as Greece. And the warm reception that the refugees have received by those living near the hotel demonstrate that poverty is not an obstacle to welcoming people with open arms. “The neighbors bring some clothes, some food — you know, they are warm. Although their lives are also ruined, they see in the ruins of their lives, the ruins of the lives of other people,” said Maria, one of the Greek activists running the hotel.

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